With Ariba Strategic Sourcing, companies readily identify and consistently achieve targeted savings

Transcription

1

2 Save more, faster, every quarter: the promise of strategic sourcing. Most companies have successfully used technology of some kind to help reduce their sourcing costs, by cutting the amount of time and paper involved in the process, securing better prices for specific items, or both. Companies found that, while better management of transactions delivers some cost savings, the largest single procurement savings opportunity is usually in better sourcing of goods and services. But all too often, these first attempts to leverage technology to secure lower prices yielded only "one-off" savings instead of repeatable, sustainable improvements in enterprise-wide sourcing. Intrigued by the potential for even greater cost savings, companies and analysts have identified the need to develop a core competence and strategic approach to sourcing. The Ariba Strategic Sourcing Solution fills that need: a comprehensive set of products and services, it rapidly and consistently delivers real savings and builds in-house expertise. Its capabilities are critical to the success of companies' Enterprise Spend Management (ESM) initiatives. With Ariba Strategic Sourcing, companies readily identify and consistently achieve targeted savings Ariba makes the difference. Companies have always practiced some strategic sourcing, carrying out the time-consuming and labor-intensive process of analyzing spend, researching suppliers, conducting RFIs and RFPs, negotiating contracts and measuring supplier performance. What's different about Ariba technology is that it makes strategic sourcing so much faster, easier, and more comprehensive. Ariba Strategic Sourcing works as a closed-loop system, which enhances its speed, boosts its efficiency, and enables companies to continually leverage their experience to make better sourcing choices. With Ariba Strategic Sourcing, companies readily identify and consistently achieve targeted savings because they can create advantageous contracts and enforce compliance. Ariba Strategic Sourcing delivers additional productivity savings through its fast and easy-to-use processes. In fact, since its processes take so few resources and so little time, companies no longer need focus sourcing efforts only on high-value goods and services. Ariba makes it cost-effective to source a much higher percentage of spend annually. Ultimately, Ariba Strategic Sourcing does far more than secure the initial set of savings a company identifies. It creates a learning organization, in which expertise gained in each sourcing effort is captured and shared across the company, helping people throughout the organization to "source smarter" with every passing quarter. There s much more to Ariba Strategic Sourcing than reverse auctions. Take it further: + Source more categories and more spend + Leverage knowledge for smarter team-based sourcing + Realize more savings with a closed-loop approach Management teams should spurn "quick win" value propositions based solely on reverse auctions. Instead, they should introduce comprehensive change management programs to raise the status and visibility of sourcing activity and embrace the process improvements made possible by e-sourcing. Andy Kyte, The Gartner Group 2

3 Ariba Strategic Sourcing helps companies optimize each of the steps of the strategic sourcing process: Identify the opportunity for savings Develop and select a strategy Source and manage negotiations Implement and execute contracts Manage and monitor supplier performance Support program, stakeholder and knowledge management throughout Program & Stakeholder Management, Supplier Enablement, Knowledge Transfer Identify the Opportunity for Savings When a contract expires, or changes occur in the business environment, it's time to assess the potential for savings through strategic sourcing. This involves reviewing spend that is currently contracted, as well as spend not managed under current contracts or fragmented across different contracts and suppliers. Unfortunately, gaining meaningful insights into spend is almost impossible if spend data is scattered across separate systems for sourcing, contracting, purchasing, and invoicing as well as different divisions and locations. Ariba Strategic Sourcing provides a comprehensive and meaningful view across all sources of spend information, so that business users better understand their data and can readily manipulate it. It supports the strategic assessment of sourcing opportunities by making it easy for companies to analyze historical spend, supply markets, and category requirements. With Ariba Strategic Sourcing, staff can quickly discover price and part usage trends, track supplier distribution and counts, and prioritize sourcing activities. Identify Opportunities Ariba Strategic Sourcing helps companies identify potential savings with enterprise wide spend visibility, a speedy and repeatable spend analysis process, and visibility, control, and refinement of every aspect of the sourcing process. Key features of the solution include: Automated, repeatable spend classification and enrichment across multiple disparate systems including ERPs, MRPs and legacy applications Services expertise in data gathering and classification, opportunity assessment, prioritization, category- and industry-specific domain issues, and strategic end-user training 100+ out-of-the-box reports that highlight areas of opportunity Robust user-friendly analytical tools with extensive OLAP "slice and dice" capability Personalized, easy-to-use dashboards with actionable analyses such as upcoming contract expirations 3

