Securing the Mandate to Achieve Cost Leadership and Build a … · 2017-07-10 · Steve Coleman • Director of T&D and Corporate Services Sourcing • Manages $2.8B+ spend, including

PG&E Confidential 1

October 21, 2009

Securing the Mandate to Achieve Cost Leadership and Build a Leading Procurement Organization

PG&E Confidential 2

Introductions

Name Company Experience

Steve Coleman

•  Director of T&D and Corporate Services Sourcing •  Manages $2.8B+ spend, including utility engineering and construction services,

gas and electric distribution and transmission materials, IT/telecom goods and services, and professional services

•  Previous director-level positions in materials distribution, strategic sourcing, and corporate real estate

•  Program management roles in strategic sourcing, supply chain transformation, material delivery optimization, eProcurement, and Y2K contingency planning

Richard Sheinfeld

•  Leads PRTM’s Strategic Sourcing practice •  Over 20 years of experience working with clients to execute major cost reduction

initiatives with a focus on procurement •  Industry experience: energy, aerospace, automotive, high-tech, healthcare, and

financial service clients •  Frequent presenter at SIG and SCNA conferences

Conrad Snover

•  Co-leads ProcureAbility’s Utilities practice •  13+ years of experience in supply chain consulting •  Industry experience: utilities, oil and gas, high tech, banking, and insurance •  Focus areas: supply chain strategy design, category management, strategic

sourcing, supplier development, and organizational sustainability •  BBA: finance and information systems

PG&E Confidential 3

PG&E Is a Gas and Electric Utility That Services Clients in Northern and Central California

Key facts •  Incorporated in California in 1905

•  One of the largest combination electric and natural gas utilities in the United States

•  70,000 square mile service area in Northern and Central California

•  5.1 million electric customers, 4.2 million gas customers

•  20,000 employees

•  Over 120,000 circuit miles of distribution lines and 18,000 miles of transmission lines

PG&E Confidential 4

PRTM’s Competency Is Operational Strategy

PRTM is the premier operational strategy consulting firm •  Marketplace realities have created new operational requirements

•  Without the right operational strategy, even strong business strategies fail

We focus on the critical link between business strategy and execution •  Operational strategy structures your business operations and economics for competitive

advantage; execution is key to driving financial results

•  We not only work with you to formulate a winning operational strategy…we work side by side with you to deliver the financial results

Business Strategy - - - - -

Where and why you’ll win

Operational Strategy - - - - -

How you’ll win

Operations - - - - -

Executing to win

PRTM Focus Area

PG&E Confidential 5

ProcureAbility Is Entirely Focused on Supply Chain

ProcureAbility includes: •  ProcureAbility Consulting -  Supply chain management consulting

-  Strategic sourcing, procurement transformation, logistics optimization

•  ProcureAbility Intelligence -  Market intelligence for sourcing professionals

-  Web-based subscription service and custom research

•  ProcureAbility Recruiting and Staffing -  Supply chain recruiting and staffing

•  ProcureAbility Sourcing Services -  On-demand sourcing execution services

“Helping Our Clients Transform Their Supply Chains Since 1996”

The ProcureAbility is a Certified Woman-Owned Business by WBENC and the CPUC

Formed in 1996, Our Only Focus Is Strategic Supply Chain Management

PG&E Confidential 6

HOW WE KNEW THE TIMING WAS RIGHT

Background

PG&E Confidential 7

PG&E Spends Almost $4B a Year on External Goods and Services

PG&E $3.8B

IT/ Telecommunications

•  IT services •  Software •  IT hardware •  Telecom equipment •  Telecom services

Transportation Management

•  Vehicles and equipment •  Fuel •  Rentals •  Freight •  Parts

Environmental Health and Safety

•  Vegetation management •  Environmental testing

Corporate

•  CEE and advertising •  Benefits •  HR/staffing services •  Professional services •  Facilities

ED Materials

•  T&D electrical equipment •  Maintenance repair and ops •  Meters •  Wire and cable •  Pipe valve fittings •  Other materials

Generation

•  Newgen •  Nuclear •  Hydro

•  Project services •  Construction services •  Engineering and

technical services •  Backfill and patch paving

ED Services

Estimated Annual Spend

PG&E Confidential 8

In 2008, There Were Four Major Factors Putting Tremendous Stress on the Sourcing Organization

