Post on 26-Mar-2015
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Best Practices for Defining and Managing Best Practices for Defining and Managing the the
Services Spend Category Services Spend Category
Presented By: H. Lee Muller, Presented By: H. Lee Muller, C.P.MC.P.M..
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OVERVIEW OF LEARNINGOVERVIEW OF LEARNING
The Growing importance of Services The Growing importance of Services GDPGDP Employment PictureEmployment Picture SG&A SG&A
Evaluating your Current Situation Evaluating your Current Situation
Services In your Company Services In your Company Collecting Data Collecting Data What to include? / What not to include? What to include? / What not to include?
Initial Subcategory Assessments Initial Subcategory Assessments
Developing a Strategy for ServicesDeveloping a Strategy for Services
Services e-ProcurementServices e-Procurement
Implementing a Strategy for Services Implementing a Strategy for Services
Managing and Continuously Improving Services Suppliers Managing and Continuously Improving Services Suppliers
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Name: Hazer Lee MullerHazer Lee Muller
ExperienceExperience Georgia-Pacific Corporation (2001 – Present)
Director of Services Honeywell (AlliedSignal) (1985 – 2001)
Regional Materials Manager, Operations Support Global Sourcing & Transitions Mgr. Various Supplier Quality assignments
EducationEducation Bachelor’s Degree in Economics (Montclair State University, NJ)
MBA Graduating Spring 2003 (Colorado State University)
CertificationsCertifications Six Sigma Black BeltASQ-C.Q.A.ISM-C.P.M.RAB Certified ISO9000 auditor
BIOBIO
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Fortune top 10 Companies then and nowFortune top 10 Companies then and now
1954 1954 1. General Motors 1. General Motors 2. Standard Oil (NJ)2. Standard Oil (NJ)3. U.S. Steel3. U.S. Steel4. GE4. GE5. Swift & Co.5. Swift & Co.6. Chrysler6. Chrysler7. Armour7. Armour8. Gulf Oil8. Gulf Oil9. Socony-Vacuum Oil9. Socony-Vacuum Oil10. DuPont10. DuPont
20012001
2. Exxon Mobil2. Exxon Mobil3. General Motors3. General Motors4. Ford4. Ford5. Enron5. Enron
8. Chevron Texaco8. Chevron Texaco
10. Philip Morris10. Philip Morris
1. Wal-Mart1. Wal-Mart
6. GE6. GE
7. CitiGroup7. CitiGroup
9. IBM9. IBM
Source: http://www.fortune.com/lists/F500/index.html
Services companies are growing in Economic importance and Impact Services companies are growing in Economic importance and Impact
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0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
1954 2000
Services
Mfg.
Trans
Communications
GDP $381 Billion GDP $9,872 Billion
Source: http://www.bea.gov/
Services as Component of GDP Services as Component of GDP Services as Component of GDP Services as Component of GDP
Services have more than Doubled as Component of GDP since 1954Services have more than Doubled as Component of GDP since 1954
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Employment in Services Vs Manufacturing 1991 - 2001Employment in Services Vs Manufacturing 1991 - 2001
Source: http://stats.bls.gov/Source: http://stats.bls.gov/
40,907,000
17,695,000
In ten (10) years from 1991 to 2001 jobs in the Services sector increased byIn ten (10) years from 1991 to 2001 jobs in the Services sector increased by 12,634,000 (45%) 12,634,000 (45%) The manufacturing sector lost 711,000 (-3.9%) jobsThe manufacturing sector lost 711,000 (-3.9%) jobs
Services’ increasingly important economic role reflected Services’ increasingly important economic role reflected
in employment Alsoin employment Also
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SG&A / Revenue SG&A / Revenue
According to an annual CFO magazine survey, cutting one percent from SG&A will tweak earnings by 2.3 percent on average. In this survey, the average net profit margin for companies is 5.06 percent; so slicing SG&A by one dollar has the same bottom-line effect as boosting sales by thirteen dollars.
