Communiqué Newsletter of NAPM-Indianapolis, Inc. Established in 1917

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1 An Affiliate of Communiqué Newsletter of NAPM-Indianapolis, Inc. Established in 1917 Inside This Issue: Letter From the Board Understanding Strategic vs. Tactical Purchasing Strategies How to Lead a Successful Kaizen Event PDM Information ISM Terms of the Month New Member 10 Making procurement a 2012 priority NAPM- Indianapolis Calendar of Events 11 Volume 21, Issue 4 Hello! 92 Years Old and still counting! September 2012 As Programs Director, I am responsible for providing a key value benefit to you- namely the monthly PDMs. While we all might belong to this organization for a variety of reasons, what we all want out of this sort of time commitment is a meaningful delivery of value. Picking great speakers and topics, a tasty menu and a convenient location are givens. To take this membership to a higher level, we want to know how to use and martial the wonderfully dynamic group of people that comprise our members and act as a group in a more profound way. To this end, this open letter is a request to all of you to inform us about the things you as individuals or your organizations care about, and let us tailor our programs beyond PDMs to include volunteer events, community activities, and more outside box efforts to use the inherent energy of the membership to provide more to the community. Ultimately, we seek relevance in this proposition, and ask you simply and humbly to offer your thoughts about how we reach deeper than we have previously to achieve that. Upcoming ISM Conferences/ Events & Seminars 11 I hope this resonates for all of you, and it spurs you to let me know how you might envision the Programs this group might provide as a service to the members in the future. It starts with you, the individual to provide the feedback on what you care about. Please reply with your thoughts to programs@napm-indianapolis.org Thank you- Patrick Carroll Programs Director NAPM Indianapolis

2 Page 2 President Megan Mills President@napmindianapolis.org Vice-President Stacie Neuhaus, C.P.M. VP@napmindianapolis.org Treasurer Erica Voetsch Treasurer@napmindianapolis.org Director of Programs Patrick Carroll Programs@napmindianapolis.org Director of Education John Hill, CPIM, C.P.M. Education@napmindianapolis.org Director of Communications Dan Levine Communications@napmindianapolis.org Director of Membership Ron Wright, C.P.M. Membership@napmindianapolis.org Understanding Strategic vs. Tactical Procurement Outsourcing Research undertaken by Proxima & NelsonHall found that many procurement outsourcing engagements, when led by the CPO, are tactical in nature (single categories, short term, department focussed). Conversely, outsourcing engagements are far more strategic (longer term, business focussed) when the CFO or even CEO are involved. In many organizations the procurement function is resourceconstrained and under-invested in and, while personnel in the function are often well regarded by their colleagues, there is clearly room for improvement in terms of the overall management and control the function provides in support of the wider business goals. However, few businesses are actively engaging with specialist thirdparty providers, with a small minority actually outsourcing indirect procurement, as a strategy to increase the focus on supporting the goals of the wider business whilst providing deep commercial insight and change management. Director of Excellence Mira Pike Excellence@napmindianapolis.org Secretary David Mumper Secretary@napmindianapolis.org Past President Lea Anne Fuchs, C.P.M., CFSP PastPresident@napmindianapolis.org Office Manager Wendy Bayley CustomerService@napmindianapolis.org Our research shows that a significant minority (17%) of organizations today are using external service providers to support their work in indirect procurement. The tendency is to use external service providers for: Discrete specific services which support the sourcing and supplier management activities: these include support for supplier identification, catalogue management and spend analytics. As such, organizations are using external services providers for support in specific activities, rather than an end-to-end process outsource, or Transactional activities: around invoice processing and disembursements. Spot purchasing, an area in which many organizations feel they lack strong capabilities, is less commonly outsourced. Many

