A Look into Purchasing Organization
                                      Optimization and Business Transformation
       ...
Introducing Ariba
    Most-Used Spend Management Software Suite
        Over the past year, customers used Ariba to:
     ...
General Motors Indirect Purchasing’s Evolution to Transformation


     Pre 1992                      Post 1992           ...
Why Transformation ?
                                                                    Savings performance over time had...
The importance of the right relationship

   Selection criteria?
       Needed a strong external change agent with organiz...
Challenges to Face

   Track record for always meeting/
 exceeding targets                                              IM...
Our Organisational Design & Transformation framework provides
the foundation upon which engagements are executed

        ...
Table of Contents

 1. Objectives of the program
 2. Partner selection criteria.
 3. The challenges facing the team initia...
Purchasing organisation completely bogged down by low value transactions,
substantial spend fragmentation. Significant pot...
Recommendations

  There is a significant untapped opportunity within GME.
  Move from a tactical to a strategic Purchasin...
How we made a “ Win- Win”

  Organizational acceptance a pre-requisite to success
    Key sponsorship from the top ( Globa...
Ariba Snapshot
Transformation Implementation Highlights


       Transparency of actual spend (higher than tracked)
      ...
Contact Information


        Barbara Whittaker - barbwhitt@comcast.net
        Executive Director Global Purchasing (Reti...
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Microsoft Power Point Sig Presentation Final

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"Purchasing Organization Optimization and Business Transformation"

SIG annual conference 2010, USA.

