procurement transformation: a story of a learning journey [amsterdam]

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1 Yolanda van Norden Senior Director Procurement October 23, 2014 | Amsterdam Procurement Transformation A story of a learning journey

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Yolanda van Norden, Senior Director for NPR Procurement, ASML Ariba Commerce Summit in Amsterdam 2014

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Page 1: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Yolanda van Norden

Senior Director Procurement

October 23, 2014 | Amsterdam

Procurement Transformation A story of a learning journey

Page 2: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Before we start… Introducing…

• Yolanda van Norden, Senior Director for NPR

Procurement at ASML

• Over 15 years of experience in global

Procurement roles at ASML, NXP

Semiconductors and Philips Electronics

• Fascinated by Indirect Procurement, and the

potential value usually ‘locked’ within the

organization

Page 3: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Before we start… Introducing…

Page 4: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Chips are everywhere….Part 1

Page 5: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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It’s hard to imagine a world without chips 5

Page 6: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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More than 180 billion chips are made every year 6

Data: WSTS

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IC units (in billions)

• Chips produced in 2012

185 Billion

• Chips per every Man, Woman and child 27

• Global Semiconductor Industry Sales

$300 Billion

Page 7: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Introducing ASML….Part 2

Page 8: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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ASML makes the machines for making

those chips 8

• Lithography is the critical tool for

producing chips

• World’s top chip makers are ASML’s

customers

• 2013 sales: €5.2 billion

• Payroll: 10,000 FTEs

Page 9: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Founded in 1984 as a spin-off from Philips 9

Page 10: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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A Global presence © 2014 Ariba – an

SAP company. All

rights reserved. 10

2,522 employees

Source: ASML Q4 2013

Over 70 Sales and Service offices located worldwide

5,654 employees

2,184 employees

Page 11: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Our procurement journey …. Part 3

Page 12: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Indirect procurement spend vs ASML’s turnover Public

Slide 15

Page 13: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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ASML’s indirect spend is split over all regions Public

Slide 16

77%

13%

10%

• Highly consolidated spend in

Veldhoven region

• Except for Logistics, our spend

is relatively local per category

• Relatively low and dispersed

spend per country

• Low spend per supplier

• Limited leverage possibilities

• Volume is relatively local per

category (except logistics)

• Relatively low and dispersed

spend

• Low spend per supplier

• Limited leverage possibilities

Page 14: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Where were we with indirect procurement three years ago?

Benchmarks 2011

Conclusion: Good potential for improvements

Procurement strategies

were incidental

No strong market insights

and deep understanding of

business drivers

Control of spend was

fragmented; organized as

check at the end instead of

directing spend in controlled

ways

Value add was consistent

and just below market

averages (2%-4%)

Supplier consolidation is at

par with market (4%)

Managed spend per

procurement employee is

very high compared to

market

In 2011

Page 15: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Our intent is to build a High Performance Indirect

Procurement organization

Strategic alignment with the ASML business and

stakeholder needs

Cross-functional partnering to drive category strategy

management processes

Reduced complexity in processes, and

supply base standardization of R2P processes

Standardized technology and tools used within

procurement processes

Page 16: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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We assessed our maturity status

Assessment

Factor

Best Practice Score

1 2 3 4 5

Strategy &

Organisation

Business

Engagement &

Functional

Excellence

Strategic

Sourcing

Category &

Supplier

Management

Purchase

To Pay

People &

Skills

Measurement,

Policies,

Controls &

Compliance

Systems,

Data & Metrics Own Efficio assessment

ASML Readiness

• Trust the Procurement team to use all levers

Team Readiness

• Capability to professionally use all levers

Resources

• Capacity to manage all spend globally

Page 17: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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The Change Program

Business alignment

Processes

People

Strategic NPR Work stream

Operational Excellence Workstream

Category Strategy

• Stakeholder needs

• Supply market dynamics

• Product portfolio

• Category specific targets

Strategy implementation

• RFI, RFQ

• Negotiations & contracting

• Contract implementation

Operational fulfillment

• Requisition to pay

• KPI management

• Supplier performance management

• Contract management

Page 18: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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The transition impacts both the own team as well as the way

we interact with our stakeholders

To

Strategic category management

Business value add KPI’s

Solution focus

Stakeholder centric procurement

Process & Service orientation

From

Tactical Procurement

Procurement KPI’s

Responsibility focus

Managing stakeholders

Task orientation

Page 19: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Our action plan

Thorough analysis of spend

Set-up cross-functional teams for all main categories

Set-up strategies for all major spend categories

Investment in team in all regions

Improved alignment with Control to ensure recognized value add in P&L

Started a transformation project on the operational requisition to pay

process (EasyBuy)

