TheKeytoSuccessE.Procurementisnotabouttechnologyalone.Savingsareneverautomatic.CentralizedprocurementwillneedtonegotiatetherequiredagreementsgStreamliningprocessesgEnablingprocesseswithtechnologygSimplifypaymentprocessgOptimizingthesupplierbaseSupplierReadiness•E.ProcurementrequiresSuppliercapabilitiesAtaminimum:1.Electroniccatalogcontentfiles2.InternetaccessDesired:3.Inventoryavailability4.OrderStatus5.Shippingdetails6.OrderentryintegrationviaXMLTwoCategoriesofProcurementProcurementofIndirectandDirectgoodsandservicesareusuallytheresponsibilityoftwoseparateorganizationsandhavedifferentbusinessobjectivesandstrategiessuchaslongtermcontractsversusspotbuys.IndirectOfficeEquipmentandsupplies,Computer&ITequipment,MRO,Services,ExpensedgoodsandservicesnotconsumedinthemanufacturingofaproductDirectRawmaterialsandpackagingmaterialsusedinthemanufactureandassemblyofproducts.BenefitslLeveragescorporatespendingpowerforlowerpriceslEnablesincreaseduseofpriceagreementsandapprovedsupplierslReducestotalleadtimeby50–80%lImprovesbuyer’sroleasnegotiatorlReducestransactionprocessingtimeandmanpowerAcquisitionInventoryCarryingTransactionCostreductioninthreemajorareasBenefitsExamplesofelectronicprocurementresultsTransactionCostsAdditionalDiscountsCycleTimeComplianceAgreementsCostsperTransaction-90%-10%-75%+30%PriceTimeCompliance100%100%20Days60%90%10%5Days90%BenefitsIntangiblesBenefitSourcePurchasedUnitCostReductionProcessEfficiencyBenefits=softwaresolution+processchangeAsapercentageoftotalpurchasecostplusprocesscostforacatalogueditemSoftware-relatedBenefitslIncreaseduseofpriceagreementslTransactioncostsreductionlAccountspayablecostreductionlLeadtimereductionlProcurementdataavailabilitylSystemsharmon-izationlUserinterfacesimplification2–5%*ProcessChangeBenefitslStrategicsourcingleveragelComplianceenforcementlDemandmanagedlLogistics/inventorycostreductionlBuyerefficiencylControlsystemsimplificationlEnd-userefficiencylAutomatedcontrolsandaudittrailslIncreasedcustomersatisfaction10–15%*PurchasingEfficiencySupplierIntegrationSAP,GlobalChemical&PharmaceuticalMarketplaceBusinessChallenge:•Chemicalindustry’sonlinesalesincreasingto40%by2005)•Disintermediationofchemicalproducers•Loweroverallsupplychaincosts•Increaseoverallserviceefficiency•Deeperpenetrationofstrategicaccounts•CapturewealthintheneweconomyEDSRole:•TechnologyandIntegrationsupport•A.T.KearneyLeveragedSourcingNetworkscorporatebuyersandstrategicsuppliersCustomersCustomersDistributorsDistributorsSuppliersSuppliersInitialMembers:•BASFAG•BayerAG•Degussa-HulsAG•HenkelKgaA•KSBAG•LindeAG•SartoriusAG•SiemensAG•HeinzWollschlagerGmbHCaseStudy–TruckBayBusinessChallenge:•CreateB2BMarketplaceforthetruckingandtruckingmaintenanceindustry.•Corporatestartup:Nobusinessprocesses,noinfrastructurearchitecture,andnoexistingsystemsareinplaceforthisEDSSolution:•Deployedtheinitialmarketplacewithin90days•Adopted30suppliers•Normalized60,000catalogitems•ImplementedMarketplaceinfivemonths•WilladdfurthercustomizationsandreverseauctionsClientValue:•Lowerbuying/sellingtransactioncosts•Providealternatepartscatalogs•Reducebuyers’inventorycarryingcosts•Increaseproductivityofprocurementprocesses•Cutlayersfromexistingdistributionchannels•ConsolidationofprocurementactivitiesTradingExchanges:TheExecutiveDilemmas•DoWeJoinanExistingExchange?–IfSo,HowDoWePreventOurProductsFromBecomingCommodities?•DoWeFormAnExchangeWithOneorMoreofOurCompetitors?–How?We’veHatedThemforDecades?•DoWeStartOurOwn?–WillAnyoneJoin?TheEnginesthatwillPowerCovisint•IntegrationEngine•CommunicationEngine•CollaborationEngine•ProcurementEngineCovisintisstillanovelty,butitwillbecomeacriticalcomponentineverysupplierse-businessstrategyProblemSummary•Lackofconnectivitytoallsuppliers/allcustomers•Pushvs.Pull•Batchvs.Realtime•Costofcommunication/EDIMaps•RequiresPersonnelIntervention•BuildsInventoryProblemSummaryReal-timeVisibilityofInventory,Consumption,Shipments,andForecastsTier-2managesmaterialflowtoTier-1,andtoTier-1'sinventoryBenefits:•Eliminateexcessinventory•Reducedexpediting•Betterplanning/execution•Economicallycommunicatedemandforecast/deliverynotificationstosuppliersInternet/ANXToday’sSolutions:•Providerealtimedataflow•WebBrowserVisible•SystemtoSystem–XML•CompatiblewithEDI•Multiplefulfillmentprocesses•Abletoconnectwithemergingexchanges•Deliveringbigresultsquickly•WINWINforbothsidesofthesupplychainToday’sSolutions:CollaborativeManufacturingWorkshopHowclosearewetoa5-daycar?63daysaway!Source:AMRResearchModuleandComponentWarehouseModuleandComponentSupplier(3dayProduction)AssemblyPlant(6daystoassemble)DistributionCenterandOutboundLogisticsOEMRegionalOfficeDealerConsumerOrder=1dayDeliverVehicle=2daysOrdertoComponent=35daysComponenttoConsumer=33daysToday’sOrdertoDelivery=68days(andthat’swithoutorderingsteel)Today’sDeliveryDateAccuracy20%AcceleratedOTDisEnabledbyInformationVisibilitySource:AMRResearchDoyouhavealime-green2-door,manual,noA/C?VehicleTrackingSystemDealerInventoryDCInventorySalesIncentiveSystemProductionSequencingSystemCRMSystemHowaboutlime-green