Wading Through Turbulent Waters
– AMD’s Procurement Journey
Presented by
Garry Christie
Director, Global Business Services...
AGENDA








AMD Profile
Business Environment
Challenges and Initiatives
Zycus – Fast Track Implementation
Change...
AMD PROFILE









Headquarters: Sunnyvale, California
Established: 1969
Employees: Approximately 10,000 worldwid...
BUSINESS ENVIRONMENT





In 2011 we anticipated a decline in our
core markets from 2012 forward
Cloud is the killer app...
AMD TRANSFORMATION



Protect our Core Business
 Desktop PC
 Notebooks
 Graphics



Attack New Markets
 Tablets
 Ga...
PROCUREMENT CHALLENGES
 Our headcount needed to reduce
 We were already below

benchmark
 We had to aggressively drive ...
PROCUREMENT INITIATIVES







Provide our global team with
tools to improve efficiency
 To meet the challenge of
incr...
ZYCUS - Fast Track
Implementation



Zycus was selected as SaaS provider
for 3 modules:






Contractual agreement a...
CHANGE MANAGEMENT



Strong support from Senior
Management was essential




Build on a strong foundation of
business p...
ZYCUS ENABLEMENT
Category
Research &
Analysis

Business
Requirements
Development

iAnalyze

Sourcing
Strategy
Development
...
ZYCUS ENABLEMENT
Category
Research &
Analysis

Business
Requirements
Development

Sourcing
Strategy
Development

Supplier
...
VALUE REALIZATION



All Supplier Management scorecards
completed in iPerform






All eSourcing completed in iSourc...
Key Procurement
Performance Indicators
Procurement Labor
Reduced 23%
Procurement Labor

Savings Increased
per FTE 26%
Savi...
CLOSING MESSAGE



Do not underestimate the
need for business process




Stay the course




Foundation of everythin...
Disclaimer & Attribution
The information presented in this document is for informational purposes only and may contain tec...
Horizon 2013 Wading Through Turbulent Waters - AMD's Procurement Journey
Horizon 2013 Wading Through Turbulent Waters - AMD's Procurement Journey
Upcoming SlideShare
Loading in …5
×

Horizon 2013 Wading Through Turbulent Waters - AMD's Procurement Journey

254 views

Published on

In this presentation Garry has shared some of the challenges the procurement team at AMD faced owing to the changing business environment & the procurement initiatives undertaken by AMD to wade through the turbulent waters. Garry has also provided insights into how an effective implementation of procurement technology can result in greater value realization for the procurement function.

