Charlie Villaseñor, CPSM, CSSP

President & CEO

Procurement & Supply Institute of Asia (PASIA)

Confidential Information. Not for Distribution

Date: October 7, 2014www.pasia.org / info@pasia.org

charlie.villasenor@pasia.org

Certified Strategic Sourcing Professional

for World Class Procurement

President and CEO, TransProcure Corporation

Chairman, Procurement & Supply Institute of Asia (PASIA)

Managing Director, ADR ASEAN

He has lead supply chain organizations of Chevron (Asia, Middle East and Africa), Coca-Cola,

3M, Regional ASEAN Head of Ariba and pioneered the largest Procurement eMarketplace in

Asia

Board Member, UN/WTO International Trade Center

(ITC-MLS Program on Supply Chain)

Board of Director, International Federation of Purchasing & Supply Chain Management

(IFPSM)

Chairman, Procurement & SCM Committee, Management Association of the Philippines

( CEO Association)

Board of Advisor, Unibersidad Los Andes School of Management, Bogota, Colombia

Education: PhD in Public Administration, MBA, Business Administration

(University of Sto Thomas)

Charlie Villaseñor, CPSM, CSSPeMail: charlie.villasenor@pasia.org

Mobile Phone: +639178909371

Agenda

Procurement and Supply Institute of Asia (PASIA)Overview

Getting to World-Class Procurement6 Key Enablers to a World-Class Procurement

Strategic Sourcing

Certified Strategic Sourcing Professional™ (CSSP)

The Power of 3

Development Needs

Analysis (DNA)

Learning

Consulting

Strategic Sourcing

Group Buying

eProcurement

Strategic Procurement

And Supply Management

Procurement and

Supply Chain Review

Supplier Discovery

Procurement

Augmentation

Certified Strategic Sourcing

Professional (CSSP)

Globally Recognize Certifications

Public Trainings and Conferences

eLearning and eBooks

Individual and Corporate

Membership

Assessment & Certifications

We have Procurement and Supply Chain Management CoveredLearning Doing Certifying

Procurement and Supply Institute of Asia (PASIA)Advancing the Procurement and Supply Management Profession in Asia Pacific

and the Middle East through Ethics, Excellence and eService

PASIA is at the heart of the huge shift that will see Asia Pacific and the Middle East become two thirds of the world economy by 2030.

It is at the heart because PASIA is the leading procurement and supply association in the region and is at the forefront of advancing the profession to be ready for this shift through advancing

ethics, excellence and eServices.

PASIA is a unique network that leverages across countries in Asia-Pacific and the Middle East and tackles strategic procurement and supply management issues. It provides opportunities for

the promotion of the profession and the expansion of professional skills and knowledge.

PASIA’s Global Reach

Europe

Middle East

ASIA

ASEANAustralia

North and South America

South Africa

Global Standards in Procurement & Supply Chain Management

Agenda

Procurement and Supply Institute of Asia (PASIA)Overview

Getting to World-Class Procurement6 Key Enablers to a World-Class Procurement

Strategic Sourcing

Certified Strategic Sourcing Professional™ (CSSP)

6 Key Enablers To A World-Class Strategic Sourcing

Organisation & Structure

• Focused teams organised effectively with clearly defined responsibility, authority & accountability and clear alignment and engagement with key stakeholders

Procurement Processes

• Strategic sourcing and SRM with supporting processes to enable effective outcomes

People and Skills

• Effective application of appropriate tools & behaviours, competency profiling driving development, incorporating procurement and stakeholders with succession planning in place

Strategy and Vision

• Clearly defined strategy and policy for procurement reflecting the Board’s expectations and aligned with the strategic aims of the business

Cost and Value Management

• Proactive management of spend and targeted programmes of improvement across the organisation incorporating stakeholders and budget and management reporting

Technology

• Use of world class spend analysis, e-sourcing, e-procurement (P2P) and eSRM tools

1. Strategy & Vision

Sourcing strategy is

driven by top-level

strategy, interacts with

functional strategy and

sets the context for

specific sourcing

category strategies.

2. Organization & Structure

1. Create focus - Strategic Sourcing (SS) &

Transactional Purchasing (TP)

2. Establish the Reporting Line

3. Determine Responsibility, Authority &

Accountability (RAA) for SS & TP

4. Build Category Management Structure

5. Allocate categories using Portfolio

Analysis

6. Ensure all spend covered by “Strategic

Sourcing”

7. Issue Sourcing and Ethics Policy

(Business Mandate)

8. Branding (Instant recognition of program

and associated values)

