Post on 26-Mar-2015
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Reengineering the Indirect Spend Compaq’s Business Case for Taking it to The Web
Reengineering the Indirect Spend Compaq’s Business Case for Taking it to The WebPaul BoxDirector, General Procurement
Compaq Computer Corporation
Paul BoxDirector, General Procurement
Compaq Computer Corporation
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Today’s agendaToday’s agenda
Compaq today Procurement overview and opportunity Solution selection Expected return Project rollout & status Q&A
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Compaq achieving profitable growthCompaq achieving profitable growth
Q4 2000 Financial Results
Revenue was $11.5 billion – up 10 percent year-over-year Gross margin increased 1.5% to 23.7% Operating expenses down more than a full point
to 17.1% of revenue Operating profit was $757 million, up 80% from same qtr
last year EPS nearly doubled to 30 cents
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Profitable growth being achieved byProfitable growth being achieved by
Developing innovative products Integrating them into compelling solutionsServing a global marketplace
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We were smart enough to recognize the Internet was not a “fad”...
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Procurement at Compaq Procurement at Compaq Total spend is forecast at ~$32B Indirect goods and services ~$6B (19% of total) 60,000+ Employees WW (our “internal customers”) N.A. General Procurement FT staff = 50 33,000+ Indirect Suppliers ~80% of Spend with < 2000 suppliers General Procurement issuing 75,000+ PO’s year
Benchmarking results - World class at “maverick” buying!
Suppliers generating 336,000 invoices a year for indirect!
40% of spend ($2.5B) “touched” by General Procurement
If there’s a way around the system, our internal customers have found it!
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CHR $1.8B31%
MarCom $1.2B
21%
Software $882M15% REOS $700M
12%
MRO $350M6%
Travel $300M5%
Telecom $250M4%
Uncategorized $232M 4%
P-card Spend $42M 1%
Other/Misc $30M 1%
2001 General Procurement Pareto by Commodity
$5.7 - $6.1 BillionTotal
All figures approximate based on best available data
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Estimated Spend by Region
EMEA
25%
APD
10%
AMER
65%
$5.7 - $6.1 BillionTotal
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Why Procurement automation was needed at Compaq: Why Procurement automation was needed at Compaq: Purchasing process paper bound Approvals cycle non automated - slow, bureaucratic No systemic process to point employees to preferred
suppliers Spending outside Procurement with non-contract
suppliers is a profit leak (6k NPR’s a month to 28k invoices a month!)
Lack of information warehouse to facilitate opportunity identification
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Our reengineering goalsOur reengineering goalsA self-service, distributed purchasing model to:
Automate via a procure-to-pay process - users go online to locate, request, approve, order & receive, seamlessly linked to A/P
Capture all WW indirect procurement spend utilizing a single tool - reduce fragmented view of our total spend
Report and Identify savings opportunities / analyze spend (to whom, when, and for what) - in UNSPSC defined Commodity Groupings Reduce supply base, item prices, and total cost of acquisition
Eliminate off contract spending, rogue solutions, paper processes
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Critical selection elements – software provider/package Critical selection elements – software provider/package Easy end user operation - “lure spenders into process”
Robust catalog search / requisition / approvals
Comprehensive info query and reporting
Ease of integration with ERP system(s), e-mail, HR system(s)
Allows attachments (Word, Excel, PP) through workflow
Support procurement card strategy
Support ad hoc purchases (non-catalog items)
Vision match / collaborative minded
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Inventoried 30+ Providers Selling “Solutions”
Interviewed 15
6 Considered ViableDeveloped / Received RFP
Roadmap & Financial Review
Review and Analysis - Evaluation Criteria
Path to solutionPath to solution
AribaAspect (SAP)Commerce OneElekom (Clarus)OracleSAP
RFP Recipients
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Resulting recommendationResulting recommendation
is the Solution
Met RFP requirements Solid financials & resources for long term success Vision match - strategic vision Committed to delivering optimized NT and Tru64
performance, tuned to Compaq hardware
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Search
Browse
