ISM: Power Up! Become a Strategic Influence with Your Company’s Indirect Procurement Spend

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Presentation by Mike Inman and Rich Vales given at ISM 2011 conference in Orlando, Power Up! Become a Strategic Influence with Your Company’s Indirect Procurement Spend

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ISM: Power Up! Become a Strategic Influence with Your Company’s Indirect Procurement Spend

  1. 1. Workshop Code: EC Power Up! Become a Strategic Influence with Your Company’s Indirect Procurement SpendMike Inman: Former: Head of Global Procurement & Strategic Sourcing, MGM Resorts International (1 of 3 reporting to CAO/EVP) Currently: Partner with TableForce Negotiations Training &Rich Vales: VP Procurement, Cott Beverages Tuesday, May 17, 2011, 10:20 – 11:40 am
  2. 2. Indirect Challenges• It’s different than Direct…• Complexity• Relationship management• Senior management support• Visibility of spend data• Collaboration with process owner• Lack of available training• “Personality” requirements
  3. 3. Communicate Communicate Communicate1. Learn their “language” while learning their Vision & Goals – Lean 6-Sigma Operators vs. “Entrepreneurs”2. Translate your Vision & Goals into their language3. Speak with them in their language regarding how the relevant points of your Vision & Goals relate supporting them in achieving theirs… • Different approaches – Sourcing & Finance: traditionally, reduce costs…. – Business Owner: traditionally, get as much value as possible from full budget
  4. 4. Benchmarking Financial Vitality SOLUTION ANALYSIS TG 3 Analyze Finalize List of FinalistsChoose Vendor/Tool CTQs Richness of Tool Yes RFP or A Benchmarking: Best-in-class? Customer testimonials? Etc. RFP Process eAuction N Kano Analysis: Plot CTQs versus “must do” and “nice-to-do” Needed? A L Financials: Revenue, income, cash flow, profitability; debt-to-equity; private No Y or public? If public, stock performance and volume. If private, financing? S What round? IPO plans? I Vendor Visits/Demos Pilot or Feasibility Analysis S Market: Competition?Market Penetration; # customers, etc. Organization/Product: Leadership background; % of team on R&D and Final Recommendation customer support? Is this product their core competency? Tech support 24x7? Sample Tools Time to market? Out-of-the-box functionality versus customization? Can we “try-and-buy”?Make vs. Buy Matrix Misc: Partnership programs? Pricing model -- server-based or user-based? In- Make/Buy Decision Worksheet house costs? % of license for maintenance? Is product global (I.e., local Make language, Unicode compliant, multi-currency, etc)? SLAs & performanceInstructions:1) For each required input, refer to the given Process Step (NPI Guide ) to determine input information2) Provide only one answer to each question3) Only record answers in provided "Answer" space Make vs. guarantees? Onsite training? ISO 9000 or Six Sigma certification?4) After entering data, answer appears to the right5) A score above 42 indicates success more probable through a sourced application SCORE: 0 Buy? Termination and penalty clauses?Process Step Question Answer Range Answer 200 # of other projects currently in development few = 1 some = 2 many = 3 200 # of development sites few = 1 some = 2 many = 3 220A # of available vendors offering similar product few = 1 some = 2 many = 3 210 Level of GEIS competency in projected development arena low = 3 high = 1 250 260B 260B Projected user level of competence # of online inquires projected for developed software User interface complexity low = 3 high = 1 few = 1 some = 2 many = 3 low = 1 high = 3 Buy Radar Chart 260B Alternate back-ups required by developed software few = 1 some = 2 many = 3 260B Projected traffic load on developed software low = 1 high = 3 Vendor Analysis Datastream 260B Response time required for developed software slow = 1 fast = 3 Web Based 260B 270B 270B Batch? On-line? Real-time processing? # of Business activities developed software will address Complexity of data storage for developed software batch = 1 online = 2 realtime = 3 few = 1 some = 2 many = 3 low = 1 high = 3 Contract & Terms and Conditions MMS/Catalog Features 10 8 eRFQ Functionality MRO 300 300 310A # of developers anticipated Staffing anticipated (other than developers) # of physical relocations made by code during development few = 1 some = 2 many = 3 few = 1 some = 2 many = 3 few = 1 some = 2 many = 3 Review (legal review for > $n) Maximo Integration 6 Catalog Search Functionality FACM 310A Hardware complexity and storage capacity required by software low = 1 high = 3 4 1 = Eq ually Imp orta nt 5 = Mor e Imp orta nt Relative 310B Relevance to previous projects already developed familiar = 1 unfamiliar = 3 Excel- Decimal 10 = Much Mor e Imp orta nt 310C # of Specialized testing or development equipment few = 1 some = 2 many = 3 2 Cost Crystal Actuate M acro Sm art2000 Row Total Value 310C # of Major subsystems projected in developed software few = 1 some = 2 many = 3 Company Stability Paperless Orders 0 .2 = L ess Imp orta nt 0 .1 = Much L ess Imp orta nt Crystal 5 10 10 25 0.66 310C Level of specialized equipment for support implementation few = 1 some = 2 many = 3 0 Actuate 0.2 5 5 10.2 