Transcript Slide 1

Best Practices in Services
Procurement for Utilities
Gregory M. Thornbury - Lead Manager, SAP Program
Pacific Gas and Electric Company
Shaz Khan - Managing Director, Supply Chain
MyITGroup, LLC
© 2008 Eventure Events. All rights reserved.
Objectives
• PG&E Corporate Overview and Transformation
• SAP Overview
• Understand services procurement scope at
PG&E
• Key successes and challenges for sourcing
complex service requisitions
• Lessons learned
• Going forward
Pacific Gas and Electric Company
Corporate Profile
• One of the largest Gas & Electric Utilities in the US; Over 100 years old
• Founded in 1905 in San Francisco
• Environmental Leader – www.letsgreenthiscity.com ; www.wecandothis.com
• Serving 1 in 20 Americans – 15 million people including:
21,000 schools, 3,300 hospitals, 21,000 High-Tech Corp.
• 123,054 circuit miles of electric distribution lines and 18,610 circuit miles of
interconnected transmission lines.
• 40,123 miles of natural gas distribution pipelines and 6,136 miles of
transportation pipelines.
• 20,000 employees with Revenues of $13.2 billion in 2007
• Assets of $34 billion - 1 Nuclear, 2 Fossil,
110 Hydro Plants;
1 Fossil Plant under construction
• 70,000 square mile service area in California
PG&E Vision
Market Dynamics
• Utility Industry Changes at Large
• Significant Pressure – Reliability, Cost,
Services Delivery
IT as a Strategic Advantage
• Consolidated Technology
• Standardized Processes
• Integrated Solutions
• Accelerated Delivery
IT Governance
• Budget Planning & Spending
• Organization
• Decision Making
Scope Of Business Transformation
• Energy Delivery
•Work Order Management
•Scheduling
•Job Estimation
• Supply Chain
•Strategic Sourcing
•
Operational
Excellence
•
•
Understand the
Customer
• Back office – Customer
•Integration
• Change Management
•Learning
•Communications
Human Resources
• Personnel/Org
• Payroll/Time
• Benefits
Nuclear
Business Intelligence
Technology/
Innovation
•
•
•
•
Solution Delivery Center
SAP Operations
Service Oriented Architecture
Compatible Units
SAP Journey to Date
• SAP since 1996
• Currently on SAP ERP 4.72 (upgrade to ECC 6.0 in 2009)
• SRM version 4.0 (upgrade to version 7.0 in 2009)
• 8,500 users for all back office and field operations
– Supply Chain Management -- Materials Management and Supplier
Relationship Management
– Equipment/Work Order Management in Plant Maintenance
– Finance/Controlling
– HR Org/Benefits/Personnel/Payroll
– Employee Self Service for 20,000 employees and 18,000 retirees
– Manager Self Service
– Business Warehouse
• Go live of 50,000 person day project in October 2007
Services Procurement Overview at PG&E
Transformation Objective -- Drive incremental supplier
performance management and process efficiency
benefits through technology
• Key purpose of service based procurement is to support
procurement of services originating from unplanned and
planned based service requests
• Services represents 75% of total purchasing across all
business units
• The SAP Supplier Relationship Management (SRM) tool
is the key sourcing and procurement platform for service
requests
• With the October 2007 implementation of SAP/SRM,
PG&E enabled a procurement technology that for the
very first time automated company contracting policies
Types of Services
Category
Examples
Method
Recurring Services
Sand and gravel, tree
trimming, wood removal
SRM Purchase Order
Project Services
Patch-paving, station
and sub-station
construction
Locksmith, catering
SRM Purchase Order
Return and repair
services
Repair work
SRM Purchase Order,
Invoice only
Professional
Staff Augmentation,
Consulting Services,
Legal
Invoice only
Small-Dollar Services
P-Card, Invoice only,
SRM Purchase Order
SRM as Complementary Solution for SAP
MM/PM
SRM leverages SAP MM functionality with an ‘easy-to-use’ application, building
upon basic processes to provide solutions to business challenges.
