OMSAN LOJİSTİK

e-Procurement

Procurement and Supplier Relationship ManagementLatin America Logistics CenterLogistics Management Series

Time elapsed to Reach 10 million users after introduction

to the marketPager

Telephone

Cable TV

Fax Machine

41 Years

38 Years

25 Years

22 Years

VCR 9 Years

Mobile Phone

Computers

CD-ROM Drive

Wireless Data Services

9 Years

7 Years

6 Years

6 Years

Internet (WWW) <2 Years

Source: USA Today, Info Tech and Pac Tel Cellular

The .COM Bubble!

Technology trigger: A breakthrough event generates significant industry interest.Peak of inflated expectations: During this phase of overenthusiasm, a flurry of activity by technology leadersresults in some well-publicized successes, but more failures as the technology is pushed to its limit.Trough of disillusionment: Because the technology does not live up to expectations it becomes unfashionable,and the press either abandons the topic or publicizes its failure to fulfill expectations.Slope of enlightenment: Focused experimentation by an increasingly diverse range of the technology’sapplicability, risks and benefits. Off-the-shelf methodologies and tools become available to ease development.Plateau of profitability: Real-world benefits based on margins and revenue of the deployed technology aredemonstrated and accepted.

IPO Initial public (stock) offering

Source: Gartner

Visibility

InternetWeb

“Dot-Com”Begins

U.S. IPOs1997/98

U.S. Christmas1998

European IPOs1999

“E Is Best”

Dot-Com Share Fallout

Bricks-and-Mortar Failures

Dot-Com Shakeout

Publicized E-Failures

BusinessDisillusionment

“True”E-BusinessEmerges

OptimizedE-business

Post-NetBusinesses

Investor Disillusionment 2006-2008E-Business Ends

1993-96 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 20092010

TechnologyTrigger

Peak ofInflated

ExpectationsTrough of

DisillusionmentSlope of

EnlightenmentPlateau of

Productivity

E-Commerce vs. Traditional Commerce

Massive Product Cataloge MaintenenceMassive Product Cataloge Maintenence

Virtual InventoryVirtual Inventory

Management ofManagement of contentscontents associated to the Catalogeassociated to the Cataloge

Commercial MarginsCommercial Margins usually usually LowerLower (disccount sales)(disccount sales)

Unlimited Theoretical CapacityUnlimited Theoretical Capacity to Serve Customersto Serve Customers

Capacity toCapacity to Customise ServiceCustomise Service without Human Interventionwithout Human Intervention

Complex Management of Complex Management of PaymentsPayments

(Picking and Packing) in charge of the Manufacturer(Picking and Packing) in charge of the Manufacturer

The New Logistics

Traditional Logistics

E-Commerce Logistics

Dispatch Type Bulk Parcel

Customer Strategic Unknown

Demand Type Push Pull

Inventory/Order Flow

Unidirectional Bi-directional

Average Order > $1,000 < $1,000

Destination Concentrated Disperse

Demand Stable, Consistent Seasonal Fragmented

Accountability One Link Alongside Supply Chain

Source: Forrester Research, Inc.

Internet Transactions Remarkable Reduce costs !

$8

$6

$1

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

Co

st ($)

Travel AgentThrough

ReservationSystem

TravelAgentDirect

CustomerBooks

ElectronicTicket

8:1

Source: U.S. Department of Commerce (1998)

$1.07

$0.52

$0.27

$0.15

$0.01$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

Co

st ($)

107:1

Branch Phone ATM PCBanking

I-NET

Attract!

Customise!

Configure !

Inform

Pay!

Plan & Supply!

Warehouse!

Delivery!

Prepare!

Cust. Serv.!

1

2

3

45

D

A

B

C

E

Information Technology

• Increase contents in product information,

• Use IT to integrate products, supply chain

and synchronise planning,

• Trend tp de-materialisation of the products,

• Access to unlimited number of customised

configurations of products & services.

