The world of procurement has evolved over the years into a respected profession within every successful company. Technology has been, and continues to be, a key enabler on this journey. This presentation will speak to the application of eProcurement within the Strategic Sourcing Process at AMD.
4. AMD PROFILE
Headquarters: Sunnyvale, California
Established: 1969
Employees: Approximately 10,000 worldwide
Facilities: more than 50 locations worldwide
NYSE Listing: AMD
Fortune 500 firm
2012 revenues of $5.42 billion
At AMD we live our core values through our actions
5. AMD’s MISSION
To be the leading designer and integrator of innovative, tailored technology
solutions that empower people to push the boundaries
of what is possible
SEMI-CUSTOM / EMBEDDED
Comms, Industrial, Gaming
DATA CENTER
CLIENT / GRAPHICS
Microservers
Personal computer, Mobility
6. Enabling Today, Inspiring Tomorrow
AMD launched the
AMD-K5®
processor, our
first independentlydesigned, socket –
compatible x86
microprocessor
1994
1996
AMD launched the
world’s first x86-64bit
processor
1998
AMD launched the
AMD-K6®
microprocessor
in, driving PC prices
below $1,000 for the
first time
2000
2002
AMD was first to break
the historic 1GHz clockspeed barrier
2004
AMD's technology is
inside every major
next generation gaming
console and home
entertainment system:
Microsoft's Xbox
One, Sony's PS4™, and
Nintendo's Wii U
AMD acquired
ATI, becoming the only
company capable of
delivering leading-edge
CPU and GPU
solutions in volume
2006
2008
2010
AMD shipped the
world’s first Accelerated
Processing Unit
(APU), featuring both a
CPU and GPU on a
single piece of silicon
2012
AMD
Acquires
SeaMicro
2014
7. CPOs Challenges In An Evolving
Business
CPO’s are typically focused on 3 things
1. FUELING ORGANIZATIONAL VISION &
FINANCIAL GOALS
Strategic Alignment
Cost Reduction (Gross Margin)
2. STAKEHOLDER SATISFACTION
Process Simplification - Automated
Global Standardization
3. IMPROVING THE SUPPLY BASE
Supplier Performance Management
Financial & Supply Risk Mitigation
8. Addressing the Challenges
Know Where You’re Headed
Strategic Plan
Documented Lean Processes
Create an Environment Supporting Creativity and Quality
Capable People Love a Challenge
Incentivize to Perform
Never Stop Innovating
Inspired by New Technology
Leverage Knowledge Management
Continually Seek External Input
Benchmarking for Information
Seeking Examples of Success
10. World Class Procurement
Hackett Defines World-Class Procurement as top quartile in
both Procurement effectiveness and Procurement efficiency
10
11. AMD has achieved World Class
Performance in Procurement
Key Effectiveness Drivers
Hackett Value Grid - Procurement Database
+ Cost reduction & avoidance savings
+ Number of suppliers
+Procurement Strategic alignment
+Spend under PR influence
+Customer satisfaction scoring
+Purchases from approved suppliers
+Suppliers providing majority of spend
+ Corporate wide spend
=Cross functional partnering
- Time spent collecting data vs. analyzing information
- Spend visibility
How effectively is Procurement meeting business demands
AMD Expected Range
World Class
1Q
PR Effectiveness
High
1Q
AMD
Low
High
PR Efficiency
Key Efficiency Drivers
+ Cost as percent of spend
+ Staffing levels
+ Corporate wide process and procedure
standardization
= Cycle time
= Technology capability
- Technology cost per FTE
- Process cost to technology cost ratio
- Percent of automated transactions
- PO transaction unit cost and processing productivity
- Receipt transaction unit cost and processing
productivity
13. AMD’s Strategic Sourcing Process
Ensure
Supply
Focused
Purpose
Manage
Cost
Strategic
Enablers
Mitigate
Risk
SSP Enablers
• Organized Methodology drives the sourcing engagement model.
• Standard Process for identifying and driving sourcing plans.
• Internal Alignment to ensure key business requirements are met.
Category
Research &
Analysis
Business
Requirements
Development
Sourcing
Strategy
Development
Supplier
Selection &
Evaluation
Business
Execution
Performance
Management
14. Role of Procurement
Technology
Category
Research &
Analysis
Business
Requirements
Development
SPEND
ANALYSIS
Sourcing
Strategy
Development
Supplier
Selection &
Evaluation
Business
Execution
E-SOURCING
PROCESS
CONTRACT
MANAGEMENT
One view of
global spend –
trusted data
• Used for all RFx
activity across
the global team
Enables
compliance with
contracts and P2P
Aligns with
supplier
selection
Embedded in
category
analysis
• Preferred
process for all
sourcing events
Holistic view of
spend combined
with analytics
Drives Supplier
Continuous
Improvement
Identification of
cost reduction
opportunities
• Knowledge
database for all
sourcing activity
Documented
system of record
Harmonization
with
stakeholders
SUPPLIER
MANAGEMENT
Performance
Management
15. AMD Philosophy
Enabling Today, Inspiring Tomorrow
Vision
Innovative,
Capable,
Far Reaching,
Inspired,
Corporate
Alignment
Committed
Talent
Management
Process
Early Adoption,
LSS Focused,
Corporate IT
Compatible,
Documented,
Global
Technology
Flexible
16. Closing Message
Procurement excellence is achievable with alignment, strategy, and the right
resources, especially technology.
