Organizations can no longer afford to be content with focusing on optimizing internal operations (inside-out view). Instead, they need to focus on optimizing the entire value chain (outside-in view) and extend collaboration beyond the four walls.
Participate in this session and discover how best-in-class companies leverage inter-enterprise collaboration as a means to mitigate supply chain risk and drive revenue growth and profitability. You'll hear how leading Ariba customers have built a collaborative sourcing and supplier management program that leverages world-class web-based technology and tools, as well as structured processes, expertise, and a networked community.
19. 19
November [ ], 2011
Ryan Wheelan
Ariba Live Conference – May 2013
20. 20
Awards and Recognition
• Stevie Awards for Customer Service – 2013
• Kiplinger’s Personal Finance (Online Bank “Hit”) – 2012
• Money Magazine “Best Banks in America” – 2012
• “Best Online Bank,” “Best Savings Account” and “Best One-Year CD”
• Ponemon Institute’s 2011 Most Trusted Companies for Retail Banking Study
Ally Financial Overview
Ally Financial is a leading vehicle financial services company powered
by a top online bank franchise. Ally offers a full suite of automotive
financing products and services, including new and used auto and RV
inventory and consumer financing, leasing, inventory
insurance, commercial loans and vehicle remarketing services. Ally
operates as a bank holding company.
22. 22
Supplier Management Collaboration
Sourcing
Line of
Business
Supplier
Risk
• Product/Service Risk Evaluation
• Ongoing Supplier
Scorecards/Evaluations
• Supplier Issue Tracking
• Supplier Controls Review
• On-site visits
• Internal Risk Function Evaluations
• Supplier Risk Documents
• RFI/RFP Data
• Sourcing Deal Data
• Supplier Selection
• Contract Negotiation
• Issue Remediation
• SLA Creation
23. 23
Collaboration: Supplier Risk
Sourcing
Line of
Business
Supplier
Risk
• SPM Project per Supplier
• Contains Phases, Survey, dForms, & linkage to Line
of Business eForms
• Supplier Risk Document Storage
• Controllable/Auditable
• Date/Time Stamps
• History Tracking
Supplier
Performance
Management
Project
• Supplier Controls Review
• Ability to send to multiple participants at Supplier via
Ariba
• Consistent Supplier Responses
• Ability to attach Risk Documents
Survey
• Supplier Risk and Internal Risk Output Data
• Product/Service Risk eForm and Survey Risk
Output
• Key Participants & Dates
dForms
24. 24
Collaboration: Sourcing
Sourcing
Line of
Business
Supplier
Risk
• Sourcing Project per Deal
• Contains Events, dForm, Approvals, & Contract
Linkage
• Sourcing Deal Documents
• Controllable/Auditable, Date/Time Stamps, &
History Tracking
Sourcing Project
• RFI/RFP Supplier Responses
• Ability to send to multiple Suppliers via Ariba
• Consistent Supplier Input
Events
• Supplier Deal Data & Approvals
• UNSPSC, Cost, Savings, Project/Service
Risk, Approvers, Supplier Selection, SLAs, etc.
