best practices for cnip industries
DESCRIPTION
Document provides the best practices available in industry and how these practices can be integrated with the help of Oracle. Document also gives the details of various business where IT has made a difference.TRANSCRIPT
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Best Electronic Procurement practices in Public & Private Sector March 17, 2009The Financials Day
Koit PuusaagMaster Principal Consultant, EE & CIS region
Agenda
• Introduction to Advanced Procurement• Best Practices and Trends in Electronic Procurement
• Save with Shared Services• Streamline with Employee Self Service• Avoid Errors with Contract Management• Take Tendering On-line• Analyze with Business Intelligence• Deploy Supplier Collaboration
Agenda
• Introduction to Advanced Procurement• Best Practices and Trends in Electronic Procurement
• Save with Shared Services• Streamline with Employee Self Service• Avoid Errors with Contract Management• Take Tendering On-line• Analyze with Business Intelligence• Deploy Supplier Collaboration
Procurement Transformation
High
Str
ate
gic
Va
lue
Maturity
Cost ProcurementCost Procurement
Tactical BuyingTactical Buying
Strategic ProcurementStrategic Procurement
Low
High
Low
Touchless Buying
Policy Enforcement
Contract Negotiation
Spend Management
Create Manual Orders
Answer Supplier Queries
Help Requesters
Manage Content
Value Creation
Collaborative Procurement
Supply Optimization
Full Process Automization
SupplyOptimization
AnsweringSupplier Queries
HelpingRequesters
ManagingContent
CreatingManual Orders
SpendAnalysis
ContractNegotiation
Project-Based
Procurement
InternalBenchmark
Delivery
Monitor &Review
Controls
Strategic
High
Medium
Low
Val
ue
Val
ue
eProcurement Adds Value!Routine Tasks Hinder Strategic Activities
Oracle Advanced Procurement
DemandCollection
IndirectGoods
DirectMaterials
EngineeredGoods
Services ApprovalRouting
TouchlessBuying
Automated Payment
Enforce Policy Compliance
Budget-BasedProcurement
ContractManagement
SupplierPerformance
Reduce Spend on Goods and Services
CategoryManagement
OnlineSourcing
SpendAnalysis
Streamline Procurement Processes
SupplierCollaboration
Settlement
Orders
ProfileManagement
SupplierNetwork
Logistics
SupplierPortal
End to End Electronic ProcurementFree Staff for High-Value Activities
Send ElectronicPO to Supplier
Receive ElectronicInvoice
CreatePurchase Order
Identify & QualifyVendors
EvaluateBids
Create & ApproveRequisition
Negotiate MasterPurchase Agreement
Pay Supplier(EFT)
AnalyzePerformance
Receive Goods or Services; Inspect
Select VendorAdjust
Contracts
SourcingStrategy
PurchasingExecution
Add Structure to Strategic Activities and Execute Routine Transactions Automatically
Agenda
• Introduction to Advanced Procurement• Best Practices and Trends in Electronic Procurement
• Save with Shared Services• Streamline with Employee Self Service• Avoid Errors with Contract Management• Take Tendering On-line• Analyze with Business Intelligence• Deploy Supplier Collaboration
Save with Shared Services
- Many organizations have complicated organizational structures, operate across countries, industries etc., leading to a number of purchasing units
- Increasing purchasing volumes means more purchasing power to negotiate with the suppliers
- Centralized purchasing means more transparency and visibility into the procurement process
- Companies realize savings by avoiding duplications in the purchasing process
- Proper IT solution ensures that each organization unit will be provided with “localized” services
- Shared services also means savings in IT investment
- Many organizations have complicated organizational structures, operate across countries, industries etc., leading to a number of purchasing units
- Increasing purchasing volumes means more purchasing power to negotiate with the suppliers
- Centralized purchasing means more transparency and visibility into the procurement process
- Companies realize savings by avoiding duplications in the purchasing process
- Proper IT solution ensures that each organization unit will be provided with “localized” services
- Shared services also means savings in IT investment
BU 1
SourceRequest Buy Pay
BU 2
BU 3
Decentralized
BU 1
SourceRequest Buy Pay
SharedService
BU 2
Central Sourcing, Local Execution
BU 1
SourceRequest Buy Pay
SharedService
BU 2
Automatedfinancialreconciliation
Complete Shared Services
Save with Shared ServicesUtilize Full Purchasing Power – Shared Services Model
BU 1
SourceRequest Buy Pay
SharedService
BU 2
