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Xerox Third Party ConfidentialPage 1
Organization Transformation
Truly Global Procurement
Craig LaudadioProcurement Solutions Manager
Xerox Corporation
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 2
Xerox Global PurchasingOrganization Transformation, Agenda
• Xerox Overview
• Business Environment and Challenges
• Developing a Solution, Planning and Implementation
• Transformation and Globalization of Procurement
• The Results & Benefits
• Wrap-Up
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 3
Xerox Overview
• Xerox Corporation is the world's leading document management technology and services enterprise.
• It provides the document industry's broadest portfolio of offerings.
• Digital systems include color and black-and-white printing and publishing systems, digital presses and "book factories," multifunction devices, laser and solid ink network printers, copiers and fax machines.
• Xerox's services expertise is unmatched and includes helping businesses develop online document archives, analyzing how employees can most efficiently share documents and knowledge in the office, operating in-house print shops or mailrooms, and building Web-based processes for personalizing direct mail, invoices, brochures and more.
• Xerox also offers associated software, support and supplies such as toner, paper and ink.
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 4
Xerox Mission
• Our strategic intent is to help people find better ways to do great work -- by constantly leading in document technologies, products and services that improve our customers' work processes and business results.
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 5
Xerox Corporation at a Glance
CEO: Ursula M. Burns
2008 revenue: $17.6 billion
2008 income: $230 million
Employees: 57,100 worldwide.
Operates in: 160 countries
Founded: In 1906 as The Haloid Company; named Haloid Xerox in 1958; named Xerox Corporation in 1961
Fortune 500 ranking: No. 147
NYSE: XRX
Headquarters: 45 Glover Avenue, Norwalk, CT 06856
www.xerox.com
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 6
Global Purchasing Ken Syme $7BGlobal Purchasing Ken Syme $7BGlobal Purchasing Ken Syme $7BGlobal Purchasing $7.8B
Business Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsPresident Ursula BurnsBusiness Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsPresident Ursula BurnsPresident Ursula Burns
Office of President and CEO
Jim Firestone & Ursula Burns
Xerox Corporation is a $17.6 BillionTechnology and Service Enterprise
Paper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloXerox Strategic Services Group Wim AppeloPaper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloXerox Strategic Services Group Wim AppeloGlobal Business and Services Group
Xerox Global Purchasing Organization
Product Related Purchasing $3.5B Indirect Goods and Services $4.3B
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 7
Xerox Global Purchasing established ICM (Integrated Commodity Management) office in Hong Kong in 1995.• Obtain quotes• Point negotiations• Quality Surveys and audits• Expedite and problem solve
Organizational Design for Sourcing inEmerging Regions –Business Environment
Supplier Base Management and Commodity Strategy, Remained in the USA.
Most of our sourcing was in USA and European Union.
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 8
Business Environment & Challenges Early 2000’s
Disruptive Technology in Products.
Fiercely Competitive industry.
Negatively Sloping Product Cost Curves.
Formidable Global Competitors.• Mostly Asian Manufacturing.• Strong Financially.• Moving Assembly Plants to low cost countries.
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 9
Xerox Global PurchasingBusiness Environment, Sourcing Trends
0102030405060708090
100
2003 2004 2005 2006 2007
Sourcing Southeast Asia
% S
ourc
ed in
Asi
a (p
rodu
ct r
elat
ed)
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 10
Global Purchasing Business EnvironmentDollars Spent by Supplier Location
Production$3.5B Supplier Spend
14%Other
86%Asia
Europe 4%North America 10%
59%U.S.