Budget pressure across the enterprise

LOB request for sourcing to be more strategic Transmission

reliability

The impact was above what the sourcing organization could support with existing infrastructure

Hydro-generation re-licensing

Volatile market

conditions

Increased demand for service and support from across the company

Organization capabilities and resources

Processes, e.g., strategic sourcing

Transactional technology and policy support

Market Pressures That Catalyzed Change

1 2 3 4

PG&E Confidential 9

BUILDING A COMPELLING BUSINESS CASE

How We Secured Trust and Funding

PG&E Confidential 10

The Stakes Are High

The leadership team is faced with non-stop problems

•  Setting company direction and expectation of stakeholders

•  Managing state and regulatory agency expectations

•  Planning and executing operational growth

Stakes are high professionally and personally

•  Most executives have significant compensation tied to their performance

•  There is tremendous turnover in the executive level

Typical decisions the leadership team will make from your insights include:

•  Funding your project

•  Changes to core business operations

•  Capital investment decisions

•  Organizational alignment decisions

•  Budget decreases and or increases

•  Positions with state and regulatory agencies

•  Acquisitions

They need to be able to understand, measure, and trust you because you are closer to the details than they are…

As you know, the stakes are high for the leadership team…

They are expecting to use your insights to execute key policy

decisions


Practical Insights

Adherence to a few core, practical insights will help secure leadership support for your initiative

•  “Make them an offer they can’t refuse” financially

•  Propose a comprehensive program focused on people, process, and technology

•  Focus on long-term improvements and the sustainability of new concepts

•  Execute the fundamentals well

•  Build trust with the leadership that they have firm control over their investment


Funding for the Program Came from the Business Lines

PG&E, with PRTM/ProcureAbility support, designed and implemented a staged, enterprise-wide program to build a high-performing and sustainable sourcing organization

Business lines (via a corporate efficiency fund) provided the funding •  Funding covers consulting fees, external hires, training, and other investments

•  Funding levels taper off over time as internal knowledge and skills are developed

•  Savings are clearly documented and signed off by LOB executives and finance

Assessment Wave I Wave II Wave III Timing May 08–Sept 08 Oct 08–Mar 09 Apr 09–Sept 09 Oct 09–Mar 10

Scope

•  Business unit (BU) engagement/buy-in

•  Diversity potential •  Savings outlook •  Business case to

capture benefits

•  Governance •  Innovative sourcing

strategies •  Process design

•  Staffing •  Skills development •  Supplier management •  Category management

•  Sustainable as a leading utility

Consulting Dependence •  90% •  75% •  50% •  0%

Cost •  $ •  $$$$ •  $$$$ •  —


The Team Actively Engaged Leaders across the Entire Enterprise

Corporate Relations (1)

Terry Stelling

Corporate Communications (1)

Renee Parnell

Customer Care (16)

Jan Berman Chris Bober Helen Burt Debra Ervin Ila Homsher Felecia Lokey Lynn Morrison Jenna Olsen Jonathan Seager Shelly Sharp Jodi Stablein Andrew Tang

Al Torres Wendy Trotter Vicki Watts Brad Whitcomb

Diversity (1)

Bill Harper

Energy Delivery (19)

Tara Agid

Fernando Aquilar Bill Arndt Chris Baker Jane Evans Tom French Gayle Hamilton Lorene Harden Bill Hayes

Greg Kiraly PJ Martinez John Meade Bruce Mosly

Terry Morford Greg Starnes Morgan Swisher Ronald Whyte Geisha Williams

Bob Woerner

Engineering and Operations (13)

Kevin Dasso

Joel Dixon David Gilbert Bob Howard Mark Johnson Marie Jordan J.C. Mathieson Peter Ng Charles Poston Daran Santi Ken Wells

Mark Wilhelm Donald Willoughby

Finance (21)

Barbara Barcon Michael Burger

Gabe Caorsi Joe Dioletto Ana Duffy

Jay Dore Trung Ha Dean Heatherington Romi Kaur

Tanya Moniz-Witten Joe Noya Joe Osborn

Kathleen Patten Betty Phillips

Matthew Putnam David Ramos Karen Roth Lupe Roush Sarah Seibert George Vaughn Chris Winter

General Counsel (5)

Kathleen Brown Elizabeth Collier Sandy Hartman Peter Ouborg Nancy Stamm

Human Resources (9)

