Sourcing Is Now Resourcing: Providing More Savings Across the Organization

Ashwani Narang, Director, Deloitte Consulting (SEA) Sdn Bhd
DaeJoong Kim ,Head of Sourcing and Corporate Service , AIA Korea
August 31, 2016
Sourcing Is Now Resourcing: Providing More
Savings Across the Organization
Public

© 2016 SAP SE or an SAP affiliate company. All rights reserved. 2Public
Agenda
Welcome
Session Overview
Deloitte Industry Overview
AIA Overview
Q&A Session

CPOs are navigating a changing environment.
 Fragmented supply base
 Volatile markets
 Intricate costing and
pricing structures
 Detailed specs and design
requirements
 Extensive supplier
qualifications
 Many line items and pricing
variances
 Existing strategic supplier
relationships
 Supplier contingency plans
 Regulatory and environmental
requirements
Market complexity
More
Category complexity Strategic constraints

Contingent labor and services
28%
Travel and other services
11%
Indirect and MRO
23%
Capex
11%
Direct and supply chain
27%
After successfully driving spend under management, procurement
leaders are ready to harness all spend categories.
Source: Spend Categories for Global Top 2000

But the procurement and sourcing systems need to catch up.
Results in:
Supplier data
in disparate systems
Contract leakage
disconnecting negotiated terms
from procurement execution
Limited process and data
integration to key execution
systems
of source-to-pay
processes for direct
materials are manual1.
of contracted direct
materials spend is
noncomplaint2.
of enterprises cannot integrate
sourcing initiatives into corporate
data management3.
69% 30% 57%
Sources: 1. Chainlink Research; 2. Paystream Advisors; 3. Aberdeen

Reimagine
Higher average
annual savings where
organizations drive
best prices through
e-auctions, global
sourcing, and new
suppliers
Source: SAP Performance Benchmarking
54%
Spend that is contract
compliant at best-in-
class companies,
versus 48%
at all others
Source: Ardent Partners
69%
lower sourcing cycle
time when using
auction as the
e-sourcing strategy
over RFP
Source: SAP Performance Benchmarking
47%

What if you could:
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 7
Manage
source-to-contract
processes on a
single solution
Address all
categories of
direct and
indirect spend
Integrate
source-to-contract
processes to ERP
and execution
systems
Public

Pricing
conditions
Product
lifecycle
sourcing
Supplier qualification and segmentation
The new way for strategic sourcing of direct materials with a tight
integration into the ERP:
Supplier information and
performance management
Contract management
professional
Sourcing
professional
User experience + SAP HANA Cloud Platform + integration of SAP ERP and non-SAP
A new layer of innovations to support direct materials sourcing
Volume and
price
forecasting
Product
costing
Supplier
performance
automation
Advanced
optimization
Multilevel
BOM
Service
item
hierarchy
PLM
integration

Panelists
Ashwani Narang
Director, Deloitte Consulting
SEA
DaeJoong Kim
Head of Sourcing and
Corporate Service , AIA
Korea

© 2016 Deloitte Consulting Pte. Ltd.
Deloitte Industry Overview

Sourcing Is Now Resourcing
Providing More Savings Across the OrganizationWhat Your Data
Is Telling You and Why It’s Worth Listening
Ashwani Narang, Director, Deloitte Consulting (SEA) Sdn Bhd

Given economic factors, CPOs are faced with increased challenges constantly
Economic Risk Factors Key Challenges for Procurement
How to match customer
price expectations?
What is the impact on
Procurement due to
commodity price
reduction and currency
volatility?
How should my supplier
contracts be structured
(duration, pricing, etc.)
How should procurement
contribute in maintaining
profitability?
Currency Fluctuations
$
€
¥
Commodity Price Reduction
Economic Slowdown
Disinflation through
falling Oil Prices
Increased Globalization

CPOs need help navigating and managing supply chain risk
Macro environment risks
Have potential effects across the entire supply chain
Economic
€$ ₤
¥
Geopolitical Hazards
!
Regulatory
Functional risks
Exist among enabling functions that support supply chain processes
Finance Human Resources LegalInformation Technology
$$$
Extended value chain risks
Originate in upstream and downstream supply chain partners
Operational risks
Relate to internal process risks
Develop Plan Source Make Deliver/Return
Tier N End Users
Supply Demand
Environmental/Socia
l Responsibility
Tier 1 Distributors3rd Party
Services
SecurityInfrastructure /
Resources
Note: Though not depicted above in order to maintain simplicity, risks are often highly inter-related with impacts spanning across functions internal to the company
and externally within the extended value chain.