Source: http://www3.best-in-class.com/
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SG&A / Revenue Example:SG&A / Revenue Example:
IBM2000 2001
Total Revenue 88,396 85,866SG&A 17,535 17,197Total Expenses 79,251 76,571Operating Income 9,145 9,295Income Before Taxes 11,534 10,953Income After Taxes 8,093 7,723Divident 20 10Net Income 8,073 7,713
Figures in Millions of Dollars
Source: http://w w w .investor.ibm.com
IBM2000 2001
Total Revenue 88,396 85,866SG&A 17,535 17,197Total Expenses 79,251 76,571Operating Income 9,145 9,295Income Before Taxes 11,534 10,953Income After Taxes 8,093 7,723Divident 20 10Net Income 8,073 7,713
Figures in Millions of Dollars
Source: http://w w w .investor.ibm.com
One percent One percent in SG&A translates to: 17,197,000,000 x 1% = 171,970,000 in SG&A translates to: 17,197,000,000 x 1% = 171,970,000
171,970,000 / 7,713,000,000 = 2.2% 171,970,000 / 7,713,000,000 = 2.2% in Net Income in Net Income
IBM ROS is 9% (7,713,000,000 / 85,866,000,000)IBM ROS is 9% (7,713,000,000 / 85,866,000,000)
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SG&A / Revenue / Various Industries SG&A / Revenue / Various Industries
http://www.cfo.com/printarticle/0,5317,6625,00.html
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Step IStep IEvaluating your Current Situation Evaluating your Current Situation
Step IStep IEvaluating your Current Situation Evaluating your Current Situation
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IT Hardware / Software &Service
$2000 MM
Telecom Hardware &services
$500 MM
Sales / MarketingCommunications
$3000 MM
Services
$2000 MM
Non-operating Rentalproperty & Equipment
$300 MM
Non-Operating supplies
$700 MM
Non-sourceable
$1500 MM
SG&Asubcategories - All
$12 Billion
Hardware- Desktops $XMM- Laptops $XMM- Printers $XMM- Monitors/Peripherals $XXMM- NT Servers $XMM- Midrange Servers $XMM- Lease Expense $XMMSoftware- Licenses & Maintenance $XXMMServices- Hardware Maintenance $XXMM- Consulting $XXMM- Outsourced Services $XXMM
Hardware- Phones / Switch brds ~$X MMLandlines- Voice$XX MM- Data$XX MM- Maintenance$XX MMWireless- Voice$XX MM- Data$XX MMConferencing- Video$XX MM- Telecom$XX MM
Printed Materials *- Web Printing$XMM- Sheet Printing$XXMM- Reproduction$XMMMarketing Events$XXMMMarketing Displays$XXMMDirect Mail $XXMMFullfillment Services$XXMMStudio Services- TV $XXMM- Video$XXMM- Photography $XXMMLabels $XX MM
Benefits- Health Ins. $XXXMMSubscriptions $XMMDues & Memberships$XXMMJanitorial $XXMMInsurance- General Risk ~XXMM- Maritime$XMM- Transportation$XXMMSmall Packages- Inbound $XXMM- Outbound $XXMMSecurity- Background checks$XXMM- Drug screening $XXMM- Guard service $XXMM- Monitoring service $XXMMTranslation Services $XXMMUniforms $XMMSaftey Shoes $XMMProfessional Services $XXX MMMail Room Service $XMMWaste-Hazardous Waste $XXMM-Non-hazardous $XXMMT&E- Airlines $XXMM- Travel Agency $XXMM- Hotels $XXMM- Event Planning $XXMM- Rental Cars $XXMMRelocation- Van Line $XXMM- Management $XXMMTemp Labor $XXMM- Light Industrial $XXMM- Clerical $XXMM- Professional $XXMMEvironmental Remediation$XXMMPayroll $XXMM
Records Storage $ XMMAircraft $6.1MMLight Fleet- Truck$XXMM- Cars $XXMM- Mgmt $XMM
Furniture $XXMMOffice Equip $XXMMOffice Supplies $XXMMPromotional $XXMMService Awards $XXMMStationary $XXMM- Forms- business cardsP-Card $XXMMPostage $XXMMFood Services- Cafeteria $XXMM- Vending $XXMM
Taxes and Fess$XXXMM- Corp. Taxes- Property Taxes- Other Taxes $XXMMRebates $XXXMMEmployee Parking$XMMMarta Rail Pass $XX MM
MRO
$2000 MM
Universe of Indirect Materials and Services Subcategories
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• History of purchases (G/L)• Unit prices by suppliers (invoice
files)• Volume purchased by supplier
(A/P)• Seasonality of purchase
(A/P, G/L)
• Information on current and past suppliers
• Unit prices• Price and pricing bases• Supplier characteristics
— Capacity— Quality— Location
• Term of payments• Supplier constraints• Product specs• Potential suppliers• Spend Analysis Software
• Product specs• Potential suppliers (name,
capabilities, quality)• Current supplier (capability,
quality, certification)• Bill of material structure• Possible alternative products
• Seasonality of end product• Sales Dept. requirements to
Purchasing Dept. (local, content, advantaged suppliers…)
• Target sales markets
• Incoming quality history• Volume by site• Seasonality of usage
• Volume history• Pricing• Service performance• Technical specs
Sales Dept. Manufacturing Dept Suppliers/Others
Accounting Dept Purchasing Dept Technical/Engineering Dept.
