Strategies to Boost Procurement Performance in your SSO

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BAE Systems and Xchanging present a case study on Procurement Outsourcing and the benefits felt.

BAE Systems and Xchanging present a case study on Procurement Outsourcing and the benefits felt.

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  • 1. Strategies to Boost Procurement Performance in Your SSOModerator – Stephen Scott; XchangingCase Study Presenter – David Gillard, BAE Systems Australia© Xchanging 2009, no part of this document may be circulated, quoted or reproduced without prior written approval of Xchanging.
  • 2. About Xchanging … Our aim: Analyst Speak: To be the global business processor of choice Position Online on Xchanging “With a few major deals that make Xchanging a big part of the (re)insurance world, Xchanging is the largest insurance One of the largest and fastest growing international outsourcer around. Xchanging is the only BPO player with a business processors significant Indian presence in this list." • Founded in 1999 in the UK, Xchanging has grown its international footprint rapidly, listed on the London Stock Dataquest rates “Xchanging as the number one BPO Exchange in 2007 company in the world” • Employ over 9,000 people in the UK, Germany, France, Italy, In Revenue size Xchanging ($1.2B) has toppled Genpact India, Singapore, Malaysia, Japan, Australia and the USA ($1.1B) since 2009. • We have 280 major customers across 42 countries Global Services 100 - Xchanging Recognized as One of the • Our major processing centres are in the UK (Preston, Chatham), Germany (Frankfurt, Hof), US (Chicago, Cleveland), India Worlds Top Outsourcing Providers (Gurgaon, Bangalore, Shimoga, Chennai) and Australia Xchanging has been recognized as one of the worlds top (Adelaide, Sydney Melbourne) outsourcing service providers in the 2010 Global Services 100 (GS100) provider list. The analysis is based on four primary pillars; Management Excellence, Customer Maturity, Global Delivery Maturity, and Breadth of Services Portfolio. Gartner: Xchanging, is a large player in the insurance BPO market there. It has 3,500 staff dedicated to insurance BPO…Its services include processing of insurance policies, premium and claims and brokering services2 “the cultural and operational reinvention of our customers’ non-core operations” © Xchanging 2011, no part of this document may be circulated, quoted or reproduced without prior written approval of Xchanging.
  • 3. Customer Case Study – Procurement Outsourcing David Gillard Director, Commercial & Procurement BAE Systems Australia© Xchanging 2009, no part of this document may be circulated, quoted or reproduced without prior written approval of Xchanging.
  • 4. BAE Systems Australia Overview • Australias largest defence company • Offers the Australian Defence Force and security customers total capability across the defence and security domains • Business Units Include: – Land and Integrated Systems – Maritime – Aerospace – Defence Logistics Our vision • To be Australia’s strategic industry capability and sustainment provider across the defence and security domains4 © Xchanging 2011, no part of this document may be circulated, quoted or reproduced without prior written approval of Xchanging.
  • 5. Procurement Strategy … …at the Business Unit Level… • Leverage domain expertise and early procurement involvement in critical and complex project subcontracts/procurement activities in order to reduce overall project risk …at the Corporate (Centralised) Level… • Leverage indirect (non-project) spend to minimise costs Historically Indirect Spend Management Challenges: • $80m annual spend in Indirect Areas (e.g. Travel, FM, HR, Marketing, Office Supplies) • Resources focused on delivering against core projects, not indirect spend • Pockets of good practice but in general uncoordinated management of indirect spend, evidenced by: – Multiple supply contracts with different suppliers providing the same goods and services (1500+ Indirect Suppliers), and multiple supply contracts with the same supplier – Complacent suppliers, with minimal formal measurement of suppliers’ performance or compliance – Tactical purchasing with reactive approach to contracting5 © Xchanging 2011, no part of this document may be circulated, quoted or reproduced without prior written approval of Xchanging.
  • 6. Why Outsource? To increase leverage of Indirect Spend, the decision was taken to outsource the management of this spend to a Strategic Sourcing Partner; Xchanging This decision was taken in order to: • Focus on reducing costs across indirect spend categories, whilst not pulling internal resources away from other critical projects • Centrally manage BAE Systems’ indirect cost base to drive compliance and improve savings • Access IP in the form of Xchanging’s Sourcing Methodology to accurately baseline current prices, track savings and manage sourcing projects • Leverage experience from BAE Systems UK/Xchanging UK relationship • Introduce a ‘Change Agent’ to drive the necessary behavioural changes in buying/usage patterns • Improve Supplier Relationships with key suppliers6 © Xchanging 2011, no part of this document may be circulated, quoted or reproduced without prior written approval of Xchanging.
  • 7. Xchanging’s Role … • Provide enterprise-wide Strategic Sourcing Services via an on-site team based at Corporate Headquarters – Identify/Generate Procurement Opportunities – Develop Sourcing strategies – Negotiate for Supply – Contract Management – Support Supplier Management • Our agreed joint objectives are: – To deliver savings whilst maintaining and wherever possible, improving on existing service levels – Contribute to the national focus on cost base reduction across BAE Systems • Xchanging is remunerated through a combination of: – Fee charged on the amount of spend managed – Share of savings achieved – Performance Bonus linked to innovation and service excellence7 © Xchanging 2011, no part of this document may be circulated, quoted or reproduced without prior written approval of Xchanging.
  • 8. The Benefits … Since contract signature at the end of 2006: • Total Net Savings of over $5M thus far • Reduction in suppliers from 1500+ to c.300 with further rationalisation planned • Improved supplier management by implementing KPI tracking across all key suppliers • Greater compliance to preferred suppliers across all Business Units The Ongoing Challenge for BAE Systems and Xchanging • Deliver continued innovation and strategic change – challenging not just the supplier base but challenging how we do business • Streamlining the Procure-to-Pay process8 © Xchanging 2011, no part of this document may be circulated, quoted or reproduced without prior written approval of Xchanging.
  • 9. Conclusions Benefits exist from outsourcing aspects of an organisations procurement, however success is dependant upon: • Strong sponsorship for new initiatives • Suitable appetite for change, and strong change management capabilities within the outsourced provider • Robust processes for measuring savings and performance that stand up to audit (typically be internal finance function) • A combined focus not just on savings, but on service to the Business Units and a drive to adopt best practices9 © Xchanging 2011, no part of this document may be circulated, quoted or reproduced without prior written approval of Xchanging.
  • 10. Contact David Gillard Director – Commercial & Procurement BAE Systems Australia David.gillard@baesystems.com Stephen Scott Head of Advisory Services Xchanging Stephen.scott@xchanging.com10 © Xchanging 2011, no part of this document may be circulated, quoted or reproduced without prior written approval of Xchanging.