Description
Procurement is the acquisition of goods, services or works from an external source. It is favorable that the goods, services or works are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality and quantity, time, and location.
Procurement Strategic Sourcing
1
AGENDA
• • • • • • What is Strategic Sourcing? Advantages of Strategic Sourcing Objectives of Strategic Sourcing Strategic Sourcing Methodology Deliverables Wave 1 Project Objectives and Results Future Opportunities
2
What is Strategic Sourcing?
Definition: A systematic and fact-based approach for optimizing an organization's supply base and improving the overall value proposition
What it is
Focused on the Total Cost of Ownership (TCO) incorporating customer needs, organizational goals, and market conditions Getting the best product/service at the best value Driven by a rigorous and collaborative approach Addresses all levers for savings Decisions based on fact based analysis and market intelligence A continuous process
What it is NOT
Focused ONLY on cost
Getting the cheapest product/service Ad-hoc activities involving only purchasing Focused on “beating up suppliers” Decisions based on opinion, unjustified preference, or complacency A one time project or decision
3
Objectives of strategic sourcing surround the reduction of cost while maintaining or improving quality
Improve the value-to-price relationship (i.e. achieve cost reductions while maintaining or improving quality/service)
Understand category buying & management process to identify improvement opportunities
Examine supplier relationships across the entire organization
Objectives
Develop & implement multi-year contracts with standardized terms and conditions across the organization
Leverage entire organization’s spend
Share best practices across the organization
4
Advantages of Strategic Sourcing
Best practice sharing Create partnerships with suppliers Cost savings
Access to new suppliers
Strategic Sourcing
Increase quality
Improve operational efficiency Standardize pricing
Spec rationalization
5
5
Strategic Sourcing Methodology: Deliverables
Planning & Data Collection Supply Market Analysis & Benchmarking Category Strategy Development Supplier Engagement & Evaluation TCO Analysis & Supplier Selection
Supplier Negotiations
Implementation
• Identify team & • Conduct hold kickoff market analysis • Develop workplan • Create potential • Review current supplier contracts master list • Gather user specifications & requirements • Define category scope & build baseline
• Develop supplier selection criteria
• Publish supplier engagement documents
• Response to • Complete supplier questions timeline & schedule sourcing • Initial supplier strategy proposal analysis • Develop assessment negotiation (qualitative & plan for each quantitative) • Develop supplier supplier • Create shortlist of engagement suppliers for documents negotiations (RFI, RFP, RFQ)
• Identify team • Develop award & scenarios with responsibilities savings calculations • Create • Make award decisions with end user and finalized savings
• Complete and validate implications of new process • Develop change management plan (if changing vendor) • Identify activities required for successful implementation • Develop implementation/ transition plan • Finalize Contract and set up in required systems • Develop Communication Plan 6
Wave 1 Implementation: Savings Opportunity and Metrics Development and Reporting
• Savings Opportunity and Execution of Strategic Sourcing
• Initial scope recommended 7 categories with up to $117MM of in-scope spend potentially yielding $7.5MM in annual savings • Staggered timeline from April 2011 through August 2011 for Wave 1 • Implemented six Wave 1 Categories (including Furniture, Office Supplies, Peripherals, Janitorial Supplies and IT hardware maintenance) • Executed contracts for furniture and janitorial supplies • Finalizing contracts for office supplies and peripherals
• Spend Metrics Development and Reporting
• Defined procurement metrics to monitor and motivate operational performance and universitywide compliance across all spend categories • Developing flexible report templates to segment data by key variable fields (department/school, category, supplier)
7
In addition to Strategic Sourcing, consistent and repeatable procurement metrics were created to track spend and savings university wide
Metrics Objectives
• Institute a metrics tracking process and tool that provides procurement with visibility into universitywide managed spend, identified savings, realized/lost savings, and optimization • Create clearly defined, consistent, data driven metrics that will provide Procurement and Leadership with actionable spend and savings information • Define a process structure to ensure long-term sustainability for performance metrics tracking while minimizing resource involvement
Future State
• Metrics reporting will be done on a quarterly basis, with a defined process that will facilitate accurate reporting • Data points used for reporting will be housed in one database • Spend and savings numbers reported are consistent and derived using Procurementset definitions • Key metrics being tracked will include: Managed Spend, Identified Savings, Realized/Lost Savings, and Supplier Optimization
8
Templates were created to summarize key metrics
Sample Dashboards – ILLUSTRATIVE ONLY
9
Potential Future Savings Opportunities
Category Lab Supplies & Chemicals Temporary Staffing Building Supplies Food Supplies IT Software Electrical Supplies IT Software Maintenance PPVF Servers TOTAL Spend ($MM) $30.0 $14.1 $7.5 $13.2 $14.8 $5.0 $5.0 $4.0 $3.6 $97.2M Savings % 8% 6% 11% 6% 4% 8% 8% 10% 8% 7.1% Savings ($MM) $2.4 $0.8 $0.8 $0.8 $0.6 $0.4 $0.4 $0.4 $0.3 $6.9M
10
Questions?
11
Central Procurement Moves to Commodity-Based Teams
Background
• As part of our ongoing efforts to be good stewards of the university’s financial resources and to provide you with better customer service, Procurement Services recently reorganized its central (Ann Arbor campus) procurement area.
New Team Alignments
• Under the new structure, procurement teams on the Ann Arbor campus are now supporting the following commodity lines:
– Facilities – Print and Professional Services – Research – Technology – Travel, General Goods and Services
Why Change?
• Formerly, some procurement agents supported units as “generalists,” administering purchasing efforts for most products/services • Others focused on specific commodity lines, including technology, food, print, and facilities. • Our new team-based approach will enable us to more efficiently help you in all phases of the purchasing process and remain a center of expertise on negotiations.
What this Means for You
• Since many of you have been purchasing your goods and services through our commodity-based teams for some time, there will be no change in the way you use our services. • We’re in touch with units across the university that have been working with procurement generalists to assist with the transition to the new model.
Team Contact Information
Visit the Procurement Services Contacts page for team members and contact information http://finance.umich.edu/procurement/contacts
Team Facilities Print & Professional Services Research Technology Travel, General Goods and Services Team E-mail Address [email protected] [email protected] [email protected] [email protected] [email protected]
Travel & Expense Update
Our Discussion Today
• New Travel and Expense Advisory Committee • We’re Listening – Recent Concur Enhancements • Concur Best Practices • Expense Approver Training Reminder
New Travel and Expense Advisory Committee
• New committee with rotating membership formed in July 2011 • Its purpose is to provide a direct line of communication between university representatives and Procurement Services as we continue to pursue opportunities for improvements to Concur and related policies
Current Committee Membership
• • • • • • • • • • • • Carolyn Batts, ISR Lisa Beymer, University Audits Charles Koopmann, MD, SACUA Mahendra Kumar, Art and Design Lynda Lyall, Internal Controls Debbie Mero, ITS Jayne Nyman, School of Dentistry Sean O’Neil, Ross School of Business Pat Ridenour, UMHS Steve Schlecht, LSA Candace Terhune-Flannery, School of Social Work Procurement Services: Carolynn Blankenship and Jeanette Frost, Lyn Fyfe, Committee Chair
We’re Listening
• New U-M Detailed Report available with expenses sorted by transaction date • Coming soon: improved Subject line information for Concur system-generated e-mail messages
– Tip: configure your mailbox to automatically move messages to folders (contact your local IT support for assistance)
Concur Best Practices
• The university has been fully live in Concur since February 15, 2011 • As thousands of employees have used the system over the past 8 months, we have identified (and will continue to identify) recommended best practices to follow when using Concur to maximize efficiencies and savings
Build Expense Reports Over Time
• Concur allows flexibility in creating and submitting expense reports • Multiple report submissions, however, result in unnecessary expense to the university and an extra burden on the expense approver
Build Expense Reports Over Time
• Best practice is to submit reports once or twice a month by building a single report over time • Out-of-pocket business expenses are the exception and can be submitted more frequently to ensure timely reimbursement to the employee
Resource
• More information about building expense reports over time can be found on the new Concur Best Practices web page: http://www.finance.umich.edu/procurement /travelexpense/concur/bestpractices
Expense Approver Training Reminder
• Those serving as approvers on expense reports are required to complete the Expense Approver Training course in MyLINC before reviewing and approving expense reports • Training must be completed annually
– Tip: put a reminder on your e-mail calendar a month prior to your training anniversary
Communications
e-Newsletter
• This month we’ll launch our new quarterly Procurement Services e-Newsletter • Updates on source-to-spend policies and processes; travel and expense; best practices; upcoming events; and more. • Subscribe by joining the M-Community group: Procurement Services News
– You can unsubscribe at any time
Website News Resources
• We’ve added new items to the Procurement Services website, where you can find recent news and communications
– News and Events
http://www.finance.umich.edu/procurement/news-events
– New in Concur
http://www.finance.umich.edu/procurement/travelexpense/concur/new
Interchanges
• With the completion of the Concur implementation, Procurement Services has resumed our regular schedule of large audience sessions • Interchange series will be held three times a year on all campuses
– Fall (October/November) – Winter (February/March) – Spring/Summer (May/June)
Questions?
doc_212020216.pdf
Procurement is the acquisition of goods, services or works from an external source. It is favorable that the goods, services or works are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality and quantity, time, and location.