R/3 MM
 Requires installation of
windows-based application
SAP GUI on each user desktop
 More complex screen which is
often suited for power users
 Extensive R/3 workflow
however, it can be
cumbersome and complex
 More traditional communication
channels Autofax/EDI
 Basic purchasing reporting and
supplier analysis
 Significant functionality and
capabilities for complex
processes and financial
requirements
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SAP SRM
Web based tool requiring no
desktop management
‘Easy to Use’ features and
functions
eCatalog based requisitions with
parametric search to ‘ease’ buying
and promote compliance
User friendly graphical interface for
workflow
Advanced electronic connectivity
with suppliers including punch out
to suppliers web sites
Electronic bidding capability to
assist in sourcing initivatives
Advanced reporting, analytics, and
supplier evaluation
Key Successes in Service Procurement
• Service-based rate cards and service catalogs
• Integrating PM/Compatible Unit work orders to
identify and source service requests
• Increasing contract compliance for service orders
• Develop consistent and automated approval
procedure for service orders
Service Catalogs in SRM
Solution
• Load service-based rate cards for certain recurring
services (which require a Contract Work Authorization –
CWA):
– Tree Brush Removal Services
– Wood Removal Services
• Catalog items have links to pricing schedule and
additional document requirements such as a CWA
template
• Shoppers in the SRM system can browse catalog and
add requested services to shopping cart
Benefits
• Uniform description, material group, unit of measure
assignment for service requests stored in catalogs
• Streamlines order processing cycle
• Increases contract compliance by assigning fixed vendors
to service catalog requests
SRM Enabled Requisitioning Process
Supplier
Purchase Order
Supplier
Supplier Catalog
Punch out
to Supplier
Catalogs
Catalog
orders
SRM
Buyer Portal
Catalog Materials
Services
Coded Materials
Single
Buyer
Portal
Automated
workflow
rules
Shopping Cart
Buyer
intervention as
required
Shopping Cart
Approval
Non-coded
materials
and Service
SAP MM
Reservations for
coded mat’ls
Sourcing Cockpit
Materials Issue
Material Reservation
Work Order
Purchase Requisition
Compatible Unit Services Integration with
SRM Sourcing
Solution
• Partnership with SAP to co-develop Compatible Unit (CU)
functionality. CU orders are schedulable and have
financial significance when associated to a PM/PS order
• Combined standardized and repetitive units of work
– Patch-paving
– New Service Installation
• CU Order with services generates a SAP Purchase
Requisition which is lifted to the SRM Sourcing Cockpit
for strategic sourcing activities
Benefits
• Higher cost accuracy and consistency
• Planned service work is integrated into sourcing cycle
• Buyers have information on service request including
requestor name and contact information
SAP Compatible Unit Example
Compatible Unit ID: PG-POLE1 (CU selected four times)
– PGE 35 Foot Yellow Pine Pole, Class 3
Insulators (4)
Material # 3455
Labor - 2 Hrs.
Cross Arms (2)
Material # 1234
Labor - 4 Hrs.
Material & Labor Totals
Special Equipment
Bucket Truck
Pole (1)
Material # 23444
Labor – 8 Hrs.