Automated financialreconciliation
Transfer to Local Business Unit
Centralised Purchasing
Accounting Office
Land Forces
IT Department
Procurement Department
Supplier 3
Supplier 1
Supplier 2
Laptops
Plane tickets
Uniforms
Accomodation
OfficeSupplies
CD ROMs
LaptopsMainframeCD-ROM
Office Supplies
AccomodationUniforms
Centralized PurchasingCentralized Purchasing
• View exceptions across multiple applications and operating units
• Create, implement, and execute agreements
• Analyze performance of procurement & suppliers
• Exceptions• Agreements• Performance Analysis
NegotiationsContracts & agreements
Invoicing & payment
Supplier Management
RequisitionsPO
execution
Professional Buyer’s Work Center
Single Access Point for All Responsibilities
Professional Buyer’s Work CenterEnable Command & Control for the Procurement Professional
Professional Buyer’s Work Center Command and control for the procurement professional
• Multi-Org Access
• Reduced pop-ups and duplicate screens
• Re-designed and streamlined entire workflows
• Reduced the number of steps to complete key tasks
• Improved overall look & feel and visual style
• Increased personalization capabilities
Streamline with Employee Self Service- Typically the purchasing process was initiated by phone
or e-mail
- Handling such administrative tasks wasted purchasing professionals time and kept them away from true value add activities
- There was no single trace of the process and requestor was never sure what was happening with the purchase request
- Self service purchasing environment allows the person to search for the goods and services on – line, initiate the approval process for the purchases and have a real time overview of the status of the purchase requistion
- Security rules and content management can be used to make sure that people can only purchase the goods they are supposed to
- Typically the purchasing process was initiated by phone or e-mail
- Handling such administrative tasks wasted purchasing professionals time and kept them away from true value add activities
- There was no single trace of the process and requestor was never sure what was happening with the purchase request
- Self service purchasing environment allows the person to search for the goods and services on – line, initiate the approval process for the purchases and have a real time overview of the status of the purchase requistion
- Security rules and content management can be used to make sure that people can only purchase the goods they are supposed to
Items are organised by
Stores
Items are organised by
Stores
Approval hierarchy Approval hierarchy
Notes can be added
Notes can be added
User checks whether funds are available
User checks whether funds are available
Avoid Errors with Contract Management
- One of the hardest challenges organizations face is making sure that correct legal paperwork goes out with every purchasing document
- Errors from poor contract management can be costly and lead to potential fines and regulation violations
- Typically, contract management has been a manual task and there has been no real collaboration between different counterparts
- A modern contract management solution automizes the whole process making sure that correct legal paperwork is included with every purchasing transaction
- One of the hardest challenges organizations face is making sure that correct legal paperwork goes out with every purchasing document
- Errors from poor contract management can be costly and lead to potential fines and regulation violations
- Typically, contract management has been a manual task and there has been no real collaboration between different counterparts
- A modern contract management solution automizes the whole process making sure that correct legal paperwork is included with every purchasing transaction
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Contract TemplatesAutomatically Import Redline Changes for Superior Compliance
Review each Review each change in detailchange in detail
Accept or Reject Accept or Reject offline changesoffline changes
Identify modified Identify modified clauses at a glanceclauses at a glance
Application can fetch data from database tables (i.e supplier name, address, terms
etc)
Application can fetch data from database tables (i.e supplier name, address, terms
etc)
Terms can be made mandatory
Terms can be made mandatory
No
IndustrySegment?
Yes
Add Clauses• High Value• Insurance
Over $50k?
CommercialGovernment
Responses Drive Responses Drive Clause SelectionClause Selection
.
.
.
