Collaborative Sourcing in the Networked Economy

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Achieving next wave of Sourcing Performance requires an optimal balance of Cost Savings, Risk Mitigation and Performance Management. With rising inflation, global competition, and tightening supply markets, eSourcing alone is not enough and organizations need to embrace a step change to make Sourcing “Strategic” in their respective organizations to be competitive.

Join this session to hear from world-class organizations who leverage Ariba technology, network and capabilities to build a Strategic Sourcing program and deliver sustainable savings with optimal risk mitigation and high performance.

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  • This is further evidenced by statistics that show that Networked Enterprises simply perform better on numerous corporate KPIs. Statistics like 24% Increased revenue, 43% greater market share and 8% higher margins really can’t be disputed in terms of shareholder value, as uncovered by a recent McKinsey report.
  • Talking Points: Largest subscription media company in U.S. – “Say bigger than Comcast and Direct TVTelematics – future streaming services in your car will include Travel Link, Google Maps, Weather, Roadside Assistance2013: In January, Liberty Media took control of Sirius XM Radio. Liberty Media owns interests in a broad range of businesses, including Atlanta National League Baseball Club, TruePosition, Live Nation, Barnes & Noble, as well as minority equity investments in Time Warner Inc. and Viacom
  • History:In 2010 – Implementation was kickoff of change management and Word of Mouth SuccessesPlus,In 2013: Spend Analysis and Diversity TrackingValue Proposition:Sirius XM also uses Ariba Contracts Pro to efficiently manage contractsNDA’s where applicableAriba Sourcing supports:Efficiency and support for business team – use of templates (timely and consistent business questions)Ethical, equally advantaged suppliersCompetitive pressureTransparencyQ&A periodAutomated Scoring to remove potential name bias
  • SOURCING:- Discovery: Data Center – very specific requirements – both service and geographical requirements- RFI - Contract Furniture: Complexity – Direct Manufacturer – Surety Bond – Three Mfr’s. Reps. From each mfr.- RFP – Examples of Savings - Auction – Examples – cumulative savings totals - On average an additional 15% savings by including auctions – RISK MANAGEMENT PROCESS- BOD Watch List – Quarterly- Financials: Risk summary reports for Sourcing Supplier Pools (vetting process) Zscore analysis for privately held companiesSUPPLIER PERFORMANCE MANAGEMENT (SPM)Implemented process for promotional print services – reduced supplier issues/generated innovative new ideas that were useful (i.e. gang runs, substrate substitution, etc.)- Tools used include: Supplier Action List and 360-degree feedback scorecard
  • Collaborative Sourcing in the Networked Economy

    1. 1. Collaborative Sourcing in theNetworked EconomyMay 2013© 2013 Ariba, Inc. All rights reserved.
    2. 2. Agenda• Introduction• Panel Discussion• Key Takeaways• Q & A© 2013 Ariba, Inc. All rights reserved.2
    3. 3. The Panel TeamSpeakers: Elaine Griffith, Sirius XM John de Brun – Top Source LLCJoe Gigliotti– Jet Blue© 2013 Ariba, Inc. All rights reserved.3Moderator : Sundar Kamakshisundaram,Sr. Director – Solutions Marketing, Ariba, Inc
    4. 4. World Class Procurement Excellence…is essential to be competitive>85% Spend Under Management6+% Annual Recurring Savings72% Compliant SpendSource: Ardent Partners CPO Rising 2012Are you World Class?© 2013 Ariba, Inc. All rights reserved.4
    5. 5. EconomicVolatilityCost Savings PressureSustainabilityFocusRisks of NaturalDisasterGlobal Trends are Driving Change in Procurement
    6. 6. Top Challenges for CPO’s© 2013 Ariba, Inc. All rights reserved.Source: 2012 CPO Agenda, Aberdeen Group61% of you will haveincreased costsavings targets44% of these targets willbe greater than5%Creating procurementprocess efficiencies isthe top priority for CFO’s& CPO’s
    7. 7. In the race for procurement efficiency, inter-enterprise collaboration is improvingproductivity and profits41%Improved collaboration acrosssilos55%Better informationsharing24%increasedrevenue77%Increased accessto knowledge63%Increased marketing effectiveness43%Greater marketshare8%Higher margins“Networked enterprises were 50% more likely than their peers to have increasedsales, higher profit margins, gain market share, and be a market leader.”*Source: McKinsey on Business Technology, Spring 2011 – “The Rise of the Networked Enterprise”
