Bill Stankeiwicz Copy Scope 2010 Bristlecone Co. Strategy
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Beyond the Hype: Building a Sustainable Supplier Risk Strategy April 12, 2010 Michael Hartman Director, Field Marketing
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Scope conference 2010 in Florida, Bill Stankiewicz attended.www.shipperswarehouse.com
Transcript of Bill Stankeiwicz Copy Scope 2010 Bristlecone Co. Strategy
Beyond the Hype:Building a Sustainable Supplier Risk Strategy
April 12, 2010
Michael Hartman
Director, Field Marketing
Agenda
Industry Update
A Solution for Today
Customer Benefits
Time to Value
© SAP 2010 / Page 2
Industry Update
Industry Update
A Solution for Today
Customer Benefits
Time to Value
© SAP 2010 / Page 3
Decreasing External Spend Contributes Significantly to Change in Net Income
9% Savings
Standardized policies
Reduction of overnight usage
Domestic vendor consolidation
Freight
How?
12% Savings
Spend consolidation
Renegotiated rates
Cogeneration
Utilities
23% Savings
Vendor consolidation
Signing bonus
Policy changes
Telecom
Income StatementCurrent
($ Millions)
Decreasing
External
Spend by 5%
($ Millions)
Increasing
Revenues
by 5%
($ Millions)
Revenues $1,000 $1,000 $1,050
Cost Margin $700 $677.50 $735
Selling General
and Administrative
$200 $178 $210
Operating Income $100 $145 $105
Taxes at 38% $38 $55 $40
Net Income $62 $90 $65
Change in Net Income $28 $3
Change in Net Income % 45% 5%
Vanessa C. Smith, Shruti Goel and Tushar Gulhane
“Enabling Profitable Growth through Procurement:
Transforming the Sourcing and Procurement
Organization” (ASUG/SAP Benchmarking and Best
Practices Program, 2007).
Suppliers Facing Business Challenges
So Mr. CEO, what exactly do you mean by price?
2003 2004 2005 2006 2007 2008 2009
$144
$125
$100
$70
$55
$25
Crude Oil
Sunflower Oil: No longer a stable staple
© SAP 2009 / Page 8
CPO’s Top Priorities Impact Financial Bottom-line
Source: SAP CPO Roundtable
Methods Used To Mitigate Risk & Most Successful Methods
Kraftliner: An example of complex global trade flows
710EY01
1000 tons
1700
60
440
1610
120
470750
360 117050
140
90
420
250
50
120
220
190
170
310
280 80
40
40
60
110
20
Total 9 million tons
20
60
20
“$10 MM earned through Russian roulette does not have the
same value as $10 MM earned through the practice of
dentistry. To an accountant though, they would be identical.”
- Nassim Nicholas Taleb Fooled by Randomness
Procurement Objectives
Centralized
procurement
Busin
ess b
enefits
Increasing corporate leadership
1 2
3
4
5
Decentralized
Procurement
Centrally co-
ordinated
procurement
Procurement
buy-sell
company
Supply chain
company
• Little overall
control
• Poor integration
with corporate
objectives
• Limited sharing of
information
• Procurement now
part of full supply
chain company
structure
• Likely with tax
advantages
Full
Procurement
Accountability
Increasing
Strategic
Control
• Procurement
takes full title of
goods
• Performance
managed centrally
• Full visibility of key
numbers
• Center asserts
more control
• Increasingly
sophisticated info
mgt
• Key deals
negotiated
centrally
• Information
sharing
• Central strategy
• Execution
decentralised
• High risk of rogue
buying
Where do you stand in the Procurement Journey?
Lower Responsiveness Acceptable
High Responsiveness Required
Sm
all
Cost A
dvanta
ge t
o L
ow
Cost
Countr
ies
Larg
e C
ost A
dvanta
ge to
Low
Cost
Countrie
s
Sourcing Frontiers A Quick Look
Busin
ess b
enefits
Increasing corporate leadership
1Siloed Risk
Management
• Little overall
control
• Poor integration
with corporate
objectives
• Limited sharing of
information
5Integrated Risk
company
• Risk now part of
full supply chain
company structure
• Proactive
determination of
potential future
risks
Full Risk
Accountability
Increasing
Strategic
Control
4Enterprise
Risk
Management
• Risks considered
across entire
organization
• Performance
managed centrally
• Full visibility of key
numbers
Centralized
Risk
3
• Center asserts
more control
• Increasingly
sophisticated info
mgt
• Key risks
managed centrally
2Centrally co-
ordinated Risk
• Information
sharing
• Central strategy
• Execution
fragmented
• High risk
exposure across
issues
Where do you stand in the Supply Risk Management Journey?