Mary King Kevin Leach Steve Leder India McClellan Chris Pickett Robin Rasmussen Tim Silvera John Simon Robin Wythe

Investor Relations (1)

Gabriel Togneri

ISTS (22)

Brian Abrahamson Diane Ayers Jeff Bennett Jim Black Ralph Cable Ken Connally Robert Dieterich Ronald Dunford Bob Glynn Silvio Gordillo Joe Hearney Barbara Horanic Pat Lawicki David Liang Brandon Maio Chris Maturo Eugene Park Pete Pence Valerie Tigert Toby Tyler Stephen Whelan Malia Wolf

Nuclear (3)

John Conway Cary Harbor Bob Oldenkamp

Power Generation (16)

Aaron Adams Tom Allen Steven Anderson Jim Barrett Steve Bennett David Bergmann Steve Broach Stacy Evans Chris Herrala Carol Lathrop-Riboli Steve Royall Randy Livingston

John Maring

Rob Potter Joe Sutton

Alvin Thoma

Shared Services (6)

Des Bell Dave Meisel Chris Piacentini Mark Rozario Gerry Young Corey Wong

Sourcing and Supply Chain (31)

John Buckley Perry Bumanlag Mario Cassettari Steve Coleman Kathleen Elliott Joe Germanetti Roy Green Paul Hann Gary Kaufmann Elizabeth Krieg Mary Kruchten Yonnie Leung Michael Lohr Glenn Lopez Art Madson Manny Meister Mike Meko Judith Olney Alan Porter Rudy Promani Jocelyn Quintana Del Ritchie Michael Ritter Rick Saverien Ronald Schoenfeld John Skerry Christopher Snyder James Sprecher Charles Twamugabo Victor Villar Susan Wells

Suppliers (8)

Don Mundy, Black & Veatch Nancy Hendrickson, CH2M Hill Richard Weeks, Core Staff Howard Bowles, Davey Tree Dave Locke, GE Carol Lee, IBM Patrick Nash, Okonite Roger Snow, Richard Heath


To Ensure Alignment with LOBs, Key Principles Were Locked Down Early

Key principles for benefits realization were developed jointly with finance to guide category teams and manage savings consistently

Planning for Benefits Capture

•  Savings resulting from strategic sourcing will support LOBs’ efforts to achieve plan targets and will not be deducted from operating plan targets

Benefits Allocation •  Business owners will determine how to take advantage of direct spend cost reductions

•  Charge-back organizations will work with affected LOBs to determine impact of savings on charge-backs

Benefits Tracking and Monitoring

•  Sourcing and lines of business must jointly agree on savings results

Program Principles


Path Forward—Delivering Sourcing Results Wave I (Oct 08–Mar 09) Wave II (Apr 09–Sept 09) Wave III (Oct 09–Mar 10)

IT and Telecom

•  IT services: computer programming and consulting

•  IT services: ongoing projects •  Telecom equipment •  Commercial printers, copiers,

MFDs •  Servers and storage •  PCs and peripherals •  Software: strategic vendors

•  Software: other •  Telecom services

Corporate Services,

Transportation, and EHS

•  Advertising, media, direct mail •  Staff augmentation •  Management consulting •  LIEE (energy partners) •  P- and c-card •  Office supplies •  Travel agency fees

•  Facilities •  Transportation vehicle and

equipment •  Transportation rental •  Print

•  Legal •  Transportation parts •  Environmental site remediation

services •  Accounting and audit •  Licensing and permitting

services

T&D and EHS

•  T&D electrical equipment •  T&D services: EPC current

awards

•  MRO •  T&D services: EPC

incremental awards

•  Vegetation management •  Construction services •  Engineering and tech services

•  Pipes, valves, and fittings •  Wire and cable •  Backfill and patch paving •  Helicopter fixed services

Generation •  Hydro: program management •  Nuclear engineering, design

•  Nuclear labor brokerage

Sourcing Commitment to

Efficiency Fund Leadership Team


Path Forward—Embedding Sustainability

Sourcing Implement Strategic Sourcing in Three Waves to Reduce Spend

Organization Design

Organization Model Design and transition to an appropriately staffed, center-led organization structure

LOB Engagement Model

Define a line of business engagement model between sourcing and each LOB

Skills and Capabilities

Increase sourcing and procurement skills within client and the sourcing organization

