Big Bang Benchmarking - Spend Optimization
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Big Bang Benchmarking - Spend Optimization
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Big Bang Benchmarking - Spend Optimization
- 2. Will YOUR 2010 be a…
- 3. Make 2010 the year procurement is remembered!
- 8. Challenges of Measuring Too many metrics! Define a clear strategy Endless debate over Cultural wars; lay down the definition law Constantly changing metrics Implement measurement strategy now Data too old by the time it’s Fix data issues collected Gaming the system Motivate consistently Silo behavior Cross-functional metrics
- 9. A Three-Step Plan: Performance Improvement
- 10. Step 1: Why? Identify Goals Different Metrics for Different Goals Guide for Managing ongoing the business (Diagnose & decisions (Scenario correct) planning) Financial reporting (Compliance & transparency) “Why” Drives “What”: Goals Drive The Metrics That Matter
- 11. Step 2: What? A Network of Hierarchies Define Metrics that Matter for different parts of business and interdependencies among them Forecast Accuracy Demand Supply Perfect SCM Order Cost • Market • Capacity Cash-to-Cash • Features • Flexibility Inventory AP AR • Pricing • Quality Total Supplie Supplie RM Purchas Dir Mtl r r On- Inv e Costs Costs Quality Time Product Cost Detail Production Schedule Variance Plant Utilization WIP + FG Inventory Order Cycle Time Perfect Order Detail • Innovation • Options • Roadmap
- 12. Step 2: What? A Network of Hierarchies XYZ XY XY Z Z XY XYZ XY XY Z Balance Sheet Z Z Income Statement XY Finance XY XYZ XYZ XY Z Z Z XYZ XY XY XY XY XYZ Z Z Z Z XY XY XY XY XY XY Z Z Z Z Z Z Forecast Accuracy DEF Perfect SCM Order Cost DEF DEF Demand Supply Cash-to-Cash DEF DEF DEF Inventory AP Total AR Marketing Supplie Supplie RM Purchas Dir Mtl DEF DEF DEF r r On- Inv e Costs Costs Quality Time Sales DEF DEF Service DEF DEF Product Cost Detail Production Schedule Plant WIP + FG Order Cycle Perfect Order Variance Utilization Inventory Time Detail DEF DEF DEF DEF ABC ABC ABC ABC ABC ABC ABC ABC ABC Applistructure Manufacturing Logistics ABC ABC ABC ABC ABC
- 13. The Hierarchy of Supply Chain Metrics Demand Forecast Assess Perfect SCM Order Cost Cash-to-Cash Diagnose Inventory AP Total AR Supplier Supplier RM Purchase Dir Mtl Quality On-Time Inv Costs Costs Production Order Perfect Cost Schedule Plant WIP + FG Cycle Order Correct Detail Utilization Inventory Variance Time Detail
- 14. The Hierarchy of Supply Chain Metrics Example Demand Demand (Strong) Forecast Forecast Assess Perfect SCM SCM Order Cost Cost Cash-to-Cash Inventory Diagnose Inventory Total (Weak) AP Total AR Supplier Supplier Supplier Supplier On- RM Inv Purchase Costs Mtl Mtl RM Purchase Dir Dir Costs High Quality Quality On-Time Time Inv Costs Costs Inaccurate Shipments Production Production Order Perfect Cost Detail Schedule Schedule Plant Utilization WIP + FG Inventory Cycle Order Detail Correct Variance Variance Time
- 15. Balance in the Details SCM Costs Company A Company B Company C Company D
- 16. Excellence is a Balancing Act
- 17. What Does Good Look Like? Level 1 Level 2 Level 3 Level 4 Reacting Anticipating Collaborating Orchestrating Business Process Consciously Excellent Organization Consciously Competent Measurement Consciously Continuous incompetent Improvement Unconsciously Technology incompetent Culture Inside out Outside in
- 18. Example Company A: Reacting Key: Above par “Unconsciously Incompetent” On par Below par Demand Forecast Assess Perfect SCM Order Cost Cash-to-Cash Diagnose Inventory Total AP AR Supplier Supplier Purch Costs Dir Mtl Correct Quality On-Time Costs Production New Order Perfect Cost Plant Product Sched Cycle Order Detail Utilization Time to Variance Time Detail Market
- 19. What Does Good Look Like? Level 1 Level 2 Level 3 Level 4 Reacting Anticipating Collaborating Orchestrating Business Non Standard, Process hottest item Consciously Excellent Localized Organization Consciously W/in Function Competent Measurement Consciously Continuous Believes are incompetent Improvement getting better Technology Little, disparate Internally cost Culture Inside focused out Outside in
- 20. Example Company B: Anticipating Key: Above par “Consciously Incompetent” On par Below par Demand Forecast Assess Perfect SCM SCM Order Cost Cost Cash-to-Cash Inventory Inventory Total Diagnose AP Total AR Supplier Supplier Supplier Supplier On- RM Inv Purchase Costs Mtl Mtl RM Purchase Dir Dir Costs Quality Quality On-Time Time Inv Costs Costs Correct Cost Production Production Plant Utilization WIP + FG Order Perfect Schedule Schedule Cycle Order Detail Detail Inventory Variance Variance Time
