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AberdeenGroup 2012
Transforming the Procurement Function:
What Comes Next?
Eric Germa ANN INC.
SVP & Chief Procurement Officer November 13, 2012
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AberdeenGroup 2012
Session Agenda
ANN INC. Overview Our call to action The new Procurement operating model Our journey to sustainable value Your role in elevating the procurement function
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AberdeenGroup 2012
Company Overview
Leading Womens Apparel Retailer
$2.2B In Revenue In 2011
2 Brands, 5 Channels of Distribution
981 Stores Across U.S.
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AberdeenGroup 2012
We Have 2 Leading US Brands
Ann Taylor and LOFT
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AberdeenGroup 2012
With Four Store Channels:
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AberdeenGroup 2012
Our Call To Action Operational Excellence Opportunity
Indirect Spend 1
Store Lifecyle Management
2
Store Operations 3
Store Portfolio Restructuring
4
Organizational Effectiveness
5
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AberdeenGroup 2012
The First Year
Clear Purpose and Commitment
Finding the Right Talent
New Approach
and Process Discipline
New Value $
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AberdeenGroup 2012
Store Occupancy, Design & Construction
Store Supplies
Facilities Management
Information Systems Marketing
Non-Merchandise Spend
Corporate Services
Logistics
Direct Merchandising Directed Buys
eCommerce
Non-Merchandise Spend
Merchandise Spend
Human Resources
Our Sandbox
>70 categories and over 15 stakeholder groups
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AberdeenGroup 2012
Clear Purpose Global Procurement Vision
Partner with all Divisions/Functions to strategically source and proactively manage Ann Taylors non-merchandise spend, and build a best-in-class procurement function for sustained savings and competitive advantage
Mission
Provide the most responsive, expert, efficient and results-oriented support for all Ann Taylors divisions and functions
Ensure strategic cost excellence lowest cost on planet, then year-over-year productivity Act as a change agent in improving processes, compliance, and supplier performance Build superior sourcing, category, and supplier development expertise in key spend
areas - Marketing, Media, Store Development, Logistics, IT, Store Supplies, HR, Professional Services
Optimize supply base, and develop strategic suppliers Develop e-sourcing/SAP eProcurement center of excellence
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AberdeenGroup 2012
The New Procurement Operating Model Spend Management Deployment
Leverage spend analytics and e-Sourcing
Implement process discipline and procurement excellence
Shift balance from tactical to strategic work
Transform Spend Management Capabilities
Re-negotiate key contracts Address new spend areas through
Value Initiative Pipeline (VIP) Lead PMO for all OPEX initiatives
Create/Sustain New Value
Align with Divisions/Functions agendas Lead cross-functional teams on VIP
initiatives Drive spend management discipline
Become a Strategic Partner
Procurement Value Creation
Engine
Recruit and develop the best talent Mentor and coach staff One Team
Develop Procurement Talent
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AberdeenGroup 2012
Becoming a Strategic Partner Strong Governance
Brand/Division Program
Management Office (PMO)
Sourcing Team
Implementation Team
Sourcing Team
Implementation Team
Procurement Council
Sourcing Team
Implementation Team
Process Continuity
Business Unit Sponsorship and
Stakeholder Buy-in
Leadership Support
Governance Structure
Procurement Council Roles and Responsibilities
Provide procurement oversight Review and approve team
recommendations
Remove internal barriers Ensure benefits to company are
optimized and balanced against other business priorities
Ensure procurement guidelines are followed
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AberdeenGroup 2012
Becoming a Strategic Partner - Implementing a new Procurement Policy to drive early involvement and compliance
No PO, No Pay
Procurement Early Involvement
Competitive Bidding
2 Signatures on Every Contract
No Shadow Procurement
Non-Compliance Consequence Model
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AberdeenGroup 2012
Create/Sustain Value - Value Initiative Pipeline (VIP)
Category Spend Addressable ($MM) Target Annual Savings Target FY09
Savings ($MM) ($MM) (%)
Spen
d M
anag
emen
t (Fu
ll Pr
ojec
ts)
Data Center Managed Services 15.0% Telecommunications Internet Platform Temporary Labor Ocean Transportation Air Freight Customs Broker Services Wrap & Pack International Trade Legal Services Merchandise Trim Tags & Labels Merchandise eSourcing Demand Mgmt W&P, Hangers, Store Supplies
