sourcing for facilities: the seven-step...
TRANSCRIPT
Sourcing for Facilities: The Seven-Step
Process
Bob Solomon, President, ServiceChannel
Paul Walsh, Director Strategic Sourcing, Gap Inc.
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Agenda
• Share the Seven Step sourcing process
• Provide examples of how it can be applied in facilities management spend categories
• Bridge the gap between sourcing and facilities experts
• Case Study Review
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Key Sourcing and Procurement Terms
Term Definition
Sourcing Finding and executing strategies for acquiring needed goods and services that meet client requirements • The process ends with a contract
Procurement Executing transactions against the contract • The process begins with a contract
Spend The dollars a company spends on everything except salaries and benefits • Direct/Indirect, GFR/GNFR, Addressable/NonAddressable
Managed Spend Spend that has been through a strategic sourcing review and is being bought on contract.
Spend categories Types of spend by commodity, department, or supply base • In facilities, this means by Trade
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A Seven Step Sourcing Methodology
• Develop Benefits Case
• Profile Category • Develop Sourcing Objectives
• Create Supplier Selection Criteria
• Complete Traditional RFP Process
• Prepare fact-based Negotiation Packages
• Roll out Agreements and Monitor KPIs
1. Kickoff and Assess Opportunity
2. Profile Internally and
Externally
3. Develop Category Strategy
4. Screen Suppliers and
Selection Factors
5. Conduct Competitive Exercise with Supply Mkt.
6. Negotiate and Develop Sourcing Re-commendation
7. Implement Agreements
• Develop Category Analysis Plan
• High-level Data Collection and Analysis
• Build TCO model
• Conduct Industry Analysis
• Develop Sourcing Strategies and Tactics
• Conduct Supplier Analysis
• Conduct Auctions
• Collaborate with Incumbent Supplier/s
AND/OR
AND/OR • Negotiate
Agreements • Develop
Implementa-tion Plan
Key
act
ivit
ies
Po
ten
tial
Del
iver
able
s
• Spend Analysis • Category
Profiles • Sourcing Waves
• Internal Profile • External Profile • TCO Model
• Category Strategy
• To-be Processes • Sourcing
Objectives
• Potential Supplier “Long List”
• Selection Decision Matrix
• RFI (Optional)
• RFP/RFQ • Reverse
Auctions • Collaborative
Discussions • Potential
Supplier
• Fact-based Negotiation Package
• Sourcing Recommendation
• Category Value Proposition
• Finalized Agreements
• Implement. Plan
Quick Wins
Sources: Accenture, AT Kearney, ServiceChannel
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Determine Strategy
Steps 1-3
Negotiate and
Contract
Steps 4-7
Receive Invoices and Pay
Analyze
Strategic Sourcing Procurement AP/Settlement Analysis
Procure And
Manage Xactions
Source to Pay Process
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Benefits Case – Sourcing Wave Plan
A wave plan prioritizes in-scope categories into “waves” based on savings opportunity and ease of implementation elements
Wave 1
Wave 2
Wave 3+
Ease of Implementation Elements • Category sourcing complexity • Company spend distribution • Market conditions • Client readiness
Savi
ngs
op
po
rtu
nit
y
Ease of Implementation
$8M
$6M
$3M
Wave Three (+)
Wave Two
Wave One
Drugs & Pharm
Rent Legal
Telecom Software
Ind. Equip & Serv
Furniture
Print Ag. Equip & Supplies
A&E
Services Auto
Service
Adv & Mktg
Industrial Equip. Rental
Health Services
Const. and Build
Mgmt Services
Cleaning Supplies
Admin. Services
Office Equip.
Med/Lab Supplies
Office Supplies
Food Auto
Micro Comp & peripherals IT Services
MRO Roadway
Bldg. Mtis.
Easier Harder
Main fr
Food
Safety & Sec Equip
Radio Equip Freight
Fuels
Network Equip.
Source: Accenture
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Strategic Sourcing Gemstone
Demand Management
Product specification improvement
Volume concentration
Best price evalua-tion
Joint process improve-ment
Relationship restructuring
Global sourcing
High buying power Low buying power
Source: AT Kearney
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Gemstone Levers in FM Gemstone Strategy Lever Example FM Applicability
Volume Concentration • Compare locations to regional/national suppliers
• Fire/Life Safety • Pest Control
Best Price Evaluation • RFP/Auction • Benchmarking • Unbundle parts
• HVAC • Janitorial • Floor Care
Global Sourcing • NA • NA
Product Specification Improvement
• NTE/SLA management based on real data
• TCO Modeling
• HVAC • Equipment
Joint Process Improvement • Integration to contractors • Parts unbundling • Source to settle process
Relationship Restructuring • Realign Broker use based on usage data
• Across broker-intensive trades where locals are sufficient
Demand Management • Troubleshooting script • Warranty work • Deferred maintenance sch.
