Reducing supply chain costs and meeting customer requirements continue to be the key supply chain priorities for many organizations. Indirect spend is a key cost driver, and managing strategic sourcing and tactical sourcing through a well-managed process lowers costs and improves execution capability. In this session, IGATE will instruct you how to benchmark yourself against your industry peers and set a goal to improve your success rate in transforming your source-to-pay process. You will also hear how other companies are experiencing success on their source-to-pay transformation journey.
Benchmark Your Costs and Transform Your Source-to-Pay Process
1. March 12, 2015 Proprietary and Confidential - 1 -
Benchmark Your Costs and Transform Your Source-to-Pay
Process
Sanjeev Singh
Giriraj Sharma
2. March 12, 2015 Proprietary and Confidential - 2 -
Agenda
New Age S2P Landscape
What it is?
Why you need to change
How you need to plan and effect the
change
Benchmark-driven cost savings
– Benchmarking defined
– Methodology
– IGATE’s case study
IGATE S2P Landscape
– Consulting & Technology solutions…
….Strengthened with enablers
3. March 12, 2015 Proprietary and Confidential - 3 -
New Age S2P Landscape
Future State
Procurement Best
Practices
Reduced Variable IT
Cost
B2C-like User
Experience for B2B
Users
Direct Procurement:
Collaborative Business
Planning
Indirect Procurement:
More discipline,
optimum DPO
Current State
Inward
focused ERP –
Fixed Cost
Largely MRP-driven
direct procurement
Operational Inefficiency:
IT & Business Processes
Indirect buy: One shoe fits
all approach
It’s a Transformation
• From traditional ERP-based Functionality…
• From e-Procurement of dotcom era to…
• Collaborative Business on e-Marketplace by business
partners of Networked Economy …….
Indirect buy: Lack of awareness about cost
saving opportunities
4. March 12, 2015 Proprietary and Confidential - 4 -
New Age S2P Landscape….Change is necessary
You need to change as this transformation
entails
• Increased awareness about category-specific
challenges. MRO is different from Capital and
Facility is different from IT spend….and so
on….
• The way your own role changes, i.e. higher
focus on indirect procurement related cost
saving opportunities
• The way procurement and supply chain
functions are merging in the direct
procurement space to create greater value in
multiple ways…..not possible in the past due
to lack of collaborative technologies
Impact
Indirect spend typically ranges from 18%-25%
of revenues
5% reduction in Indirect Spend results in 1%
improvement in Gross Margin
5. March 12, 2015 Proprietary and Confidential - 5 -
New Age S2P Landscape….Change is necessary
How is your own role changing: Higher focus on indirect procurement-related cost
saving opportunities than expedition
6. March 12, 2015 Proprietary and Confidential - 6 -
New Age S2P Landscape….Change is necessary
How procurement and supply chain functions are merging in the direct procurement
space to create greater value in multiple ways…..not easily possible in the past due to
lack of collaborative technologies
7. March 12, 2015 Proprietary and Confidential - 7 -
New Age S2P Landscape….Change is necessary
How you need to change? Business Performance Assessment , Analysis and
Benchmarking is the first step.
Benchmarking is the process of comparing one's business processes and
performance
Benchmarking is used to measure performance using a specific indicator (cost
per unit of measure, productivity per unit of measure, cycle time of x per unit of
measure or defects per unit of measure) resulting in a metric of
performance that is then compared to others metrics to industry bests
or best practices from other companies
8. March 12, 2015 Proprietary and Confidential - 8 -
Benchmarking Defined
Key Performance Indicators
Service Levels – On-time Delivery Performance
Responsiveness – Order Fulfillment Lead Times
Inventory Level and Carrying Costs
Performance
Analysis
Framework
Staffing Levels and Organization
Staffing Levels and Costs
Technology
System Landscape
Implementation Maturity and Usage across Processes
Best Practice Adoption
Importance of Best Practices
Current Coverage of Best Practices
Importance and Coverage Gap
Key Performance Drivers
Alignment with Category-specific demand for Accuracy
and Granularity
Safety-stock Visibility/Monitoring
Efficiency
Effectiveness
Key Performance
Indicators
Performance
Drivers
9. March 12, 2015 Proprietary and Confidential - 9 -
Why Benchmarking ?
40 % organization use performance
Benchmarking and about 80 % are
satisfied with results and believe it’s
extremely effective management tool
Benchmarking has been among Top 5
Management Tools for over a decade.
It was top on the list during recession
and following years. Many companies
are using it considering increasing
complexity, uncertainty and
competitive pressures.
10. March 12, 2015 Proprietary and Confidential - 10 -
Benchmarking – Standalone or as part of Transformation?