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  1. 1. A Look into Purchasing Organization Optimization and Business Transformation Spend & Savings Suppliers Change Structure Management & Adoption People 1st April, 2010 Process Systems Barbara Whittaker (Executive Director Global Purchasing, General Motors – Retd) George Joseph (Managing Director, Ariba Inc.) A R I B A® C O N F I D E N T I A L 2010 General Motors Vision To be the world leader in transportation products and related services” Global sales leader for 76 years GM does business in 140 countries Produces products in 34 countries Over 8 million vehicles sold in 2008 Employs 204,000 people GM purchases over $40 billion per year A R I B A® C O N F I D E N T I A L 2010 2 1
  2. 2. Introducing Ariba Most-Used Spend Management Software Suite Over the past year, customers used Ariba to: • Source $340B across 450 categories • Enrich more than $240 billion of spending • Manage over $170B in spend transactions • Manage more than 2 million expense reports • Manage more than 3 million contracts • Generate over $30 billion in savings Global Services and Expertise 700 global consultants 400 Spend Management specialists Four global service centers Open Global Network 168,000 transaction-enabled suppliers (>250,000 total suppliers) 21.5M POs, $110B annually 10M Invoices, $60B annually >1,000 customers of all industries, sizes, geographies Including more than half of the Fortune 100, including 18 of the F20 3 A R I B A® C O N F I D E N T I A L 2010 3 Table of Contents 1. Objectives of the program 2. Partner selection criteria. 3. The challenges facing the team initially. 4. The methodology that was applied. 5. The initial findings and recommendations. 6. The real life challenges faced and compromises made implementing the change. 7. The end results of the change A R I B A® C O N F I D E N T I A L 2010 4 2
  3. 3. General Motors Indirect Purchasing’s Evolution to Transformation Pre 1992 Post 1992 2006 Future State Local Purchasing with World Wide Purchasing “ Act as One GM” Approach Less tactical and Buyers at each GM created New GPSC organization transactional work division and facility Beginning of global Broader scope of purchases Buyers manage strategic (BOC,CPC,GMPT, sourcing initiatives Marketing & Advertising and business critical GMTG,SPO, Opel AG, spend Vauxhall, Holden, etc) More influence on Mature global network but low supply base and spend transparency to data More use of e-auctions Low influence on and spend analysis tools supply base or spend Clear need to drive to Substantial influence on bottom line savings supply base and spend One global purchasing Mostly tactical and system transactional activities Reduced focus on transactional activities Focus on Return on Procurement Investment Use of e-auction tool (ROI) GFIMS (SAP) defined A R I B A® C O N F I D E N T I A L 2010 5 Vision Global operations that leverage both supply base and GM purchasing resources in execution of the procurement of goods, services, and equipment required by the company at the best value and on-time. Segmentation Characteristics Characteristics Enablers Enablers Results Results Segmentation • High Risk, Complexity, APV • Global CT Leadership • Best in class Supply base • High Risk, Complexity, APV • Global CT Leadership • Best in class Supply base • Global or Regional Commodities • Global Pipeline Tool, SAP • Standardized Global • Global or Regional Commodities • Global Pipeline Tool, SAP • Standardized Global Strategic • Strategic Engagements- Supplier, • Internal Customer alignment • Internal Customer alignment Specs Specs • Strategic Engagements- Supplier, Internal Customers • Highly skilled Project Buyers • Maximize Value (Total Internal Customers • Highly skilled Project Buyers • Maximize Value (Total • Governance Structures Cost outlook) vs. just Cost • Governance Structures Cost outlook) vs. just Cost • Benchmarking Reduction (Package Cost) • Benchmarking Reduction (Package Cost) • Medium Risk, Complexity, APV • Global CT Leadership •Rationalized Supply base • Medium Risk, Complexity, APV • Global CT Leadership •Rationalized Supply base • Global or Regional Commodities • Local/Regional Buyers •Cost Reduction due to • Global or Regional Commodities • Local/Regional Buyers •Cost Reduction due to Tactical • High Interaction with Suppliers and • Spend Visibility for bundling aggregated volumes • High Interaction with Suppliers and • Spend Visibility for bundling aggregated volumes Customer opportunities (SAP) •Transparent and shorter Customer opportunities (SAP) •Transparent and shorter • Extensive use of E-Auctions Sourcing leadtimes • Extensive use of E-Auctions Sourcing leadtimes • Benchmarking • Benchmarking • Low Risk, Complexity, APV • Centralized, Outsourced • Low Risk, Complexity, APV • Centralized, Outsourced • Reduced Structural Costs Transactional • Highly Transactional • Reduced Structural Costs • Highly Transactional Operations • Satisfied customers • Low Supplier, customer interaction Operations • Satisfied customers • Low Supplier, customer interaction • Self-Service capabilities • Reduced Spot buys • Self-Service capabilities • Reduced Spot buys • Common coding (SAP) • Common coding (SAP) A R I B A® C O N F I D E N T I A L 2010 6 3
  4. 4. Why Transformation ? Savings performance over time had flatten. Number of resources had grown disproportionately to the spend by region. (GME 178 vs. NAO 139) Numerous purchasing systems with little integration.( SAP, Olympic, OLAS) Company Challenged to cut structural cost and control spending Repeated regional attempts to restructure yielded modest results Heighten awareness of the need for internal controls.( internal audit, SOX requirements) I Increased performance Imperative A R I B A® C O N F I D E N T I A L 2010 7 Table of Contents 1. Objectives of the program 2. Partner selection criteria. 3. The challenges facing the team initially. 4. The methodology that was applied. 5. The initial findings and recommendations. 6. The real life challenges faced and compromises made implementing the change. 7. The end results of the change A R I B A® C O N F I D E N T I A L 2010 8 4
