Eprocurement sourcing mro environment

657 views
467 views

Published on

Published in: Business
0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
657
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
30
Comments
0
Likes
2
Embeds 0
No embeds

No notes for slide

Eprocurement sourcing mro environment

  1. 1. eProcurement / Sourcing MRO Environment Utilising Lean Six Sigma Anand Subramaniam
  2. 2. 2 “The Internet Is Like Darwinism On Steroids. You Evolve Or Are Eliminated.” - Paul Fernandez, Proxicom
  3. 3. 3 Implementation Highlights … 10% Technology 90% Change Management 70% Strategic 30% Paperwork
  4. 4. 4 Highlights  MRO - Heavy Machinery Industry (Implementation Highlights)  Strategic Sourcing  eProcurement
  5. 5. MRO - Heavy Machinery Industry (Implementation Highlights)
  6. 6. 6 Client’s - Terms & Definition  Purchasing  Transactional function of buying products / services or the placement and processing of a purchase order  Procurement  Sourcing products and services required to manufacture a product (direct) or to operate the organisation (indirect) from point of supply to the point of demand  Strategic Sourcing  Broader and more comprehensive than the procurement process where it focuses more on supply chain impacts of procurement and purchasing decisions, and works cross-functionally within the business firm to help achieve the organisation’s overall business goals  eProcurement  Employees’ finds the products they need to buy, requisition generation, approval if needed, creating the purchase order, and delivering that order electronically to the supplier for confirmation and fulfilment
  7. 7. 7 Client’s - Vision & Mission E-Procurement Access online catalog via desktop browser Access online catalog via desktop browser Internet Access Catalog: • Items from contracted vendor • Product configuration tool • Color photographs, animation & videos of prod.application, • Product detailed specifications • Interview with other users Quick search Quick searchInventory Check Option Inventory Check Option Price Comparison Price Comparison Test Drive Test Drive Online Support Online Support Order Completion Order Completion “Buyer” “Supplier” Electronic PO Electronic PO Workflow Approval Workflow Approval Order Management System Order Management System Ack. & Ship notice/ changes Ack. & Ship notice/ changes Payment Process Payment Process Self-Service Purchasing Open Standards & IP Technologies Process Workflow Corporate Contracts Business Rules
  8. 8. 8 Brainstorming / Focus Group Level of AutomationLevel of Automation  End to end processEnd to end process  Requisition to orderRequisition to order Content (catalogue)Content (catalogue)  Cat managed externallyCat managed externally  Cat managed internallyCat managed internally  Supplier managedSupplier managed Distribution of FunctionalityDistribution of Functionality  ERP basedERP based  Free standing integrated best ofFree standing integrated best of breedbreed  Distributed functionalityDistributed functionality OrganisationalOrganisational  Change ManagementChange Management  Regional / DivisionalRegional / Divisional  Legal & Fiscal needsLegal & Fiscal needs Spend SegmentationSpend Segmentation DeploymentDeployment  Desktop / MobileDesktop / Mobile  Limited accessLimited access  Purchasing dept onlyPurchasing dept only Maximise benefits/Maximise benefits/ Minimise risksMinimise risks  Lean, 6 SigmaLean, 6 Sigma  Process MappingProcess Mapping Deployment StrategiesDeployment Strategies  Phases, stage gatesPhases, stage gates  QA review / sign offQA review / sign off
  9. 9. 9 eProcurement Process 1. Spend Analysis (Opportunity Identification) 3. Supplier Identification 4. Sourcing (eTendering / eAuctions) 5. Contract Management (Portal) 6. Procurement (P2P) 7. Order Fulfillment 8. Invoicing, Reconciliation & Payment 2. Supplier Assessment
  10. 10. 10 What was involved & benefits 2. Employee- Facing Catalog Finance Purchasing Employees 1. Workflow for originating and approving requisitions 3. Purchasing Data and Analytics Supplier Site Supplier Catalog Direct connect Catalog tools 4. Procurement Vendor’s Supplier Network 4. Procurement Vendor’s Supplier Network Benefits • Reduced purchase process costs • Improved compliance with sourcing policies • Provided analytical reports for informed decision making
