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Procurement Transformation – Story of Learning Journey


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ASML has been on a journey to use technology, innovation, and collaboration to drive a procurement transformation that brings the function closer aligned with the business. In this session, discover the company's first steps of success that were taken, the trials and tribulations they faced, and how those challenges have shaped the future.

Particular points of discussion will include: collaboration and support between IT, Supply Chain & Finance, process re-design and lifting the procurement capabilities toward world class.

Published in: Business, Technology
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Procurement Transformation – Story of Learning Journey

  1. 1. #AribaLIVE Procurement Transformation: Story of a Learning Journey Yolanda van Norden, Senior Director Procurement, ASML April 9, 2014 © 2014 Ariba – an SAP company. All rights reserved. @ariba
  2. 2. Before we start… introducing… • Yolanda van Norden • Senior Director Procurement at ASML • Over 15 years of experience in global Procurement roles at ASML, NXP Semiconductors and Philips • Fascinated by Indirect Procurement, and the potential value usually „locked‟ within the organization • “By accident” working in the High Tech Industry © 2014 Ariba – an SAP company. All rights reserved.2
  3. 3. Before we start… introducing… © 2014 Ariba – an SAP company. All rights reserved.3
  5. 5. It’s hard to imagine a world without chips 5
  6. 6. More than 180 billion chips are made every year 6 Data: WSTS In 2012 185 billion chips were produced — 27 for every man, woman and child on the planet. Global semiconductor industry sales reached $300 billion. 0 20 40 60 80 100 120 140 160 180 200 IC units, in billions
  8. 8. ASML makes the machines for making those chips 8 • Lithography is the critical tool for producing chips • All of the world’s top chip makers are our customers • 2013 sales: €5.2 bln • Payroll: 10,000 FTEs © 2014 Ariba – an SAP company. All rights reserved.
  9. 9. Founded in 1984 as a spin-off from Philips 9 © 2014 Ariba – an SAP company. All rights reserved.
  10. 10. A global presence 10 2,522 employees Source: ASML Q4 2013 Over 70 sales and service offices located worldwide 5,654 employees 2,184 employees © 2014 Ariba – an SAP company. All rights reserved.
  11. 11. © 2014 Ariba – an SAP company. All rights reserved.11 A global presence Public Slide 11 Veldhoven Wilton (CT) Chandler (AZ) Korea Taiwan San Diego(CA)
  12. 12. © 2014 Ariba – an SAP company. All rights reserved.12 Company 2013 semi capex (estimate, $M) Intel 10,500 TSMC Group 9,750 Samsung 9,500 GlobalFoundries 4,000 SK Hynix 2,730 Toshiba (incl. SanDisk) 2,580 Micron Technology 1,800 United Microelectronics Group 1,500 SMIC 805 Infineon 640 Sony 617 STMicroelectronics 500 A market of 12 large ASML customers For the 10th consecutive year, top five of VLSI‟s “Best Wafer Processing” suppliers„Good Partner‟ Award Preferred Quality Supplier Award Technology Collaboration Award Source: Gartner, Q4 2013 18 February 2014 Public Slide 12
  14. 14. Where were we with indirect procurement three years ago? In 2011: • Procurement strategies were incidental • Procurement strategies were not fuelled by strong market insights and deep understanding of business drivers • Control of spend was fragmented; organized as check at the end instead of directing spend in controlled ways Benchmarks 2011 • Value add (combined savings & contribution) is consistent and just below market averages (2%-4%) • Supplier consolidation is at par with market (4%) • Managed spend per procurement employee is very high compared to market •  Conclusion: Good potential for improvements 15 © 2014 Ariba – an SAP company. All rights reserved.
  15. 15. Our intent is to build a High Performance Indirect Procurement organization High Performance procurement means * 1. Strategic alignment with the ASML business and stakeholder needs  translated into measurable value add to the business 2. Cross-functional partnering to drive value add category strategy management processes 3. Reduced complexity in processes, and supply base  standardization of R2P processes 4. Standardized technology and tools used within procurement processes * Sources: The Hackett Group; G.Rietveld © 2014 Ariba – an SAP company. All rights reserved.16
  16. 16. We assessed our currently maturity status Assessment Factor Best Practice Score 1 2 3 4 5 Strategy & Organisation Business Engagement & Functional Excellence Strategic Sourcing Category & Supplier Management Purchase To Pay People & Skills Measurement, Policies, Controls & Compliance Systems, Data & Metrics Own Efficio assessment ASML Readiness • Trust the Procurement team to use all levers Team Readiness • Capability to professionally use all levers Resources • Capacity to manage all spend globally © 2014 Ariba – an SAP company. All rights reserved.17
  17. 17. Category strategy Objectives Stakeholder needs Supply market dynamics Product portfolio Category specific targets Strategy implementation RFI, RFQ Negotiations & contracting Contract implementation Operational fulfillment Requisition to pay KPI management Supplier performance management Contract management Business alignment Processes People The change program Strategic NPR Workstream Operational Excellence Workstream © 2014 Ariba – an SAP company. All rights reserved.18
  18. 18. The transition impacts both the own team as well as the way we interact with our stakeholders To Strategic category management Business value add KPI’s Solution focus Stakeholder centric procurement Process & Service orientation From Tactical Procurement Procurement KPI’s Responsibility focus Managing stakeholders Task orientation © 2014 Ariba – an SAP company. All rights reserved.19
  19. 19. Our action plan What we did • Thorough analysis of spend • Set-up cross-functional teams for all main categories • Set-up strategies for all major spend categories • Investment in team in all regions • Improved alignment with Control to ensure recognized value add in P&L • Started a transformation project on the operational requisition to pay process (EasyBuy) © 2014 Ariba – an SAP company. All rights reserved.20
  20. 20. Indirect procurement spend vs ASML’s turnover 21 © 2014 Ariba – an SAP company. All rights reserved.