Process and Tool Improvement

Category Management Improve category management and sourcing capabilities

Supplier Relationships Implement supplier tiers and the corresponding relationship model

Procurement Process Streamline the requisition to pay process, tools, and support


Path Forward—Formal Process for All Categories

Our sustainability plan included the implementation of forward-looking category plans, which defined the category roadmap for 2010–2012 A category plan has four sections:

1.  Internal analysis

2.  External assessment

3.  Goals and strategies

4.  Initiatives to implement strategies

A category plan requires collaboration with the business unit and finance

Category plans became the basis for sourcing’s annual operating plan PG&E Confidential 6

Key Suppliers:

Plan Deliverable: 1. Executive SummaryCategory Profile/Scope:Generation Supply Chain supports the sourcing of key materials and services to our Hydro facilities located within 48 counties of northern and central California. Key areas of focus are in professional engineering, O&M and construction services catering to Hydro Power Generation service and project-based nature. Internal:Hydro Power Generation is a vital component of the Generation portfolio. PG&E has implemented program management to address the increase in capital and expense projects, equipment asset management and FERC relicensing.External:Professional engineering service suppliers are at or near resource capacity, their ability to obtain capital is now more challenging due to the downturn of the financial market.Risk:•CPUC approval for project-related rate filings could be delayed.•Lack of resources and capital to support safe maintenance operations.•Inability to keep up with increase in capital and expense programs.

LOB Business Priorities:

• Cost management - avoid engineering and project cost/schedule overruns.

• Permitting - rely on strong EPC Partners to adhere to strict FERC guidelines.

• Planning - meet all Helms pumped storage facility emergent work demands.

• Streamline powerhouse outage schedules.

• Focus on Strategic Alliance Partners with proven reliability, technology and project management experience.

• Address all capital and expense projects with defined timelines.

Key Strategies:•Establish uniform process for LOB involvement in sourcing.•Target diverse supplier outreach with Strategic Alliance Partners.•Focus on integration with Parsons for program management.•Streamline project management workshop initiative.•Strengthen partnerships with engineering alliance partners.

Key Initiatives:•Implement Parsons program management roadmap.•Supplier collaboration and performance management.•LOB engagement projects:

•Category plan and sourcing process coordination •Engage and understand Hydro Power Generation business process and requirements.•Market intelligence coordination.

The Executive Summary is the first Category Plan deliverable but is completed last

Top 3 Suppliers in 2009

Vendor A

Vendor B

Vendor C

All Others


WHAT WE ARE COMMUNICATING BACK TO THE EFFICIENCY FUND

Our Commitment to Results


Results to Date—Savings and Diversity

Sourcing will exceed its savings commitment to the efficiency fund by over $47M and deliver $192M in diversity spend*

Sourcing Initiative Annualized Savings Results

Sourcing Initiative Diversity Results

$79M

Total Wave II

$113M

Wave I

$40M$40M

$65M$62M

+63% +55%

Wave II Wave I

Actual Target

* Wave II results are not finalized yet


Organization Training Skills Transfer

Results to Date—Establishing a Leading Organization

Nearly 25 new hires were added and extensive training was provided to strengthen PG&E’s overall sourcing capabilities

• 23 new positions approved • Hiring included two directors

and 12 category leads • Recruited senior external

resources to build capabilities and bring new perspectives into the organization

• Sourcing “boot camps” attended by all category team members

• Boot camp training delivered by sourcing professionals

• Customized training (e.g., analytics) delivered by consultants

• Transition from consultant-led to PG&E-led in Wave II

• Focus on analysis and communication skills

• PG&E responsible for leading analysis and developing executive presentations


OUR PROGRAM APPROACH TO ENSURE WE ACHIEVED THE RESULTS

Execution


Q1 2008 Q2 2008 Q3 2008

Develop Wave Plan

Conduct Strategic Sourcing

Assessment

Strategic Sourcing—

Wave I

Sustainability

The Program Roadmap Balanced Sustainability with Sourcing and Diversity Goals

Transition and Ramp up Suppliers

Sign Contracts and Plan Implementation

Conduct Negotiations and Select Suppliers

Execute Sourcing Events and Define Negotiation Strategies

Develop Sourcing

Strategies

Assess Marketplace

Create Category Profiles Ramp

up Wave I

Roll out Tools to Larger Organization Implement Strategic Sourcing Process

Develop BIC Tools Assess Tools

Procurement Excellent

Assessment Profile Spend

5–6 Weeks

6–9 Months

Roll out Model to Larger Organization Pilot LOB Engagement Model Develop

LOB Engagement Model

Assess LOB Needs

Upgrade Skills (Training, Coaching, Select External Hiring, etc.) Create Plan to Bridge the Gap

