CombineNet: Adding Advanced Sourcing to SAP, Ariba, and Oracle Environments

Adding Advanced Sourcing to SAP, Ariba and Oracle Environments

Copyright © 2012. CombineNet, Inc.

Speakers & Agenda


Moderator: Greg Holt, Director of Product Marketing, CombineNet

Constantine Limberakis, Senior Analyst, Supply Management, Aberdeen Group

– 2012 Strategic Sourcing Benchmark Research Findings: Advanced Sourcing

Jennifer Sikora, VP of Marketing, CombineNet– Company solutions for Advanced Sourcing in SAP, Ariba, and

Oracle Environments

– Customer Case Studies

Q&A

http://www.aberdeen.com/

Market Developments

SAP announced acquisition of Ariba

SAP, Oracle, and Ariba combine for nearly 50% of procurement software revenue (Source: Gartner, April 2011)

Solution gaps remain in Sourcing:“Other vendors remain in a league of their own and we encourage Ariba and

SAP customers and prospects to explore whether or not advanced sourcing/optimization capability is important based on their internal skill sets, spend profile and willingness to embrace alternative sourcing and negotiation approaches; if so, alternatives should be given top priority until SAP and Ariba catch up in advanced sourcing areas.” – Spend Matters, May

30, 2012


The Market Continues to Use Excel

Polled 100 commercial organizations

Conducted April-May 2011

Not currently CombineNet customers

Procurement, sourcing, and supply chain roles

0%

10%

20%

30%

40%

50%

60%

70%

Microsoft Excel eSourcing & Procurement Suites

Microsoft Word Home-Grown Solutions

Solutions Used to Support Sourcing(select all that apply)

Source: CombineNet Market Survey, May 2011







0%

10%

20%

30%

40%

50%

60%

70%




Still regularly use Excel for creating RFPs and collecting bids:

ERP/Procurement Suite users = 74%








0%

10%

20%

30%

40%

50%

60%

70%




Still regularly use Excel for analyzingbids:

ERP/Procurement Suite users = 85%



General sourcing tools designed for less strategic spends, smaller scale, and low business impact.

Excel Use Driven by ERP/Suite Limitations

Limited data collection from suppliers– Non-price components of bids are poorly supported– Lacks robust Cost Model components– Supplier Capacity not considered

Result: Price-focused RFPs that Leave Supplier Value and Innovation on the Table

Limited support for size and scale

– Smaller # of items/locations/suppliers (example: 1,000 bid elements = 200 items x 5 bid elements/item)

Result: Forces Lotting/Bundling Strategies and Reduced-Scope Events that Fail to Leverage Spend Volumes and Supplier Capabilities

Very basic analytical capabilities– Lowest price/unit is often the deciding factor– Little ability to conduct “What if?” analysis

Result: Awards that Don’t Meet Real-World Requirements; Missed Opportunities for Savings and Innovation


Understanding “Advanced Sourcing”

First-generation sourcing approaches only capturing up to 30% of spend under management– Focus mainly on lowest-cost results

– Simple RFPs

– Traditional E-auctions

– Complexities handled via workarounds

Next-generation sourcing means:– Advanced sourcing processes that involve total cost analysis, risk

management, optimization, and innovation

– Improved e-sourcing technology to remove current limitations on categories supported and event size, scale and flexibility

– Stronger influence and business results


AberdeenGroup’s Latest Benchmark: Advanced Sourcing--Maximizing Savings

Identification

Constantine Limberakis


Please note: All data findings included in this

presentation are early representations of the

Strategic Sourcing 2012 data pool.

© AberdeenGroup 2012 10

Aberdeen Thoughts on SAP & ARIBA

News provides an opportunity for organizations to reassess their current strategies

Creates a new alignment of competitive marketplace

Glaring redundancy and duplications of sourcing and contract management platforms for both on-Demand and on-premise components

Hesitation on further deployment of existing sourcing platform

Competitors reacting by providing discount to programs for signing up


Aberdeen’s Research Methodology

Web-based / online benchmark survey (35 to 40 questions)

Analysis of data aggregate Dissection into Maturity Framework (Best-in-

Class, Industry Average, and Laggard) Benchmark research reports 5-to-7 page research derivatives (Analyst

Insights, Sector Insights, etc.) Follow-up discussions with select end-users for quotes

and case studies Webinars, assessment tools, social media, etc.


