Using Technology to Streamline Procurement and the Supply Chain

Transcription

1 Using Technology to Streamline Procurement and the Supply Chain August 2006

2 Agenda Where does Procurement fit into the overall supply chain process? Key Procurement process steps and using technology to streamline and improve them Using Procurement techniques to drive supplier performance improvement Managing indirect suppliers through Procurement technology

3 Spend Profile Drives Technology Usage

4 Spend Profile Drives Technology Usage High Spend by Category High Value / Low Volume Electronic P/Os EFT Recurring Payments Address Governance High Volume / High Value Electronic P/Os ERS / RCTI Direct Connect Systems Focus Low Low Value / Low Volume P-Cards One Time Vendors Minimise Activity Low High Volume / Low Value Electronic Catalogues Electronic P/Os P-Cards Reduce Overhead High Number of Transactions

5 Putting the Systems Jigsaw Together Systems Spend Analysis Demand Planning Manufacturing Expense Management System (EMS) E-Procurement ERP EDI / ERS Supplier Portal Forecasting / MRP Supplier Portal EDI / Direct Connect Evaluated Receipt Settlement Supplier Performance Management System E-Procurement with Catalogues Electronic RFX for Quick Sourcing Supplier Portal for invoice submission EFT via core ERP system P-Cards Expense Management System EMS interface to ERP Key Direct Suppliers General Suppliers Low Value Suppliers

6 Supply Chain Planning Process Flow Demand Planning Prepare Demand Forecast based on historical actual sales and known promotions activity SKU Level forecast for each major sales channel Production Planning Using Demand Plan Forecast, prepare 13 week rolling Production Plan by SKU per plant Used for MRP runs and ordering of input materials Production Operations Run MRP to order inputs, schedule production runs to make actual SKUs Make actual product based on Production Plan Distribution Planning Prepare Distribution Plans for finished goods based on actual Customer Orders Distribution Manage distribution of finished goods to company warehouses, direct to customer shipments and export customers

7 Supply Chain Network Process Flow Customer Channels Forecast Demand Produce to Forecast Ship to Order Demand Plans by SKU by Customer Channel, based on actual sales history, seasonality and planned promotions Production Plans are based on total SKU forecast across customer channels. Map SKU demand to most appropriate manufacturing location. Distribution plans pre-position stock based on forecast demand in State Warehouses. Major customers use direct shipping. Major 1 Major 2 Retail Route Product A Product B Product C Map Demand Plans to Production Sites Factory 1 12 X Factory 2 10 X Factory 3 17 X Major Warehouses QLD NSW VIC SA Direct Shipments Direct Shipments Major 1 Major 2 Retail Route Other Factory 4 23 X WA Other

8 Procurement Process Flow Buyer selects item Buyer places order Supplier receives order Supplier sends item Buyer receives item Supplier sends invoice Buyer approves invoice Buyer send invoice to A/P A/P pays invoice Forecast Order Receipt Invoice & Pay Manage Supplier

9 Forecasting Data integrity Forecast accuracy Sharing forecasting with suppliers Supplier portals

10 Ordering Purchase Orders Blanket Orders EDI Ordering Evaluated Receipt Settlement (ERS)

11 Technology Linkages with key suppliers - ERS / EDI How to setup ERS with key suppliers Catalogue items Contracted pricing Supplier needs to change their invoicing process Focus on accurate receipting Agreed reconciliation process

12 EDI / Direct Connect with Suppliers Transmission of Purchase Orders Advanced Shipping Notices (ASN) Goods Receipt Invoicing Variations

13 Receipting Goods receipt to trigger payment

14 Invoicing and Payment ERS / RCTI Electronic invoicing versus standard invoicing Consolidated invoicing Payment terms

15 Managing Suppliers Using KPIs to measure and drive performance

16 Supplier Scorecards Scorecards are typically used to provide a summary of supplier performance against KPIs Traditionally Procurement has focused on hard metrics (Quality, Service, Price). Increasingly soft metrics are considered.

17 Measurement Systems Commercial software vendors SAP, Oracle, Ariba, Emptoris, etc Base KPI functionality available in core purchasing systems Off the shelf systems, can be expensive to acquire and install In-house developed systems Customised to your industry and requirements Requires significant investment but can deliver flexibility May have stronger focus on quality or process specific issues Manual systems and processes Spreadsheets and Simple but can be effective if applied consistently

18 Collecting KPI Data Through Systems At point of ordering reference contract to track compliance At point of receipt Delivered In Full, On Time At point of invoicing invoice accuracy, blocked invoices etc At point of inspection or usage Quality metrics, defects, out of specification issues At completion of order poll users for feedback on order On going management Qualitative data Feedback from end users

19 System KPI Reporting Purchase Price Variance (PPV) Variance to budgeted cost and price Delivered In Full On Time (DIFOT) Number of orders delivered short / Number of orders delivered late Invoice accuracy Number of invoices blocked or held up / Number of invoices requiring rework Quality Number of defects for a particular supplier Supplier performance Some systems allow for each transaction to be scored by an end user upon completion constant feedback loop Contract compliance Requires orders to reference contract at time of purchase and payment Can calculate spend against contract versus total spend in category

20 Supplier Performance League Table DIFOT Performance January Supplier A 2. Supplier D 3. Supplier I 4. Supplier G 5. Supplier B Quality Performance January Supplier D 2. Supplier G 3. Supplier B 4. Supplier A 5. Supplier I Invoice Accuracy Performance January Supplier G 2. Supplier B 3. Supplier I 4. Supplier A 5. Supplier D Comparing performance can be a powerful motivator for suppliers Especially if results drive the next sales cycle

21 Indirect and MRO Suppliers Streamlining the Tail

22 E-procurement Overview of E-Procurement Punch out technology overview Types of suppliers ready for E-procurement

23 P-Cards Using P-Cards Expense Management Systems

24 Supplier Portals Use supplier portals to streamline administration Terms and conditions Order transmission Supplier performance statistics Invoice submission and tracking Procurement contacts