Optimizing Indirect Procurement

through Global Outsourcing

Consolidation

General Motors

Dan MahlebashianGM Global Executive Director - Purchasing Services, RTP and

Enterprise SAP

The Hackett Group

Steven WrightSenior Director Strategy and Operations

www.sig.org/eval

GENERAL MOTORS

Optimizing Indirect Procurement through

Global Outsourcing Consolidation

March 2015

GENERAL MOTORSOptimizing Indirect Procurement through

Global Outsourcing Consolidation

Presentation for SIG Global Executive Summit

March 2015

| 3

Daniel A. Mahlebashian

GM Global Executive Director - Purchasing Services, RTP and

Enterprise SAP

Dan has a key role in the Global Business Services Organization (GBS), where he

serves as the Executive Director of Global Purchasing Services, RTP and

Enterprise SAP. In this role Dan is responsible for all Global Purchasing Services,

including Transactional and Tactical buying, flowing through Business Services, as

well as being the Global Process Leader for all Request to Pay and SAP activities

across the enterprise.

YOUR SPEAKERS

Steven L. Wright

Senior Director – The Hackett Group

Steve has over twenty-five years of strategic sourcing, procurement operations,

shared services/service delivery modeling, master data management, technology

implementation (Oracle/SAP) and business process outsourcing experience. In his

current role he directs client projects through all phases of deployment in Source to

Settle focusing on best practices in people, process and technology components.

His experience spans multiple industries including Pharmaceuticals, Manufacturing,

Distribution, Chemicals, Automotive, Technology and Services.

| 4

GM COMPANY OVERVIEW

• General Motors Company designs, builds, and sells cars, crossovers, trucks, and automobile parts worldwide with annual sales of $155B.

• We operate globally through GM North America, GM Europe, GM International Operations, GM South America, and GM Financial segments.

Our 212,000 plus employees work in 396 facilities touching six continents, they speak more than 50 languages and touch 23 time

zones.

• The company markets its vehicles primarily under the Buick, Cadillac, Chevrolet, GMC, Opel, Holden, and Vauxhall brand names, as well

as under the Alpheon, Baojun, Jiefang, and Wuling brand names.

• We sell cars and trucks to dealers for consumer retail sales, as well as to fleet customers, including daily rental car companies, commercial

fleet customers, leasing companies, and governments. In addition, the company offers connected safety, security and mobility solutions,

and information technology services (one example is OnStar which has continued to set the standard in vehicle safety, security and

connectivity for the automotive industry).

• The company, through its subsidiary, General Motors Financial Company, Inc., provides automotive financing services. General Motors

Company was founded in 1897 and is based in Detroit, Michigan.

| 5

HACKETT GROUP CAPABILITIES

The Hackett Group brings a broad array of integrated, business improvement capabilities to help clients

achieve World Class Performance through Operational Excellence

BENCHMARKING

STRATEGY &

OPERATIONS

ENTERPRISE

PERFORMANCE

MANAGEMENT

ADVISORY

TECHNOLOGY

SERVICES

TRANSFORMATION

CASH FLOW, COST, &

SERVICE

OPTIMIZATION

Growth Agility

Cash Service Cost Risk

| 6

THIS PRESENTATION WILL ADDRESS:

• How to conduct a current-state analysis and design a future-state Outsourced Service

Delivery Model for Indirect Materials and Services

• The elements of, and business case for, a Global Procurement RFP for Procurement

BPO

• The organizational impact of a proposed BPO future state model

• BPO Success Factors - Highlights of decision analysis, contracting efforts,

implementation planning and guidance on transition governance and management

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TO ACCOMPLISH THIS, WE’LL TALK THROUGH A KEY INITIATIVE THAT THE GM TEAM DROVE DURING 2013/2014

• Procurement BPO Trends, Challenges, And Hackett Approach

• The Challenge for GM’s Global Business Services (GBS)

• Guiding Principles And Vision

• GM Historical Environment

• Engaging In The New Service Delivery Model

• Success Factors

• What’s Next For GM GBS

• Q & A

| 8

Process integrity is

driving provider selection

Organizations are selectively outsourcing processes, however some Multi-Tower deals

enable end-to-end process synergies (e.g. Benefits Administration, Payroll, etc.)