- 21. What Does Good Look Like? Level 1 Level 2 Level 3 Level 4 Reacting Anticipating Collaborating Orchestrating Business Standardized Process starting lean Consciously Consolidated Excellent Organization Shared services Consciously Standardized Competent Measurement but inside out Internally Continuous focused Improvement ERP plus stand Unconsciously alone apps Technology incompetent Improve but as a centralized effort Culture Inside out Outside in
- 22. Example Company C: Collaborating Key: Above par “Consciously Competent” On par Below par Demand Forecast Assess Perfect SCM Order Cost Cash-to-Cash Diagnose Inventory Total AP AR Supplier Supplier RM Purch Costs Dir Mtl Costs Quality On-Time Correct Inv Production WIP & FG Order Perfect Cost Plant Inventory Sched Cycle Order Detail Utilization Variance Time Detail
- 23. What Does Good Look Like? Level 1 Level 2 Level 3 Level 4 Reacting Anticipating Collaborating Orchestrating Business Global integrated Process w/suppliers Consciously Center led Excellent Organization Outside in metrics and w/suppliers Measurement Consciously Taking costs out Continuous incompetent Bus – IT Improvement partnership/Suite Unconsciously functionality Technology incompetent Leverage best of Culture best – includes Inside out Outside in suppliers
- 24. Example Company D: Orchestrating Key: “Consciously Excellent” Above par On par Below par Demand Forecast Assess Perfect SCM Order Cost Cash-to-Cash Diagnose Inventory Total AP AR Supplier Supplier Purch Dir Mtl Costs Correct Quality On-Time Costs Production WIP + FG Order Perfect Cost Plant Sched Inventory Cycle Order Detail Utilization Variance Time Detail
- 25. What Does Good Look Like? Level 1 Level 2 Level 3 Level 4 Reacting Anticipating Collaborating Orchestrating Business Procurement portfolio Process Organization CPO w/CFO & Consciously COO Competent Measurement Outside in aligned Consciously with biz Continuous incompetent Profit, joint value Improvement Unconsciously Advance use, Technology incompetent cutting edge to drive business Culture Competitive Inside out Outside in Advantage/Market
- 26. Network Interdependencies Example XYZ XYZ Profit/Lo XYZ XYZ XYZ ss XYZ XYZ Accts Rec Balance Sheet Trade Income Statement XYZ XYZ XYZ XYZ XYZ XYZ XYZ XYZ Promotion XYZ XYZ XYZ Adjustments Inventory Goodwill XYZ XYZ XYZ XYZ XYZ XYZ DEF DEF DEF Forecast Forecast Accuracy Customer Incentive Accuracy Perfect SCM Effectiveness DEF DEF DEF Demand Supply Order Cost Cash-to-Cash Inventory DEF Marketing DEF DEF Perfect AP Total AR Sales Order Supplier Supplier RM Purch Dir Mtl DEF DEF DEF DEF Product Quality On-Time Inv Costs Costs DEF DEF Service DEF DEF ABC Cost Prdctn Sched Plant Util WIP Order WIP + FG + FG Cycle Perfect Detail Inventory Order ABC ABC Variance Inventory Time Detail Time to Time to Market Breakeven % Customer First Pass Yield ABC ABC Needs Met ABC ABC ABC ABC ABC
- 27. Performance Measurement Maturity HIGH Analysis Paralysis Excellence Addict Measurement Aptitude LOW Ingrained Inertia The Right Stuff LOW Results Actionability HIGH Organizational culture is key!
- 28. Measurement Best Practices Develop a metrics strategy
- 29. Making performance management sustainable over time What makes it “sticky”? Leadership Continuous Measurement Improvement Aptitude Culture Power “East-West” Through Process Process Performance (e.g. S&OP) “North- South” Goal Alignment
- 30. The Benefits of Measurement • Determine realistic and desirable performance targets • Use data to analyze: • Tradeoffs and interdependencies • Root cause • Measurement excellence = capability to improve and stay ahead
- 31. How To Demonstrate Success
- 32. What Does Good Look Like? Level 1 Level 2 Level 3 Level 4 Reacting Anticipating Collaborating Orchestrating Business Process Consciously Excellent Organization Consciously Competent Measurement Consciously Continuous incompetent Improvement Unconsciously Technology incompetent Culture Inside out Outside in
- 34. 10 Must Measure Metrics
- 35. Why Transactional Benchmarks?
- 36. Establishing Benchmarks
- 37. Important Requisition Benchmarks Ways to Improve •Allow for mobile approvals •Provide pertinent information in requisition emails •Give real time budget information to approvers
- 38. Important Requisition Benchmarks Ways to Improve •Policies available at time of requisition •Flexible catalogs and e-forms to drive employee request process
- 39. Important Purchase Order Benchmarks Ways to Improve •Identify contributing factors for high touch orders •Streamline processes with advanced approval workflows, contract checks, etc.