Latest Benchmark - Advanced Sourcing: Maximizing Savings Identification

Job title: The research sample included respondents

with the following job titles: Manager (40%); Director

(28%); VP / EVP / SVP (4%); C-level / executive office

(3%), Consultants (8%), and Others (7%).

Industry: The research sample included respondents

from the following industries: health/medical/dental

(11%); industrial equipment/products (10%); financial

services (8%); education (6%); consumer packaged

goods (5%); and 28 others.

Geography: The majority of respondents (55%) were

from North America. Remaining respondents were from

the following regions; Europe (25%); Asia / Pacific

(10%); Middle East and Africa (3%); and South / Central

America (3%).

Company size: 25% of respondents were from very

large enterprises (annual revenues above US $5 billion);

27% were from large enterprises (annual revenues

between $1billion and $5 billion); 22% were from

midsize-large enterprises (annual revenues between

$50 million and $1billion); and 17% of respondents were

from small businesses (annual revenues of $50 million

or less).


Importance of Strategic Sourcing in your

organization

Source: AberdeenGroup, May 2012

Critical role34%

Prominent role34%

Moderately significant

role25%

Neutral role4%

No role3%

(Percentage of survey respondents, n=146)


Formal Strategic Sourcing program


37%

29%

15%

9%

3% 3% 3%

0%

5%

10%

15%

20%

25%

30%

35%

40%

More than 5 years

3 to 5 years 1 to 2 years Less than one year

None yet, but budgeted to

start within 12 months

None yet, but under

consideration

None planned



49%

54%

72%

0% 10% 20% 30% 40% 50% 60% 70% 80%

More robust management of key spend categories

Better alignment of sourcing and business objectives

Increased level of cost savings

Top Benefits recognized with Strategic Sourcing




1 2 3 4 5 6 7

Question: How do you improve this process?


Evolution of Strategic Sourcing from being a

savings concept to strategic importance

Selection of suppliers beyond just cost criteria;

need to adapt to complex, multi-variant scenarios

Sourcing has been pulled into understanding the

wider-organizational challenges

Globalization creating inherent risks for managing

supply chain

Sustainability & CSR becoming more important

factors in the context of strategic sourcing

Problem of eSourcing with just Traditional Means


Pressures related to Strategic Sourcing


14%

18%

21%

36%

69%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Stakeholder pressure for measuring against sustainable sourcing initiatives

Need to mitigate supplier risks due to supply disruptions

Need to improve sourcing performance

Need for more effective category management strategies / knowledge

Corporate mandate to reduce cost / increase savings



43%

50%

50%

33%

29%

27%

0% 10% 20% 30% 40% 50% 60%

Supply risk assessment

Optimization of ideal suppliers

Proactive data analytics for future sourcing projects

Currently Implemented

Plan to Implement

Key Capability Gaps in Strategic Sourcing




The Best-in-Class Maturity Framework


Table 1: Top Performers Earn Best-in-Class Status

Definition of Maturity Class

Mean Class Performance

Best-in-Class: Top 20%

of aggregate performance scorers

76% - percent of total spending sourced using a formal strategic sourcing process

32% - percent total spending sourced based on sustainable strategic sourcing approaches

16% - average yearly savings identified by sourcing team

Industry Average: Middle 50% of aggregate

performance scorers




Laggard: Bottom 30% of aggregate

performance scorers




Source: Aberdeen Group, May


11%

18%

12%

16%

17%

20%

0%

4%

8%

21%

21%

46%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

No formal sourcing organization

Formal sourcing or supply management group resides within individual business units or regions

Centralized or shared services sourcing team with power users dispersed across the enterprise

Formal company-wide sourcing or supply management group

Centralized or shared services sourcing team in conjunction with business unit or regional teams

Centralized sourcing team that manages all strategic sourcing projects

Best-in-Class

All Others

Organizational structure to address strategic

sourcing




Groups collaborating with Sourcing Team

27%

44%

42%

49%

57%

43%

72%

68%

33%

58%

58%

63%

63%

67%

79%

92%

0% 20% 40% 60% 80% 100%

Sustainability office (CSO)