    8. 8. Agenda• Introduction• Panel Discussion• Key Takeaways• Q & A© 2013 Ariba, Inc. All rights reserved.8
    9. 9. Collaborative Sourcing in a Networked EconomyElaine Griffith, C.P.M.Director - Global Strategic SourcingMay 2013
    10. 10. AGENDA10 About Sirius XM Radio, Inc. Global Strategic Sourcing (GSS) – Process Overview Value Proposition eSourcing Data Success Stories and Conclusion
    11. 11. About Sirius XM Radio - It’s wherever you go!11 Background Sirius XM Radio Inc. is the worlds largest radio broadcaster (measured by revenue), andsecond largest subscription media company in U.S. Stock listed on NASDAQ: SIRI North America presence: USA and Canada (Equity Ownership) 1990: Sirius Satellite Radio was founded 2008: Sirius Satellite Radio and XM Radio merged to become Sirius XM Radio, Inc. 2012: $2 billion stock buyback program announced. Financials In 2012, SiriusXM reported:• $3.4 billion in revenue, up 13% vs. prior year• 23.9 million subscribers, up 2MM vs. prior year• Enterprise value exceeds $20 billion In the News Listen everywhere: Online, Smartphone, iPad®, SiriusXM Lynx radio and compatibleinternet radios. Telematics – “Everything you need streaming to your car”• In 2012, SiriusXM announced Nissan alliance.
    12. 12. Global Strategic Sourcing (GSS)Process Overview12 History: July 2010: GSS Startup occurred Nov. 2010: Supplier Risk Management process initiated May 2012: Supplier Performance Mgmt. (SPM) process initiated GSS Process overview: Leadership of an efficient and ethical process Confirms Addressable Spend via Validation & Analytics Prepares Supplier Participants for Sourcing event Engages and collaborates with stakeholder community Provides Project Management & Cross-functional team leadership Implements Risk Management Process for sourcing events Utilizes Category Management skills Launches Supplier Performance Management Process Ariba Sourcing supports: Cost Savings and Avoidance Identifying Global Suppliers via Discovery Efficient Process Suppliers equally advantaged Mandatory Acceptance Terms IT Security, Compliance and Privacy Coverage Scoring and Results Reporting efficienciesAribaeSourcingAribaContractsSupplierPerf. Mgmt.RiskManage-mentSpendValidation&AnalyticsDiscoverySearch
    13. 13. GSS Value Proposition13 Supplier Risk Review Risk Summary Report for Sourcing Project• Z-Scoring for Privately-held Companies Quarterly Key Supplier Risk Report NDA’s Security, privacy and compliance requirements coverage Procurement Project Management Trained internal resource Professional Sourcing Process Optimizing efficiency by utilizing technology (Ariba Sourcing Pro) Vetting suppliers to quality for participation in sourcing events Generating cash savings Supplier Performance Management Monthly Touch Point Meetings Quarterly Business Review (QBR) Meetings and 360 Feedback Scorecards Innovation discussion is a QBR requirement Talent Development Learning culture: formal learning plan and training opportunities Doing: Increasing leadership skills, stretching individuals’ skillsets Team recognition
    14. 14. Sourcing Data14Ariba eSourcing Data: Spend under Management by Procurementtrending positively RFP Savings Range (vs. Addressable spend): 3% - 73% 2012 FY Number of Categories: 72012 FYSpendmanagedbyProcure-mentSavings32%2012 Spend Managed by Procurement2010 2011 2012Ariba Event Activity TrendsFrom Q3 2010 - FY 2012eRFI eRFP eAuctions eDiscovery12%3%6%6%12%3% 3%RFP’s under Management by ProcurementFacilitiesCall CenterFinanceEngineeringITMarketingBroadcast
    15. 15. Success Stories15SOURCING Discovery Supplier Search: Data Storage Centers RFI: Contract Furniture RFP: Office Relocation and Moving Services Contact Preference Management Services Auction – Total Savings (vs. baseline): Mult-functional printers Third-party Quality Assurance Services Learning Management SystemsRISK MANAGEMENT PROCESS Watch List of Key SuppliersSUPPLIER PERFORMANCE MANAGEMENT (SPM) Incorporated this process for shared services suppliers.- Promotional Print ServicesCONCLUSION Strategic Sourcing process supports increased savings and risk mitigation.THANK YOU!
