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8/13/2019 Take That Little Step Exchanging
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TAKE THAT LITTLE STEP
How pilot projects can be the beginning
of a long and successful engagement
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© 2013 Xchanging plc
Horses for Sources Blueprint 2013 “HIGH PERFORMER” for ProcurementOutsourcing
Identified as a “LEADER” and “STAR PERFORMER” by Everest Research PEAK
matrix (Performance, Experience, Ability, Knowledge) for Procurement
Outsourcing
XCHANGING PROCUREMENT SERVICES
2
XPS at a Glance
• Practitioner Procurement Organization; led by former CPOs and SeniorSMEs.
• Ranked #3 globally (Everest Research Group). Annual sourcing ‘Spend
Under Management’: $4.4B and transactions of $21B processed• More than 5,000 sourcing initiatives completed that have delivered
savings in excess of $800M to our customers
• Customers in the USA, UK, Europe and Australia. Presently servingAerospace & Defense, Banking, Fast-moving Consumer Goods, Food &Beverage, Manufacturing, Real Estate, Retail and Logistics industries.
Xchanging provides Procurement, Processing and Technology servicesinternationally for customers across multiple industries
• $1B+ company founded in 1999 with more than 8300 staff supportingcustomers in 50 countries.
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© 2013 Xchanging plc
MARKET TRENDS
3
• Procurement outsourcing rapidly growing since 2000• 2013: Procurement outsourcing represented a US$ 1.7B market; CAGR 13%
• Service providers manage over $220B of spend for their customers
! Mega trends
– Revenues flat or declining " focus on cost management
– Regulatory pressures" need greater controls and improved compliance measures
– Globalization"demand for knowledge and capacity in multiple geographies
! Macro procurement trends
– Indirect Procurement is an under-exploited area of shareholder value
– 10-30% of savings in indirect generate 2-3 margin points improvement
– Many companies only manage 50% of non-core spend
– 40% of negotiated savings never hit the bottom line
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© 2013 Xchanging plc
THE CFO’S OBJECTIVES
4
Reduce
operatingexpenses
• Increase return to shareholders• Increase top line• Decrease bottom line
Improve businessoutcomes
• Any money saved has to be visible in the P&L – increase operating profit,earnings per share and working capital
Tangible savings
• Savings need to be:• Tangible – need to be viewable on a balance sheet• Measurable – should be able to calculate them easily
• Auditable – the calculation needs to be verifiable
Who can the CFO call upon to deliver this value?
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© 2013 Xchanging plc
THE CPO’S CHALLENGE
5
The view from
the executiveleadership
• Increased role and higher profile of the CPO in strategic operations• Increased impact of procurement on corporate effectiveness• Procurement has the potential to influence up to 80% of operating costs
Direct Materialsand supply chain
• Critical to the company’s business• High level of maturity• Already on the radar of CFOs and CPOs
• Indirect categories managed at the department level• Finance executives do not have visibility to the magnitude of spend in each
category
• Individual category spend seems very low compared to direct materials• Spend is fragmented across business units, locations and functions; large
number of end users• Organizational challenge to implement a program and provide results by
combining:
• Expertise and skill needed for specialized sub-categories• Best in class processes
• Technology• Market Intelligence
IndirectProcurement
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© 2013 Xchanging plc
DIY VS. PROVIDER
6
Criteria Do it yourself Provider / Partnership
Timeline
• Recruitment, training can takebetween 6-12 months
• Realization of benefits can takebetween 18 -24 months
• Team ready from day 1• Benefits can be realized quickly, in
3-6 months, impacting businessoutcomes
Cost &Savings
• Initial recruiting costs high• High operating costs, but sub-
optimal utilization
• Savings only generated throughindividual sourcing events
• Savings remain in budget and notvisible
• Self funded, P&L positive• Higher level of savings achieved
through a partner’s global
infrastructure, talent andrelationships
• Savings can be strategicallyredeployed
Process &
Governance
• Success of the programdependent on procurement’srelationships and capabilities of
getting buy-in from stakeholders• Compliance depends on end users
and not a procurement function
• External programs have high level ofvisibility in the organization – acts asa powerful change and
compliance agent• Providers have proven model for
stakeholder engagement
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CHOOSING A PROVIDER
7
Engage anadvisor
Build abusiness
case
Get internalbuy-in
RFI / RFPprocess
Selectionand duediligence
ContractingImplement
ation
Engagesupplier (s)
Analyzecurrentstate
Buildbusiness
case
Presentbusiness
case
Approvalto proceed Contracting
Implementation
Competitive process
Sole sourced process
• Time: Drawn out process, sometimes over 12 months• Cost: Consulting engagements are typically investment heavy• Unclear on provider’s real capabilities• Complicated decision making process• Loss of focus