The “New Economy”

Business today compete in two markets:Business today compete in two markets:

– the the market-placemarket-place,, where products and resources where products and resources physically exist and need traditional physical physically exist and need traditional physical movement movement (e.g. transportation services)(e.g. transportation services)

– the the market-spacemarket-space,, the virtual world of e-commerce in the virtual world of e-commerce in which the basic transaction is informationwhich the basic transaction is information (with (with unlimited resources)unlimited resources)

Supply/Demand Paradigms

Doing BusinessDoing Business

Organising BusinessOrganising Business

Business EconomicsBusiness Economics

Value AddedValue Added

InfrastructureInfrastructure

• MarketMarketplaceplace

• HierarchiesHierarchies

• Scarce Physical ResourcesScarce Physical Resources

• Machines and CraftingMachines and Crafting

• Equipment & BuildingsEquipment & Buildings

• MarketMarketspacespace

• Networks / extended enterpriseNetworks / extended enterprise

• Unlimited Digital ResourcesUnlimited Digital Resources

• Staff with KnowledgeStaff with Knowledge

• Information TechnologyInformation Technology

New paradigmNew paradigmCurrent ParadigmCurrent Paradigm

Fulfilment Systems

Final CustomerFinal Customer

Online Online CustomerCustomerOrdersOrders

Local/Global Local/Global SuppliersSuppliers

Cross Docking (Out

Of Stock Items)

Deliveries (Local Transportation Company)Supplier’s

Order Entry

Products in Stock (Owned or in-consignment stock)

Drop Shipment

InformationInformationSystemsSystems

Supplier DirectDeliveries

Local SuppliersLocal Suppliers

Distribution Distribution CenterCenter

Internet Changed the “Rules of the Game”

• Limited Visibility

• Manual, not-online

• Latent Analysis and

Decision Making

• Serial Execution

• Transparency

• “Always on”

• Executable Operations

• Data

• Collaboration

“Batches” EnterpriseLong Lead Times, High Operational Cost

“Real-time” EnterpriseAdaptation Adaptation and Continuous Monitoring

Customers

Retailer

Re-Seller

Distributor

Producer

Supply Chain Traditional

Product Decisions

Assortment Decisions and Costs

Replenishment Decisions

Sell!

Get what NEEDED (generally)

Pus

h S

yste

m

Consolidation and distribution a lowest possible cost Works with the Stores for Product Development

Get what WANTED

Assortment and Ordering Decisions

Demand Chain Management

Producer

Customers

Store

EfficientDistribution

Throughput(daily items)

Pul

l Sys

tem

e-Sourcing or e-Procurement: a solution

• e-Sourcing uses web-based technologies to identify, evaluate and configure new and potential producers/suppliers

• Initially used in “blanket contracts” and long-term contracts negotiation

E-Sourcing is changing business paradigms

E-Sourcing is changing business paradigms

Analysts confirm that e-sourcing deliver critial improvements in:

Costs • Efficient and competitive markets• Global supply sources

Quality• Standardised supply processes improve

quality• Identification of the Best Suppliers

Cycle Time• Dramatic reductions in supply

processes time• Increased spot market opportunites

“…Strategic sourcing solutions …reduce…cycle times by 50%” - Goldman Sachs

“…Savings typically by selected category are between 15% and 25%” - AMR Research

“Organisations using e-sourcing technologies have reached quality levels of products and services” - Aberdeen Group

$ Millions

As Reported

5% less indirect costs

Revenue 6,625 6,625COGS 5,613

Purchases – Direct 50% 2,807 2,807Purchases – Indirect 25% 1,403 1,333Other direct expenses 25% 1,403 1,403

Gross Profit 1,012 1,082SG&A Expenses 813 813

Operating Income 199 269Taxes and Other Expenses 65% 129 175Net Income 70 94Shares Outstanding 56.3 56.3

Earnings Per Share $1.24 $1.67Stock Multiplier (P/E Ratio) 25 25Market Value Per Share $30.93 $41.83

Improvement 35.3%

E-procurement Increases Market Value!