Multi-Tower engagements enable a more simplified governance structure and end-to-

end service level visibility

Global delivery center

capabilities are expanding

Ability to deliver services for multi-national corporations

Language capabilities

“Around the Clock” / “Follow the Sun” service delivery

Country-specific requirements and knowledge

Disaster Recovery / Business Continuity planning

Maximizes mix of on-, near- and off-shore delivery

Service providers are

offering value added tools

and applications

Avoids client’s capital investment to develop and maintain tools and applications

Speed to value accelerated

Increases acceptance levels with perception of better service

Service providers

delivering more complex

services

Service providers are maturing beyond transactional processing

Service Delivery Centers are located in highly skilled and educated geographies

Highly developed training and education programs

In addition to productivity improvements and cost reductions, solutions include process

enhancements, standardization and full transformation

Business process outsourcing is rapidly expanding and has matured beyond transactional processes

to more complex services.

TRENDS IN OVERALL BPO/OUTSOURCING

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What to Outsource

• Procurement execution/transaction management

• Invoice reconciliation and auditing

• Catalog content management

• Spot buy and operation sourcing support

• Payments

• Contract management

• Strategic sourcing negotiation

SLAs to Manage

• Req to PO interval

• PO accuracy

• Adherence to policy & procedures

• % automated vs. manual

• Category savings

• Demand management savings

• Compliance savings

How to Choose a Supplier

• Ability to deliver savings

• Ability to deliver against SLAs

• Ability to support global operations

• Comprehensive P2P services

• Category expertise

• Technology infrastructure

• Economies of scale

Why Outsource

• Improve visibility into spending

• Focus on more strategic activities

• Access to improved pricing

• Access to category management expertise

• Lower transactional processing costs

• Access to supplier intelligence

• Reduce headcount

CONSIDERATIONS FOR INDIRECT PROCUREMENT OUTSOURCING

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Closely collaborating with Service Providers and establishing robust contractual agreements help

companies address specific Procurement Outsourcing challenges.

Procurement Outsourcing

ChallengesWays to Address Challenge

Baseline Spend Analysis

• Perform current state spend analysis (may include rationalizing data

sets from different systems)

• Define baseline per-unit cost (where possible)

• Align definitions of spend categories with Service Provider

Demand Management and Enforcing

Compliance

• Establish well-documented, standard processes for procurement

procedures and escalations (e.g. “No-PO, No Pay”)

• Drive compliance from internal executive management

• Utilize procurement cards and regular reporting within a business

intelligence component to provide transparency into spend

Measuring and Reporting “Identified”

vs. “Realized” Savings

• Collaborate with the Service Provider to ensure that the Savings

Methodology captures all potential saving scenarios (e.g. demand

management, compliance, cost avoidance) and that savings are

credible and verifiable

• Implement and enforce Service Level Agreements (SLAs) to hold the

Service Provider accountable to contract savings levels

• Drive savings into departmental budgets to ensure savings realization

Process and Application Integration

• Engage interrelated process and technical leaders to understand

constraints, handoffs and interface requirements

• Identify technical requirements, assign responsibility and identify

internal costs to implement

CHALLENGES UNIQUE TO INDIRECT PROCUREMENT OUTSOURCING

| 11

OUTSOURCING BUSINESS CASE BENEFITS & CHALLENGES TO CONSIDER

Potential Benefits

• Provides a “variable” cost structure

• Promotes the ability to focus on core competency

• Provides flexibility to scale up or down

• Provides defined services at agreed upon service levels and at consistent performance levels