Published in: Business, Technology
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
254
On SlideShare
0
From Embeds
0
Number of Embeds
35
Actions
Shares
0
Downloads
2
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • I will not spend a bunch of time on this since Alex spoke to it yesterday. Just a reminder that we have been in business since 1969, which is a long time for a semiconductor company. Our headquarters is in Sunnyvale, California although our primary campus at present is in Austin, Texas.Anyone who follows our stock is aware of the transition we have been going through and the next couple of slides speak to that.
  • While we anticipated a decline, we did not anticipate the speed and depth of the change. The cloud is the killer app that changes EVERYTHING…redefining the landscape and providing new growth opportunities. Traditional IT is just not well-suited for the cloud era computing…new IP and solutions are needed….AMD is embracing this change.Removes architectural barriers, Tsunami of devices, new wave of innovation, Demands new technical requirements, Fluid, intelligent and immersive interfaces, Exponential increase in demand for compute, networking and storage. We need to think differently --technology, product and business modelThe iPad kicked off the change and momentum continues to build. Move away from creating content to accessing email and entertainment. Consumers expect ‘always on’ and consistent user interface across all devices.When the market change really started to hurt in 2012 we were in position with the move to new markets, as demonstrated with our design wins with gaming consoles. Our CEO, Rory Read, had assembled his leadership team and reshaped our organisation model around the BU. However, our operating cost was too high and we had to right size. All of this was what we termed Reset and Restructure.We are at Accelerate and Execute., as we transition to the new market opportunities. We like to think of this as Protect and Attack, which the next slide provides a little more meaning to.
  • The successful execution of our strategy will enable us to lead in profitable, high-growth segments. We must accelerate our longer term strategy for growth by focusing on creating our differentiated IP leadership through low-power technologies; an ambidextrous architecture that spans the x86 and ARM ecosystems; building a set of re-useable IP Blocks (SOC-15) to lower cost and speed to execution; and unlocking the compute andvisualization experiences driven by APUs and GPUs through Heterogeneous Systems Architecture (HSA). We stated that 20% of our revenue in 2H’13 will come from these new markets. Our Q3 results showed that we are on track. We also stated that within the next 2-3 years this will grow to 40-50%. The strong market acceptance of our new low-power APU’s, and the recent announcement by Verizon on the selection of SeaMicro to be their server architecture for the cloud, reinforces that we are also on track for this.Gaming has been the big success story this year, and I encourage you to buy both the Microsoft Xbox One and the Sony Playstation 4 when they are launched next month.
  • As presented yesterday by Alex, benchmarking activities over the years demonstrated that we run with a lean organization. So when the company determined that expenses had to be cut further we were already behind the 8 ball !While there is talk around understanding what you will stop doing with a reduction in headcount, the reality is that there is very little you can actually stop. That particularly applies to our cost reduction goals, since these become more important than ever to help improve the financial results of the company.The change in business model, while incredibly exciting and visionary for AMD, is still change and that leads to questions and concerns from our supply base. Since we are the front line forAMD regarding supplier communication, we play a key role in taking the time to articulate the story.
  • As explained earlier, the drive to reduce operating expense for the company impacted every department. Procurement was no exception. At the same time, we played a more important role than ever in helping to take cost out of our products and departmental budgets across the company. In order to do this we needed to help the remaining talent by providing tools to improve efficiency and productivity.Direct spend, in general, lies with a relatively small number of suppliers. Their products have to meet quality requirements as specified by AMD. However, suppliers of Indirect goods and services do not have to go through this process. When I joined the company in 2010 to lead the Indirect Procurement team one of my initial observations , apart from inheriting a great team, was that we were unable to demonstrate that we had a comprehensive understanding of spend. Each sourcing manager had a reasonable handle on their category, however the approach that each person took to pull data from SAP was different. The capability level of each person to do this was also different, and in some cases it could take the good part of an entire day to pull what appears to be pretty basic data. So from my initial 30 day plan I had an ask to invest a small amount of money in a spend analytics tool. The challenges which now faced our team, having to do more with less, moved this to be a demand.So we developed a business case, with a good return on investment, which was approved as a funded project. Great ! Now we had the challenge to make it happen. One of the headwinds we faced was that we had to do this without having a procurement systems team to lead the project. I believe that we did have such a team many many years ago, however we had been running for some time without. So while this would help efficiency at some point in the future, it was going to be a drain in the immediate term as I turned to my team of sourcing managers to step up and lead.
