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TRANSCRIPT
Experiences in Outsourcing
Source-to-Pay
Service Excellence at
Dow Corning:
Dow Corning
David HirschiGlobal Procurement Director - Indirect Services
www.sig.org/eval
Enhancing Category ManagementImplementing a managed service model
David Hirschi – Dow Corning Corporation
March 2015
SIG Summit – Amelia Island, FL
Agenda
• Dow Corning – Brief Introduction
• Managed Services Defined
• Services Selection
• Program Design
• Implementation
• Results
• Lessons Learned
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AV15087
4
Guided by our vision
to benefit everyone, everywhere.
We are innovative leaders
unleashing the power of silicon
5
A global leader in silicon-based technology and innovation
Area Headquarters
Manufacturing Sites
Warehousing Sites
Commercial/Service Centers
Science & Technology Centers
Equally owned by The Dow Chemical Company and Corning Incorporated
6
Dow Corning Corporation – Fast Facts
• $5.71 billion USD in sales
• $376 million USD net income
• 7,000 products and services
• 25,000 customers
• 11,000 employees
• 6,000+ vendors
• 4-5% investment of sales in R&D
• 5,377 active patents
• 62 manufacturing and warehouse locations
Agenda
• Dow Corning – Brief Introduction
• Managed Services Defined
• Program Objectives & Services Selection
• Program Design
• Implementation
• Results
• Lessons Learned
7
Procurement Service Options
8
Managed
Services
Type o
f S
erv
ice O
ffering
Technology
Driven
Labor
Driven
Content
Driven
Continuous
Service Consumption
Discrete
(Project Based)
Content /
Connectivity
Software
Applications
Research
Content &
Community
Knowledge
Process
Outsourcing
Business
Process
Outsourcing
Consulting
Firms Contractors /
Temp Labor
SaaS tools, MDM, Hosted
applications, EBP
Supplier Networks, Integrated Templates & Tools, Syndicated
Content
Crowd Sourcing, Research & Advisory programs
Benchmarking, Benchmarking, Consortia
Market Intelligence
Multi-Tower, Customized, Niche
3PLs, MSPs etc…
Management, IT Consulting etc…
Contingent Labor,
Staff Augmentation
1099 consultants
Source: Spend Matters – Jason Bush
Managed Services Defined
9
Managed
Services
Typ
e o
f S
erv
ice
Off
eri
ng
Technology
Driven
Labor
Driven
Content
Driven
ContinuousService Consumption
Discrete
(Project Based)
Content /
Connectivity
Software
Applications
Research
Content &
Community
Knowledge
Process
Outsourcing
Business
Process
Outsourcing
Consulting
FirmsContractors /
Temp Labor
SaaS tools, MDM, Hosted applications, EBP
Supplier Networks, Integrated Templates & Tools, Syndicated Content
Crowd Sourcing, Research & Advisory programs
Benchmarking, Benchmarking, Consortia
Market Intelligence
Multi-Tower, Customized, Niche
3PLs, MSPs etc…
Procurement Business Process Outsourcing
Shifts the responsibility, and process management over
to a 3rd party to execute on behalf of the client often
includes establishment of COE, external shared service
organization.
BPO replaces procurement organization for outsourced
processes
Procurement Managed Services
Provides service augmentation to stretch existing resource
under the guidance and direction of the procurement
professional.
