Transforming Strategic Sourcing and Procurement – The New Model

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This session will provide an overview on how Grupo Posadas, a leading Mexican hospitality company, transformed its Sourcing and Procurement model.

Key Achievements:
• A standardized sourcing and supplier management process. USD 27.3 million in savings in 2.5 years which accounts for 18% savings against the baseline
• Improved leveraging of customer needs and buying power
• Focused compliance and use of contracts. In 2012 compliance has improved to 96%
• Enhanced communication of customer requirements
• Standard key performance metrics

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Transforming Strategic Sourcing and Procurement – The New Model

  1. 1. Transforming Strategic Sourcing andProcurement – the New ModelMBA, B. Eng. Raul Carranza H.Grupo PosadasMay, 2013
  2. 2. #AribaLIVEAgenda• Posadas Today• Supply Chain Opportunity Assessment• Ariba Decision and Roll Out• Main Achievements• Industry Benchmarks2 © 2013 Ariba, Inc. All rights reserved.
  3. 3. #AribaLIVEPOSADAS TODAY3 © 2013 Ariba, Inc. All rights reserved.
  4. 4. #AribaLIVEPosadas Today
  5. 5. #AribaLIVELIFESTYLEDELUXELUXURY UPPER MIDDLE ECONOMYVACATIONCLUBSource: Grupo PosadasBrand Architecture
  6. 6. #AribaLIVEPosadas Today• 5 Hotel brands and 1 Vacation Club: Aqua, Fiesta Americana, FiestaAmericana Grand, Fiesta Inn y Hoteles One, Fiesta AmericanaVacation. Club• GRUPO POSADAS operates 105 hotels and more than18,000 rooms.• Presence in all major urban and coastal locations in Mexico
  7. 7. #AribaLIVEOverlook1 Intercontinental Hotels Group 34,1972 Accor Hotels 32,6653 Marriott International 20,0904 Meliá Hotels International 19,0935 Riu Hotels & Resort 18,4246 Grupo Posadas 17,6227 Hilton Worldwide Corporation 16,8368 Starwood Hotels & Resorts 16,6299 Wyndham Worldwide Corporation 16,04610 Barceló Hotels & Resorts 13,079LatinoaméricaMéxico(42%)1 Intercontinental Hotels Group 19,3322 Grupo Posadas 17,6223 Riu Hotels & Resort 9,2134 City Express 7,5905 AM Resorts 7,248Sudamérica (28%)1 Accor Hotels 29,2222 Intercontinental Hotels Group 8,6893 Starwood Hotels & Resorts 7,6854 Choice Hotels 7,0955 Golden Tulip Hospitality Group 5,922Centroamérica y Caribe (30%)1 Meliá Hotels International 13,9172 Marriott International 10,6123 Riu Hotels & Resort 9,2114 Barceló Hotels & Resorts 7,9835 Hilton Worldwide Corporation 7,819Fuente: Estudio de Cadenas. 2012Total de habitaciones: 436,954Total de habitaciones: 182,269Total de habitaciones: 131,004Total de habitaciones: 123,681
  8. 8. #AribaLIVE8,8676,9836,4285,0064,6414,5133,2643,1022,8932,7242,5152,4222,2692,260Source: Estudio de Cadenas 2012 (Información a octubre 2012).Hotel Chains: Room number(European plan)
  9. 9. #AribaLIVEASSESSMENT
  10. 10. #AribaLIVEOpportunity• In 2009, Grupo Posadas identified the opportunity tostrengthten its Purchasing Department to achieve savings,improve the control and spend visibility to increase thecustomer level service.• In November 2009, a consulting Company made a diagnosticregarding the purchasing capabilities and potential savingsin Posadas.• To capitalize on the benefits identified in the diagnostic. GrupoPosadas undertook the Transforming Sourcing &Procurement Project.
  11. 11. #AribaLIVEAssessment• The assessment was based on a High Performance Purchasing Model with thefollowing findings: Human and Physical Capability constraints, lack of centralizednegotiations, lack of the requiered technology to add value.• Particularly:There is not a spend analysis. Therefore priorities are not well definedSeveral suppliers as well as several prices to buy the same SKUThere is no purchasing power aggregationLimited capability to understand the suppliers cost structure and their competitivesituation, Lack of a systematic supplier cost analysisTCO is not considered. Partial analysisThe main stakeholders are not considered in the decision making processLimited number of alternatives. New suppliers search is triggered by anincrease in credit limitsLack of standardization in processes, policies and proceduresSavings are not documented and are not recognized for Finance and OperationsThere aren’t contracts or written agreements with suppliers.Information Systems are not used to communicate and guarantee centralizednegotiations. Low compliance
  12. 12. #AribaLIVEAssessmentPosadas’ situation was:FTE involved inthe processCurrent ProcessCostActivities Annual Cost SuppliersCurrent FTE’smillion millionSourcing Strategy Sourcing and CategoryManagementRequisition to Pay Supplier RelationshipmanagementPeople and Organization TechnologyGrupo Posadas vs Benchmark – Souncing & Procurement World Class Capabilities
  13. 13. #AribaLIVEDECISION