- 40. Important Purchase Order Benchmarks Ways to Improve •Utilize automation to continually drive this metric down
- 41. Important Invoice Benchmarks Ways to Improve •Enable invoice submission vis cXML or EDI •Utilize a supplier network to flip PO’s into invoices •Drive adoption with an incentive program
- 42. Important Invoice Benchmarks Ways to Improve •Utilize automation to continually move this metric down
- 43. Important FTE Related Benchmarks Ways to Improve •Understand why employees are not using negotiated pricing •Sole-source or find two or three vendors that can fit your needs •Negotiate with vendors to gain favorable pricing •Put controls in place to route employees to use the new negotiated pricing
- 45. YOUR Mid-Year Check Up CSM / Efficiency Measures YOU Market Trans Req Approval Cycle (Time) Average cycle time from requisition submission to 5.79 - 9.35 approval = days Orders / Invoices Processed per FTE (#) PO: 29,467 Number of Approved POs / Invoices Invoice: = 35,147 Number of FTEs processing POs / Invoices Total Procurement Costs .34 -.38% of SG & A as a % of revenue and spend revenue = .80-.85% of spend Days Payable Outstanding DPO Accounts Payable = increasing Total Revenue/# of days )(90 or 365) on average Touchless Procurement # of manual intervention points in P2P Process Average is 5 = Best is 2
- 46. YOUR Mid-Year Check Up CSM / Effectiveness Measures YOU Market Trans Savings / spend Maturity is Total Savings = issue: 2 – Total Spend 8% Quality: Rejection % Total Requisitions Rejected = Total Requisitions Approved Cost of Processing per Order / Invoice (USD) PO: $217 PO: $8.70 Loaded cost of FTEs processing POs / Invoices = average Invoice: Number of Approved POs / Invoices Invoice: $2.18 Spend Under Management Spend Actively Managed = 48% - 87% Total Spend Customer Satisfaction Ratings Satisfied Customers = 30% - >90% Total customers
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- 53. Make 2010 A Year to Remember!
- 54. THANK YOU!
Notes de l'éditeur
- Rob Bernshteyn, Coupa CEO, will set the stage and introduce the session:At Coupa, we have one mission, one core value that drives us, and that is to help companies achieve SUCCESS through their spend management initiatives. That’s why we are here today, we are midway into 2010 and now is the time to really think about how you are going to demonstrate the results at the end of the year.
- Rob Bernshteyn, Coupa CEO, will set the stage and introduce the session:Will YOUR 2010 be a monumental savings success, will you deliver against goals and objectives to drive bottom line savings? Or will your 2010 be a forgotten failure, a year where spend remained out of control and things were business as usual?
- Rob Bernshteyn, Coupa CEO, will set the stage and introduce the session:We want to make sure that 2010 is the year that procurement – and all of your efforts to spend smarter and save – are remembered!
- Rob Bernshteyn, Coupa CEO, will set the stage and introduce the session:During this session, you will: Discover the 10 metrics that will allow you to demonstrate real results and showcase how procurement is delivering savings.Learn how to establish a baseline performance benchmark and develop a measurement strategy to match your procurement maturity.See how you stack up against the market – compare yourself to real industry benchmark data! Get advice from industry and solution experts on how to measure your performance and demonstrate your savings in a way even the skeptics won't question
- Rob Bernshteyn, Coupa CEO, will set the stage and introduce the session:I’d like to introduce the two experts who will be participating in today’s session. First we are lucky to have Mickey North Rizza, a top analyst at AMR Research and a supply chain expert….NEED MICKEY’S BIO
- Rob Bernshteyn, Coupa CEO, will set the stage and introduce the session:Also with us today is Ravi Thakur, Coupa’s Vice President of Services and an implementation expert. Ravi has spent more than a decade deploying e-procurement and other enterprise applications, often having to deal with challenging, complex integrations with other back office systems such as financial and ERP systems.
- Jason/Rob slide to speak too.
- Mickey and Ravi to pick up presentation here….
- From a sc perspective, the 3 supplier-related metrics that are needed are: supplier on-time, supplier quality, and purchasing operating costs as a % of revenue (all fixed and variable costs associated with the purchasing function). Other supplier-related metrics needed are DPO (days payables outstanding, aka accounts payable), and direct material costs.
- Bullet 1 example: Saving 10% over the course of 3 months sounds good, but what if other organizations saved 30% over that time period, that’s not as good anymore!
- Requisition Approval cycle time (19 hours)Amount of time taken to approve a requisition from the time it is submitted for approval.Important to track the velocity of business…if this time is measured in days and not hours people will not use the system, takes to long to get their job done.Ways to improve: allow for mobile approvals, provide pertinent information requisition emails, give real time budget information to approvers
- Req approval cycle time:Percentage of Requisitions rejected (4.1%)High percentage could indicate either poorly documented/visible policies for your employees or a lot of off contract spend that is reigned in via the approval process.Ways to improve: have policies made available at time of requisitioning as part of the request submission process instead of on email or company intranets, allow the business to change catlogs and eforms to better drive employee request process.
- Mickey to pick up this section
- Mickey and Ravi to tag team this section to provide answers to participant questions…
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