31%Europe
Canada/Brazil 7%Other 3%
Indirect Goods and Services$4.3B Supplier Spend
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 11
Xerox Global Purchasing Organization Pre-transformation
CPS / BPO $4.3BProduct Purchasing $3.5B
Xerox Designed Products
Product Cost
Engineering
Fuji Xerox Procurement Operations
Business Process
Outsourcing
Corporate Procurement
Services
Supplier Quality
Assurance
OEM Designed Products
Global Purchasing Ken Syme $7BGlobal Purchasing Ken Syme $7BGlobal Purchasing Ken Syme $7BGlobal Purchasing $7.8B
Business Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsPresident Ursula BurnsBusiness Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsPresident Ursula BurnsPresident Ursula Burns
Office of President and CEO
Jim Firestone & Ursula Burns
Paper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloXerox Strategic Services Group Wim AppeloPaper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloXerox Strategic Services Group Wim AppeloGlobal Business and Services Group
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 12
Organizational Design for Sourcing inEmerging Regions – Solution development
• Global Purchasing Senior Staff team
• Checked Job Titles and Current roles at the door.
• Used “Good to Great” approach.
• Posed the question, “If we started this all over again and didn’t have the limitations of the existing infrastructure around us, how would we do this?”
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 13
We studied the activities of Global Purchasing personnel.– Buyers/Supplier/Commodity Managers– Supplier Quality Assurance Engineers– Advanced Manufacturing Engineers– Product Cost Engineers
– We studied their roles and identified activities that should be located with Product Delivery Teams and Business Teams and activities that should be located with suppliers.
– In late 2006 we transferred ALL activities to Asia that could / should be managed from Asia.
Organizational Design for Sourcing inEmerging Regions – Solution development
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 14
Total Acquisition Cost
Unit Cost + Duty Insurance & Freight + Hurdle rate = Total Acquisition Cost
Hurdle rates includeCommunication & travel cost.
Premium Freight.
Increased Inventory Holding.
Scrap, rework, obsolescence.
Compliance Monitoring.
IP protection.
Business Resumption Plans.
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 15
Other Considerations and related decisions
• We purchased and studied research by Aberdeen, Everest, Forrester and Gartner on procurement outsourcing.
• We commissioned a Study at Portland State University.
• Considered whether to further Invest in Asia or whether to outsource procurement and buy the service.
• Had to decide on which side of the procurement outsourcing movement Xerox should be positioned.
• We concluded that Xerox had the necessary scale, scope and some unique processes and expertise (particularly in product related purchasing) that made internal investment prudent.
Before we restructured
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 16
Xerox Global Purchasing Asian Procurement OpsXerox Global Purchasing Asian Procurement OpsProject TimelineProject Timeline
GP Management Strategy May 06
GP Management Business Plan Formulated July 06
Corporate officer approval Aug 06
Communicate to GP employees Worldwide Sept 06
Begin Hiring in Asia and restructure Oct 06
Complete Restructuring Dec 06
Complete Hiring in Asia 1Q 07
Canvas Stake- holders July 06
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 17
Global Purchasing Realignment of Product Purchasing Resources (headcount) to Asia
Europe 8
Portland65
Rochester85
*266 heads in 2006 *266 heads in 2008
Rochester 122
Portland 79
Asia47
Europe12 Brazil Canada 6
* Does not include Indirect Purchasing headcount
Asia 108
Before After
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 18
Xerox Global Purchasing Organization Pre-transformation
CPS / BPO $4.3BProduct Purchasing $3.5B
Xerox Designed Products
Product Cost
Engineering
Fuji Xerox Procurement Operations
Business Process
Outsourcing
Corporate Procurement
Services
Supplier Quality
Assurance
OEM Designed Products
Global Purchasing Ken Syme $7BGlobal Purchasing Ken Syme $7BGlobal Purchasing Ken Syme $7BGlobal Purchasing $7.8B
Business Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsPresident Ursula BurnsBusiness Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsPresident Ursula BurnsPresident Ursula Burns
Office of President and CEO
Jim Firestone & Ursula Burns
Paper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloXerox Strategic Services Group Wim AppeloPaper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloXerox Strategic Services Group Wim AppeloGlobal Business and Services Group
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 19
CPS / XGS / BPO $4.3BProduct Purchasing $3.5B
Asian Procurement Operations
Global Purchasing for
Production Systems Group
Fuji Xerox Procurement Operations
Global Purchasing for
Xerox Office Group
Procurement Outsourcing
Services
Business Process
Outsourcing
Global Purchasing for Xerox Global
Services
Corporate Procurement
Services
Xerox Global Purchasing Organization Post-transformation
Global Purchasing Ken Syme $7BGlobal Purchasing Ken Syme $7BGlobal Purchasing Ken Syme $7BGlobal Purchasing $7.8B
Business Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsPresident Ursula BurnsBusiness Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsPresident Ursula BurnsPresident Ursula Burns
Office of President and CEO
Jim Firestone & Ursula Burns
Paper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloXerox Strategic Services Group Wim AppeloPaper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloXerox Strategic Services Group Wim AppeloGlobal Business and Services Group
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 20
Xerox Asian Procurement Operations (APO) own Xerox Global Sourcing Strategy.