• Across all trades
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Q4
Waste Services RFP • Ensure best in class solutions for Waste & Recycling Management services • Reduce cost through vendor pricing, increased recycling, appropriate
equipment and containers and maximizing efficiency • Maximize rebate potential • Improve visibility to performance, spend and Gap Inc. sustainability goals
through better technology and reporting tools
Q1
Q2
2013 2012
-12 Suppliers interviewed and pre-qualified (Fixx book) -RFI/RFP questions drafted
-9 Suppliers advance to RFI/RFP -Select Finalists -Begin Negotiations
-Award Business -Contract Review & Execution -Deployment
Objective
Timeline
Spend
Objective
Waste Management
Spend $”Y”M (79%)
Retail Lease Spend $”X”M (21%)
Waste ManagementSpend
Retail Lease Spend
2012 Waste Spend - $X +Y M
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Waste Services Overview Strategic Sourcing launched a comprehensive RFP for all services related to Waste Management incorporating all Brands and functions across Gap Inc. The efforts of this initiative resulted in:
• Selection of a new Supplier, TBD • Cost reduction of x % - $x in professional fees • Securing of additional services such as customized reporting, enhanced Sustainability and Project Management tools, improved data capture processes and Global capabilities • Comprehensive list of service ownership (LL vs Gap Inc. responsibility) to serve as basis for audit
Regionalized market focus Transparency to waste procurement process Robust reporting platform Comprehensive data validation process Strong partnership with Utility Bill Pay Supplier, ServiceChannel Purchasing leverage: $20B managed spend
Why did we choose this supplier?
Services
Optimization & Analysis
Sustainability Budgeting & Forecasting
Performance Reporting & Technology
Utility Bill Processing &
Payment
-Procurement strategy & process
-GHG reporting --Initiative tracking
-Develop annual budget -Monthly forecast & variance reporting
-Produce monthly Dashboard reports
-Receive, process & pay utility invoices
-Resolve billing exception types
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THE OLD WAY
• Local decision or relationship driven Strategy
• Paper-based, vendor days, phone, fax Negotiate
• Paper or handshake, filed in drawers never to be seen again Contract
• Phone calls, faxes and paper work orders on service; no way to manage parts/supplies Manage
• Paper invoices and late payments Pay
• Call and ask suppliers for reports on ad-hoc basis Report
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The New Way
•Local decision or relationship driven
• Sourcing and Facilities team up for “loose-tight” solution Strategy
•Paper –based, vendor days, phone, fax
• Can be electronic, even real-time, using algorithms Negotiate •Paper or handshake, filed in drawers never to be seen again
• Electronic, living documents, “consulted” on every invoice Contract
•Phone calls, faxes and paper work orders on service; no way to manage parts/supplies
• Automated documents, check in/out, catalogs, troubleshooting, workflow, surveys
Manage •Paper invoices and late payments
• Automated invoice, 4 way match, payment and discount management
Pay •Call and ask suppliers for reports on ad-hoc basis
• Complete transparent, flexible reporting in your hands not the supplier’s
Report
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Recap of Sourcing Methodology
• Step 1: Kickoff and Assess Opportunity
• Step 2: Profile Internally and Externally
• Step 3: Develop Category Strategy
• Step 4: Screen Suppliers and Selection Factors
• Step 5: Conduct Competitive Exercise with Supply Mkt.
• Step 6: Negotiate and Develop Sourcing Recommendation
• Step 7: Implement Agreements
Picture provided by: louisville.edu
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Additional Resources
• PRSM Resources
White Papers:
– Sourcing Case Studies for Retail Facilities
– Supplier Insights into Competitive Sourcing Options for Retail Facilities
– Understanding Retail Facilities Sourcing
• “Purchasing Must Become Supply Management”, Harvard Business Review (September/October 1983)
– http://www.purchasingchessboard.com/
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Q&A • Paul Walsh, Director of Strategic Sourcing, Gap Inc.,
• Bob Solomon, President, ServiceChannel, [email protected]
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Topics and Discussion Includes:
• Trends in How We Buy
• Ranking the Respondents: RFP Scorecards
• A Framework for Assessing and Improving: Under-Performing Service Providers
• Anatomy of a Waste Management and Recycling RFP
• Qualifying Green Vendors & Products
• Diverse Strategies in Developing a Strategic Sourcing Plan