4 Insulators $ 50
2 Cross Arms $50
1 Pole $350
Labor $2800
Cost of CU $ 3250
Total cost of job $13,000
Contract Management in SRM for
Services
Solution
• Purchasing contracts are created in SRM to establish a
valid source of supply for service requests
• Value contracts created based on service category,
performance zones, validity period, and target value
• Contract (transactional documents) integrated with
approval workflow process to ensure signature linkage
before release
Benefits
• Increasing compliance of services spend
• Increasing contract compliance by forcing Buyers to only
use valid contracts
• Integrated approval process for signature release
SRM Enabled Sourcing Process
Award Notification
Sourcing Cockpit
Bid Award
Approval
Supplier
PO / CWA
SRM
Supplier
Supplier
Bid
Shopping Cart
Contract Creation
Contract
Approval
SAP MM
Non-coded
materials
and Service
Work Order
Purchase Requisition
Outline
Agreements
Automated approval workflow for service
requests
Solution
• Automated approval workflow for shopping cart service
requests
• Capability for line item rejection for purchase request
• Approval notifications for purchase requests are sent to
approver’s email inbox
Benefits
• Consistent central process for delegation of authority and
visibility of approval hierarchies
• Additional approvers and reviewers can be added to
workflow on an as-needed basis
Catalog Status as of October 2008
Currently Loaded: 280 catalogs
• Punch-out material catalogs (16)
• Internal material catalogs (5)
• Traditional service catalogs (18)
• CWA service catalogs (241)
Catalog Breakdown By Portfolio
• Corporate Services Catalogs (115)
• Energy Delivery Material Catalogs (5)
• Energy Delivery Services Catalogs (74)
• Environmental Health & Safety
Catalogs (64)
• Generation Catalogs (17)
• IT/Telecommunication Catalogs (5)
• Transportation Catalogs (0)
Future Catalogs: 17 catalogs
• Punch-out material catalogs for promotional and office supplies (2)
• Information Technology material catalogs (4)
• CWA service catalogs (11)
–
(Inspection Services; Misc. Energy Delivery Services; Corporate Services;
Ergonomic Solutions)
SRM Usage Since Inception (Oct. 2007)
SRM Purchase Order Totals:
Total SRM PO's
Count Of PO's
Total Amount
100,373 2,065,734,188.15
SRM Catalog Based Purchase Order Totals:
Total SRM Catalog PO's
Count Of PO's
Total Amount
74,916
44,860,872.89
Shopping Cart Counts:
Month
12 Month Total
Shopping Cart
Count
125,879
Key Challenges in Service Procurement
• Bringing spend under management for other types of
services such as:
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–
–
–
Advertising/Marketing
Real estate/Leases
Legal
Telecom
• How to measure quality and delivery of services
performed before payment?
• Services specifications and performance dates are
constantly changing. Need effective methods to manage
purchase order change process.
• Variable service rates and milestones (overtime, a la
carte fees, etc.) are difficult to capture in a purchase order
Lessons Learned
• Invest heavily in change management
• Establish clear purchasing channels for service categories for
your employees
• Many ways to peel the ‘services procurement’ onion (not one
magic solution)
• Engage with suppliers early in the design process for service
procurement tasks
• Focus on the complete procurement lifecycle for services
procurement especially invoice processing and payment
• Manage change with business and IT
• Simplify and rationalize tools, applications, platforms, and
processes
• Super-users are critical – Make sure each business area is
represented with resident experts preferable from the line of
business
• Stretch your resources
SRM – Services Roadmap
2009 +
Procurement and Sourcing Roadmap
Today
 Catalog procurement for
simple services
 Contract management
 Automated approval
worklfow for services
procurement
 E-invoicing capabilities
with certain suppliers
through third-party tool
Tomorrow
 Complex service
specifications and
sourcing
 RFx bidding
participation for
strategic sourcing
initiatives
 Supplier service
confirmations for time
and labor performed
 Automated approval for
unplanned service
requests
Going Forward
• Upgrade to latest SAP and SRM releases (2009) to take
advantage of new service functionalities including service
hierarchy and model service specification support in SRM
• Improve capabilities for handling unplanned services
• Launch supplier portal to enable increased supplier
collaboration including:
– Supplier self-registration in the supplier portal
– Service confirmations initiated by suppliers
– RFx bidding process
• Introduce Blanket Purchase Orders for certain types of
services
• Increase contract compliance and improved quality
review for temp labor and consulting services
Questions
Gregory M. Thornbury
Pacific Gas and Electric Company
Email: [email protected]
Shaz Khan
MyITGroup, LLC
Email: [email protected]
© 2008 Eventure Events. All rights reserved.