Transcript Document
Intensive Savings Delivery Programmes
1
© supply chainge management ltd. 2008
Intensive Savings Programmes
(as an interim manager)
Petro-chemicals
Pan-European Post Acquisition Purchasing Synergies
NOVA acquired four large chemical plants from Shell - giving £ 500m turnover
Replaced McKinsey’s role in previous acquisitions
Led first pan-European supplier conference & intensive negotiation programme
1 year assignment
Delivered synergy target in 12 weeks.
Exceeded annual savings target too
Substantially exceeded client’s expectations
Awarded 2 “applause!” awards & offered the permanent role
Polymer compounding industry
Client wanted a review of a selection of spend categories
Identified global suppliers using supplier industry research tools incl. India
Launched global RFQs and engaged with suppliers
Re-negotiated categories based upon global quotations
Delivered annual savings target 7% (> £ 400k) in 8 weeks (brand new industry entirely unsupported)
Substantially exceeded client’s expectations
Contract extended
Invited to examine supply chain improvement opportunities.
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© supply chainge management ltd. 2008
Carefully designed & well executed processes...
Project 1a
Synergies (PIES)
Project 1a
nsive European
Purchasin
Purchasing: Inte
g: Inten
Pan-European
Purchasing Synergies Programme
March
April
May
June
July
August
September
October
Project 1a: Raw Materials Synergies - Intensive
Project 1b: Raw Materials Synergies
(ongoing material rationalisation focus)
DJ (F/T) Analyst/Indirect Buyer
(F/T) (Global synergies ??)
PIES Team
DJ (P/T) & SAP
Process
Purchasing Rep. (F/T)
SAP (Purchasing) Implementation
Manual Input
Spend/Volu
me
Spreadshee
t
Leaders
Individual
Kick-off
Communic
ations
Project 1a
Create
“Fax- shot”
Report
Data
“Fax-shot”
(- NA &?)
Eur. Vols by
Item
Preparation
Stored Data
Org. Developments
“Responses
from
Potential
Suppliers
Review
RFQ
Create Suppl
ier
Email Addre European
ss Book
Category
– including by
existing
Eur. & NA
suppliers
Merge
Predefined
Process
Multi-document
Reports:
Priorities for
1.Progress
Material Rationalisation/
Process
2.Savings
Standardisation & Substitution
Manual
Input
Report
Data
Preparation
PIE
S Teaan
Need
m
inspection
activity
Predefined
Process
here
? Merge
Current (2000):
prices
volumes
contract details
DJ
Review
Review
Pan - European Purchasing Operations Management
JU/DP/LH/DJ & Team
• DJ
• Analyst/Indirect Buyer (F/T 6 months)
• Material Technologist (P/T 6 months -> ongoing)
•SAP Purchasing Rep. (F/T)
Note: this programme does not address $ 0.7m freight opportunities.
Quotes
from
Suppliers
Input
Quotation
Data to
Spreadsheet
Quotation
Spreadsheet
Ongoing operational line
management roles
Develop
Negotiation
Strategy
Week
20/3
Week
27/3
Week
3/4
Week
10/4
Week
17/4
Week
24/4
Contract
Update
Contracts
Week
1/5
Week
8/5
Week
15/5
Week
21/5
Consolidate/Validate Data (Analyst)
Identify Supplier Long Lists by Category – Kompass (DJ)
Email RFQs
LaunchRFQs
RFPs
to potential suppliers & analysis of quotes (DJ)
to
Suppliers
DJ 50%
availability
Booked holidays
& Bank Holidays
Preparation of RFQs & nego. dates for current supply base (DJ)
Multi-documen
t
Manual Process
Preparation of Presentations “Big Bang” (DJ)
Supplier Communication Day “Big Bang” & subsequent meetings
Measure
Savings
Select
Suppliers for
Negotiation
Week
13/3
?
Distribute
Local Copies
of Contracts
Shell Acquisition Purchasing
Change Management
Programme
Week
6/3
Pittsburgh Launch (DJ)
Stored Data
DJ (P/T) / TBD
Resource Requirements
Week
28/2
European Launch (DJ)
Create &
Resource Allocation Confirmed (JU)
Email
RFQs
Prepare for Supplier Meeting (Associate)
Merge
Copies of contract
details to sites
Manual Process
t
Leaders
Purchasing: Intensive European Synergies (PIES)
Measure Savings
Review
Produce
RFQ
Email
Address
Book by
Category
“Fax-shot”
to Suppliers
Auto send
“Fax-shot”
Technologis
Analyst
Specs. vs.
volume data
PIES Team
Programme Management
20th March Meeting
(Formal Launch ?)