3. Procurement Processes

1. Category Management

2. Strategic Sourcing

3. Cost Management

4. Cost Change Measurement

5. Stakeholder Engagement

6. Approval Levels / Levels of Authority

7. Supplier Conditioning & Information Control

8. Negotiation

9. Management of Indirect Spend

10.Supplier Relationship Management

11.Category Strategy Plans

4. People and Skills Place the right people in charge of the right category using portfolio analysis

Clarify Responsibility, Authority & Accountability

Develop the appropriate skill sets

Recognize importance of cross-functional team capability

AnalyticalInnovatorTenacious

Committed

CreativeOptions generator

Relationship builderStrategic negotiator

CompetitiveCombative

Tough mindedTactical negotiator

Well organizedConscientiousEnthusiastic

Steady worker

Expenditure

High

Low

HighLow

CRITICAL STRATEGIC

ACQUISITION LEVERAGE

MarketDifficulty

Skills

Thinking

BehavioursPractices

5. Cost and Value ManagementThere are many different types of strategic sourcing process.

Typically a strategic sourcing process as a number of clearly defined steps:

STEP 1 = Business Needs Analysis

STEP 2 = Category Profiling

STEP 3 = Sourcing Strategy Development

STEP 4 = Market Test

STEP 5 = Quotation Analysis

STEP 6 = Sourcing Recommendation

STEP 7 = Sourcing Strategy Implementation

STEP 8 = Supplier Management

Stakeholder involvement is key to the success of the process. In this example stakeholders are involved in the Steps marked

6. Technology

The following solutions that are required to

support strategic sourcing and transactional

purchasing activity:

1. Spend Analysis

2. e-Sourcing (eRFi / eRFx / e-Auction

capability)

3. e-Procurement (P2P -Purchase-to-pay).

Each of the solutions will be SAAS (cloud),

out-of-the-box, low cost, easy to use

THE FUTURE DEVELOPMENT OFSTRATEGIC SOURCING

The Future of Strategic Sourcing External Forces of Change

Globalization

Changing demographics

Shifts in consumer demand

Resource scarcity

Environmental pressures

Technology advances

Government regulation

Financial crisis

Politics

Forex / Cost Movements

Revolution

How will these forces

affect Strategic

Sourcing?

The Future of Strategic Sourcing Seven strategies for success

Responding to the external forces of change, businesses globally will require SS to develop and employ new business models aimed at improving shareholder value

1. Developing innovative category strategies

2. Developing and Managing Suppliers

3. Designing and reducing risk in multiple supply networks

4. Leveraging technology enablers

5. Collaborating internally and externally

6. Attracting and retaining supply management talent

7. Managing and enabling the future supply management organization

Required Competencies Of Sourcing Professionals

Highly developed business skills

Ability to manage in a global market place

Deep understanding of macro-and micro-economics

Deep understanding of commodity management

Highly developed influencing skills

Relationship management skills for internal and external relationships

Highly developed analytical skills

Refined collaboration skills

Understanding of organizational political dynamics

Deep understanding of finance and financial management

Persuasion skills

Ability to think strategically & create a vision

Ability to lead and motivate

Outstanding communication and networking skills

Ability to take responsibility, authority and accountability

Ability to lead and manage change

WORLD

CLASS

Strategic

Sourcing

FRAMEWORKSO MANY ACTIVITIES –

YOU NEED A MAP!

Strategic Sourcing - Change in perception from

"Necessary Evil” to Strategic Imperative

YESTERDAY

Jack Welch (GE) once said

“Engineers who can’t engineer things, operators who can’t run their equipment, and accountants

who can’t add become Strategic Sourcing professionals”

TODAY

“organizations that employ leading-edge strategic sourcing techniques achieve almost double the

margins of companies with below-average sourcing capability - 20.2% versus 10.9 %” McKinsey

Strategic Sourcing

Strategic Sourcing is a rigorous process to develop and implement highly advantageous supplier agreements for all externally purchased goods and services. It requires continually managing supplier relationships to achieve corporate strategic goals.

The Journey to World Class Strategic Sourcing

6. Give some insight into the essential tools that ACHIEVE RESULTS

2. Provide a DEFINITION of BEST PRACTICE

1. Show you why Strategic Sourcing is so IMPORTANT

3. Identify where you NEED TO BE

4. Provide a FRAMEWORK for change

5. Show the potential FINANCIAL IMPACT

Why is Strategic Sourcing so important to YOU?

Purchased Material, Goods & Services is a very significant cost for any

organization

Typically an organization will buy externally >50% of it’s sales value

Spend is made up of:

direct materials (conversion)

indirect materials (consumption)

capital (investment)

product for resale (branded)

The Value Gap (or Margin Squeeze)Why Strategic Sourcing is Important to your business

Impact of Globalization Increased competition

Price pressures from best cost countries

Suppliers consolidating and increasing their

power

Commodity price increases driving up costs

Margins squeezed

P&L and balance sheet impacted

Your Customers

YOUR BUSINESS

Your Suppliers

“Companies today are being driven to deliver more services, more functionality

and more value for less money … It’s all part of a broad and pretty dramatic

improvement in productivity that’s going on in multiple industries”. Champy,

James: Business Author and Chairman of Perot Systems

Evolution of Strategic Sourcing

Theme“Serve the

Factory”“Lowest Unit Cost”

“Co-ordinated

Procurement”

“Category

Management”

“World-class

supplier

management”

“Entrepreneurial

procurement”

Organization

al Form• Everybody buys• Reports to ??