    16. 16. Collaborative Sourcing in the Networked EconomyJohn de BrunSourcing Manager, Top Source LLC© 2013 Ariba, Inc. All rights
    17. 17. TopSource is a wholly owned subsidiary of Topco Associates LLC and providesnot-for-resale (NFR) spend management. For 65 years, Topco has leveraged thescale with its members in procurement to lower product costs. Frozen Dairy/Bakery Grocery HBC/GM Rx Fresh Meat Branded Meat Produce National BrandsFor-Resale Programs NFR Spend ProgramsTopSource Overview Construction Equipment Hired Services IT Telecom Logistics & Distribution Marketing Office Products & Supplies Packaging & Supplies HR Benefits Fuel Utilities
    18. 18. Our customer network represents collectively over $150 billion in annual retail saleswhich includes over sixty grocery retailers, drug stores, wholesalers, foodmanufacturing companies, food services, restaurants, and other retail businesses.TopSource Overview
    19. 19. TopSource manages not-for-resale spend on behalf of our wholesale and retailcustomers. In addition, TopSource conducts auctions on behalf of all customersacross for-resale and indirect spend.SpendManagementeSourcing CenterOf Excellence Dedicated eSourcing / Auctions team with wide rangingexperience Mature process and capabilities Retail and Distribution Strategic Sourcing Professionals Sourcing Leverage – over $13 Billion in potential indirectspend Proven sourcing process meshed with enabling technology(Spend Analytics, eSourcing, and Contract Management)TopSource OverviewSupplierManagement Mature and Strategic Supplier Scorecarding Process Financial Risk Assessment Price Change Management
    20. 20. Sourcing Process – eSourcingTopSource utilizes a number of esourcing technology tools to conduct its strategicsourcing process more effectively and to institutionalize their learning.Sourcing AuctionContractManagementSupplierManagement Standardizecontract creation Store all contractrelated documents Generatenotifications tobuyers and teams Provide robustsearch andreporting Utilize Discovery Issue RFx andcollect responses Store profileinformation Create categoryspecific templates Drive processadoption Negotiateprice Maximizecompetition Increasespeed tosavings Consideralternativeprice scenarios Measuresupplierperformance Drivecontinuousimprovement Monitorsupplierfinancials Manage pricechanges
    21. 21. ChallengesParticipationStakeholderEngagementSpecificationsAlignmentAwardRiskComplexSpecificationsSupplierFinancialTimingInitiativeAward /Legal
    22. 22. Sourcing - CollaborationCollaborationStakeholder EngagementListenRelationships / CredibilityInvested in ProcessSupplier PerformanceFeedbackInnovate in SubsequentSourcing InitiativesSuppliersRepetition / ClarificationOutlier AnalysisPerformance Feedback /ImprovementsRisk AbatementListen to AlternativeOptions
    23. 23. Results• From our inception, TopSource has saved anaverage of 13% on everything we touched• In 2012, TopSource managed almost $313million in spend over 100 commodities• Included in the 100 commodities were 48Aggregated Sourcing Initiatives• 100% Ariba utilization for Aggregated SourcingInitiatives and Contracts
    24. 24. Key InsightsMeasure forImprovementStick to DefinedProcessIncentivizeUtilizationFeedback toSuppliers•Bid Related•PerformanceEducateStakeholdersSourcingInnovationCredibility
    25. 25. Supply Chain TransformationJoseph Gigliotti – JetBlue Airways© 2013 Ariba, Inc. All rights reserved.
