securing benefits by ai dassessing and transforming the ... grant - final.pdf · introductions kpmg...

Securing Benefits By A i dAssessing and Transforming the Supply Chain

November 2010

Supply Chain Function

ADVISORY

1

IntroductionsKPMG LLP

• The audit, tax, and advisory firm is the U.S. member firm

of KPMG International.

• KPMG International’s member firms have 137,000

professionals in 144 countries.

• KPMG d li l b ll i t t t f

GRANT POETER

Senior Manager

National Strategic Sourcing & Procurement• KPMG delivers a globally consistent set of

multidisciplinary services based on deep industry

knowledge.

• Our industry focus helps KPMG professionals develop a

National Strategic Sourcing & Procurement Practice

Our industry focus helps KPMG professionals develop a

rich understanding of clients' businesses and the insight,

skills, and resources required to address industry-specific

issues and opportunities.

MICHAEL COLLINS

Senior Managerpp

National Strategic Sourcing & Procurement Practice

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. 39734DAL

2

Agenda

• Total Value Delivered

• Performance Measurements by Attribute• Performance Measurements by Attribute

− Talent Management

− Operational Excellence

− Supplier Relationship Management

− Supply Chain Innovationp

− Right Sourcing

• Comparator Assessment Key Features

pp y

− Customer Alignment

• Case Study - Large Integrated Oil & Gas Company

• Transformation Map


3

Total Value DeliveredTotal Value Delivered is a culmination of interdependent attributes.

l

Total Value Delivered

Supply Chain InnovationSupplier Relationship

ManagementRight Sourcing

Customer Alignment

Operational Excellence

Management

Talent Management


4

Talent Management Interactive Questions

Qualitative Quantitative

•Attrition/Turn-over RateMet

rics

•Depth of Team’s Skill Set

T h d d l

•Number of Certifications

•Training Hours per Employee

Exam

ple •Organization Knowledge Risk

•Succession Planning

To what degree does your organization currently use

talent based metrics?

1. None currently used1. None

Degree Talent Metrics are Used

2. Identified but not tracked

3. Tracked

4. Acted

4. Tracked and acted upon

2. Identified


3. Tracked

5

Operational ExcellenceInteractive Questions


•Delivery DelaysMet

rics

•Confidence Level to Respond to Emergency

T h d d l

•Average transaction time

•% of e-catalog enabled POs

Exam

ple Needs

•Degree Group is Proactive


operational based metrics?


Degree Operational Metrics are Used


3. Tracked

4. Acted


2. Identified


3. Tracked

6

Right Sourcing Interactive Questions


•Spend Under ManagementMet

rics

•Supplier Risk Exposure

T h d d l

•Sustainability Index

•Realized Benefits vs Forecast

Exam

ple •Level of Market Analysis Conducted


sourcing based metrics?


Degree Sourcing Metrics are Used


3. Tracked

4. Acted


2. Identified


3. Tracked

7

Supplier Relationship ManagementInteractive Questions


•# of Suppliers with ScorecardsMet

rics

• Importance of Collaborative Improvements

T h d d l

•# of Supplier Issues Identified

•% of Suppliers by Performance

Exam

ple •Depth of Supplier Scorecards


supplier relationship based metrics?


Degree Relationship Metrics are Used


3. Tracked

4. Acted


2. Identified


3. Tracked

8

Supply Chain InnovationInteractive Questions


•# of InitiativesMet

rics

•Perceived Level of Innovation by Internal

T h d d l

•Additional Value Captured

•% of Suppliers by Performance

Exam

ple Customers

•Maturity versus Competition


supply chain innovation based metrics?


Degree Innovation Metrics are Used


3. Tracked

4. Acted


2. Identified


3. Tracked

9

Customer AlignmentInteractive Questions


•Strategic Sourcing RatingMet

rics

•Demonstration of Contracts Supporting

T h d d l

•Customer Satisfaction Survey

•Frequency of Communication

Exam

ple Company Objectives

•Level of Integration into Process


customer alignment based metrics?


Degree Innovation Metrics are Used


3. Tracked

4. Acted


2. Identified


3. Tracked

10

Area for OpportunityInteractive Questions

Which Attribute Is Most Undervalued in Reporting?

1. Talent ManagementMost Undervalued Attribute

2. Operational Excellence

3. Right Sourcing

1

6

4. Supplier Relationship Management

5. Supply Chain Innovation

6 C t Ali t

25

6. Customer Alignment

34 3


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Comparator Assessment Key Features

• A Comparator Assessment combines three key data points in helping provide a more

holistic assessment.

- External Benchmarks

- Peer Comparatorsp

- KPMG Maturity Assessment

• The assessment can be tailored to fit a company’s unique situation and the key

questions it wants to answer

• Assessments can be scaled to the level of detail and scope that provide a meaningful

l ianalysis


12

Case Study - Large Integrated Oil & Gas Company

Background and Objective•External purchases for indirect materials and services constitute significant operating costs to

p y

oil & gas companies.

