Enhancing Your Direct Spend Initiatives with Ariba Discovery

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Companies continually cite reducing the costs of supply as a top business objective. But achieving additional savings in direct materials sourcing and procurement year ovoer year is becoming increasingly challenging.

This session will demonstrate best practices for utilizing Ariba Discovery to support your direct spend sourcing strategy through initiatives from better supplier identification, handling shortages and stock-outs, to seizing current market opportunities to lower direct material costs.

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  • Smoke and scattered containers are seen at a devastated factory area after an earthquake and tsunami in Sendai, northern Japan, March 13, 2011. Credit: Reuters/Kim Kyung-Hoonhttp://www.reuters.com/article/2011/03/14/us-japan-quake-supplychain-idUSTRE72D1FQ20110314
  • Complicated business model – decentralized businesses investing in a center-led support groupVariety of existing supplier relationships and various amounts of data/methods of data collectionMultiple businesses using similar products or suppliers across various categoriesPotentially inconsistent relationships with shared suppliersDiversity in business needs and specificationsDesire to qualify so we can compare overall values, not just priceNeed for new suppliers in new locations due to constant growth and developmentFocus on customer service with global reach
  • Determined Discovery Postings would be center-led task in our sourcing event processAriba Discovery Posting templates were offered and built for each interested project manager when events were brought to the teamIncoming Discovery supplier questions were provided to project teams and answers were delivered publicly and stored internally(public responses for suppliers, keeping list in-house as well)Central management allows us to add critical details to the postingsValuable information in the seller ratings and customer referencesSharing the buyer portal URL on our supplier information page increased awareness of buying opportunitiesSuppliers and how they get around by asking in the Q&A Section
  • Determined Discovery Postings would be center-led task in our sourcing event processAriba Discovery Posting templates were offered and built for each interested project manager when events were brought to the teamIncoming Discovery supplier questions were provided to project teams and answers were delivered publicly and stored internally(public responses for suppliers, keeping list in-house as well)Central management allows us to add critical details to the postingsValuable information in the seller ratings and customer referencesSharing the buyer portal URL on our supplier information page increased awareness of buying opportunitiesSuppliers and how they get around by asking in the Q&A Section
  • We were able to quickly identify additional suppliers for commodity-type productsUncovered previously unknown capabilities of existing suppliersUsed the questions and answers section to refine our requirements and preferencesEasy to evaluate, compare, respond to the correspondence in one place
  • Enhancing Your Direct Spend Initiatives with Ariba Discovery

    1. 1. Enhancing Your Direct Spend Initiatives with Ariba Discovery Chris Wang, Director of Marketing, Ariba Discovery @AribaDiscovery March 18, 2014 #AribaLIVE @ariba © 2014 Ariba – an SAP company. All rights reserved.
    2. 2. Agenda • • • • 2 Ariba Discovery Key Direct Spend Trends Best Practice Sharing Q&A © 2014 Ariba – an SAP company. All rights reserved.
    3. 3. Direct Purchasing Challenges • Direct purchasing and sales efforts have traditionally been manual and inefficient processes Buyers and sellers are forced to access multiple, disconnected platforms that increase costs, impede adoption, and limit scope and coverage Finding, connecting, and transacting with trading partners is often repetitive and time-consuming, making the return on e-commerce investments challenging to realize 3 © 2014 Ariba – an SAP company. All rights reserved.
    4. 4. Better Purchasing with Ariba Discovery • Quickly discover and qualify new sources of supply Discover new suppliers in days or hours, not weeks Compare multiple bids for every project Easily import suppliers into other Ariba solutions Save up to 90% of time and 75% of cost* Lower spend by 15% on average** *Identifying and qualifying suppliers. Based on documented customer experiences ** 2011 Ariba GSO Case Study 4 © 2014 Ariba – an SAP company. All rights reserved.
