20131003 Erste Group Procurement Supplier Relationship Management

Erste Group Procurement (EGP)

The Procurement Company of Erste Group (EG)

Robert SEMETHY

2013-10-23

EGP – Member of Erste Group © 2013All rights reserved Page 2

Erste Group went public in 1997 with a strategy to expand its retail business model into CEE

Acquisition of more than 10 banks between 1997 and 2008

Erste Group now runs market leading retail banking operations in the new EU member states, which remain underpenetrated compared to their Western European markets

2000

2001

2005

2006

2007

1997

2004

2003

New holding structure improving Group Governance

2008

History: Austria’s first savings bank: Founded in 1819

Erste Group’s customer base grew from 600 000 in 1997 to 17,3 million in 2011


Erste Group in Central and Eastern Europe

Source: http://www.sparkasse.at/erstebank

EGP – Member of Erste Group © 2013All rights reserved

History: Erste Group Procurement (EGP)

Page 4

2006

2007

In the new Erste Holding structure s Proserv reports to the CFO (previously to the COO).

2011

s Proserv renamed to Procurement Services GmbH in HQ and Erste Group Procurement on group level

2012

Groupwide roll-out of:• Procurement Policy• Procurement

Handbook

Foundation of s Proserv100% subsidiaries in• AT (HQ)• CZ • HU • SK

2009

`07-`09

Onboarding further subsidiaries:• HR • RO• RS Proc.

Dept.

Start of NGPS project(New Group Procurement Solution)

2013

`09-`10`10-`11

Onboarding of • UA Proc. Dept. • ME Proc. Dept.

2010

Start implementation of Lean Enterprise Order Management (LEO)

New reporting tool (Qulick View)

Service optimisation• SRM Management• Category Management

Increase the value of a centralised procurement company

• Transparency• Service Quality in Sourcing

and Procurement• Cost Reduction and Cost

Avoidance• Ethical Standards• Fraud Prevention

Finalisation of new structure and documents:• Business plan in place• Alignement with

Procurement Handbook

`11-`12

• New RFx and eAuction tool (Electool)

• New Project Tool (CAP)


Erste Group Procurement: Procurement of the Erste Group

Functional

Leadership by EG

P

Erste Group Bank AG - Holding Board

CEO CFO COO CRO Group Markets Group Retail

Group Property

Group Org/IT

Erste Group Procurement(Procurement Services GmbH)

Operations/Processing

EGP AT(incl. Centre Functions, as Finance,

HRM, Org/IT)

EGP RO

EGP CZ

EGP SK

EGP HU

EGP HR

Procurement RS

Procurement ME

SPV DRUCK

Erste Group Procurement Facts & Figures:

Central procurement function within Erste Group

Headcount approximately 180 employees

Process owner for group-wide S2P process

AT: Warehouse with more than 3 000 sqm

GCIB

Source: http://www.sparkasse.at/erstebank

Finance

Sourcing AT

Sourcing CZ

Sourcing SK

Sourcing HU

Sourcing HR

Sourcing RO Erste Group Procurement RO

Erste Group Procurement SK

Erste Group Procurement HU

Erste Group Procurement AT

Erste Group Procurement CZ

Erste Group Procurement HR

RS3)

1) Department of Erste Bank AD Podgorica – Montenegro2) Department of Sparkasse Bank Makedonija AD Skoplje3) Department of Erste Bank Novi Sad

SPV – DRUCK

EBSPK

Sourcing RS

Sourcing

Board Division Team in Matrix

Org/ITHRM

ME1)

Management Board

Erste Group Procurement – (Procurement Services GmbH)

MK2)

Procurement MK


Clearly defined EGP in Erste Group

EGP Cooperation with customers based on:

Contract (SLAs)

Responsibility (NDAs)

Code of conduct

Purchasing Policy & Handbook

Aligned priniciples within Erste Group:

…The central and single competence for procurement activities within Erste Group lies in Erste Group Procurement (EGP)…

…EGP has to be involved in any external spend of any Erste Group majority owned entity. Any exception has to be agreed between EGP and the respective Erste Group entity…

…All external spend should follow the principle of Total Cost of Ownership (TCO) and Quality, Cost and Delivery. In balance with socio-economic, ecological and customer relationship factors the assignment of a contract has to follow the highest added value for Erste Group principle…

…EGP owns, defines and aligns with the local entities the procurement processes within Erste Group...