• No requirement for location management infrastructure

• Clearly defined cost structure

• Leverage provider’s transformation execution capability

Potential Challenges

• Loss of intellectual property

• Limited ability to make processes more effective & efficient

• High attrition causing a loss of business/industry knowledge

• Increased compliance risk

• Limited flexibility due to being bound long term contractual agreements

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Market Scan

Conduct collaborative discovery sessions with service providers

Review and summarise session results / analysis of solutions

Facilitate collaborative solution work sessions with providers

Develop high level business case and determine feasibility of moving forward with short list of selected finalists

Decide short list of service providers

Implement

Develop detailed transition plans

Manage project plans to key milestones

Advise on contracting key milestones

Advise on transition related issues

Execute communication plans

Execute change management plans

Support the implementation of the transition plan

Planning

Develop baseline questionnaire for collect ion of pertinent data and demographics1

Facilitate Strategic Intent Workshop

Develop potential service provider candidate list based on requirements; communicate with candidate providers to gauge interest

Create Market Scan Package

Distribute Market Scan to participating service providers

Solutioning RFP

Develop initial drafts of Master Agreement, SOWs and Service Levels

Prepare Solution Packages (RFP) Service

descriptions Contract

documents Detailed

Baselines

Develop provider communication plan

Distribute RFP

Respond to service provider questions

Receive solution responses

Solution Refinement

Analyze provider Solutions

Conduct Collaborative Solution Sessions

Conduct Collaborative Transition Planning Sessions

Conduct Collaborative Contracting Sessions

Update business case

Risk Management

Perform remaining due diligence tasks

Develop request for best and final offer

HACKETT HAS DEVELOPED AN END-TO-END APPROACH TO BPO…

Service Provider Partner SelectionStrategic Intent

WorkshopMarket Scan

Transition

Management

Negotiations

Evaluate BAFO and update Business Case

Final down select (including internal options)

Provide contracting support :

Contract structure

Pricing structure/ change control

Finalise SOW

Finalise SLA

Exhibits

Negotiations Support

Support functional aspects of contract negotiations

Phase 1 Phase 2 Phase 3

1 – Baseline questionnaire and data collection will leverage prior benchmark data collection where applicable

Project Management

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FOR GM - DEVELOPING A GBS CAPABILITY IS LIKE BUILDING A CAR

• GM’s Mission – Design, Build and Sell the World’s Best Cars

• GM announced the formation of a GBS team in July of 2013

• Our GBS Mission – Develop a World Class Global Business

Services function that leverages GM’s enterprise strengths and

provides a competitive advantage to our business partners and

internal stakeholders

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GM’s future-state will drive toward global, common processes that deliver World-class Request-to-

Pay services through effective and efficient transaction centers...

Global, Common Processes – Leveraging GM’s Global Size and Scale

Global by Design Regional as Appropriate Local as Required

GUIDING PRINCIPLES ARE CRITICAL TO GBS SUCCESS

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• Deliver World-class Global Procurement Operations Services, including

transactional and support services, across enterprise Request-to-pay (RTP)

processes, to all GM customers in the most efficient and effective manner.

• We will achieve this by:

o Optimizing our RTP processes through a core set of end-to-end channels,

o Utilizing proven technologies, leveraging SAP, to drive seamless and consistent service delivery,

visibility and compliance

o Enabling highly effective sourcing and procurement processes,

o Fostering a global environment of innovation and continuous improvement,

o And leverage our internal global, cross functional GM talent and leading third party strategic

business partners, recognized for their collective talent, initiative and leadership, to …

• Exceed our business partner and internal customers expectations - becoming the

Purchasing Services and RTP service provider of choice for GM globally.

GM ARTICULATED A FORMAL GBS REQUEST-TO-PAY (RTP) MISSION STATEMENT

Deliver Effective, Efficient and Lower Cost Services

| 16

Processes:

PO, PO Transmit,

Receive, Invoice,

Catalog Mgmt, Item

Master File Maint.

