Efficient Processes and Cost Reductions through RWE Corporate Procurement

Transcription

1 Efficient Processes and Cost Reductions through RWE Corporate Procurement Dr. Ulrich Piepel, CPO RWE Group, RWE Systems AG ELP Forum London, 23 rd /24 th May

2 Importance of Procurement is Increasing Year By Year Globalization leads to global sourcing Outsourcing and reduction of internal value added leads to higher procurement volume Focus on core competencies and less diversification puts also procurement in focus Value creation of procurement is getting into the scope of CEO s 2

3 The Profit Contribution of Procurement Operating result Other costs Personnel costs Procurement costs Profit contribution of Procurement: B = Procurement costs in % of sales K = Cost reduction in % of procurement costs UR = Return on sales GB B = Potential profit contribution of Procurement disclosed as comparable sales increase GB B = B*K UR Mechanical engineering Chemical industry Food industry Trade Return on sales in % A reduction of procurement costs by 3 % has the same effect on results as an increase in sales by 43 % 24 % 60 % 52 % Source: Dresdner Bank / Dennso Management Consulting 3

4 A: Organization of RWE Systems Corporate Procurement B: Tools to realize savings C: Efficient procurement processes D: Procurement Controlling 4

5 A: Organization of RWE Systems Corporate Procurement B: Tools to realize savings C: Efficient procurement processes D: Procurement controlling 5

6 RWE AG Revenue: 42 billion Employees: approx RWE Power, Essen, D RWE Dea, Hamburg, D RWE Gas Midstream, Essen, D RWE Trading, Essen, D RWE Energy, Dortmund, D RWE Npower, Swindon, GB RWE Systems, Dortmund, D Power Generation Exploration Gas & Oil Gas Distribution & Wholesale Energy Trading Electricity & Gas Transportation Grid Power Generation Corporate Services Lignite Mining Electricity & Gas Distribution Grid Retail 6

7 RWE Systems Realizes Synergies through Bundling of Corporate Services Services of RWE Systems AG Corporate Procurement Real Estate Facility Management Information Technology Payroll, Internal Audit, Fleet Management and others Key Data 2006 RWE Systems Corporate Procurement Business volume (internal): 633 million 55 million Employees (staff equivalent) Locations Strategic coordinated 4,8 billion procurement volume** Procurement volume in direct responsibility** 2,5 billion 7

8 Added Value by Bundling of Procurement Functions Within Corporate Procurement Service provider for companies without own procurement function RWE AG (Group Center) RWE Power* RWE Trading RWE Gas Midstream RWE Energy RWE Energy AG RWE Westphalia Weser Ems AG RWE Rhein-Ruhr AG Transport Network Electricity GmbH Transport Network Gas GmbH Customer Service GmbH RWE Npower (Corporate & IT demand) RWE Systems RWE Systems Corporate Procurement Strategic controlling and confirmation of Group Frame contracts (4,8 billion** without gas, water, electricity, insurances) Strategic controlling and coordination of local procurement organizations RWE Power* RWE DEA Matra RWE Energy REG: East (enviam) West (VSE) Southwest (Süwag, Kevag) South (LEW) Middle (ELE, rhenag) Netherlands Czech Poland Hungary Slovakia Austria RWE Npower (Utility demand) operative procurement (1,7 billion**) Accounting by: Percentage procurement volume Transaction costs (Catalogue, Call- off-order, Single order) * Project-/Complex Procurement primarily by RWE Power ** Volume 2006 respective company structure

9 Procurement Organizations within the RWE Group Systems UK, United Kingdom Npower, United Kingdom REG Netherlands REG Czechia STOEN, Poland VSE, Slovakia Locations of RWE Systems Corporate Procurement Bad Kreuznach Brühl Dortmund Düren Essen Grevenbroich/Frimmersdorf Idar-Oberstein Köln Osnabrück Saffig Siegen Trier Wesel Swindon Worcester KELAG, Austria REG Hungary MATRA, Hungary Further procurement organizations of subsidiaries in Germany Augsburg Chemnitz Frankfurt Gelsenkirchen Hamburg Koblenz Langen Saarbrücken 9

10 A: Organization of RWE Systems Corporate Procurement B: Tools to realize savings C: Efficient procurement processes D: Procurement controlling 10

11 Main Levers for Procurement Cost Reductions Group wide coordination of procurement Reduction of over specification Functional vs. technical requisition Split of demand and supply Highly trained procurement staff Use of modern procurement tools 11

12 The Structure of SAP Systems in the RWE Group Needs IT Solutions for Networked Procurement Processes RWE Power, RWE Systems (WWE, RR ) Global Spend Client (GSC) Group contracts, Master Data Süwag VSE Energis RWE Dea RWE Energy RWE Energy RWE Energy Mitgas LEWLEW RWE Energy Cz Matra HU EnviaM KEVAG SAP BW VSE Slovakia RWE Npower UK ELMÜ / EMASZ HU analysis, reports systems within SAP master group (same Master Data, structures) systems out of SAP master group (local Master Data) 12