•Many procurement organizations obtain the materials and services for operations in a very

t ti l d t ti l t hi h f f it i li d l / fittactical and transactional nature, which forfeits in unrealized value/profit.

The AssessmentThe AssessmentThe six week assessment used a combination of qualitative reviews of peer companies,

external benchmark data, internal interviews, document reviews, and the team’s collective

b k d h l h f kbackground in the oil & gas to answer their four key questions.


13


The Four Questions•H d th t i ti ’ ff ti d t t k

p y

•How do the procurement organization s processes, effectiveness, and costs compare to key

competitors?

•How do the organization structure and practices compare with peers?

•What are the metrics that could be used to compare the procurement organization’s

efficiency and effectiveness with peers long-term?

•If th i li d l h h l / i / h t i ht b•If there is unrealized value, how much value/savings/revenue enhancement might be

captured if steps were taken to increase competitiveness?


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Outcomes• G i d d t di f th l h i i ti ’ t it d t

p y

• Gained an understanding of the supply chain organization s maturity as compared to

industry and peer benchmark results

• Gathered a set of actionable recommendations developed to close the company’s gaps

with their peers (Organization, Processes, Technology, Performance Management)

• Estimated of the potential value derived from implementing the recommendations

• Revised their Value/Saving Capture Methodology to be more inline with their peersg p gy p


15


ILLUSTRATIVEBased on a comparison with identified peer companies, PROC performs on an average basis.

US1

US2

US3

IOC

1

IOC

2

IOC

3

IOC

4

IOC

5

DS1

DS2

DS3

PRO

p y

1 2 3 4 5

OrganizationSize and structure of organization, roles, skills mix

Strategy AlignedProcurement strategy is aligned with business goals

Sourcing & Category ManagementOrg in place, processOrg in place, process ingrained, drives process, robust supplier management, training programs

Performance Metrics/ Benefits CaptureFormal process in place with stretch targets (external andstretch targets (external and internal).; hard dollar savings with formal recognition process

TechnologyCommon procurementsystems for spend analysis, sourcing, P2P, and reporting


16

High level of capability Moderate level of capability Low level of capability

Case Study - Large Integrated Oil & Gas CompanyIn general, we believe procurement performs well against independent DS/US peers There are opportunities for

ILLUSTRATIVE

p y

independent DS/US peers. There are opportunities for improvement when compared to some IOC practices.

Overall Procurement Maturity

Low High

Overall Assessment by Area

PROCI

Low High

Low High

Low High

Low High

Process

Tech. & Tools

Perf. Mgmt.

Org. & People


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OverviewOrganization & People+ CPO role and organizational position

ILLUSTRATIVE

p y

+ CPO role and organizational position+ Skill mix and blend of procurement professionals with business/operations talent+ An active network exists with a shared services support organization– Business/operations talent within procurement has not been educated in supply chain practices

ProcessProcess+ Operational procurement tightly integrated with the business– Inconsistent definition of strategic sourcing process and non-existence of category management

approach– Undefined Procure-to-Pay processUndefined Procure-to-Pay process

Technology & Tools+ Technology investment creates opportunity to improve procurement platform+ Innovative integration of market place+ Different systems (US/DS) create data availability and visibility challenges (e g spend by category+ Different systems (US/DS) create data availability and visibility challenges (e.g., spend by category,

total suppliers, master data errors and duplications)Performance Management + Strong procurement metrics gathering process in place+ Supplier performance management is fully defined and implemented


+ Supplier performance management is fully defined and implemented.– Several key supplier scorecards are still in development.

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Compared to KPMG’s Overall Procurement Maturity Model, PROC Performs at the Median.

COMPONENTS MATURITY OF PROCUREMENT ORGANIZATION

ILLUSTRATIVE

p y

Entirely internally focused

Value driverMultiple agendas,

local procurement teamssupport a cost center

mentality

Procurement visionagreed and alignedwith the business

Focus on life cyclecost

Board member and keyinfluencer and driver

across functionalboundaries

Business partnerincorporated in design,

development,manufacturing

Federal structureGlobal

procurement Autonomous

functions, e.g.objective setting at

Local procurementreporting directlyinto Local Mgmt /

Strong alignment with Group

Procurement (hard

Global procurement

Central guidancelocal

COMPONENTS

Customer Alignment

Operational E ll

MATURITY OF PROCUREMENT ORGANIZATION

pfunction

objective setting at BU or local CFO

into Local Mgmt / dotted line to Group

Procurement (harddotted) communityimplementation

Buyers Business partnerBuyersLittle or no formal

procurementtraining

Qualified byexperience

Professionalpurchasers

incorporated withbusiness

Professionalpurchasers

L d f R d ti f St t iGl b l di t

Excellence

Talent Management

Locally specific Standardized and enhanced

No commonprocesses or structures

Low degree ofstandardization and

automation (divisions/geographies)