• “Buying” at SBU level

• Reports to Operations.

• Direct spend only• Transactional still priority

• Centralised procurement

• Cross-unit coordination.

• Recognisable buyers• Reports to senior manager

• Split between Strategic &

Transactional Purchasing

• Center-led with execution in

SBU.

• Extensive use of cross-

functional teams.• Lead Buying

• Cross-functional

supplier development teams.

• Cost/profit center.

• Network with strong communities of practice.

Key skills• Logistics focus• Transactional

• Price focused

• 3-bids.• Negotiation.

• Price Focused

• Sourcing strategy.

• Company-wide

coordination (e.g., building procurement database).

• Supplier cost focus

• Supplier development.

• Cross-functional problem solving.

• Should cost focus

• Relationships mapped.

• Supplier capability

improvement and measurement.

• Internal customer

orientation.

• Linking sourcing strategy

to company strategy and

shareholder value.• Learning organisation.

Sourcing working aloneSourcing working with internal

stakeholders

Sourcing working with internal

stakeholders and suppliers

Where are YOU today?

Where do your suppliers think you are?

Where do you competitors think you are ?

At the Category LevelCategory Segmentation

Strategic SourcingCategory Management

Strategic Sourcing as a Driver of Shareholder Value

Shareholder Value

Revenue Growth

Operating Cost

Reduction

Fixed Capital Efficiency

Working capital

efficiency

Tax minimization

Each of these drivers

are affected by strategic

sourcing strategy:

Revenue Growth

Operating Cost

Reduction

Fixed Capital

Efficiency

Working Capital

Efficiency

Tax minimization

Strategic Sourcing Process ExampleThere are many different types of strategic sourcing process.

Typically a strategic sourcing process as a number of clearly defined steps:

STEP 1 = Business Needs Analysis

STEP 2 = Category Profiling

STEP 3 = Sourcing Strategy Development

STEP 4 = Market Test

STEP 5 = Quotation Analysis

STEP 6 = Sourcing Recommendation

STEP 7 = Sourcing Strategy Implementation

STEP 8 = Supplier Management

Stakeholder involvement is key to the success of the process. In this example stakeholders are involved in the Steps marked

Certified Strategic Sourcing Professional™ (CSSP)Strong Backbone for Sustainable Procurement

Protect your Company

ADD VALUE. MANAGE RISK.

IMPROVE COST

Certified Strategic Sourcing Professional™ (CSSP)An Overview

• Focus on

Strategic

Sourcing as Key

Value Generator

• Focus designed

to drive

application

• Suitable for Non-

Procurement

Professionals

Benefits of CSSP Education

This program benefits professionals and employers

by:Aligning sourcing strategies with business objectives to achieve cost

reductions while maintaining or improving quality

Demonstrating mastery of the concepts that create consistency and

promotes collaboration in the organization

Proving credibility throughout the industry

Process of Certification

Certified Strategic Sourcing Professional™ (CSSP)An Overview

Face to Face Training

Module 1: Essentials of Strategic

Sourcing

Strategic Sourcing Process

Stakeholder Analysis • Spend Analysis

Portfolio Analysis • Supply Market Analysis

Sourcing Event • E-Sourcing

Negotiation • Supplier Management

Business Needs Analysis • Category Profiling

Opportunity Analysis • Supplier Preferencing

Sourcing Strategy • Deconstructing Price

Supplier Conditioning

Key Performance Indicators

Module 2: Advanced

Strategic Sourcing

Price and Cost Differences

Price Models

Deconstructing Price (continued)

Minute Rate Analysis

Supplier Financial Analysis

The Value of Growth

Negotiating Long Term Benefits

Category Segmentation

Advanced Purchased Price Cost

Analysis

Should Cost Analysis

Total Cost of Ownership

The Cost of Credit

Conditioning

Module 3: Implementing

Strategic Sourcing

Managing Strategic Sourcing Supplier

Relationship Management

Risk Management

Using Strategic Sourcing Templates

CSSP PROGRAM MODULES

This is the pinnacle of competency in procurement. The strategic

sourcing professional is capable of delivering enormous value to the

organization for which they work. Value delivered as a result of

strategic sourcing covers cost, quality, risk, sustainability, continuity

and capital preservation among others. Thus delivering significant

bottom line results to your company.

Asia’s Annual Procurement and Supply Management

Conference

November 19-20, 2014 Manila, Philippines

Join this Annual ASEAN conference and learn from some of the World’s best speakers and trainers as they share

insights, cases, practices and trends in procurement and supply chain management during ASEAN’s largest

conference of its kind – in Manila.

Thank You!

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