Source: CSC

Why are we interested?

Total Benefits in Procurement (savings as % of expenses)

Source: CAPS

Top performers save up to 5x more!

Stratgic Sourcing is Critical to Add Value to the Organisation

Stratgic Sourcing is Critical to Add Value to the Organisation

Cost Analysis Supply Strategy

RFI/RFQ Development

Negotiate & Contract

Observe Supply Performance

Strategic e-Procurement Objectives

1. Select products, services, suppliers that offer the lower total cost

2. Guarantee that procurement decisions support the structure of the business, their objectives and limitations

3. Identify the best practices that can be repeated and standardised within the company

Successful e-Procurement

Positioning• Select an e-Sourcing solution that satisfy your capacity and limitations

• Develop an implementation plan– Identify Targets with the greater return potential

first– Identify and Institutionalise best practices– Continually analyse expenses, negotiations and

the market for new opportunities

• Guarantee that negotiated contracts are used

E-sourcing is changing the “Rules of the Game”…

Information and Quantified Information and Quantified Analysis offers better Analysis offers better

procurement decisionsprocurement decisions

COGS reduction of 15-25%COGS reduction of 15-25%

ROI in less than 3 monthsROI in less than 3 months

Speed in cycle times 25-30%Speed in cycle times 25-30%

How to Reap Benefits?

• Reduced goods and services prices (5% - 20%)– Quick creation of a competitiveness space– Access to New suppliers – Bigger Geographic Scope

• Lower Cycle Times (25% - 30%)– Process Automation RFP/RFQ– Simplified process order-to-payment– Expand the role of the strategic sourcer

• Reduce Administrative Costs– Increase buyers productivity– Reduce/eliminate paper processes

• Improves the capability to create/manage and optimal supplier base– Improves data market– Minimises demand sparks

• Develop/use the procurement “best practices”

The B2B MatrixC

omo

Com

pran

?

Operative Supplies

ManufacturingSupplies

MRO Hubs Catalog Hubs

SystematicProcurement

AribaW.W.Grainger

MRO.com

ChemdexSciQuest.com

PlasticsNet.com

Yield Managers Exchanges

Spot Procurement

EmployeseAdauction.com

CapacityWeb.com

e-SteelPaperExchange.com

Altra Energy

Que Compran?

How to Organise B2B?

AutoMfg

AutoMfg

Buyers

Sellers

Market Maker/Dealer /Broker

Mutual Interests Communities (Leader Buyer)

Verticalnet Sites

Groups of buyers with common needs and interests joined to increase purchase power

Neutral Exchange

e-steel

A community is formed around a common exchange interest (nodominant entity)

Distributors (Leader Seller)

Grainger.com

Buyers are organised through a distributors site that offer economies of scale

Eco-SystemModel Type

Examples Chrysler/GM Deal

All industry suppliers integrated through systems

Features

Integrated Supply Chain

www.saludayuda.com

Neutral entity that offers a platform for eBusiness in vertical markets

Choosing the Right Model

Leader

With Others

Pro

duct

Diff

eren

tiatio

n

“Brand” Awareness

Low High

For Suppliers

Pudding malls

Pudding malls

WEB Page

Budines malls; Información marts

Leader

With Others

Buy

er’s

Siz

e

Potential Number of Suppliers

Low High

For Buyers

Buying Agents

Supplies Jointners

Procurement posting; Supplies Jointners

Pudding malls; Auctions

Carefully choose your Partner: B2B can be “Best to Best”

The McKinsey Quarterly

Basic Questions for B2B Decisions In Which Exchanges We Want to Participate?

Shall we build Partnerships with our competitors?

Shall we Demand our Suppliers to Automate in the Internet?

In Which Technology/Software do we have to Invest?