    26. 26. About JetBlue AirwaysJetBlue is New Yorks Hometown Airline™ with other focus cities in Boston, FortLauderdale, Los Angeles (Long Beach), San Juan and Orlando. Known for itsaward-winning service and free inflight entertainment as much as its low faresJetBlue offers the most legroom in coach of any U.S. airline (based on averagefleet-wide seat pitch) as well as super-spacious Even More Space® seats.JetBlue is also Americas first and only airline to offer its own Customer Bill ofRights, with meaningful and specific compensation for customersinconvenienced by service disruptions within JetBlues control. JetBlue serves77 cities with 800 daily flights.© 2013 Ariba, Inc. All rights reserved.26
    27. 27. What Drove the Need?© 2013 Ariba, Inc. All rights reserved.27Areas of opportunity identified:• Contract Management• Sourcing and Procurement• Policies and Procedures• Signature Authorization Policy• Centralized vs. Decentralized FinanceFunctionRecap: 3rd Party Internal Controls AssessmentAssessment observations:• Lack of formalized and documented policiesand procedures• Lack of the necessary education/training• Lack of clearly defined requirements andownership• Lack of monitoring• Insufficient focused resources andprioritization• Low volume of purchase orders used• Services performed without contracts• Lack of direct finance and accountingoversight within operating departmentsObservations are consistent with the current stage of our corporate lifecycle
    28. 28. Common Corporate Evolution© 2013 Ariba, Inc. All rights reserved.28InitialManagedStandardizedPredictableOptimizedWith company evolution…comes process maturity and predictabilityAd hoc…Heroics!Intuitive…RepeatableStandardized…UniformConsistent…Well UnderstoodTimeMaturityJetBlueToday
    29. 29. Program Vision© 2013 Ariba, Inc. All rights reserved.29CorporateGovernance“Getting StuffDone”Drives• Lower Costs• ROIC• Efficiencies• PredictabilityBalance between controls and JetBlue’s entrepreneurial culture
    30. 30. Program Approach© 2013 Ariba, Inc. All rights reserved.30Current StateSessionsPURPOSE: To gain anunderstanding of howdifferent business units usethe Supply Chain Process.Work Performed:• Met with key stakeholdergroups, including, Commercial, People, CRE, IT, Airports, TechOps and Working Team to walkthrough and document thecurrent processResults- Created 25 detailed process flows includestakeholder pain points and improvement opportunitiesCurrent StateProcess AnalysisPURPOSE: To determine theroot cause(s) of why thecurrent Supply ChainProcesses are notconsistently followed.Work Performed:• Identified key pain points and process inefficiencies with thecurrent Supply Chain LifecycleResults- Identified focus areas for improvement.12Future State ProcessOpportunitiesPURPOSE: To considerbusiness unit suggestions forimproving the Supply ChainProcesses to meet theirneeds .3 Work Performed:• Using the stakeholder’s feedback from sessionsabove, identified areas of opportunity along the current SupplyChain Lifecycle, including Centralized/Decentralized FinancefunctionsResults- Document Business Unit suggestions for FutureState considerations.Scope: Assessment of the entire Supply Chain and Legal Lifecycle including
    31. 31. Project Team Created© 2013 Ariba, Inc. All rights reserved.31PMO Team• Process Effectiveness• Supply Chain SMEWorking TeamAriba SupportFinance and Legal VPsProject SponsorsSpendApprovalSourcingContractDevelopmentPurchasing andInvoicingPerformanceManagement• Sourcing SMEs• FP&A • Legal andContractManagementSMEs• Procurementand AP SMEs• SPM SMEsPolicy/Procedure/Training SupportAdditional Stakeholders: IT, Finance, Corp Comm, Audit“Customers” – Business Units End UsersProcessSupport• ProcurementOperationsSMEBPs
