[M204]SupplierRelationshipManagement

Monday,19May15:00–16:15

Compliments of:

1.  Introductions

2.  Overview

3.  Case Studies

• Bank of America

• Cushman and Wakefield

• Eli Lilly and Company

4.  Questions

5.  Closing

Agenda

Introductions Daniel Maschoff, Global Category Director Accenture Procurement Solutions

Deborah Steele, Senior Vice President, Corporate Travel & Meetings, Bank of America

Steve Kiernan, Assistant Director, Corporate Purchasing, Cushman and Wakefield, Inc.

Anne-Marie Christian, Manager, Lilly Travel and Meeting Services, Eli Lilly and Company

What is SRM? •  Management operating

system and practices to ensure alignment of suppliers and buyers

Why use SRM? •  Ensures TCO objectives

forecasted are achieved, maintained and even surpassed

•  Vehicle for continuous improvement

Action Title

Purchase Cost

Transactional (Process) Costs

Cost of Poor Quality (COPQ) Costs

Non-Compliance Costs

Opportunity Costs

Perceived “Costs”

Total Potential Costs

Overview of Supplier Relationship Management (SRM)

SRM should be ….

•  Strategic component in Travel Management program

•  Enable healthy and sustainable partnerships

•  Fact-based, correlating data management and contract terms

SRM will ….

•  Ensure continued alignment on value delivery

•  Considered early in process – earlier the better!

•  Provide for increasing value over time

Time

TCO

sav

ings

Traditional A

B

C A.  Strategic Sourcing Savings B.  Capability Enhancement

(Workforce, Process & Technology)

C.  Category Management - Supplier Management - Demand Management - Contract Management

SRM Planning

SRM Sample Components •  Service Expectations, Commitments

and ongoing Metrics •  Key Performance Indicators (KPI’s) /

Service Level Agreements (SLA’s) •  Process Re-engineering, e.g. Buying

Channels •  Issue Management: Resolution and

Escalation •  Change Management / Implementation

Process •  Contract Adherence Letter and Spirit

Changes

KPI’s

Prices

Services

Agreement

SRM Drivers

Supplier Relationship Management

Bank of America Corporate Travel Services

Bank of America Corporate Travel Services (CTS)

Bank of America Travel Program: •  Air - $140MM •  Hotel - $75MM •  Car Rental - $5MM •  Meeting/Event Management - $60MM

2008 Key Initiatives: •  Global TMC rollout into 25 countries •  Cost savings initiatives •  Small meetings solution

Bank of America Corporate Travel Services

Bank of America Operating Environment: •  Enterprise wide “cadence deliverables” apply to major

suppliers utilized for any commodity. –  Major suppliers identified through spend, structure and

dependency parameters.

•  CTS rolls up to Supply Chain Management –  Sourcing & Supplier Management sit within the same

organization.

Bank of America Corporate Travel Services

CTS Application:

•  CTS major suppliers –  Global Travel Management Company, –  Meeting and Event Management supplier, –  Fleet Vehicle supplier, –  Airlines that we are dependant on.

•  Other suppliers are also closely managed, but not with the full cadence requirements.

Bank of America Corporate Travel Services

Supplier management program component examples:

Supplier Scorecard Sub-Contracting and Off shoring Review

Business Continuity Planning

Insurance Validation

Risk Review Remediation Planning

Bank of America Corporate Travel Services

Monthly Supplier Scorecard Process:

Supplier completes and sends scorecard to supplier manager SM reviews and shares with CTS team manager SM reviews scorecard with supplier GM Appropriate measures recommended to correct any non-green status

Bank of America Corporate Travel Services

Meeting & Events Management Scorecard:

•  Contractual SLA’s / Metrics examples: –  User Satisfaction –  Invoice reconciliation timeliness –  Staffing levels –  Savings against target

•  Scoring - % and Red/Yellow/Green •  Review:

–  Monthly – Team –  Quarterly – Posted for senior leadership

Cushman & Wakefield

Supplier Relationship Management

The Cushman & Wakefield Travel Program •  Roughly 1,200 travelers, $5 million travel spend •  Organized under Procurement

