Horizon 2013 AMD's Tryst with Technology - A Path to Procurement Excellence

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The world of procurement has evolved over the years into a respected profession within every successful company. Technology has been, and continues to be, a key enabler on this journey. This presentation will speak to the application of eProcurement within the Strategic Sourcing Process at AMD.

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  • Introduction
  • Good morning and thanks for the opportunity to be here. It’s a pleasure and honor to speak about AMD’s procurement operation and eProcurement. I’d also like to take the opportunity to again recognize Zycus for their recognition as a Leader in the 2013 Strategic Magic Quadrant by Gartner.
  • In late 2000, I was elected to the International Board of the Institute for Supply Management (ISM). At that time it was still known as NAPM or the National Association of Purchasing Manager. I was an up and coming director of procurement and thought I knew just about everything about purchasing. I had just completed spending $3B on a new factory in Germany and had been recently recognized as a Texas Outstanding Corporate Executive. What I didn’t recognize, was there was a lot to learn, which changed quickly based on association with the other leaders on the International Board. That enlightenment specifically helped me understand how important benchmarking and technology was to procurement excellence.In my presentation, I’m going to talk about procurement excellence and link it to use of eProcurement tools. My agenda is listed above.
  • A few comments about AMD.AMD, is headquartered in Silicon Valley and was founded in 1969, now 44 years old.And although we are a traditional silicon valley company, with the exception of our Chief Financial Officer, all other ‘C’ level executives now reside in Austin, Texas.We now have approximately 10K employees worldwide in more than 50 locations and in 2012, we had revenue of $5.42 billion dollars in revenue.
  • AMD has played a leadership role in the cloud era of computing. Our mission is to be a leader in designing and integration of innovative, technology solutions that empower people to push the boundaries.Those solutions include communication and gaming devices, data center solutions, and personal computers and mobile applications.Approximately 40% of all computers sold in 2012 used AMD graphics chips.
  • As the semiconductor market has evolved, AMD has been known as an innovator in microprocessor design creating intelligent and innovative ways for people and businesses to interact. AMD has pushed the technology envelope, from the introduction of the K5 microprocessor which was AMD’s first independently designed X86 microprocessor to our most recent collaboration with every major next generation game console and home entertainment system manufacturer. This includes Sony with their new Playstation 4, Microsoft with their new Xbox One and Nintendo’s enhanced Wii U. These manufacturers will be introducing these new products during this holiday season. I f you are a parents of young kids of teenagers, or if you are a gamer, you’ll want to take a look at these new products for holiday gifts. We’ve seen some features and they are outstanding. Now, the point of this slide is to highlight the technical innovations developed by AMD over the past years and to highlight why there has been, and still is, a need for the procurement organization to innovate and improve.
  • In an evolving business, CPO’s have many challenges. But whether you’re a Chief Procurement Officer or a sourcing manager at a small, medium, or large corporation, there are some common and consistent challenges. And while these challenges may be different based on the company, there are 3 things that are fairly universal. First is Fueling the Organizational Vision. This is a critical success factor that separates failing organizations from those that have at least a fighting chance to succeed. Your vision for a global strategic sourcing team requires early strategic alignment with the CEO or CFO. The alignment may come with a mandate to the company, but one of the primary roles of the CPO is driving cost reduction. And, there’s added pressure because the CFO emphases the need to contribute to improving the company’s gross margins. Next there’s the challenge of satisfying the many and different stakeholders. Every organization says and really think they are different and unique. Marketing says their requirements are different from engineering, who’s requirements are different from IT, and so on. This situation is repeated with every organization in the company. You quickly recognize there’s a need for some process simplification and automation. And, oh by the way, your responsibility covers the global enterprise which complicates the situation even more.Then there’s the need to rationalize the supply base. You may have recognized there are too many and the same type suppliers and no standard sourcing processes. And, along with no standard sourcing processes you realize there’s also a need to assess supply and financial risk. And for the key suppliers, you have to set some supplier performance expectations. This all as you are being pressed for immediate solutions long before you truly understand the problems.