Sources of Preliminary Category Information
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Potential Potential “Services” “Services”
subcategories subcategories
Category StructureCategory Structure• SG&ASG&A• Indirect MaterialsIndirect Materials• Operation Operation
Support Support • MROMRO• Services Services
Management Level Management Level SegmentationSegmentation•Company levelCompany level•SBU levelSBU level•SBE levelSBE level•Site levelSite level
Scoped Scoped Category Category
Company Company
SBU SBU
SBE SBE
Site Site
Scoping Services for Your Organization Scoping Services for Your Organization
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Potential Potential “Services” “Services”
subcategories subcategories
Category StructureCategory Structure• SG&ASG&A• Indirect MaterialsIndirect Materials• Operation Operation
Support Support • MROMRO• Services Services
Scoped Scoped Category Category
Things to Consider when Scoping the Category Structure Things to Consider when Scoping the Category Structure
Things to Consider:Things to Consider: Industry Industry GeographyGeographyProcurement OrganizationProcurement Organization StructureStructure Functional Organizations Functional Organizations
structure structure Resources Resources Skill Sets and Expertise Skill Sets and Expertise
Things to Consider:Things to Consider: Industry Industry GeographyGeographyProcurement OrganizationProcurement Organization StructureStructure Functional Organizations Functional Organizations
structure structure Resources Resources Skill Sets and Expertise Skill Sets and Expertise
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Management Level Management Level SegmentationSegmentation•Company levelCompany level•SBU levelSBU level•SBE levelSBE level•Site levelSite level
Scoped Scoped Category Category
Company Company
SBU SBU
SBE SBE
Site Site
Things to Consider:Things to Consider: Opportunity for leverageOpportunity for leverage
- Used by all segmentsUsed by all segments- Used in all regions Used in all regions - Size of SpendSize of Spend
GeographyGeography National Potential National Potential Regional Potential Regional Potential Where does the expertise and Where does the expertise and
experience for the category experience for the category reside?reside?
How is the subcategory How is the subcategory currently sourced?currently sourced?
Things to Consider:Things to Consider: Opportunity for leverageOpportunity for leverage
- Used by all segmentsUsed by all segments- Used in all regions Used in all regions - Size of SpendSize of Spend
GeographyGeography National Potential National Potential Regional Potential Regional Potential Where does the expertise and Where does the expertise and
experience for the category experience for the category reside?reside?
How is the subcategory How is the subcategory currently sourced?currently sourced?
Things to Consider when Segmenting the Category Things to Consider when Segmenting the Category
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Source at CompanyLevel
Source at SBULevel
Source at SBELevel
Source at SiteLevel
SG&Asubcategories - All
$12 Billion
Hardware- Desktops $XMM- Laptops $XMM- Printers $XMM- Monitors/Peripherals $X.XMM- NT Servers $XMM- Midrange Servers $XMM- Lease Expense $XXMMSoftware- Licenses & Maintenance $XXMMServices- Hardware Maintenance $XXMM- Consulting $XXMM- Outsourced Services $XXMM
Hardware- Phones / Switch brds ~$X MMLandlines- Voice$XX MM- Data$XX MM- Maintenance$XX MMWireless- Voice$X.X MM- Data$XX MMConferencing- Video$XX MM- Telecom$XX MM
Printed Materials *- Web Printing$XMM- Sheet Printing$XXMM- Reproduction$XMMMarketing Events$X.XMMMarketing Displays$X.XMMDirect Mail $X.XMMFullfillment Services$XXMMStudio Services- TV $XXMM- Video$XXMM- Photography $XXMMLabels $X.X MM
Benefits- Health Ins. $XXXMMSubscriptions $XMMDues & Memberships$XXMMJanitorial $XXMMInsurance- General Risk ~$XXMM- Maritime$XXMM- Transportation$XXMMSmall Packages- Inbound $XXMM- Outbound $XXMMSecurity- Background checks$XXMM- Drug screening $XXMM- Guard service $XX.XMM- Monitoring service $XXMMTranslation Services $MMUniforms $X.XMMSaftey Shoes $XMMProfessional Services $XXXMMMail Room Service $XMMWaste-Hazardous Waste $XXMM-Non-hazardous $XXXMMT&E- Airlines $XXMM- Travel Agency $XXMM- Hotels $XX.XMM- Event Planning $XXMM- Rental Cars $X.XMMRelocation- Van Line $X.XMM- Management $XXMMTemp Labor $XX.XMM- Light Industrial $XXMM- Clerical $XXMM- Professional $XXMMEvironmental Remediation$XXMMPayroll $X.X MM