  • We went through a comprehensive RFP for a spend analysis solution, inviting all of the industry leading companies to participate including our ERP provider. It look a little bit longer than we would have liked, as some of the companies needed time to speak to their latest offering. However, in the end we selected Zycus.. This was based on a number of reasonsThey were cost competitiveIndustry analysts considered their spend analysis solution to be one of the bestThey impressed us as a company who would listen to our needs and truly seek to find solutions to address our concernsAs we worked through the sourcing process it became clear to us that it would make sense to bundle this spend with other modules in the strategic sourcing suite. Our existing solutions for eSourcing and Supplier Management were both old and unlikely to be upgraded or developed. So when we reached a deal with Zycus it was for iAnalyze, iSource and iPerform.We reached agreement and signed a contract at the end of June 2011. We knew that in the case of iSource and I Perform that we had to go live at the start of 2012 since the existing solutions were either going to not have license renewed or the application was going to be retired. With iAnalyze the desire was to go live as soon as we possibly could since our need grew larger with each passing day that we did not have a solution. Despite the magnitude of change associated with this being significantly greater than either of the other modules,we targeted year end as go-live consistent with the others. As stated in the previous slide, I needed to ask individuals in my team to step up and take lead roles in the deployment of the modules. It’s not ideal, however I am fortunate to have an outstanding number of people in my team . The 3 individuals who agreed to take this lead position are here today and I would like to thank and acknowledge Kat, Karen and Jason for the leadership they displayed with this activity. Each of them reached out to the global procurement organisation by building a team of super users. Same concept applied to each of the module to ensure a consistent approach. Zycus helped by providing an excellent set of training guides. However, we needed to augment this with training geeared specifically to AMD so Karen, Kat and Jason became media experts and created computer based training for the global procurement team.
  • I can’t overstate the importance of the first point. The words on the slide are part of the culture at AMD around how we get alignment. It works. Take sufficient time to ensure items are discussed, however once a decision is made get behind it and make it happen. Discussion is over. Once we made our selection the onus was on us to deliver on time against our commitment. My boss provided the necessary support to give us the opportunity to execute. He listened to any requests for help, he helped provide structure to keep us focused, and he consistently demonstrated belief in what we were doing and our ability to execute. Alex spoke yesterday about our Strategic Sourcing Process. As he stated, this is no secret sauce and probably very similar to what you have in your procurement organisations. However, it is the essence of everything we do. It is the reason we were able to implement all 3 modules in 6 months, despite not having a systems team. It is important to note that we see it as the foundation, not the u8ltimate solution. We do not expect to be best in class at everything we do, and are only too happy to learn from others. We share best practices across the super user team. We ask Zycus for their guidance on how we can make the best use of their systems. We have a thirst for continuous improvement, which emanates from the Snr VP of Global Operations and runs throughout his team. It can be challenging for some folk when they join the team, not understanding why we never settle for what we have, however they quickly absorb the culture and thrive on the approach.Finally, we were extremely fortunate to have a terrific partnership with IT. It helps that we have a terrific business relationship with them as we support their needs to continually lower the cost of goods and services. There have been 3 CIO’s during the 3 ½ years I have been with AMD, and the relationship has been strong with each of them. It also helped that the lead for the spend analysis project within IT was as passionate about what we were doing as we were. He worked with us on the business case, provided personal support to his program management lead, and challenged us on the business process. Our data feed was less complex than most companies in that we run with one instance of SAP. However, building the data set such that we sent good data in an acceptable structure to Zycus in a timely manner was absolutely critical to the success of the application. We send our spend file each month so there is not a lot of time to recover if the data is not good first time. They truly played a key, pivotal role in the success of the implementation and deployment.
  • So what did we deploy ?Let’s start with iAnalyze. This, as stated earlier, was new ground for our team at AMD. While the user interface is excellent It did take a while for people to get used to it. Ideally you have an analytics team to run reports upon request and use their creativity to identify opportunities. Actually, my first experience of seeing spend analytics being practised on procurement spend was in a prior company. A senior executive was seconded to help the team improve performance, primarily to increase the level of savings being returned. One of the first things he did was to take someone from my team, the best analytics mind we had in the organisation, and got him to build a bunch of reports directly from SAP. He hadthe data sliced and diced many different ways, and funneled those reports out to the different commodity managers with specific questions regarding that spend. That made me aware of the power of analytics, and I’m sure was behind my thirst for data when I joined AMD.While we have improved the analytics capability of the sourcing managers in AMD, in most cases it is not their strongest skill set, and not their passion. If you can find a way to fund a team who can do this well, then I encourage you to do so. Having said that, I am extremely proud of what we have achieved at AMD and I am very confident we will continue to learn and improve.