Sales / Marketing (CSO/ CMO)

Executive office (CEO)

Manufacturing (VP SCM)

IT (CIO)

Product development (VP PD)

Operations (COO)

Finance (CFO)

Best-in-Class

All Others



Capability Gaps with Best-in-Class


15%

24%

28%

30%

33%

33%

37%

55%

63%

67%

63%

67%

79%

83%

88%

0% 20% 40% 60% 80% 100%

Commodity councils actively engaged in sourcing process

Ability to enrich spend and supplier data

Ability to collect spend data from multiple sources

Cross-functional coordination with finance, product, and sourcing groups

Cross-functional coordination with line of business and sourcing groups

Best-in-Class

Industry Average

Laggards



Top Six (6) Stated Sourcing Strategies

75%71%

67%63% 63%

58%59%

42%

67%

31%

54%51%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Total Cost of Ownership

Matrix or tiered pricing

Payment terms Optimization Multi-stage sourcing

Total Landed Cost

Best-in-Class

All Others




Strategic Sourcing versus eSourcing

Source: AberdeenGroup, April 2012

8%

15%

23%

27%

21%

40%

51%

62%

0% 10% 20% 30% 40% 50% 60% 70%

Legal services

Temporary labor

Transportation / logistics services

IT hardware

Strategically-Source

Using eSourcing


Percent of Spend through eSourcing

33%35%

28% 28%29% 29%

27%

22%

12%

9% 9% 10%

0%

5%

10%

15%

20%

25%

30%

35%

40%

% of total spend % of direct materials spend

% of total non-production / indirect

materials spend

% of total services spend

Best-in-Class

Industry Average

Laggards




Automated Sourcing Attributes

7%

11%

11%

9%

13%

9%

26%

33%

37%

40%

40%

36%

50%

46%

46%

42%

38%

33%

0% 10% 20% 30% 40% 50% 60%

Sourcing optimization / bid analysis

Event analysis / reporting

Bidding collection / aggregation

Event creation

Event templates

Event management

Best-in-Class

Industry Average

Laggards




Preferred Deployment Approach for

eSourcing


17%

13%

25%

36%

8%

13%

29%

46%

0% 10% 20% 30% 40% 50%

No preference

Hosted by a 3rd party provider

Installed on-premise

Deployed on-demand, Software-as-a-Service (SaaS)

Best-in-Class

All Others



Key Criteria for eSourcing Selection

6%

16%

28%

21%

37%

23%

39%

25%

25%

25%

29%

38%

42%

42%

0% 10% 20% 30% 40% 50%

Complementary sourcing services available from solution provider

Solution provider experience (i.e. industry)

Advanced functionalities within the eSourcing application

Ease of integration with upstream spend areas

Core functionality

Ease of integration with back-end systems (ERP, MRP, PLM)

Ease of use (usability)

Best-in-Class

Others




Recommendations for Action

Continue to invest in diverse skills and capabilities on the strategic sourcing teams

Improve supplier assessment capabilities for strategic sourcing efforts

Develop the ability to enrich spend and supplier data for use in sourcing

Improve the usage of optimization tools and techniques

Increase the use automation in strategic sourcing tools particularly for complex spend

Implement sustainable/csr sourcing strategies across more categories

CombineNet Advanced Sourcing Solution & Customer Results


Strategic Sourcing Not Constrained by Technology…

“What We Have is Working Good Enough.”

You can drive clear improvements where sourcing involves any of the following:– Business-critical spends/categories

– Larger-sized RFPs

– Non-price data that must be collected and analyzed

– Supplier collaboration

– Risk mitigation

– Multiple decision stakeholders before awarding

– Deeper analytics needed at faster speed

– Aggregation of regional or lotted spends

– Improved e-sourcing cycle times (speed, productivity)


CombineNet Company Overview

Established in 2000.

Global: Offices in Pittsburgh, PA; London, UK; Hamburg, Germany. Partners for Latin America, Middle East, APAC

Customers: Global 2000 spanning CPG, Food & Bev, Retail, Manufacturing, Transportation, and more

The Company The Technology Customer Value


Capture >2X spend under E-Sourcing management

Manage supply risk with Cost-Risk-Benefit analysis

Fast implementation and broad adoption for any type of user

Nearly 100% see full payback after 1st sourcing event

Best of Breed Solutions that improve Strategic Sourcing. 21 U.S. Patents.

Software-as-a-Service (SaaS) delivery model for ease of adoption and scale

Easy integration into your environment to complement existing applications

CombineNet ASAP® for Advanced Sourcing

SaaS-based Best-of-Breed product used by sourcing teams and their suppliers.

Speeds, simplifies, and centralizes the creation and management of sourcing events of any size, scale, or complexity.

For any spend category (direct materials, indirect materials, transportation, services).

Complements and enhances existing solutions and processes.

Key Differentiators:

Optimization Engine handles extensive data inputs; 21 patents.

Scenario Builder enables rapid and advanced ‘what-if’ analysis.

Expressive Bidding® supports an expressive, collaborative marketplace between buyers and suppliers.

Fast Implementation – 1 ½ day training, quick-start wizards, template uploads, event editing, etc. enable fast, smooth adoption, and immediate ROI.


Our Advanced Sourcing Product: ASAP®


CombineNet ASAP

RFxpress (RFI, RFP, E-

Auction)

Templates

Event Quick-Start

Expressive Bidding®

Expressive Feedback

Scenario BuilderSM

Optimization

Reporting & Dashboards

Create Bid Analyze & Award

Typical CombineNet Customer

70% of Customers Use CombineNet ASAP alongside ERP/Suites

Already have ERP/E-Sourcing Suite in place, but:– Multiple categories unaddressed by E-Sourcing – need a more

flexible, robust technology solution to support.

– Reached a savings plateau in mature categories – need more innovative E-Sourcing to drive savings.

– Struggle with bid analytics – need ability to identify best sourcing decision based on “what if?” scenarios.

Selected or are in process of implementing ERP/Suite, but:– Significant sourcing events are on the horizon

– Need near-term value creation for supply chains


We Do this for Companies Just Like Yours


A Wide Variety of Customers across All Industries

http://www.mcbride.co.uk/

http://www.crowncork.com/

http://www.maersk.com/

Where Do Our Customers Use Us Today?


Based on FY2011 data

Across All Spend Categories:Direct, Indirect, Transportation, Packaging, Services

- Spends Sourced (sampling) -ChemicalsCommoditiesFats & OilsFood IngredientsRaw MaterialsResinsSteel

Capital ExpensesConstruction Mat’sDisplaysFleet VehiclesOffice SuppliesMarketing/MediaTelecom

Air FreightDrayageOceanLTLParcelTruckloadRail/Intermodal

AdvertisingFacility ServicesLaborLegal ServicesMeetingsPrintingTreasury/Finance

Bottles/VialsCansCartonsCorrugateFlexible FilmsPrinted LabelsSecondary Pkg

From the Routine…- 51% had <100 items

… To the Complex 20% had >1,000 items 20% had >50 suppliers 18% had >10,000 bids

Large European Conglomerate

Customer Profile:

>1,000 e-sourcing events annually

Ariba user since 2007

Adopted CombineNet in January 2011

More than 2X Increase in Corporate Spend Managed via E-Sourcing in year 2 with CombineNet ASAP


$7.5 Billion E-Sourced in 2012

(projected) Ariba CombineNet

0

1

2

3

4

5

6

7

8

2010 2011 2012

$ Billion in Spend Managed Annually

Case Study – Foodservice Operator

Client Profile:

CombineNet and Ariba User

CombineNet Details

– Implementation: < 1 wk

– Training: 1 day

– In the first 6 months:

10 Events Opened

9 Awarded

Bags

Eggs

Tortillas

Chicken

Sample Categories in First 6 Months Using CombineNet

Bread

Buns

Bakery Needs

Distribution

First Event:ROI: >100X

Payback : Immediate


Case Study – Foodservice Operator (continued)

Opportunity:

2 RFPs run in existing suite– Analyzed for 2 weeks &

awarded manually

Loaded same data into CombineNet– Analyzed multiple possible

award options in a few hours (all in the product)

Result:

2X in savings

2 weeks in time savings


Case Study – Major U.S. Retailer

Client Profile:

Customer using ERP procurement solution and CombineNet

CombineNet Details

– Implementation: < 1 mo

– Training: 1 day

– Ran >8 events in CombineNet

in first 6 months

Ocean Freight

Recycled Corrugate

Treasury Services

Sample Categories in First 6 Months

Air Freight

Trash Removal

Network Batteries


Changing the Way You Think about e-Sourcing


Don’t let your technology define

your strategy!