  21. 21. We decided to measure our efforts by using the following metrics 23 Strategic Workstream Now Savings Below benchmark Return on Investment At benchmark Spend covered by a contract Above benchmark Consolidation Benchmark % Spend covered by an approved strategy Below benchmark Operational Workstream Now Catalog orders Below benchmark % of e-invoicing Below benchmark Spend covered by a PO At benchmark © 2014 Ariba – an SAP company. All rights reserved.
  22. 22. Our journey starts…. © 2014 Ariba – an SAP company. All rights reserved.24
  23. 23. A mission helped to clarify the new organization's purpose • To deliver recognized added value to its stakeholders and the ASML business by pro-actively driving a cross-functional category strategy approach • Translating market opportunities into valuable business propositions • Enabling easy buying methods for ASML © 2014 Ariba – an SAP company. All rights reserved.25
  24. 24. Our Procurement Journey was clarified to our stakeholders with defining our ‘product’ © 2014 Ariba – an SAP company. All rights reserved.26 Our key tasks Strategic value add Tactical procurement Operational fulfillment Business offering Expertise Process Service # Stakeholders Very limited: executive mgt More: budgetholders and up Many: everyone who can order stuff Key care-abouts Support / enable business strategy Do the work – secure delivery of service on time (and cost) Quality of service – reduced complexity and red tape Our promise “We know the market, and can help trigger change” “We deliver a professional process any way you like it” “We answer any procurement question you have” Our delivery model Procurement & Category Consultancy – Cluster managers Procurement Account managers - Anyway you like it Helpdesk: EasyBuy, email, telephone
  25. 25. The strategic procurement challenge Sourcing Lever Benefits Value Added Relationships Process Effectiveness & Compliance Supply Base Restructuring Total Cost Management Design & Specification Optimisation Supply Market Leverage Demand side Supply side Sourcing levers Supply Market Leverage Value Added Relationships Process Effectiveness & Compliance Supply Base Restructuring Total Cost Management Design & Specification Optimisation Supply Market Leverage Demand side Supply side Sourcing levers Supply Base Restructuring Value Added Relationships Process Effectiveness & Compliance Supply Base Restructuring Total Cost Management Design & Specification Optimisation Supply Market Leverage Demand side Supply side Sourcing levers Design & Specifications Optimisation  Bundled, fully leveraged volumes and requirements  Best practice commercial arrangements, where suppliers‟ incentives are aligned with ASML‟s needs  Concentration of spend with most qualified suppliers  Cost flexibility, whereby service levels and volumes can be adjusted based on ASML‟s market conditions  A more disciplined, structured and transparent approach to supplier management  Optimised total lifecycle costs
  26. 26. Both the Procurement team and the business needs to be prepared and equipped A cultural change for both parties Prepared & equipped: required from the Procurement Team •Sufficient CAPACITY to address entire NPR spend strategically •Required SKILLS to utilize more advanced sourcing levers •Appropriate MINDSET towards customers •Effective APPROACH to stakeholder engagement Prepared: Required from the Business • Willingness to work with Procurement CROSS- FUNCTIONALLY • Willingness to start with an OPEN MIND with regards to specifications and suppliers used • RESOURCES to work in cross- functional sourcing teams 28
  27. 27. The operational procurement challenge • Reduce bureaucracy By steering purchases into the most appropriate and efficient buy-channel By eliminating “double‟ approval loops from contract to requisition • Improve stakeholder satisfaction by a faster procurement process • Improve control on spend by improving the procurement involvement earlier in the buy-process • Improving the “closed loop” of contract to requisition to order to deliver to pay © 2014 Ariba – an SAP company. All rights reserved.29
  28. 28. What we like to achieve  Simple and efficient ordering, invoicing & payment process  Substantial reduction in process time   reduce with 50%  Minimal manual handling & interventions  30% - 40% hands free buying via catalogues, templates, and scheduled ordering  < 20% paper invoices  Full visibility for users within the R2P process  Reduction in alternative ordering processes  one platform for all required sourcing channels  Pushing spend through the right channels and reduce the alternatives for users  Procurement at the start of the process © 2014 Ariba – an SAP company. All rights reserved.30
  29. 29. Why we choose for Ariba P2O 31 • Functionality: • categories • e-Invoicing • NPR & PR • Process: • Authorization • Reporting • Master data • Integration Interfaces Architecture ASML adjustments Ease of implementation • Implementation Team and set-up Planning • Financials & Contract: • Implementation costs • Recurring costs • Business case • Contract conditions • Statement of Work • Supplier network • Amount of suppliers • On-boarding capabilities • ASML suppliers on the network • User interface • Intuitive • User friendly • After go-live • Supplier governance • Support organization • KPIs and business review structure • Suppliers • Presentation / sales team • Cultural fit • Company profile / financials • Customer reference © 2014 Ariba – an SAP company. All rights reserved.
