An Innovative Approach to Putting Your Indirect Spend under Control
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The document summarizes a presentation about using Ariba Discovery to manage indirect spend. It includes presentations from Karen Sherrill of Ohio State University Medical Center and Jarrod McAdoo of American Eagle Outfitters. Ohio State uses Ariba Discovery to identify new suppliers, resulting in $2.5 million in savings. American Eagle uses it to source goods and services to address challenges from new competitors, improved logistics, and shifting to online retail. Both organizations achieved benefits like reduced sourcing times and improved compliance.
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An Innovative Approach to Putting Your Indirect Spend under Control
- 1. #AribaLIVE @ariba An Innovative Approach to Putting Your Indirect Spend Under Control Chris Wang, Senior Director, Product Marketing @AribaDiscovery April 9, 2015 © 2015 Ariba – an SAP company. All rights reserved.
- 2. #AribaLIVE @ariba Agenda • Panel Introduction • Ariba DiscoveryTM for Indirect Spend • Best Practice Sharing • Q&A © 2015 Ariba – an SAP company. All rights reserved.2 @AribaDiscovery
- 3. #AribaLIVE @ariba Panel • Karen Sherrill Senior Commodity Manager, Indirect Strategic Sourcing The Ohio State University Wexner Medical Center • Jarrod McAdoo Senior Manager, Procurement Operations American Eagle Outfitters, Inc. © 2015 Ariba – an SAP company. All rights reserved.3 @AribaDiscovery
- 4. #AribaLIVE @ariba Addressing Indirect Spend - How Ariba Discovery Fits into the Ariba Solution Suite © 2015 Ariba – an SAP company. All rights reserved.4 Strategic Sourcing Sourced Goods and Services High-Dollar Items Category Management in Place RFI/RFP/Auctions Catalogs Addressed by Current Sourcing & Procurement Solutions Tactical Sourcing 3 Bids and a Buy Mid-Dollar Items No Category Management RFQs Addressed by Current Sourcing & Procurement Solutions P U R C H A S I N G T I M E ITEMCOST Ad-hoc Buying Find & Buy Low-Dollar Items Not Sourced Upcoming Ariba Network Spot Buy Ariba DiscoveryTM @AribaDiscovery
- 5. #AribaLIVE @ariba Addressing Indirect Spend - How Ariba Discovery Fits into the Ariba Solution Suite © 2015 Ariba – an SAP company. All rights reserved.5 Supplier Management Collaborative Procurement Ariba Network Spot Buy (w/ P2P, P2O, APC) Ariba Sourcing w/ Ariba Discovery Collaborative Sourcing Plan Request Approve Order Receive Manage PayContractSourceBUYERS SELLERS Source & Contract Request & Buy Invoice & Pay Customer Management Confirm Fulfill Invoice Monitor CashContractMarket Bid Specify Strategic Spend Tactical Spend Ad-Hoc Spend Ariba Spot Quote Collaborative Procurement @AribaDiscovery
- 6. #AribaLIVE @ariba Ariba DiscoveryTM: Matching Buyers to Suppliers Globally • The premier service for matching business buyers and suppliers globally, built on the world’s commerce network © 2015 Ariba – an SAP company. All rights reserved.6 @AribaDiscovery
- 7. #AribaLIVE @ariba Strong Supplier Community © 2015 Ariba – an SAP company. All rights reserved.7 @AribaDiscovery
- 8. #AribaLIVE @ariba Leading Supplier Categories © 2015 Ariba – an SAP company. All rights reserved.8 @AribaDiscovery
- 9. #AribaLIVE @ariba How Buyers Can Use Ariba Discovery to Manage Indirect Spend © 2015 Ariba – an SAP company. All rights reserved.9 @AribaDiscovery
- 10. #AribaLIVE @ariba Karen Sherrill • Senior Commodity Manager, Indirect Strategic Sourcing • The Ohio State University Wexner Medical Center • karen.sherrill@osumc.edu © 2015 Ariba – an SAP company. All rights reserved.10
- 11. #AribaLIVE @ariba OSU Wexner Medical Center © 2015 Ariba – an SAP company. All rights reserved.11 Located in Columbus, OH, The Ohio State University Wexner Medical Center is one of the largest and most diverse academic medical centers in the country and the only academic medical center in central Ohio
- 12. #AribaLIVE @ariba Who We Are • Our Mission is to improve lives through Innovation in Research Education Patient Care • The James Cancer Hospital and Solove Research Institute The World’s Most Advanced Cancer Hospital 1.1 million square feet and over 21 floors • 2015 College Football National Champs – Go Bucks! © 2015 Ariba – an SAP company. All rights reserved.12
- 13. #AribaLIVE @ariba Sourcing Process Objectives © 2015 Ariba – an SAP company. All rights reserved.13 A means to collaborate with stakeholders to identify suppliers and reduce total costs by: Reducing Costs Improving productivity Eliminating inefficiencies Analyze Category Develop Strategy Execute Sourcing Event Award Contract Enable Supplier Implement Req to Payment Process Measure Performance