Acce
lera
ted
Sour
cing
POS Maintenance Corrugated Hangers Woven Labels Catalog Print Travel Hotels Office Supplies
Wave 2 Indirect Spend Total
Indirect Spend
1
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AberdeenGroup 2012
New Process Discipline In Search of Insights Source and Negotiate
Award And Implement
Implement New Processes
Measure Performance
And Continuously
Improve
Develop Pipeline and Annual Project Plan
Profile Category and
Identify Opportunities
Develop Sourcing Strategy
Benchmark and
Develop Solutions
Final Recommend-
ation and Approvals
Develop Savings/Re-Engineering Hypothesis
1 2
3a 4a 5a
3b 4b 5b
6 7
Value Initiative Pipeline
Category Profile
RF(x) Package
Savings Tracking
Realization
Supplier Scorecards
Baseline Approval
Form
Sourcing Strategy
RF(x) Grading
Contract Summary
Sheet
Quarterly Business
Review Form
Supplier Market
Analysis
Negotiation Strategy
Negotiated Savings
Form
Award Recommen
dation
Strategic Sourcing Deliverables
Risk Management
Form
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AberdeenGroup 2012
Transform Spend Management Capabilities What-if analyses
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Develop Procurement Talent A new Paradigm The New Strategic Sourcing Manager Customer-focused
Fact-driven, analytical
Technology savvy
Strong project management
A change leader
Value-driven
Accountable
Global mindset
Collaborative but assertive, and aggressive
Constantly reinvents
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AberdeenGroup 2012
Talent Development Excellence in Role Competency Senior Analyst Manager Senior Manager Director Senior Director
Problem Solving & Analytics - Process Effectiveness -Problem structuring & resolution - Analysis & synthesis Tools -Market Research -Spend Analytics -eSourcing -Scenario Planning
Identifies issues and independently leverages data sources and market research
Rigorously identifies issues and creatively uses all data sources to develop comprehensive fact-base
Develops new insights into issues, efficiently and creatively directs team to develop powerful fact base, leverages analytical tools, and shares market insights
Stretches team perspective, creates faster, broader, deeper insights into issues Drives team to high-quality deliverables and ensures actionable recommendations
Structures comprehensive approach to validate hypotheses, performs complex analyses, synthesizes and presents findings to stakeholders
Independently develops and directs hypotheses, develops solution and work plan while managing stakeholder relationship and requirements
Directs team to develop powerful fact-base, leverages new analytical tools Coaches team on structuring approaches to complex problems and adjusting strategy as needed Structures approaches to ill-defined problems
Builds Excel models and Powerpoint presentations
Builds and validates advanced Excel models. Develops well-structured and compelling Powerpoint presentations tailored to audience
Organizes and directs work; develops a comprehensive set of sound recommendations
Develops clear recommendations and feasible implementation plans
Challenges conclusions from analyses to ensure best quality. Sets overall messaging for audience, and reviews Powerpoint presentations
Builds RFx and projects on eSourcing platform
Builds and manages complex RFx and projects on eSourcing platform Probes and vets team members conclusions from Excel analyses and PPT presentations. Drives stakeholder decisions based on data and compelling logic/communications
Helps team to leverage Sourcing platform to accelerate value delivery
Leverages additional tools as appropriate (BIQ, TSC, etc.) Strategic Sourcing and Demand Management Knowledge -7Step process - Vendor Mgmt - SME - Sourcing & Outsourcing strategies - Cost models - Negotiations
Is proficient in the 7-step spend management process and the associated deliverables
Demonstrates expertise in the 7-step sourcing process and integrates the process into work activities
Trains cross-functional teams on the 7-step spend management process and clearly articulates all deliverables required
Sells Global Procurement and 7-step spend management process throughout organization. Has proven track record of executing large, complex sourcing programs, delivers sustainable results.
Subject matter expertise in 1-2 basic sourcing categories and strategies
SME in 2-4 basic sourcing categories
SME in 1-2 complex sourcing categories and advanced sourcing strategies across several basic categories. Considers alternatives to sourcing-only methodologies (e.g., specs improvement, joint process improvements).
Broadens SME across teams regarding complex sourcing categories and advanced sourcing strategies (e.g., specs improvement, joint process improvements, relationship restructuring, off shoring, demand management, etc.)