Assess Skill Gaps

Execute and Continuously Improve Program Implement Program

Develop Communication

Program Analyze

Audiences

Strengthen Sourcing

Organization

Deploy an Effective

Communication Program

Partner with LOB


All Categories Went through a Structured Sourcing Process

Each spend category went through a gated sourcing process that consisted of four milestones and achieved business case sign-offs from officers in sourcing, LOBs, and finance

Governance milestones

Kickoff

•  Identify potential suppliers •  Define sourcing strategy

and levers

•  Shortlist suppliers for negotiations

•  Negotiation strategy defined

•  Negotiations completed •  Award recommendation

developed •  Savings defined

•  Annualized savings approved from finance

•  Implementation plan defined

2

Sourcing Strategy

Incumbent Negotiations

( Vendors A and B)

1

Issue RFP to Select

Manufacturers(e.g. Vendors C, D

and E)

2

Issue RFP To Distributors

(e.g. Vendors F and G)

3

Manufacturers in ScopeSourcing Strategy

Manufacturers withIncumbent Relationships

Manufacturers with NoIncumbent Relationships

Manufacturers withIncumbent Relationships

Manufacturers with NoIncumbent Relationships

• May or may not supply PG&E currently

• Primary focus on LCC manufacturers

• Relationships with multiple distributors in region

All manufacturers Serving PG&E

(Pursue if #1 and #2 do not meet objectives)

Products in Scope

EstimatedSpend 2010 Comments

• All products $xx.xM

• PG&E requires value-added services for most products

• PG&E largely satisfied with services (pipe yard, VMI, forecasting, etc.)

• Large and smalldiameter pipe

• Standard pipe fittings

$x.xM

• Vendor D is in YYY, CA; lowers logistics costs ~5%

• Quantify opportunities to work directly with manufacturers - balance savings potential with implementation costs

• Use information to support incumbent negotiations

$xx.xM

• Standard pipe fittings $ xx.xM

• Pursue only if sourcing strategies #1 and #2 do not meet objectives

• Consider alternative distributors for defined portion of spend

3

Evaluation of supplier capabilities shortlisted five suppliers however, Vendors A and B will be considered for negotiations as they are the only 2 suppliers bidding for Bus bar• Only Vendor C committed to diversity contribution, discuss with other suppliers during negotiations

9

Vendor W

22

20

2

Vendor A

25

23

2

Vendor Q

26

22

4

Vendor L

27

25

3

Vendor E

30

28

2

Vendor P

30

27

3

Vendor O

31

28

3

Vendor M

33

31

2

Vendor X

36

32

4

Vendor T

37

34

3

Vendor G

38

35

3

Vendor B

40

38

1 2

Vendor C

52

40

3

CapabilityDiversityOther

RFP Evaluation Results

Other includes Exceptions and RFP Completeness

CUT OFF

• Cannot meet all service requirements• Limited value added services• No locations in PG&E territory

Poin

ts (M

ax: 7

0)

Shortlisted Supplier

4

Wire & Cable Award Scenarios Overview

The team has identified three potential award scenarios based on two rounds of negotiations with Wire and Cable suppliers:

Option 1 Option 2

Estimated Savings $5.1M $5.6M

Diversity $22.4M $20.2M

Suppliers

• Vendor A• Vendor B• Vendor C• Vendor D

• Vendor A• Vendor C• Vendor D• Vendor E• Vendor F• Vendor G

(Recommended) (Recommended)

$22.4$20.2

Option1 Option2

Millions

$5.1 $5.6

Option 1 Option 2

Mill

ions

Estimated Savings Diversity

Recommended

5

Wire and Cable Business Case Estimated Annual Savings Overview

Portfolio T&D Materials

Affected LOBs(% of spend) 75% Elect Distribution 25% Elect Transmission

Contract Details Establishing new contracts with incumbent suppliers

Key Suppliers Vendors A, B, C, and D

Award Detail (2010 Year)

Supplier Award Estimated Savings ($)

% of Total Savings % Diversity

Goal (2010)