In addition to this, CPOs still need to focus on key priorities
Cost reduction is the top priority for CPOs as they look to sustain business growth in a slowing market
The top four corporate priorities for CPOs in 2016 show an appetite for growth but a slight shift back to a more conservative focus. Cash generation has risen again, coupled with a 5
percentage point increase in the focus on cost reduction.
Widening of talent gap, with CPOs increasingly feeling their teams lack the skills needed to deliver their procurement strategy
Cost
reduction
New product /
market development Increasing cash
flow
Organic expansion
62 percent of CPOs do not believe their team has the skills and capabilities to
deliver their procurement strategy, compared with 48 percent two years ago
2013
2014
2015
52% 48%
43% 57%
38% 62%
And yet investment in talent development has not been prioritized. This is
exemplified by the decline in spend on training over the past three years.
spent less than 1% on training budgets spent less than 1% on training budgets
Talent
Top four CPO Priorities for 2016
Source: Deloitte Global CPO Survey, 2016

For CPOs, Strategic Sourcing remains main driver to generate value along with
technology adoption
CPOs are primarily focusing on the following strategies to deliver value over the
next 12 months:
Consolidating spend
Increasing level of supplier
collaboration
Restructuring existing supplier
relationships
Top 4 Key Focus Areas for 2016
Increasing Competition
43%
39%
25%
32%
38%
37%
30%
Spend Analysis
Contract
Management
eSourcing
Technology Investments for 2016
CPOs plan to invest in technology that will help increase spend visibility,
improve compliance, reduce TCO and increase supplier collaboration
29% Supplier Relationship
Management
Source: Deloitte Global CPO Survey, 2016© 2016 Deloitte Consulting Pte. Ltd.

But leading organizations still need to catch up
Manual and
inconsistent
processes across
organization
Disparate systems for
managing S2P
processes
No single source of
truth for spend data
Compliance issues &
contract leakage
Broken integrations Limited supplier
performance & risk
monitoring

Best in class organizations view procurement as a closed loop
where Strategic Sourcing, Operational Procurement & Supplier
Management processes feed each other
Source: Deloitte Global CPO Survey, 2016
Analyze
Spend
Assess
Opportunities
Implement
Contract
Negotiate
Contract
Conduct RFx
Qualify Suppliers
Define
Sourcing
Strategies
Strategic
Sourcing
Lead Source
Selection Team
Conduct Auctions
Optimize Bids
Share
Knowledge
Alliance/Exchange
Strategy
Exploit Tax
Opportunities
Create
Requisition
Receive Goods
and Services
Obtain ApprovalsIdentify
Need
Operational
Procurement
Manage
Compliance
Create Purchase
Order
Manage
Shipping
Manage Payment
Collect Performance
Data
Measure
Performance
Qualify and
Certify
Manage
Issues
Communicate
Performance
Supplier
Management
Perform
Benchmarking
Compare
Performance
Manage
Contracts
Continuous
Improvement
Key Objective:
Improve performance and
capabilities of significant external
sources of supply while building
key partnerships where needed.
Key Objective:
Identify the supply
arrangement that
provides the best quality
item/service at the lowest
total cost of ownership.
Key Objective:
Provide an efficient means
for acquiring goods and
services while collecting key
performance, compliance,
and financial data.
Integrated Roles
Integrated Processes
Integrated Master Data
Integrated Technology

Best in class organizations utilize technology
Source: Ardent Partners CPO Rising 2015
Automated Spend
Analysis
E-Sourcing
E-Procurement
E-Payables
Business Network
Best in Class* Others
48%
33%
55%
46%
64%
52%
47%
38%
40%
25%
* Achieved 90% spend under management