ICM Offices Previously
Project manage ( new and resourced)Expedite and Problem SolveObtain QuotesNegotiate CostsSome PCE EstimatingSQA Survey approvals Audits
APO Currently also
Develop Global Commodity StrategyManage the supplier base Contracting for Asian suppliersPCE estimating for Asian sourcingAll SQA and AME support for AsiaAll sourcing activities in Asia
Key message: Supplier base management decisions and Contract approvals will be in Asia.
Xerox Global Purchasing Team Co-Located with Suppliers
Acronym Footnote:PCE – Product Cost Engineering; SQA – Supplier Quality Engineering; AME – Advanced Manufacturing Engineering
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 21
Design Centers and APO Office LocationsXerox Global Purchasing Asian Procurement
Webster, NY
Shenzhen
Hong Kong
Singapore
Wilsonville,OR
Welwyn, UK
Korea
Japan
India
Malaysia
Design Centers
APO Offices
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 22
Global Purchasing,Xerox Office Group Organization
Administrative AssistantSue Leavenworth
Welwyn Garden City(Europe)
Dan Sullivan
Samsung(Webster)
John Mostyn
Cost, Operations, OEM Suppliers
(Wilsonville)
Electronics Procurement(Wilsonville)
Chris Campbell
Solid Ink Materials(Wilsonville)Eric Walters
APO Engagement Processes(Wilsonville)
Charley Burnett
Global Purchasing for XOG
Marty Annas
FX & Contracts(Wilsonville)
Kevin Hoffman
Administrative Assistant
Welwyn Garden City(Europe)
Strategic OEM
Cost, Operations, PCE (Wilsonville)
Electronics Procurement(Wilsonville)
Solid Ink NPI(Wilsonville)
Solid Ink Purchasing(Wilsonville)
Global Purchasing for Xerox Office Group
FX & Software(Wilsonville)
Other OEM Suppliers
Global Purchasing for PSG
Diane O’Connor
Judy Taylor
Acquired ProductsBob Zeman
Xerox Designed ProductsMike Ryan
Procurement Engineering Ernest Wilson
SuppliesTom Viola
Administrative Assistant
Judy WilliamsGlobal Purchasing for
Production Systems Group
Contract Manufacturing & Spares
Acquired Products
Xerox Designed Products
Procurement Engineering Consumables
Administrative Assistant
Global Purchasing,Production Systems Group Organization
Early Supplier Engagement for New Technologies
Procurement for prototype development hardware
Coordinate material procurement activities
Design change management with suppliers
Transition to RPP management.