dForm
• Contract Workspace per Contract
• Contains Contract Risk dForm & Sourcing
Project Linkage
• Contracts
• Controllable/Auditable, Date/Time Stamps, &
History Tracking
Contract
Workspace(s)
• Contract Risk
• Template Deviations
• Risk Approvals
dForm
25. 25
Collaboration: Line of Business
Sourcing
Line of
Business
Supplier
Risk
• Product/Service Risk Evaluation
• Automated Workflow
• Calculated Fields based on algorithms and
scoring
eForms
• Ongoing Supplier Scorecards/Evaluations
• Automated Workflow
• Calculated Fields based on algorithms and
scoring
eForms
• Supplier Issue Tracking
• Enterprise-wide tracking of Supplier Issues
• Ability to categorize as Closed/Open
• Broad access and controls
Offline
Tool
27. 27
Ally Supplier Management Metrics
Data
Warehouse:
Reporting
Supplier
Risk
Line of
Business
Sourcing
•Supplier Risk
•Managed Suppliers in Program: 100+
•Categories Managed: All
•Monthly Scorecards Created: 100+
•Sourcing
•Sourcing Deals for Suppliers in
Program: 1,500+
•Contracts for Suppliers in Program:
3,500+
•Line of Business
•Product Service Risk Evaluations:
2,500+
•Issue Tracking: 250+
28. 28 Fifth Third Bank | All Rights Reserved
Strategic Sourcing Ariba Process Overview
April 2013
29. 29 Fifth Third Bank | All Rights Reserved
Sourcing Process Integrated with Ariba
Service Risk
Tier
Evaluation
Supplier
Integration
Supplier
Risk
Review
Performance
Monitoring
1) Know the Service and Potential Risk-Calibrate the Correct Due Diligence Required (Ariba)
2) Integrate Right Number of Suppliers for Project Bid – Self Registration Ariba-5/3
3) Correct Level of Risk Review Based on Risk Calibration of Service (Ariba)
4) Continual Supplier Performance Monitoring – SLA Scorecard (Ariba)
PROCESSES DEIGNED AND EXECUTED IN ARIBA
30. 30 Fifth Third Bank | All Rights Reserved
Disaster
Recovery
Initial Filter (SAS)
PLC
Level 3
Assessment
of
Risk
Tier
Level
Sourcing Portfolio
Officers
Sourcing
Relationship
Partners
Criticality of
Service
Volume of
Data
Data
Sensitivity
Regulatory
= Sourcing Initiatives
Review and Oversight Tier Levels
6: Highest Level
5: High-Moderate
4: Moderate
3: Moderate-Low
2: Low
1: Lowest
Location
Service Risk Tier Evaluation
Service Assessment Survey (SAS) Executed with Ariba SI Workspace
31. 31 Fifth Third Bank | All Rights Reserved
Sourcing – Supplier Integration
Project Initiation
Opportunity
Assessment
Sourcing
Strategy
Supplier
Registration
(Ariba)
Sourcing Event
Supplier
On boarded
Supplier
Performance
Monitoring
Strategic Sourcing Process Cycle
End
32. 32 Fifth Third Bank | All Rights Reserved
Supplier Risk Review
IT Risk
• Completes IT Risk Review Requirements
Operational
Risk
• Operational Requirements are Met
Human
Resources
• H.R. Requirements are Compliant
Community
Affairs
• Reviews Diversity/ISO/Green Status
Finance
• Strength of Financial Position B/S-P/L-Cash Flow
Enterprise
Risk Mgt
• Overarching Risk Review Completed
Risk Review Completed for Service Providers using Ariba PM Workspace
33. 33 Fifth Third Bank | All Rights Reserved
SLA Scorecard Performance Monitoring
Supplier
On Boarded
SLA Scorecard
- Created in Ariba
- By Service
- Line of Business Owner
- Review Schedule Set
Scored on
Schedule Basis
Ongoing
Collaborative
Performance
Monitoring
Supplier Performance Excellence
Collaborative Monitoring
Best In Class Performance
34. Dabur. Celebrate Life.
Maximizing Trading Partner
Performance and Collaboration in the
Networked Economy
A Dabur perspective
Somit Mukherjee
Head-Procurement
Dabur India Ltd
May 2013
35. Dabur. Celebrate Life.
DABUR GROUP – AN INTRODUCTION
Largest Indian Personal &
Health care Company –
Revenue of over USD 1Bn
Market Cap of USD 4 Bn
World Leader in Ayurveda
Portfolio of over 400
Herbal / Ayurvedic Products
Professionally Managed
Awarded for excellence in
Corporate Governance
Strong Internal Competencies
Robust Manufacturing Set up &
State of the Art R&D Facilities
A Trusted Indian Brand
38. Dabur. Celebrate Life.
A DIVERSIFIED SOURCING BASE OF 3000+ ITEMS
• Global Materials spend of over US $ 450 million
• 900 commodities , 3000 item codes
• 21 sourcing locations & 700 + vendors
• 9 sourcing time-zones globally
• 5 Currencies
• Std deviation of over 30% in prices
39. Dabur. Celebrate Life.
Price
Costs
Profit
Price
Costs
Price
Profits
Profit Costs
What business model do you operate on ?
• Store brands control price. . Investors expectations control profits.