Key benefits of a fully integrated Source to Pay process cycle
Procurement Strategy
Spend Analysis
eSourcing
Contract Mgmt.
eProc / EIPP
Supplier Mgmt.
Spend Analysis
 Single “Source of Truth “ for spend capture and tracking
 Manages spend by vendor, commodity, and
contract
 Provides value for sourcing and vendor
management
Contract Management
 Integrates with Sourcing to enable source-to-
contract project management
 Facilitates contracting standardization
 Ability to view contract spend / commitments
from Purchase Orders
Supplier Relationship Management
 Enables centrally-led structured approach to
supplier management
 Ability to monitor and track supplier
performance and risk
Request to Order
 Ensures use and price compliance to contracts
 Provides line item data for spend analysis
 Automatically creates purchase order from catalogue requisitions/contract execution
 Pulls contract information (preferred supplier / price) for catalogue purchases
Receiving
 Receiving based on PO
 Transactional information and performance tracked
in SRM / SPM
eInvoicing, Discounting & Settlement
 Allows for electronic receipt , approval and payment of invoices
 Cash flow optimization through Dynamic Discounting
Sourcing
 Consistent process, templates and
nomenclature for all sourcing events
 Management and tracking of the sourcing
process and portfolio of sourcing projects
Integrated Platform Benefits

Imagine if you could…
Manage entire Source-
to-Pay process with
single solution
Integrate seamlessly
with your existing
ERP system
Collaborate better
with your strategic
suppliers
Address all spend
categories

Strategic Sourcing with SAP Ariba solutions
SAP offers a single platform which is able to manage your entire Source-to-Pay process while seamlessly integrating with your
existing ERP system
Cloud solutions
SuppliersBuyers
Integrations with SAP HANA Cloud Platform + SAP ERP and non-SAP ERP
Ariba
Spend
Visibility
Ariba Collaborative Finance and
Ariba Collaborative Supply Chain
Ariba
Collaborative
Sourcing
SAP Ariba
procurement
solutions, on demand
Ariba
Collaborative
Commerce

Case Studies

A Pharmaceutical Perspective
Sourcing is ReSourcing Journey
The client is a well known Specialty Generics Pharmaceutical Company and is ranked among the Top 5 of the World.
3.5%
7.5%
12.0%
22.0%
29.0%
33.0%
37%
2008 2009 2010 2011 2012 2013 2014
SpendPenetrationacrossCategories
Year
E-procurement Journey
• Following Credentials explains the Success
Rate of this client:
• 4 Major Countries on-boarded
• 3-4 Auctions/ day
• 50-80 RFP’s/ Month
• Strong team of 30+ people utilizing the
Sourcing platform
• Sourcing Journals released every month
• Focus on Training and Designing of Standard
Processes
• Buyer Recognition Program
• Monthly e-Sourcing Champions

AIA confidential and proprietary information. Not for distribution. SAP Ariba Live Singapore•27
Strategic Sourcing
Breakout Session

AIA confidential and proprietary information. Not for distribution. SAP Ariba Live SingaporeAIA confidential and proprietary information. Not for distribution. SAP Ariba Live Singapore
Introduction of AIA
American InternationalAssurance
Ariba Transformation
Ariba Implementation
Strategic Sourcing
Ariba Sourcing
Ariba Pros & Cons
Pros & Cons
05 Q & A
Questions& Answers

Introduction of AIA
 AIAOverview
 Whereweare
 AIACentury ofHistory
 AIAMarketPosition

AIA confidential and proprietary information. Not for distribution. SAP Ariba Live Singapore
AIA Overview
The business that is now AIA was first
established in Shanghai over 90 years
ago. It is a market leader in the Asia-
Pacific region (ex-Japan) based on life
insurance premiums and holds leading
positions across the majority of its
markets.
Total Asset US$ 167.6 bil.
<End of 2015>

Where we are

AIA Century of History
American International Assurance Company
1919 …
2010
2011
2012
2013
2014
2015
GROUP FOUNDER
CORNELIUS VANDER
STARR ESTABLISHED AN
INSURANCE AGENCY IN
SHANGHAI
LISTING ON THE HONG KONG
STOCK EXCHANGE
WORLD 3RD LARGEST
CONSTITUENT OF THE HANG
SENG INDEX
DIVESTMENT OF AIG
ACQUISITION OF ING MALAYSIA
SRI LANKA BECOMES AIA'S 16TH
MARKET
THE REAL LIFE COMPANY
INTEGRATION OF AIA MALAYSIA
AND ING MALAYSIA
EXCLUSIVE LONG-TERM
PARTNERSHIP WITH CITI
EXTENDED PARTNERSHIP WITH
TOTTENHAM HOTSPUR
5 YEARS AS AN
INDEPENDENT COMPANY
#1 WORLDWIDE FOR MDRT
MEMBERS
ESTABLISHED
IN CAMBODIA

