Beyond the Transaction

Beyond the Transaction:

Enabling Knowledge Based Services in your Procurement

Captive

Philip Ideson

Procurement & outsourcing experience as a client and

provider across multiple industries. Lived and worked in UK,

US & India.

Key Points

• Background: Offshore Shared Services Procurement Office

• Approach: Identifying Knowledge Based Processes

• Enablement & Engagement: Building Offshore Capabilities

• Creating Value: Knowledge Based Services Examples

• Capture the Benefit: Conditioning Home Country Colleagues

Quick Poll: ABOUT YOU

1

2Captive Shared Service or

Outsourced?

Who has offshored part of their

procurement function ?

3Do they perform any knowledge

based services?

OUR PROCUREMENT SHARED SERVICES JOURNEY

Initial Vision: Offshore team to provide tactical procurement activities

5 Years In: 170 FTE’s across multiple verticals

We then challenged ourselves:

“Move beyond labor arbitrage and create value for our home

office through the provision of knowledge based services”

“Work flow platforms are enabling us to

do for the service industry what Henry

Ford did for manufacturing.

We are taking apart each task and

sending it around to whomever can do it

the best, and because we are doing it in

a virtual environment, people need not

be physically adjacent to each other, and

then we are reassembling the pieces

back at headquarters…24/7/365.”

Approach: WORK FLOW PLATFORMS

- Thomas Friedman; The World is Flat

We plotted the process steps for every job type based on the complexity and the

strategic nature of the process

We then allocated each process step to either our home office colleagues or an analyst

in our offshore shared service center, and rebuilt the process flow and R&R’s

Approach: Filling the Gaps

We identified gaps in the capabilities of our resource

constrained home office procurement teams

Approach: FILLING THE GAPS

We considered how we could leverage the

masses of data we accumulated during our

transactional activities

Approach: LEVERAGING DATA

We identified three key areas where we could

create value through knowledge based services:

1. Strategic Sourcing (support Direct & Indirect spend categories)

2. Analytics (market intelligence, cost modeling, negotiation support)

3. Category Management (low value, “ignored” categories)

To enable the implementation, we built a holistic

framework to grow the entire organization…

1. Talent

2. Performance

3. Governance

4. Transitions

5. Structure

6. Branding



1. Talent

2. Performance

3. Governance

4. Transitions

5. Structure

6. Branding

TALENT:Develop, Measure, Incent & Grow

Example / Success Factor:

Voluntary Attrition of 12%

1. Talent

2. Performance

3. Governance

4. Transitions

5. Structure

6. Branding

PERFORMANCE:Create a performance driven culture


Performance metrics across 100% of our processes



1. Talent

2. Performance

3. Governance

4. Transitions

5. Structure

6. Branding

GOVERNANCE:SOW’s & Business Operating Reviews


Only group within Global Purchasing to commit KPI’s to internal clients



1. Talent

2. Performance

3. Governance

4. Transitions

5. Structure

6. Branding

TRANSITIONS:Consistency of Approach


Implemented formal project management process for all transitions



1. Talent

2. Performance

3. Governance

4. Transitions

5. Structure

6. Branding

STRUCTUREBuild a locally managed business


In-country chain of command ensures accountability of local leadership



1. Talent

2. Performance

3. Governance

4. Transitions

5. Structure

6. Branding

BRANDINGBrand as an external service provider


Focus on brand helped facilitate 100% growth within 12 months



We identified an internal client

and advocate who would help

build and pilot new knowledge

based services

Pilot: PHONE-A-FRIEND

While for other activities, clients were

not able to visualize the possibilities, so

we built services and then demonstrated

the value they could create

Enablement Route 2: Built it and they will comePilot: BUILD AND THEY WILL COME

Enablement Route 2: Built it and they will comeExample: BUYER/CAPTIVE R&R SPLIT

Market Intelligence

Amortization Tracking

Supplier contact database

Performance Information Gathering

Category Info Gathering

Populate RFQ

1. Global Commodity Strategies

Regional Commodity Buyer Activities

Captive Purchasing Support Activities

Governance



Outsourcing Visteon Manufacturing

Budgeted Parts Reconciliation

Supplier Legal Issues

Make/Buy Participation

Commodity Strategy

EST Cost Models & Targets

Escalated Service Pricing Issues

Escalated Payment Issues

Obsolescence Mgmt.

Supplier Management and RelationsManage Supplier Location Changes

(SCR)

Claim Verification and Processing

Directed Supplier Purchases

On-line bidding events

Raw Material Surcharge analysis

Populate RFQ

Information Gathering

On-line bidding events

Info Gathering (CMMS, SAP)

Populate RFQ

2. Sourcing



Recommend Source

Selection (auction or eRFQ)

Information Gathering

3, Negotiations & Supply Base Performance



Non-Design Price Changes

Negotiate Service Price Ups

Supplier Charge back

Supplier Resourcing

Supplier Resourcing

Productivity Negotiations

Supplier Assessment

Strategic Sourcing – Source Selection

Warranty negotiations

Supplier Management and Relations

For our Commodity Buyer’s, we split all roles

and responsibilities between the home office

Buyer and our Captive Team

Enablement Route 2: Built it and they will comeExample: SOURCING PROCESS

STEP 2 STEP 3 STEP 4 STEP 5 STEP 6 STEP 7

Build Sourcing Strategy

RFQ Preparation and issuance

Supplier response collection & analysis

Evaluation, negotiation and sourcing award

Implement Sourcing

Performance Management

STEP 1

Identify Sourcing Requirement

We divided the work flows across the sourcing process between colleagues

in our home offices and our offshore captive center:

Strategy & Needs Id ● RFQ Requirements ● RFQ Analysis ● Negotiation ● Implement ● Supplier Management

Build & Issue RFQ ● RFQ Q&A ● RFQ Collection ● Negotiation Data Analysis ● Issue PO ● Track Performance

Value Creation Activities

Time Consuming Activities

Example: COST ANALYTICS

� Analyzing cost breakdowns� Cost elements (FOREX, Material, Labor, Markups)

� Supplier costs for similar products & services

� Gather market intelligence� Commodity prices, price trends, price forecasts)

� “Should Cost” Models

� Negotiation Support Reports

OUTPUT:

Our Captive took a lead role in

capturing, analyzing and

reporting intelligence

CAPTURE THE BENEFIT

Conditioning of home office colleagues

� Cultural awareness

� Understanding of captive shared services capabilities

�Ability to reassemble work flow platforms

Key Takeaways

� Identify the processes you want to

target

� Build the organizational foundation

that will enable you to make the leap

to knowledge based services

� Pilot your services with an internal

advocate

� Use early successes and advocates to facilitate growth

� For maximum benefit, ensure your team members providing the

knowledge based services are fully integrated into your home office

teams

KEY TAKEAWAYS

Continue the Conversation

[email protected]

+1 313 670 1333

www.linkedin.com/pub/philip-

ideson/1/552/618

CONTINUE THE CONVERSATION

Title Name URL

Thomas Friedman Charles Haynes http://www.flickr.com/photos/americanprogress/3077771442/sizes/m/in/photostream/

Euros Username 1suisse http://www.flickr.com/photos/1suisse/3752554593/sizes/l/in/photostream/

Mind the Gap Username limaocarjuliet http://www.flickr.com/photos/limaoscarjuliet/3305886294/sizes/l/in/photostream/

Fish & Chips Box Username livepine http://www.flickr.com/photos/livepine/4550549518/sizes/z/in/photostream/

With Thanks: PHOTO CREDITS

With Thanks: OUR TEAM IN INDIA!