Records Storage $ XMMAircraft $X.XMMLight Fleet- Truck$XX.XMM- Cars $XXMM- Mgmt $.XMM
Furniture $X.XMMOffice Equip $X.XMMOffice Supplies $XXMMPromotional $X.XMMService Awards $XXMMStationary $X.XMM- Forms- business cardsP-Card $XX.XMMPostage $X.XMMFood Services- Cafeteria $XXMM- Vending $XXMM
Dues & Memberships$X.XMMJanitorial $X.XMM
Uniforms $X.XMM
Saftey Shoes $XMM
Mail Room Service $XMM
Waste-Hazardous Waste $XXMM-Non-hazardous $XXXMMFood Services- Cafeteria $XXMM- Vending $XXMM
Marketing Events $X.XMMMarketing Displays$X.XMMWireless- Voice$X.X MM- Data$XX MM
MRO
Dues & Memberships$X.XMMJanitorial $X.XMM
Uniforms $X.XMM
Saftey Shoes $XMM
Mail Room Service $XMM
Waste-Hazardous Waste $XXMM-Non-hazardous $XXXMMFood Services- Cafeteria $XXMM- Vending $XXMM
Marketing Events $X.XMMMarketing Displays$X.XMMWireless- Voice$X.X MM- Data$XX MM
MRO
Dues & Memberships$X.XMMJanitorial $X.XMM
Uniforms $X.XMM
Saftey Shoes $XMM
Mail Room Service $XMM
Waste-Hazardous Waste $XXMM-Non-hazardous $XXXMMFood Services- Cafeteria $XXMM- Vending $XXMM
Marketing Events $X.XMMMarketing Displays$X.XMMWireless- Voice$X.X MM- Data$XX MM
MRO
Scoped, Segmented Services Subcategories
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IT Hardware / Software &Service
$2000 MM
Telecom Hardware &services
$500 MM
Sales / MarketingCommunications
$3000 MM
Services
$2000 MM
Non-operating Rentalproperty & Equipment
$300 MM
Non-Operating supplies
$700 MM
Company LevelSG&A Category
Hardware- Desktops $XMM- Laptops $XMM- Printers $XMM- Monitors/Peripherals $X.XMM- NT Servers $XMM- Midrange Servers $XMM- Lease Expense $XXMMSoftware- Licenses & Maintenance $XXMMServices- Hardware Maintenance $XXMM- Consulting $XXMM- Outsourced Services $XXMM
Hardware- Phones / Switch brds ~$X MMLandlines- Voice$XX MM- Data$XX MM- Maintenance$XX MMWireless- Voice$X.X MM- Data$XX MMConferencing- Video$XX MM- Telecom$XX MM
Printed Materials *- Web Printing$XMM- Sheet Printing$XXMM- Reproduction$XMMDirect Mail $X.XMMFullfillment Services$XXMMStudio Services- TV $XXMM- Video$XXMM- Photography $XXMMLabels $X.X MM
Benefits- Health Ins. $XXXMMSubscriptions $XMMInsurance- General Risk ~$XX.XMM- Maritime$XMM- Transportation$XX.XMMSmall Packages- Inbound $XXMM- Outbound $XXMMSecurity- Background checks$XXMM- Drug screening $XXMM- Guard service $XX.XMM- Monitoring service $XXMMTranslation Services $MMProfessional Services $XXXMMMail Room Service $XMMT&E- Airlines $XXMM- Travel Agency $XXMM- Hotels $XX.XMM- Event Planning $XXMM- Rental Cars $X.XMMRelocation- Van Line $X.XMM- Management $XXMMTemp Labor $XX.XMM- Light Industrial $XXMM- Clerical $XXMM- Professional $XXMMEvironmental Remediation$XXMMPayroll $X.X MM
Records Storage $ XMMAircraft $X.XMMLight Fleet- Truck$XX.XMM- Cars $XXMM- Mgmt $.XMM
Furniture $X.XMMOffice Equip $X.XMMOffice Supplies $XXMMPromotional $X.XMMService Awards $XXMMStationary $X.XMM- Forms- business cardsP-Card $XX.XMMPostage $X.XMM
Company Level Segment Services Subcategories
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IT Hardware / Software &Service
$2000 MM
Telecom Hardware &services
$500 MM
Sales / MarketingCommunications
$3000 MM
Services
$2000 MM
Non-operating Rentalproperty & Equipment
$300 MM
Non-Operating supplies
$700 MM
Below CompanyLevel Categories
Wireless- Voice$X.X MM- Data$XX MM
Marketing Events$X.XMMMarketing Displays$X.XMM
Subscriptions $XMMDues & Memberships$X.XMMJanitorial $X.XMMUniforms $X.XMMSaftey Shoes $XMMMail Room Service $XMMWaste-Hazardous Waste $XXMM-Non-hazardous $XXXMM
Food Services- Cafeteria $XXMM- Vending $XXMM
MRO
$2000 MM
SBU, SBE, or Site Level Segment Services Subcategories
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Step IIStep II Initial Subcategory Assessments Initial Subcategory Assessments
Step IIStep II Initial Subcategory Assessments Initial Subcategory Assessments
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Initial Evaluation of Initial Evaluation of Current SituationCurrent Situation
Gather Initial Supply Gather Initial Supply base Intelligence base Intelligence
Assess:Assess:
Issues / BarriersIssues / Barriers Assess:Assess:
Opportunities / RisksOpportunities / Risks
• Current supplier(s)
• Subcategory spend
• Functional area ownership
• Recently sourced?