Before answering any of these questions ask yourself:

WHY ARE WE DOING IT?WHY ARE WE DOING IT?

e-procurement Sites

Industry ParticipantsEnergy Chevron, Texaco

Auto Daimler-Chrysler, Ford, General Motors

Agro-Industry Cargill, Dupont, Cenex Harvest States Cooperative

Consumable Bestfoods, Colgate-Palmolive, Grocery Manufactures of America, H.J. Heinz, Kraft Foods, Nestle USA, PepsiCo, Proctor & Gamble

Aerospace/Defense Boeing, Lockheed Martin, Raytheon, Bae Systems,

Retail Albertsons, CVS, Kmart, Safeway, Target, Walgreens, Marks & Spencer

Energy BP Amoco, Conoco, Dow Chemical, Mitsubishi, Royal Dutch/Shell, Unocol

Seeds Cargill, Farmland Industries, Gold Kist, IBP, Smithfield Foods, Tyson Foods

Paper International Papers, Weyerhaeuser, Georgia-Pacific Group

Metal Dot-com Companies 80% failed!80% Will FailAsiasteel.com

Autoxchange.comBusinesshere.comBuystainlessonline.comChinasteelnet.comDealsteel.comDoveBid.come-STEEL.comFerrousexchange.comFreemarketsGoindustry.comImark.comIndustrydeals.comIspatudyog.comISteelAsia.com Livesteel.comMaterialnet.com

Metalauctions.comMetalclick.comMetalmart.comMetalsales.comMetalshopper.comMetalsite.comMetalsuppliersonline.comMetalworld.comMetique.comOnlinemetals.comPipemart.comScrapexchange.comScrapsite.comSmartmetal.comSpotMetals.comSteelbroker.comSteeldemand.com

Steelexchangeindia.comSteelExpress.comSteel-market.comSteelmillrfq.comSteelmills.comSteelplus.comSteelplus.comsteelsales.comSteelscreen.comSteelSpider.comSteeltrade.comThyssen.de TradeexchangeTradeout.comVerticalnet.comWorldmetal.comWorld-trading.com

Value Added?

Buyers

• Lower search and acquisition costs

• Expanded supplier pool• Lower cost of goods sold• Reduced inventory of

supplies• Improved forecasting

(shared demand capacity information)

• Collaborative product development

• Faster time-to-market

Sellers

• Lower risk of excess inventory and over capacity

• More & new suppliers• Lower cost of goods sold• Technology support

provided• High degree of supply chain

integration… forward to auto companies and backward to component suppliers

"Co" represents connectivity, collaboration and communication.

"Vis" represents the visibility that the Internet provides, and the vision of the future of supply chain management.

"Int" represents the integrated solutions the venture will provide as well as the international scope of the exchange.

COVISINT in the Auto Industry

3PLRevenuesl in e-business

millions $Web Site

UPS Logistics Group Inc. 800 www.wwlog.comBAX Global 800 www.baxworld.com

Circle International Group Inc. 750 www.circleintl.comPenske Logistics 750 www.penske.com

Menlo Logistics Inc. 600 www.menlolog.comFDX Supply Chain Services (formerly

Caliber Logistics Inc.) 600 www.fdxlogistics.com Eagle USA Airfreight Inc. 500 eagleusa.com

Tibbett & Britten Group North America Inc. 500 www.tbg.co.uk

J.B. Hunt Logistics Inc. 400 www.jbhunt.comUSF Logistics 350 www.usflogistics.com

GATX Logistics Inc. 250 www.gatxlogistics.comMSAS Global Logistics 250

ProLogis 250 www.prologis.comC.H. Robinson Worldwide Inc. 2.1 www.chrobinson.com

Ryder Integrated Logistics 1.8 www.ryder.comFritz Companies Inc. 1.35 www.fritz.com

Schneider Logistics Inc. 1 www.schneiderlogistics.comEmery Worldwide 1 www.emeryworld.com

Third-Party Logistics Suppliers

Source: Third-Party Logistics: Improving Global Supply Chain Performance.