    5. 5. Strong Supplier Network • Ariba Discovery has grown exponentially with more suppliers than ever before Vehicles, Transportation & Logistics, 5% Raw Materials & Chemicals, 4% Agriculture, Farming & Fishing, 1% Construction & Engineering, 11% Culinary Equipment, Food & Beverage, 3% Education, Organizations & Clubs, 3% Professional Services, 12% Electronics & Electrical Components, 5% 1.2M 500K 5 Energy, Drilling & Mining, 2% Paper, Packaging & Containers, 3% 750K 2012 Parts & Components, 5% Facilities & Maintenance, 7% Other Products, 5% 2013 2014 © 2014 Ariba – an SAP company. All rights reserved. Office Supplies & Printing, 4% Medical, Heathcare & Lab Equipment, 4% Industrial Equipment, 5% IT & Telecomm, 9% Marketing & Communications, 7% Industrial Services, 5%
    6. 6. Easily Analyze, Discover & Qualify Unplanned Purchases Planned Purchases RFI Phase Supply Market Analysis Conduct Analysis on Ariba Discovery Preview suppliers by category or keyword Review supplier profiles Message interesting suppliers for more details Include relevant suppliers in Posting RFP Phase Create Posting on Ariba Discovery Create a posting in just a few minutes Target all matching suppliers (or invite selected) Share requirements publicly Receive offers from qualified suppliers Compare all offers in single location Find suppliers with existing transacting relationships on the Ariba Network Review rich supplier profiles with Ariba Network activity data Access objective third-party financial and risk information Fully integrated with Ariba Sourcing™ On-Demand and Ariba Procurement 6 © 2014 Ariba – an SAP company. All rights reserved.
    7. 7. Insight-Rich Supplier Profiles • All key details on a single page Ariba Network activity data Financial and risk information Diversity qualifications “Having access to suppliers already transacting on the Ariba Network makes things much References easier.” Kory Manley, Director, Strategic Sourcing, Caesars Entertainment 7 © 2014 Ariba – an SAP company. All rights reserved.
    8. 8. Extensive Global and Local Network • Growing international supplier base Over 30% of suppliers are headquartered outside of the United States More than 36% of suppliers have global reach in addition to serving locally and regionally Geographic distribution of suppliers Latin America, 1% AsiaPacific, 15% North America, 69% “The opportunity to get vendors in the game by using Ariba Discovery is big for us. It’s a good tool – whether you’re in the Americas, EMEA, or Asia Pacific – as it allows us to look well beyond local vendors. It helps grow the maturity of the buyer organization and capture the efforts in building commercial bid analyses.” Brian Bender, Sr. Director Global Purchasing, J.M. Huber 8 © 2014 Ariba – an SAP company. All rights reserved. Other, 5% Europe, Middle East & Africa, 10%
    9. 9. Access Diversity and Green Suppliers • • Highlight diverse and green requirements in postings or during preview See available qualifications on supplier profile pages “We received strong bids from diverse suppliers through Ariba Discovery. The best price came from a local, woman-owned supplier. This is a huge win – without Ariba Discovery, it would have been very challenging to find this supplier.” Kory Manley, Strategic Sourcing Process & Compliance Manager, Caesars Entertainment 9 © 2014 Ariba – an SAP company. All rights reserved.
    10. 10. ThomasNet Partnership • Access a deeper pool of OEM and MRO suppliers through the integration with Ariba Discovery and ThomasNet.com Access to ThomasNet.com’s directory of over 600K suppliers from Ariba Discovery Detailed product information for 100 million+ parts, components, materials and more Postings in covered categories matched to ThomasNet.com’s network suppliers Greatly expanded match and response rates for direct and MRO category postings Have multiple qualified vendors compete for your business Get more high-quality supplier quotes right to your inbox 10 © 2014 Ariba – an SAP company. All rights reserved.
    11. 11. Integration with SAP ERP System • Ariba® Spot Quote for easier supplier identification and qualification ERP system generates automated RFQ and publishes it in Ariba Sourcing Suppliers (invited/matched by Ariba Discovery) provide responses through Ariba Sourcing Responses are sent back automatically to the source system 11 © 2014 Ariba – an SAP company. All rights reserved.
    12. 12. More Benefits from SAP Integration • Ariba® Spot Quote – Benefits Reduction in processing time for spot quotes through highly automated process New supplier discovery via Ariba Discovery provides increased saving potentials Quick ROI due to out-of-the-box configuration of templates/integration adapters, plus zero implementation and training Bundled customer support for supplier participants and Sourcing administrators Robust out-of-the-box integration with SAP ERP and Oracle E-Business Suite 12 © 2014 Ariba – an SAP company. All rights reserved.