Develop supplier tooling cost budget and controls
Tooling spend approval and PO issue
Best of Breed benchmarking
Participate in Global Commodity Strategy development
Key Activities for
Co located Teams-
Xerox Global Purchasing Team Co-Located with Business Groups
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 23
Administrative Assistant
Rose Chng
Asian Procurement Operations
David Partridge
Singapore OfficeMalaysia / Singapore Supplier Base
Choo Swee Hock
Japan OfficeJapan Supplier Base
Jerry Hatch
Flextronics Contract and Asia Procurement
GovernanceCrystal Martin
Hong Kong OfficeChina / Taiwan Supplier Base
Mike Krasnozon
India OfficeIndia Supplier Base
Dinesh Raghav
Korea OfficeKorean Supplier Base
Jae Nam Cho
Financial Planning and Analysis
Silvia Fung
Administrative Assistant
Rose Chng
Asian Procurement Operations
David Partridge
Singapore OfficeMalaysia / Singapore Supplier Base
Choo Swee Hock
Japan OfficeJapan Supplier Base
Jerry Hatch
Flextronics Contract and Asia Procurement
GovernanceCrystal Martin
Hong Kong OfficeChina / Taiwan Supplier Base
Mike Krasnozon
India OfficeIndia Supplier Base
Dinesh Raghav
Korea OfficeKorean Supplier Base
Jae Nam Cho
Administrative Assistant
Rose Chng
Administrative Assistant
Rose Chng
Asian Procurement Operations
David Partridge
Singapore OfficeMalaysia / Singapore Supplier Base
Choo Swee Hock
Japan OfficeJapan Supplier Base
Jerry Hatch
Flextronics Contract and Asia Procurement
GovernanceCrystal Martin
Hong Kong OfficeChina / Taiwan Supplier Base
Mike Krasnozon
India OfficeIndia Supplier Base
Dinesh Raghav
Korea OfficeKorean Supplier Base
Jae Nam Cho
Singapore OfficeMalaysia / Singapore Supplier Base
Choo Swee Hock
Japan OfficeJapan Supplier Base
Jerry Hatch
Flextronics Contract and Asia Procurement
GovernanceCrystal Martin
Hong Kong OfficeChina / Taiwan Supplier Base
Mike Krasnozon
India OfficeIndia Supplier Base
Dinesh Raghav
Korea OfficeKorean Supplier Base
Jae Nam Cho
Financial Planning and Analysis
Silvia Fung
Develop Global Commodity Strategy
Manage the Supplier Base
Contracting for Asian Suppliers
PCE Estimating for Asian Sourcing
Identify Benchmarks and Drive Productivity
All SQA and AME Support for Asia
All Sourcing Activities in Asia
Expediting and Problem solving
Xerox Asian Procurement Operations own Xerox Global Sourcing Strategy.
Key Message: Supplier base management decisions and Contract approvals will be in Asia.
Xerox Global Purchasing Team Co-Located with Suppliers
Key Activities for
Co located Teams-
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 24
HEADCOUNT LOCATION BASED ON:
•SPEND PROFILE
•SUPPLIER PROXIMITY
•INDIA (ASIAN EXPANSION)
•MALAYSIA NEW OFFICE
•SHANGHAI CLOSED END DECEMBER 2006
•KOREA POSITIONED TO SUPPORT SAMSUNG/FXK/SR
Singapore(32)
Hong Kong(25)
India(10)
China(12)
Malaysia(15)
Korea(9)
Japan(5)
TOTAL HEADCOUNT 108
Xerox Global Purchasing Asian Procurement OpsHeadcount Location Profile
Administrative Assistant
Rose Chng
Asian Procurement Operations
David Partridge