Public

Slide 22

Page 20: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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We decided to measure our efforts by using the following

metrics Public

Slide 23

Strategic Workstream Then

Savings Below

benchmark

Return on Investment At benchmark

Spend covered by a

contract

Above

benchmark

Consolidation Benchmark

% Spend covered by

an approved strategy

Below

benchmark

Operational

Workstream

Then

Catalog orders Below

benchmark

% of e-invoicing Below

benchmark

Spend covered by a

PO

At benchmark

Page 21: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Our journey starts…. Public

Slide 24

Page 22: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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A mission helped to clarify the new organization's purpose Public

Slide 25

To deliver recognized added value to its stakeholders and the ASML

business by pro-actively driving a cross-functional category strategy

approach

Translating market opportunities into valuable business propositions

Enabling easy buying methods for ASML

Page 23: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Our Procurement Journey was clarified to our stakeholders

with defining our ‘product’ Public

Slide 26

Our key tasks Strategic value add Tactical procurement Operational fulfillment

Business offering Expertise Process Service

# Stakeholders Very limited: executive mgt More: budgetholders and

up

Many: everyone who can

order stuff

Key care-abouts Support / enable business

strategy

Do the work – secure

delivery of service on time

(and cost)

Quality of service –

reduced complexity and

red tape

Our promise “We know the market, and

can help trigger change”

“We deliver a professional

process any way you like

it”

“We answer any

procurement question you

have”

Our delivery model Procurement & Category

Consultancy – Cluster

managers

Procurement Account

managers -

Anyway you like it

Helpdesk: EasyBuy, email,

telephone

Page 24: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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The Operational Procurement challenge Public

Slide 27

Reduce bureaucracy By steering purchases into the most appropriate and efficient buy-channel

By eliminating “double’ approval loops from contract to requisition

Improve stakeholder satisfaction by a faster procurement process

Improve control on spend by improving the procurement

involvement earlier in the buy-process

Improving the “closed loop” of contract to requisition to order to

deliver to pay

Page 25: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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The Operational Challenge translated into the following

goals Public

Slide 28

Simple and efficient ordering, invoicing & payment process

Substantial reduction in process time reduce with 50%

Minimal manual handling & interventions 30% - 40% hands

free buying via catalogues, templates, and scheduled ordering

< 20% paper invoices

Pushing spend through the right channels and reduce the

alternatives for users Procurement at the start of the process

Page 26: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Why we choose for Ariba Public

Slide 29

Functionality:

categories

e-Invoicing

NPR & PR

Process:

Authorization

Reporting

Master data

Integration

Interfaces

Architecture

ASML adjustments

Ease of implementation

Implementation

Team and set-up

Planning

Financials & Contract:

Implementation costs

Recurring costs

Business case

Contract conditions

Statement of Work

Supplier network

Amount of suppliers

On-boarding capabilities

ASML suppliers on the network

User interface

Intuitive

User friendly

After go-live

Supplier governance

Support organization

KPIs and business review structure

Suppliers

Presentation / sales team

Cultural fit

Company profile / financials

Customer reference

Page 27: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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A planning was detailed out

• Phase 1

• E-invoicing

• Technical solution first

• Onboarding suppliers in waves

• Phase 2

• P2O

• Technical solution and catalog

preparations

• Go-life per region

Page 28: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Top level Ariba landscape Public

Slide 31

Ariba P2O Application

Catalog Buy

Non - catalog

Buy A

ppro

va

l

flow

TIBCO interface

SAP ECC

~ 60 csv

files

PR info

XML Use

rs Catalog

management and

approval

Appro

val

flow

Suppliers

GDS (user roles)

User

info

Ariba Network

Ariba Reporting SAP BI reports

~ 45

manual

files

Page 29: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Communications & change management started early Public

Slide 34

Own ‘brand’ for the new solution:

Channel strategy owned by Procurement team, not the Project

Training materials and dedicated website

Instruction sessions for all requestors in all regions

Go life in waves

Page 30: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Status today… improvements everywhere Public

Slide 35

Strategic Workstream Now

Savings Doubled

Return on Investment Doubled

Spend covered by a

contract

Increased with

10%

Consolidation Down to 3.5%

% Spend covered by

an approved strategy

Increased with

90%

Operational

Workstream

Now

Catalog orders Increased with

20%

% of e-invoicing Increased with

40%

Spend covered by a

PO

Increased with

20%

Page 31: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Learning along the way…. Public

Slide 36

The Strategic Program went faster, yielded faster results, and was easily

accepted

The Operational Program was more difficult to explain; processes are more

integrated with other stakeholders

Not only Procurement should want the solution, also ALL stakeholders

Understand the impact on your own processes; willingness to change and

adapt

IT architecture is to be understood early in the process; don’t think it is all SAP

now, so it will work

Find a project manager or consultant that has experience with the Ariba

solution (or the solution you have chosen).

Page 32: Procurement Transformation: A Story of a Learning Journey [Amsterdam]

37

Are we there yet??? Public

Slide 37