Transforming Strategic Sourcing and Procurement – The New Model
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This session will provide an overview on how Grupo Posadas, a leading Mexican hospitality company, transformed its Sourcing and Procurement model. Key Achievements: • A standardized sourcing and supplier management process. USD 27.3 million in savings in 2.5 years which accounts for 18% savings against the baseline • Improved leveraging of customer needs and buying power • Focused compliance and use of contracts. In 2012 compliance has improved to 96% • Enhanced communication of customer requirements • Standard key performance metrics
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Transforming Strategic Sourcing and Procurement – The New Model
- 1. Transforming Strategic Sourcing and Procurement – the New Model MBA, B. Eng. Raul Carranza H. Grupo Posadas May, 2013
- 2. #AribaLIVE Agenda • Posadas Today • Supply Chain Opportunity Assessment • Ariba Decision and Roll Out • Main Achievements • Industry Benchmarks 2 © 2013 Ariba, Inc. All rights reserved.
- 3. #AribaLIVE POSADAS TODAY 3 © 2013 Ariba, Inc. All rights reserved.
- 5. #AribaLIVE LIFESTYLE DELUXE LUXURY UPPER MIDDLE ECONOMY VACATION CLUB Source: Grupo Posadas Brand Architecture
- 6. #AribaLIVE Posadas Today • 5 Hotel brands and 1 Vacation Club: Aqua, Fiesta Americana, Fiesta Americana Grand, Fiesta Inn y Hoteles One, Fiesta Americana Vacation. Club • GRUPO POSADAS operates 105 hotels and more than 18,000 rooms. • Presence in all major urban and coastal locations in Mexico
- 7. #AribaLIVE Overlook 1 Intercontinental Hotels Group 34,197 2 Accor Hotels 32,665 3 Marriott International 20,090 4 Meliá Hotels International 19,093 5 Riu Hotels & Resort 18,424 6 Grupo Posadas 17,622 7 Hilton Worldwide Corporation 16,836 8 Starwood Hotels & Resorts 16,629 9 Wyndham Worldwide Corporation 16,046 10 Barceló Hotels & Resorts 13,079 Latinoamérica México (42%) 1 Intercontinental Hotels Group 19,332 2 Grupo Posadas 17,622 3 Riu Hotels & Resort 9,213 4 City Express 7,590 5 AM Resorts 7,248 Sudamérica (28%) 1 Accor Hotels 29,222 2 Intercontinental Hotels Group 8,689 3 Starwood Hotels & Resorts 7,685 4 Choice Hotels 7,095 5 Golden Tulip Hospitality Group 5,922 Centroamérica y Caribe (30%) 1 Meliá Hotels International 13,917 2 Marriott International 10,612 3 Riu Hotels & Resort 9,211 4 Barceló Hotels & Resorts 7,983 5 Hilton Worldwide Corporation 7,819 Fuente: Estudio de Cadenas. 2012 Total de habitaciones: 436,954 Total de habitaciones: 182,269 Total de habitaciones: 131,004 Total de habitaciones: 123,681
- 8. #AribaLIVE 8,867 6,983 6,428 5,006 4,641 4,513 3,264 3,102 2,893 2,724 2,515 2,422 2,269 2,260 Source: Estudio de Cadenas 2012 (Información a octubre 2012). Hotel Chains: Room number (European plan)
- 10. #AribaLIVE Opportunity • In 2009, Grupo Posadas identified the opportunity to strengthten its Purchasing Department to achieve savings, improve the control and spend visibility to increase the customer level service. • In November 2009, a consulting Company made a diagnostic regarding the purchasing capabilities and potential savings in Posadas. • To capitalize on the benefits identified in the diagnostic. Grupo Posadas undertook the Transforming Sourcing & Procurement Project.