  • This was not a new business process so implementation was a lot less complex than with iAnalyze. However, change management is always an important part when you transition to a new tool. Training, provided by both Zycus and AMD, was critical in ensuring minimal impact in the transition from Ariba to Zycus. We use this extensively across the global team, for all RFx’s without exception. I certainly believe we have room for improvement, and will speak to that again a little later.
  • The functionality of iPerform compared with our homegrown tool is a vast improvement. I don’t know about your experience, however at AMD it can be quite a challenge to get stakeholders to participate in the scoring process, particularly with Indirect spend, including providing comments consistent with the score to allow suppliers an understanding of what we are seeking from them to improve. The user interface with iPerform removes the excuses around the system being difficult to understand or cumbersome to use. It also makes it a lot easier for the sourcing manager to load questions, summarize results, compare trends, and track continuous improvement plans .
  • So have we realized value from our investment ? The answer is an emphatic yes.For both iPerform and iSource the value did not lie in providing a new capability to the procurement team. We were already doing this with other, older systems. The value was realised in the efficiency of using the Zycus solutions and the adoption across the global team.Supplier management has been a cornerstone of the strategic sourcing process with the Direct Materials team at AMD for many years, running several events every quarter. Hence it was essential that this change did not impact their ability to do so. The reality is that the efficiencies created with iPerform allowed them to spend less time on the administrative side and more on driving the Continuous Improvement Plans with their top suppliers. We only started running this process with Indirect suppliers since I joined in 2010. It’s not as natural a process to apply here as with Direct spend, however we have worked hard to make it part of our DNA and encourage our stakeholders to embrace. The clearest recognition of our progress is the fact that for the first time in AMD’s history we recognised 2 Indirect suppliers with performance awards at our annual Supplier Day in May.eSourcing was already pretty much part of the DNA across our global teams. Zycus have worked with us to continuously improve their solution to meet the evolving requirements from our team. I make reference in the slide to the fact that we see our teams outside of the US leading the way. For those of us old enough to remember, it was not that long ago that the concept of eSourcing was challenged by both suppliers and buyers. It is now readily accepted as how we conduct RFx events, and I would be interested to hear from you in what adoption you see in your teams along with expectations on what type of events you consider appropriate for the use of this technology.Spend Analysis was by far the biggest change, and challenge. The most tangible result we have achieved to date was applying this to payment terms. Like every other company, particularly those who do not have hordes of cash, management of working capital is critical. By having this global view of spend we were able to identify those suppliers who were outliers against our standard terms. We reviewed this monthly until all large spend suppliers who we could convert, did. In fact, one of the managers in the US lead a Lean Six Sigma Project, using iAnalyze reporting capabilities, to drive sustainable process and results in this space. Efficiency is hard to capture but easy to appreciate. I can’t tell you how many times I personally have been able to quickly answer questions regarding spend, no matter how complex the request. Quite simply, if you removed this reporting capability from my team I don’t know how we would be able to know we are on top of spend. This has been a key factor in minimising business impact following reduction in headcount.
  • Here is what I would like to leave you with. I hope you heard throughout my presentation today and the one yesterday from Alex, that business process is the foundation of everything. Without it you will always find yourself swimming upstream. Under Alex’s leadership this has been a key focus, and we continue to build on this foundation year after year in our thirst for improvement.Stay the course. Without a systems team, and the increasing demands from our stakeholders with the business challenges, there are many times when we could have put things on hold or even cancelled. It is hard, but if you truly believe in where you are heading you will get there. And get there on time. Keep believing.Finally, you cannot do this on your own. I said earlier that one of the reasons we chose Zycus was that we believed they would be responsive to our needs. We knew that we did not know everything as we started on this journey, and if we wanted to stay the course then we needed a technology provider who would do everything they can to respond to our demands. I have no hesitation in saying that Zycus have supported us every step of the way. We are a demanding customer. It’s the nature of the industry, the culture of the company, and the behaviour of our leaders. The response from Zycus has not been to try to silence us, but to listen and help where they can be improving the capability of their solutions, which in turn will help all of their customers. I thank them from their support and look forward to see that continue in the years ahead.Thank you.
  • Horizon 2013 Wading Through Turbulent Waters - AMD's Procurement Journey

