Use Spend Analysis & eSourcing Technologies to Drive Buy in and Compliance_US Airways

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Re-engineering procurement function by focusing on improvements in people, process and technology.

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  • Here is today’s agenda
  • We want to show our customer how we are approaching our sourcing strategy and moving from a transaction-oriented perspective to a strategic-oriented enterprise – and how this model will help us in this transformationWe have completed most of our fact-finding and data gathering in steps 1 and 2 of the process and will share key elements with you in the upcoming slidesAs highlighted in step 3, we are currently conducting the Supply Market Analysis and will show you our time-line for completion when we get to the “Next Steps” slide
  • Develop and Implement……Customer Metrics for our Monthly ReviewsOur Sourcing Strategy for Aircraft Appearance Products and ServicesSupplier Score Cards and Key Performance Indicators
  • Knowing your customers Bill of Material and Statement of work are essential to starting any strategic sourcing strategy
  • These are the Aircraft Appearance SKU’s33 SKU’s and 17 Suppliers are controlled by our distributor MLCO and will be integrated into our strategy
  • Use Spend Analysis & eSourcing Technologies to Drive Buy in and Compliance_US Airways

    1. 1. Use Spend Analysis and e-Sourcing technologies to drivebuy-in and compliance Presented by: Edward Jimenez Sr. Sourcing Leader US Airways October 22, 2012
    2. 2. Key Messages Why it’s important to know your customers and the industry they serve Delivering value through People, Processes & Tools Understand the enabling power of your spend analysis and e-Sourcing tools Our ―Desired End State‖ for Corporate Purchasing
    3. 3. Agenda  U.S. Airline Industry  US Airways Overview  Reengineering the Procurement Function  Desired End State  Delivering Value
    4. 4. U.S. Airline Industry Capacity Management Ancillary Revenue – (US Airways > $500M in 2011) Consolidation Fuel is 25 to 32% of Operating Expenses – US Airways does not hedge (since 2009) Quality Cabin Service is a key advantage – 1st Class (Domestic) – Envoy (International)
    5. 5. US Airways OverviewUS Airways Chronology 1939 - 1953 1968 1972 1979 1988 / 1989All American Aviation Allegheny Merges Allegheny Acquires Allegheny Changes PSA & Piedmont / Allegheny w/Lake Central /Mohawk Airlines Name to USAir Merge w/USAir Airlines 1992 1996 May 2005 Sept. 2005USAir & Trump Shuttle USAir is named America West & US Airways & America Begin Marketing US Airways US Airways announce West Merger complete Affiliation plans to merge
    6. 6. US Airways Overview Fact Sheet  Total Daily Flights: 3,197 daily departures (1,268 US Airways Mainline 1,929 US Airways Express)  Total Employees: 32,306 (as of 7/1/2012) – Pilots: 4,234 – Flight Attendants: 6,817Headquarters – Maintenance and Related: 3,522111 W. Rio Salado Pkwy. – Fleet Service: 5,779Tempe, AZ, 85281 United States – Airport Ticket/Gate: 5,010(480) 693-0800 – Reservations: 1,580http://www.usairways.com – Other: 5,364 Hub Operations: – Charlotte Daily Flights: 633 (264 US Airways Mainline, 369 US Airways Express) Gates: 65 – Philadelphia Daily Flights: 453 (148 US Airways Mainline, 305 US Airways Express) Gates: 87 – Phoenix Daily Flights: 287 (189 US Airways Mainline, 98 US Airways Express) Gates: 56 Focus City: – Washington, D.C. Daily Flights: 214 (55 US Airways Mainline, 159 US Airways Express) Gates: 16
    7. 7. US Airways Overview Across the board, US leading the industry OperationsGood Good Flights that depart on time Flights that arrive on timeGood Good Bags that don’t arrive on time Scheduled flights completed
    8. 8. US Airways OverviewFinancialsNot only has US Airways set several operational records, but we also reported a record quarterlyprofit. Additionally, we’re ahead of our peers in pretax margin performance, which indicates how muchof every dollar of revenue collected the Company keeps. 2Q12 Pretax Margin 14.7₵- AS • Operating Revenues: 9.7₵— WN 8.6₵— US 2011 2010 2009 = 6.7₵— B6 6.1₵— DL • Mainline $8,501 $7,645 $6,752 5.5₵— UA • Express $3,061 $2,821 $2,503 1.5₵— AA • Cargo $ 170 149 100 • Other $1,323 $1,293 $1,103 • Totals $13,055 $11,908 $10,458
    9. 9. US Airways Purchasing Groups Fuel Administration Supply Chain / Procurement Corporate Purchasing Fuel Hedging & Supply  Technical Purchasing  Aircraft Appearance ‒ Repair Analysis  Clubs Fuel Operations ‒ AOG’s / Spare Parts  Company Store ‒ Ground Support Equip.  Corporate / Distresses Travel Corporate Finance / Fleet  Copy Center / Print Shop  Power Plant Programs Administration  HR Software ‒ Contracts & Leasing  InFlight (Dinning & Cabin)  Light / Heavy Maintenance  IT / Telecom Support  Warehouse & Distribution  Mail Services  Material Planning  Marketing  Multi-Function Copiers  Printed Materials  Office Supplies  Safety  Uniforms US Airways does not hedge (since 2009)
    10. 10. Products & Services
    11. 11. Reengineering the Procurement Function  Understand the Mess  Current State  Teaching the Monster to Change  Where do you start?  Sourcing Strategy Process Model  Plan and Execute