Providers tend to offer ala carte or customized services
based on needs and can range from discrete project work
to sourcing & contract desk services
Managed service providers do not replace the
procurement organization
Program Design
• Use existing process framework
• Will not “outsource” strategic processes
• Retain/build stakeholder engagement
High-Level Value Proposition by Procurement Process
Strategic Processes
Value Proposition depends upon getting more
out of the market
- Increasing spend under management
- More competitive bidding
- Bringing in specific market expertise
Transactional Process
Value Proposition depends upon becoming more efficient
- Process Standardization
- Improved Governance/Compliance
- Labor Arbitrage
Strategic Process Transactional Process
Spend
Analytics
Contract
Management
Vendor
Management
Purchase &
Returns
Accounts
PayableSourcing
Category
Management
• Maintain/enhance market intimacy
• Improve team’s strategic skill sets
• Bring more spend under management
Key Objectives for Managed Service Program
Work Load & Process Mapping
• Identify workload by business process
• For each work stream/business process get an
accurate understanding of FTEs spent working the
process
• Identify resources outside of Procurement function
supporting or working on a procurement workflow
• Data will be used in a number of ways:
– Better understand your cost to deliver each process
– To identify where FTE resources are being consumed
– Select which areas would lend themselves to Managed
Service Support
11
Strategic
Sourcing
Category Mgmt
Spend Analysis
Market Research
Contract
Management
Types of ProvidersStrengths & Weaknesses by provider type
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Provider Type Strengths Weaknesses
Full Service
Providers
Transaction
Specialists
Boutique
Sourcing Firms
• Well developed process
• Experienced at transitions
• Very savings driven
• Deep bench & resources
• Inflexible process
• Loss of market intimacy
• Stakeholder engagement
• Competition for mindshare
• Transactional experts
• Brings standardization
• Ramp up/down quickly
• Cost effective
• Transactional experts
• Brings standardization
• Ramp up/down quickly
• Cost effective
• Adapts to your workflows
• Strong sourcing skill sets
• Engage as program or
SOW based
• Easier to get mindshare
• Lacks true global scale
• Rely on 3rd party for gaps
• Limited commercial flex
• Mostly Indirect experience
Agenda
• Dow Corning – Brief Introduction
• Managed Services Defined
• Program Objectives & Services Selection
• Program Design
• Implementation
• Results
• Lessons Learned
13
Program Design – Augmentation Services
Execute Sourcing Projects – simple / standard / complex Augment Sourcing Projects - RFx input into Ariba, Market Research etc… Special Projects – e.g. EBP optimization , standardization of bid templates
Vendor Prequalification PO Terms & Conditions Negotiations Contract Negotiation – simple / standard / complex
Market Research Projects – simple / standard / complex Vendor Identification Spend Analytics to support category plans & sourcing projectsMarket Research &
Spend Analytics
Sourcing Support
Contracts Support
S2C Services
Network of Category Coaches & Market Experts Category Management Training Category Strategy Development Support
Category Management
Enablement
Program Design – Operating Model
Market Research &
Spend Analytics
Sourcing Support
Contracts Support
S2C
ServicesCategory Management
Enablement
Program Leadership
Managed Service
ProviderDow Corning
Program Manager
Regional Operations MgrsGlobal Sourcing Mgr
Global Sourcing Mgr
Regional Sourcing Mgrs
DirectorService Line Lead
Service Line Lead
Service Line Lead Global Contracts Mgr
Management
Activities
- SLA Development /Tracking
- Resource Planning / Budget
- Contract Management
- Scorecard & Reporting
- Category Plan Review
- Template / Tool Development
- Training
- Capacity / Demand Mgmt
- Operating Guide Development
- Quality control
- Capacity / Demand Mgmt
- Operating Guide Development
- Quality control
Research Mgr- Capacity / Demand Mgmt
- Operating Guide Development
- Quality control
Dow Corning governance/management investment ~ 4 FTE
Program Design: SLA / Scorecard Philosophy
Financial Perspective Customer Perspective
Learning & Growth Internal Perspective
16
Performance &
Effectiveness
Customer Satisfaction
Quality & Continuous
Improvement
Operational Efficiency
High Level Program Dashboard
Backed up with detail KPI’s
Program Design: Example Monthly Dashboard
17Behind schedule / immediate intervention required
Activity needs to be monitored, else can go to red. Not to be concerned but aware
Activity progress as planned
Behind schedule / immediate intervention required
Activity needs to be monitored, else can go to red. Not to be concerned but aware
Activity progress as planned* SLA
