Still have procurement outside shared services? Ever ask yourself why?

Jerker Gunnarsson

May 24th, 2012

P2P leaders Chicago 2012 – Jerker Gunnarsson Page

Deutsche Post DHL facts & figures

Global Business Services (GBS)

MAIL

• 82 high-tech mail sorting

centres

• 80,000 mail delivery staff

• 34,600 vehicles for mail

delivery

• ~ 3,300 delivery bases

• ~ 54,700 delivery districts

• Nearly 40 million households

• 108,000 letter boxes

• 69 million mail items every day

• 930,000 P.O. boxes

• More than 12,500 retail outlets

EXPRESS

• Operations in 220

countries and territories

• More than 124,000

Express employees

• 36 express hubs

worldwide

• More than 4,700

express facilities

worldwide

• 420 aircraft operating on

behalf of DHL Express

• Around 72,000 express

vehicles

GLOBAL

FORWARDING

FREIGHT

• ~ 11,000 employees

• More than 40m tons

transported per year

• More than 160 Freight

terminals in Europe

SUPPLY

CHAIN

• Facilities in over 3,000

locations with more than

148,000 employees

• Around 1,400 logistics

centres, terminals and

warehouses worldwide

• 35,000,000 sqm

warehouse storage

capacities worldwide

• More than 30 countries

covered

Corporate Center (CC)

DP DHL financial key indicators (2011):

Revenue: 53 bn €

EBIT: 2.4 bn €

2


Questions to determine the path to a

successful Shared Services Purchasing Organization

3

What tools do we deploy

to facilitate the business

processes and improve

efficiency?

How do we organize

ourselves to be cost

efficient while

improving business

value?

What processes do

we implement to

optimize performance

of the organization?

1 2

3

BUSINESS

PROCESSES

ORGANIZATIONAL

STRUCTURE

TECHNOLOGY

Success

depends on us

covering ALL

THREE of these

areas!


Breaking out Procurement group from

the business into one global organization

4

DP DHL bundled in 2006 all major internal support functions in a new division

“Global Business Services” to streamline and strengthen service and efficiency.

GBS – a

worldwide

organization

• ~10,000 FTE Europe (incl.

Germany)

• ~2,000 FTE Americas

• ~1,000 FTE Asia Pacific

In total 13,000 GBS employees

worldwide

Global Coverage

• IT Services

• Finance Operations

• Real Estate

• Procurement

• HR Operations

• Legal

• Risk & Insurance

• Fleet

• Business Consulting

• Global Customer Solutions

10 Service Lines

• 3 Global Data Centers

• 5 Regional Accounting Centers

• 350 milo square feet properties

• >90,000 Fleet managed

Basic Volume

P2P leaders Chicago 2012 – Jerker Gunnarsson Page 5

Standardized the setup, but ensure to

deliver to each specific need

• Establish demand requirements

• Define initial specifications

• Transfer technical understanding

• Communicate customer needs

BUSINESS

• Conduct standardized Purchasing process

• Perform spend analytics/benchmarking

• Utilize advanced ePurchasing platforms

• Leverage volumes and best practices

PROCUREMENT

supplier bid management supported end-end solution templates

standardized process risk database spend analytics

documented audit trail contract management

Foundation on standardized toolset


An

aly

ze

Purchasing Monitoring

Identifying the process steps in scope

for shared services

6

Demand

Sourcing (Strategic procurement)

4

3

2

1

5

1 2 3 4 5 6 7 Contract & Catalogue

Management

(Demand Identification)

Requisitions Approval Purchase

Order

Delivery Invoice Reconci

liations*

Payment

Get Tool

Purchasing (Operational procurement)

Transactional

Marketplace

The procurement process consists of two

major parts. These are sourcing (strategic

procurement) and purchasing (operational

procurement). An efficient procurement

operation can separate the processes and

optimize the individual services


Steps to centralize Operational

Procurement – US & CA

7

Results: Reduction in Operational Purchasing cost by >50%

Centralization of Operational

staff to one location

Super users with authority to

transact with preferred

vendors under “sandbox”

concept

Catalog solutions for all high

transaction items P-card with spending limits

and blocked merchants for

all low value ad hoc

transactions


Year # POs # FTEs Cost/Purchasing Staff POs/FTE Staff

Cost/PO**

2008 80,506 13 $1,019,000 6,193 $12.66

2009* 37,672 5 $384,000 7,534 $10.19

2010 41,313 3 $254,000 13,771 $6.15

*Reduction in volumes from business downsizing 2008-2009

6,193 7,534

13,771 $12.42 $10.90

$6.15

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2008 2009* 2010

Co

st/P

O P

Os

/FT

E

POs/FTE Cost/PO

Results show dramatic gains in

operational transaction cost

8


Development of KPIs need to consider the balance of the

expected performance of the Procurement organization

Ensure balanced performance tracking

with all stakeholders considered

9


Dashboard keeps business informed of

progress in procurement operations

10

The Procurement Dashboard is an automated

report pushed from a data warehouse to

Business Partners directly


GeT

eProcurement

System

e-Marketplace

Hosted Catalogs

/ Punch-out

Catalogs

Catalog & non-

catalog via

same

requisition

Technologies used in our Procurement

shared services operation

11

Global

Sourcing

Application

Strategic

Sourcing

Reverse e-

Auction

Supplier

Database

Procurement

Data Warehouse

Reporting

capabilities for

the whole

“Procure to Pay

Process”

Spend Cube

Information

Management

Document

SharePoint

Contract

Repository/Mana

gement

Supplier

Management


Conclusion

12

• Make sure the technology support each step of

the process

• The right technology will help drive down the

processing cost

• Implement shared

services structure to

drive cost efficiencies

and synergies.

• Maintain business

partner intimacy and

clarify roles and

responsibilities

• Standardize product

offering/processes

• Consolidate and

automate operational

procurement

• Implement KPIs and

scorecards to drive

behavior

BUSINESS

PROCESSES

ORGANIZATIONAL

STRUCTURE

TECHNOLOGY


Backend ERPs

Backup

Moving towards a touch less P2P process

13

https/OCI or cXML

https/cXML

Email

• Item search/Punchout

• eCatalog Management

• Content Enrichment

Procurement Content

• Transaction Routing

• Vendor Self-Service Portal

PO & Inv Automation


THANK YOU

Questions

14

Education

Still have procurement outside shared services? Ever ask yourself why?