    13. 13. Buyer Successes in Key Categories Retail High Tech Manufacturing Chemicals Reduced time to find suppliers from 4-8 weeks to days or hours Connects with suppliers in a few days instead of weeks Received first responses within 24 hours Up to 58% cost savings through competitive bidding 95% unit cost saving for new product launch 15% cost saving across different categories 20% cost savings for packaging Solves challenges by tapping into supplier expertise 13 Received 10 bids/posting and found 5 new suppliers Gained predictability by working with quality suppliers 40% productivity increase Delivered savings 3x initial investment in Ariba Sourcing © 2014 Ariba – an SAP company. All rights reserved.
    14. 14. Presenters David Landsman Sr. Adoption Manager, Ariba Discovery @SourcingDavid 14 © 2014 Ariba – an SAP company. All rights reserved.
    15. 15. Rethink Supply Strategy • Four key areas can impact direct sourcing costs and present opportunities for improved efficiencies Supply Chain Risk and Disruptions Move to Reshoring Supplier Margin Volatility Supplier Consolidation 15 © 2014 Ariba – an SAP company. All rights reserved.
    16. 16. Supply Chain Disruptions on the Rise • Frequency of supply chain disruptions is increasing its effect on business performance… Globalization increases supply chain complexity and amplifies impacts Lean manufacturing, JIT inventory, reduced product lifecycles, outsourcing, and supplier consolidation introduced new supply chain risks and reduced error margins 85% of global supply chains experienced at least one significant disruption in the preceding 12 months¹ 16 © 2014 Ariba – an SAP company. All rights reserved. ¹ “Supply Chain Resilience 2011,” November 2011, Business Continuity Institute.
    17. 17. Ineffective Risk Management • …and shareholder value, yet companies are often not sufficiently prepared ~30% decrease in shareholder returns for firms suffering a publicly announced supply chain disruption² 45% consider their supply chain risk management programs only somewhat effective or not effective at all3 17 © 2014 Ariba – an SAP company. All rights reserved. ²“An Empirical Analysis of the Effect of Supply Chain Disruptions on Long-Run Stock Price Performance and Equity Risk of the Firm,” Spring 2005, Production and Operations Management Journal. 3 Deloitte study: The Ripple Effect: How manufacturing and retail executives view the growing challenge of supply chain risk.
    18. 18. Lack of Insights on Suppliers • Supply chain risks are particularly pronounced on the supplier side: Only 8% ask to see their suppliers’ business continuity plans or investigate who and where their suppliers get their components.4 Over 40% of disruptions come from sub-tier suppliers with which a company has no contractual connection.4 18 © 2014 Ariba – an SAP company. All rights reserved. 4 Zurich Financial Services-sponsored study conducted by the Business Continuity Institute, cited in: “Japan One Year Later: The Long View On Tech Supply Chains”, Forbes.
    19. 19. Effective Risk Management • Leverage Ariba Discovery to mitigate risk: Conduct real-time market and supply research Access geographically diverse supplier base Run rapid RFI/RFP to respond quickly to market changes Achieve cost savings, shorter lead time, quality improvements Experience no-risk process to foster product innovation Review suppliers’ credit and risk scores 19 © 2014 Ariba – an SAP company. All rights reserved.
    20. 20. Move Toward Reshoring • US is poised for a large growth in exports as manufacturing moves stateside • • • • 20 Exports have reached their highest point in 50 years4 Favorable wage, natural gas, and electricity prices Increased wages in export-heavy developing countries US shipping advantage along important trade routes © 2014 Ariba – an SAP company. All rights reserved. 4“The U.S. as One of the Developed Worlds Low-Cost Manufactures, Behind the American Export Surge,” August 20, 2013, Harold L. Sirkin, Michael Zinser and Justin Rose, BCG Perspectives
    21. 21. Rethinking Geographical Suppliers • Leverage Ariba Discovery for reshoring: Conduct geography-based market and supply research Evaluate shipping routes and other specific requirements Assess skills and resources through detailed RFI/RFP process Achieve cost savings through shorter lead times and reduced shipping rates Widen supply opportunity 21 © 2014 Ariba – an SAP company. All rights reserved.