Learning comes from Challenging the conventional – recognize the need to
move out from ERP to non-ERP best of breed Suite players.
Partner with the right technology provider who is flexible, customer focused
and agile to blend into your ever evolving procurement process.
Good morning and thanks for the opportunity to be here. It’s a pleasure and honor to speak about AMD’s procurement operation and eProcurement. I’d also like to take the opportunity to again recognize Zycus for their recognition as a Leader in the 2013 Strategic Magic Quadrant by Gartner.
In late 2000, I was elected to the International Board of the Institute for Supply Management (ISM). At that time it was still known as NAPM or the National Association of Purchasing Manager. I was an up and coming director of procurement and thought I knew just about everything about purchasing. I had just completed spending $3B on a new factory in Germany and had been recently recognized as a Texas Outstanding Corporate Executive. What I didn’t recognize, was there was a lot to learn, which changed quickly based on association with the other leaders on the International Board. That enlightenment specifically helped me understand how important benchmarking and technology was to procurement excellence.In my presentation, I’m going to talk about procurement excellence and link it to use of eProcurement tools. My agenda is listed above.
A few comments about AMD.AMD, is headquartered in Silicon Valley and was founded in 1969, now 44 years old.And although we are a traditional silicon valley company, with the exception of our Chief Financial Officer, all other ‘C’ level executives now reside in Austin, Texas.We now have approximately 10K employees worldwide in more than 50 locations and in 2012, we had revenue of $5.42 billion dollars in revenue.
AMD has played a leadership role in the cloud era of computing. Our mission is to be a leader in designing and integration of innovative, technology solutions that empower people to push the boundaries.Those solutions include communication and gaming devices, data center solutions, and personal computers and mobile applications.Approximately 40% of all computers sold in 2012 used AMD graphics chips.
As the semiconductor market has evolved, AMD has been known as an innovator in microprocessor design creating intelligent and innovative ways for people and businesses to interact. AMD has pushed the technology envelope, from the introduction of the K5 microprocessor which was AMD’s first independently designed X86 microprocessor to our most recent collaboration with every major next generation game console and home entertainment system manufacturer. This includes Sony with their new Playstation 4, Microsoft with their new Xbox One and Nintendo’s enhanced Wii U. These manufacturers will be introducing these new products during this holiday season. I f you are a parents of young kids of teenagers, or if you are a gamer, you’ll want to take a look at these new products for holiday gifts. We’ve seen some features and they are outstanding. Now, the point of this slide is to highlight the technical innovations developed by AMD over the past years and to highlight why there has been, and still is, a need for the procurement organization to innovate and improve.
In an evolving business, CPO’s have many challenges. But whether you’re a Chief Procurement Officer or a sourcing manager at a small, medium, or large corporation, there are some common and consistent challenges. And while these challenges may be different based on the company, there are 3 things that are fairly universal. First is Fueling the Organizational Vision. This is a critical success factor that separates failing organizations from those that have at least a fighting chance to succeed. Your vision for a global strategic sourcing team requires early strategic alignment with the CEO or CFO. The alignment may come with a mandate to the company, but one of the primary roles of the CPO is driving cost reduction. And, there’s added pressure because the CFO emphases the need to contribute to improving the company’s gross margins. Next there’s the challenge of satisfying the many and different stakeholders. Every organization says and really think they are different and unique. Marketing says their requirements are different from engineering, who’s requirements are different from IT, and so on. This situation is repeated with every organization in the company. You quickly recognize there’s a need for some process simplification and automation. And, oh by the way, your responsibility covers the global enterprise which complicates the situation even more.Then there’s the need to rationalize the supply base. You may have recognized there are too many and the same type suppliers and no standard sourcing processes. And, along with no standard sourcing processes you realize there’s also a need to assess supply and financial risk. And for the key suppliers, you have to set some supplier performance expectations. This all as you are being pressed for immediate solutions long before you truly understand the problems.