  5. 5. The importance of the right relationship Selection criteria? Needed a strong external change agent with organizational credibility. Important that analytical tools were readily available. Ability to broaden scope and be flexible on timing. Approach presented fit organization strengths and weaknesses. What did Ariba bring? Excellent on site leadership jointly selected. Extensive category management expertise. Strong analytical capabilities. A methodology to drive results. An understanding of our business Positive past performance with auction support etc. A R I B A® C O N F I D E N T I A L 2010 9 Table of Contents 1. Objectives of the program 2. Partner selection criteria. 3. The challenges facing the team initially. 4. The methodology that was applied. 5. The initial findings and recommendations. 6. The real life challenges faced and compromises made implementing the change. 7. The end results of the change A R I B A® C O N F I D E N T I A L 2010 10 5
  6. 6. Challenges to Face Track record for always meeting/ exceeding targets IME Employee distribution: Global Total- 544 Unstable economic environment GMNA- 190 Size and Scale GME - 175 Sweden -12 Number and disbursement of IME employees Indirect spend $1,666 per /vehicle Over 470,000 Items ( excluding service) Canada - 8 U.K.- 12 Germany- 83 25,000 Suppliers globally Spain-12 Austria -8 179 plant sites plus headquarters Japan -1 USA- 165 Portugal - 5 China- 8 Korea - 54 Customer acceptance and increased Egypt -7 demands Mexico- 20 Dubai- 2 APO- 125 Thailand- 9 Venezuela -8 India -22 Leadership understanding and support Columbia-4 throughout the company Equador-4 Brazil -31 Language and cultural differences LAAM- 73 Australia- 18 Organizational alignment i.e. Global Manufacturing South Africa- 7 Chile -4 Argentina- 6 Lack of spend analysis and visibility Global Purchasing and Supply Chain Resistance to change 5 Rev. 04OC05, Joe Kushuba Skill assessment of employees Disparity of systems A R I B A® C O N F I D E N T I A L 2010 11 Table of Contents 1. Objectives of the program 2. Partner selection criteria. 3. The challenges facing the team initially. 4. The methodology that was applied. 5. The initial findings and recommendations. 6. The real life challenges faced and compromises made implementing the change. 7. The end results of the change A R I B A® C O N F I D E N T I A L 2010 12 6
  7. 7. Our Organisational Design & Transformation framework provides the foundation upon which engagements are executed • Spend & Savings – Identification of yearly spend and the activity distribution to manage the spend. Furthermore, identification of savings opportunities through sourcing or procure-to-pay category enablement. • Structure – Evaluation of the spend management organization’s internal design, reporting relationships, place in the overall customer organization, and the identification of opportunities for greater efficiency or effectiveness. Spend & Savings • Processes – Identification of process improvement opportunities based on best practices across the phases of the Spend Management Lifecycle. Suppliers Change • Systems – Review of current spend management platform (applications, infrastructure Structure and support) for opportunities to support more categories / spend under management and to Management People improve internal customer service. Process • People & Culture – Evaluation of the organization’s performance and potential Systems through the assessment of roles / responsibilities, training, professional development, communication and change management. Identification of the appropriate metrics and measures that firmly connect the organizational performance to strategies / goals. • Suppliers - How do we manage our relationship with suppliers, How do our suppliers rate us as a counterparty to do business with, how do we leverage the expertise of our suppliers in our business. • Change Management – Assess the extent of Change required across above dimensions and all functional groups, stakeholders and internally within the Purchasing team. Generate awareness, understanding and positive perceptions of the Strategic Spend Management Team. Address necessary actions to improve state of readiness for change. Engage and gain commitment from all sponsors, users & stakeholders to lead the change process. Develop a Change management plan. A R I B A® C O N F I D E N T I A L 2010 13 There are two key phases: Due Diligence and Implementation. Taken together, they average 24 months to deliver. Due Diligence – 3/6 months and 5 Sourcing events Implementation – 18/24 months – Subject to Output from Due Diligence. Due Diligence Implementation Spend & Spend Management Life Cycle Savings Identify Opportunit Develop Source Contract and Invoice Monitor and Strategy and and Pay y Procure Manage Suppliers Negotiat e Spend Change Structure Management Savings People Jan ‘10 Week 1 Jan ‘10 Jan ’10 Week 2 Week 3 Week 4 Jan ’10 Feb Mar Apr May Jun Q3 ‘10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Structure Purchasing Charter & Plan Process Process Develop reporting, compliance mechanism, & savings tracking PMO PMO Ongoing program oversight, resource coordination & effort prioritization Systems Change Mgmnt: Vision Workshop, Stakeholder Analysis, Change Planning, Ongoing Execution Systems AS IS Benchmark Plan People Transformation Transformation Program Data Analysis Data Analysis Best in Class Best in Class Program Spend Management Spend Management Transformation Transformation Roadmap Roadmap Qualitative Assessment Qualitative Assessment Gap Analysis Gap Analysis Suppliers Transform: Standard Process Creation, Training, Adoption Plan (Tech & Process) Category Assessment Execution* Sourcing Execution* Benchmarking / “Quick Hit” Savings Projects Sourcing Execution: Strategy, Demand Mgmnt, RFx, Negotiation, Supplier Management, Compliance A R I B A® C O N F I D E N T I A L 2010 14 7
  8. 8. Table of Contents 1. Objectives of the program 2. Partner selection criteria. 3. The challenges facing the team initially. 4. The methodology that was applied. 5. The initial findings and recommendations. 6. The real life challenges faced and compromises made implementing the change. 7. The end results of the change A R I B A® C O N F I D E N T I A L 2010 15 Total Spend Spend under management (reported) was substantially lower than actual spend (variance in excess of 150%) Spend Tracked for Performance - $X Spend Based on data Analysis - $ 2.1X Spend back calculated by Finance - $ 2.6X A R I B A® C O N F I D E N T I A L 2010 16 8