Template
Contract
Contract
Draft
Expert-Based AuthoringProduce Compliant Contracts
• Configurable rulesdrive terms selectionfor complex contracts
• Clauses default based on product, supplier, contract value, etc.
• Author high quality contracts with minimal legal supervision
Take the Tendering On - Line- Paper based tendering is time consuming, in many
cases lack transparency, restricted to limited suppliers only
- On – line tendering reduces the tender times, allows the user to define specific qualification and evaluation criterias, use powerful tools for negotiating and evaluating the tenders
- Links to external websites (like TED) allow the user to work with much wider supplier base
- All transactions are completely transparent, comply with EU and local legislations and leave behind a complete audit trail
- Public Sector is to be ready for full electronic tendering based on EU directives
- Paper based tendering is time consuming, in many cases lack transparency, restricted to limited suppliers only
- On – line tendering reduces the tender times, allows the user to define specific qualification and evaluation criterias, use powerful tools for negotiating and evaluating the tenders
- Links to external websites (like TED) allow the user to work with much wider supplier base
- All transactions are completely transparent, comply with EU and local legislations and leave behind a complete audit trail
- Public Sector is to be ready for full electronic tendering based on EU directives
Take Tendering On-lineSlash Cycle Time by Eliminating Manual Processes
Quickly create new rounds Quickly create new rounds & amendments & amendments
Instantly create new event Instantly create new event from previous agreement from previous agreement
or requisitionor requisitionView responses & monitor View responses & monitor
bids in real-timebids in real-time
Reduce Preparation Time and Manual Effort
View status and View status and incoming supplier incoming supplier
messagesmessages
Team Scoring of Requirements
• Each team member scores the assigned section
• Oracle Sourcing calculates average of individual score sheets to determine section score
• Sum of team scores determines overall response score (as input to optimization)
Quality Control Team
Technical Team
Technical Capabilities (40% weight)
Commercial Team
Price (40% weight)
Past Performance (20% weight)
Quote ABC
• John = 90• Mary = 85• Sue = 80
• Sue = 75• Doug = 80• Tina = 85
• Alan = 90• Mark = 80
Technical Capabilities = 34
Price = 32
Past Performance = 17
TOTAL SCORE : 83
Optimized, Policy-Compliant Award Recommendation
• Multiple Sites• Dozens of Bid
Lines
Company Policy Complex Bids
Maximum of 5 Vendors
Minimum 60% to incumbent
supplier
$100k Annual Maximum
• Sourcing Rules• Budget Constraints• Supply Base Rules
Multiple Suppliers
Model multiple business constraints and supplier inputs
Award Optimization Engine
* Requires Sourcing Optimization
System Generated Recommendations*Eliminate Time-Consuming Manual Analysis with Sourcing Optimization
Oracle On-Line Negotiation Event Example: Supplier Bid Monitor
Oracle Sourcing Customer Example
Exploit More Savings OpportunitiesImprove Sourcing Effectiveness Without Increasing Staff
Time
Vo
lum
e o
f S
pen
d U
nd
er C
on
trac
t
Oracle Enabled Sourcing
Traditional Sourcing Approach
“Learning Curve”
Average Improvement Through eSourcing*
50% reduction in sourcing cycle time
60% reduction in Admin costs
10-15% improvement in time-to-market (NPI)
Enhanced market knowledge and improved transparency
Dramatically improved ability to identify and negotiate with new sources of supply on a global basis
“E-sourcing technologies deliver information visibility and globally infrastructure to enhance and accelerate strategic sourcing”*
*Source: Aberdeen
•Structured Event Creation•On-Line Negotiation Support•Efficient Change Management
CategoryCategory Benchmarks Benchmarks
Raw MaterialsRaw Materials 2 to 5 % & Better Risk Mgmt.2 to 5 % & Better Risk Mgmt.