    1. 1. Wading Through Turbulent Waters – AMD’s Procurement Journey Presented by Garry Christie Director, Global Business Services Advanced Semiconductor Devices (AMD)
    2. 2. AGENDA        AMD Profile Business Environment Challenges and Initiatives Zycus – Fast Track Implementation Change Management Value Realization Closing Message
    3. 3. AMD PROFILE        Headquarters: Sunnyvale, California Established: 1969 Employees: Approximately 10,000 worldwide Facilities: more than 50 locations worldwide NYSE Listing: AMD Fortune 500 firm 2012 revenues of $5.42 billion At AMD we live our core values through our actions
    4. 4. BUSINESS ENVIRONMENT   In 2011 we anticipated a decline in our core markets from 2012 forward Cloud is the killer app that changes everything  Commercial and consumer spending moving from PC’s and Notebooks to Tablets and Phablets  3 phase turnaround put in place  Reset and restructure  Accelerate & Execute  Transform to Win
    5. 5. AMD TRANSFORMATION  Protect our Core Business  Desktop PC  Notebooks  Graphics  Attack New Markets  Tablets  Gaming  Embedded  Dense Servers
    6. 6. PROCUREMENT CHALLENGES  Our headcount needed to reduce  We were already below benchmark  We had to aggressively drive cost reduction in all areas  Gross Margin  Factory Operating Cost  R&D plus SG&A  Need to increase leverage with suppliers  Spend decreasing  Business model changing
    7. 7. PROCUREMENT INITIATIVES    Provide our global team with tools to improve efficiency  To meet the challenge of increasing goals with decreasing headcount Specific need for Analytics with our Indirect Spend  Significantly larger number of categories and suppliers than Direct Implement with minimal budget and no procurement systems team  We cannot allow this to impact a successful deployment
    8. 8. ZYCUS - Fast Track Implementation  Zycus was selected as SaaS provider for 3 modules:     Contractual agreement at end of June 2011   Spend Analysis – new capability eSourcing – replaced Ariba Supplier Management – replaced home grown solution Go-live with all modules at start of 2012 Each module was led by one of our sourcing managers   Global team of super users created for each stream Zycus training augmented by AMD computer based
    9. 9. CHANGE MANAGEMENT  Strong support from Senior Management was essential   Build on a strong foundation of business processes   Discuss, decide, embrace & execute Continuous Improvement as we learn from enhanced capability Develop an unwavering partnership with IT   Program Management is critical Building a trusted data set is key
    10. 10. ZYCUS ENABLEMENT Category Research & Analysis Business Requirements Development iAnalyze Sourcing Strategy Development Supplier Selection & Evaluation Business Execution iAnalyze  One comprehensive view of global spend  Clear user interface to run reports  Standard work process deployed globally Performance Management
    11. 11. ZYCUS ENABLEMENT Category Research & Analysis Business Requirements Development Sourcing Strategy Development Supplier Selection & Evaluation iSource  Used for all RFx activity across the global team  System is able to support all types of events  Easy interface supports complex pricing scenarios Business Execution iSource Performance Management
    12. 12. VALUE REALIZATION  All Supplier Management scorecards completed in iPerform     All eSourcing completed in iSource    100% of top tier suppliers Terrific usability and collaboration Supported selection of award winners for annual Supplier Day Average savings percentage greater than benchmark Regional teams leading the way iAnalyze used for Spend Analysis across global procurement    Enabled improvement in pay terms to support increased DPO Significant efficiency gains in gathering Indirect spend data One consolidated view of global spend
    13. 13. Key Procurement Performance Indicators Procurement Labor Reduced 23% Procurement Labor Savings Increased per FTE 26% Savings per FTE Source: AMD Data Supply Base Reduced 30% Active Supply Base
    14. 14. CLOSING MESSAGE  Do not underestimate the need for business process   Stay the course   Foundation of everything we do All issues can be overcome with conviction and fortitude Pick a good partner  Success would not have been achieved without the support and flexibility of Zycus
    15. 15. Disclaimer & Attribution The information presented in this document is for informational purposes only and may contain technical inaccuracies, omissions and typographical errors. The information contained herein is subject to change and may be rendered inaccurate for many reasons, including but not limited to product and roadmap changes, component and motherboard version changes, new model and/or product releases, product differences between differing manufacturers, software changes, BIOS flashes, firmware upgrades, or the like. AMD assumes no obligation to update or otherwise correct or revise this information. However, AMD reserves the right to revise this information and to make changes from time to time to the content hereof without obligation of AMD to notify any person of such revisions or changes. AMD MAKES NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE CONTENTS HEREOF AND ASSUMES NO RESPONSIBILITY FOR ANY INACCURACIES, ERRORS OR OMISSIONS THAT MAY APPEAR IN THIS INFORMATION. AMD SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. IN NO EVENT WILL AMD BE LIABLE TO ANY PERSON FOR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES ARISING FROM THE USE OF ANY INFORMATION CONTAINED HEREIN, EVEN IF AMD IS EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. ATTRIBUTION © 2013 Advanced Micro Devices, Inc. All rights reserved. AMD, the AMD Arrow logo and combinations thereof are trademarks of Advanced Micro Devices, Inc. in the United States and/or other jurisdictions. Other names are for informational purposes only and may be trademarks of their respective owners.

    ×