  • So, how do you start addressing some of these challenges? First we had to know where we were headed. Some of you may have heard of Gene Richter who was IBM’s Chief Procurement Officer during the mid to late 90’s and worked at Hewlett Packard and Black & Decker before then. Gene passed away in 2003, but he’s credited with developing the concept of strategic thinking in supply management. As a matter of fact, there’s a supply management scholarship funded by his Foundation and ISM. But, regardless of the size or type of operation you’re managing, a strategic plan is the starting point. You have a higher probability of getting support, both at the executive and operating level, when everyone knows your vision and how you intend to get there. Equally important is a set of documented processes that are based on Lean Six Sigma principles. Lean Six Sigma is an enabler to improve efficiency, but it’s also a key talking point for engineering and manufacturing management when building relationships. We have been specifically focusing on administrative applications for lean six sigma with increasing success. Procurement has been taking a leadership role in this space.Creating an environment that supports creativity. Jerry Sanders, AMD’s founder and CEO for the first 35 years of the company’s history had a saying, People first, products and profits will follow. That principle holds true today especially with highly motivated sourcing managers. The work environment is strategically important, and I’m not talking about the size of offices or desk. Environment in this context is related to the culture and the opportunity for motivated individuals to be creative. Once the right culture is in place, it has to be nurtured with incentives for high performers.Next, the CPO has to drive innovation and there’s also a need to periodically re-engineer the organization, processes, and systems. As new technology is introduced, much like from Zycus suite, the CPO has to embrace and find a way to leverage globally. Now this is easier said than done because there are ROI expectations for every dollar spent on the organization. But you have to manage the total mindset of the organization and lead it to change. Norman Vincent Peale, once said, “Change your thoughts and you change your world”.Norman Vincent PealeSeeking external input can help set strategy and targets. And, often innovation is driven by benchmarking and seeking out examples of success. I’ve found it helpful to use benchmarking as the “voice of the truth”. For example, if you are trying to convince your management to spend money on a new venture, just hire a consultant to come in and make the recommendation. The next day you’ll be asked by your management why didn’t you think of that!
  • Speaking of consultants, Management consultants and researchers play a critical role in driving procurement excellence and technology development. Over the past 10 years we’ve engaged with many sources for insight, comparison, and examples of success. Many are listed here.
  • One case in particular, several years ago, our CFO commissioned a study of all G&A functions. “Commissioned” is another word for “directed”. The Hackett Group was selected and we were introduced to Hackett’s Value Grid. Hackett defines World-Class Procurement as the top quartile in both Procurement effectiveness and Procurement efficiency. This is an example of a populated Value Grid with typical data indices that would be evaluated.Effectiveness is related to how well you execute specific tasks and efficiency is related to quantitative values of execution.
  • Our strategic sourcing process is the basis for all of our sourcing decisions and I’d like to spend a few minutes explaining how we use it. The strategic sourcing process, or SSP, starts with a focused Purpose statement with strategic enablers. These include: An Organized methodology that drives our engagement model. Standard Processes that drive sourcing plans on a global basis. And last, but extremely important is Internal Alignment that ensures key business requirements are known and supported. I’ll use the six (6) process steps in the blue chevrons at the bottom to highlight how we overlay technology.
  • AMD’s procurement organization has been recognized as an early adopter for several areas of non-ERP technology. A lot of the drive was intended to compensate for other areas of limited resources, like headcount. However, there’s also been a pure drive to be best in class. I’ll walk though the specific eProcurement tools we’ve implemented.To support our Category Research and Analysis process step, we’ve implemented Zycus’ Spend Analysis tool. We’ve used it to complement our concept of Trusted Data and have been able to identify cost reduction opportunities. Cost savings opportunities have been realized in leveraging spend, pay terms improvement, and compliance. For Supplier Selection & Evaluation, we’ve implemented Zycus’ eSourcing tool. We use the capability for all RFx and electronic sourcing events across the enterprise. The resulting database of knowledge serves well when we have a change in commodity management.For Contracts Management, we use a competitor’s tool, but there is certainly opportunity for Zycus in the near future. We’re using the capability to enable compliance, reporting and archiving.And lastly, for the key to our overall process, Performance Management, we use Zycus’ Supplier Management tool. It’s the first step in our annual Segmentation process, it drives supplier continuous improvement, and is embraced by stakeholders. Our prior homegrown tool was poorly designed and difficult to use which resulted in low compliance and usage. Everyone loves the intuitive user interface and the reporting generated from the system.
  • Our corporate vision is to Enable Today, while Inspiring Tomorrow. The Supply Management organization is doing exactly the same as represented by the earlier charts I showed. I suspect each of you in procurement have similar improvement goals. In order to continue to drive value into the future, which is a key differential from just cost savings, there are four key areas I’ve touched on in this presentation: Vision, it has to be Innovative, Out into the Future, and Aligned with the corporate strategy. Procurement can’t be relegated to the back office.You have to have Talent, but it has to be capable and you have to inspire that capability and ask for a commitment. Today’s evolving leaders have to have a reason to stretch.You have to be Process Oriented, with a focus on Lean Six Sigma principles on an enterprise basis. And yes, the processes need to be documented so everybody is working from the same sheet of music.And finally, you have to embrace Technology. Early adoption isn’t for everybody, but when you do, your IT organization has to be on the bus. This is also where non-ERP solutions come into play for flexibility. Size only matters if you need it and there’s no other solution. These areas of focus, along with hard work, have enable AMD to achieve success.
  • So, in summary, ….Excellence is not out of the reach of any organization, regardless of size. Innovate continuously and raise the bar, but also benchmark to stay connected with the world.However, the challenge is not to reside in a big box, but explore the potential of non ERP solutions. Zycus’ procurement performance suite has been an integral enabler of AMD’s procurement success. We are pleased to see market recognition of Zycus and look forward to continuing (expanding) our relationship in the years ahead.Thank you!