Procurement Strategic Sourcing
1
AGENDA
• • • • • • What is Strategic Sourcing? Advantages of Strategic Sourcing Objectives of Strategic Sourcing Strategic Sourcing Methodology Deliverables Wave 1 Project Objectives and Results Future Opportunities
2
What is Strategic Sourcing?
Definition: A systematic and fact-based approach for optimizing an organization's supply base and improving the overall value proposition
What it is
Focused on the Total Cost of Ownership (TCO) incorporating customer needs, organizational goals, and market conditions Getting the best product/service at the best value Driven by a rigorous and collaborative approach Addresses all levers for savings Decisions based on fact based analysis and market intelligence A continuous process
What it is NOT
Focused ONLY on cost
Getting the cheapest product/service Ad-hoc activities involving only purchasing Focused on “beating up suppliers” Decisions based on opinion, unjustified preference, or complacency A one time project or decision
3
Objectives of strategic sourcing surround the reduction of cost while maintaining or improving quality
Improve the value-to-price relationship (i.e. achieve cost reductions while maintaining or improving quality/service)
Understand category buying & management process to identify improvement opportunities
Examine supplier relationships across the entire organization
Objectives
Develop & implement multi-year contracts with standardized terms and conditions across the organization
Leverage entire organization’s spend
Share best practices across the organization
4
Advantages of Strategic Sourcing
Best practice sharing Create partnerships with suppliers Cost savings
Access to new suppliers
Strategic Sourcing
Increase quality
Improve operational efficiency Standardize pricing
Spec rationalization
5
5
Strategic Sourcing Methodology: Deliverables
Planning & Data Collection Supply Market Analysis & Benchmarking Category Strategy Development Supplier Engagement & Evaluation TCO Analysis & Supplier Selection
Supplier Negotiations
Implementation
• Identify team & • Conduct hold kickoff market analysis • Develop workplan • Create potential • Review current supplier contracts master list • Gather user specifications & requirements • Define category scope & build baseline
• Develop supplier selection criteria
• Publish supplier engagement documents
• Response to • Complete supplier questions timeline & schedule sourcing • Initial supplier strategy proposal analysis • Develop assessment negotiation (qualitative & plan for each quantitative) • Develop supplier supplier • Create shortlist of engagement suppliers for documents negotiations (RFI, RFP, RFQ)
• Identify team • Develop award & scenarios with responsibilities savings calculations • Create • Make award decisions with end user and finalized savings
• Complete and validate implications of new process • Develop change management plan (if changing vendor) • Identify activities required for successful implementation • Develop implementation/ transition plan • Finalize Contract and set up in required systems • Develop Communication Plan 6
Wave 1 Implementation: Savings Opportunity and Metrics Development and Reporting
• Savings Opportunity and Execution of Strategic Sourcing
• Initial scope recommended 7 categories with up to $117MM of in-scope spend potentially yielding $7.5MM in annual savings • Staggered timeline from April 2011 through August 2011 for Wave 1 • Implemented six Wave 1 Categories (including Furniture, Office Supplies, Peripherals, Janitorial Supplies and IT hardware maintenance) • Executed contracts for furniture and janitorial supplies • Finalizing contracts for office supplies and peripherals
• Spend Metrics Development and Reporting
• Defined procurement metrics to monitor and motivate operational performance and universitywide compliance across all spend categories • Developing flexible report templates to segment data by key variable fields (department/school, category, supplier)
7
In addition to Strategic Sourcing, consistent and repeatable procurement metrics were created to track spend and savings university wide
Metrics Objectives
• Institute a metrics tracking process and tool that provides procurement with visibility into universitywide managed spend, identified savings, realized/lost savings, and optimization • Create clearly defined, consistent, data driven metrics that will provide Procurement and Leadership with actionable spend and savings information • Define a process structure to ensure long-term sustainability for performance metrics tracking while minimizing resource involvement
Future State
• Metrics reporting will be done on a quarterly basis, with a defined process that will facilitate accurate reporting • Data points used for reporting will be housed in one database • Spend and savings numbers reported are consistent and derived using Procurementset definitions • Key metrics being tracked will include: Managed Spend, Identified Savings, Realized/Lost Savings, and Supplier Optimization
8
Templates were created to summarize key metrics
Sample Dashboards – ILLUSTRATIVE ONLY
9
Potential Future Savings Opportunities
Category Lab Supplies & Chemicals Temporary Staffing Building Supplies Food Supplies IT Software Electrical Supplies IT Software Maintenance PPVF Servers TOTAL Spend ($MM) $30.0 $14.1 $7.5 $13.2 $14.8 $5.0 $5.0 $4.0 $3.6 $97.2M Savings % 8% 6% 11% 6% 4% 8% 8% 10% 8% 7.1% Savings ($MM) $2.4 $0.8 $0.8 $0.8 $0.6 $0.4 $0.4 $0.4 $0.3 $6.9M
10
Questions?
