Yolanda van Norden, Senior Director for NPR Procurement, ASML Ariba Commerce Summit in Amsterdam 2014

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Yolanda van Norden
Senior Director Procurement
October 23, 2014 | Amsterdam
Procurement Transformation A story of a learning journey

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Before we start… Introducing…
•Yolanda van Norden, Senior Director for NPR Procurement at ASML
•Over 15 years of experience in global Procurement roles at ASML, NXP Semiconductors and Philips Electronics
•Fascinated by Indirect Procurement, and the potential value usually ‘locked’ within the organization

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Before we start… Introducing…

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Chips are everywhere….Part 1

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It’s hard to imagine a world without chips
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More than 180 billion chips are made every year
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Data: WSTS
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IC units (in billions)
•Chips produced in 2012
185 Billion
•Chips per every Man, Woman and child
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•Global Semiconductor Industry Sales
$300 Billion

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Introducing ASML….Part 2

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ASML makes the machines for making those chips
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•Lithography is the critical tool for producing chips
•World’s top chip makers are ASML’s customers
•2013 sales: €5.2 billion
•Payroll: 10,000 FTEs

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Founded in 1984 as a spin-off from Philips
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A Global presence
© 2014 Ariba – an SAP company. All rights reserved.
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2,522 employees
Source: ASML Q4 2013
Over 70 Sales and Service offices located worldwide
5,654 employees
2,184 employees

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Our procurement journey …. Part 3

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Indirect procurement spend vs ASML’s turnover
Public
Slide 15

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ASML’s indirect spend is split over all regions
Public
Slide 16
77%
13%
10%
•Highly consolidated spend in Veldhoven region
•Except for Logistics, our spend is relatively local per category
•Relatively low and dispersed spend per country
•Low spend per supplier
•Limited leverage possibilities
•Volume is relatively local per category (except logistics)
•Relatively low and dispersed spend
•Low spend per supplier
•Limited leverage possibilities

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Where were we with indirect procurement three years ago?
Benchmarks 2011
 Conclusion: Good potential for improvements
Procurement strategies were incidental
No strong market insights and deep understanding of business drivers
Control of spend was fragmented; organized as check at the end instead of directing spend in controlled ways
Value add was consistent and just below market averages (2%-4%)
Supplier consolidation is at par with market (4%)
Managed spend per procurement employee is very high compared to market
In 2011

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Our intent is to build a High Performance Indirect Procurement organization
Strategic alignment with the ASML business and stakeholder needs
Cross-functional partnering to drive category strategy management processes
Reduced complexity in processes, and supply base  standardization of R2P processes
Standardized technology and tools used within procurement processes

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We assessed our maturity status
Assessment Factor
Best Practice Score
1
2
3
4
5
Strategy & Organisation
Business Engagement & Functional Excellence
Strategic Sourcing
Category & Supplier Management
Purchase To Pay
People & Skills
Measurement, Policies, Controls & Compliance
Systems, Data & Metrics
Own
Efficio assessment
ASML Readiness
•Trust the Procurement team to use all levers
Team Readiness
•Capability to professionally use all levers
Resources
•Capacity to manage all spend globally

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The Change Program
Business alignment
Processes
People
Strategic NPR Work stream
Operational Excellence Workstream
Category Strategy
•Stakeholder needs
•Supply market dynamics
•Product portfolio
•Category specific targets
Strategy implementation
•RFI, RFQ
•Negotiations & contracting
•Contract implementation
Operational fulfillment
•Requisition to pay
•KPI management
•Supplier performance management
•Contract management

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The transition impacts both the own team as well as the way we interact with our stakeholders
To
Strategic category management
Business value add KPI’s
Solution focus
Stakeholder centric procurement
Process & Service orientation
From
Tactical Procurement
Procurement KPI’s
Responsibility focus
Managing stakeholders
Task orientation

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Our action plan
Thorough analysis of spend
Set-up cross-functional teams for all main categories
Set-up strategies for all major spend categories
Investment in team in all regions
Improved alignment with Control to ensure recognized value add in P&L
Started a transformation project on the operational requisition to pay process (EasyBuy)
Public
Slide 22

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We decided to measure our efforts by using the following metrics
Public
Slide 23
Strategic Workstream
Then
Savings
Below benchmark
Return on Investment
At benchmark
Spend covered by a contract
Above benchmark
Consolidation
Benchmark
% Spend covered by an approved strategy
Below benchmark
Operational Workstream
Then
Catalog orders
Below benchmark
% of e-invoicing
Below benchmark
Spend covered by a PO
At benchmark