Singapore OfficeMalaysia / Singapore Supplier Base
Choo Swee Hock
Japan OfficeJapan Supplier Base
Jerry Hatch
Flextronics Contract and Asia Procurement
GovernanceCrystal Martin
Hong Kong OfficeChina / Taiwan Supplier Base
Mike Krasnozon
India OfficeIndia Supplier Base
Dinesh Raghav
Korea OfficeKorean Supplier Base
Jae Nam Cho
Financial Planning and Analysis
Silvia Fung
Administrative Assistant
Rose Chng
Asian Procurement Operations
David Partridge
Singapore OfficeMalaysia / Singapore Supplier Base
Choo Swee Hock
Japan OfficeJapan Supplier Base
Jerry Hatch
Flextronics Contract and Asia Procurement
GovernanceCrystal Martin
Hong Kong OfficeChina / Taiwan Supplier Base
Mike Krasnozon
India OfficeIndia Supplier Base
Dinesh Raghav
Korea OfficeKorean Supplier Base
Jae Nam Cho
Administrative Assistant
Rose Chng
Administrative Assistant
Rose Chng
Asian Procurement Operations
David Partridge
Singapore OfficeMalaysia / Singapore Supplier Base
Choo Swee Hock
Japan OfficeJapan Supplier Base
Jerry Hatch
Flextronics Contract and Asia Procurement
GovernanceCrystal Martin
Hong Kong OfficeChina / Taiwan Supplier Base
Mike Krasnozon
India OfficeIndia Supplier Base
Dinesh Raghav
Korea OfficeKorean Supplier Base
Jae Nam Cho
Singapore OfficeMalaysia / Singapore Supplier Base
Choo Swee Hock
Japan OfficeJapan Supplier Base
Jerry Hatch
Flextronics Contract and Asia Procurement
GovernanceCrystal Martin
Hong Kong OfficeChina / Taiwan Supplier Base
Mike Krasnozon
India OfficeIndia Supplier Base
Dinesh Raghav
Korea OfficeKorean Supplier Base
Jae Nam Cho
Financial Planning and Analysis
Silvia Fung
Contract manufacturing and Asia Procurement
Governance
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 25
CM(34)
INF(13)
PCE(17)
SQAE(23) AME
(21)
• OFFICE EXPANSION AVAILABLE IN BOTH CHINA AND MALAYSIA OFFICES
Headcount Functional Profile 08 Plan
TOTAL HEADCOUNT 108
NEW EMPLOYEE DEMOGRAPHICS DEGREE LEVEL, AVERAGE AGE 32 YEARS, AVERAGE EXPERIENCE 9 YEARS, AVERAGE SALARY $30KPREVIOUS EXPERIENCECELESTICA, SANMINA SCI, DELPHI, FLEXTRONICS, TREND, PANASONIC,HP, RICOH, EPSON, FOXCONN, DELTA, JOHNSON MOTORS
Xerox Global Purchasing Asian Procurement OpsEmployee Functional Profile
Buyer AME SQAE PCE Inf / AdminMalaysia 4 2 5 3 1 15 15 0
Singapore 8 7 6 6 5 32 27 5Hong Kong 10 7 0 5 3 25 24 1
China 3 2 5 1 1 12 12 0Japan 3 0 1 0 1 5 4 1Korea 3 1 4 0 1 9 9 0India 3 2 2 2 1 10 10 0
Total 34 21 23 17 13 108 101 7
ExpatSite Total Local Function
CM
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 26
Description of Job Functions
Commercial
Buyers/Commodity Managers
Industry Research Negotiation Business Reviews
Commodity Strategy Contracting Productivity Management
Sourcing Supplier Management EOL Support
Sourcing Includes
Prototype/Preproduction parts Lead CSI Activities Procure Production Tooling
Support TTM Deliverables Enable Spares Procurement Negotiate Design Change Impacts
Procurement Engineering
SQA (Supplier Quality Assurance) PCE (Product Cost Estimating) AME (Advanced Mfg. Eng.)