AIA Market Position

Ariba Transformation
 AIAGroupSAPERP
 NecessityofSpendManagement
 SpendManagement Solution
 Transformations
 SAP,Buyer,Supplier

AIA Group SAP ERP Launching

Necessity of Spend Management thru
The System
Complianceofsourcing
process
Systematizationof
contractcategorizationSpendmanagement
followedbyexpenseanalysis
Groundbasisofexpense
controlforentireAIA
entities

Chosen Spend Management Solution
Ariba Concur
Maximize
costefficiencyIntegratedmanagement
ofcontracts
Leverageeffect
forprocurement

WORKSHOP
• Project overview
• Functional design workshop
• 2 months
……
CONFIGURED
• Blue print confirmation
• Master & static data review
• Process FIT gap and BPM
• Finalize user group and
approval flow
• 2 months
……
TESTED
• Build
• System Integration
Test
• BPM review and
Update
• Change impact
assessment
• Training material
preparation
• User Acceptance Test
• 1 month
……
IMPLEMENTED
• Cut-over plan & Execution
• Production health check
• Business Process Menu sign-off
• 1 month
……
GOLIVE
• Hypercare
• 2 months
……
Ariba System Implementation
 System Implementation Plan
 Resource Plan

SAP Ariba Buyer Ariba Supplier

Strategic Sourcing
 AribaSourcingOverview
 SupplierEnablement
 RFPEvent
 Collaborative Evaluation
 AwardSupplier
 CLMtoP2P

Ariba Sourcing Overview
Supplier
Enablement
Contract Life
Cycle
Management
Procure-To-Pay
RFP
Initiative
Strategic
Evaluation
Supplier
Awards
Ariba
1
2
3
4
5
6

Supplier Enablement

e-Bid Initiative w/ RFP Event

Collaborative Evaluation

Award Supplier

Ariba Sourcing Merits are…
e-Processing AnalysisDiscovery Audit Trail
• You can find various
suppliers in the
WORLD even if you
don’t know any
particular supplier or
industry.
• All processes are to
be electronic basis,
you don’t printing
anything you require.
• You can analysis
where saving point is
and who suppliers
are pre-eminent via
Ariba report. (by
Commodity codes, spend
amount)
• Outstanding audit
trail function
provided, you don’t
have to worry for
auditors!

Contract Life Cycle Management
TheContractLifeCycle
ContractrequestRenewal
Authoring
Negotiation
Approval
Execution
Obligation
management
Contract
amendment
Audit&
reporting

Procure-To-Pay

Ariba Pros & Cons
CONSPROS
Localization
As Ariba initial introduction stage in Korea, there are
limitations for localization such as Ariba helpdesk to
support both buyer and supplier
Cloud on Demand
No additional cost based on Cloud for infrastructure
and its maintenance cost, outdated system
enhancement cost as well
Cloud on Demand
Limitation from Could, take a considerable time for
service request such as bug fix, error handling and
enhancement request
Invoicing
For invoicing, currency decimal issues and tax bill
(centralized by government) handling still pain point for
Korean customers
Easy access and usability
UI enhancement and online mall-basis purchase enable
normal users to access and use the system more easily
Low cost license
Low license fee for normal users exclusive of
enterprise license users
Supplier connectivity thru Discovery
Direct connection to supplier portal enables to purchase
various product, enlarge sales opportunities of supplier
thru Discovery

Thank you for your attention,
Do you have any questions?
“
”
pend management is a pre-eminent
source of company competitiveness.

Thank you Contact information:
Ashwani Narang
Director, Deloitte Consulting (SEA) Sdn Bhd
ashnarang@deloitte.com
Direct: +60 3 7610 7567
DaeJoong Kim
Head of Sourcing and Corporate Service
AIA Korea
KyoungHo.Sung@aia.com
+82 2 3707 4956
#SAPAribaLive

Important information
This information reflects the status of SAP Ariba solution planning as of June 2016. All such
information is the Confidential Information of SAP Ariba (per the contract between our
companies), and must not be further disclosed, as stated in the confidentiality clause of that
contract. This presentation contains only intended guidance and is not binding upon SAP Ariba
to any particular course of business, product strategy, and/or development. Its content is
subject to change without notice. SAP Ariba assumes no responsibility for errors or omissions
in this document. SAP Ariba shall have no liability for damages of any kind including without
limitation direct, special, indirect, or consequential damages that may result from the use of
these materials.

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