Processes:

Requisition, PO, PO

Transmit

Mexico Cell

Processes:

Requisition, PO, PO

Transmit

Processes:

Requisition, PO, PO

Transmit

Processes:

PO, PO Transmit,

Contract Management

Processes:

PO, PO Transmit

India Cell

See GMIO

GMIO

Processes:

PO, PO Transmit

Thailand Cell

See GMIO

Korea Cell

See GMIO

Processes:

Requisition, PO, PO

Transmit

PPI / CDI

NA Parts Coding

(Common Coding,

SAP Attrib.) and

Material Management

LEGACY PROCUREMENT SERVICES ENVIRONMENT - 2013

An example of regional and commodity-specific solutions with a high cost structure,

multiple providers, and few common processes or metrics

| 17

LEGACY RTP SERVICES ENVIRONMENT - 2013

Our world was far from World-Class and our stakeholders demanded better bottom

line results from RTP

Increasing

Capacity

Growing

Innovation

Developing

Best in Breed

Pay Terms,

Pricing, and

Resources

To Improve

Bottom Line

Results

MANY INVOICES -

LATE

MANY PAYMENTS -

LATEREQS.

INCOMPLETE

LOW BU TRUST

IN BUYERs

INEFFECTIVE

SUPPLIER

ENGAGEMENT

LIMITED METRICS

AND

TRANSPARENCY

Our focus

needed to

shift to:

| 18

• Focus on the customer

• Define Service Placement clarity

• Enable a Global Operating Model

• Implement in Phases

• Develop an aggressive but achievable, decision/governance timeline

• Simplify, standardize and automate

• Establish KPIs and measure success

• Increase the speed of change

• Business Case that Achieves the Vision

GBS IS ACCOMPLISHING IT’S MISSION AND INCREASING CUSTOMER SATISFACTION BY FOCUSING ON KEY SUCCESS FACTORS

| 19

SUCCESS FACTOR – FOCUS ON THE CUSTOMERS

The GBS Team worked diligently to understand stakeholder and customer

requirements – not “business as usual”. This took additional time and effort but

really made an impact on customer satisfaction.

| 20

SUCCESS FACTOR – DEFINE SERVICE PLACEMENT

Transactional ,

Low Cost, High

Volume Activities

Transaction

Service Center

Outsourcing Providers,

Other Partners &

Providers

Third Party

PartnersCorporate

Strategy,

Policy , Governance

and Statutory

Centers of

Excellence

High Level Skills,

Experience,

Confidentiality

Business Areas

Requires Business

Specific Knowledge

or Close Proximity

End Users

Self-service with

Automated Controls,

Approvals, Workflow

• Management &

Administration

– Function

oversight

Management

– Strategy &

Performance

– Policy &

Procedure

Governance

• Sourcing and

Supply Base

Strategy

• Compliance

Strategy

– Internal

– External

• Sourcing Execution

– Category Strategy

– Requirements

definition and supplier

bidding

– Negotiation and

supplier contract

creation

• Supplier Relationship

Management

– Supplier Dev/Mgmt

– Supplier Partnering

• Customer Management

– External Customer

– Internal Customer

– Product Development

and Design Support

• Management Oversight

of Transactional

Processing

– Requisition and PO

– Invoice & Payments

– Spot Buying

• Supply Data

Management

– Supplier Master

– Item Master

– Catalog Master

– Contract Master

• Supplier Scheduling

Oversight

• RTP Help Desk

• Sourcing CoE and

Spend Analytics

Oversight

• Supplier Performance

Management

• Compliance Mgmt.

• BPO Provider Oversight

• Receipt Processing

– Materials and

goods

– Services

• Supplier Scheduling

– Requirements

review

– Supplier scheduling

– Order Release

– Inbound Supply

– Delivery

Coordination

• Requisition (Self-

Service for Entry &

Approval)