• Contract(s)
• Contract expiration dates
• Diversity Opportunity?
• P-card opportunity
• Subcategory description
Initial Subcategory Assessment
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Big Dawg Spend$100 MM
BU - A$50 MM
BU - B$30 MM
BU - C$20 MM
Data Source: ICG IMAUS (Corp. spend distributed)
Subcategory Status:
• Prime - Addecco
• Kelly, Olsten, CDI, Manpower
• Not sourced
• subcategory includes:
1) Light Industrial, 2) Clerical
3) Professional
• Contracts expiring Q32003
Diversity Opportunity:
• First and Second tier
P-Card Opportunity:
• Investigate
Initial Subcategory Assessment Summary 4up
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Initial Evaluation of Initial Evaluation of Current SituationCurrent Situation
Gather Initial Supply Gather Initial Supply base Intelligence base Intelligence
Assess:Assess:
Issues / BarriersIssues / Barriers Assess:Assess:
Opportunities / RisksOpportunities / Risks
• Major suppliers
• Overall size of the Industry
• Industry trends
• Current supplier(s)
• Subcategory spend
• Functional area ownership
• Recently sourced?
• Contract(s)
• Contract expiration dates
• Diversity Opportunity?
• P-card opportunity
• Subcategory description
Initial Subcategory Assessment
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Market data
Note key: D = Diversity, IN = International, N = National, R =
Regional Industry has experienced some consolidation
-Adecco / Olsten merger 1999- Alert forms partnership with Adecco in 1997- Alert Staffing filed for chapter 11 protection in July 2002
Sluggish economy has impacted this industry $94 billion Industry world-wide 16 providers represent 29% of US Market (~7000 providers in US)
Sources: Staffingtoday.net, SI Industry report
Major Providers -Manpower (IN)-Addecco SA (IN) - AOC - AJILON -TAD - LEE HECHT - Jonathan Wren - Adecco Technical
-CDI (N)
-Kelly Services (IN)
-Olsten (franchises) (R)
-Georgia TEMP (R)
-Staff Workers (R)
-Alert Staffing (D)
-Act I Personnel (D)
-Personnel Connect (R)- NEW - SNELL Personnel
Big Dawg Spend$100 MM
BU - A$50 MM
BU - B$30 MM
BU - C$20 MM
Data Source: ICG IMAUS (Corp. spend distributed)
Subcategory Status:
• Prime - Addecco
• Kelly, Olsten, CDI, Manpower
• Not sourced
• subcategory includes:
1) Light Industrial, 2) Clerical
3) Professional
• Contracts expiring Q32003
Diversity Opportunity:
• First and Second tier
P-Card Opportunity:
• Investigate
Initial Subcategory Assessment Summary 4up
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Initial Evaluation of Initial Evaluation of Current SituationCurrent Situation
Gather Initial Supply Gather Initial Supply base Intelligence base Intelligence
Assess:Assess:
Issues / BarriersIssues / Barriers Assess:Assess:
Opportunities / RisksOpportunities / Risks
• Major suppliers
• Overall size of the Industry
• Industry trends
• Current supplier(s)
• Subcategory spend
• Functional area ownership
• Recently sourced?
• Contract(s)
• Contract expiration dates
• Diversity Opportunity?