0.27 Excel-M acro 0.1 0.2 1 1.3 0.03 Rela tivehttp://mnweb1geis.is.ge.com/sixsig/ProjectTools/ProjectTools_Main.html Sm art2000 0.1 0.2 1 1.3 0.03 Crite ria / Decimal Onl y fi ll bel ow grey line - Top wi ll be auto-calcT otal => d. 37.8 Speed to Implement C rite ria P-Card Support Cost Cost Feature Rich Reliability Sc alability Row Total V alue 5 5 10 20 0.55 Feature Rich 0.2 5 5 10.2 0.28 Relative Excel- Decimal Reliability 0.2 0.2 5 5.4 0.15 Feature Rich Crystal Actuate Macro Smart2000 Row Total Value Sc alability 0.1 0.2 0.2 0.5 0.01 GEPS Architecture Workflow Functionality Only fill below grey line - Top w ill be auto -calcd. Total => 36.1 Crystal Actuate 0.2 5 10 5 0.2 1 15.2 6.2 0.40 0.16 Excel -Macro 0.1 0.2 0.1 0.4 0.01 Price/ROI GUI/Usability Smart2000 5 1 10 16 0.42 Only f ill below grey line - Top wi ll be auto-calcd.T otal => 37.8 Relative Excel- Decimal Reliab ility Crystal Actuate M acro Sm art2000 Row Total Value Crystal 1 5 1 7 0.26 Actuate 1 5 1 7 0.26 Relative Excel-M acro 0.2 0.2 0.1 0.5 0.02 Crit eria / Feature Decim al Sm art2000 1 1 10 12 0.45 Optio ns Cost Rich Reliability Sc alability Row Total Value O nl y fi ll bel ow grey line - Top wi ll be auto-calc d. otal => T 26.5 Crystal 0.37 0.11 0.04 0.01 0.53 0.53 Actuate 0.15 0.05 0.04 0.01 0.24 0.24 Relative Excel- Decimal Ex cel- Scalab ility Crystal Actuate M acro Sm art2000 Row Total Value Ma cro 0.02 0.00 0.00 0.00 0.03 0.03 Crystal 1 10 10 21 0.44 Sm art2 000 0.02 0.12 0.07 0.00 0.21 0.21 Actuate 1 10 10 21 0.44 Total => 1 Excel-M acro 0.1 0.1 5 5.2 0.11 Sm art2000 0.1 0.1 0.2 0.4 0.01 Onl y fi ll bel ow grey line - Top wi ll be auto-calcT otal => d. 47.6
  5. 5. Objective Decision Making# of large hospitality customers in Las Vegas 1.0 1.0 1.0 5.0 5.0 3.0 3.0# of technicians certified on product in Las Vegas 2.0 2.0 4.0 4.0 8.0 4.0 8.0Local field service management team 3.0 3.0 9.0 3.0 9.0 2.0 6.0Local service inventory quality and availability 4.0 4.0 16.0 2.0 8.0 3.0 12.0After hours support structure 5.0 5.0 25.0 1.0 5.0 4.0 20.0Customer service support structure 1.0 1.0 1.0 5.0 5.0 2.0 2.0Price per port 2.0 2.0 4.0 4.0 8.0 3.0 6.0Price per technician 3.0 3.0 9.0 3.0 9.0 4.0 12.0Vendor training 4.0 4.0 16.0 2.0 8.0 2.0 8.0Vendor manufacturer support 5.0 5.0 25.0 1.0 5.0 3.0 15.0System alarming (NOC) services 1.0 1.0 1.0 5.0 5.0 4.0 4.0Core business hours 2.0 2.0 4.0 4.0 8.0 2.0 4.0Discount on product (hardware and software) 3.0 3.0 9.0 3.0 9.0 3.0 9.0Time and Material 3.0 3.0 9.0 4.0 12.0 4.0 12.0 PBX Maintenance Options 1. # of large hospitality customers in Las Vegas 25 14. Time and Material 2. # of technicians certified on product in Las Vegas 20 13. Discount on product (hardware and software) 3. Local field service management team 15 10 12. Core business hours 4. Local service inventory quality and availability 5 0 11. System alarming (NOC) services 5. After hours support structure 10. Vendor manufacturer support 6. Customer service support structure A B
  6. 6. Earn your stripes by getting tired and dirty… StrategicStrategic & Easy to do Strategic & Hard to do e.g. Running RFPs & e.g. identifying scoring responses opportunities & solutions 3 4 Easy Hard 2 1Tactical & Easier to do Tactical & Hard to do… e.g. finding suppliers e.g. digging through and creating an RFP invoices / contracts template Tactical and performing data analysis
  7. 7. Did we mention communicate???• Own the communication plan with suppliers – Continue to speak your internal customers language – Take 80% of the “burden” off of your internal customer, but let them decide on the 20% they want to take – Remind your internal customers that how and when they communicate is a strategic signal to suppliers • “why are they talking to me” – Keeping control while not stepping on your internal customers ego… • “There is no way I’m going to take this forward and present it to the decision committee…” • “There is no way I’ll support this in committee” • If someone is going to “be the bad guy”, make sure it’s you!
  8. 8. Let them know you care• Ask for feedback – 1 x per year (no one likes a needy pest…) – Across a large cross section – Anonymous • But let them know you selected them!• Let’s them feel like they’re a part of improving the sourcing process just you’re becoming a part of improving their process
  9. 9. Group hugs all around• Give ALL the credit to your internal customer – Mention strategic “wins” and value first – Cost “save” last, if at all From: Inman, Mike To: Exec Team Subject: Re: Agency of Record results To respond to your initial request, before looking at the fees (and I assume you’re also looking for the associated reduction) I think we were able to: 1) get a fantastic agency (supported by more objective criteria than just “they’re very creative” – attached is the final evaluation) 2) improve the service offering (adding strategic planning and web) 3) increase the amount of work we expect the agency to perform (both strategic and tactical) 4) reduce the risk contractually (as they are new and hungry, we were able to get very favorable terms to reduce our risk of going with them, something that would have been more difficulty with the incumbent agencies) and lastly, reduce costs…

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