. Mgt has to control costs. . Business environment highly challenging
. Calls for end to end collaboration
41. Dabur. Celebrate Life.
Networked Environment
Strategic Roadmap of Sourcing
Maverick
Buying
(Decentralized)
Centralized
Procurement,
Scale Analysis
E-Procurement
Contract
Management,
Opportunity
Identification
Benchmarking,
Supplier
Performance
Collaborative
Sourcing
Competition Timeline
We have a significant
head start
Dabur Timeline
42. Dabur. Celebrate Life.
COLLABORATION Vs TRADITIONAL
SOURCING : Improving Trading Partner Performance
• Procurement departments have defined budgets and a volatile price
environment
• Need to expand the scope of high value sourcing activities across a wider
range of spend, categories , business units spread globally
• Identification of ‘ripe’ high value categories , spends and partners as part of
Enterprise Risk Management
• Unleash Next generation of Value enhancing changes in Sourcing
43. Dabur. Celebrate Life.
COLLABORATION
NEEDS….
…..AND LEADS TO…
• Improved visibility and understanding
into the true cost of sourcing
decisions and awards
• Mitigating the risk of savings leakage
& Potential risks (incl. delivery) by
enabling a shared visibility into various
sourcing scenario impacts
• Providing the sourcing team deeper
insights into the global spend
manager's needs and preferences for
future planning.
• Top Management Commitment
• Supplier performance
management
• Training & Capacity Building
• Risk mitigation & production
focus enhancement by
intermediary manufacturing in
non core areas
• Due diligence in supplier
selection , GAP analysis &
continuous assessment
• Vendor as a partner for Price
Risk Management
44. Dabur. Celebrate Life.
Physical Factual
Emotional
LEVERAGES HUMAN
SENSIBILITIES BETTER
• Real Worldly
– Efficient & Journey oriented
– Effective & more likely to
sustain
– Focus on maximising
Business potential
• Traditional
– Competitive
– Effective but often
mistrusting
45. Dabur. Celebrate Life.
An independent agency for
price assessment and
discovery
Independent price
assessment is done to
enhance transparency in
pricing for all stakeholders.
The means to offset
price risk for all players
is provided.
The means of price
discovery mechanism
through efficient paper
markets (Exchanges and
OTC) to be provided.
Farmers/Vendors/Suppliers
•Focus on improving yield .
• Invest in cultivation with
assured return and finance
at early stages.
DABUR/CP Co.
• Provide long term, fixed price
and /or guarantee contracts to
trade partners.
• Develop supply chain.
• Provide financial institution
with quality assurance.
• Invest in stakeholder education.
Financial Institution
• Provide finance against long term contracts
and infrastructure development.
. Provide finance against commodity warehouse.
DABUR/CP Co.
Invest in branding/marketing to
create genuine structure
margins.
Processors
Engage in contract
manufacturing with the
assurance of structured
market
RESOURCE CONNECTIVITY & PERFORMANCE
46. Dabur. Celebrate Life.
BENEFITS REALIZED BY ACTIVE PARTNER(S)
COLLABORATION
Cycle Time
Reduction
More Time
for Strategic
Inputs
Improved
Bottom-line
Process
Compliance
Market
Transparency
• Significant reduction in data collection
efforts and cycle time
• More time for high value activities
such as spend analysis, strategy
selection, and award optimization
• Helped shave off significant time from
the traditional offline negotiation
process
• Helped the organization save bid-to-
award lead time
• Significant reduction in cost due to
dynamic bidding process
• Average savings of 5 – 15%, depending
on category type and other governing
factors
• Increased transparency
• Objective and documented
supplier selection
• Helped to derive the true and best
market price of the auctioned items.