• P-card opportunity
• Subcategory description
• Known complexities
•Known obstacles
• Regulatory
• Statutory
• Political
•Social
Initial Subcategory Assessment
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Market data
Big Dawg Spend$100 MM
BU - A$50 MM
BU - B$30 MM
BU - C$20 MM
Data Source: ICG IMAUS (Corp. spend distributed)
Issues / Barriers to Sourcing
HR Strategy for Temp labor unclear
Internal resource does not currently compete with external suppliers
Some pressure to move away from existing agreements with incumbents -- killing credibility within industry
Subcategory Status:
• Prime - Addecco
• Kelly, Olsten, CDI, Manpower
• Not sourced
• subcategory includes:
1) Light Industrial, 2) Clerical
3) Professional
• Contracts expiring Q32003
Diversity Opportunity:
• First and Second tier
P-Card Opportunity:
• Investigate
Note key: D = Diversity, IN = International, N = National, R =
Regional Industry has experienced some consolidation
-Adecco / Olsten merger 1999- Alert forms partnership with Adecco in 1997- Alert Staffing filed for chapter 11 protection in July 2002
Sluggish economy has impacted this industry $94 billion Industry world-wide 16 providers represent 29% of US Market (~7000 providers in US)
Sources: Staffingtoday.net, SI Industry report
Major Providers -Manpower (IN)-Addecco SA (IN) - AOC - AJILON -TAD - LEE HECHT - Jonathan Wren - Adecco Technical
-CDI (N)
-Kelly Services (IN)
-Olsten (franchises) (R)
-Georgia TEMP (R)
-Staff Workers (R)
-Alert Staffing (D)
-Act I Personnel (D)
-Personnel Connect (R)- NEW - SNELL Personnel
Initial Subcategory Assessment Summary 4up
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Initial Evaluation of Initial Evaluation of Current SituationCurrent Situation
Gather Initial Supply Gather Initial Supply base Intelligence base Intelligence
Assess:Assess:
Issues / BarriersIssues / Barriers Assess:Assess:
Opportunities / RisksOpportunities / Risks
• Major suppliers
• Overall size of the Industry
• Industry trends
• Current supplier(s)
• Subcategory spend
• Functional area ownership
• Recently sourced?
• Contract(s)
• Contract expiration dates
• Diversity Opportunity?
• P-card opportunity
• Subcategory description
• Know complexities
•Know obstacles
• Regulatory
• Statutory
• Political
•Social
• Estimate potential benefits
• Estimate potential Risks
Initial Subcategory Assessment
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Opportunity to reduce cost
LowLow
LowLow
HighHigh
HighHigh
Risk
MedMed
MedMed
Market data
Big Dawg Spend$100 MM
BU - A$50 MM
BU - B$30 MM
BU - C$20 MM
Data Source: ICG IMAUS (Corp. spend distributed)
Risk Elements:
• Potential divergence from overall Temp labor strategy?
Opportunity Elements:• Not Sourced • TCO / Make-buy / BV • Large, fragmented spend • Develop Sourcing Strategy• Validate market pricing
Issues / Barriers to Sourcing
HR Strategy for Temp labor unclear
Internal resource does not currently compete with external suppliers
Some pressure to move away from existing agreements with incumbents -- killing credibility within industry
Subcategory Status:
• Prime - Addecco
• Kelly, Olsten, CDI, Manpower
• Not sourced
• subcategory includes:
1) Light Industrial, 2) Clerical
3) Professional
• Contracts expiring Q32003
Diversity Opportunity:
• First and Second tier
P-Card Opportunity:
• Investigate
Note key: D = Diversity, IN = International, N = National, R =
Regional Industry has experienced some consolidation
-Adecco / Olsten merger 1999- Alert forms partnership with Adecco in 1997- Alert Staffing filed for chapter 11 protection in July 2002
Sluggish economy has impacted this industry $94 billion Industry world-wide 16 providers represent 29% of US Market (~7000 providers in US)
Sources: Staffingtoday.net, SI Industry report
Major Providers -Manpower (IN)-Addecco SA (IN) - AOC - AJILON -TAD - LEE HECHT - Jonathan Wren - Adecco Technical
-CDI (N)
-Kelly Services (IN)
-Olsten (franchises) (R)
