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Procurement Transformation: A Story of a Learning Journey [Amsterdam]

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Yolanda van Norden, Senior Director for NPR Procurement, ASML Ariba Commerce Summit in Amsterdam 2014

Text of Procurement Transformation: A Story of a Learning Journey [Amsterdam]

  • 1. 1Yolanda van NordenSenior Director ProcurementOctober 23, 2014 | AmsterdamProcurement Transformation A story of a learning journey

2. 2Before we start IntroducingYolanda van Norden, Senior Director for NPR Procurement at ASMLOver 15 years of experience in global Procurement roles at ASML, NXP Semiconductors and Philips ElectronicsFascinated by Indirect Procurement, and the potential value usually locked within the organization 3. 3Before we start Introducing 4. 4Chips are everywhere.Part 1 5. 5Its hard to imagine a world without chips5 6. 6More than 180 billion chips are made every year6Data: WSTS0204060801001201401601802001990199119921993199419951996199719981999200020012002200320042005200620072008200920102011IC units (in billions)Chips produced in 2012185 BillionChips per every Man, Woman and child27Global Semiconductor Industry Sales$300 Billion 7. 7Introducing ASML.Part 2 8. 8ASML makes the machines for making those chips8Lithography is the critical tool for producing chipsWorlds top chip makers are ASMLs customers2013 sales: 5.2 billionPayroll: 10,000 FTEs 9. 9Founded in 1984 as a spin-off from Philips9 10. 10A Global presence 2014 Ariba an SAP company. All rights reserved.102,522 employeesSource: ASML Q4 2013Over 70 Sales and Service offices located worldwide5,654 employees2,184 employees 11. 14Our procurement journey . Part 3 12. 15Indirect procurement spend vs ASMLs turnoverPublicSlide 15 13. 16ASMLs indirect spend is split over all regionsPublicSlide 1677%13%10%Highly consolidated spend in Veldhoven regionExcept for Logistics, our spend is relatively local per categoryRelatively low and dispersed spend per countryLow spend per supplierLimited leverage possibilitiesVolume is relatively local per category (except logistics)Relatively low and dispersed spendLow spend per supplierLimited leverage possibilities 14. 17Where were we with indirect procurement three years ago?Benchmarks 2011 Conclusion: Good potential for improvementsProcurement strategies were incidentalNo strong market insights and deep understanding of business driversControl of spend was fragmented; organized as check at the end instead of directing spend in controlled waysValue add was consistent and just below market averages (2%-4%)Supplier consolidation is at par with market (4%)Managed spend per procurement employee is very high compared to marketIn 2011 15. 18Our intent is to build a High Performance Indirect Procurement organizationStrategic alignment with the ASML business and stakeholder needsCross-functional partnering to drive category strategy management processesReduced complexity in processes, and supply base standardization of R2P processesStandardized technology and tools used within procurement processes 16. 19We assessed our maturity statusAssessment FactorBest Practice Score12345Strategy & OrganisationBusiness Engagement & Functional ExcellenceStrategic SourcingCategory & Supplier ManagementPurchase To PayPeople & SkillsMeasurement, Policies, Controls & ComplianceSystems, Data & MetricsOwnEfficio assessmentASML ReadinessTrust the Procurement team to use all leversTeam ReadinessCapability to professionally use all leversResourcesCapacity to manage all spend globally 17. 20The Change ProgramBusiness alignmentProcessesPeopleStrategic NPR Work streamOperational Excellence WorkstreamCategory StrategyStakeholder needsSupply market dynamicsProduct portfolioCategory specific targetsStrategy implementationRFI, RFQNegotiations & contractingContract implementationOperational fulfillmentRequisition to payKPI managementSupplier performance managementContract management 18. 21The transition impacts both the own team as well as the way we interact with our stakeholdersToStrategic category managementBusiness value add KPIsSolution focusStakeholder centric procurementProcess & Service orientationFromTactical ProcurementProcurement KPIsResponsibility focusManaging stakeholdersTask orientation 19. 22Our action planThorough analysis of spendSet-up cross-functional teams for all main categoriesSet-up strategies for all major spend categoriesInvestment in team in all regionsImproved alignment with Control to ensure recognized value add in P&LStarted a transformation project on the operational requisition to pay process (EasyBuy)PublicSlide 22 20. 