    12. 12. The Mess
    13. 13. The Mess People Processes Tools Skills Common Systems Corporate Purchasing Enterprise Training Aligned Customers Material Sourcing Suppliers Budgets Strategy Bill ofFunctions Metrics & Materials Statement Ethics & Scorecards of Work Integrity Best Practices Contract Unions Management
    14. 14. The Mess Unleashed Customer 1 Customer 2 Customer 3 Customer 4
    15. 15. Current State
    16. 16. Corporate Purchasing Functional Excellence People Tools & Systems • Demonstrate Highest Ethical Standards • Spend Analysis & eSourcing • Capabilities and Skills for the Future (Recruiting) • ShopUS / Sceptre (Authorization Levers) • Engaged, Diverse Workforce • E5 / Data Warehouse (Accounting tools) • Share Point (Purchasing Website) • Detailed Customer Knowledge and focus Processes Preferred Suppliers • Enterprise Aligned • Valued Relationships • Gate Reviews (Project Approval Process) • Global Supply Chain Networks • Project Management Best Practices • Continuous Improvement • Sourcing Strategy Process Model • Quality and Performance Driven • Demonstrate Highest Ethical Standards Delivering Value
    17. 17. Teaching the Monster to Change Where are we going? How are we getting there?
    18. 18. Where do you start? People Processes Tools Ineffective, tactical, reactive, n  No Standard Processes  Limited Data / Spend Visibility on-strategic thinking  Limited Policy Enforcement  Poor or Limited use of Technology Limited customer knowledge  Cost Leakage  Weak Invoice Reconciliation / Decentralized organization Management  Processes not leveraged High turnover  Limited Long Term Forecasting  Limited Contracts & Price Approach Tribal knowledge culture Agreements  Minimal Market Analysis No clear career develop path  High Process / Labor Costs Complex Union Issues  Limited 3rd Party Cost Structure Analysis
    19. 19. e-Enabling our Business Domestic Global Procurement Supply Chain Supply Chain Professional Strategic Sourcing Standard Data Warehouse and Tools Detailed Customer  Supplier Portal Knowledge Transportation  e-Sourcing /Auctions  e-Collaboration & Data Transmittal  e-Purchase Orders & Payments Project  e-PO File Management Finance Management  Supplier Performance Enabling Power of Our Tools
    20. 20. Understand the enabling power of your spend analysis and e-Sourcing tools Working Together
    21. 21. Sourcing Strategy Approach The Corporate Purchasing function is transitioning from a transaction-oriented perspective to a strategic- oriented enterprise. The Sourcing Strategy Process Model highlighted below will help drive this transformation and provide US Airways customers greater overall value in the Supply Chain Process.Sourcing Strategy Process Model 1 2 3 4 5 6 Conduct Develop Implement & Profile Conduct Supply Issue RFP’s Opportunity Commodity Manage Commodities Market Analysis & Negotiate Assessment Strategy PerformanceAssess and prioritize Develop a detailed profile Conduct market Develop organization Develop and issue Implement contractsopportunities based of commodities including analysis to identify wide commodity RFP’s based on and/or pricingon a thorough spend profile & industry acquisition strategy sourcing agreements, continuallydepartment-wide Specifications trends, supply & based on commodity strategy, conduct measure, track, andspend analysis demand profile & supply market negotiations, evaluat manage performance levers, potential new analysis e proposals and suppliers, negotiation negotiate contracts & levers, and available pricing agreements contract vehicles
    22. 22. Aircraft Appearance StrategySourcing Strategy / Customer Metrics / Supplier Scorecard & KPI’s
    23. 23. Aircraft Appearance StrategyCustomer Bill of Material and Statement of Work
    24. 24. Aircraft Appearance StrategyAircraft Appearance SKU’sNote:33 SKU’s and 17 suppliers are controlled by MLCO
    25. 25. Office Supplies Strategy Supplier A - ScoreCard Performance as of 9/18/2012 Monthly Status Performance Summary in 2012-2013 Metric # Description Owner Goal Actual Apr May Jun Jul Aug Sep Oct Nov Dec 1.5% Rebate US01 Monthly Spend Bell/Miner $233.3K $ 327,418 B B B B B 1.5% Rebate US02 Cum Spend Bell/Miner $1.166M $1.481M B B B B B US03 Fill Rate Bell/Miner 98% 99.59% G G G B B US04 Returns Bell/Miner <1.7% 0.87% R G G B B US05 Order Size Bell/Miner <$50 @ 15% 17.35% G G G G G US06 Customer Calls Bell/Miner <45 Avg 26 Y G G Y B Measurement Codes: B B = Blue Significantly ahead of plan G G = Green On plan Y Y = Yellow Marginally off plan R R = Red Significantly off planMajor Milestones: 4/1/11 06/2012 06/2013 06/2014 4/1/15 4/1/16 Annual Quarterly Annual Quarterly Annual Quarterly Start Sourcing Quarterly New Contract New Contract Quarterly Vendor Reviews Vendor Reviews Vendor Reviews Process Reviews Awarded Awarded Reviews Expo Expo Expo
    26. 26. Desired End States Utilizing people, processes and tools to lower our CASM (cost per available seat mile) and increase profitability!
    27. 27. Thank You!

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