  11. 11. 11 Business Case Approved Reduced Product/Process Costs Improved Compliance Reduced Inventory Costs Reduced Maverick Purchasing Value Drivers Improved Process Efficiency Pain Points • Fragmented data • Unreliable/inaccurate data • Fragmented data • Unreliable/inaccurate data • Rampant off-contract spend (approximately 27% of indirect spend) • Rampant off-contract spend (approximately 27% of indirect spend) • Long lead times result in purchase of large safety stocks • Long lead times result in purchase of large safety stocks • Long lead times due to high manual processing, 1/3 time spent reviewing manual requisitions • Long lead times due to high manual processing, 1/3 time spent reviewing manual requisitions • High transaction costs • Long supplier negotiation • Non contract compliance drives up price • High transaction costs • Long supplier negotiation • Non contract compliance drives up price
  12. 12. 12 Scope – Sourcing & eProcurement  Determined the types of purchase and spend categories  percentage of addressable spend by category  level of compliance by reference to the extent to which corporate contracts are in place,  the level of maverick spend and the number of suppliers by spend categories  Stakeholder buy-in with regard to phasing the strategic procurement  applying benchmark savings percentages to addressable spend by category  Determined Potential benefits by mapping the procure-to-pay process and defined  how the process is undertaken, including technology  timings / outcomes for each process step  the resources involved in each process step and their cost  calculation method - unit costs for order and invoice processing  As-Is process and To-Be in line with best practices  potential process savings in the selected services and extrapolated the potential savings across all areas
  13. 13. 13 Scope (Contd.)  Determined the procurement strategy and policies for the program direction & implementation  Used Value Stream Mapping to define As-Is ~ To-Be process along with metrics  Determined the necessary levels of investment & ROI  Performed procurement process audit & supplier evaluation  Evaluated the effectiveness of the strategic sourcing process including user needs and supplier / vendor relationship  Developed certification process (ISO, TQM) & training requirements
  14. 14. 14 Scope (Contd.)  Evaluated pricing / cost structures for total cost of ownership (TCO) (direct, indirect, landed, technology, logistics, material, disposal, transaction, relationship cost)  Analysed corporate contracts (including outsourced service delivery) - the number of suppliers : value bands of invoices  Change management strategy and communication management plan  Defined Standard formats and the trade off for Content Management  Determined the system integration points (push and pull) between numerous vendors and deciding on which suppliers to use
  15. 15. 15 Stakeholder Management Strategy Reaching critical mass in contract coverage Risk Strateg y Risk Strateg y Change Management Approach Supplier Adoptio n Legal & Fiscal - Country BU / Site constraints Technical Integratio n Providing Change Management guidance, with a specific focus on the areas relating to e-procurement implementation Case Studies - extracting lessons learnt from a range of industries (related and unrelated) who had undertaken different approaches to Change Management
  16. 16. 16 Success Factors  Strategic  Freed up front line resources to focus on value-added activities  Stakeholder briefed on policies, process and procedural changes  Senior management buy-in to improve strategic procurement policies  Process  Cross functional teams involvement  Well defined project and change management process  Staff resources trained on capabilities and competencies  Standardisation (processes, documents, specifications, product catalogues) and streamlined back end processing  Finance  Effective and realistic benefits realisation
  17. 17. 17 Transition (As-Is ~ To-Be) = 7.2 months Integration Procurement viewed as key contributor to business strategy Value Optomisation Procurement strategy tied to business strategy Value Innovation Sustainability STAGE 1 STAGE 2 INFORMAL -Focus on purchase orders -Detailed reconciliation -‘Back Office’ function CONTROL Procurement has some accountability for overall cost reduction STAGE 3 STAGE 4 STAGE 5 As-Is To-Be Took 7.2 months (11 days ahead of schedule & $12.8k under budget)
  18. 18. 18 Results Achieved Business Metrics Governance & Internal Controls Client Satisfaction P.O. Processing Cycle Time e-Transaction: Invoice Contract: Cycle Time Length Ledger Miscodes Suppliers Connected via Web Savings via Web Stock Keeping Unit Before Implementation 40-50% 40% 23 Days ?? 6- 28 months 57 pages 78% 0 0 283,000 After Implementation 90% 93% 2.1 hour 98% 45 days 6 pages 9% 17,000 $112M 134,000
  19. 19. Strategic Sourcing