EGP Focus

Before RFxP/RFQ

RFx

Supplier Relation Management

Contract Management

Category Management

Today

Foundation andCore

Supplier Relation Management

Contract Management

Category Management

Implemen-tation


Clearly defined EGP Services in Scope based on Lean Enterprise Order Management (LEO) Principles

SourcingInternational/Local

Tactical Purchasing

Order Management

Business Process Outsourcing

Operations of support processes for the local entities, i.e.

• Print Shop• Warehouse

Provide cost-efficient services

Purchasing Project

Contract Creation

Category MgmtVendor Mgmt

Contract Mgmt

Requisition &

Ordering

Documentation&

CR/CA Calculation

Receipting&

Evaluating

InvoiceProcessing

Erste Group Procurement

Purchasing Project

Contract Creation

Category MgmtVendor Mgmt

Contract Mgmt

Requisition &

Ordering

Documentation&

CR/CA Calculation

Receipting&

Evaluating

InvoiceProcessing

Purchasing Project

Contract Creation

Category MgmtVendor MgmtContract Mgmt

Requisition &

Ordering

Documentation&

CR/CA Calculation

Receipting&

Evaluating

InvoiceProcessing

CustomisedProcurementServices

Additional requirements requested by customer and are not in the scope ofprocurement

Customer Satisfaction

Compliance with Outsourcing Policy Provisionof OutsourcingProject Documentation

Compliance to regulatory and internalrequirements

OutsourcingCompetenceCenter

Strategic, monitored purchasing in a team approach

Ensure fast, easy and efficient execution

By EGP By EGP or Customer

On Customer’sDemand

Additional Servicesfor the customer’s benefit

Invoicing as a % of 3rd party spend Invoicing in a separate fee (SLA)

In Scope

Out of Scope

LEO principles


external data

• Analysing supplier sales data

Page 9

Sourcing

internal data

• Analysing spend of entity/ supplier/ category

• Strategic basis for purchasing projects

Reporting Package(SAP FI / QLIKVIEW)

• Allows the linking of information to a 360° view of projects, contracts, product categories and suppliers.

• “In-house” development

supplier / Country / Project Management tool (“CAP”)

• Live eAuctions

• Collecting of informationen (RfI*) and offers (RfQ*) in a defined specification form

eAuction, RFx(Electool)

Sourcing is the strategic process of identifying potential suppliers, conducting negotiations, and agreeing on supply contracts in order to achieve a sustainable cost

reduction and meet the customer’s expectations.

Supporting tools

*RfI = Request for Information*RfQ = Request for Quotation

Demand analyses

based on

Category Management

Supplier Management

Contract Management

Identification of potential suppliers

to conclude a GMA

support through

eAuction/RFx/negotiation

GMA

Cross – checking internal vs external data

LEO principles


Sourcing International/LocalSupplier Relationship Management Tools

• Standardised Questionnaire for Assessment and Self Assessment

• Document Management System, Reminders periodically and automatically

• Scoring through Business Line

• Risk Management (restricted party screening & financial screening)

• Ethics

Supplier Audits

• Similar to Category Management

• Long Lists and Short Lists

SupplierStrategies

• Escalation management

• Single Point of Contact and coordination of all participants (Business Line, Legal, Countries, Suppliers)

• Identification of disqualified suppliers

Escalation

Identify and focus on key suppliers. Implement supplier relationship model in cooperation with Business Line.

• HYR/QBR

• Standardised presentations

• Participants: Business Line, Supplier and EGP

• Measuring the cooperation

• Search out further cooperation/collaboration

Business Reviews

• Standardised Questionnaire for Assessment and Self Assessment

• Document Management System, Reminders periodically and automatically

• Scoring through Business Line

• Risk Management (restricted party screening & financial screening)

• Ethics

• Similar to Category Management

• Long Lists and Short Lists

• HYR/QBR

• Standardised presentations

• Participants: Business Line, Supplier and EGP

• Measuring the cooperation

• Search out further cooperation/collaboration


Supplier Relationship Management ToolsStandardised Questionnaire for Assessment and Self Assessment

Page 11

Supplier Audit Scorecard

Weighting• Financial Healthcheck – 30% • Quality & IT System – 25%• Governance – 15%• Social – 15%• Environmental – 15%

Scoring• < 2.5 - failed the audit, no business• 2.5 - 5 opportunity to do business,

but should provide a plan for correcting the areas where they performed weakest.