-Georgia TEMP (R)
-Staff Workers (R)
-Alert Staffing (D)
-Act I Personnel (D)
-Personnel Connect (R)- NEW - SNELL Personnel
Initial Subcategory Assessment Summary 4up
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Step IIIStep III Developing a Strategy for Services Developing a Strategy for Services
Step IIIStep III Developing a Strategy for Services Developing a Strategy for Services
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Opportunity to reduce cost
LowLow
LowLow
HighHigh
HighHigh
Risk
MedMed
MedMed
• BenefitsBenefits
• Temp LaborTemp Labor
• Professional ServicesProfessional Services
• Wireless Wireless
• Office SuppliesOffice Supplies
• IT ConsultingIT Consulting
• Janitorial Janitorial
Opportunitie
s
Opportunitie
s
• DeskTopsDeskTops
• Rental CarsRental Cars
• Insurances Insurances
• Subscriptions Subscriptions
• Waste DisposalWaste Disposal
• HotelsHotels
• Office Equipment Office Equipment
• P-CardP-Card
• Relocation ServiceRelocation Service
• UniformsUniforms
• Small PkgsSmall Pkgs
Developing a Strategy for Services
Aggregate Risk / Cost Reduction Analysis
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Developing a Strategy for Services (Con’t)
Planning and Prioritizing the category
Wave 3
Wave 2
Wave 1
Possible Implementation Waves
Priority
Screening
Drop
- Business Impact- Potential Savings
($ MM)
Wave 1
Wave 2
1. Ease of Implementing
Alternate Sourcing Strategy
Low High
M
L
D J
H
F
P
O
I
BA
E
CG
T
S
NQ
K
$1.25
$1.00
$0.75
$0.50
$0.25
Wave 3
Note: (1) Size of circle represents total expenditure for the category
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Things to think about Things to think about
What is the cultural climate within the organization? What is the cultural climate within the organization?
What is the companies value discipline(s)?What is the companies value discipline(s)?-Operational Excellence?Operational Excellence?
- Product leadership? Product leadership?
- Customer Intimacy?Customer Intimacy?
What are the company’s strategic objectives? What are the company’s strategic objectives?
- Cost control?Cost control?
- Sales growth?Sales growth?
- Earning growth?Earning growth?
- Diversity?Diversity?
Are there SBU/SBE/Site issues or objectives that should be considered?Are there SBU/SBE/Site issues or objectives that should be considered?
- Specific service issues Specific service issues
- Specific cost reduction opportunities Specific cost reduction opportunities
- Specific opportunities Specific opportunities
Possible Screening criteria
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Things to think about:Things to think about:
What is the strategic objective of the purchasing organization? What is the strategic objective of the purchasing organization? - Internal process Improvement? Internal process Improvement?
- Supplier process Improvement (productivity)?Supplier process Improvement (productivity)?
- Strong supplier partnerships?- Strong supplier partnerships?
- Commodity trading? Commodity trading?
- Supplier Alliances?Supplier Alliances?
- Strategic Sourcing?Strategic Sourcing?
What are the resources available to work the strategy?What are the resources available to work the strategy?- Analytic support?Analytic support?
- Category management?Category management?
What is the current economic climate?What is the current economic climate?-Buyers market?Buyers market?
- Sellers market?Sellers market?
Do unusual opportunities exist in specific categories?Do unusual opportunities exist in specific categories?- Distressed industryDistressed industry - New technologyNew technology
Possible Screening criteria Possible Screening criteria Con’tCon’t
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•Supply Strategy Decision Tree (Trident)Supply Strategy Decision Tree (Trident)
TechnicallyComplex
?
HighSpend
?
Price Volatility
?
Market Difficulty
?
StrategicImportance
?
Savings Potential
?
Savings Potential
?