• Receipt Processing*

– Materials and goods

– Services

GM Business StakeholdersGPSC Strategy & Governance

• RTP Transactions

– Requisition

Processing

– PO Processing

– Invoice Processing

– Payments

– Spot Buying

– RTP Help Desk

• Supply Data

Management

– Supplier Master

– Item Master

– Catalog Master

– Contract Master

• Supplier Scheduling

– Supplier scheduling

– Delivery

Coordination

• Spend Analytics

• Sourcing CoE

GBS RTP - Transaction Processing

Aligning activities with the correct roles and responsibilities enables success

| 21

SUCCESS FACTOR – A GLOBAL OPERATING MODEL DRIVES TRANSACTIONAL EFFICENCY/STRATEGIC SOURCING EFFECTIVENESS

Strategic Sourcing

PO Order Processing & Management

Com

plia

nce

& S

avin

gs

Supplier On-

Boarding

Customer

Support and Issue

Management

Low Value Purchase

Order

Execution

Automated Purchase

Order Management

Ongoing Spot Buying/High Value Purchasing

High Value Source & Buy

Single/Target

Source

(Spot Buy)

Competitive Bid

(Medium Value)

Transition &

Manage Suppliers

Negotiate

with Suppliers

Evaluate

Suppliers

Assess

Suppliers

Develop Sourcing

Strategy

Profile

Category/

Commodity

Str

ateg

y &

Gov

erna

nce

On Going Governance

Project Management Office (Change Management and Transition )

Technology Delivery

Solution Delivery Enablement Components

Target Development and Performance Management

Catalog/Contract/

Item Management

GMNA GMOV GMSA GMIO

Transactional Activity –

Service Provider/GM OversightTactical Activity – Service Provider

or GM by Category based on expertise

BPO

GM 6-step sourcing process defines the supply base for all transactional

and automated activity

Strategic Activity – GM Sourcing Professional

Supported by Service Provider where applicable

Supported by

Sourcing CoE

| 22

SUCCESS FACTOR – IMPLEMENT IN PHASES TO LIMIT RISK AND INCREASE SUCCESS

BPO Providers

1

2

3

4

5

6

Internal

Transaction

Cells

GM Mexico

GMIO

GMSA

Current

Footprint

RATIONALIZE HIGH COST

OPERATIONS

(Pilot)

ESTABLISH CONSISTENT

OPERATING MODEL

- Define Strategic Sourcing COEs

- Identify Global Governance

- Common processes/metrics

- Est. Savings goals

Pilot/Phase I

ALIGN CHANNEL STRATEGY

TO ONE SAP IMPLEMENTATION

- Establish Common Foot print

GO TO MARKET FOR

LONG TERM PROVIDER(S)

- RFP & Negotiation

- Est. Global Trans. Team

- Long term view

6 Months 1.0 Year 1.5 Years 2.0 Years

Wave I MIGRATE

ADDITIONAL CELLS TO BPOs

ONE SAP & CHANNEL

STRATEGY Group 1

Phase II

IMPLEMENT OPERATING MODEL

- Strategic Sourcing COEs

- Global Governance

- Common processes/metrics

- Est. Savings goals

ONE SAP & CHANNEL

STRATEGY Group 2

Wave I MIGRATION 9-12 MOS

IMPLEMENT,

TRAIN,

STABILIZE

IMPLEMENT,

TRAIN,

STABILIZE

MEASURE/ADJUST MEASURE/ADJUST

Phase III Phase IV

Wave II MIGRATE

ADDITIONAL CELLS TO BPOs

Wave III MIGRATE

ADDITIONAL CELLS TO BPOs

Wave II MIGRATION 8-

10 MOS

ONE SAP & CHANNEL

STRATEGY Group 3

IMPLEMENT,

TRAIN,

STABILIZE

Wave III

MIGRATION

6-8 MOS

| 23

SUCCESS FACTOR – DEFINE AN AGGRESSIVE, BUTACHIEVABLE, DECISIONS/GOVERNANCE TIMELINE

Supplier Selection

Timeline

Operations & Governance

Timeline

Jan Feb Mar Apr May Jun

Issue RFP

Initial Down

Select

Enable

GTC

Operations

Director

Supplier Oral

Presentations

IME Initial

Sourcing

Table Review

Best & FinalContract

PhaseBegin Initial

Implementation

IME Sourcing Table

Recommendation

Enable GTC

Resources to Support

Implementation

Transition Services to

BPO

Final Vetting of RFP RFP Evaluation Due Diligence Evaluation Contracting Implementation

Gain Approval for

Operations Org

Identify & Train

Selected Operations/GTC Staff

Identify & Train

Selected Operations/GTC Staff

Ensure Communication to Stakeholders

Transition Staff

Review/Score

RFP ResultsDue Diligence Phase

RFPs

Returned

Final

Agreement

Initiate Staff

Training GTC Operational

| 24

SUCCESS FACTOR – SIMPLIFY, STANDARDIZE, AND AUTOMATE…

Develop global, common, efficient processes across all in-scope transactional

activities.

| 25

Reporting

1

Process

2

Tracking

3

2014+ Realized

Savings

2015 - 2018 Budget

Process

Budget

$

Robust Systems Savings by Work Stream Feed into Budget Cycle

Strong reporting capabilities are

required that will reflect global

spend and savings

Robust and vetted processes will

allow for clear definitions in tracking

of realized savings

Spend will be easily allocated to

particular work streams

Rapid spend analytics deployed by partners will be

able to clearly identify realized savings with the

strong definitions agreed to by GM finance and the

suppliers

Savings can be allocated to individual work

streams and represent savings by lower level

categories

The realized savings in each work stream

can be removed from budgets in future

years to ensure savings drop to GM’s

bottom line

This process will be replicated each year

and adjusted for business needs

Capabilities

What gets measured, gets done. But, resist the temptation to measure everything!

Select KPIs that matter and drive change to the bottom line.

SUCCESS FACTOR – ESTABLISH KPIs AND MEASURE…

| 26

To return the greatest value to our customers, we must increase the speed of

change, deliver greater value and become the “trusted advisor”.

SUCCESS FACTOR – INCREASE THE SPEED OF CHANGE…

| 27

SUCCESS FACTOR – A BUSINESS CASE THAT DELIVERED REAL SAVINGS WHILE ACHIEVING OUR VISION!

Our vision developed and delivered a wide range of transactional and support services beyond the

current capabilities for GM stakeholders, suppliers, and customers that represented a competitive

advantage for the organization

Efficiency and effectiveness were achieved through the adoption of global,

common processes, leading-edge technologies and an unwavering focus on

end-to-end processes across all GM businesses

The GBS team is responsible for designing, delivering and reporting on all

Requisition to Payment (RTP) activities across the organization

How we Achieved the Vision

• Strong leadership commitment to the change

• Focus on global, common processes

• Tight alignment between Purchasing and GBS

| 28

Sao Caetano, Brazil1

Bangalore India

Transactional Center

Hub, Help Desk, Data

Center

Manila, Philippines

Serves GMIO languages

Sibiu, Romania

Serving GMOV languages

and Center for Item Master

File Maintenance

Hermasillo, Mexico

Regional Support for

GM Mexico and

GMSA languages

Seoul, South Korea2

Regional Locations Providing

Support by Exception Only

Clark, NJ

CURRENT PROCUREMENT SERVICES ENVIRONMENT

GBS RTP is now an example of a global solution with a low cost structure, a single

transaction provider, with common processes and metrics

| 29

KEY LEARNINGS…

GBS requires retraining our “ear” to understand business and stakeholder requirements – and

solution them! We are providing a competitive advantage by changing the paradigm!

| 30

THE GM JOURNEY – CURRENT TIMELINE

We are a little over a year into our GBS implementation and the leadership team has a

much better grasp of what is in front of us to drive the results that are expected.

The new 2015 Chevrolet Corvette Stingray• 6.2 Liter, LT1 V8 – over 450 horsepower

• Zero to 60 in less than 4 seconds

• Direct Injection Variable Valve Timing

• Fuel Management System

And wait until you see the new Cadillac CT6 due out this fall!

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Session #2

Optimizing Indirect Procurement through Global

Outsourcing Consolidation

Dan Mahlebashian

General Motorsdaniel.mahlebashian@gm.com

Steven Wright

The Hackett Group704-907-2774

swright@thehackettgroup.com

Speakers:

www.sig.org/eval