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DECISION MAKING PROCESS
8
• Cultural fit• Disruption to the business• Nervousness of the retained organization• Fear of the unknown
Federated decision making processC-Suite, Business stakeholders, Functional Heads, Procurement support
• References• Risk management• Executive mandate
Key challenges Mitigation strategies
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START SMALL – WITH A PILOT
9
• Defined scope, defined end date, expected results
DefinitionDemonstration in principle, whose purpose is to verify that some concept or theory has
the potential of being used in a larger scale
Activities
Types • Category; initiative; location;
End game
Definite
Conditional
Undecided
• Leads on to a full-fledged engagement
• Will expand only if pilot is successful
• May not lead to a larger engagement, but can lead to otherprojects
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SELECTING THE RIGHT CANDIDATE
10
• Manageable category• Contracts up for renewal
• Projects in-flight• Suitable stakeholders• Industry environment
• Critical mass spend• Ease of implementation• Availability of resources
Property and facilities IT & Telecoms
MRO Transportation
Categories Locations
• Similar language and market• Stakeholders eager for change• Important enough for the overall business
Function
• Central function• Established relationship with procurement• Commoditized
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ORGANIZATION AND GOVERNANCE
11
Project Lead
Category manager
Sourcing analyst
Finance manager
Project Team
R e g u
l a r c o m m u n i c a t i o n a n d u p d a t e s
Steering committee
Provider Customer
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TYPICAL TIMELINE
12
Week1
Week2
Week3
Week4
Week5
Week6
Week7
Week8
Week9
Week10
Review Spend Data/Contracts
Needs Formalization
Market Analysis/Supplier List Development
Finalize Strategy
Bid Analysis
Negotiations
Supplier Selection
Contract Execution
InternalCommunications
Savings Calculations
Launch eRFX
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EVALUATION CRITERIA
13
Criteria Description
Cultural fit• Does the provider fit into the organization• Are they flexible and adaptable?• Do they manage change well?
Language andlocation support
• Can the provider handle local requirements?• How do they deal with stakeholders at a local level?• Did they leverage their regional presence?
Business and
Geographicaldifferences
• How does the provider manage conflict across regions?• How do they ensure stakeholders are always aligned?
Thriving in acomplexenvironment
• How does the provider deal with in-flight projects?• How do they deal with incomplete data?• How do they deal with changing requirements?
Savings andvisibility
• How much savings did the provider generate?•
How visible were they, during the process?• Did the customer see them as an extension of their organization?• Were they seamless in the way they implemented and transitioned their
services within the customer’s organization?
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© 2013 Xchanging plc
BENEFITS
14
RiskReduction
• Customer and provider understand each other’s processes• Risk mitigation occurs both ways
Financial• Benefits are realized in an accelerated time-frame for pilot projects• Customer is more confident in the overall business case
Validate
Capabilities
• Provider demonstrates capability• Exposes customer to best-in-class talent• Customer experiences providers research and benchmarking capabilities
Implementation• Validates implementation strategy• Provider aware of internal organization and constraints of the customer
CulturalFit
• Establish relationships with stakeholders• Establish relationships with customer’s suppliers
• Projects deliver immediate value and builds confidence in the program
Systems &Technology
• Provider understands customer’s system landscape
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© 2013 Xchanging plc
KAUSHIK DASBISWAS
15
Director of Solutions at Xchanging
14 years of experience in procurement, IT and business process outsourcing. Managed solutions, implementation and changemanagement for engagements in procurement, financial services, IT services and insurance services. Managed service deliveryprograms of up to $20M. Experienced in setting up, training and managing offshore service centers.Organizations
Kaushik has worked with organizations like BASF, Cushman & Wakefield, and GEP.
Defining process and solutions for full cycle source to pay processes as well as discrete projects; determining strategy andstandardization for delivery – onsite/onshore, near shore, offshore; defining multi-year solutions to increase process efficiency andeffectiveness; create business case, cost models and commercial models for outsourced services; help customers select best-of-breed technology solutions for spend analysis, sourcing, contract management and procure-to-pay processes;
Bachelor’s degree in Computer Engineering from the University of Mumbai and a certified PMP from the Project ManagementInstitute.
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THANK YOU
For further information please contact:
Kaushik Dasbiswas
Director of SolutionsE: [email protected]: +1 (973) 452-2015