Supplier Risk Scorecard – Quantitative and Qualitative Weighting and Indexing
Overall
Performance
(H, M, L)
Financial Risk
(H,M, L)
Legal Risk
(H, M, L)
Operational Risk
(H, M,L)
• Financial
Health
• Bankruptcy
Index
• Acquisition
Risk
• Credit Risk
• No. of Suits
• No. of
Judgments
• No. of Liens
• On time
delivery
• Fill Rate
• Lead time
• Defects
• Returns
• Compliance
Replacement
Risks
(H, M,L)
Other Risks
(H, M,L)
• Geo-Political
Risks
• Supplier Eco-
system Risks
• Management
Policy Risks
• On-boarding
cost
• Qualification
lead time
• Compliance
• Operational
performance
15% 5%20%20%40%
Supplier and Risk Management Requires Analytics
Source: Thomas Davenport, “Competing on Analytics”
© SAP AG 2010 / 17
Cutting Costs: Chopping a Tree or Pruning the Right Branch?
Maintaining Perspective
A Solution for Today
Industry Update
A Solution for Today
Customer Benefits
Time to Value
© SAP 2010 / Page 19
© SAP AG 2010 / 20
Procurement Organizations Measured on Savings Delivery & Spend Under Management
If I can take the data from my spend analysis tool and understand where
it comes from and tie it to performance, then I can easily address the
opportunities to drive savings and reduce spend.”
CPO,
Large North American Insurance Company
“
This requires:
Enterprise-wide visibility and
context to spend and buying
patterns
Complete, accurate, trustworthy
data
Powerful information at the hands
of the business user
To meet strategic business
goals, procurement needs
to …
Quickly identify savings
opportunities
Avoid or mitigate supplier
risk
Ensure contract and
regulatory compliance
SAP BusinessObjects Spend Performance Management Why SAP?
SAP provides a platform for a mid/long-term strategy
Enterprise process integration with SAP E-Sourcing
Cornerstone solution for our comprehensive Procurement Performance Management vision
SAP provides the lowest risk & TCO
30+ years in spend data cleansing/classification
Leverages investments made with SAP
SAP can address immediate needs of business
Unique approach for spend data classification
Proven BI platform for actionable analytics
SAP BusinessObjects Spend Performance Management
Comprehensive Roadmap for Procurement Performance Mgmt
Today
SAP Spend Performance Mgmt
Enterprise data extraction
Data standardization & enrichment
Comprehensive SAP BW data model
Pre-delivered analytics & reporting
Flexible deployment options
Delivered integration with E-Sourcing
Tomorrow
Risk
Management
Spend
Analysis
Global
Trade
Services
E-Sourcing
Harmonized
User
Experience
Supply Chain
Performance
Mgmt
Procurement Performance Management
Comprehensive procurement performance
management platform
Integration with Risk Management
Integration with Global Trade Services
Integration with Supply Chain Performance
Management
SAP BusinessObjects universe layer
Harmonized UI across SAP EPM products
© SAP AG 2010 / 23
Empower Procurement Business Users with Relevant Insights To Support Spend Initiatives
Over 130 packaged
analytics
Four role-based
dashboards
Create new reports and
dashboards (self-service)
Create custom measures
Comparison to
Plan or Budget
Contract
Performance
Price
Variance
Spend Related
Insight
Savings
Potential
Evaluate
Supplier Risk
© SAP AG 2010 / 24
Addressing the #1 Challenge: “How Do I Get to My Spend Data?”
Partial Solutions: MDM, ETL
Manual processes are expensive
Multiple vendor licenses
Disparate Data Sources
Can’t quantify buying leverage without knowing supplier parent-child
Can’t identify aggregate volume by category of spend
Can’t optimize for common purchases across departments
Complex spreadsheets
Reliance on IT for reports
Complicated analysis tools
Analysis not integrated to transaction systems
GL
P-Cards BW
Government watch lists
Supplier financial/
Operational data
Disparate Data Sources Dirty Data Difficult to Access
Global coverage
1.6T transactions in knowledge
base
100+ external data sources
Supplier financial and risk data
Diversity and government
watch lists
Data Standardization
& Enrichment
Global Reference
Database
Transactional
Knowledge
Base
Phase 1: Supplier
Data Standardization
& Enrichment
Phase 2:
Spend Data
Classification
Over 120 pre-built spend analysis models
Out-of-the-box support for supplier risk analysis
Set & Track Performance Targets with Spend Advisor
Comprehensive set of Analytics functionality
Briefing book supports stakeholder collaboration
Spend & Supplier
Risk Analysis
SAP extractors (SAP ECC, SAP SRM)
Data Integrator ETL license for non-SAP systems
Support to bring in third-party data feeds
Data Integration
P-Cards
GL/AP
Supplier data
Integrated Data Management Enables Continuous and Clear Spend Analysis
BW
Supplier data
© SAP 2010 / Page 26
SAP Spend Performance ManagementDashboards and Reports
Relevant Out-
of-the-box
Analytics
Personalized
Access
Dashboard
Wizard
© SAP 2010 / Page 27
SAP Spend AdvisorSet Goals, Measure Performance
Set Goals
Measure
Performance
Identify
Opportunities
© SAP 2010 / Page 28
Briefing Books
Build and
Store
Analytics
Aggregate
Communicate
© SAP AG 2010 / 29
Multiple Disparate Solutions or an Integrated Closed-Loop Solution?