Monitor
Review
Create
Punch-out
Industry benchmarks show that up to 20% of annual spend
can be saved through implementation of a well integrated System…
Infrastructure support - network computing architecture 3%
Process improvement - Self service procurement
Aggregation volume buying - consolidation of vendors & contracts
Contract leakage reduction - enforcement of available discounts
3%
7%
7%
Key Components:
Integration to ERP
Transaction system
Decision support
Automated workflow and sourcing processes
Benefit to the bottom line Benefit to the bottom line
Source: Savings based on Arizona State University Center for Advanced Purchasing Studies (Summary of Aerospace and Defense Industry Purchasing Benchmarks), 1997
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Implementation status & value over timeImplementation status & value over time
Implementation
Integration
Information
Fully Leveraged
S/W Installation
High
ROI
Low
Where we are today
April 2000 November 2000 June 2001Time to Benefits January 2001
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Implementation status & value over timeImplementation status & value over time
Implementation
Integration
Information
S/W Installation
High
ROI
Low
Key Milestones• Proof of concept April 17, 2000 (down rev product) • December 29th –– live with 100 users• New technology stack deployed (SSP5, 11i, 8i)• Rollout to ~4000 on January 31st
April 2000 November 2000 June 2001Time to Benefits January 2001
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GP Online goals / objectives GP Online goals / objectives
USGEO
Catalog / non-catalog (ad hoc) requisitions, workflow driven approvals, auto PO launch
Basic reportingP-Card / CC charging enabledHR, Supplier, COA IntegrationSupplier PO ack
Functionality
Roll out to ~4000 US employees5 catalog suppliersAutomate requisition process for all P-Card holders
GP Online Goals / Objective
1Q01
US
Q1 functionality plus:Integration to SAP or Oracle APEnhanced reportingSupplier website link-outEnhanced catalog mgmt.AMEX interoperabilitySingle sign-on loginSupplier transaction query Supplier PO ack, ASBN
Roll out to all US employees20 catalog suppliersRetire GP StoreCommence NA, EMEA implementation
2Q01
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GP Online goals / objectives cond. GP Online goals / objectives cond.
NA, EMEAGEO
1Q US functionality for Canada, EMEA
SAP Custom IntegrationEnhanced reporting across multiple systems
Functionality
Limited roll out to Canada, EMEAAll US indirect purchasing via GP Online
Retire IPA
GP Online Goals / Objective
3Q01
NA, EMEA
2Q US functionality for Canada EMEA
Expanded roll out Canada, EMEA
All EMEA, Canada purchasing via GP Online
4Q01
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Catalog content strategyCatalog content strategy
Order Order MgmtMgmt..Order Order MgmtMgmt.. ReceivingReceivingReceivingReceivingSourcing &Sourcing &
ApprovalApprovalSourcing &Sourcing &ApprovalApproval
Source and Procure
Pay on Receipt
Pay on Receipt InvoicingInvoicing Financial
Reporting
Financial Reporting
LocalLocalCatalogCatalogLocalLocal
CatalogCatalog
PayRequest
ECGateway
ECGateway
ProcurementCatalogServer
ElectronicDocuments
Orders &Orders &SchedulesSchedulesOrders &Orders &
SchedulesSchedulesReceipts & Receipts & PaymentsPayments
Receipts & Receipts & PaymentsPayments
PostedPostedRFQsRFQs
PostedPostedRFQsRFQs
Supplier Self-ServiceSupplier Self-Service
SuppliersSuppliers
Direct Supplierwith XML,
EDI, OBI, etc
Managed inside Compaq
REQUISITECatalog Content Management
Services
Compaq Unified Catalog
Catalog Files for AggregationCompaq pays Requisite for Service
CompaqCompaq
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Utilizing Oracle ExchangeUtilizing Oracle Exchange
Supplier Catalogs Compaq Specific
Catalogs
XML Catalog Feeds to Exchange • Compaq Contract Pricing• Volume Leverage Items
• Approved Configurations
GPOnline End
Users
Sourcing with Non-Contracted Suppliers Professional
Buyers
SuppliersSuppliers
End Users
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Compaq Alpha Tru64 Unix systemCompaq Alpha Tru64 Unix system
App Server
App Server ClusteredDB Server
Standby DB (SDS) Server
Reporting (ODS) Server
GPOnline user
SAP
PeopleSoft
SigAuth
AMEX
Interface (IPC)
Server
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What We Believe...What We Believe... The Oracle Internet Procurement suite - a standard by which
others will be judged– Management and Development focus is intense– Financial commitment / depth of resources significant– Vision and thought-leadership– Collaboration with Compaq on features and function
The Compaq Implementation is a Success !Compaq - Oracle working relationship excellentRoll-out acceleratingROI compelling