3PL offering e-logistics

Hurdles to Adopt B2B

• Technology Factors- Security on the WEB- Systems Integration- Data Conversion- Software and Hardware Compatibility

• Social Factors- Lack of familiarity with B2B Commerce- Risk Aversion- Lack of Trust Among Participants- Incogruent Cultures

Company Company OptimisationOptimisation

Network Network OptimisationOptimisation

ProcureProduceProducts

ManageLogistics

ForecastDemand

Optimise

A

F

D

G

C

EB

Company

Company

Company

Company

Company

CompanyCompany

eMarkets use Internet technology to optimise processes and

Networks

Relationship Management is more difficult than Function Management; it is more complex and requires different skills and knowledge

Innovation in Supply Chain Control e-Business Transformation

Sup

plie

rsS

uppl

iers

Cus

tom

ers

Cus

tom

ers

PlanearPlanearCollaborative Supply Chain PlanningCollaborative Supply Chain Planning

ProveerProveer HacerHacer EntregarEntregarSupplySupplyChainChainExecutionExecution

ProductProductLifecycleLifecycleManagmentManagment

E-SourcingE-Sourcing

Supply Chains are the Owners of the Companies

• The Brands are Critical in Connecting Consumers

• Information flows in Real Time throughout the Supply Chain

• Core Competency Emphasis

• Profits Maximisation are the Priority

Effective Management of Customer Expectations

Reliable and Automated Information (EDI) of catalogue, contents and stock Availability from Suppliers

Payment systems reliable and standardised

Advanced Services of Operations Logistics (tracking, cross-docking,…), Flexible (packs Handling, Customised Deliveries,…) and highly scalable

Innovative Delivery Services (points of picking and stock, credit card repayments, Automated anticipated dispatch notes, CRM systemsCRM systems politics of quality / customer service, efficient and dynamic management of resources,…

e-commerce Requirements

Definitely,Definitely, is not enoughis not enough a Front-End and a Conventional Logistics a Front-End and a Conventional Logistics Operator!!!Operator!!!

A A Back-EndBack-End (ERP) powerful and a(ERP) powerful and a CRM system,CRM system, perfectly perfectly integrated with integrated with the Logistics Operationsthe Logistics Operations, is unavoidable., is unavoidable.

Likewise, the management of a ,massive catalogue and their contents, Likewise, the management of a ,massive catalogue and their contents, needs a tool that controls the needs a tool that controls the workflowworkflow necessary to make the Front-End necessary to make the Front-End and the Back-End have the data they require (availability, price, contents)and the Back-End have the data they require (availability, price, contents)

Information Systems: the foundation

Qualified Staff to Analyse Qualified Staff to Analyse the specific needs for each cusotmerthe specific needs for each cusotmer

Capable to offerCapable to offer Advanced Transactional ServicesAdvanced Transactional Services (Credit Card (Credit Card Payments and Reimbursments, management of backorders,...).Payments and Reimbursments, management of backorders,...).

Capability to Capability to manipulate productsmanipulate products (kits assembly, packs,...)(kits assembly, packs,...)

Knowledge and capability to manageKnowledge and capability to manage Reverse LogisticsReverse Logistics

Capable toCapable to process data and offer process data and offer to the customer (data-mining)to the customer (data-mining)

… other key factors for a Logistics Operator

e-Business Fundamentals

The Internet is an alternative channel, NOT A SUBSTITUTE:

• Companies Cannot survive only from the Web page as a sole operation– eToys.com– Pets.com– Furniture.com– Drugstore.com– Webvan.com

• Customers expect equivalent service and recognition in all the distribution channels– Ordering/Returning– Uniform Promotions

Perspectives

“What is my ROI with e-commerce? Are you crazy? e-commerce is Colon in the New World. What was his ROI?”

Andy Grove CEO, Intel

“We always Over-estimate changes within the next two years and Under-estimate changes within the next ten years.”

Bill Gates

CEO, Microsoft

The Problems Never is how to Introduce New

Ideas in the others’ minds. The Problem is how to Pull Out the Old

Ideas!

Dee Hock