13 Corporate Procurement Portal (CPP) Corporate Procurement RWE Systems RWE Power RWE Energy Süwag Npower Procurement Organizations in the RWE Group Reports CPP Global Spend Client (GSC) Group Contracts, Master Data Single Sign On Group frame contracts Master Data Spend analysis with SAP-BW demands orders SAP system Systems SAP system Power SAP system Energy SAP system Süwag SAP system Npower SAP system Requisitions in the RWE Group 13

14 Contract Server: Transparency About All Frame Contracts Central Contract Server creation and administration of group frame contracts distribution of group frame contracts creation and maintenance of authorization profiles monitoring of call-off volume local SAP R/3 system of the company automatic transfer frame contract automatic transfer call-off volume SAP R/3 contract server SAP R/3 Systems in the RWE Group Copy of the group frame contract in the specific mandator local call-off orders retransfer of call-off information to the contract server local SAP R/3 system of the company local SAP R/3 system of the company local SAP R/3 system of the company 14

15 Sourcing Teams Bundle Group Wide Procurement Power and Know how Target: One face to the supplier RWE Systems SÜWAG enviam RWE Power RWE Transgas Czech RWE Npower Elmü/Emasz Stoen Sample Switch gear Boilers Cables Meters Chemicals Office material.. Commercial Product Manager Technical Product Manager 15

16 A: Organization of RWE Systems Corporate Procurement B: Tools to realize savings C: Efficient procurement processes D: Procurement controlling 16

17 Assessment of the Procurement Process Catalog process Process Efficiency Automatic release order Frame order with descriptions Manual release order Shortened order process Free text order Frame order Maverick Buying Process Efficiency FO Maverick Buying ZVB NB FO-D B2B MAB AB Control of Spend through Procurement Transparency B2B = Catalog process MAB = Automatic release order (SAP) AB = Manual release order (SAP) FO = Frame order (Call-off) (SAP) FO-D = Frame order with descriptions ZVB = Shortened order process NB = Free text order 17

18 Call-off-orders and Catalog Orders are Increasing % Ø 2003 Ø 2004 Ø 2005 Ø 2006 frame contract (incl. catalog) only catalog 18

19 Catalogs Gain Capacity for Strategic Procurement Development of catalog procurement (B2B): Catalog procurement increases importance substantially Increase of order positions from approx (2001) to (2006) Procurement volume: raises from 6 million (2003) to approx. 25 million (2006) > 60 % of all order positions handled through catalog > 100 catalogs with approx. 85 suppliers number of order positions

20 eauction Established as Successful Tool in Corporate Procurement Average savings 2,2 % 33 % 23,13 % in million ,1 10,3 10,2 0,9 3,4 0, Plan 2008 Auctioned volume Procurement result 20

21 A: Organization of RWE Systems Corporate Procurement B: Tools to realize savings C: Efficient procurement processes D: Procurement controlling 21

22 KPI`s are the Basis of an Efficient and Successful Procurement Organization Result Procurement result Procurement performance Operating result Cycle time Back log Quality Maverick Buying quota Productivity Invoiced volume and procurement volume per FTE Frame contract quota Customer satisfaction Customer visits Customer satisfaction Automated methodology to measure relevant key data Graphic format with target Structured after organizational units 22

23 Team Structures are Implemented within the Departments (F4) and Master Data Management Corporate Procurement Utility Procurement F3 Standard Procurement IT + Material Standard Procurement Services Catalogue Procurement Procurement Strategy & Coordination Distribution Grid Services Transport Grid Services Electronics Team 1-2 Team 1-4 Team 1-4 IT Team 1 Team 2 Team 3 Team 4 Material Consulting, HR & General Services Team 1 Team 2 Team 3 Facility-, Waste Management, Agriculture Team 1 Team 2 Procurement Catalogue Articles Development Catalogue Purchasing Team 1 Team 2 Travel Management Master Data Management Team 1 Team 2 Team 3 Procurement Planning & Key data Procurement Systems & Processes Procurement Strategy & Guidelines Gas/Water Engineering Team 1-2 Team 1 Team 2 Team 3 Team 3 Travel & Vehicles Marketing Catalogue Purchasing Civil Engineering Team 1-2 Team 1 Team 2 23

24 Key Indicators 1 Example 24

25 Key Indicators 2 Example 25

26 Suppliers Also Deliver KPI`s to Procurement Savings (%) Lead time Savings ( ( ) Balanced Score Card for Suppliers Suppliers report key data to Corporate Procurement Focus on main KPI`s All KPI`s are measurable Target agreements for all KPI`s Quarterly supplier meetings with measures for improvement 26

27 Reduction of Maverick Buying Through a Group Wide Guideline and Controlling Total Spend Volume handled by procurement Maverick Buying Reduction of Maverick Buying from 10 % to < 2 % Volume not in procurement focus

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