- 11. #AribaLIVE Assessment • The assessment was based on a High Performance Purchasing Model with the following findings: Human and Physical Capability constraints, lack of centralized negotiations, lack of the requiered technology to add value. • Particularly: There is not a spend analysis. Therefore priorities are not well defined Several suppliers as well as several prices to buy the same SKU There is no purchasing power aggregation Limited capability to understand the suppliers cost structure and their competitive situation, Lack of a systematic supplier cost analysis TCO is not considered. Partial analysis The main stakeholders are not considered in the decision making process Limited number of alternatives. New suppliers search is triggered by an increase in credit limits Lack of standardization in processes, policies and procedures Savings are not documented and are not recognized for Finance and Operations There aren’t contracts or written agreements with suppliers. Information Systems are not used to communicate and guarantee centralized negotiations. Low compliance
- 12. #AribaLIVE Assessment Posadas’ situation was: FTE involved in the process Current Process Cost Activities Annual Cost Suppliers Current FTE’s million million Sourcing Strategy Sourcing and Category Management Requisition to Pay Supplier Relationship management People and Organization Technology Grupo Posadas vs Benchmark – Souncing & Procurement World Class Capabilities
- 14. #AribaLIVE Decision Maximize savings though a standard and formal process that incorporates rigorous analytics, tools and techniques to reduce total cost of purchased goods and services. Establishing the baseline and developing the team, processes, structure and implementation plan to drive the program and sustain results Eq. Menor Eq. Mayor Eq. lavandería Fumigación Plomería Tratamiento de aguas Decoración Eq. telefónico Eliminación de desperdicios Jardineria Aire acondicionado Servicio de limpiezaElectromecánica Correos y mensajeria Pastelería y panadería Pescados y mariscos Reparacion de edificio Gastos de viajes Honorarios profesionales Papelería de Oficina Suministros Limpieza Seguridad Articulos Telefonia Vinos y Licores Lavado de blancos Frutas y verduras Publicidad Electricidad Obra Civil -1 10 21 -1 5 11 Facilidad de implementación Ahorropotencial Increase control and improve visibility of global, cross-business-unit spend Purchasing Model Strategic Sourcing • With a promising Business Case, the Transforming Sourcing and Procurement Project started supported by a state-of-the-art software platform (Ariba) with the following goals:
- 15. #AribaLIVE • The adopted model would be supported by a technological platform. The solution to our Sourcing and Procurement model is. SPEND ANALYSIS STRATEGIC SOURCING CONTRACTS CONTRACT COMPLIANCE PROCUREMENT EVALUATION & SUPPLIER DEVELOPMENT POLICIES TECHNOLOGICAL PLATFORM PROCESSES STRUCTURE Spend Vis Sourcing Pro Contracts Contract Compliance P2O SIPM Decision
- 17. #AribaLIVE • The Busines Case was evaluated in October 2012. NPV of $ 26.6 million USD, $ 5.1 million USD more than the NPV estimated in 2009 Cash Flow $21.5 NPV $26.6 NPV 1.46 Pay back time 1.01 Pay back time 260% IRR 458% IRR (0.7) 3.9 (0.0) (0.8) 1.0 3.2 (10.0) (5.0) 0.0 5.0 10.0 15.0 20.0 25.0 30.0 CAPEX 2010 2011 2012 2013 2014 Cash flow Estimado Cash flow Revisado VPN 2012 VPN Original $ 5.1 VPN adicional ORIGINAL 2012 Outcome Original NPV2012 NPV Additional NPV Estimated Cash Flow Revised Cash Flow
- 18. #AribaLIVE Outcome FTE involved in the process Current FTE’s Current Process Cost Activities Annual Cost Suppliers Savings Million Million Million
- 19. #AribaLIVE Outcome • Savings • 27.3 USD millions in savings in a 2.5 year period • 18% in average savings in all the spend categories • Comprehensive Spend Analysis through “Spend Visibility” module • Savings recognized by Finance and Operations • Enhanced Spend Control and Visibility • All Sourcing projects have been developed through Ariba, using: Task Manager Electronic Events such as RFI or RFP Standardize and control contract development • Global Trading with support for multiple languages and currencies • Improved project management and compliance with advanced, automated workflow and approval-routing • Transparency in the RFxs, negotiations and deliverables • 95% in compliance • Advanced Approval flow for all Purchase Orders • Information System is used to communicate and guarantee centralized negotiations • Contract library • Supplier scorecard • Surveys
- 20. #AribaLIVE Outcome 20 Scope • Discovery of new qualified suppliers through integrated Ariba Discovery to improve bid competitiveness • Corporate Supply Base Rationalization Program. 56% reduction in the supplier base • Wider selection of suppliers is considered for RFx’s • Standardized practices, formats and deliverables • Transaction history recorded automatically in the purchase requisition
- 21. #AribaLIVE • There is a significant improvement in the Posadas Purchasing best pracices, which enebles us to excel in the cycle: find the money, get the money and sustain the money. • Well-defined processes, having the right people and a robust platform are considered the key succes factors for Posadas’ Sourcing and Procurement Initiative Grupo Posadas vs. Benchmark – Sourcing & Procurement World Class Capabilities 24% 58% 80% Progress ¿What is missing? November 2009 Assessment November 2011 Assessment Ideal State. Defined in the Implementation Survey of 14 interviews and 65 on line interviews in 2012 51% 62% 50% 54% 48% 40% 28% 29% 30% 23% 13% 23% 52% 66% 70% 58% 52% 53% 89% 87% 80% 73% 87% 63% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Estrategia de Compras Abastecimiento y Gestión de Categorías Requisición a recibo Gestión de la relación con proveedores Gente y Organización Tecnología 51% Benchmark Sourcing Strategy Sourcing and Category Management Requisition to Pay Supplier Relationship management People and Organization Technology
- 22. Thank you Raúl Carranza Hernández: Strategic Sourcing Director raul.carranza@posadas.com 52 (55) 5326 6756
- 23. Questions? 23
- 24. #AribaLIVE Please Complete Session Survey Go to Surveys © 2013 Ariba, Inc. All rights reserved.24 Select Session Click Choose one Rate Session Thank you for joining us