MQA Supplier Surveys Cost Estimating Part Introduction/Qualification
Process Certification Target Setting Sourcing Support
Process Audits Competitive Analysis Drawing Translation/Interpretation
Performance Management Best of Breed Specification Study
Warranty Opportunity Identification Design for Manufacture
Acronym Footnote:EOL – End of Life; CSI – Continuous Supplier Involvement; TTM – Time to Market; MQA – Materials Quality Assurance
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 27
Xerox Procurement - Transformation Results
•Clock Speed Time to Market
•Better Supplier Relationships
•Access to Emerging Technology
•Increased Supplier productivity
•Reduced Procurement Operation Costs
•Transfer of procurement functions to suppliers’ time zone
What we planned to Achieve What we Actually Achieved
•Clock Speed Time to Market
•Better Supplier Relationships
•Access to Emerging Technology
•Increased Supplier productivity ($2-3M in yr 1 )
•Reduced Procurement Operation Costs (>$3M/Yr)
•Transfer of procurement and other functions to suppliers’ time zone
•Increased Supply Chain Flexibility / Responsiveness
•Tax Optimization Opportunity
•More robust supervision of suppliers
•Business Growth Opportunity
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 28
Rochester, NY
Shenzhen
Malaysia
Hong Kong
Singapore
Korea
Japan
India
Xerox Global Purchasing Asian Procurement OpsXerox Global Purchasing Asian Procurement Ops
APO Legal Entities
XC Trading Singapore PTE. LTD. (Incorporated in Singapore, Aug 2007)
XC Trading (Shenzhen) Co., Ltd. (Incorporated in China, Plan 2Q08)
XC Trading Hong Kong Limited (Incorporated in Hong Kong, Oct 2007)
XC Trading Japan GK (Incorporated in Japan, Nov 2007)
XC Trading Korea (yuhan hoesa) (Incorporated in Korea, Feb 2008)
XC Trading Malaysia Sdn Bhd (Incorporated in Malaysia, Dec 2007)
No new Indian Entity was required
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 29
Xerox Procurement - Transformation Results
•Clock Speed Time to Market
•Better Supplier Relationships
•Access to Emerging Technology
•Increased Supplier productivity
•Reduced Procurement Operation Costs
•Transfer of procurement functions to suppliers’ time zone
What we planned to Achieve What we Actually Achieved
•Clock Speed Time to Market
•Better Supplier Relationships
•Access to Emerging Technology
•Increased Supplier productivity ($2-3M in yr 1 )
•Reduced Procurement Operation Costs (>$3M/Yr)
•Transfer of procurement and other functions to suppliers’ time zone
•Increased Supply Chain Flexibility / Responsiveness
•Tax Optimization Opportunity
•More robust supervision of suppliers
•Business Growth Opportunity
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 30
Procurement Outsourcing
Aberdeen Group in their 2006 Procurement Outsourcing Benchmarking Report noted:
• “Large enterprises led the way” 38% outsource now and 13% plan to within two years leaving those who don’t in the minority at 49%.
• Medium 24% now and 21% plan.• Small – 20% now and 16 plan.
Gartner drew a “Hype Cycle” and noted that “steady growth will make BPO non-controversial eventually”
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 31
Procurement Outsourcing; What do companies want out of it?
Aberdeen Noted drivers of outsourcing as:• Access to Improved pricing• Lower transactional processing costs and fewer burdens• Access to supplier intelligence.• Fewer Full time Procurement employees.
Gartner Noted Cost as the primary motive (through transaction and vendor leverage).
The Everest Institute noted that the impact of procurement outsourcing can be up to five times the benefit of other BPO’s…”a game changer”
Aberdeen also noted that while Enterprises are more apt to outsource management of indirect spend categories, the outsourcing of direct materials was also coming into play.
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 32
Procurement Outsourcing at Xerox unanticipated benefit of our Transformation
• Because of scale, scope and unique capability Xerox had elected not to outsource.
• Soon after establishing our infrastructure we received an unsolicited request from one of our own suppliers to help them source.
• We are now partnering with HCL Technologies Ltd to provide procurement outsourcing.
• HCL Technologies Ltd already have an established BPO service for transactional procurement, Xerox will provide sourcing expertise for HCL.
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 33
Key to Successful Transformation
• Planning
• Understand Scale, Scope and Capability
• Consider your relative strength and BPO opportunity
• Stake Holder Buy-in
• Calculated & documented Business Case
• Detailed Transition Planning
• Flawless execution, backed by teamwork and genuine commitment.
• Governance, Ethics and Training.
• Corporate Culture transplant.