Demonstrates intellectual leadership in spend management
Coaches and leads others regarding strategies for addressing complex sourcing categories
Prepares accurate spend baseline and negotiated savings forms, detailing underlying assumptions
Reviews spend baseline and negotiated savings forms and obtains required signatures from project sponsors Develops advanced cost models and negotiation strategies
Reviews spend baseline and negotiated savings forms as needed Ensures executive alignment with project results Conducts ongoing follow-up with stakeholders and identifies new projects
Key Competencies
Problem Solving and Analytics
Spend Management Knowledge
Communication and Stakeholder Influencing
People Management
Strategic Planning and Sourcing Pipeline Development
Leadership and Commitment
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AberdeenGroup 2012
Storming Performing Ingrained
Spend Analytics
PMO
Complex Sourcing
Talent Development
Stakeholder Partnership
Alignment to Strategic Initiatives
Supplier Development
Excellence in Role
Value Creation
2009 2010 2011 2012 2013
Governance
Pipeline Management
Opportunistic Sourcing
Talent Acquisition
Our Procurement Journey
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AberdeenGroup 2012
What Comes Next? Background
Exceeded cost savings targets for four consecutive years!
Stakeholder satisfaction at all time high!
Procurement viewed as a Strategic Partner to the Business!
Results
Stakeholder Acceptance is a Must
Procurement Leadership must own the result
Must Align with the Business Strategy
Must Provide Career Growth Opportunities
Requirements Actions Interviews and workshops with over 30
Executive Stakeholders
Informal benchmarking and best practice discussions with Procurement Leadership
Tailored HR strategy for our people
Align Procurement Goals with Strategic Business Objectives
Focus on Managing Strategic Categories
Accelerate Strategic Sourcing
Enhance Data Reporting
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AberdeenGroup 2012
Strategic Supplier Relationship Management
Aligns with Ann Inc. corporate objectives (multi-channel growth; international expansion; and new store expansion)
SRM focuses on total relationship value (advanced capabilities, joint processes, innovation, etc.) not transactional issues
SRM positions Ann Inc. for capturing benefits above and beyond traditional Strategic Sourcing
We estimate Strategic SRM will deliver 40-50% of total benefits within the next 24-36 months!
(SRM) Program is a strategic initiative to transform how Ann Inc. manages its non merchandise suppliers
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AberdeenGroup 2012
The Pillars of Strategic SRM at Ann
Prioritize Define expectations at every supplier level.
Engage
Manage supplier engagement to drive collaboration among Ann staff and suppliers.
Measure Automated scorecards to drive improved supplier performance.
Invest Capabilities for planning and executing supplier development
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AberdeenGroup 2012
Create a vision generate excitement develop a team
Secure clear executive support
Stay stakeholder-focused price, quality, service, and innovation
Understand spend, develop fact-base, excel at analytics
Leverage technology
Establish team credibility by demonstrating early results
Find the best talent to support tomorrows vision, dont delay talent decisions
Embrace suppliers' capabilities and collaborate
Pick the battles that matterdont underestimate the time it takes to change behaviors
Communicate, communicate, communicate
Dont wait, create a sense of urgency
Lessons Learned Keys to a successful Procurement Transformation
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AberdeenGroup 2012
How Do You Lead? Procurement Leadership Style
Uneven
Jerk
Avoider
Doer Challenger
Problem Solver Ambassador
Strategist
Politician
Value Creation
Great
Superior
Average
Stakeholder Management
You
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AberdeenGroup 2012
What are your next BIG IDEAS? How do you improve stakeholder collaboration? How will you lead next year?
Closing Thoughts
"If you want to build a ship, don't drum up the men to go to the forest to gather wood, saw it, and nail the planks together. Instead, teach them the desire for the sea." Antoine de Saint-Exupery
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AberdeenGroup 2012
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AberdeenGroup 2012
Thank you
Eric Germa, SVP & Chief Procurement Officer
ANN INC. (212) 536-4355
Eric_Germa@anninc.com
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AberdeenGroup 2012
Transforming the Procurement Function: What Comes Next?Session AgendaCompany OverviewWe Have 2 Leading US BrandsWith Four Store Channels:Our Call To ActionOperational Excellence OpportunityThe First YearOur SandboxClear Purpose Global ProcurementThe New Procurement Operating ModelBecoming a Strategic Partner Strong GovernanceBecoming a Strategic Partner - Implementing a new Procurement Policy to drive early involvement and complianceSlide Number 13Slide Number 14Transform Spend Management Capabilities What-if analysesDevelop Procurement Talent A new ParadigmSlide Number 17Slide Number 18What Comes Next?Strategic Supplier Relationship ManagementThe Pillars of Strategic SRM at AnnSlide Number 22Slide Number 23Slide Number 24Slide Number 25Thank you Slide Number 27
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