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PESA SUPPLY CHAIN SEMINAR | FEBRUARY 18, 2015
Edward J. KovalChief Procurement Officer & Vice PresidentGlobal Supply Chain & ProcurementSpectra Energy
Market Intelligence as a Strategic Weapon
Market Intelligence as a Strategic Weapon |
Agenda
Spectra Energy at a Glance
The Transition to Category Management
Attributes of World Class PSCM Organizations
Critical Skills Needed
Our Process and Examples of MI & BILeveraging Market Intelligence as a Competitive AdvantageSpectra Energy Case Studies
Q&A
2
Market Intelligence as a Strategic Weapon |
Spectra Energy at a Glance
• Spectra Energy, a FORTUNE 500 company, is one of North America's leading pipeline and midstream companies
• For nearly a century, Spectra Energy and its predecessor companies have developed critically important pipelines and related infrastructure connecting supply sources to premium markets
• Approximately 5,700 employees
3
Market Intelligence as a Strategic Weapon |
The Power of Our Portfolio
Gas storage facilityGas processing plantPropane terminalNGL storageShale gas formationsCrude storageMajor oil pipeline terminal
Natural Gas Transmission Pipe: 19,000 mi Natural Gas Storage Capacity: ~300 Bcf
Natural Gas Gathering Pipe: 70,000 mi Crude Transmission Pipe: 1,700 mi
NGL Transmission Pipe: 1,500 mi SE Gas Processing Capacity: 3.7 Bcf/d
4Q14 DCP Gathered and Processed: 6.7 Tbtu/d
4Q14 DCP NGLs Produced: ~450 MBbl/d Distribution Pipe: 39,900 mi
Union Gas Retail Customers: 1.4 million
4
Market Intelligence as a Strategic Weapon |
The Transition to Category ManagementIn
crea
sing
Org
aniza
tiona
l Val
ue
Future
Transactional Buying – PSCM As Order Taker
TCO and Strategic Sourcing
Category Management
Advanced Strategies
• Introduction of consistent go-to-market process
• Leveraged spend and buyer influence
• Focus on value
• Continual process improvement
• Cross-organizational collaboration
• Deep market knowledge and dynamic value taking
• Supplier Relationship Management
• Demand Planning • Dynamic Sourcing
PSCM: Procurement and Supply Chain Management
PSCM organizations continue to evolve and seek out new ways to extract value from their supply activities
5
Market Intelligence as a Strategic Weapon |
The Promise of Category Management
Aligns PSCM activities with enterprise stakeholder objectivesMaximize impact on the enterprise via total cost vs. price, speed vs. reliability, cost vs. quality
Increased Business Unit engagementPositions PSCM as a core member of the team, orchestrating activities to deliver maximum value
Ensures that supply chain is leveraging all weaponsUtilize SRM, demand planning, market intelligence, etc., rather than relying exclusively on Strategic Sourcing
Allows supply chain to react effectively to market eventsDynamic and volatile markets require real-time adaptive solutions that Category Management can provide…- The Hackett Group
6
Market Intelligence as a Strategic Weapon |
World Class PSCM
SRM: Supplier Relationship Management
Attributes of World Class PSCM organizations who have adopted a category management approach:
Centers of Excellence/
Expertise & Market Intelligence
Category Segmentation
→ SRM Sector
Strategies
Governance PSCM Competencies
7
Market Intelligence as a Strategic Weapon |
Critical Skills Needed
1. Ability to engage and influence stakeholders
2. Experienced in conducting research
3. Solid foundation in technical and analytical skills
Strategic Business Acumen
Supply Chain ManagementFinancial and market analysis
Creativity/InnovationPlanning
Relationship Manager
CredibilityActive listening ability
Consensus-BuildingInfluencing
InterpersonalCommunication
Subject Matter ExpertIndustry
Products/ServicesCost drivers
Market conditionsSupply BaseRegulations
8
Market Intelligence as a Strategic Weapon |
Our Process
Examples of Market Intelligence• Markets, industries, and structures• Goods, commodities, and services• Cost Structures/value drivers• Supplier alternatives• Trends, indices, general information• PESTLE analysis• Contract benchmarking• Financial/risk assessment
Examples of Business Intelligence• HSE requirements• Sustainability considerations• Spend/demand outlook• Regulatory requirements• Performance/quality expectations• Technology/specifications
Identify NeedDetermine
Requirements & Market
Conditions
Conduct Sourcing
Implement Contract
Sustain Category Transition
•Category Management/ Strategic Sourcing drives the process•The Business retains control
Analyze information and test hypotheses to identify business value, risks and develop strategic options
9
Market Intelligence as a Strategic Weapon |
COE
Financial impactCost modelingBest practicesBusiness reportingIndicesConsultant viewM&A Info
Leveraging Market Intelligence as a Competitive Advantage
COE: Center of Expertise
Category Mgr.Strategic Sourcing Mgr.
Multi-year strategies
Marketintelligence
Business intelligence
Bestpractices
Marketupdate
Analytics
Suggested strategies
External and internaldata sources
Market Intelligenceanalyst
OutputsBenchmarking
Multi-year strategies
The use of Market Intelligence extends beyond PSCM to influence Business decisions and strategies
Triangulate informationand using it to identify
strategic advantage
Supplierrelationship
3rd party research
10
Market Intelligence as a Strategic Weapon |
Case Study:Market Intelligence in Line Pipe Sourcing
• The MI function forecasted an increase in steel prices, which was the basis for accelerating the RFP process timeline
• MI for logistics, steel and pipe mills, along with cost models was the basis for negotiations
Initial Quote Round 1Negotiated
Cost Reduction
Round 2Negotiated
Cost Reduction
AdditionalNegotiated
benefitsFinal Cost
Benefits due to accelerating the timeline
Budget based on recent purchaseExample of first pipe purchase using Market Intelligence and Category Management
$
11
Market Intelligence as a Strategic Weapon |
Case Study:Cost Modeling for Globally Performed Professional Services
• Algorithms
• Assumptions
• Should cost
• Sensitivity analyses
• Hundreds of benchmarks– Normalized job classifications– Current data– Geography specific– Service (scope) specific
• Man-hour histograms• Proposal pricing, markups, etc.
DYNAMIC COST MODEL OUTPUTSINPUTS
Identified gaps betweenproposalsand the market
12
Market Intelligence as a Strategic Weapon |
Case Study:Health Care Program Administration
- Convert incumbent contracts so that profit is tied to performance measures- Address past performance issues- Enter into a 3-year contract usingMarket Intelligence as the basis for single source negotiation
Company provides guidance on health care plan for active and retired employees
OBJECTIVES OUTCOMECONTEXT
20% reductionin transaction cost
Implemented Key Performance Indicators
13
Market Intelligence as a Strategic Weapon |
Conclusion
Catalyst for innovation Helps manage supplier risk more effectively
Market Intelligence is a critical driver of world-class PSCM organizations
Provides a powerful tool to influence Business
stakeholdersRequired for cost modeling
14