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 34
• Business Ethics– 100% Trained using Xerox CD– 100% staff signed Xerox Code of Conduct
• Gift and Gratuity letter written and sent to suppliers (taken from Global Purchasing
Business Practices)
• Xerox Security– Contract Management – Distributed– Confidential Disclosure Agreement/Non-Disclosure Agreement – Training done– PC Security part of audit process
• Personal / Security and Safety– Safety training done– Safety audits performed at each office
• BRP (Business Resumption Plan) written and filed for each office.
• Financial & Budgetary Controls
– Travel
– Hiring
– Auditing
GovernanceXerox Global Purchasing Asian Procurement Ops
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 35
Key to Successful Transformation
Planning
Understand Scale, Scope and Capability
Consider your relative strength and BPO opportunity
Stake Holder Buy In
Calculated & documented Business case
Detailed Transition Planning
Flawless Execution backed by teamwork and genuine commitment.
Governance, Ethics and Training.
Corporate Culture transplant.
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 36
Hire International Students and Cycle through existing locations.Reduce Skills learning curveEstablish relationships between APO Staff and Value Chain
Partners Transplant Global Purchasing culture, tools and processesReduce our dependence on expatriates
Partnerships with local UniversitiesPortland State, Rochester, Buffalo and Syracuse. Purchasing modules added to MBA curriculum.
University of Rochester Example216 Full time MBA’s (720 apply 30% Acceptance)39% International StudentsAverage Student Age 27, work experience 4 ½ years
Highest Concentration of International:
1. India
2. China
3. South Korea
4. Japan
Highest Concentration of International:
1. India
2. China
3. South Korea
4. Japan
Xerox Global Purchasing Asian Procurement Ops International Talent Acquisition
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 37
If your are thinking about something similar..
Assess work that needs to be done and where it could best be accomplished.
Pay attention to your scale and expertise• Don’t just be in one offshore location, provide yourself options
and associated protection against future risk and economic changes.
• Don’t ignore the trends towards procurement outsourcing. • Decide, should you perform yourself or manage through a
provider?• Compare processes, skills, expertise and leverage.
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 38
Xerox Global Purchasing Asian Procurement Operations (APO)
We built a highly motivated, enthusiastic, skillful and empowered team in Asia.
They own our supplier strategy, and make key decisions locally. Same time Zone, no delays.
Happy Employees.
Better managed suppliers.
Better results.
Lower costs.
Improved velocity.
Better Supplier relationships
Identify best suppliers.
Manage supplier strategy.
Identify Benchmarks.
Drive productivity.
Drive improvements in quality.
Improve supply flexibility.
Negotiation support.
Technical support.
Contracting.
Qtrly Productivity Business Reviews.
Procurement Outsourcing alliance with HCL
APO Highlights APO Activities
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 39
Transition Planning – Making it Work• 10% Expatriates or Permanent Transfers• The right person to lead it.• The right skills balance in Expatriate team• Hire the best people• Buy in / strategy ownership at home.• Upfront and clear strategy communications.
Sustaining & Improving• Communicate, Communicate, Communicate• Sustain strong relationships between home teams and remote
locations.• Acquire talent and reduce dependency on expatriates.
Xerox Global Purchasing Asian Procurement Ops
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 40
• Business environment changed and we responded to it.
• Purchasing co-located with suppliers delivers benefits (same time zone, increased supplier productivity, lower purchasing operations cost).
• Senior / empowered staff located in the region.
• Rapid learning and continuity and synergy during restructure achieved through 7 expatriates support and 2 permanent transfers to Asia.
• On-going synergy across locations supported by student hiring strategy.
• Continuing to evaluate additional functions that could be more effectively managed when co-located with suppliers.
• Positioned Xerox as a provider in the Procurement outsourcing business in partnership with HCL Technologies
Xerox Global Purchasing Asian Procurement Ops Summary of Management Strategy
Presented by Craig Laudadio @ Xerox 585-265-5131
Page 41
Thank you
Craig Laudadio
Procurement Solutions Manager
Xerox Corporation
585 265 5131