  30. 30. A planning was detailed out • Phase 1 • E-invoicing • Technical solution first • Onboarding suppliers in waves • Phase 2 • P2O • Technical solution and catalog preparations • Go-life per region © 2014 Ariba – an SAP company. All rights reserved.32
  31. 31. 33 Top level Ariba landscape Ariba P2O Application Catalog Buy Non - catalog Buy Approval flow TIBCO interface SAP ECC ~ 60 csv files PR info XML Users Catalog management and approval Approval flow Suppliers GDS (user roles) User info Ariba Network Ariba Reporting SAP BIreports ~ 45 manual files
  32. 32. P2O preparation was done through a project team and the procurement organization • Project team Focus on technical solution and customizing P2O functionalities Onboarding suppliers for e-invoicing Set-up communication plan and change management approach • Procurement team Catalog preparations and channel strategies Execute change management activities „Walk the talk‟ © 2014 Ariba – an SAP company. All rights reserved.34
  33. 33. Category managers were tasked to prepare a channel strategy © 2014 Ariba – an SAP company. All rights reserved.35 Non catalog No PO flow Category Sub-category Sub-sub-category punchout cif internalsupplier NonCatalogPOwith Collaborative Requisitioning ServicesProcurement Releaseordercontract (nocommit) BPO-Releaseorder contract(metcommit) NonreleaseBPO/Non releasecontract(P2P) RegularPO Invoiceonly Training - general X Training - specific (technical) X X X Recruitment - Scholarships X Recruitment - Executive search X B Recruitment - Search and selection - (Non-executive) X X X Housing B X X Lease Cars - monthly allowance B X Lease Cars - fuel B X Relocation services US, APAC X B X Relocation services UTS - Vhv B X Compensation & Benefits B X X Financial - Accounting X B X Pay roll services, Employee Benefit admin X B X Insurances B X Internal X X Labor Market X X B IP B X Law Firm X B X Milestone based X B X Time and material B X Time Based X Professional Services HRO People Development HRO Mobility HRO Compensation and Benefits Financial Services Communications Legal Services Consultancy Catalog Non Catalog catalog PO collaborative (Non) release BPO • Keep Category responsible for full end- to-end process in their own category • Increase adoption of new system in Procurement • Enable good content at the moment of go-life  impact for end-users
  34. 34. Communications & change management started early • Own „brand‟ for the new solution: EasyBuy • Channel strategy owned by Procurement team, not the Project • Training materials and dedicated website • Instruction sessions for all requestors in all regions • Go life in waves © 2014 Ariba – an SAP company. All rights reserved.36
  35. 35. Status today… improvements everywhere 37 Strategic Workstream Now Savings Doubled Return on Investment Doubled Spend covered by a contract Increased with 10% Consolidation Down to 3.5% % Spend covered by an approved strategy Increased with 90% Operational Workstream Now Catalog orders Increased with 20% % of e-invoicing Increased with 40% Spend covered by a PO Increased with 20% © 2014 Ariba – an SAP company. All rights reserved.
  36. 36. Learning along the way…. • The Strategic Program went faster, yielded faster results, and was easily accepted • The Operational Program was more difficult to explain; processes are more integrated with other stakeholders • Not only Procurement should want the solution, also ALL stakeholders • Understand the impact on your own processes; willingness to change and adapt • IT architecture is to be understood early in the process; don‟t think it is all SAP now, so it will work • Find an project manager or consultant that has experience with the Ariba solution (or the solution you have chosen). © 2014 Ariba – an SAP company. All rights reserved.38
  37. 37. Are we there yet??? © 2014 Ariba – an SAP company. All rights reserved.39