  • Horizon 2013 AMD's Tryst with Technology - A Path to Procurement Excellence

    1. 1. AMD – A Pathway to Procurement Excellence Alex Brown Chief Procurement Officer Advanced Micro Devices (AMD)
    2. 2. AGENDA       AMD - Enabling Today, Inspiring Tomorrow CPO Challenge Assessment - Benchmarking Strategic Sourcing Process Technology Enablement 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. AMD’s MISSION To be the leading designer and integrator of innovative, tailored technology solutions that empower people to push the boundaries of what is possible SEMI-CUSTOM / EMBEDDED Comms, Industrial, Gaming DATA CENTER CLIENT / GRAPHICS Microservers Personal computer, Mobility
    5. 5. Enabling Today, Inspiring Tomorrow AMD launched the AMD-K5® processor, our first independentlydesigned, socket – compatible x86 microprocessor 1994 1996 AMD launched the world’s first x86-64bit processor 1998 AMD launched the AMD-K6® microprocessor in, driving PC prices below $1,000 for the first time 2000 2002 AMD was first to break the historic 1GHz clockspeed barrier 2004 AMD's technology is inside every major next generation gaming console and home entertainment system: Microsoft's Xbox One, Sony's PS4™, and Nintendo's Wii U AMD acquired ATI, becoming the only company capable of delivering leading-edge CPU and GPU solutions in volume 2006 2008 2010 AMD shipped the world’s first Accelerated Processing Unit (APU), featuring both a CPU and GPU on a single piece of silicon 2012 AMD Acquires SeaMicro 2014
    6. 6. CPOs Challenges In An Evolving Business CPO’s are typically focused on 3 things 1. FUELING ORGANIZATIONAL VISION & FINANCIAL GOALS  Strategic Alignment  Cost Reduction (Gross Margin) 2. STAKEHOLDER SATISFACTION  Process Simplification - Automated  Global Standardization 3. IMPROVING THE SUPPLY BASE  Supplier Performance Management  Financial & Supply Risk Mitigation
    7. 7. Addressing the Challenges  Know Where You’re Headed  Strategic Plan  Documented Lean Processes  Create an Environment Supporting Creativity and Quality  Capable People Love a Challenge  Incentivize to Perform  Never Stop Innovating  Inspired by New Technology  Leverage Knowledge Management  Continually Seek External Input  Benchmarking for Information  Seeking Examples of Success
    8. 8. Benchmarking
    9. 9. World Class Procurement Hackett Defines World-Class Procurement as top quartile in both Procurement effectiveness and Procurement efficiency 10
    10. 10. AMD has achieved World Class Performance in Procurement Key Effectiveness Drivers Hackett Value Grid - Procurement Database + Cost reduction & avoidance savings + Number of suppliers +Procurement Strategic alignment +Spend under PR influence +Customer satisfaction scoring +Purchases from approved suppliers +Suppliers providing majority of spend + Corporate wide spend =Cross functional partnering - Time spent collecting data vs. analyzing information - Spend visibility How effectively is Procurement meeting business demands AMD Expected Range World Class 1Q PR Effectiveness High 1Q AMD Low High PR Efficiency Key Efficiency Drivers + Cost as percent of spend + Staffing levels + Corporate wide process and procedure standardization = Cycle time = Technology capability - Technology cost per FTE - Process cost to technology cost ratio - Percent of automated transactions - PO transaction unit cost and processing productivity - Receipt transaction unit cost and processing productivity
    11. 11. 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
    12. 12. AMD’s Strategic Sourcing Process Ensure Supply Focused Purpose Manage Cost Strategic Enablers Mitigate Risk SSP Enablers • Organized Methodology drives the sourcing engagement model. • Standard Process for identifying and driving sourcing plans. • Internal Alignment to ensure key business requirements are met. Category Research & Analysis Business Requirements Development Sourcing Strategy Development Supplier Selection & Evaluation Business Execution Performance Management
    13. 13. Role of Procurement Technology Category Research & Analysis Business Requirements Development SPEND ANALYSIS Sourcing Strategy Development Supplier Selection & Evaluation Business Execution E-SOURCING PROCESS CONTRACT MANAGEMENT  One view of global spend – trusted data • Used for all RFx activity across the global team  Enables compliance with contracts and P2P  Aligns with supplier selection  Embedded in category analysis • Preferred process for all sourcing events  Holistic view of spend combined with analytics  Drives Supplier Continuous Improvement  Identification of cost reduction opportunities • Knowledge database for all sourcing activity  Documented system of record  Harmonization with stakeholders SUPPLIER MANAGEMENT Performance Management
    14. 14. AMD Philosophy Enabling Today, Inspiring Tomorrow Vision Innovative, Capable, Far Reaching, Inspired, Corporate Alignment Committed Talent Management Process Early Adoption, LSS Focused, Corporate IT Compatible, Documented, Global Technology Flexible
    15. 15. Closing Message    Procurement excellence is achievable with alignment, strategy, and the right resources, especially technology. Learning comes from Challenging the conventional – recognize the need to move out from ERP to non-ERP best of breed Suite players. Partner with the right technology provider who is flexible, customer focused and agile to blend into your ever evolving procurement process.
    16. 16. 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.

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