    22. 22. Reshoring Case Study • Discovered highly competitive local supplier of iron-on products and moved entire production from China to US Achieved 34% cost savings Reduced lead time by 75% Improved product quality Increased marketability “Posting my buying needs on Ariba Discovery has been a huge success. I was able to discover a supplier that was right below my nose. Not only did I achieve huge savings and significantly improved quality, I can now market our products as “Made in America” – it’s a win all the way around.” Leanne Melton, Strategic Supply Base Manager, Plaid Enterprises 22 © 2014 Ariba – an SAP company. All rights reserved.
    23. 23. Considering Supplier Margins • Volatility, scarcity, logistics, and regulations impact supplier margins, resulting in pass-through prices Electricity costs have had large impact on supplier margins Sudden demand or growth in new markets impact pricing Growing need for “rare earth” materials across industries and difficulty in recycling 23 © 2014 Ariba – an SAP company. All rights reserved.
    24. 24. Optimizing Cost Structure • Leverage Ariba Discovery for supplier margins: Conduct supply market research to understand entire production and cost structure to assist in negotiation and risk mitigation Access to different sources of supply and different geographies can help manage unexpected disruptions Find suppliers who can do more for less 24 © 2014 Ariba – an SAP company. All rights reserved.
    25. 25. Supplier Rationalization • Optimizing the number of suppliers in a particular category can increase savings and minimize risk Consolidation trend may no longer serve in an increasingly volatile market Geography, supply source stability, and risk mitigation practices are important factors Competition, market share, and financial strength assist in rationalization 25 © 2014 Ariba – an SAP company. All rights reserved.
    26. 26. Supplier Rationalization • Leverage Ariba Discovery for supplier rationalization: Conduct real-time market and supply research Find niche players who can provide cost savings or quality improvements Access geographically diverse supplier base Achieve cost savings, shorter lead time, quality improvements Mitigate risk with additional suppliers 26 © 2014 Ariba – an SAP company. All rights reserved.
    27. 27. Source Direct Materials Smarter • How does a progressive company achieve cost savings? Innovation starts with you! Things are different. Seize the opportunities. Pointing at indirect material savings isn’t enough. Lean time in manufacturing. Don’t identify, achieve cost savings. Be willing to change suppliers. Be willing to look in new geographies for suppliers. Don’t hesitate. Take full advantage. 27 © 2014 Ariba – an SAP company. All rights reserved.
    28. 28. How Ariba Discovery Works 28 © 2014 Ariba – an SAP company. All rights reserved.
    29. 29. How Ariba Discovery Works 29 © 2014 Ariba – an SAP company. All rights reserved.
    30. 30. How Ariba Discovery Works 30 © 2014 Ariba – an SAP company. All rights reserved.
    31. 31. How Ariba Discovery Works 31 © 2014 Ariba – an SAP company. All rights reserved.
    32. 32. How Ariba Discovery Works 32 © 2014 Ariba – an SAP company. All rights reserved.
    33. 33. How Ariba Discovery Works 33 © 2014 Ariba – an SAP company. All rights reserved.
    34. 34. Integration with Ariba Sourcing • Easy access directly from Create menu “Market Research Posting” (RFI) or “Quick Quote Posting” (RFP) 34 © 2014 Ariba – an SAP company. All rights reserved.
    35. 35. Sourcing Initiatives Integration with Ariba Procurement • Easy access, use with or without a requisition To create posting without requisition, click on “Create” menu and select “Quick Quote Posting”, then click on “Post Now” button Create requisition under “Create Non-catalog Item”, then click on “Start Now” button to create a posting #AribaLIVE 35
    36. 36. How to Get Started • Getting started with Ariba Discovery is easy: 1. 2. 3. Contact us. We will show you how to get the right process set up. Onboard and train team members. Assign user accounts and access permissions. Try different categories. Create postings for different categories to increase success. Ariba Sourcing (On-Demand, On-Premise) Ariba Procurement (P2P) discovery.ariba.com 36 © 2014 Ariba – an SAP company. All rights reserved. Ariba Discovery (Website)
    37. 37. Presenters Ashley Moore e-Sourcing Analyst, Illinois Tool Works @itwAshleyMoore 37 © 2014 Ariba – an SAP company. All rights reserved.
    38. 38. About Illinois Tool Works • • • • Fortune 200 company with 100 years of history Multinational manufacturer of diversified range of industrial products and equipment, operations in 58 countries Broad portfolio of nearly 12,000 active patents Key 2012 financial metrics: USD $ 18+ billion in revenue USD $ 2.8 billion in operating income 38 © 2014 Ariba – an SAP company. All rights reserved.
    39. 39. ITW Business Segments Segment % of ’13F Revenues 39 Automotive OEM Test & Measurement and Electronics Food Equipment Polymers & Fluids Welding Construction Products Specialty Products ~17% ~15% ~15% ~14% ~13% ~12% ~14% © 2014 Ariba – an SAP company. All rights reserved.
    40. 40. ITW Primary Brands Test & Measurement and Electronics Automotive OEM Polymers & Fluids Food Equipment Construction Products Welding Specialty Products 40 © 2014 Ariba – an SAP company. All rights reserved.
    41. 41. Strategic Sourcing at ITW  Embed sourcing as a key capability Sourcing teams in place  Ahead of year one targets  41 Reduce costs  Progress   Objectives Leverage global sourcing spend Steady flow of projects at segment and commodity level © 2014 Ariba – an SAP company. All rights reserved.
    42. 42. ITW’s Sourcing Environment • • • • • 42 Decentralized business model Variety of existing supplier relationships and data Review overall quality and values, not just price Handling constant growth and development Focusing on customer service with global reach © 2014 Ariba – an SAP company. All rights reserved.
    43. 43. Approach to Using Ariba Discovery • Discovery Postings are center-led task Postings are offered for all new sourcing projects Supplier questions were provided to project teams and answers were delivered publicly and stored internally Allowed for standardization and a quick learning period • Valuable information in ratings and references Complete supplier profiles are easy to review/import 43 © 2014 Ariba – an SAP company. All rights reserved.
    44. 44. ITW’s Usage Summary • 53 Ariba Discovery Postings 59 Responses from registered Sellers 177 Questions & Answers Averaging approximately five responses/posting 44 © 2014 Ariba – an SAP company. All rights reserved.
    45. 45. Ariba Discovery’s Value Positives m Good market test m Ariba’s support has been excellent m Are able to display or hide ITW name m New suppliers to involve in sourcing events m Reduces incumbent complacency m Remove single-source dependencies 45 © 2014 Ariba – an SAP company. All rights reserved. Challenges y Unable to review a directory of matching suppliers y Similar products often require various listings y Incumbent suppliers can’t be excluded from posting
    46. 46. Ariba Discovery Posting Results • Able to quickly identify additional suppliers Example of good response times Ariba’s Supplier Outreach Team has helped increase results • Ariba’s review process has helped improve content Developed Discovery Posting Template • Easy to evaluate, compare, respond to the correspondence in one place Ability to export data would add value 46 © 2014 Ariba – an SAP company. All rights reserved.
    47. 47. Ariba Discovery’s Impact • Invited suppliers to RFI/RFP events Recent metal fabrication event • • • Eliminated single-source supplier dependencies Built a repository of potential suppliers Supports our 80/20 Philosophy Streamlines one-time buys or specialty product searches 47 © 2014 Ariba – an SAP company. All rights reserved.
    48. 48. Q&A 48 © 2014 Ariba – an SAP company. All rights reserved.
    49. 49. Helpful Resources • Resources on Ariba Discovery for Buyers Live Demo Registration http://www.ariba.com/resources/live-demo/ariba-discoveryfor-buyers Buyer Posting Tips Datasheet http://exchange.ariba.com/docs/DOC-2366 Ariba Spot Buy (Tactical Spend) Datasheet http://exchange.ariba.com/docs/DOC-2591 Ariba Discovery Customer Presentation http://exchange.ariba.com/docs/DOC-2101 49 © 2014 Ariba – an SAP company. All rights reserved. Quick Start Guide for Ariba Sourcing Buyers http://exchange.ariba.com/docs/DOC-2592 Quick Start Guide for Ariba P2P/P2O Buyers http://exchange.ariba.com/docs/DOC-2361 Quick Start Guide for Ariba Discovery Website Buyers http://exchange.ariba.com/docs/DOC-2517
    50. 50. Thank You! 50 © 2014 Ariba – an SAP company. All rights reserved.

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