4 Develop The Right Strategy The companies that achieve the greatest returns from their sourcing efforts are those that invest time and effort in determining the best strategy for each category. Information from the analysis phase helps a company define the most appropriate strategy for handling supplier engagement and negotiation for each spend category. With traditional sourcing methods and tools, however, information gathering can take a long time, and staff may have only limited ways of analyzing the data to assess the impact of different strategies. This makes for a slow and resource-intensive process, which in turn leads companies to focus their strategic sourcing efforts on only a few, high-priority categories. The category-centric approach of Ariba Strategic Sourcing helps companies create and implement the most appropriate strategy for each category. Businesses can readily evaluate factors such as the value of the good or service to the business-usually measured by dollar volume or similar metrics-as well as the item's uniqueness, supply-chain dependencies, price volatility, and other considerations. These shape a strategy that specifies what type of sourcing is most appropriate, how pricing should be set, how long the contract should last, and whether the category should be sourced locally or globally. The strategy also spells out whether the good or service should be sourced from one or more suppliers, and whether the company should emphasize cost-savings leverage or joint-advantage collaboration in its supplier relationships for that category. Ariba Strategic Sourcing enables companies to develop strategies that take into account the total cost of ownership of the category, including consideration for make/buy decisions and the line between supplier-driven vs. internal costs. Develop Strategy Ariba Strategic Sourcing helps companies identify and implement new and breakthrough sourcing strategies that take a total system cost approach and deliver significant savings. Because it simplifies development of a strategy for each category, it enables companies to source even smaller categories cost-effectively. Features include: Dedicated category-specific knowledge capture and process management, with a best practice strategy development process Analysis tools that support strategy development with the right level of detail on category requirements Collaborative platform and workflow that helps stakeholders agree on the sourcing strategy Robust total cost capabilities that enable a full range of strategic possibilities to be analyzed Ariba Solutions Delivery SM (ASD) consulting that supports strategy development with experience in more than 200 categories of spend Our Ariba solution has helped us to think more strategically about how we want to source a particular good or service what aspects are most important, and which cost drivers to target. It has also decreased our sourcing cycle times, so our professionals can now use Ariba tools to support critical thinking and analysis of a greater number of categories with the same or fewer resources. Sarmento Silva, Director, Purchasing System Development and Re-Engineering, AstraZeneca 4

5 Source and Negotiate Once a company has developed its category strategy, internal and external stakeholders need to work together to select suppliers and establish the contracts that make the strategy real. Ultimately, contract negotiations determine most of the total cost of ownership. Negotiating advantageous contracts requires analyzing relevant information and effectively engaging internal stakeholders and suppliers before, during, and after sourcing events. This is challenging with traditional systems, because the information required is usually dispersed and inaccessible. Manual, paper-based processes make it difficult to compare supplier responses and identify the best approach. Traditional methods also don't support a smooth exchange of information between suppliers, internal customers, and procurement professionals, which is necessary to ensure clear understanding of all sourcing criteria. Ariba Strategic Sourcing supports team-based best practices for RFX and negotiations management with easy communication and automation of every step in the sourcing and approval process. By enabling team review and approval of the criteria for supplier evaluation and the RFX content, as well as team scoring of responses, Ariba Strategic Sourcing helps companies secure organizational commitment to complying with the best negotiated agreement. Whether a strategy includes an auction event for a major spend category, or a simple RFX for an operating service, Ariba Strategic Sourcing saves time and effort and ensures a standard and consistent negotiation process. It also provides decision support, giving all authorized users immediate access to RFX optimization tools, what-if scenario building, and the ability to suggest award proposals to the team. Source and Negotiate Ariba Strategic Sourcing speeds and streamlines negotiations management with communications support, robust questionnaire capabilities, and automated supplier bid collection. It also supports enterprise-wide tool adoption and perpetual knowledge capture and dissemination through best-practices templating of RFXs. The solution features: Robust platform for all RFX, auction, and negotiation types, including managed templates New supplier discovery via integration to the Ariba Supplier Network, as well as through Ariba Solutions Delivery services Support for direct materials categories, with hierarchical BOM item structures, matrix pricing, tier pricing, index-based bidding, and a robust constraint-based optimization engine Excel-based event creation and supplier bid upload, real-time reporting, and streamlined supplier communications Team features for RFX scoring and proposal creation, as well as several team roles such as observer and delegate ASD services that develop customer expertise in strategizing, creating, and supporting events Early sourcing events resulted in savings of up to 24 percent, however we wanted to reap continuous savings, so we incorporated the sourcing solution into our daily purchasing practices. As a result we are seeing average savings between 9-24 percent from each sourcing event and have achieved our payback over a year ahead of schedule. Antonio Coronel, Purchasing Director, International Container Terminal Service (ICTSI) 5