Performance Metric Target
Current
Month YTD G / A / R Comments
Total Annual Savings ($M) * $XM - - EOY Total Procurement Target (Prevention + Reduction)
1-Year Portfolio Value (1.5X vs. Savings Target) * $1.5xM - - Based on 2015 savings target
3-Year Portfolio Value (1.75X vs. Savings Target) * $1.75xM - - Based on 2015 savings target
Category Plans Completed * X - - Plans = Full Strategies, Category Briefs; defined by Roadmaps
Spot Buy Prevention Cost Savings * X% - - Total spot buys -Low volume
Retention - Staff Turnover Percent * <x% - - % of total service staff; Quarterly measure not Monthly
Post-Project Satisfaction Surveys - NPS * X% - - % of "Yes" responses; Simple Sourcing projects
Post-Project Satisfaction Surveys - 3/5 Question * X - - Average score (1-5) across Std/Complex Sourcing and Contracts
Total Project Throughput Volume X - - Contract project throughput improving
Total Project Addressed Spend ($M) $XM - - Total Spend addressed from Providers Completed Projects
% Sourcing Projects < Target Cycle Time * 90% - - % of Sourcing Projects under target Turn around Time (TAT)
% Contract Projects < Target Cycle Time * 90% - - % of Contract Projects under target Turn around Time
Spot Buy Cycle Time * 90% - - % of Spot Buys under 2 day TAT target - Low volume
Managed Service Resource Capacity Utilization 80% - - Actions in process to better utilize off shore -sourcing team
Issue Log Non-Compliances - Level 1 0 Severity 1 issues that require RCA and Preventive Measures
Issue Log Non-Compliances - Level 2 0 Severity 2 issues that require RCA and Preventive Measures
Issue Log Non-Compliances - Level 3 0 Severity 3 Issues logged for tracking
PERFORMANCE & EFFECTIVENESS
CUSTOMER SATISFACTION
OPERATIONAL EFFICIENCY
QUALITY & CONTINUOUS IMPROVEMENT
Agenda
• Dow Corning – Brief Introduction
• Managed Services Defined
• Program Objectives & Services Selection
• Program Design
• Implementation
• Results
• Lessons Learned
18
Implementation - Knowledge Transfer
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• Create operating
guide for each
Service Line
• Regional
addendums
• Ariba RFx
templates
• Contract Templates
• Opportunity
Assessment
• Complete Joint
Project
• Complete
Independent
Project
• Deliverables
Complete
• Projects executed
• CM confident in
service provider
1. Operating Guide
Development
2. Knowledge
Transfer Projects4. CM Signoff
The four key deliverables for the Knowledge Transfer process:
3. Define Templates
Build & Sign-off on managed service provider’s internal on-boarding, quality Control, &
governance processes. Establish an audit routine for these!
Week 1
20
General Knowledge Transfer Approach (each country)
Week 2 Week 3 … Week TBD
Kickoff Meeting
KT Workshops
(3 Hrs each Category)
Scope & Kick-off KT Projects
Execute KT Projects
Complete Operating
Guide Country
Addendums & Templates
Category Manager Sign-off
Country Guide Addendums Completed
Ariba templates completed
Completed KT sourcing projects
Implementation: Total Program Timelines
Internal Analysis & preliminary business case development (4 – 6 months)
RFP time lines (2 – 4 months)
Due Diligence & Contracting time lines (5 – 7 months)
Execution & Ramp-up (12 – 18 months)
Total Time (24 – 36 months)
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Contract (SA) signed
Initial wave of StC projects kicked-off
Oct 7 Jan 6 June July
Board
review
SepSep 16Aug 15 Feb 10 Oct
US KT for Managed Services
EMEA Go Live
US Go Live APAC Go Live
APAC KnowledgeTransfer
EMEA KTKnowledge Transfer
Agenda
• Dow Corning – Brief Introduction
• Managed Services Defined
• Program Objectives & Services Selection
• Program Design
• Implementation
• Results
• Lessons Learned
22
Results
2014 Results
• Implemented across NA, EMEA, Asia in ramp up year
• Exceeded total savings expectations by 20%
• Gross ROI = Incremental Savings / Managed Svc Cost = 3.5x
• 2015 Portfolio - Built proactive portfolio valued at 1.2x in 2014
2015 Improvements
• Increase ROI to > 7x in 2015
• Significantly increase support for Direct Procurement projects
• Improve cycle times on projects to increase capacity
Lessons learned
01 Implementation / change management VERY HARD
02 Shared Goals between Category Managers & Service Provider ESSENTIAL
03 Assess the providers internal governance & training in due diligence
04 SLA development critical to drive proper behavior – LESS is MORE
05 Don’t underestimate IT and system access issues
06 Spend a lot of time defining roles & responsibilities
07 Own your future – team stronger & more independent
25
David HirschiGlobal Procurement Director
Dow Corning Corporation
Work: 989 496-4000
Email: [email protected]
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Session #13
Service Excellence at Dow Corning: Experiences in
Outsourcing Source-to-Pay
David Hirschi
Dow Corning989 496-4000
Speaker:
www.sig.org/eval