–  Procurement group has broad scope of responsibility over multiple commodities

–  Travel is +/- 10% of $45M total indirect spend –  C&W requires hands-on travel partner to be our “Gate Keeper” –  Travel partner acts as eyes and ears, monitoring industry trends –  Makes recommendations for appropriate supplier engagements –  Make recommendations and monitors performance of contracts,

policies and programs

Cushman & Wakefield Travel Policy

Mandate all air, hotel, car bookings using preferred suppliers maximize

negotiated rate contract savings

Advance purchase guidelines were provided

Receipts were required for all expenses greater than $25

Non-compliance will result in penalty up to non-reimbursement for

expenses

Lack of adherence to guidelines will result in appearance on non-

compliance reports

Receipts will be required for all expenses greater than $10

Recent overhaul of travel policy due to loss of two preferred agreements due to non-performance

Weaker policy enforcement

Old Policy Revised Policy

Use of preferred suppliers for air, hotel and car were suggested

C&W Program Optimization Exercise •  Partnered with broad based travel service provider to

–  Provide recommendations for travel policy improvements –  Conduct detailed analysis of total program spend

•  Agency booked travel versus reimbursed travel spend –  Determine compliance to preferred hotel and rental suppliers –  Identify opportunities to re-engage airlines for preferred

pricing agreements –  Develop strategies for supplier engagement –  Provide assistance in supplier negotiations –  Assist with implementation of program recommendations

once Sr. Management buy-in was obtained

Corrective actions for program optimization •  Secure upper management support

–  Strict and clearly defined consequences for non-compliance to policy –  Executive communication to travelers regarding the need for cost

control and the role they play in program success •  Mandate consolidation and use of preferred suppliers

–  One agency of record, single source of reporting data, maximize ability to meet preferred agreements

–  Non-compliance significantly reduced negotiation leverage with key suppliers

•  Reinforce class of service & advance purchase policies –  More explicit policy language communicated ‘ No First Class’ message

in stronger terms –  Implement 7-day advance purchase policy

•  Improved use of agency services and reporting to reduce waste –  All complex international itineraries should be booked via an agent to

leverage expertise of International Rate Desk to maximize savings –  Require travelers to apply unused tickets in their profile to next booking

Cushman & Wakefield program optimization results

Mandate all air bookings through agency of record to maximize

negotiated rate contract savings

Use single agency of record for rental car reservations for better

visibility and spend control

Enforce per diem and use agency of record for hotel reservations

Enforce travel policy and require all travel bookings with single agency

of record

Expected annual savings of nearly $200K on United/Star Alliance, Continental and British Airways

Lower average daily rate, eliminate $252K in leakage

Increased spend visibility and estimated annual savings of $34,622

Eliminated $3.5 million in leakage, consolidated spend for better vendor

negotiation leverage

Eli Lilly and Company

Supplier Relationship Management

Lilly at a Glance

•  Pharmaceutical company based in Indianapolis, IN •  $18.6 Billion in Sales (2007) •  41,000 Employees •  Operates in 130+ countries •  Major products include:

• Prozac • Cymbalta • Zyprexa • Cialis

Lilly Travel Program

•  Consolidated meetings program $40+ million •  Air spend $50+ million •  Key Initiatives in 2008

– Rolled out hotel caps for top domestic markets on January 1 and increase TMC utilization for hotels

– 2008 RFP’s: •  Global Air •  Domestic Car •  Transient Hotel •  Meetings Hotels

– Reviewing travel policy: $ and time windows – Ongoing on-line adoption increase initiatives;

currently at 40%

Travel Agency SRM

Begin with a business plan in the fall for next calendar year Establish: Projects and primary metrics (Cost/txn, ASA, On-line %) Balance: Cost and customer service

At last year end, Lilly management reviewed the plan and agreed with all assumptions; however they issued a challenge:

Cut $300K out of the budget

Actions Taken

Discussions with TMC leadership and account managers led to a plan:

1.  TMC brainstormed a list of possible projects 2.  TMC industry expert was brought in to review operations

and suggest improvement opportunities 3.  A six sigma Kaizan project with TMC/Lilly team members

was created to tackle one specific productivity opportunity

Results to date of $300K Challenge •  Five projects approved for implementation •  One project is in pilot phase •  Two are still under consideration

–  Technology dependent or perceived customer service concerns •  Annualized savings ranges from $20K - $150 each •  No low hanging fruit!

Keys to success: •  A partnership that allows for give and take •  Longer term commitment from both parties •  Focus on the possibilities •  Good data to find opportunities and measure success

Any questions?

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