Recommendation forcommon methods,

processes andreference data

Strategiccategories and

processes for directand indirect

Global directprocurement, local

indirect procurement

Incompatible systems and

data models

Global data model/systems

No procurementsystem PO system Data extracts from

base ERP data

Full data-setanalysis and

reporting tools

Data extracts frommultiple systems

(ERP, quality)

Supplier Management

Technology / Innovations

Location-focused Value-focusedPer locationPurchasing groups

but no commondata set

Common datasets,common suppliers

Commonrequirements,

datasets, suppliers

Majority ofprocurement

processing in SSCsRight Sourcing


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Transformation MapA Transformation Map

establishes the envisioned future Prioritized Category

Purchasing Policy and Procedures Formalized

Develop Contract

Compliance Determine

Technology

Manage & Control

Maverick

Present Short Term Long TermPurchasing Vision Future“Managing Procurement to Deliver Value for Growth”•Strategic Focus

Quick Wins Short Term Long Term

ence

state of Procurement at a

company compared to its

current state. It also lays out a

Proc

ess

Sourcing –Quick Hits

Source to Purchase Processes

P-Card Sourcing & Implementation

Processes

Upgrade Purchase to Pay Process

Implement Contract

Compliance Processes

Implement SAP Upgrades

Implement Contract

Enabled Contract Compliance Approach

Spend

Transition Organization to New

Accountabilities

•Strategic Focus•Process Optimization•Technology Enabled•Real Time Spend Visibility•Sourcing Optimization•User Partnering•Cross-functional•Contract ComplianceImplement e-Sourcing

Functionality

Implement Supplier

Determinee-procurement compatibility

Ope

ratio

nal E

xcel

le

eProcurementImplementation

y

sequenced set of initiatives to

begin achieving the future state

in a structured and sustainable chno

logy

SAP Planning & Implementation Validation

SAP Assessment

Conduct e-Sourcing

Auction Pilots

pCompliance Technology

Cascade Messages Through

Determine e-Sourcing Strategy

Confirm Roles & Responsibilities

(RACI Chart)

Educate Users on Purchasing Best

Transfer Benefits Delivery to Budget

Owner

Introduce Supply Base Optimization (SBO) Process: Phase 1,

p ppCertification Process

Leverage Spend with Preferred

Suppliers

Implement Total Cost Model for Total nn

ovat

ion

in a structured and sustainable

manner.

Tec Organization

Communicate KPI Status: Identified,

Scoreboarded, Delivered

Determine Org Design Strategy: Technology Enabled, Relationship

Management, Outsourcing, etc.

Educate Users on Current ant & New

Contracts

Purchasing Best Practices

Conduct Steering Committee Benefits

Review

Implement Benefits

Educate TPNA of Bottom Line Impact: $1 Saved =

$25 in Sales Contribution To EBIT

Develop Supplier Scorecard

Low-end Spend; Phase 2, Leverage

Cost of Ownership

men

tIn

Corp

Supp

lier

Man

agem

ent Communicate

Purchasing Processes & Success Stories

Identify Transformation

Steering Committee

Conduct Leadership Alignment

Workshops

Increase Purchasing Organization Capacity

(Hire Commodity Mgrs.)

Establish Benefits Tracking Process

Implement Communications Process: Media,

Managers’ AgendasAlign Leadership & Functional Areas

Around User Driven Approach

Purchasing As-Is Low spend visibility•“Fluid” processes, reactive•Spend not leveraged•Inadequate systems, processes, tools•Limited organizational capacity•Many are “buyers” but only “place orders”•Relevant KPI’s not used•Capabilities not optimized throughout org.•Anecdotal to analytical rigor

Delivery Approach: Reinvestment, Budget Impacts – Negotiate with Budget Holders

To EBIT

Sup

plie

r Man

agem


People & Organization Benefits Delivery Communications & Mobilization

•Anecdotal to analytical rigor

Talent Management Right Sourcing Customer Alignment

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Benefit ErosionSelecting and focusing on one aspect of a transformation sub-optimizes results.

ion

(+)

Procurement TransformationSourcing ProgramBusiness As Usual

P t St d Al

act C

ost R

educ

t i e-Procurement Stand Alone

Time

Fina

ncial I

mpa

-)C

ost I

ncre

ase

(- Doing what you’vealways done gives youwhat you’ve always 1st Implementation

2nd Implementation


C got

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Grant Poeter Michael CollinsGrant Poeter

Senior Manager

KPMG LLP

700 Louisiana Street

Michael Collins

Senior Manager

KPMG LLP

700 Louisiana Street

Houston, Texas 77002

Tel 713-319-3661

Fax 713-583-4294

Houston, Texas 77002

Tel 713-319-3066

Fax 713-583-9956

Cell 281-382-7518

[email protected]

Cell 281-382-7034

[email protected]

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 39734DAL

The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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