6 Implement Contract and Execute To maximize realized savings, companies must monitor contract compliance and ensure adherence to agreed-on payment terms. Projected savings often fail to materialize if systems can't detect or prevent maverick purchases. In addition, without an automated method for comparing invoices to contracts, companies often lose out on negotiated savings or fail to realize agreed-on supplier discounts. The problem occurs even more frequently as contracts become increasingly complex, specifying not just price or rates but also performance criteria, rebates, charge-backs, and other terms. Ariba Strategic Sourcing enables companies not only to search, manage, and leverage contracts in procurement, but also to measure and if desired mandate compliance, so that certain goods and services can only be bought through an established contract. The integrated tools simplify and optimize the entire contract lifecycle from sourcing, negotiation, and execution to compliance, supplier management, performance analysis, and post-transactional analysis. These tools free staff to focus on the higher-level aspects of business partnerships rather than on routine contract administration tasks. Implement Contract Ariba Strategic Sourcing integrates sourcing and procurement to speed the process of creating, reviewing, and signing off on new contracts, as well as communicating those contracts and compliance guidelines to all employees. It enables businesses to add credibility to sourcing efforts, increase negotiation leverage with suppliers, and fully realize their negotiated savings. Features include: Direct integration between sourcing bid results and contract creation, even for multiple contracts, with ability to pass attachments Contract authoring and collaboration with document management tools, including versioning, review, and approval workflow Searchable contracts repository and contracts dashboard with relevant alerts Automated employee and supplier compliance alerting and tracking Integration with invoicing, including the ability for suppliers to flip contract terms in order to create accurate invoices over Ariba Supplier Network Companies are implementing targeted contract management projects in two to three months that deliver a 150 percent to 200 percent payback within a year. One company brought procurement processes into compliance with contracts and reported that they were on track to eliminate 1% of total spending altogether. Source: The AMR Research Report, The Compelling ROI of Contract Management by Lindsey Sodano and Pierre Mitchell, February

7 Monitor and Manage Supplier Performance Successful spend management requires that companies know which suppliers are providing the most value. An accurate assessment must include both quantitative measuressuch as accuracy, adherence to promised delivery times, and ability to meet milestonesand qualitative measures, such as service levels, job satisfaction, and perceptions of how easy it is to work with the supplier. Most businesses don t have holistic visibility into supplier performance: the information they need is scattered, with no enterprise-wide supplier scorecard standards or other efficient way of obtaining complete supplier information. Additionally, lack of communication across business units and departments that interact with the same supplier often makes it difficult to establish who owns the supplier relationship. Ariba Strategic Sourcing provides decision-makers meaningful performance management scorecards with KPIs from across the enterprise, drawing on both qualitative data from stakeholder surveys, as well as quantitative data from Ariba, ERP and other systems. Staff may also make scorecards, specific Key Performance Indicators (KPIs) and action plans available to suppliers if desired. Ariba Strategic Sourcing manages supplier performance as a persistent process that affects all supplier interactions, from RFX considerations to operational and procurement process improvement. By providing quick, contextual access to up-to-date supplier information and analysis, it helps companies manage supply risk issues, supply base rationalization, and supplier relationships. Manage Supplier Performance Ariba Strategic Sourcing provides visibility into all supplier information all the time, to support supply base rationalization and drive better sourcing, operating and procurement decisions. The solution streamlines collaboration activities and prompts proactive supplier management. Features include: Customized scorecards and scorecard templating, by category and/or supplier, with automated data import from Ariba, ERP, MRP and legacy systems Qualitative surveys that gather and aggregate stakeholders supplier performance feedback, which is automatically calculated into the scorecard Support for SPM process standardization and dedicated spaces for suppliers and staff to collaborate on joint performance improvement projects Full 'supplier snapshot' and 'category snapshot' views of all relevant data with drill-down to details ASD services for customized KPI formulation and SPM process definition 7

