Vendor Management Cell – Essar GroupPresentation to all employees of Essar

March 2007

Why?

Vendor Management

• Governance

• Streamline & Implement SOP for Vendor Management

• Relationship management

• GLOBAL list of reliable registered Vendors

• Unified vendor code

• Managed acquisitions

Objectives

• Scattered Vendor Information across the group.

• Various format

• Centralized repository of vendor data

• Unification of vendor across the group

• Proper classification of vendor’s and flow of such authentic information across group

Key Issues

Methodology

• Study of existing system

• Opinion of stake holders

• Development & Implement of procedures & formats

• Web enabled system

• Centralized repository of vendor database

• Dialogue with Trade commissioner of various countries.

• TASK force for Unification of vendor across group

New System

• Vendor Information

• Pre registration evaluation

• Periodical evaluation of existing vendors

• Unification of vendor

• Centralized repository of vendor database

Pre Registration Evaluation

• Analyze the information provided by vendor

• Decision about the requirement of additional vendor for a specific product / service.

• Panel of expertise for various product/services for pre registration evaluation

• Feedback from the listed customer of a vendor

Panel of Expertise

PANEL OF EXPERTISE FOR PRODUCT / SERVICE GROUP Number of Experts

Automation System 10

Cement 4

Construction Equipments 7

Control Valves, PRD 10

Electrical Consumables 8

Field Instruments 10

General 8

HT & LT Motors 8

HT & LT Switchgears 8

Instrumentation Consumables 10

Material Handling 9

Mechanical Consumables 14

Piping 11

Refractory Insulations 7

Rotating Equipment 15

Static Equipments 7

Steel 4

Technology Package – Power 11

Technology Package – Refinery 7

Technology Package – Steel 7

Transformer & High Technological Packages 8

Utility Packages 18

Grand Total (Considering common experts )36

Evaluation of existing vendor

• No of vendors to be evaluated:

High Spend Suppliers : Can be determined by 80-20

rule

SupplierSpen

dInclude

ABC Company

XYZ Inc

Paper Clips Store

Spend Captured

INR

Yes

Yes

Yes

Value

High impact supplier: Shut company’s production line down / Project delayed:QualityDelivery

Reduction of profit?Price

Poor after sales service

Vendor Scorecard

Performance

MeasuresWeightage (%) Score of supplier

Weighted point

Price 30 70 21

Quality

40 80 32

Delivery

20 70 14

Service

10 70 7

Total 74

Supplier weighted average scorecard

Flow Chart (New Vendor)

CENTRALIZED VENDOR LIBRARY

NEW VENDOR

VENDOR REGISTRATION

FORM

APPROVAL AUTHORITY

VENDOR MANAGEMENT

CELL

PANEL OF EXPERTISE

PRE REGISTRATION EVALUATION

+

EV

ALU

ATIO

N

REP

OR

TAPPROVE

REJECT

Flow Chart (Existing Vendor)

CENTRALIZED VENDOR LIBRARY/

SAP

EXISTING VENDOR

USER DEPARTMENT

(ACROSS GROUP)

VENDOR MANAGEMENT

CELL

EVALUATION (WAR)

VENDOR RATING

VENDOR RATING

Unification

Mile Stone Target Date

Consolidate & mapped the cleaned vendor data of all client

31st March 2007

Mapping of unified vendor code with existing code

31st March 2007

Identify & Fix the Vendor block types :Activity & stage wise blocking of vendor

15th March 2007

Authorize to MDM team for vendor code creation in new system

1st April 2007

Unification Flow Chart

REQUEST FOR VENDOR CODE CREATION

(USER DEPARTMENT )

AUTHORIZATION BY HOD (USER DEPARTMENT )

REQUEST TO MDM

INFORMATION AVAILABLE IN DATABASE

/ SAP CODE EXISTS

YES

NEW / EXISTING SAP CODE

NO

VENDOR APPROVAL PROCESS

NEW SAP CODE

Benefits

• Standard procedure of vendor registration & approval

• Reduce Risk

• Gain flexibility

• Improve vendor performance

• Obtain competitive advantages

• Unified vendor code across group

Special Emphasis on China

• Global Sourcing team in China

• Primary responsibility: Evaluate vendors for different products & services

• Statistics as on February 2007.

• Another 527 nos vendors have been identified for evaluation

Category RecommendedNot

RecommendedGrandTotal

Common 51 4 55

Power 3 1 4

Refinery 12 5 17

Steel 19 1 20

Total 85 11 96

East Europe & CIS

Identification of new vendors:

COUNTRY

CATEGORY POLAND RUSSIA ROMANIA UKRAINECZECH

REPUBLIC

SOUTH KOREA

ITALY

POWER 10 3 3 2 6 3

REFINERY 1 1

STEEL 1 4 2 10 3

COMMON 35 25 20 13 15 18 25

MECHANICAL CONTRACTOR

14 1

ELECTRICAL CONTRACTOR

CIVIL CONTRACTOR

1 2

TOTAL 48 32 39 16 21 18 34

Trinidad project

VENDOR

CATEGORYCOUNTRY

BRAZIL VENEZUELA GUYANA

CIVIL CONTRACTOR 10 13 6

STRUCTURAL FABRICATOR

4 6

CONSTRUCTION MATERIAL

7 5

CONSTRUCTION EQUIPMENT

10 2

TOTAL 31 26 6

For Trinidad & Tobago integrated steel plant

Future Plans

• China model for Eastern Europe & Other low cost countries

• KAM concept

• Vendor self appraisal

• Vendor satisfaction program

• Centralized vendor library more informative.

• Vendor vs Cost trend

• Full proof vendor rating system

Approval process

Transaction

THANK YOU

Need your valuable suggestion for further improvementNeed your valuable suggestion for further improvement

E-mail: vmanagement@essar.comE-mail: vmanagement@essar.com