  20. 20. 20 Identify - Sourcing Solution Solutions Overview Diagnostic tool List of key vendors Requirements template and guidance Discussion paper Experiences of e-procurement Output - Deliverables Input - Questions Addressed Stakeholder buy in - Increase awareness & understanding What solution types are available ? What & why on solution fit? What lessons from dis / similar firm? What & why to capture? Who are leaders / visionaries? Specific Solution highlights, why?
  21. 21. 21 Strategic Sourcing - Roadmap Source: Adjoined Consulting. LLC
  22. 22. 22 Drivers - Strategic Sourcing  Increase customer focus  Focus on supplier economics  Drive continuous improvement  Assess the total cost of ownership  Reduce costs and delivery cycle times  Increase number of global competitors  Improve quality/long-term financial performance  Deliver more innovative products more frequently & cheaply than competitors
  23. 23. 23 Lean - Supplier Rationalisation  Applying Lean concepts for supply base reduction and foster alliance  Fewer supplier management problems  Closer and more frequent interaction between buyer and supplier  Greater levels of quality and delivery reliability.  Supplier selection & termination conducted with cross functional teams included were  Supplier certification programs are used  Site audits conducted, to identify a supplier’s process capabilities  Purchase cost becomes relatively less important, when evaluating suppliers for strategic partnering  Undertake Value Engineering activities for cost reduction, improve quality, and reduce new product development time.  Outsourcing opportunities / risks reviewed (3PL & 4PL) for Vendor Managed Inventory (VMI)
  24. 24. eProcurement
  25. 25. 25 Procurement Vision – Reduce Cost 39 43 8 28 3 3 0 10 20 30 40 50 60 70 80 90 As~Is To~Be Vision Internal Processing Cost External Processing Cost  Minimise total cost from $82 to $6  Reduce cycle times  Improve Accuracy
  26. 26. 26 eProcurement Challenges Gaining initial interest Gaining initial interest Making the case Making the case Commit resources Commit resources Deliver the benefits Deliver the benefits Leadership and ownership of the project Leadership and ownership of the project Management and user buy-in Selling the benefits Management and user buy-in Selling the benefits Management and user buy-in Selling the benefits Management and user buy-in Selling the benefits Organisation design Compliance with corporate contracts and processes Organisation design Compliance with corporate contracts and processes
  27. 27. 27 eProcurement - Roadmap
  28. 28. 28 Waste Eliminated  Excessive quality checking  Multiple reports highlighting the same things  Delivering above the agreed service levels  Excessive paperwork sitting within departments and on people’s desks  Rework due to incorrect information provided  Excessive validation of reporting data  Reformatting automatically generated reports  Excessive downloading and uploading of data into the ERP system  Multiple printing and binding of reports  Time in process waiting for action Waiting Over-servicing Accumulation Errors Over-processing Motion Movement Waste
  29. 29. 29 eProcurement Tools Introduced  Spend Analysis – data on spend patterns  eTendering – receipt of tenders & evaluation  P2P – purchasing, workflow, requisition, ordering  eAuctions – commodity focused, competitive market  Marketplace – contracts, collaboration, management information  Portals – suppliers registration, tender / opportunities, supplier evaluation, risk analysis, contract award  eInvoicing – invoice presentment, automatic match, authorisation & payment
  30. 30. 30 Take Away  Define metrics to measure and monitor Progress  Ensure on-going supplier certification and evaluation  Benchmark & using proven implementation methodologies for sourcing & eProcurement  Re-engineer process and remove waste (utilise Lean / 6 Sigma concepts)  Develop selection criteria to appoint strategic suppliers (Leichardt scale)
  31. 31. 31 Take Away (Contd.)  Automate areas to eliminate re-entry / re-work / duplication  Review inventory policies for cycle-times & inventory levels reduction  Manage supplier relationships to support priority or time-critical purchases  Undertake comprehensive analysis and research, to understand procurement price, costing and the total cost of ownership (TCO)  Consolidated details of actual spend with each supplier and product category  Select a Solution Vendor based on - organisational / industry fit, expertise, product strategy, history of success, interview consultants for their competencies / capabilities
  32. 32. 32 “Latecomers Must Be 10 Times Better Than What They Replace.” - Peter Drucker
  33. 33. 33 Good Luck http://www.linkedin.com/in/anandsubramaniam

×