3 Page 3 indirect procurement BPO engagements are tactical in nature. This is particularly the case when the outsourcing engagement is instigated by the procurement function itself (rather than by the Chief Financial Officer/Chief Executive Officer). However, CPOs still tend to think of outsourcing indirect procurement activities as a tactical initiative. Just 25% express a belief that this outsourcing would likely lead to a significant increase in the effectiveness of the indirect procurement function within their organizations. Importantly, CFOs express a significantly higher degree of confidence than CPOs about the likelihood of outsourcing indirect procurement leading to major increases in effectiveness. This caution by CPOs perhaps reflects a lack of awareness by many CPOs of the various forms that indirect procurement BPO can take, as well as a fear of loss of control and perceived influence. The fact that outsourcing could be used as a strategy to extend their ability to work more closely with the wider organization is not widely understood. The chart on the next page highlights the two polar ends of the procurement outsourcing spectrum comparing tactically focused outsourcing engagements with strategic focused outsourcing engagements. There are of course exceptions to this simplified classification (with areas such as supplier performance management, savings measurement, supplier innovation initiatives, etc sitting in between the two sides), but most procurement BPO arrangements fall into one of these two camps. Procurement outsourcing as a tactical decision, is usually instigated from inside the procurement function and the activities tend to be geared towards a support service rather than a transformational service. Procurement outsourcing, as a strategic decision, is an investment to save substantial sums of cash, impacting profitability. The outsourcing provider needs to bring to the table all the capabilities that can help the client to improve business performance, catalyst or impact big change programs, realign cultural attitudes towards cost management and positively change spend behaviors. This type of arrangement is seldom (currently) instigated by the CPO, much more commonly by the CFO, COO or even CEO and it s clearly a strategic move.

4 Page 4 How to Lead a Successful Kaizen Event Follow certain procedures and processes to increase likelihood of success Jill Jusko, Industry Week May 21,, 2009 Kaizen events, which are short-term continuous improvement events designed to improve an area or a process, are key to many manufacturing plants' lean efforts. At the recent IndustryWeek Best Plants annual conference, Will Franks, vice president of production at Reliable Automatic Sprinkler Co., shared some thoughts about how to increase the chance for successful outcomes of kaizen events. Outlined in this article are a few of his ideas. Critical to the success of a kaizen event is the makeup of the team performing the event. Franks suggests that the team:

5 Page 5 Be cross-functional Include members from various levels of the organization Include hands-on associates Consist of both leaders and followers Typically include eight to 12 people Include support functions More successful kaizen events include a team dynamic in which there is balanced participation by all team members and conversations occur one at a time, Franks said. He provided additional team guidelines, which state: be on time; focus on the process, not the people; be sensitive to the process owner or creator; and importantly, have fun. Also, make the team a full-time commitment for the duration of the kaizen effort. Also imperative to a successful kaizen event is the event facilitator. Franks outlined five facilitator prerequisites. The facilitator should be: Knowledgeable on the overall business A lean tools expert A kaizen process expert A team dynamics expert A teacher Of course, critical to the success of the kaizen event is the project itself. Franks says to pick a project that is manageable in scope and which has a high probability of success. Choose one that will make a measurable impact and that is tied to business goals. Also, pick a project with high visibility. High visibility will show a greater number of people the impact a kaizen event can have on improving operations..

6 Page 6 Making procurement a 2012 priority Written by William Gindlesperger, Chairman and CEO, e-lynxx Corporation A wise New Year s resolution is to assess how more can be done with existing resources. This is certainly true as organizations continue to look for ways to squeeze every penny out of every dollar. One proven way of maximizing resources is to save on goods and services through the purchasing process. Often relegated to back-office operations, procurement has earned its place at the strategic decision-making table of any organization that wants to improve its bottom line. According to the most recent survey of chief procurement officers by Capgemini, 79 percent of chief procurement officer respondents stated that procurement must be more focused on improving an organization s bottom line. The Capgemini survey also found that more than 70 percent of purchasing functions now report directly to boards of directors, and more than a quarter report directly to chief executive officers. Given the growing importance of procurement, there are some basics that must not be overlooked to establish a cost-effective and efficient program: Plan properly - Consult with departments within the organization to determine projected needs, timetables, quality and quantity requirements, budgets and frequency of orders. Inadequate planning will lead to problems. Centralize purchasing of similar items where possible. Assign accountability - Establish roles and responsibilities so all know who is responsible for such key decisions as quantity, quality, design, deadlines, final approvals, etc. Get as many decisionmakers as possible involved in the planning process so all bases are covered from legal to shipping.