  14. 14. #AribaLIVEDecision Maximize savings though a standard and formal process that incorporatesrigorous analytics, tools and techniques to reduce total cost of purchasedgoods and services. Establishing the baseline and developing the team, processes, structure andimplementation plan to drive the program and sustain resultsEq. MenorEq. MayorEq. lavandería FumigaciónPlomeríaTratamiento de aguasDecoraciónEq. telefónicoEliminación dedesperdiciosJardineriaAire acondicionadoServicio de limpiezaElectromecánicaCorreos y mensajeriaPastelería y panaderíaPescados y mariscosReparacion de edificioGastos de viajesHonorariosprofesionalesPapelería de OficinaSuministros LimpiezaSeguridadArticulosTelefoniaVinos y LicoresLavado de blancosFrutas y verdurasPublicidadElectricidadObra Civil-11021-1 5 11Facilidad de implementaciónAhorropotencialIncrease control and improve visibility of global, cross-business-unit spendPurchasing ModelStrategic Sourcing• With a promising Business Case, the Transforming Sourcing and ProcurementProject started supported by a state-of-the-art software platform (Ariba) with thefollowing goals:
  15. 15. #AribaLIVE• The adopted model would be supported by a technological platform. The solution toour Sourcing and Procurement model is.SPEND ANALYSISSTRATEGICSOURCINGCONTRACTSCONTRACTCOMPLIANCEPROCUREMENTEVALUATION &SUPPLIERDEVELOPMENTPOLICIESTECHNOLOGICAL PLATFORMPROCESSESSTRUCTURESpend VisSourcing ProContractsContract ComplianceP2OSIPMDecision
  16. 16. #AribaLIVEOUTCOME
  17. 17. #AribaLIVE• The Busines Case was evaluated in October 2012. NPV of $ 26.6 million USD, $ 5.1million USD more than the NPV estimated in 2009Cash Flow$21.5NPV$26.6NPV1.46Pay back time1.01Pay back time260%IRR458%IRR(0.7)3.9(0.0) (0.8)1.0 3.2(10.0)(5.0)0.05.010.015.020.025.030.0CAPEX 2010 2011 2012 2013 2014Cash flow Estimado Cash flow RevisadoVPN 2012 VPN Original$ 5.1VPNadicionalORIGINAL 2012OutcomeOriginal NPV2012 NPVAdditionalNPVEstimated Cash Flow Revised Cash Flow
  18. 18. #AribaLIVEOutcomeFTE involved inthe processCurrent FTE’sCurrent ProcessCost Activities Annual Cost SuppliersSavingsMillionMillionMillion
  19. 19. #AribaLIVEOutcome• Savings• 27.3 USD millions in savings in a 2.5 year period• 18% in average savings in all the spend categories• Comprehensive Spend Analysis through “Spend Visibility” module• Savings recognized by Finance and Operations• Enhanced Spend Control and Visibility• All Sourcing projects have been developed through Ariba, using:Task ManagerElectronic Events such as RFI or RFPStandardize and control contract development• Global Trading with support for multiple languages and currencies• Improved project management and compliance with advanced, automatedworkflow and approval-routing• Transparency in the RFxs, negotiations and deliverables• 95% in compliance• Advanced Approval flow for all Purchase Orders• Information System is used to communicate and guarantee centralizednegotiations• Contract library• Supplier scorecard• Surveys
  20. 20. #AribaLIVEOutcome20Scope• Discovery of new qualified suppliers through integrated Ariba Discovery toimprove bid competitiveness• Corporate Supply Base Rationalization Program. 56% reduction in thesupplier base• Wider selection of suppliers is considered for RFx’s• Standardized practices, formats and deliverables• Transaction history recorded automatically in the purchase requisition
  21. 21. #AribaLIVE• There is a significant improvement in the Posadas Purchasing best pracices, whichenebles us to excel in the cycle: find the money, get the money and sustain the money.• Well-defined processes, having the right people and a robust platform are consideredthe key succes factors for Posadas’ Sourcing and Procurement InitiativeGrupo Posadas vs. Benchmark –Sourcing & Procurement World Class Capabilities24%58%80%Progress¿What ismissing?November 2009 AssessmentNovember 2011 AssessmentIdeal State. Defined in the ImplementationSurvey of 14 interviews and 65 on line interviews in 201251%62%50%54%48%40%28% 29% 30%23%13%23%52%66%70% 58%52%53%89% 87%80%73%87%63%0%10%20%30%40%50%60%70%80%90%100%Estrategia de Compras Abastecimiento y Gestiónde CategoríasRequisición a recibo Gestión de la relación conproveedoresGente y Organización Tecnología51%BenchmarkSourcing Strategy Sourcing and CategoryManagementRequisition to Pay Supplier RelationshipmanagementPeople and Organization Technology
  22. 22. Thank youRaúl Carranza Hernández:Strategic Sourcing Directorraul.carranza@posadas.com52 (55) 5326 6756
  23. 23. Questions?23
  24. 24. #AribaLIVEPlease Complete Session SurveyGo to Surveys© 2013 Ariba, Inc. All rights reserved.24Select SessionClickChoose oneRate SessionThank you for joining us

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