    32. 32. Current State Analysis© 2013 Ariba, Inc. All rights reserved.32Power Users Recent Adopters Potential PromotersCurrent State Assessment ApproachIdentified key BU users to complete current state analysis
    33. 33. Current State “Subway Map”© 2013 Ariba, Inc. All rights reserved.33Mapped current BU processes. Confirmed process inconsistencies• “We are unsure when to loop Supply Chain in so wemay be missing opportunities for sourcing savings &sometimes perform our own sourcing”• “Project SMEs (Third Party Business Partners) actingas a Sourcing Team are helpful to have involved due tolack of internal knowledge”• “Sourcing & AFE approval is time consuming”• “There are too many non integrated approvals today atvarious points in the process:AFE, PO, GR, Invoice, Contact, etc and they are takingtoo long”• “Some Business Units perform mini RFPs within theirown area if they have the knowledge & the resources”• “We track contract expiration manually because theyare not in a monitoring tool”“We have recently started utilizingSupply Chain & have seen the valueof the process for savings & effectivevendor selection”Current Process What’s Driving the Variation
    34. 34. Root Cause Analysis - “Fishbone”© 2013 Ariba, Inc. All rights reserved.34Determinewhether thereis lack of aconsistent &integratedSupply ChainProcessSPEND APPROVAL SOURCING CONTRACTINGPO & NON PORECEIVINGINVOICING PERFORMANCE MANAGEMENT RENEWAL PROCESSOnly OpexSourcingby SCUncertainty whereSC involvement isrequired & when it isnot since no policyexistsRFP Processmay be lengthydue to untimelyresponses, notenoughresourcesRFP Process notleveraged for last minrequestsSome large projectsare done with noRFP
    35. 35. Using Analysis to Shape our Future© 2013 Ariba, Inc. All rights reserved.35JetBlue’s Refined Supply Chain Process should be…• Governed by JetBlue’s New Corporate Supply Chain Policy• Clearly Defined and Agreed-Upon supply chain criteria for all stakeholders and endusers• Jointly Planned , Coordinated and Approved with Business Units, Supply Chain andAppropriate Stakeholders• Timely executedSupply Chain LifecycleFuture State Success depends on…Clear Roles, Responsibilities and ProcessesFuture State Goal: Develop and Implement an Integrated Supply Chain Process to capturemore spend under management.SpendApproval/AFESourcingContractDevelopmentPurchasing &PaymentPerformanceManagement1 2 3 4 5
    36. 36. Proposed Future State Process© 2013 Ariba, Inc. All rights reserved.36Opportunity Solution ObjectiveEarly Involvement • Supply Chain plugged into periodic planning processes(Annual and Quarterly)Multiple Sourcing Methods • Creating three Souring methods that enable thebusiness and keep Supply Chain focused on largeropportunitiesStandardized Templates • Standard templates for sourcing, contracting andperformance managementUtilize Process Automation • Workflow and validation functionality to facilitate properreview protocolBusiness Partner PerformanceMonitoring• Provide the proper protocol for documenting,escalating and resolving business partner performanceissuesGoalIncrease spendundermanagementwhile enablingbusiness units toget thingsdone…SpendApproval/AFESourcingContractDevelopmentPurchasing &PaymentPerformanceManagement1 2 3 4 5Improved decision-making, role clarity and accountability drivenby tools, guidelines and process changes