Obtain
Information
& Input
Kick Off
Communica
tion
(by Phone?)
Merge
Purchasing: Intensive European Synergies (PIES)
Obtain &
harmonise
specs and
volumes
Analyst
Obtain Supplier
Databases
Supplier
Databases
To next page
pean Syne
rgies (PIES
)
Technologist
Advise on
Database
Selection
Current (2000):
prices
projected volumes
contract details
Project 3: Pan European Indirect Spend Analysis
Project 4: Strategic Pan European
Purchasing projects e.g. MRO
Project 5:
Material Speci
fications
(from Techn
ology)
“Identify
Potential
Suppliers”
“Get the
Data
Resource Requirements”
Right
DJ (F/T)+ Analyst (F/T) +Continuously
support from NA PS raw Update ion
Informat
matl. leaders
& Input
Material Technologist (P/T)
Packaging Consultant
Project 2: Pallets & Octoboxes
Systems/ structure review
sive Euro
(from
Spend Data Analysis
ng &/or
European Purchasi
Logistics teams)
European Site Meetings (DJ)
Negotiation Tactics Planning (DJ)
First Round Negotiations (DJ)
?
Second Round Negotiations (DJ)
Measure Savings (Analyst)
Negotiation
Priorities
Negotiations
for each
Material
Negotiation
Strategies
Implement Savings at Sites (Analyst)
Negotiation
Technologist
Process
Manual Input
Report
Data
Preparation
Stored Data
Predefined
Process
Merge
Multi-document
Manual Process
Analyst
Helen wants to visit European Sites
Leaders
Key: Changes from presentation in week 2
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© supply chainge management ltd. 2008
Prioritising Negotiation Programmes
Focus by Supplier
Hi
Hi
Strategic
Bottleneck /
Collaborative
Start
Here
Proportion of
Project Spend
Supply Market
Risk / Challenge
ow
ow
Routine /
Transactional
Leverage /
Opportunist
Start Here
Lo
Lo
Chance of Success
Lo
Hi
Lo
Value / Expenditure
Hi
Kraljic
Output: Added focus on highest priority suppliers
e.g. some suppliers may supply several lower value systems not picked up in key sub-systems
Also need to understand risk (quality, lead time/liquidated damages etc.)
Opportunities for e-auction ?
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© supply chainge management ltd. 2008
Prioritising Negotiation Programmes
Hi
Low Spend
Low Levels of
Competition
Supply Market
Risk / Challenge
High Levels of
Competition
Lo
Bottleneck /
Collaborative
High Spend
Strategic
Risk of Not Achieving Savings
Monopolistic suppliers
Easier for the supplier to say “No”
Risk of Not Achieving Savings
Easier for the supplier to say “No”
PROJECT APPROACH
Prepare a “bespoke” approach that
acknowledges the complications of the
relationship. E.g. Threaten giving
development projects to new emerging
suppliers. Consider working on the lower risk
suppliers in this segment first.
PROJECT APPROACH
Ignore
(Should be few suppliers here (e.g. BA < 10)
ow
Routine /
Transactional
Leverage /
Opportunist
Low Spend
High Spend
Good Chance of Achieving Savings
Good Chance of Achieving Savings
PROJECT APPROACH
Move into here once finished in Leverage
PROJECT APPROACH
Start here and move progressively left
Lo
Value / Expenditure
Impact on end product / service attractiveness
5
Hi
© supply chainge management ltd. 2008
Prioritising Negotiation Programmes (cont)
Focus by Sub-system
Value
Where’s the value in the entire system?
Use the BoM Structure
Focus on the Pareto value
Cascade the target prices through the major sub-systems & components
What are the drivers of these prices
Sanity check
Risk (e.g. delivery and quality)
Where’s the risk in the entire system
Use the logistics plan
Focus on the pareto long lead time sub-systems ?
What are the drivers of these lead times ?
“Real” lead times?
Elapsed time vs. op time ratio
Can we buy ourselves time?