Business Transformation
Technology Projects
Benchmarking Services
• Procurement Assessment
• BPM “ ProFound ”
• AMS 2.0
• ERP Implementation
• S2P Platform Deployment
• ADM Projects
• Best Practices Benchmarking
• Industry Benchmarking
• Peer Benchmarking
Process
Assessment
KPI Evaluation
APQC
Benchmarks
SCOR & APQC
Best Practices
Roadmap for
Improvement
Benchmarks Relative Position Data Driven Insights
Enablers
Outcomes
Improved Performance
Competitive Advantage
Market Position
11. March 12, 2015 Proprietary and Confidential - 11 -
Benchmarking Methodology
Preparations Assessment
BenchmarkingRecommendations
KPI Analysis and Validation
Global Benchmarking
Industry Best Practices
Roadmap for Improvement
Data
Collection
Survey Interviews Brainstorming
Walkthrough
sessions
12. March 12, 2015 Proprietary and Confidential - 12 -
IGATE’s Benchmarking Methodology - Timeline
Understanding of Business
scenario
Current projects plans
Secondary research
Evaluation of benchmarking
process
Sync up with project teams
Kick-off
Setting Scope &
expectations
Interviews / Walkthrough
sessions
Supply Chain Classification
Define business priorities
Identification of focus area
Study business process
Data collection
Understanding of KPIs
Evaluation of KPIs
Process analysis
Evaluation of Best practices
Benchmarking data from
APQC
Analysis of Benchmarks
Identify areas of
improvement
Suggest best practices
and recommendations
Create roadmap for
improvement
Presentation
Sign-off
Preparation
Assessment
Benchmarking
Recommendations
Week 0
Week 1
Week 5
Week 3, 4
All the data and information provided are based on the HVAC company’s current performance
It does not take in to consideration future/current improvement initiatives in terms of supply chain structure,
processes, and policies etc. which might have positive impact and reduce the performance gap.
14. March 12, 2015 Proprietary and Confidential - 14 -
Background and Scope of Benchmarking
Procurement
Supply Chain
planning
Manufacturing
Logistics
New Product
Development
Sales &
Marketing
Information
Technology
Understanding current performance level
Comparing performance with global benchmarks
Identifying potential areas of improvements
Primary Focus
Client is a global manufacturer of heating and cooling systems selling products through independent
distributors and dealers, and available under some of the most recognized consumer brands
As a part of supply chain transformation initiative, IGATE carried out a Benchmarking & Best Practices
exercise to identify gaps and highlight areas for improvement
15. March 12, 2015 Proprietary and Confidential - 15 -
Benchmarking Data Collection – High Level
Finance Supply Chain Planning
Manufacturing
Operations
Inventory Management
Supply Chain
Collaboration
Information
Management
Data Collection – Functional Areas
Sample Data across Functional Areas
Brainstorming
Survey
Discussion
Sourcing Procurement
Procurement
Procurement
Costs
Supplier Lead
Time
Spend under
Management
16. March 12, 2015 Proprietary and Confidential - 16 -
Supply Chain Planning - Priorities & Related Metrics
On Time Delivery
Order Cycle Time
Cash Conversion Cycle
Inventory Turnover
Supply Chain Cost
Customer Service Level-95%
Customer Lead Time -21 Days
Working Capital Reduction
Inventory Reduction
Freight Reduction
Priorities Important Metric
The top two priorities are driven by customer centricity and are related to order fulfilment and
responsiveness. The remaining three priorities focus on supply chain cost reduction.