Supplier Evaluation Scorecard

Weighting• Quality – 15%• Delivery – 15%• Costs – 15 %• Responsivness – 15%• Innovation – 15%• Risk – 10%• Company & Corporate Social

Responsibility (CSR) – 15%

Any supplier who fails to obtain a score of 75% or more, maybe put on probation or even removed from an preffered supplier.

Supplier Audit Questionnaire

Type of data collected• Company Information• Financial Information• Operational• Governance • Social• Environmental• Business Reference• Additional Information


Supplier Relationship Management ToolsDocument Management System

Page 12

DMSSupplier ‚A‘ on Group LevelContent:• Business Reviews

Documentation (ppt, minutes, approvals, tasks)

• Reports, Questionnaires, Scorecards

• Financial Reports

Supplier ‚A‘ local country

Contract SystemSupplier ‚A‘ on Group Level

Content:• Contracts (e.g. GMA)• NDA

Project ToolSupplier ‚A‘ on Group Level

Content:• Project Documentation• CR/CA



Content on local level:• Project

documentation

Content on local level:• Business Reviews

Documentation (ppt, minutes, approvals, tasks)

• Reports, Questionnaires, Scorecards

• Financial Reports

Content on local level:• SLAs

Supplier ‚A‘ local country Supplier ‚A‘

local country



Supplier Relationship Management ToolsRisk Management

Page 13

Process• All supplier records from all systems are compared to the lists• A fuzzy algorithm returns a list of technical matches• The results are manually vetted and

• False positives are marked to avoid next run• Positives are rechecked (on additional dimensions) and if confirmed escalated to Compliance Manager

• Part of the ‘know your business line resp. counterpart’ process

• Flags a compliance issue against up-to-date information on embargoed country, restricted party, and business rules lists.

SAPSuppliers

Electoolsuppliers

Other Contractors

Query List(automatic search)

US Consolidated Screening List- Dept. of Commerce- Dept. of State- Dept. of the Treasury

EU Financial Sanctions

AT National Bank(Terror List)

Restricted Party List


Q3/2013CR/CA

3rd party

managed

spend

~ 4% CR

~ 1,36% CA

3rd Party Spend

Cost Reduction / Cost Avoidance

In Q3/2013 – 4,6% CR as credible, transparent and auditable savings achieved.

→ Real and permanent reduction in the unit cost of goods manufactured or services rendered without impairing their suitability for the use intended or

diminution in the quality of the product.

Peer Group Benchmark*: 1.80%, World Class Benchmark*: 3.00%

In Q3/2013 - 0,95% CA achieved.→ A purchasing action by means of which certain material/supplier increases are

not incurred by the purchasing firm.

Peer Group Benchmark*: 0.20%, World Class Benchmark*: 1.39%

Savings resulting from structured purchasing activitiesHow much do we save?

EGP Cost Reduction/Cost Avoidance evolution since 2011

*based on Hackett Report

~ 4,6% CR

~ 0,95% CA

~ 2,5% CR

~ 0,6% CA

2011CR/CA

2012CR/CA

Positive trend as outcome of structured procurement processes.


Drove continuous high level of customer satisfaction while at the same time decreasing budget and Cost of Acquisition.

2008 2009 2010 2011 2012 2013

3% 2% 1,5% 1,4% 1,2% 1,1%

87%93%

98%

92% 93%

Cost Development In Mio €

CoA

Customer Satisfaction*

*completely satisfied and satisfied cumulated

Erste Group Procurement (EGP) KPIs since 2008


Thank you!

Erste Group ProcurementProcurement Services GmbH

Robert SEMETHYManaging Director

Chief Procurement Officer

Email: [email protected]

mailto:[email protected]


Maverick Spend: Identification

Page 17

Maverick Spend is any spend of money to any external supplier/company covered by the EGP “In Scope” definition, where EGP was either too late or not at all involved* in the set-up of the commercial agreement.

EGP Maverick Spend Report

Covered by Purchase

orders

Covered by contracts

Spend to be processed by EGP

Maverick spend

Maverick Spend Definition graph

1. Based on SAP/FI, Contracts, Purchase Orders2. Responsible is EGP3. Considering

• Spend relevance• Involvement of EGP• Service Agreements

Maverick Spend Calculation

*currently not measuring late involvement

• The numbers have to be understand in a full context.

• Periodically reviews with the customers

• Ensures alignment and agreement on Maverick Spend data.

• Reporting to show progress on data clean-up.