    37. 37. Sourcing Future StateSpend Threshold• Annual Supplier or Project SpendQualitative ThresholdThis is the first time working with this BUCategory is complex and specifications arenot very thoroughRequires through understanding of TCORequires advance project managementskillsPotential ancillary revenues might begenerated from the acquired servicesLarge cross-functional teamPotential external consultant involvement“Center-led” Approach: Level of Supply Chain InvolvementBusiness UnitProduct/ServiceNeedBusiness Unit DrivenBusiness Unit/SupplyChain Driven“Self-Service”Supply ChainTeamSpend Threshold• Annual Supplier or Project SpendQualitative ThresholdBU is very familiar with the SC&F processBU has worked many times before w/SC&FProduct / Service specifications are verypreciseCategory is not complexThere are no significant spend aggregationopportunities or exposure to priceescalation“Collaborative”Inputs:• Annual Operating Plan• CapEx Request• New Corporate Initiative• Renewal Events (Product or Services)
    38. 38. Three Sourcing Methods© 2013 Ariba, Inc. All rights reserved.38RFx method used based on qualitative and quantitative assessmentof event and resource availabilityBU SourcingVerify Spend ApprovalProject Kickoff MeetingVerify decision matrixVerify bidsVerify T&CsVerify contract sign-offHybrid SourcingVerify Spend ApprovalProject Kickoff MeetingVerify NDAs obtainedVerify RFP package•Requirements•Questionnaire•Bid SheetVerify decision matrixVerify bid analysisVerify T&CsVerify contract sign-offStrategic SourcingVerify Spend ApprovalProject Kickoff MeetingFull RFP ProcessContract NegotiationsVerify contract sign-offBU Sourcing is a BU enabledproject with processfacilitation from SourcingCOEHybrid Sourcing is a BUenabled project with pre-defined milestones facilitationfrom Sourcing COEStrategic Sourcing is aStrategic Sourcing led projectwith cross-functional teamcollaboration
    39. 39. Deciding on Sourcing Method© 2013 Ariba, Inc. All rights reserved.39Optimal sourcingmethod based onopportunity andcomplexityQualitative andQuantitativecriteriaDrives…
    40. 40. Full Sourcing Project Phases© 2013 Ariba, Inc. All rights reserved.40Sourcing method dynamically drives functionality through conditions- tasks, owners, required/optional, approvers, etc…
    41. 41. Program Roadmap© 2013 Ariba, Inc. All rights reserved.41Adoption Efficiency Cost SavingsCompliance withprogram….Getting stuffdone…Costdiscipline…Metrics Focus:• Program Roll-Out• Training• Pilot Projects• Increase Spend UnderManagement• Flight Plan• Channel Strategies• Corporate Audit RatingMetrics Focus:Adoption Metrics Plus,• Reduced Cycle Times• Business Case• Sourcing• Contracting• Purchase Order• Payment• Lower Cost per PO/Invoice• Increase PO/Invoice MatchAutomationMetrics Focus:Adoption and EfficiencyMetrics Plus,• Increased Cost Savings• Utilization of Early-Payment Discounts2013 Goals 2013 Baseline Period - 2014 GoalsA B C
    42. 42. Advanced Sourcing Techniques• Packaging for onboard snack items• Flight Hour Agreements• Turn based rates for airport services© 2013 Ariba, Inc. All rights reserved.42
    43. 43. © 2013 Ariba, Inc. All rights reserved.Align Results Align Results to ObjectivesObtain Executive Sponsorship from senior leadership(e.g., CFO, Business Unit GM and or Functional Leaders)Work on building collaborative relationships with partnerfunctional groups (particularly Finance) and SuppliersExecutiveSponsorshipsCollaborativeRelationshipsBe Flexible Be willing to make difficult choices and do more with lessTake on aggressive goals beyond sourcingMore spend under management, more processcoverage, more strategic impactAdd more value…Summary and Key Take-aways
    44. 44. Please Complete Session SurveyGo to Surveys© 2013 Ariba, Inc. All rights reserved.44Select SessionClickChoose oneRate SessionThank you for joining us
    45. 45. Q&AContact info:Sundar Kamakshisundaram: sundar@ariba.com© 2013 Ariba, Inc. All rights reserved.45

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