• Enabled buyers to know and achieve
the best market price
Sourcing
Collaboration
47. Dabur. Celebrate Life.
AT DABUR……
LIVE EXAMPLES OF THE TRADE PARTNER
COLLABORATION
Participate in Infrastructure : Logistics
Rigid Polymer containers : Packaging
Herbs Sourcing : Raw Material Protection & Sustainability
Honey Sourcing : Expansion of Supply
Fruit Pulp Procurement : Managing the External Supply Chain
48. Dabur. Celebrate Life.
49
LOGISTICS : SCOPE OF COLLABORATION
•3rd party collaboration in Logistics to maximise value for
Farmers, Processors and Buyers
49. Dabur. Celebrate Life.
RIGID PACKAGING SOURCING
Technology provider, Manufacturer, Raw Material processor and Buyer working in
synergy to combat inflation
50. Dabur. Celebrate Life.
SUSTAINABLE HERBS SOURCING
•Production of planting material
•Sale to farmers at cost
•Agreements with other input
providers
•Buy back arrangements
•E-auctions for regular
procurement
•Now, due to our everyday e-
procurement, there is a need for
an Ariba mobile APP
51. Dabur. Celebrate Life.
HONEY PROCUREMENT
2. Overhaul of Buying strategy of Honey :- From Competitive Buying to Collaborative Buying
3. Advantageous Position :-
- Company “collaborates with Vendor “ to arrive at the best negotiated rate
- Negotiations still on , However Vendor COGM +Margin is the basis for negotiations
instead of a flat market price being trust on vendors
- “Correct Identification “ of best market price - crucial for an agricultural item with a
unstructured market.
1. Traditional model of Procurement :-
- Fierce Competition amongst vendors ,
followed by intensive negotiations to arrive at the
best possible market rate
Over a period of time – inherent flaws in
the system crept up :- quality, shrinking of vendor
data base, etc.
52. Dabur. Celebrate Life.
FRUIT PULP PROCUREMENT
Fruit stocking & ripening Washing of Fruits
Thermal treatment
Crushing & Destoning
Homogenization Pasteurisation Packaging
•Primary producers of a commodity, processors, logistics providers and
buyer networking in a perishable high value product
53. Dabur. Celebrate Life.
Knowledge driven
sourcing
Sustainable
Business
Eco-system
Hedge if
required w.r.t
portfolio
adjusted
budgeted prices
Mark to
Market/Mark to
Target/Use VAR
concepts with
suitable
software
Ensure continuity of successes
and reduce/revisit failure
TRUE COST/PRICE
DISCOVERY
Operationalize Sourcing Decisions/Collaborate
on market intelligence/forecasts and Value
add techniques
Analyze spends and ‘Focus’ on objectives
Procurement
optimisation/
Price Decision
Performance/
Risk monitoring
Partnering/
Hedging costs
Systematizing
Efficiencies
Target setting
Budgeting
MAXIMISING TRADING PERFORMANCE
Growth&stability
60. The Hackett Group Procurement Benchmark-2011
Backup slide 1
2.22
2.50
1.67
2.20
2.56
2.38
2.40
2.60
2.80
3.00
3.80
0.32
0.56
0.48
0.81
0.96
0.68
0.38
1.35
0.32
1.35
1.85
Supplier development resources (e.g., Lean/six sigma experts) help suppliers improve
performance and capabilities
Detailed supplier capability studies and open-book costing techniques used for mutually
beneficial improvement opportunities
Gainsharing established so suppliers share in realized SRM benefits
Relevant suppliers measured on submitting improvement ideas; process in place to
assess and provide timely feedback on proposals
Supplier conferences for best-practices sharing, supplier recognition, supplier feedback
etc.
Formal assessment and nurturing of ongoing strategic relationships
(e.g., communications, conflict resolution)
A "voice of the supplier" feedback process used (e.g., supplier surveys, reverse
scorecards, etc.); process in place to respond to supplier feedback
Issue resolution via clear escalation/resolution process; preventive process
improvements focused on relationship health
Concise SRM strategies and 1/3/5-year plans developed for strategic suppliers
SLAs periodically reviewed to ensure relevancy and minimize bureaucracy; metrics
linked to business outcomes
Periodic supplier performance reviews for contract compliance and to identify
improvement opportunities (e.g., risk reduction)
Peer group Top performers
Top performers
average 2.56
Peer group
average 0.82
Extent to which practices have been implemented
Capability
mgmt.
Collaboration
management
Relationship
healthmgmt.