• Agreement with customers, on concrete actions in order to

decrease the Maverick


Valuable Customer (customers as suppliers)

Objective:

To clarify WHO is treated as a „valuable customer“ and HOW this group of customers is treated within

ERSTE Group as supplier. It shall avoid that special customers are not considered in tenders within

product/service classes of their business operations.

Basic principles:

• Valuable customers are the top customers per country, based on data provided by Large Corporate or

Corporate.

• The valuable customers are identified and updated in regular intervals

Supplier Long List Supplier Short List Selection

Valuable customers are automatically on the Long

List if they can provide a service in a category/region

If a valuable customer is not qualified for the short list, Management Board of EGP can overrule and enforce inclusion

If a valuable customer is not the best bidder, the opportunity loss is calculated and the decision is taken jointly by Management Board EGP and an according EG Board Member.


Our Way to World Class Procurement

Financial Perspective:- COA < 1%- CR/CA > 4,4%

- 20 mio av. spend by buyers

Financial Perspective:- COA < 1%- CR/CA > 4,4%

- 20 mio av. spend by buyers

Learning Perspective:- A team of good purchasers - Pro-active working- Willingness of responsibility- Good working atmosphere

Learning Perspective:- A team of good purchasers - Pro-active working- Willingness of responsibility- Good working atmosphere

Vision: World Class Procurement

organisation in the financial area

Vision: World Class Procurement

organisation in the financial area

Customer Perspective: - Our customers adhere to our vision and support it - Our customers see high value added in EGP services and are ready to pay for this - Our strategy supports customers targets

Customer Perspective: - Our customers adhere to our vision and support it - Our customers see high value added in EGP services and are ready to pay for this - Our strategy supports customers targets

Processes Perspective: - Paying PO’s only - Maverick spend < 10% - Spend coverage > 90% - Delivering core processes - Fully integrated AR/CM/CR-CA/PM/eSourcing - Mature Category Mgmt and SRM

Processes Perspective: - Paying PO’s only - Maverick spend < 10% - Spend coverage > 90% - Delivering core processes - Fully integrated AR/CM/CR-CA/PM/eSourcing - Mature Category Mgmt and SRM


Sourcing International/Local Category Management/Matrixorganisation

Sourcing Specialist, the first contact for the customer and groupwide Category Manager and Supplier Relationship Manager.

145 categories divided according to local and international opportunities.

Find opportunities, create & implement a strategy in a team approach with the Business Line.

Matrixorganisation Category Classification

Category Management

FM Facility Management (FM) IT Informationstechnology (IT) S&O&M Service & Operations & Marketing (S&O&M)FM FM Maintenancerelated Services/Work IT Personal and Office Computing S&O&M Car Fleet

FM FM Investmentrelated Services/Work IT Telephony and Communication S&O&M Cards

FM Goods IT Networks S&O&M Consulting

FM Energy IT Branch Equipment S&O&M Logistic

FM Security Equipment IT Servers/Storage/Host Components S&O&M Marketing

FM Property Management IT Infrastructure Software S&O&M Office Equipment & Office Operation

IT Direct Application Software S&O&M Personnel Management

IT IT Services S&O&M Travel

IT Indirect Application Software S&O&M Security Service

Sourcing Categories

EGP – Member of Erste Group © 2013All rights reserved Page 21Page 21

Sourcing International/Local Contract Management/Spend Data Analysis/Data Reporting

Structure spend by suppliers, categories, countries and entities

Real-time Business Intelligence Tool for management

Define Spend categories, analyse it (spend & suppliers)

In a team approach with the Business Line.

Budget and Category Analysis Tool Data Reporting

Integrate all supplier contracts in Contract management solution and establish proactive & timely contract activity plan

Contract Management


Tactical Purchasing (TP) and Order Management (OM)Purchasing Project

• In 3 countries available

• Integration with MM / Accounting

• Covering about 55% of the spend

SAP SRM

The fast, easy and efficient execution of routine administrative tasks. These are day-to-day buying activities, which are low volume with no strategic importance or based

on agreements that have been set in place.

Supporting tools

• In all EGP countries available

• Efficient eAuction through web based forms

• Supplier’s self registration for saving resources

eAuction(Electool)

• Standardised articles

• Order Processing for low purchases

• Integration in Warehouse Management System

Catalogue/OM Software(Online E-Shop)

Demand(online or catalogue)

Purchase requisitionthrough GMA or catalogue(OM)

Tender Project (TP)

Offer Agreement

LEO principles