  9. 9. Purchasing organisation completely bogged down by low value transactions, substantial spend fragmentation. Significant potential to increase savings by focusing on larger spend, consolidation & aggregation. Base Data Sourcing 226,973 Orders Activity Av $207k 100% of Spend Frame Contracts Spot Buys Release Orders 3,655 Contracts 100,208 Orders 18.11% 19.24% Spot Buys < 12.5K Spot Buys > $12.5k 86,639 Orders Rush Orders 10,157 Orders 6.55% 46,604 Orders 74.46% 0.67% Transactional Activity 80% of transactions Emergency Orders 712 Orders 0.67% A R I B A® C O N F I D E N T I A L 2010 17 Number of GME´s current active suppliers: 15,396 $3.500.000.000 10% of all active suppliers represent 90% of the total spend (3.1bn U$) $3.000.000.000 $2.500.000.000 Spend U$ $2.000.000.000 $1.500.000.000 13,961 suppliers represent only 299 Mio U$ of total spend Ø $21,416 / Supplier $1.000.000.000 $500.000.000 $0 1 606 1211 1816 2421 3026 3631 4236 4841 5446 6051 6656 7261 7866 8471 9076 9681 10286 10891 11496 12101 12706 13311 13916 14521 # of suppliers A R I B A® C O N F I D E N T I A L 2010 18 9
  10. 10. Recommendations There is a significant untapped opportunity within GME. Move from a tactical to a strategic Purchasing Organization. Re-organize sourcing organisation using current commodity groups. Aggregate and Reduce Sourcing events Increase percentage of spend in frame contracts Increase size of negotiated contracts by aggregation. Increase time spend on establishing sourcing contracts Create a transaction centre in a low cost region and push low value transactions to this centre. Implement a process/ system to get more visibility into your spend. Deploy a process management system with workflows, templates/knowledge-supporting tasks and on-line approval schemes Rationalise approval process and thresholds. Ensure compliance to Frame contracts. Rationalise Supplier base and reduce low volume suppliers. Identify Strategic Suppliers and roll out SPMP over time Invest in Stakeholder Management. Implement a Talent Management program. Clearly outline, define and communicate roles & responsibilities across the Purchasing organization A R I B A® C O N F I D E N T I A L 2010 19 Table of Contents 1. Objectives of the program 2. Partner selection criteria. 3. The challenges facing the team initially. 4. The methodology that was applied. 5. The initial findings and recommendations. 6. The real life challenges faced and compromises made implementing the change. 7. The end results of the change A R I B A® C O N F I D E N T I A L 2010 20 10
  11. 11. How we made a “ Win- Win” Organizational acceptance a pre-requisite to success Key sponsorship from the top ( Global Executive Director and Region VP ) Regional leadership approval (Strategy board member communications and buy-in cross functionally, Works Council discussions by country gained support) Clarity of mandate Establish a set of metrics with customer buy-in. Set baseline through data collection and cleansing. Alignment to current organization out of synch GFIMS delay in implementation required segregation of resources Functional changes in Manufacturing resulted in country hub structure Optimal location of transaction center not in line with GPSC hub Ability to assess skills and talent inhibited due to work rules Conducted global talent reviews to establish crucial skills Appointments based on performance and needs. Challenges to off shoring solution not fully anticipated. Timing adjustments made to allow adequate training Metrics were reassessed and revised to focus on customer turnaround Management oversight was extended to allow for support Key to overcoming implementation challenges Ariba change management process Real time data and metrics to assess status Timing of resource redeployment allowed deployment flexibility Quick early wins secured organization support A R I B A® C O N F I D E N T I A L 2010 21 Table of Contents 1. Objectives of the program 2. Partner selection criteria. 3. The challenges facing the team initially. 4. The methodology that was applied. 5. The initial findings and recommendations. 6. The real life challenges faced and compromises made implementing the change. 7. The end results of the change A R I B A® C O N F I D E N T I A L 2010 22 11
  12. 12. Ariba Snapshot Transformation Implementation Highlights Transparency of actual spend (higher than tracked) Improved visibility into sourcing pipeline and re-sourcing requirements. Low Value transactions moved out allowing focus on Strategic Buying Strategic Buying hubs established (High Cost & Low Cost location). Faster turnaround time and improved efficiency Clarified Global common approval process Reduced Complexity in approval levels and process Reduced Structural costs by approx 35%. A R I B A® C O N F I D E N T I A L 2010 23 Significant Impact on Savings Performance Savings performance 160 140 135 140 Start of 127.4 130.3 124.5 124.3 Transformation 120.58 117.9 118.4 111.1 113.7 120 106.4 100.2 101.8 101.7 100 92 91.9 83.3 $ Million 78.3 73.5 73.9 80 68.5 69.7 63 12 63.4 65.3 55 54.7 52.8 54.5 60 48.1 44.9 40 40.3 38 38.7 39 39.3 39.6 39.8 37.3 34.2 36.4 34.3 35.9 40 30.7 25.6 25.9 18.4 20.2 38.5 38.9 39.4 41.3 15.6 16.1 32.9 35.4 20 27.3 27.8 22.5 24.9 20.8 15.2 16.1 Before Transformation 0 ITB Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2004 2005 2006 2007 2008 A R I B A® C O N F I D E N T I A L 2010 24 12
  13. 13. Contact Information Barbara Whittaker - barbwhitt@comcast.net Executive Director Global Purchasing (Retired), General Motors Corporation. Cell: +1 (586) 899 1309 Office: +1(248) 3351943 George Joseph – gjoseph@ariba.com Managing Director, Spend Management Services Ariba, Inc. Mobile: +1(908) 635 4732 Office: +1(412) 297 8081 A R I B A® C O N F I D E N T I A L 2010 25 A R I B A® C O N F I D E N T I A L 2010 26 13

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