So, how do you start addressing some of these challenges? First we had to know where we were headed. Some of you may have heard of Gene Richter who was IBM’s Chief Procurement Officer during the mid to late 90’s and worked at Hewlett Packard and Black & Decker before then. Gene passed away in 2003, but he’s credited with developing the concept of strategic thinking in supply management. As a matter of fact, there’s a supply management scholarship funded by his Foundation and ISM. But, regardless of the size or type of operation you’re managing, a strategic plan is the starting point. You have a higher probability of getting support, both at the executive and operating level, when everyone knows your vision and how you intend to get there. Equally important is a set of documented processes that are based on Lean Six Sigma principles. Lean Six Sigma is an enabler to improve efficiency, but it’s also a key talking point for engineering and manufacturing management when building relationships. We have been specifically focusing on administrative applications for lean six sigma with increasing success. Procurement has been taking a leadership role in this space.Creating an environment that supports creativity. Jerry Sanders, AMD’s founder and CEO for the first 35 years of the company’s history had a saying, People first, products and profits will follow. That principle holds true today especially with highly motivated sourcing managers. The work environment is strategically important, and I’m not talking about the size of offices or desk. Environment in this context is related to the culture and the opportunity for motivated individuals to be creative. Once the right culture is in place, it has to be nurtured with incentives for high performers.Next, the CPO has to drive innovation and there’s also a need to periodically re-engineer the organization, processes, and systems. As new technology is introduced, much like from Zycus suite, the CPO has to embrace and find a way to leverage globally. Now this is easier said than done because there are ROI expectations for every dollar spent on the organization. But you have to manage the total mindset of the organization and lead it to change. Norman Vincent Peale, once said, “Change your thoughts and you change your world”.Norman Vincent PealeSeeking external input can help set strategy and targets. And, often innovation is driven by benchmarking and seeking out examples of success. I’ve found it helpful to use benchmarking as the “voice of the truth”. For example, if you are trying to convince your management to spend money on a new venture, just hire a consultant to come in and make the recommendation. The next day you’ll be asked by your management why didn’t you think of that!
Speaking of consultants, Management consultants and researchers play a critical role in driving procurement excellence and technology development. Over the past 10 years we’ve engaged with many sources for insight, comparison, and examples of success. Many are listed here.
One case in particular, several years ago, our CFO commissioned a study of all G&A functions. “Commissioned” is another word for “directed”. The Hackett Group was selected and we were introduced to Hackett’s Value Grid. Hackett defines World-Class Procurement as the top quartile in both Procurement effectiveness and Procurement efficiency. This is an example of a populated Value Grid with typical data indices that would be evaluated.Effectiveness is related to how well you execute specific tasks and efficiency is related to quantitative values of execution.
Our strategic sourcing process is the basis for all of our sourcing decisions and I’d like to spend a few minutes explaining how we use it. The strategic sourcing process, or SSP, starts with a focused Purpose statement with strategic enablers. These include: An Organized methodology that drives our engagement model. Standard Processes that drive sourcing plans on a global basis. And last, but extremely important is Internal Alignment that ensures key business requirements are known and supported. I’ll use the six (6) process steps in the blue chevrons at the bottom to highlight how we overlay technology.
AMD’s procurement organization has been recognized as an early adopter for several areas of non-ERP technology. A lot of the drive was intended to compensate for other areas of limited resources, like headcount. However, there’s also been a pure drive to be best in class. I’ll walk though the specific eProcurement tools we’ve implemented.To support our Category Research and Analysis process step, we’ve implemented Zycus’ Spend Analysis tool. We’ve used it to complement our concept of Trusted Data and have been able to identify cost reduction opportunities. Cost savings opportunities have been realized in leveraging spend, pay terms improvement, and compliance. For Supplier Selection & Evaluation, we’ve implemented Zycus’ eSourcing tool. We use the capability for all RFx and electronic sourcing events across the enterprise. The resulting database of knowledge serves well when we have a change in commodity management.For Contracts Management, we use a competitor’s tool, but there is certainly opportunity for Zycus in the near future. We’re using the capability to enable compliance, reporting and archiving.And lastly, for the key to our overall process, Performance Management, we use Zycus’ Supplier Management tool. It’s the first step in our annual Segmentation process, it drives supplier continuous improvement, and is embraced by stakeholders. Our prior homegrown tool was poorly designed and difficult to use which resulted in low compliance and usage. Everyone loves the intuitive user interface and the reporting generated from the system.
Our corporate vision is to Enable Today, while Inspiring Tomorrow. The Supply Management organization is doing exactly the same as represented by the earlier charts I showed. I suspect each of you in procurement have similar improvement goals. In order to continue to drive value into the future, which is a key differential from just cost savings, there are four key areas I’ve touched on in this presentation: Vision, it has to be Innovative, Out into the Future, and Aligned with the corporate strategy. Procurement can’t be relegated to the back office.You have to have Talent, but it has to be capable and you have to inspire that capability and ask for a commitment. Today’s evolving leaders have to have a reason to stretch.You have to be Process Oriented, with a focus on Lean Six Sigma principles on an enterprise basis. And yes, the processes need to be documented so everybody is working from the same sheet of music.And finally, you have to embrace Technology. Early adoption isn’t for everybody, but when you do, your IT organization has to be on the bus. This is also where non-ERP solutions come into play for flexibility. Size only matters if you need it and there’s no other solution. These areas of focus, along with hard work, have enable AMD to achieve success.
So, in summary, ….Excellence is not out of the reach of any organization, regardless of size. Innovate continuously and raise the bar, but also benchmark to stay connected with the world.However, the challenge is not to reside in a big box, but explore the potential of non ERP solutions. Zycus’ procurement performance suite has been an integral enabler of AMD’s procurement success. We are pleased to see market recognition of Zycus and look forward to continuing (expanding) our relationship in the years ahead.Thank you!