Performance
management
Scale:
0 = Not applied
1 = Applied somewhat in a few areas
2 = Applied very well in a few areas
3 = Applied somewhat across most areas
4 = Applied well across most/all areas
5 = Going even beyond this practice
61. 64%
52%
64%
52%
49%
41%
21%
21%
Some type of supplier management process incl. outside of
procurement - Direct spend
Some type of supplier management process incl. outside of
procurement - Indirect spend
Enterprise-wide SRM program/process - Direct spend
Enterprise-wide SRM program/process - Indirect spend
Peer group Top performers
Backup slide 2
Percent of companies
Harder
(but better)
Easier
62. The Hackett Group Procurement Benchmark-2011
Backup slide 3
1.7
1.9
1.3
2.2
1.6
2.1
2.1
1.7
2.2
1.7
2.1
2
1.9
1.8
2.2
2.4
2.2
2.1
2.4
2.1
1.8
2.6
1.8
2
2.2
1.6
1.6
1.8
2
2.2
2.1
2.2
2.1
2.3
1.2
0.9
1.4
1.1
1.2
1
1.2
1.3
1.1
1.2
1
1
1.2
0.7
0.6
0.9
1
1.2
0.9
1.1
1
0.7
1.1
1.2
1.1
1
1
1
1.1
1
1.2
1
1.1
0.8
Extent to which supplier portals are used
Degree of external system integration with suppliers for day-to-day operations
Degree of technology used to enable supplier management programs and processes
Level of skills on SRM team
Degree of skills and training provided to SRM professionals
Maturity of SRM roles
Maturity of supplier capability assessments
Maturity of issue resolution processes with suppliers
Maturity of supplier risk management
Maturity of processes for supplier certification
Level of support given to suppliers
Level of supplier enablement and capability building
Level of continuous performance improvement with suppliers
Maturity of supplier partnering structures
Level of collaborative activities with suppliers
Level of supplier collaboration
Maturity of process for supplier to provide feedback to buying organization
Maturity in setting joint objectives with suppliers
Focus of influence on suppliers
Degree of risk and reward-sharing with suppliers
Extent to which supplier stratification practices are used
Level of value measurement with suppliers
Extent of supplier scorecards to drive performance improvement
Sophistication of KPIs and SLAs used for supplier performance management
Sophistication of establishing supplier metrics and targets
Maturity of service placement strategy
Maturity of business process sourcing strategy
Clarity of performance management roles
Maturity of organizational structure to support SRM
Level of executive support for SRM program
Level of focus on supplier innovation outside of new-offering development
Degree that SRM is tied into strategic sourcing activities
Degree of collaboration with stakeholders
Scope of SRM program
Current Maturity Level (average score) Gap to Target Maturity Level
Source: Hackett Procurement Capability Maturity Model (SRM section), 2012
Strategy &
alignment
Organization
Performance
management
Process:
Alignment
Process:
Partnering &
development
Process:
Risk/quality
Skills & talent
Enabling
technology
Lagging Achieving Exceeding Leading
1 2 3 4
Editor's Notes
Speaking Notes: If procurement is about maximizing the value of supply, then strategic sourcing, as typically applied, addresses only a single element: pricing and TCO. Sourcing can only do so much to tap the true value of strategic relationships, drive innovation and improve supplier capabilities and performance over time. It is true that a strong sourcing process, embedded within a robust category management methodology, should set up the appropriate supplier relationship management (SRM) processes for success, especially surrounding strategic supplier relationships. But once preferred suppliers in a rationalized supply base are put in place, the game shifts toward joint value creation. This demands a collaborative approach that may prove difficult for many procurement organizations, as it requires new skills, processes, tools and organizational support.
In the next three years, SRM is predicted to overtake sourcing in overall value contribution (savings from the program as a % of spend).For every $1B in annual spend, top-performing organizations can expect to reduce costs by 2.48% or $24.8M through SRM investments. On average, this adds up to $1.1M in savings per strategic supplier. Top performers are turning to strategic suppliers to bring continuous improvement ideas to the table, leveraging lessons learned from pockets of excellence in areas like IT vendor management.
Top SRM performers: have 2.3X fewer strategic suppliers (per $B spend) than peers, enabling them to perform SRM with 37.5% fewer resourcesdedicate over 2.7X more resources to each strategic supplierare more than twice as likely to lead SRM via a single enterprise SRM group and program/processhave effective SRM skills at more than 2X the rate of peersdeveloped best-practice capabilities at 3X the rate of peer organizationsadopt technology much more aggressively than peers in self-service, analytics, etc.
Discuss Tab 1.3 of the PIP being the only source to determine what is the appropriate IT methodology for a particular project. Discuss the fact that the determination is not solely based on the number of Effort Hours but includes multiple criteria including:RiskComplexityNew vs. ExistingLevel of effort thresholdsInsist that adherence to the proper methodology class are tracked KPIs.