Strategic Alliance
Close Relationship
Partnership
Commodity Trading
Simple Tender Leverage
Relationship Focus
Cost Focus
HighHigh
High High
High
Low Low
Low Low
Yes Yes
No
No
Low
Approaches
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Sub-Category
Category Baseline Spend $ 000
Annualized Savings $ 000
Savings %
Original Planned Start Date
Revised Planned Start Date
Original Realization Date
Revised Realization Date
Completion Year
Wave IInsurance (General risk, land, sea, air) $60,000 $0 0% 10/01/01 01/01/02 03/01/02 07/01/02 2002Professional Services $125,000 $2,100 2% 10/01/01 01/01/02 03/01/02 07/01/02 2002Rental Cars $5,300 $430 8% 01/01/02 01/01/02 05/01/02 05/01/02 2002IT Consulting $50,000 $3,750 8% 03/01/02 03/01/02 09/01/02 09/01/02 2002IT Peripherals - Group Printers v Local $6,500 $250 4% 03/01/02 03/01/02 09/01/02 09/01/02 2002Waste Disposal $70,000 $100 0% 10/01/01 03/01/02 03/01/02 09/01/02 2002Subscriptions $7,000 $140 2% 10/01/01 03/01/02 03/01/02 09/01/02 2002Wave IIHotels-2002 $20,000 $150 1% 06/01/02 06/01/02 01/01/03 01/01/03 2002Janitorial $3,000 $200 7% 06/01/02 06/01/02 12/01/02 12/01/02 2002Relo - Moving Company $3,000 $200 7% 06/01/02 06/01/02 10/01/02 10/01/02 2002Security (Focus on Monitoring services) $7,000 $300 4% 06/01/02 06/01/02 12/01/02 12/01/02 2002Office Equipment $5,000 $375 8% 06/01/02 06/01/02 10/01/02 10/01/02 2002Wave IIIIT Datacenter - make or buy $40,000 $1,500 4% 07/01/02 07/01/02 01/01/03 01/01/03 2002IT Voice & Data services $40,000 $1,250 3% 07/01/02 07/01/02 01/01/03 01/01/03 2002Temporary Services $54,000 $2,000 4% 08/01/01 07/01/02 12/01/02 12/01/02 2002Inbound FedEx/UPS $10,000 $750 8% 09/01/02 09/01/02 02/01/03 02/01/03 2003P-Card - Relaunch $25,000 $750 3% 09/01/02 09/01/02 02/01/03 02/01/03 2003Uniforms $5,000 $375 8% 09/01/02 09/01/02 02/01/03 02/01/03 2003
Totals: $535,800 $14,620
2002 Services Category Wave Plan Summary:
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Step IVStep IV Implementing the Strategy for ServicesImplementing the Strategy for Services
Step IVStep IV Implementing the Strategy for ServicesImplementing the Strategy for Services
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Analyze Analyze Current Current SituationSituation
Initial GOInitial GO
11 22 4433
Assess Assess Supply Supply BaseBase
Determine Determine Strategic Strategic Sourcing Sourcing Strategies Strategies to Applyto Apply
Strategy Strategy GOGO
Engage Engage SuppliersSuppliers
Execution Execution GOGO
55
DevelopDevelopTransitionTransition
PlanPlan
Determine Determine StrategiesStrategies
Gather InformationGather Information Implement StrategyImplement Strategy
66
Manage Manage Supply BaseSupply Base
And the Category Strategy is?And the Category Strategy is?
Leverage and Leverage and cost reductioncost reduction focused? focused?
Leverage and Leverage and cost controlcost control focused? focused?
Relationship and process Improvement focused?Relationship and process Improvement focused?
Diversity focused? Diversity focused?
The overall Category Strategy will Set the tone for how you approach the The overall Category Strategy will Set the tone for how you approach the sourcing process sourcing process
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Step VStep V Managing and Continuously Improving Managing and Continuously Improving
Services SuppliersServices Suppliers
Step VStep V Managing and Continuously Improving Managing and Continuously Improving
Services SuppliersServices Suppliers
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Analyze Analyze Current Current SituationSituation
Initial GOInitial GO
11 22 4433
Assess Assess Supply Supply BaseBase
Determine Determine Strategic Strategic Sourcing Sourcing
Strategies Strategies to Applyto Apply
Strategy Strategy GOGO
Engage Engage SuppliersSuppliers
Execution Execution GOGO
55
DevelopDevelopTransitionTransition
PlanPlan
Determine Determine StrategiesStrategies
Gather InformationGather Information Implement StrategyImplement Strategy
66
Manage Manage Supply BaseSupply Base
• Define Appropriate Management Structure
• Contract Management• Issue Resolution• Market Dynamics - suppliers
position relative to market• New Products,services &
technology• New suppliers• Competitor evolution• Pricing relative to market
• Communication Plan
• Confirm goals• Understand issues & current
metrics• Create metrics• Confirm collection methods• Set up review procedure• Take action based on
metrics• Communicate results
The degree to which these attributes are required is dependent on the category and the supplier
Supplier Management
• Set Goals• Review progress• Communicate results
Structured Process ImprovementRelationship Management Metrics
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Low
Low
High
HighOpportunity to reduce cost (including delivery of savings)
Risk
Spec Chem
OfficeSupplies
Fleet
Insurance
Wireless
Med
Supplier Management
Understand risk/opportunity inherent with supplier
Understand Risk/Opportunity
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A similar risk/opportunity matrix to the one developed in understanding the risk/opportunity inherent with the supplier can be used to show the appropriate management structure for supplier management.
Define appropriate Management Structure
Low
Low
High
HighOpportunity to reduce cost
(including delivery of savings)
Risk to G-PSmall TeamNo Steering Team
Cross-functional teamSteering Team
One personTeam not necessaryNo Steering Team
Increasing complexityof process and resources required
Supplier ManagementRelationship Management