Today:Multiple Solutions from different vendors
Sustainable Solution:Integrated, Insight Driven, Actionable
Multiple systems
No data integration(No single view of data)
One solution
Complete visibility
Supplier
Performance
Supplier
Rating/Risk
Spend
Analysis
Supplier
Intelligence
Supplier
Evaluation/
Audits
© SAP AG 2010 / 30
Quickly Improve Operating Margin Implement spend reduction strategies
based on global priorities
Initiate renegotiation backed by hard data
Reduce overall contract leakage
Embed Risk Mitigation Into Sourcing
Approach Risk alerts and mitigation strategies built into KPIs
Balance supplier scorecards based on financials,
liquidity, and traditional evaluation criteria (cost, etc.)
Enable supplier declaration on critical compliance
initiatives
Quick Short-Term Wins with Sustainable Long-Term Gains
Enable Supply Chain Decisions Through Spend Visibility Dashboard visibility to key supplier and contract manufacturing
opportunities
Immediately identify cost and renegotiation opportunities with supply chain
Free up cash based on optimized category strategies aligned to demand
requirements
Automate Spend Data Management to
Enable Sourcing & Procurement
Strategies Packaged extractors and ETL capability to
ensure data capture.
Supplier normalization and classification
based on robust automated methodology
Enable Sourcing & Procurement Excellence
Integrated Spend & Risk Management Approaches
© SAP 2010 / Page 31
Summary
Visibility into accurate spend data
Increase spend under management
Rapidly identify savings opportunities
Reduce supply disruptions
Maximize Savings, Reduce Supplier Risk
We selected SAP not only based on the functionality of its solutions, but for
its experience and commitment to helping companies like ours achieve rapid
ROI. Because we have a variety of spend categories across numerous
company divisions, we needed a solution that was versatile enough to
accommodate our current needs, yet scalable enough to grow with our
company.” Christine Rousseau, SVP Information Technology, Callaway Golf Company
“
Customer Benefits
Industry Update
A Solution for Today
Customer Benefits
Time to Value
© SAP 2010 / Page 32
© SAP AG 2010 / 33
$150 million in procurement-
related savings from supply
base rationalization
[Entertainment]
Leading Companies Already Benefiting TodayIn Procurement with SAP BusinessObjects Solutions
Aggregated data from 19 business
units, 22 source systems at one
company
In 12 weeks, classified all spend into
a proprietary taxonomy and
performed supplier normalization
Consolidated billions in spend across
~15 sites and multiple business units
50% improvement in RFQ
process cycle time with sub-
contract supplier visibility [High
Tech]
4x leverage with a single
global supplier, with local
relationships [CPG]
© SAP AG 2010 / 34
Proven Supplier Validation and Spend Classification
Financial Client - 66% Reduction Electronics Client - 44% Reduction
Supplier Normalization
Telecom
23% Savings
Vendor Consolidation
Signing bonus
Policy changes
Freight
9% Savings
Standardized policies
Reduction of overnight usage
Domestic vendor consolidation
Utilities
12% Savings
Spend consolidation
Renegotiated rates
Cogeneration
Predictive Coding Classification methodology: business context focused
19%
25%
56%
13%
3%
16%
34%
34%
© SAP 2010 / Page 35
Sara LeeSourcing Excellence in 45 Days!
John Freel
Director of Procurement
“SAP E-Sourcing has helped
to save over 12% on $240M of
Indirect procurement spend.”