The priorities are assessed considering end-to-end supply chain performance with respect to
customer value & financial performance
17. March 12, 2015 Proprietary and Confidential - 17 -
Procurement - Priorities & Related Metrics
Achieve YOY savings of $ 5 M
Leveraging of spend across
different business units
Decrease lead time of critical
items
Supplier consolidation
Localization of suppliers
Standardize policies and
procedures
Spend Management
Cycle Time
Process Efficiency
Strategic Sourcing
Process / FunctionPriority
Total cost to perform the
procurement process group
per $1,000 purchases
Average supplier lead time
on purchased materials
Number of FTEs for the
procurement cycle per $1
billion purchases
Metric
The top priority is driven by corporate, and remaining priorities focus on procurement
organization’s internal initiatives focused on cost reductions and improved efficiencies
18. March 12, 2015 Proprietary and Confidential - 18 -
Procurement Organization - Maturity Assessment
Leader
Competitive
Basic
Beginner
World
Class
Overall Rating Level
0 - 1.5 Beginner
1.6 - 2.2 Basic
2.21 - 2.7 Competitive
2.71 - 2.9 Leader
2.91 - 3 World Class
Overall
Maturity
Maturity in 4 dimensions
19. March 12, 2015 Proprietary and Confidential - 19 -
Procurement - Key Indicators and Opportunities - Sample
Key metrics compared to
global benchmarks
Single Largest Opportunity – “Supplier Lead Time”
KPI Customer
All Participants Peer: Industry Peer: Revenue Range Peer: Region
Bottom Median Top Bottom Median Top Bottom Median Top Bottom Median Top
Average supplier
lead time on
purchased materials
30 11 7 4 32.06 20 6 20 10 8 14 8 5
20. March 12, 2015 Proprietary and Confidential - 20 -
Impact of Supplier Lead Time on Shareholders Value
Supplier lead time has direct impact on Order fulfilment and Cash-to-cash cycle which relates to
Cost & Capital efficiency of shareholder’s value
Improved Average
procurement lead
time
Improved
Supplier Lead
Time
Improved PO
processing
time
Cost reduction
Shareholders
Value
Improved
working Capital
efficiency
Improved
Order
fulfillment
Reduced Cash
to Cash Cycle
22. March 12, 2015 Proprietary and Confidential - 22 -
IGATE Procurement Optimization Methodology
Process
assessment
KPI assessment
Benchmark
Spend Analytics
MDM
Process
Optimization
Roadmap & Business Case
Technology / Tools
ARIBA
Organizational Alignment
Platform +BPO
Comprehensive Discovery Assessment
Decentralized buying - Diverse
operations in multiple locations
Lack of visibility into spend
Lack of best practices – High
SG&A
Lack of contract visibility – Large
supplier base
Lack of Category Management
Specialization
Symptoms
Process & KPI assessment
Technology Assessment
MDM
Spend analytics
Technology Implementation
BPO activities
SolutionOfferings
Reduced indirect procurement spend
Visibility & comparison with industry
best practices
Improve Process Efficiency & Reduce
cost of process
ValueProposition
Tail End
Management
23. March 12, 2015 Proprietary and Confidential - 23 -
Assessment &
Benchmarking
Industry Specific
Process Repository
(ProFound)
SpendSmart
Collaborative
Platforms
(ARIBA)
Consulting –led
delivery
IGATE’s business outcome model…
Our
Differentiators
Procurement
Transformation
Efficiencies
Streamlined
Supplier
Relationships
Reduced
Indirect SpendStandardization
Bring Efficiencies to
Procurement and AP
Process reengineering
Implementing CI Six
Sigma
P2P Automation
Establish metrics, KPIs
program
Simplify, upgrade, and
standardize procurement
systems
Assessment of current
systems
Procurement systems
architecture
Migration and rollout
Reduced sourcing and
procurement cycle times
Improved contract
compliance
Reduced supplier
delinquency
Supplier master data
cleansing
On-boarding and support
Supplier lifecycle
management processes
Source 2 Buy Diagnostic
Review systems,
processes, cost structures
Spend analysis
Transformation program
design
24. March 12, 2015 Proprietary and Confidential - 24 -
….and is strengthened with enablers
ph Assessments
Benchmarks &
KPIs
SCOR
Codified business processes
Simulation & Real time
monitoring
Enterprise architecture view
Reference process maps
IGATE’s frameworks &
templates
Benchmarking, best
practices & KPIs
Industry Point of Views
Shareholder value maps BPM
SAP Value
Maps
Benchmarking
Rapid Transition
Continuous
business process
improvement
Business case
Simulation &
Optimization of
business
processes
Process
monitoring
Value Delivered By
25. March 12, 2015 Proprietary and Confidential - 25 -
Some Procurement-Related Engagements…
INDUSTRY/
CLIENT
CLIENT LOCATION FUNCTION
SERVICES/
TRANSACTIONS OFFERED
Leading industrial manufacturer North America S2P Procurement Assessment
Large Global Conglomerate Global
B2P – Supplier
Setup
Vendor Setup & Management
Watchlist
Payment & Tax Exception handling
Leading Luxury Hotel Chain
Global (US,
Europe, APAC)
B2P – AP Global Accounts payable across properties
Largest Canadian Bank Canada
B2P - AP
Accounts Payables, T&E processing
Payment processing Vendor Reconciliations, Vendor
setup
Aviation Subsidiary of Large Global
Conglomerate
US S2B - Sourcing
Sourcing of Sheet Metal Components
Vendor Evaluation, Negotiation, and development
Supplier coordination for delivery and supplier
performance management
North American subsidiary of a MNC
Testing & Measurement solution
provider
US S2P – End to End
Procure to Pay operations including direct sourcing
(Supplier Management, RFQ & Bid Evaluation, PR &
PO, Spend Analysis, P – Card, MRP Report, Supplier
co-ordination)
Relocation Service Provider US
S2B - Sourcing
B2P - AP
Accounts Payables, T & E administration,
Tax Gross Ups, Management Reporting
Sourcing of Services
26. March 12, 2015 Proprietary and Confidential - 26 -
THANK YOU!