- 14. #AribaLIVE @ariba Indirect Spend Management Approach © 2015 Ariba – an SAP company. All rights reserved.14 Analyze Category Develop Strategy Execute Sourcing Event Award Contract Enable Supplier Implement Req to Payment Process Measure Performance People TechnologyProcesses Align Strategic Sourcing Approach with: 1. People 2. Processes 3. Technology
- 15. #AribaLIVE @ariba • People Stakeholder Collaboration Knowledge is Power • Technology Supports Efficient Collaboration & Knowledge Sharing Supports Process Efficiencies through automation © 2015 Ariba – an SAP company. All rights reserved.15 Analysis Category Develop Strategy
- 16. #AribaLIVE @ariba • People with appropriate skills are required to run Technology • Technology allows for efficient supplier collaboration, event execution & analysis with stakeholders © 2015 Ariba – an SAP company. All rights reserved.16 Execute Sourcing Event People + Technology = Efficiency
- 17. #AribaLIVE @ariba Buyer Seller © 2015 Ariba – an SAP company. All rights reserved.17 Award Contract Stakeholder Collaboration People
- 18. #AribaLIVE @ariba Process + Technology = Efficiency © 2015 Ariba – an SAP company. All rights reserved.18 Enable Supplier Efficient Requisition to Payment Process Environmentally Friendly Improved Document Management Efficient Supplier Collaboration & Negotiations Effective Payment Discount Management Implement Req to Pay
- 19. #AribaLIVE @ariba Importance Ranking © 2015 Ariba – an SAP company. All rights reserved.19 Inverted Pyramid of Collaborative Support #1 People #2 Process #3 Technology Stakeholders
- 20. #AribaLIVE @ariba The Ohio State University and Ariba Discovery • Easily integrates with Ariba Sourcing and Ariba Contract Management • Uses Ariba Discovery to increase competition and find new suppliers for a wide range of categories • Results Business Results: – Identified a new supplier for linens and signage, resulting in $2.5M in savings and better value over contract terms Environmental Benefits: – Greened strategic sourcing process with improved visibility and validation © 2015 Ariba – an SAP company. All rights reserved.20
- 21. #AribaLIVE @ariba Achieving Successful Outcomes © 2015 Ariba – an SAP company. All rights reserved.21 Effective Collaboration Leads to Process Compliance Knowledgeable and Collaborative People are Required for Processes and Technology to be Effective Technology Supports Efficient Collaboration and Process Compliance
- 22. #AribaLIVE @ariba Pay Less Use Less Waste Less Successful Outcomes © 2015 Ariba – an SAP company. All rights reserved.22 Stakeholder Sourcing Collaboration & Engagement Yields: Reduced costs Improved Productivity Inefficiencies Eliminated
- 23. #AribaLIVE @ariba Jarrod McAdoo • Senior Manager, Procurement Operations • American Eagle Outfitters, Inc. • McAdooJ@AE.com © 2015 Ariba – an SAP company. All rights reserved.23
- 24. #AribaLIVE @ariba American Eagle Outfitters, Inc. © 2015 Ariba – an SAP company. All rights reserved.24
- 25. #AribaLIVE @ariba Lifestyle Brand • High-quality brand, not just fast fashion • Customers can trust American Eagle Outfitters (AEO) to provide only the best • Customers are very loyal • AEO is the #1 lifestyle brand among teens Teens have most purchasing power than any other demographic © 2015 Ariba – an SAP company. All rights reserved.25
- 26. #AribaLIVE @ariba Changing Face of Retail Landscape • New competitors • Improved logistics • Shift from brick and mortar to online © 2015 Ariba – an SAP company. All rights reserved.26
- 27. #AribaLIVE @ariba Maintaining Competitive Advantage • Improve margin without increasing prices • Use technology to improve processes • Managing indirect spend is a key component of these charters © 2015 Ariba – an SAP company. All rights reserved.27
- 28. #AribaLIVE @ariba Addressing Challenges: New Competitors • Adapt to changing customer base by expanding American Eagle Outfitters brand Created new Aerie clothing and lingerie line to target younger demographics Added Aerie stores within existing AEO stores Built 22 stand alone Aerie stores • Adapt to new compliance challenges during expansion © 2015 Ariba – an SAP company. All rights reserved.28
- 29. #AribaLIVE @ariba Addressing Challenges: New Competitors • Examples of goods & services sourced from Ariba Discovery: Floor scrubbers Staffing services Janitorial and landscaping service providers Event management and production services Mailers, marketing services © 2015 Ariba – an SAP company. All rights reserved.29
- 30. #AribaLIVE @ariba Addressing Challenges: Improved Logistics • Improve logistics with new technology and adopt new processes Upgraded technology in distribution centers Manage stores’ operational supplies and predict orders before they are placed Adopt store-to-store shipping for online orders that are out of stock in distribution centers © 2015 Ariba – an SAP company. All rights reserved.30