11
Central Procurement Moves to Commodity-Based Teams
Background
• As part of our ongoing efforts to be good stewards of the university’s financial resources and to provide you with better customer service, Procurement Services recently reorganized its central (Ann Arbor campus) procurement area.
New Team Alignments
• Under the new structure, procurement teams on the Ann Arbor campus are now supporting the following commodity lines:
– Facilities – Print and Professional Services – Research – Technology – Travel, General Goods and Services
Why Change?
• Formerly, some procurement agents supported units as “generalists,” administering purchasing efforts for most products/services • Others focused on specific commodity lines, including technology, food, print, and facilities. • Our new team-based approach will enable us to more efficiently help you in all phases of the purchasing process and remain a center of expertise on negotiations.
What this Means for You
• Since many of you have been purchasing your goods and services through our commodity-based teams for some time, there will be no change in the way you use our services. • We’re in touch with units across the university that have been working with procurement generalists to assist with the transition to the new model.
Team Contact Information
Visit the Procurement Services Contacts page for team members and contact information http://finance.umich.edu/procurement/contacts
Team Facilities Print & Professional Services Research Technology Travel, General Goods and Services Team E-mail Address [email protected] [email protected] [email protected] [email protected] [email protected]
Travel & Expense Update
Our Discussion Today
• New Travel and Expense Advisory Committee • We’re Listening – Recent Concur Enhancements • Concur Best Practices • Expense Approver Training Reminder
New Travel and Expense Advisory Committee
• New committee with rotating membership formed in July 2011 • Its purpose is to provide a direct line of communication between university representatives and Procurement Services as we continue to pursue opportunities for improvements to Concur and related policies
Current Committee Membership
• • • • • • • • • • • • Carolyn Batts, ISR Lisa Beymer, University Audits Charles Koopmann, MD, SACUA Mahendra Kumar, Art and Design Lynda Lyall, Internal Controls Debbie Mero, ITS Jayne Nyman, School of Dentistry Sean O’Neil, Ross School of Business Pat Ridenour, UMHS Steve Schlecht, LSA Candace Terhune-Flannery, School of Social Work Procurement Services: Carolynn Blankenship and Jeanette Frost, Lyn Fyfe, Committee Chair
We’re Listening
• New U-M Detailed Report available with expenses sorted by transaction date • Coming soon: improved Subject line information for Concur system-generated e-mail messages
– Tip: configure your mailbox to automatically move messages to folders (contact your local IT support for assistance)
Concur Best Practices
• The university has been fully live in Concur since February 15, 2011 • As thousands of employees have used the system over the past 8 months, we have identified (and will continue to identify) recommended best practices to follow when using Concur to maximize efficiencies and savings
Build Expense Reports Over Time
• Concur allows flexibility in creating and submitting expense reports • Multiple report submissions, however, result in unnecessary expense to the university and an extra burden on the expense approver
Build Expense Reports Over Time
• Best practice is to submit reports once or twice a month by building a single report over time • Out-of-pocket business expenses are the exception and can be submitted more frequently to ensure timely reimbursement to the employee
Resource
• More information about building expense reports over time can be found on the new Concur Best Practices web page: http://www.finance.umich.edu/procurement /travelexpense/concur/bestpractices
Expense Approver Training Reminder
• Those serving as approvers on expense reports are required to complete the Expense Approver Training course in MyLINC before reviewing and approving expense reports • Training must be completed annually
– Tip: put a reminder on your e-mail calendar a month prior to your training anniversary
Communications
e-Newsletter
• This month we’ll launch our new quarterly Procurement Services e-Newsletter • Updates on source-to-spend policies and processes; travel and expense; best practices; upcoming events; and more. • Subscribe by joining the M-Community group: Procurement Services News
– You can unsubscribe at any time
Website News Resources
• We’ve added new items to the Procurement Services website, where you can find recent news and communications
– News and Events
http://www.finance.umich.edu/procurement/news-events
– New in Concur
http://www.finance.umich.edu/procurement/travelexpense/concur/new
Interchanges
• With the completion of the Concur implementation, Procurement Services has resumed our regular schedule of large audience sessions • Interchange series will be held three times a year on all campuses
– Fall (October/November) – Winter (February/March) – Spring/Summer (May/June)
Questions?
doc_212020216.pdf