Existing Tools Are Limiting Your Sourcing Strategy

– Restrictions on size and scope require lotting, or breaking events into smaller pieces

– Rigid bidding mechanisms deprive you of supplier innovation and value creation

– Price-focused analysis reduces options for real change

Advanced Sourcing Helps Reduce Supply Risk


Cost-Risk-Benefit Decision MakingIdentify and evaluate the risk factors of your supply decisions, and understand the cost impact of risk mitigation strategies

Geographical Risk Mitigation ExampleLimit Japanese supply volume to 25%Limit S. Korea supply volume to 40% per plantAt least 30% supply from China for each item

There is a cost tradeoff for every decision; Optimization helps you quantify the cost-risk-benefit

Advanced Sourcing Drives Next-Generation E-Sourcing Value


Conquer Complex Spend CategoriesProven results provide confidence in conducting the largest and most complex e-sourcing events

Improve Results in Mature Spend CategoriesGet beyond “savings plateaus” with advanced capabilities to find new supplier-driven savings and efficiencies

Speed Up the e-Sourcing ProcessQuick on-boarding and faster time-to-award improves sourcing team productivity and Return on Procurement

CombineNet ASAP Provides a Clear Path to Execute Your Sourcing Strategy


Execute Any Bidding Strategy with the Most Flexible and Scalable RFX platform– Unlimited event size and scope

– Robust options for RFI, RFP, E-Auction event types

– Expressive Bidding® for price and non-price bid elements, supplier information, innovation, and value-add

Explore All of Your Options with Industry-Leading Bid Analysis– Fast, easy “What If?” scenario optimization

– Combine RFI, RFP/Q, E-Auction responses, business preferences and constraints for a complete understanding of sourcing decisions

– Uncover hidden savings opportunities and find the best sourcing solution faster

Fast Value Creation – Speed to ROI


Nearly all customers get

100%+ payback after first CombineNet ASAP event

80% of our customers use

us to fill gaps in existing

e-Sourcing/ERP suites

Across ALL spends:

Average 10% savings

against spend size

(ranges of 5-60%)

Rapid on-boarding and

implementation = online

bidding in days

Strategic Sourcing Not Constrained by Technology…

“What We Have is Working Good Enough.”

You can drive clear improvements where sourcing involves any of the following:– Business-critical spends/categories

– Larger-sized RFPs

– Non-price data that must be collected and analyzed

– Supplier collaboration

– Risk mitigation

– Multiple decision stakeholders before awarding

– Deeper analytics needed at faster speed

– Aggregation of regional or lotted spends

– Improved e-sourcing cycle times (speed, productivity)


What Next?

Look for an email with:

– Copy of the Aberdeen 2012 Sourcing Benchmark Report

– Link to CombineNet ASAP® for Advanced Sourcing White Paper

Contact Us to compare results for key spends:

– [email protected]

– [email protected]

– www.combinenet.com


mailto:[email protected]


http://www.combinenet.com/


Reach Out!

Twitter: @ABG_SpendMngmt

LinkedIn: http://www.linkedin.com/in/climberakis

Aberdeen Group GSM Research Group

Aberdeen Group GSM Research Advisory Council (RAC)

Aberdeen Research Blog: blogs.aberdeen.com

http://www.linkedin.com/in/climberakis

http://www.linkedin.com/in/climberakis

blogs.aberdeen.com

Thank You.Questions & Discussion


Constantine LimberakisSenior Research AnalystAberdeenGroupwww.aberdeen.comconstantine.limberakis@aberdeen.com Twitter: @ABG_SpendMngmtPhone: +1.312.470.6071

Jennifer SikoraVice President of MarketingCombineNet, [email protected]: +1 877-293-5480

http://www.aberdeen.com/