Planned Results (Projections for 2011 & 2012) Vendor A $xx.xM $x.xM 94% 60%

Spend $xx.xM $xx.xM in 2011$xx.xM in 2012 Vendor B $xx.xM $x.xM 3% 12%

Savings $x.xM 10.9% $x.xM in 2011$x.xM in 2012

11.2% in 201111.2% in 2012

Vendor C $x.xM $x.xM 2% 0%

Vendor D $x.xM $x.xM 1% 0%

Diversity $xx.xM 44% $xx.xM in 2011$xx.xM in 2012

44% in 201144%In 2012 Total $xx.xM $x.xM 100% 44%

Expense Capital Non-Earning Core Team

Savings % 0% 100% 0% Lead: Paul Hann/ Pat GeoffreyCore Team: JC Mathieson, Carlos Araquistain, Dan Quinn, Rose Poquiz, Nick Bhatt

Business Case Summary Approval Signatures & DateSummary: Achieve 10.9% savings across $xx.xM (2010) in Wire and Cable spend, while improving supplier diversity participation through an RFP for multiple categories and negotiating with the incumbent for medium voltage cable.

Decision Summary: Approval to proceed with contract awards to incumbent Wire and Cable suppliers

Business Implications: Minimal risk by negotiating with incumbent suppliers

Assumptions : (See appendix of Business Case Milestone presentation)

Sourcing (Steve Coleman)

Elect T&D (PJ Martinez)

Elect T&D (Greg Kiraly)

T&D Business Ops (Bill Arndt)

T&D Business Ops (Alynn Delisle)

Business Finance (Matt Giesecke)

Projected Savings

Timeframe Q1 ‘10 Q2’10 Q3 ‘10 Q4 ‘10 Q1 ‘11 Q2 ‘11 Q3 ‘11 Q4 ‘11 Q1 ‘12 Q2’ 12 Q3 ‘12 Q4 ‘12

Projected Savings $x.xM $x.xM $x.xM $x.xM $x.xM $x.xM $x.xM $x.xM $x.xM $x.xM $x.xM $x.xM

$xx.xM$xx.xM

Spend 2010 Adjusted

Savings 2010

Baseline 2010

-10.9%

Business Case

Sourcing Strategy

Award Scenario

Negotiations Strategy


Program Results Were Tracked through a Weekly Dashboard

Category Weekly Status/ Trend

2009 Targets Results to Date Milestones

Savings $M

Diversity %

Savings $M

Diversity %

Sourcing Strategy

Negotiation Strategy

Award Scenario

Business Case

Approved

Hydro $5.0 5% $10.1 25% Comp. prior 11/13/08 12/03/08 01/26/09

T&D Materials $8.0 25% 10/28/08 11/13/08 A:02/17/09 A:03/03/09

T&D Services $3.0 25% 11/13/08 12/18/08 03/04/09 03/19/09

T&D Const. Services Civil $0 20% 12/18/08 12/18/08 02/03/09 03/04/09

T&D Const. Services Electric $0 20% 12/18/08 02/03/09 03/04/09 03/19/08

IT Services $10.0 28% 12/18/08 02/11/09 03/12/09 03/30/09

Marketing $3.0

29%

$10.6 32% Comp. prior 10/24/08 11/13/08 12/18/08

Staff Augmentation $3.0 12/18/08 02/03/08 03/19/09 03/19/09

Office Supplies $1.0 $1.3 92% 10/14/08 11/13/08 01/15/09 01/29/09

Management Consulting $3.0 12/11/08 02/03/09 03/04/09 03/19/09

Target $38.0 25.0% $22.0 32.8%

Issues Impacting Goals On track Potential Issues


To Ensure Success, We Established a Collaborative, Cross-LOB Leadership Team

Disciplined project management is about teaming and cadence, not bureaucracy and status reporting

Benefits Realization

§  Finance §  Internal Audit

Critical success factors §  Small, cross-functional core

teams §  Program management

meetings led by senior leaders—PG&E Directors and PRTM/ProcureAbility Partners

§  Significant finance involvement

§  Flexible stakeholder involvement mechanisms

§  Clearly defined decision points (milestones)

Steering Committee/BU Officers §  Set diversity and savings targets §  Track results §  Provide project funding

Leadership Team §  Own overall program results §  Make key sourcing decisions at milestone meetings