23We decided to measure our efforts by using the following metricsPublicSlide 23Strategic WorkstreamThenSavingsBelow benchmarkReturn on InvestmentAt benchmarkSpend covered by a contractAbove benchmarkConsolidationBenchmark% Spend covered by an approved strategyBelow benchmarkOperational WorkstreamThenCatalog ordersBelow benchmark% of e-invoicingBelow benchmarkSpend covered by a POAt benchmark 21. 24Our journey starts.PublicSlide 24 22. 25A mission helped to clarify the new organization's purposePublicSlide 25To deliver recognized added value to its stakeholders and the ASML business by pro-actively driving a cross-functional category strategy approachTranslating market opportunities into valuable business propositionsEnabling easy buying methods for ASML 23. 26Our Procurement Journey was clarified to our stakeholders with defining our productPublicSlide 26Our key tasksStrategic value addTactical procurementOperational fulfillmentBusiness offeringExpertiseProcessService# StakeholdersVery limited: executive mgtMore: budgetholders and upMany: everyone who can order stuffKey care-aboutsSupport / enable business strategyDo the work secure delivery of service on time (and cost)Quality of service reduced complexity and red tapeOur promiseWe know the market, and can help trigger changeWe deliver a professional process any way you like itWe answer any procurement question you haveOur delivery modelProcurement & Category Consultancy Cluster managersProcurement Account managers -Anyway you like itHelpdesk: EasyBuy, email, telephone 24. 27The Operational Procurement challengePublicSlide 27Reduce bureaucracyBy steering purchases into the most appropriate and efficient buy-channelBy eliminating double approval loops from contract to requisitionImprove stakeholder satisfaction by a faster procurement processImprove control on spend by improving the procurement involvement earlier in the buy-processImproving the closed loop of contract to requisition to order to deliver to pay 25. 28The Operational Challenge translated into the following goalsPublicSlide 28Simple and efficient ordering, invoicing & payment processSubstantial reduction in process time reduce with 50%Minimal manual handling & interventions 30% - 40% hands free buying via catalogues, templates, and scheduled ordering< 20% paper invoicesPushing spend through the right channels and reduce the alternatives for users Procurement at the start of the process 26. 29Why we choose for AribaPublicSlide 29Functionality:categoriese-InvoicingNPR & PRProcess:AuthorizationReportingMaster dataIntegrationInterfacesArchitectureASML adjustmentsEase of implementationImplementationTeam and set-upPlanningFinancials & Contract:Implementation costsRecurring costsBusiness caseContract conditionsStatement of WorkSupplier networkAmount of suppliersOn-boarding capabilitiesASML suppliers on the networkUser interfaceIntuitiveUser friendlyAfter go-liveSupplier governanceSupport organizationKPIs and business review structureSuppliersPresentation / sales teamCultural fitCompany profile / financialsCustomer reference 27. 30A planning was detailed outPhase 1E-invoicingTechnical solution firstOnboarding suppliers in wavesPhase 2P2OTechnical solution and catalog preparationsGo-life per region 28. 31Top level Ariba landscapePublicSlide 31Ariba P2O ApplicationCatalog BuyNon - catalog BuyApproval flowTIBCOinterfaceSAP ECC~ 60 csv filesPR info XMLUsersCatalog management and approvalApproval flowSuppliersGDS (user roles)User infoAriba NetworkAriba ReportingSAP BIreports~ 45 manual files 29. 34Communications & change management started earlyPublicSlide 34Own brand for the new solution:Channel strategy owned by Procurement team, not the ProjectTraining materials and dedicated websiteInstruction sessions for all requestors in all regionsGo life in waves 30. 35Status today improvements everywherePublicSlide 35Strategic WorkstreamNowSavingsDoubledReturn on InvestmentDoubledSpend covered by a contractIncreased with 10%ConsolidationDown to 3.5%% Spend covered by an approved strategyIncreased with 90%Operational WorkstreamNowCatalog ordersIncreased with 20%% of e-invoicingIncreased with 40%Spend covered by a POIncreased with 20% 31. 36Learning along the way.PublicSlide 36The Strategic Program went faster, yielded faster results, and was easily acceptedThe Operational Program was more difficult to explain; processes are more integrated with other stakeholdersNot only Procurement should want the solution, also ALL stakeholdersUnderstand the impact on your own processes; willingness to change and adaptIT architecture is to be understood early in the process; dont think it is all SAP now, so it will workFind a project manager or consultant that has experience with the Ariba solution (or the solution you have chosen). 32. 37Are we there yet???PublicSlide 37