(Same for quality and other risks)
6
© supply chainge management ltd. 2008
e-Sourcing
Facilitates easy like for like comparisons for multiple suppliers & large nos of SKUs
Requires preparation….but really worth it
Conditions suppliers that customer has high expectations
Barriers to adoption no longer significant, even for SMEs (e.g. £ 5k per seat/annum)
Auctions (when used) typically deliver an additional ~10%
33% saving on leaflets
Remarkable result for “Fleet Management”
7
© supply chainge management ltd. 2008
Managing Supplier Conditioning
Co-ordinated multi-media campaign
XX% savings
needed…
Letters from CPO /
CFO / CEO etc.
(PR/Comms support?)
“Introduction
of auctions”
Standard Presentation Packs /
Supplier Conferences
gin
Mana
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13
© supp
ly
c hainge
manage
ment
ltd. 2008
Emails
“Supplier
Rationalisation”
Phone calls
• Purchasing
• Logistics
• Supplier Quality
Meetings
“Lean
Supplier
Interventions”
“Global
Sourcing
Initiative”
8
© supply chainge management ltd. 2008
Cost Modelling
e.g. Raw Material Price Variations eg metals
Quotation
Analysis
Form
Other O/h
+ Profit
Depreciation
Indirect Labour
12
9
12
12
9
LME Copper Prices $/Tonne
Direct Labour
22
12
10,000
9,000
8,000
7,000
22
Direct Materials
45
$/Tonne
6,000
5,000
4,000
3,000
2,000
22.5
1,000
Se
p06
No
v-0
6
Ja
n07
M
ar
-0
7
M
ay
-0
7
Ju
l-0
7
Se
p07
No
v-0
7
Ja
n08
M
ar
-0
8
M
ay
-0
8
Ju
l-0
8
Se
p08
No
v-0
8
Ja
n09
M
ar
-0
9
M
ay
-0
9
Ju
l-0
9
-
Examples:
• Plastic Mouldings
• Man-made Textiles (e.g. Polyester Staple Fibres)
• Metal Pressings
9
© supply chainge management ltd. 2008
Cost Modelling
Volume Increases / Decreases – say 2x volume
Quotation
Analysis
Form
Other O/h
+ Profit
Depreciation
Indirect Labour
12
9
6
12
4.5
6
Volume
Before
Direct Labour
22
Direct Materials
45
After
2x
Example:
Strategic Make vs. Buy: Case Example 1
• Right-sourcing of electrical control systems categories:
• pressings
• turned and prismatic machining
• coil winding
• moulding
• plating
Modelling effects on fixed costs & ROCE
ROCE Target 25% - achieved 41%
Design:
ROCE > 25%
ROCE = 41%
Make
Best in Class
45
Pan-European Solonoid
Manufacturer
Multi-disciplinary Team Strategic
Make vs Buy Concept Design: ~ 3 months
Target:
22
Process technology road maps
Product technology road maps
Identify core / non core processes
Model allocation of remaining fixed
costs
TUPE employees and transfer capital
equipment
Consolidate plants
Dispose of assets (land, buildings etc)
Outsourced
Competitiveness
of In-House Process
Technologies
Outsource
Turning
Milling
Grinding
Presswork
Retained
Coining (high tolerance presswork)
Copper Coil Winding
Assembly
Worst in Class
Low
Importance to
Business’ Competitive Advantage
149
10
High
© supp ly c hainge management ltd. 2008
© supply chainge management ltd. 2008
What Information is Available for Cost Modelling?
E.g. If volume effects are key opportunity:
What’s known about the split between
direct and indirect costs?
What’s known about volume changes?
Our volume changes by line
Total volume changes by line
Possible sources of information:
QUAFs
Database Hosts (e.g. volume increases)
Published accounts
Category Manager’s knowledge
Questionnaires (RFIs / eRFIs)
Org charts
SQA Audits
Other touch points:
Supplier Management Team
Logistics
Factory gate monitoring
Lean re-engineering diagnostics
11
© supply chainge management ltd. 2008
Database Hosts
Web based pay as you go service
No training required
Largest source for immediate intelligence gathering
40,000 sources
Journals and Periodicals
20,000+ licensed news sources
13 languages
163 countries
2000 global newspapers
Newswires, Associated Press, PR Newswire, AAP Newsfeed,
Datamonitor Newswire, US News, PA Newswires &
FinancialWire
Hundreds of UK regional newspapers
Information on > 46,000,000 companies
Creditreform Companies, Directory of Corporate Affiliations
Executive Directories, Dun and Bradstreet, Hoover's Company
Profiles, Investext, Bundesanzeiger, Mergent, Hoppenstedt and
Worldscope International Company Profiles, ICC Directory of UK
Companies, ICC Financial Analysis Reports and ICC Full-Text
Quoted Company Annual Reports.