Driven value in >$240M in
spend
Standardized process across
the organization
Savings from 12-22%
The Challenge
One of the largest Petroleum with upstream and downstream
services
Diverse systems spread over multiple geography
Multiple vendors for same products with no central visibility
Extensive duplication of material, vendors and services
Challenging contract management
The Solution
Implemented Spend Analysis, Contract Management and
Supplier evaluation
Activated custom classification schema for mapping
Enabled Bristlecone spend analysis and optimization methodology
Implemented BI and Portal solutions as well
The Result
Enabled strategizing of sourcing
Consolidated the spend to a focus group of suppliers
Optimized spend data visibility across the board
Enabled across the board purchase price visibility
Activated streamlined contract management
Huge savings on direct and indirect spend
Key Deliverables:
Supplier
Normalization
Supplier Evaluation
Contract Management
Spend Analysis
Service Enabled:
On Premise
Environment
Refresh Services
Consulting Services
A fluid success at a large petroleum company
© SAP 2010 / Page 37
RevlonManaging 95% of Their Supply Base
“The rapid, three-week
phase I implementation
process allowed us to
immediately start generating
benefits.”
William Reis,
Chief Procurement Officer
250% increase in COGS
savings over three years
300% increase in managed
spend, using same staff levels
Live implementation in three
weeks
In Production in 3 Weeks!
Time to Value
Industry Update
A Solution for Today
Customer Benefits
Time to Value
© SAP 2010 / Page 38
Rapid Business
Enablement
Accelerated Savings in ProcurementIdentify, Optimize, and Sustain Supplier Value
Rapid Business Enablement Offer
Leveraging years of expertise, Bristlecone offers a fixed-fee and fixed time implementation. Impact your organization in as little as 90 days and $125,000!
Risk mitigation – Fixed price deployment contract Deferred payment – Customers who simultaneously sign a
Bristlecone services contract with an SAP license agreement, will have only 25% of the services contract amount due in 30 days, with the remaining amount due upon going live.
Services discount – If the Bristlecone contract contains Spend Performance Management and Data Standardization and Enrichment Services then the customer is eligible for a 10% services discount.
Flexibility – Deployment may be hosted, on-premise, or on-premise with managed services.
For more information contact: [email protected]
OfferDuration
(weeks)
Rapid Business Enablement Investment ($USD)
Small
(<$1B Spend)
Medium
($1-3 B Spend)
Large
(>$3B Spend)
DSE + SPM 10 + $190,000 + $255,000 + $380,000 +
SPM Only 6 + $125,000 + $175,000 + $250,000 +
E-Sourcing + CLM 18 + $330,000 + $425,000 + $535,000 +
CLM Only 13 + $280,000 + $330,000 + $375,000 +
© SAP AG 2010 / 40
Key Points to Take Home
Traditional focus on efficiency and cost alone is not sufficient; proactive visibility to supply risk is critical
Ensure information is complete, accurate, and timely
Establish an integrated process from insights to action
Empower business users with easy-to-use solutions to drive adoption and deliver results
Drive collaboration with key internal stakeholders and suppliers; provide management visibility to drive informed decision making
Pre-packaged applications deliver out-of-the-box capabilities that are best in class
A cohesive approach looking across cost factors, mitigation actions, and monitoring of KPIs is required to minimize supply chain disruptions
About Bristlecone
© SAP 2010 / Page 41
The Mahindra Group
• Leadership
• Innovation
• Global Potential
• Financial Returns
• Customer
Centricity
Automotive
Information Technology
Trade and Financial Services
Infrastructure
Development
Farm Equipment
Automotive Components
Bristlecone: Our Parent Company – The Mahindra Group
US$ 6.7 Billion Conglomerate with Diversified Interest across 6 Segments
Our Global Services Capability
Supply Chain Planning &
Collaboration
Supply Chain Execution
Integrated Sourcing & Procurement
Information Management
Managed Services
Technology & Integration Services
Diagnose. Design. Enable. Enhance.
Strong and pro-active relationship
with SAP since inception
SAP and Bristlecone – Unique Relationship
SAP AG Works and Services Partner SAP Services Partner SAP BPO Partner SAP Business Partner
(All-in-One Solutions for Auto, Hi-tech, OGSD) SAP xAPPs Partner SAP Ramp-up Partner for NetWeaver SAP Indian Offshore Partner
Core Product & Custom Development Partner
Founding partner for SAP Testing Competency Center (TCC)
Founding partner for CRM on Demand
Part of the Hi-tech Industry Value Network
200,000 Man days of
development relationship
We are not only just a Global SI but have “Co-developed” SAP -to earn hands-on experience on
all phases of SAP’s product development lifecycle.
Bristlecone is consistently rated as one of the top
quality partner for deployment services at SAP
Labs
© SAP AG 2010 / 45
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Copyright © 2010 Bristlecone
Thank you!
Michael Hartman
(404) 964-8966
