2009 Strategic Sourcing & Procurement evaluation

1. PROCUREMENT
TRANSFORMATION
• Background
• Spend Analytics (The Linchpin)
• Strategic Sourcing (The Result)
• Tools (For Buyers, Partners, Suppliers)
• Metrics (The Sustainable Measures)
• Change Management (The Process)
• Allies (The Vehicle)
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2. PROLOGUE
Procurement at the Utility
• Largely Transactional
• Minimal Value Add
• Reactionary
• De-centralized (Approach & Process)
• Like Driving With a Blindfold on
• This Has To Change!
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3. SPEND ANALYTICS
• Major Emphasis
• Metrics
– Score Card 80%
Strategic
– Market Intelligence
– Commodities Indexing to
Exception Analysis
• Marquee Leveraging! 85%
(Mission Critical)
• Cross-functional Teams
• Initial Emphasis
• Minimize Base
• Automate!
15% to
Tactical
• On-line Catalogs, VMI, 3PL
• P2P! 20%
• Co-source?
• Cross-functional Teams
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4. STRATEGIC SOURCING
BENEFITS
• Improves Costs
– Volume Discounts
– Reduced Freight Costs
– Increased Automation (fewer touches)
– Reduction in Procurement Operational Costs
• Improves Quality
– Better Supplier Delivery Performance
– Increased Supplier Assurance (lower risk)
– Decreased Processing Errors
– Better Contract Compliance
• Improves Culture
– Management by Exception
– Strategic Partner to BUs
– Visibility to Performance
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5. TOOLS FOR BUYERS
• Spend Analytics
– Dollar Volume (plus Mission Critical Sourcing)
– Quantity of Goods vs. Value of Goods
– Supplier Rationalization (Leverage AEP Marquee)
• Standardized Operating Procedures
• Supplier Score-carding
• Market Intel Tools (organic or purchased?)
• Commodities Intel Tools
• Technology Tools (EDI!, P2P, Web-based
Transactions)
• Cross-functional Teambuilding with BUs
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6. SOURCING CAREER
DEVELOPMENT
• Buyer (III, II, I, Sr.)
• Contract Analyst (III, II, I, Sr.)
• Strategic Sourcing Analyst (III, II, I, Sr.)
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7. TOOLS FOR PARTNERS
• Agnostic Sourcing Model
• Total Cost of Ownership Acquisitions
• Operational Assessments
• Market Intel (organic or purchased?)
• Cross-functional Teambuilding with
Buyers
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8. TOOLS TO IMPROVE
SUPPLIERS
• Supplier Performance Management
Program
• Operational Assessments
• Score-carding
• Formal Standardized Corrective Action
Plans
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9. INTERNAL METRIC MEASURES
• Reduce Quantity of Suppliers
• Reduce Number of Touches by Buyers
• Reduce Aberrant (Rogue) Spend
• Reduce Non-blanket Spend
• Reduce Rework
• Improve Savings & Cost-Avoidance
Metrics
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10. STRATEGIC SOURCING
• “Herding Cats”
• “Boiling Frogs”
(for next two years)
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11. CHANGE MANAGEMENT
• People (Skillsets)
• Processes (Standardization)
• Technology
(0 for 3)
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12. STRATEGIC PARTNERS FOR
CHANGE
• Accounts Payable
• Treasury
• Legal
• Risk
• Audit
• CFO?
• Wires?
• Generation?
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