12
© supply chainge management ltd. 2008
McKinsey Negotiation Process
Team based negotiation
Synergistic: “X heads are better than one”
Tag-team approach to questions
Variety of styles / role playing
Rules of engagement - maverick s can derail progress
Value of consensus in identifying & validating SWOTs
Rigorous planning
Post N
egotia
tion Ev
alua
SU
PPLIER:
______
______
y learni
ngs / tak
eawa
ee ke
1.
2.
3.
Who we
re tod
ys from
ay’s pa
Name
this ne
gotiatio
n?
rticipa
nts
Position
Role Ex
Key de
hibited
cis
in Nego
negotia ion make
tiation
rs not
tions?
includ
ed tod
Name
ay tha
t we ne
ed to
ensure
are inc
Position
luded
in future
What fac
ts or inf
ormati
on did
1.
we lea
rn tod
2.
ay?
t).
Pos
PLIE
SUP
on
s (c3.
tion 5.4.
lua
a
6.
v
E
__
R: __
____
____
____
____
cif
spe
7.
8.__
____
ext
ic n
step
eed
en
sw
e
re th
at a
p
Ste
Next
to ta
b
ke
Wh
ay’s
d
n to
do
Base iew?
rv
inte 1.
2.
Formal debriefs to close the loop
Back to planning the next negotiation
tion
______
__
e the thr
n
iatio
got
t Ne
Objectives
SWOTs
Role playing
______
What ar
disc
,
ion
uss
go
t ne
wha
?
tion
hip
otia
ners
neg
Ow
ext
en
ber
em
re th
mM
a
Te
efo
on
tiati
tac
tics
u
yo198
do
re
nd
2
the
7
alist
in Re
At ta Target
t
wha
ng,
eeti r?
rst m pplie
su
ur fi
n yo om the
o
d
fr
Base ipate
c
anti
resp
onse
do
you
No
ic
gs
Savin
y
Likel
5
3
Enth
sti
usia
c
1
ne
ld
wou n?
How otiatio
neg
nle, No
Hosti erat ive
coop
’s
day
of to
to
the
al Exp
ssifyec
cla
tation
you
s (Stre
199
Supplie
r-Spe
cific St
rength
ngths
199
& Wea
s & Wea
knesse
ply
inge
manag
ement
ltd.
8
200
cha
knesse
s)
Weakn
ess
Streng
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•Flexib
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ility
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require to customer
ments
produc
t
•Total
cost of
ownersh
menta
lity
ip redu
ction
•Other
•Overa
ll
© suppl
y chain
ge mana
gement
ltd. 2008
et ch
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ReacTarget
4
1
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me
com
5
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© supp
ly
13
chainge
manageme
nt ltd.
2008
© supply chainge management ltd. 2008
Contract Models
Structured process to develop bespoke contracts from standard
models…
Contract Management
Procedure, Guidelines
& Standard Forms
(available on intranet)
Generic Contract Frameworks
• Direct Goods
Purchasing to become a key
interface between budget
holders, to facilitate the
evaluation of risk and specify
requirements including
target service levels and
Legal (Sheila)
(e.g. Raw Materials & Packaging)
• Indirect Goods
• Services
(e.g. Development Services)
Have contract models been
established?
Have they been set up as “non
negotiable” ?
Risks ?
(Legal & Purchasing)
• Capital Equipment
• etc.
(available on intranet) (Legal)
Risk Evaluation
Bespoked Schedule/s
• Risk
• Scale of Likely Impact
• Probability of Occurrence
• Prevention
• Mitigating Action
• etc
• Commercial Specification
• Service Level Agreement
• Prices & Incentivisation
• etc.
(Purchasing & Internal Customer)
Bespoke Contract
To be used for invitation to
tender (ITT) & contract
negotiation.
(Purchasing & Legal)
Guidelines for Drafting
Comprehensive
Purchasing Specifications
--including Service Level
-Agreements (SLAs)
-
14
Examples of
good practise
become future
standards
On-line Contract Repository
Signed contracts to scanned & be
held in .pdf form on a central
Server i.e. accessible to Legal,
Purchasing, etc. with change
control procedure.
-(available on intranet)
(Purchasing)
© supply chainge management ltd. 2008