- 31. #AribaLIVE @ariba Addressing Challenges: Improved Logistics Examples of goods & services sourced from Ariba Discovery: Receiving services Inventory services Commercial appliances for distribution center Specialized boxes for shipping shoes Packaging pouches, bags © 2015 Ariba – an SAP company. All rights reserved.31
- 32. #AribaLIVE @ariba Addressing Challenges: Shift from Brick & Mortar to Online • Keep customers shopping in brick and mortar stores by maintaining innovative displays Each store is completely changed out 10 times a year 7.5 miles of window displays in stores This means speed sourcing of indirect goods as well as merchandise © 2015 Ariba – an SAP company. All rights reserved.32
- 33. #AribaLIVE @ariba Addressing Challenges: Shift from Brick & Mortar to Online Examples of goods & services sourced from Ariba Discovery: Round size dividers for clothing displays Large, uniform quantities of used corrugated boxes Pallets Inventory services Gift wrapping bags and boxes © 2015 Ariba – an SAP company. All rights reserved.33
- 34. #AribaLIVE @ariba Benefits of Using Ariba Discovery • Reduced sourcing cycle time • Found new suppliers that we would not have otherwise found before • Fulfilled urgent buying needs • Improved compliance • All of which helped improve margins and maintain competitive advantage © 2015 Ariba – an SAP company. All rights reserved.34
- 35. #AribaLIVE @ariba THANK YOU! QUESTIONS? © 2015 Ariba – an SAP company. All rights reserved.35
Editor's Notes
- I. What is indirect spend? A. Indirect spend consists of all the materials and services that businesses need in order to operate. This can include areas like marketing and other professional services, travel, IT and HR, facilities, utilities, and maintenance, as well as basic consumables such as paper, paper clips and other office supplies. B. While it may seem like this area of spend wouldn’t be significant, especially compared to expenditures directly related to producing finished goods, recent studies have found that indirect spend can account for up to 50 percent of a company’s purchases and manufacturers specifically can spend 20 percent or more of their total revenue on indirect expenditures. C. Indirect spend is the next frontier of spend optimization D. While your company may have optimized every cent spent with direct suppliers, lean Six Sigma's your manufacturing operations, and tightened your supply and delivery timelines down to the hour, indirect spend presents the next frontier in opportunity for increased efficiency and cost control. II. Why is indirect spend management such a challenge? Require significantly more and varied suppliers Have a smaller average spend Require a larger number of smaller purchases, more frequently Consist of more maverick spend Be driven by more internal stakeholders Require diverse experience Be difficult to evaluate Be considered less strategic
- I. What is indirect spend? A. Indirect spend consists of all the materials and services that businesses need in order to operate. This can include areas like marketing and other professional services, travel, IT and HR, facilities, utilities, and maintenance, as well as basic consumables such as paper, paper clips and other office supplies. B. While it may seem like this area of spend wouldn’t be significant, especially compared to expenditures directly related to producing finished goods, recent studies have found that indirect spend can account for up to 50 percent of a company’s purchases and manufacturers specifically can spend 20 percent or more of their total revenue on indirect expenditures. C. Indirect spend is the next frontier of spend optimization D. While your company may have optimized every cent spent with direct suppliers, lean Six Sigma's your manufacturing operations, and tightened your supply and delivery timelines down to the hour, indirect spend presents the next frontier in opportunity for increased efficiency and cost control. II. Why is indirect spend management such a challenge? Require significantly more and varied suppliers Have a smaller average spend Require a larger number of smaller purchases, more frequently Consist of more maverick spend Be driven by more internal stakeholders Require diverse experience Be difficult to evaluate Be considered less strategic
- Talking point: Highlight how relationship continues to evolve
- Waste Less: Utilization ratios are within national averages Reduced Linen Hoarding Improved Product Quality Product Standardization Eliminated Soiled Linen Place in Trash Implemented Education and Awareness Program
- Maintain brand loyalty by keeping prices competitive