Difficult Topics This Team Addressed

The governance structure was put in place to address difficult topics along the way that could interfere with the program’s success

•  Willingness to consider other suppliers

•  Willingness to test different pricing models and contract terms for best value

•  Commitment to utilize the full strategic sourcing process

•  Willingness to challenge existing specifications and business processes

•  Willingness to evaluate scope and challenge internal and external cost for best total value

•  Willingness to work cross-functionally and collaboratively

•  Business unit willingness to help realize savings and allocate budgets accordingly

•  Managing and mitigating key risks


We Built Alignment with the LOBs and Momentum by Requiring Formal Signatures

Results •  Successfully met marketing’s

requirements and sourcing’s goals

•  Realized 22% in overall savings, significantly exceeding 5% savings target

•  Reduced media commissions by 2%

•  Awarded multiyear, multimillion-dollar contracts to two Tier 1 contracts with mirror capabilities, ensuring supplier performance and business continuity over the contract term

•  Executed both Tier 1 contracts within the three months, ensuring business continuity for marketing

Signed Marketing Business Case

Signatures from LOB, finance, and sourcing leaders

Example Business Case Summary Dashboard


We Ensured Sustainability by Having Portfolio Leaders Deliver the Training

Training began with identifying skill requirements, assessing individual’s gaps relative to those requirements, and defining individual and group training to address the gaps

Individual Development Plans Capabilities and Skills Training Process Training

•  Individual development plans for all category leads and procurement specialists −  Training tied to developing specific

skills to advance from novice to proficient to advanced to master

•  Analyst development program for sourcing analysts

•  Negotiations workshops •  Executive presentation

development •  Business insights/analytics

−  Spend analysis and baseline creation −  RFP analysis −  Business plan and budget analysis

•  Strategic sourcing •  Category plan development

150+ people trained 100+ people trained 200+ people trained

PG&E Confidential 1

Procurement ExcellenceSkills & Capabilities Improvement

Sourcing Skills and Capabilities Baseline Results


LESSONS WE LEARNED THAT WILL MAKE YOUR PROGRAM MORE SUCCESSFUL

In Summary


Wrap-up / Lessons Learned

Achieving lasting results was a result of a vigorous dynamic between management direction and organizational motivation—what we refer to as “push-pull”

LastingResults

Articulate the Goal

Identify the Organizational

Scope

Define the New

Operating Model

Maintain Momentum

and Excitement

Establish Sustainable Capability

PUSH

PULL

Lasting Results

•  ~40% diverse spend based on award allocations

•  ~$125M annualized savings

•  All category leads “proficient” or “advanced” skill rating

•  Project on budget, on time

Goals

•  Defined comprehensive performance targets—diversity, savings, transaction productivity, skills enhancement

•  Required signed-off business cases to close each sourcing event

Organization Scope

•  Engaged utility officers, business units, and sourcing employees

New Operating Model

•  Executed innovative sourcing strategies

•  Defined ongoing processes—both strategic and tactical

Momentum and Excitement

•  Ran disciplined and nuanced program management

•  Engaged BU VPs and Directors in decision making

Sustainable Capability

•  Developed individual skill development plans

•  Conducted extensive training


PG&E Partnership with PRTM/ProcureAbility

PG&E partnered with PRTM and ProcureAbility who have forged a relationship to address supply chain challenges in the utility industry

•  Established track record for superior results across procurement and other facets of the supply chain -  Over 1,000 assignments in procurement/supply chain management

-  Over 200 projects in electric and gas sectors

•  Clear understanding of the distinctive problems of the utility industry and its supply chains

•  Deep experience with PG&E operations and strong relationships with senior management and LOB executives

PRTM/ProcureAbility had complementary skills that were leveraged to create value to PG&E

•  ProcureAbility: Market intelligence and research services, supplier diversity element

•  PRTM: Change management methodology to enable sustainability, organizational structure and performance


Questions?

For additional information or follow-up, feel free to contact us:

Steve Coleman PG&E Sourcing Director +1 415.972.7177 [email protected]

Rich Sheinfeld PRTM Director +1 917.806.5756 [email protected]

Conrad Snover ProcureAbility Executive Vice President +1 415.806.6726 [email protected]

Documents

Securing the Mandate to Achieve Cost Leadership and Build a … · 2017-07-10 · Steve Coleman • Director of T&D and Corporate Services Sourcing • Manages $2.8B+ spend, including