4. 4
Highlights
MRO - Heavy Machinery Industry
(Implementation Highlights)
Strategic Sourcing
eProcurement
5. MRO - Heavy Machinery Industry
(Implementation Highlights)
6. 6
Client’s - Terms & Definition
Purchasing
Transactional function of buying products / services or the placement and
processing of a purchase order
Procurement
Sourcing products and services required to manufacture a product (direct) or to
operate the organisation (indirect) from point of supply to the point of demand
Strategic Sourcing
Broader and more comprehensive than the procurement process where it
focuses more on supply chain impacts of procurement and purchasing decisions,
and works cross-functionally within the business firm to help achieve the
organisation’s overall business goals
eProcurement
Employees’ finds the products they need to buy, requisition generation, approval
if needed, creating the purchase order, and delivering that order electronically to
the supplier for confirmation and fulfilment
7. 7
Client’s - Vision & Mission
E-Procurement
Access online catalog
via desktop browser
Access online catalog
via desktop browser
Internet Access
Catalog:
• Items from contracted
vendor
• Product configuration tool
• Color photographs,
animation & videos of
prod.application,
• Product detailed
specifications
• Interview with other users
Quick
search
Quick
searchInventory
Check
Option
Inventory
Check
Option
Price
Comparison
Price
Comparison
Test
Drive
Test
Drive
Online
Support
Online
Support Order
Completion
Order
Completion
“Buyer” “Supplier”
Electronic
PO
Electronic
PO
Workflow
Approval
Workflow
Approval
Order Management
System
Order Management
System
Ack. &
Ship notice/
changes
Ack. &
Ship notice/
changes
Payment
Process
Payment
Process
Self-Service Purchasing
Open Standards &
IP Technologies
Process Workflow
Corporate Contracts
Business Rules
8. 8
Brainstorming / Focus Group
Level of AutomationLevel of Automation
End to end processEnd to end process
Requisition to orderRequisition to order
Content (catalogue)Content (catalogue)
Cat managed externallyCat managed externally
Cat managed internallyCat managed internally
Supplier managedSupplier managed
Distribution of FunctionalityDistribution of Functionality
ERP basedERP based
Free standing integrated best ofFree standing integrated best of
breedbreed
Distributed functionalityDistributed functionality
OrganisationalOrganisational
Change ManagementChange Management
Regional / DivisionalRegional / Divisional
Legal & Fiscal needsLegal & Fiscal needs
Spend SegmentationSpend Segmentation
DeploymentDeployment
Desktop / MobileDesktop / Mobile
Limited accessLimited access
Purchasing dept onlyPurchasing dept only
Maximise benefits/Maximise benefits/
Minimise risksMinimise risks
Lean, 6 SigmaLean, 6 Sigma
Process MappingProcess Mapping
Deployment StrategiesDeployment Strategies
Phases, stage gatesPhases, stage gates
QA review / sign offQA review / sign off
10. 10
What was involved & benefits
2.
Employee-
Facing
Catalog
Finance
Purchasing
Employees
1.
Workflow
for originating
and approving
requisitions
3.
Purchasing
Data and
Analytics
Supplier
Site
Supplier
Catalog
Direct
connect
Catalog
tools
4.
Procurement
Vendor’s
Supplier
Network
4.
Procurement
Vendor’s
Supplier
Network
Benefits
• Reduced
purchase
process costs
• Improved
compliance
with sourcing
policies
• Provided
analytical
reports for
informed
decision
making
11. 11
Business Case Approved
Reduced Product/Process
Costs
Improved Compliance
Reduced Inventory Costs
Reduced Maverick
Purchasing
Value Drivers
Improved Process Efficiency
Pain Points
• Fragmented data
• Unreliable/inaccurate data
• Fragmented data
• Unreliable/inaccurate data
• Rampant off-contract
spend (approximately
27% of indirect spend)
• Rampant off-contract
spend (approximately
27% of indirect spend)
• Long lead times result in
purchase of large safety
stocks
• Long lead times result in
purchase of large safety
stocks
• Long lead times due to
high manual processing,
1/3 time spent reviewing
manual requisitions
• Long lead times due to
high manual processing,
1/3 time spent reviewing
manual requisitions
• High transaction costs
• Long supplier negotiation
• Non contract compliance
drives up price
• High transaction costs
• Long supplier negotiation
• Non contract compliance
drives up price
12. 12
Scope – Sourcing & eProcurement
Determined the types of purchase and spend categories
percentage of addressable spend by category
level of compliance by reference to the extent to which corporate contracts are in
place,
the level of maverick spend and the number of suppliers by spend categories
Stakeholder buy-in with regard to phasing the strategic procurement
applying benchmark savings percentages to addressable spend by category
Determined Potential benefits by mapping the procure-to-pay process and
defined
how the process is undertaken, including technology
timings / outcomes for each process step
the resources involved in each process step and their cost
calculation method - unit costs for order and invoice processing
As-Is process and To-Be in line with best practices
potential process savings in the selected services and extrapolated the potential
savings across all areas
13. 13
Scope (Contd.)
Determined the procurement strategy and policies for the program
direction & implementation
Used Value Stream Mapping to define As-Is ~ To-Be process along
with metrics
Determined the necessary levels of investment & ROI
Performed procurement process audit & supplier evaluation
Evaluated the effectiveness of the strategic sourcing process
including user needs and supplier / vendor relationship
Developed certification process (ISO, TQM) & training requirements
14. 14
Scope (Contd.)