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Our journey starts….
Public
Slide 24

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A mission helped to clarify the new organization's purpose
Public
Slide 25
To deliver recognized added value to its stakeholders and the ASML business by pro-actively driving a cross-functional category strategy approach
Translating market opportunities into valuable business propositions
Enabling easy buying methods for ASML

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Our Procurement Journey was clarified to our stakeholders with defining our ‘product’
Public
Slide 26
Our key tasks
Strategic value add
Tactical procurement
Operational fulfillment
Business offering
Expertise
Process
Service
# Stakeholders
Very limited: executive mgt
More: budgetholders and up
Many: everyone who can order stuff
Key care-abouts
Support / enable business strategy
Do the work – secure delivery of service on time (and cost)
Quality of service – reduced complexity and red tape
Our promise
“We know the market, and can help trigger change”
“We deliver a professional process any way you like it”
“We answer any procurement question you have”
Our delivery model
Procurement & Category Consultancy – Cluster managers
Procurement Account managers -
Anyway you like it
Helpdesk: EasyBuy, email, telephone

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The Operational Procurement challenge
Public
Slide 27
Reduce bureaucracy
By steering purchases into the most appropriate and efficient buy-channel
By eliminating “double’ approval loops from contract to requisition
Improve stakeholder satisfaction by a faster procurement process
Improve control on spend by improving the procurement involvement earlier in the buy-process
Improving the “closed loop” of contract to requisition to order to deliver to pay

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The Operational Challenge translated into the following goals
Public
Slide 28
Simple and efficient ordering, invoicing & payment process
Substantial reduction in process time reduce with 50%
Minimal manual handling & interventions  30% - 40% hands free buying via catalogues, templates, and scheduled ordering
< 20% paper invoices
Pushing spend through the right channels and reduce the alternatives for users  Procurement at the start of the process

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Why we choose for Ariba
Public
Slide 29
Functionality:
categories
e-Invoicing
NPR & PR
Process:
Authorization
Reporting
Master data
Integration
Interfaces
Architecture
ASML adjustments
Ease of implementation
Implementation
Team and set-up
Planning
Financials & Contract:
Implementation costs
Recurring costs
Business case
Contract conditions
Statement of Work
Supplier network
Amount of suppliers
On-boarding capabilities
ASML suppliers on the network
User interface
Intuitive
User friendly
After go-live
Supplier governance
Support organization
KPIs and business review structure
Suppliers
Presentation / sales team
Cultural fit
Company profile / financials
Customer reference

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A planning was detailed out
•Phase 1
•E-invoicing
•Technical solution first
•Onboarding suppliers in waves
•Phase 2
•P2O
•Technical solution and catalog preparations
•Go-life per region

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Top level Ariba landscape
Public
Slide 31
Ariba P2O Application
Catalog Buy
Non - catalog Buy
Approval flow
TIBCO
interface
SAP ECC
~ 60 csv files
PR info XML
Users
Catalog management and approval
Approval flow
Suppliers
GDS (user roles)
User info
Ariba Network
Ariba Reporting
SAP BI
reports
~ 45 manual files

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Communications & change management started early
Public
Slide 34
Own ‘brand’ for the new solution:
Channel strategy owned by Procurement team, not the Project
Training materials and dedicated website
Instruction sessions for all requestors in all regions
Go life in waves

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Status today… improvements everywhere
Public
Slide 35
Strategic Workstream
Now
Savings
Doubled
Return on Investment
Doubled
Spend covered by a contract
Increased with 10%
Consolidation
Down to 3.5%
% Spend covered by an approved strategy
Increased with 90%
Operational Workstream
Now
Catalog orders
Increased with 20%
% of e-invoicing
Increased with 40%
Spend covered by a PO
Increased with 20%

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Learning along the way….
Public
Slide 36
The Strategic Program went faster, yielded faster results, and was easily accepted
The Operational Program was more difficult to explain; processes are more integrated with other stakeholders
Not only Procurement should want the solution, also ALL stakeholders
Understand the impact on your own processes; willingness to change and adapt
IT architecture is to be understood early in the process; don’t think it is all SAP now, so it will work
Find a project manager or consultant that has experience with the Ariba solution (or the solution you have chosen).

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Are we there yet???
Public
Slide 37