PackagingPackaging 10 to 20 %10 to 20 %
Indirect Materials and ServicesIndirect Materials and Services 10 to 20 %10 to 20 %
Information TechnologyInformation Technology 15 to 30 %15 to 30 %
Professional Services Professional Services 8 to 15 %8 to 15 %
Logistics/TransportationLogistics/Transportation 7 to 15 %7 to 15 %
Media,Marketing,Promotional ItemsMedia,Marketing,Promotional Items 10 to 20 %10 to 20 %
Other Indirects Other Indirects 5 to 15 %5 to 15 %
Capital ProjectsCapital Projects 7 to 15 %7 to 15 %
© 2005 Greybeard Advisors LLC
Why The Interest In Sourcing? Conservative Estimates Of Cost Reduction Metrics Through Sourcing
Analyze with Business Intelligence
- Purchasing reporting used to be purely transactional, it lacked trends metrics and any kind of analytic capabilities
- As a result of this approach mistakes were made, and areas for improvement undiscovered
- Modern purchasing reporting solution takes the transactional reporting but allows the user to add to it analytical tools, metrics, KPI’s
- Reporting solution should be in real time and allow the user to drill down to the transaction levels, it should be quick to implement and easy to change
- Purchasing reporting used to be purely transactional, it lacked trends metrics and any kind of analytic capabilities
- As a result of this approach mistakes were made, and areas for improvement undiscovered
- Modern purchasing reporting solution takes the transactional reporting but allows the user to add to it analytical tools, metrics, KPI’s
- Reporting solution should be in real time and allow the user to drill down to the transaction levels, it should be quick to implement and easy to change
Oracle Procurement and Spend AnalyticsSupplier Performance
Oracle Procurement and Spend Analytics
Procurement & Spend Dashboard Dashboard
Pages
Roles
Performance Measures
Reports based on Multiple Sources
FlexibleView Selectors
Prebuilt Reportswith over 5200 metrics
Conditional Navigation
Highlighting
Guided Navigation
Configurable Filters
Deploy Supplier Collaboration
- Commonly the most common communication channels with the supplier are phone, fax and e-mail
- Many supplier related activities like entering invoices, shipping notices, RFP responses etc. are purely administrative and take procurement professionals time away from true value add activities
- Modern eProcurement solution contains supplier self service module allowing the supplier to carry out many activities traditionally handled by the purchasing department.
- Commonly the most common communication channels with the supplier are phone, fax and e-mail
- Many supplier related activities like entering invoices, shipping notices, RFP responses etc. are purely administrative and take procurement professionals time away from true value add activities
- Modern eProcurement solution contains supplier self service module allowing the supplier to carry out many activities traditionally handled by the purchasing department.
Supplier Management User-InterfaceStreamlined supplier profile management
Create supplierCreate supplier
To Do List for requestsTo Do List for requests
Search or drill down to supplier detailsSearch or drill down to supplier details
Real time overview of all actionsReal time overview of all actions
The Lives Of Procurement Professionals Are Already Changing
Procurement Organization Focus**(% of Time Involved in Strategic
Activities)
50%
67%
39%
52%
67%
79%
2 Years Ago Current 2 Years FromNow
LeadersFollowers
* Aberdeen Group, The CPO Agenda: Five Strategies for Organizational Transformation. **A.T. Kearney’s Assessment of Excellence in Procurement
The CPO’s Agenda*
1. Improve supplier development and collaboration
2. Enhance and integrate procurement automation infrastructure
3. Adopt low cost country supply initiatives
4. Transition to a center-led procurement organization
5. Increase spend under management and improve spend compliance
34%
3,512
0.74%
54
World ClassPurchasing
Organization
36% Increase25%
% time spent on Risk Management and Decision Support
Activities
More Buying Power
7,805 Suppliers Per $Billion of
Spend
27% LowerCosts
1.01%
Total Cost of Procurement
(as % of Spend)
48% Less Staff104FTE per $Billion of
Spend
ComparisonSummary
TypicalPurchasing
OrganizationPerformance Indicator
Shift investment in procurement to higher-value activities
Reduce staff by swapping labor for technology
Opportunity: Achieve World Class Procurement
Source: Hackett Group
AQ&Q U E S T I O N SQ U E S T I O N S
A N S W E R SA N S W E R S