Evaluated pricing / cost structures for total cost of ownership (TCO)
(direct, indirect, landed, technology, logistics, material, disposal,
transaction, relationship cost)
Analysed corporate contracts (including outsourced service delivery)
- the number of suppliers : value bands of invoices
Change management strategy and communication management
plan
Defined Standard formats and the trade off for Content Management
Determined the system integration points (push and pull) between
numerous vendors and deciding on which suppliers to use
15. 15
Stakeholder Management Strategy
Reaching
critical mass
in contract
coverage
Risk
Strateg
y
Risk
Strateg
y
Change
Management
Approach
Supplier
Adoptio
n
Legal & Fiscal
-
Country
BU / Site
constraints
Technical
Integratio
n
Providing Change
Management guidance, with
a specific focus on the areas
relating to e-procurement
implementation
Case Studies - extracting
lessons learnt from a range
of industries (related and
unrelated) who had
undertaken different
approaches to Change
Management
16. 16
Success Factors
Strategic
Freed up front line resources to focus on value-added activities
Stakeholder briefed on policies, process and procedural changes
Senior management buy-in to improve strategic procurement policies
Process
Cross functional teams involvement
Well defined project and change management process
Staff resources trained on capabilities and competencies
Standardisation (processes, documents, specifications, product
catalogues) and streamlined back end processing
Finance
Effective and realistic benefits realisation
17. 17
Transition (As-Is ~ To-Be) = 7.2 months
Integration
Procurement
viewed as key
contributor to
business
strategy
Value
Optomisation
Procurement
strategy tied to
business
strategy
Value Innovation
Sustainability
STAGE 1
STAGE 2
INFORMAL
-Focus on
purchase
orders
-Detailed
reconciliation
-‘Back Office’
function
CONTROL
Procurement
has some
accountability
for overall
cost reduction
STAGE 3
STAGE 4
STAGE 5
As-Is
To-Be
Took 7.2 months (11 days ahead
of schedule & $12.8k under
budget)
18. 18
Results Achieved
Business Metrics
Governance & Internal Controls
Client Satisfaction
P.O. Processing Cycle Time
e-Transaction: Invoice
Contract: Cycle Time
Length
Ledger Miscodes
Suppliers Connected via Web
Savings via Web
Stock Keeping Unit
Before
Implementation
40-50%
40%
23 Days
??
6- 28 months
57 pages
78%
0
0
283,000
After
Implementation
90%
93%
2.1 hour
98%
45 days
6 pages
9%
17,000
$112M
134,000
20. 20
Identify - Sourcing Solution
Solutions
Overview
Diagnostic
tool
List of key
vendors
Requirements
template and
guidance
Discussion
paper
Experiences of
e-procurement
Output - Deliverables
Input - Questions Addressed
Stakeholder buy in - Increase awareness & understanding
What
solution
types are
available ?
What &
why on
solution
fit?
What lessons
from dis /
similar firm?
What & why
to capture?
Who are
leaders /
visionaries?
Specific
Solution
highlights,
why?
22. 22
Drivers - Strategic Sourcing
Increase customer focus
Focus on supplier economics
Drive continuous improvement
Assess the total cost of ownership
Reduce costs and delivery cycle times
Increase number of global competitors
Improve quality/long-term financial performance
Deliver more innovative products more
frequently & cheaply than competitors
23. 23
Lean - Supplier Rationalisation
Applying Lean concepts for supply base reduction and foster alliance
Fewer supplier management problems
Closer and more frequent interaction between buyer and supplier
Greater levels of quality and delivery reliability.
Supplier selection & termination conducted with cross functional teams included were
Supplier certification programs are used
Site audits conducted, to identify a supplier’s process capabilities
Purchase cost becomes relatively less important, when evaluating suppliers for
strategic partnering
Undertake Value Engineering activities for cost reduction, improve quality, and
reduce new product development time.
Outsourcing opportunities / risks reviewed (3PL & 4PL) for Vendor Managed
Inventory (VMI)
26. 26
eProcurement Challenges
Gaining initial
interest
Gaining initial
interest
Making the
case
Making the
case
Commit
resources
Commit
resources
Deliver the
benefits
Deliver the
benefits
Leadership and
ownership of
the project
Leadership and
ownership of
the project
Management
and user buy-in
Selling the
benefits
Management
and user buy-in
Selling the
benefits
Management
and user buy-in
Selling the
benefits
Management
and user buy-in
Selling the
benefits
Organisation design
Compliance with
corporate contracts
and processes
Organisation design
Compliance with
corporate contracts
and processes
28. 28
Waste Eliminated
Excessive quality checking
Multiple reports highlighting the same
things
Delivering above the agreed service
levels
Excessive paperwork sitting within
departments and on people’s desks
Rework due to incorrect information
provided
Excessive validation of reporting data
Reformatting automatically generated
reports
Excessive downloading and uploading of
data into the ERP system
Multiple printing and binding of reports
Time in process waiting for action
Waiting
Over-servicing
Accumulation
Errors Over-processing
Motion
Movement
Waste
30. 30
Take Away
Define metrics to measure and monitor Progress
Ensure on-going supplier certification and evaluation
Benchmark & using proven implementation
methodologies for sourcing & eProcurement
Re-engineer process and remove waste (utilise Lean / 6
Sigma concepts)
Develop selection criteria to appoint strategic suppliers
(Leichardt scale)
31. 31
Take Away (Contd.)
Automate areas to eliminate re-entry / re-work / duplication
Review inventory policies for cycle-times & inventory levels reduction
Manage supplier relationships to support priority or time-critical purchases
Undertake comprehensive analysis and research, to understand
procurement price, costing and the total cost of ownership (TCO)
Consolidated details of actual spend with each supplier and product
category
Select a Solution Vendor based on - organisational / industry fit, expertise,
product strategy, history of success, interview consultants for their
competencies / capabilities