7 Page 7 Ensure transparency - Make sure all participants in the procurement process, internal and external, know that procurement ethics will be applied to ensure fairness and avoid favoritism or any relationship that may seem questionable. Be legally compliant - Be meticulous with all contracts, orders and licensing agreements so as to ensure that everything is legally sound with every client before the procurement process is initiated. Welcome innovation - Seek new approaches to procurement that were not available just a few years ago. New procurement technology, such as automated vendor selection technology, is reducing the cost of custom goods and services by an average of 42%. Be clear - Communicate in a way that is easily understood and in a way in which all participants are informed in a timely manner about key decisions, tasks, quality, quantity, deadlines, changes and delivery. Establish payment terms - Do not leave anything to chance regarding how payments to the successful vendor are to be calculated once they have been awarded the contract. Make payments on time. Document everything - Ensure that the whole process is adequately documented and recorded to demonstrate the decision-making processes to others. This contributes to full accountability by all involved and serves as an archive for reference with future similar jobs. These basics come together when a competitive bidding environment is established for vendors. Of all new approaches to vendor bidding on the market, the one that is producing the best results is the automated vendor selection technology.

8 Page 8 These basics come together when a competitive bidding environment is established for vendors. Of all new approaches to vendor bidding on the market, the one that is producing the best results is the automated vendor selection technology. Savings of 25 to 50 percent on procured goods and services, such as printing and manufactured specialty parts, are being reported. The strength of this process is it has the buyer establish a database of pre-qualified vendors that the buyer maintains so that the database is up-to-date from project to project. All vendors in the database are carefully vetted so the buyer knows that regardless of pricing a quality job will be delivered on time by a trusted supplier. When job specifications are entered into the computer, the automated vendor selection procedure matches the specs with the capabilities of all vendors in the buyer s database but only invites those best qualified to do the work to bid. Low bid typically wins, and prices are discounted because vendors usually bid on the work to fill production gaps or downtime. With advances such as this, every C-level executive should take notice and make a 2012 resolution to improve bottom-line results by controlling expenses with procurement innovation that will bring antiquated procurement processes into the 21st Century.

9 Page 9 PDM LOCATION Sheraton 8787 Keystone Crossing Indianapolis, IN Registration and Networking 5:30 PM Dinner 6:00 PM Free for members $40.00 for Guests $20.00 for Students

10 NAPM-Indian apolis MEM BERSHIP Septemb er, Building a Powerful Profession: One Member at a Ti me Volume 21, Issue 4 Page 10 Social Media in the Supply Chain ISM Membership Number of CPSM s Number of CPSD s NAPM-Indianapolis 41,038 4, Membership 214 New Members of our Affiliate Please welcome the following new members of NAPM-Indianapolis, Inc. Name Harold Wims Mike Gadus Karen V. Faley Adam Larrison Company Ascension Health MSC Delta Faucet Nice-Pak Products, Inc. Specialty Coating System, Inc. The Board of NAPM-Indianapolis would like to express a warm welcome to each of our new members. Please let us know how we can better serve you by answering any questions you may have. ISM Terms of the Month: LEAN SUPPLY MANAGEMENT A overall methodology that seeks to minimize the resources required for supply chain activities by eliminating waste (non-value-added activities) that inflate costs, leadtimes and inventory requirements, and by emphasizing the use of quality improvement programs and flexible workforces and facilities. VALUE STREAM MAPPING Originally, a lean manufacturing technique in which the transformation of materials is traced from beginning to end to determine if there is waste in the process either in the form of a step where no value is added or a point of "wait time" when material is being stored to await further value-adding transformation. This concept may also be applied to services.

11 Page 11 NAPM-Indianapolis Monthly Calendar DATE DAY TIME EVENT Sept 20 Thurs 5:45-8:30 PDM Rose Kelly-Falls SVP Supply Chain Risk Mgmt. Supply Chain Risk; you can t sweep it under the rug Oct Wed/Thurs 8:00a-5:00P Education Supply Mgmt, a seminar for new buyers. Join us on Linked-In and NETWORK, NETWORK, NETWORK with your colleagues. about=&gid= &report% 2Esuccess=r3Tayp0nRRro3Er8iWS8vOu_mFd11ndGIOEdAI27ES3KgpplepkOcIgotS3mJWzXqb2u21w qjdjwm