8 Support Program, Stakeholder, And Knowledge Management For a sourcing initiative to deliver significant benefits, it needs to address program, stakeholder, and knowledge management. Program management is essential, as the perceived value of the procurement team hinges on being able to measure and market sourcing program effectiveness, as well as the efficient use of team resources. Unfortunately program level information is typically very difficult to collect and analyze. Also critical is the participation of multiple internal and external stakeholders before, during, and after the sourcing and negotiation phase to ensure the best results, but this is difficult to achieve when sourcing professionals are hampered by inadequate information and poor communication within both the buyer and supplier organizations. Additionally category knowledge within the organization is rarely leveraged, because it resides in the heads of a few employees or is recorded in a binder at a single location. Within most companies, sourcing professionals must dedicate the majority of their time to tasks that address these challenges, instead of contributing their expertise to the business' strategy. Ariba Strategic Sourcing supports sourcing and execution of a program by enabling even geographically dispersed project teams to work effectively together in a virtual collaborative environment. It automates, standardizes and streamlines team-based sourcing processes, helping organizations to seamlessly coordinate all stakeholders and empower them to make advantageous strategic sourcing decisions. Ariba Strategic Sourcing also supplies sourcing professionals the forms, teaching tools, category knowledge, and best-practice processes they need to benefit from the experience of others throughout the organization. Manage Programs, Teams and Knowledge Ariba Strategic Sourcing increases process consistency and control for improved program management and reduced sourcing project cycle times. It enables teams to collaborate more effectively for better, faster results, and helps staff leverage expertise and best practices from across the company so they can learn from each other's successes. Features include: Flexible process management capabilities to support companies' unique category-specific sourcing processes Dedicated online workspaces for any designated initiative, to provide a single point of access to multiple Ariba applications and management of communication and documentation Capture and contextual :push of organizational category knowledge, for reuse by the right employees at the right time Easy resource tracking to support efficient deployment of sourcing resources Personalized, easy-to-use "dashboards" for actionable management of daily sourcing activities Program and detailed level project and resource reporting for effective sourcing program management Within each company, we find pockets of expertise about specific product or service categories, but because individuals have no easy way of sharing that expertise and building it into the company's sourcing processes, the company doesn't fully benefit. Ariba's category management capability is an eye-opener for sourcing experts, because it enables them to readily leverage the category and process expertise of others, both to further their own professional development and increase the company's savings. Donovan Favre, Partner, Procurement Practice North America, Accenture 8

9 Implement a Sourcing Solution that Delivers Bottom Line Results Many companies find that sourcing a single category can take as long as 24 to 36 weeks, so they target sourcing efforts to just a few key categories. But innovators and early adopters of strategic sourcing solutions are slashing those timeframes and gaining competitive advantage by sourcing more categories, smarter and faster, for greater bottom line profitability. Strategic sourcing has become a necessity, not just for business success, but even for business survival. Ariba customers are reporting consistent cost savings through better strategic sourcing. Those savings are only going to increase as each company further develops its expertise. To turn up the pressure on your competition and to stand up to their ability to cut costs investigate what the Ariba Strategic Sourcing Solution can do for your business. Ariba Strategic Sourcing Solution Applications and Services Ariba Strategic Sourcing Solutions Ariba Analysis Ariba Enterprise Sourcing Ariba Category Management Ariba Contracts Ariba Solutions Delivery Services, including: Spend Assessment and Program Definition Initial esourcing Implementation Fast Track Sourcing Waves of Category Sourcing Building a World-Class Sourcing Organization Managing Program and Stakeholders About Ariba Ariba, Inc. is the premier provider of Enterprise Spend Management (ESM) solutions for Global 2000 companies. With Ariba's powerful software and services, spend can be strategically managed so that expenses fall faster than revenue in down times, and grow more slowly than revenue in up times. Ariba's spend-centric, closed-loop approach enables hundreds of leading companies to achieve true breakthroughs in efficiency and bottom line savings. To learn more about the dramatic benefits of Ariba Strategic Sourcing solutions, visit Copyright 2003 Ariba, Inc. Ariba and the Ariba logo are registered trademarks of Ariba, Inc. Ariba Solutions Delivery, Ariba Supplier Network, Ariba Analysis, Ariba Enterprise Sourcing, Ariba Category Management and Ariba Contracts are trademarks or service marks of Ariba, Inc. Part Number: