0 Airtel_Spend Diagnostic Findings_V17

8/12/2019 0 Airtel_Spend Diagnostic Findings_V17

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NOTICE: Proprietary and ConfidentialThis material is proprietary to Opera Solutions. It contains trade secrets and confidential information which is solely the property of Opera Solutions. This material is solely for the

Clients internal use. This material shall not be used, reproduced, copied, disclosed, transmitted, in whole or in part, without the ex press consent of Opera Solutions.

2009 Opera Solutions. All rights reserved.

Airtel: Spend MacroMap & DiagnosticDiscussion with Airtel SCM Team

October 22nd, 2009


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NOTICE: Proprietary and ConfidentialThis material is proprietary to Opera Solutions. It contains trade secrets and confidential information which is solely the property of Opera Solutions. This material is solely for the

Clients internal use. This material shall not be used, reproduced, copied, disclosed, transmitted, in whole or in part, without the ex press consent of Opera Solutions.


Airtel: Spend MacroMap & Diagnostic

Travel & Entertainment


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Spend Profile (1/2)

T&E spend is fragmented amongst ~347 vendors. Almost 2/3rdof the spend does not follow PO

process

Top VendorsTTM Aug09, INR Crores

Spend by TimelineTTM Aug09, INR Crores

Spend by BUTTM Aug09, INR Crores

Spend by PO StatusTTM Aug09, INR Crores

Total Spend: 52 Crores Total Number of Vendors: 347

Total Spend: INR 52 Crores

Vendor Spend

The Explorers 6.3

Thomas Cook India 5.3

Indtravels 3.8

Air Travel Bureau 1.8

Travel Corporation India 1.5

7.2

4.6 4.9

3.6

8.4

2.7

4.4

3.1 3.1 3.4 3.33.7

Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09May-09 Jun-09 Jul-09 Aug-09

Top 5

vendors

36% spend

Top vendors are TravelAgents; shows absence ofCorporate deals withHotel chains or Airlines

22.7

9.78.3 8.2

3.4

0.1

Mobility Corporate TNG Telemedia AES DTH

PO

38%

Non-PO

62%

Profile and analysis excludes Charter Plane services (Jindal Steel & Power, Forum 1 Aviation); Employee ReimbursementsOracle Invoice Distribution Line Level Data, Opera Analytics


Under Syndication


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Spend Profile (2/2)

Our understanding of T&E encompasses Air and Surface travel, Car Rentals, Lodging and Meeting &

Conferences

T&E CategoryTTM Aug09, INR Crores

82%

18%

Total Spend: 52 Crores

Hotel, Lodging & Others: 9.7cr

Hotel Rooms

Meeting & Conferences

Indicative Vendors (Total = 169)

Tata Hotels

ITC Hotels

Cri Events

PO Compliance: 48%

Travel: 42.7cr

Automobile Rental

Air Travel Surface Travel

Indicative Vendors (Total = 229)

The Explorers

Thomas Cook India

CarzOnRent

PO Compliance: 36%

Profile and analysis excludes Charter Plane services (Jindal Steel & Power, Forum 1 Aviation); Employee ReimbursementsOracle Invoice Distribution Line Level Data, Opera Analytics

Under Syndication


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Vendor Fragmentation: Surface Travel

Top vendors constitute relatively small % of the spend. Long tail renders average spend per vendor

significantly low, showing possible opportunity for vendor consolidation, at least at circle level

Vendor DistributionSurface TravelTTM Aug09

0%

20%

40%

60%

80%

100%

# of vendors

37% spend Top 5 vendors

Top 80% spend 32 vendors

Last 1% spend 75 vendors

Total Number of Vendors: 229

23.1

14.4

10.6

7.2

5.3

0.3

TNG

Corporate

Telemedia

AES

Mobility

DTH

17

10

45

17

105

5

# Vendors Avg. Spend per Vendor

Avg. Spend per VendorSurface TravelTTM Aug09, INR Lakhs

High # Vendors

Low Avg. Spend per Vendor

Avg. Spend per VendorSurface TravelTTM Aug09, INR Lakhs

0.2

0.3

1.2

1.6

1.8

1.9

1.9

1.9

2.0

2.4

2.5

3.1

3.2

3.5

4.8

4.9

4.9

5.3

6.7

7.0

11.6

14.7

16.3

U.P. West

Orissa

Himachal Pradesh

U.P. East

Haryana

Rajasthan

Mumbai

Tamil Nadu

Gujarat

Maharashtra

Bihar

Kerala

Kolkata

Madhya Pradesh

Jammu & Kashmir

West Bengal

Andhra Pradesh

Punjab

Assam

North East

Delhi

Karnataka

Chennai

1

7

8

10

4

4

7

3

9

5

12

6

6

5

4

5

7

9

5

1

7

6

2

High # Vendors

Low Avg. Spend per Vendor

# Vendors Avg. Spend per Vendor

Source: Oracle Invoice Distribution Line Level Data, Opera Analytics

Under Syndication


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Opportunity exists to consolidate volumes from local vendors to few national vendors leading to

better negotiated rates and service level agreement

Vendor Fragmentation: Consolidation Opportunity

TTM Aug09, Mobility

Car Rentals Delhi Mumbai Chennai Kolkata

CarzOnRent

Carlson Wagonlit

Orix

National vendors notbeing used across circles

Air Travel AES DTH Corporate Mobility Telemedia TNG

IndTravels

Air Travel Bureau

Naveen Tours

Skyworld

Vendors being used byfew BUs. Spend can beconsolidated

TTM Aug09

TTM Aug09, No. of Hotels Used

No. of Hotels SpendHigh Medium Low

Usage

Frequency

High 8 2

Med 13 32 9

Low 6 36 63

Negotiate and contractualizefrequently used hotels for better

rates and service; Recommendedhotels by most often usedlocation

Hotels used infrequently or forsmaller spend may beconsolidated


Under Syndication


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Opportunity in Travel Optimization

Large companies frequently pay more than is necessary for print due to inherent inefficiencies

Typically the size of the savings opportunity is 15-30%

L e v e r D e s c r i p t i o n O p p o r t u n i t y / S o l u t i o n

Rate Negotiation

Vendor Consolidation

Demand Management

/ Spec Rationalization

Compliance and

Governance

Hotel spot rates differ significantly even

during the same time period

Travel agencies charge extra under various

heads

Contracted rates with top hotels at each

location and 1-2 air travel agencies

This ensures better prices, to be used when

spot rates are higher than contracted rates

Within the same circle, various agencies

being used for hotel / travel booking

Consolidated volume with fewer vendors at

least at the circle level to enjoy consistent

rates and service

Bookings arising at short notices, or for

specific hotels / flights cost more

Users may be unaware of approved

agencies / hotels for bookings

Check for ad-hoc purchasing (immediate

time window, purchase from unapproved

vendors, etc.)

Standardize specifications for class, spend

limits for different employee grades

Non-contracted purchases from hotels /

travel agencies

Review and check for policy non-

compliance

Put vendor governance and user

governance controls in place

Potential Opportunity: INR 5-10 Crores*

* Further analysis with granular data required to pursue the opportunities, including rates (negotiated and actual, usage frequency etc.)


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Case Study 1: Comprehensive T&E Spend Optimization

By focusing on the savings levers, Opera achieved a saving of $7.5MM over T&E spend of a leading

telecom equipment manufacturer

7.5

3.9

0.8

1.3

1.5

RFP / Contract

Negotiations

Rate

Compliance

Bypass

Reduction

Demand

Management

Total

Savings

Annual Baseline: $78MM$MM

Each region had individual program Multiple approaches to hotel type

and no rate cap

All commissionable rates

Single approach to hotel type with cityrate maximums

All rates net of Commission

Streamlined /automated booking

15 preferred airlines

Multiple contracts with individual

airlines

Low discounts for disproportionally

high market share

2 global airlines & 5 regional airlines

Stronger discounts with realistic hurdles

Service enhancement with new carriers

6 preferred suppliers

No differential pricing

Little or no service enhancements

2 preferred suppliers

Peak versus off-peak pricing

Automatic enrolment into service

priority club

13 preferred agencies

45% of booking outside preferred

agencies

Compensation scheme was

commission/override sharing

4 preferred agencies

20% bookings outside preferred

agencies

Management fee-based compensation

P r e - S o u r c i n g P o s t - S o u r c i n g

Airlines

Hotels

Cars

Agencies

ContractNegotiation

Airline: Redesign negotiation strategy (number of preferred airlines, segments with contracted shares, rate discount structure) that ensures continuedcompetitive rates and discounts. Strengthen demand management

Hotel: Conclude contracts with major chains. Rationalize contract terms to universally include most frequent incidentals. Explore options for morefavourable contracts with select chains

CarRental: Explore cashback / rebate on non-contracted volumes, lower rates for longer contract term, apply rate cap on higher car classes

Rate Compliance Airline:Continue policy/communication efforts to expand advance booking period

Hotel:Monitor rates and overheads for hotelsparticularly for billing of services meant to be complimentary

Bypass Reduction

Airline: Possibly tie agency compensation to preferred airline booking

Hotel: Strengthen booking compliance with preferred properties and chains

Car Rental: Strengthen screening/reimbursement policy for out-of-contract rentals

DemandManagement

All: Define targets and report progress against targets. Recognize and reward spend reduction ideas and efforts

Hotel: Define clear prioritization sequence for hotels. Partner with preferred chains to facilitate switch by most-frequent maverick users by awardingmatching points/status etc.



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Employee

Business Unit Cost Centre

Type (Restricted, Unrestricted)

Class (Business, Economy)

Sub Class (Y, J )

Detailed analysis of Air Travel usage and spend led to savings of $4.1MM for a major investment bank

Details behind

the Invoices

Build

Micromap

Type (Purchase, Cancellation, Reschedule) Airline Code

Purchase Date Travel Date

T r a n s a c t i o n

Source

Destination

Miles

S e g m e n t T i c k e t

E m p l o y e e

Cost per mile Burn Rate

Base Fare

Taxes

R a t e

Whois buying?

Whatis being bought?

Howdoes the priced amount break-down?

Is the rate competitive? Are we paying similar rates for similar flights?

Do we get discount?

Can we standardizespecs?

Case Study 2: Air Travel Spend Optimization

Spend

Visibility

4.1

1.0

0.8

1.2

0.6

0.2

0.3

Business Coach First Business Coach Total

SavingsBy Class, annual baseline: $33MM$MM

Savings

Spend

Optimization

High Frequency> 500 Trips / yr

Low Frequency< 500 Trips / yr

International Domestic Pricing Structures

Quarterly / annual up-front purchasefor fixed rates on

high frequent sectors

Negotiate discount over spotrates

Quarter / Year-end rebateover committed volume

Execution

Internal travel deskfor employee policy guidance

Single travel agentfor non-contracted sector travel

Separate airlines for confirmed and flexible tickets

Tackling Spot Rates

Spot rates are considerably high when lead time is less

(typical case for business needs)

Renegotiatecontracts when spot rates consistentlybelow negotiated rates


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Savings can be achieved on hotel spend by negotiating rates based on internal and external

benchmarks and placing compliance processes in place

Opera Methodology:Hotel Sourcing

Develop CityProfile Identify

Universe

of Hotels

PropertyClassification;

Target Rate

Setting

Rate

Negotiation

Property

SelectionCompliance

Total client spend

Average rate paid

Number of roomnights

Hotel share

Define market structure

Geographic

Competitive clusters

Capacity

Establish benchmarks

Current client org.

Travel agency rates

Other corporations

Existing deals

Using benchmark prices,categories all propertiesinto the following tiers:

Deluxe: Top 15%

Upscale: Next 15%

Moderate: Next 30%

Economy: Next 20%

Budget: Bottom 20%

Select a target rate forthe market which isrepresentative ofmoderate properties

Screen all properties andeliminate those that do notmeet minimum criteria of

quality and safety:

Room service most hours

Reasonable proximity orcommute to client offices

Full bathroom in room

Telephone in room

Access to fax and copier

Initiate negotiations withproperties which pass the

screen. Focus on thepotential benefits to thehotel which have beenquantified from the cityprofile: i.e.. increasednumber of room nights;share gains vs. directcompetitors.

Use the compliance

approach as support

Based on the negotiatedrates, select anappropriate number of

hotels to meet clientcapacity needs, includingat least 2-3 deluxeproperties which fallunder the target rate

Communicate to allemployees

Print selected hotels inthe employee travel guide

Inform and train travelcounselors

Script travel counselors tosuggest the leastexpensive hotel first

Decline employeereimbursement except viareceipt from select hotelsor below target price

Monitor non-compliance


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Understanding pricing drivers for travel agencies help unbundle and reduce the cost on their services

Opera Methodology:Travel Agency Sourcing

Pricing DriversReturn to

Client

Income

Commission Overrides

Expenses

Direct

Salaries Operational

CorporateOverhead

Management

Fee

Profit % Gross AirBookings

Agencies keep all airline/hotel commissions/overrides

Require agencies to return all commissions and overrides to client anddevelop audit trails

Costs are not transparent Require all costs to be delineated, e.g.:

Foreign exchange services

Emergency telephone service etc.

Reduce number of staff required to service account through consolidation

Corporate overhead hidden in agency pricing Make overhead costs transparent and negotiate explicit reductions

Profit not transparent Make profit transparent and negotiate to 1.5 % of gross travel bookings

T y p i c a l C l i e n t S i t u a t i o n S o u r c i n g G o a l s


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Next Steps

Obtain Travel specifications based on business usage

Critical information like location, class / type of service is missing in current invoice data to do further

meaningful analysis

Obtain data feeds from vendors and homogenize / consolidate to get a single window view

Airtel will then need to standardize specifications based on its actual business requirements

Identify top hotels at each location and 1-2 air travel agencies at national level Conduct competitive travel agency selection process with the identified market basket and leverage

consolidated volumes to negotiate for best-in-class terms with the vendors

Enter one-on-one negotiations with select agencies to achieve lower rates and potentially shift to new

rate structure

Contractual agreements with top hotels, to be to be used when spot rates are higher than contracted

rates

Put compliance monitoring process in place to reduce bypass spend on vendors not approved / centrally

contracted and to check demand


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NOTICE: Proprietary and ConfidentialThis material is proprietary to Opera Solutions. It contains trade secrets and confidential information which is solely the property of Opera Solutions. This material is solely for the Clients

internal use. This material shall not be used, reproduced, copied, disclosed, transmitted, in whole or in part, without the express consent of Opera Solutions.


Airtel: Spend MacroMap & DiagnosticCourier and Postage

Under Syndication


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Agenda

Category Overview

Analysis Summary

Detailed Analyses and Examples from Spend Macromap

Opportunity Summary

Appendix


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Courier & Postage: Expense Profile Overview

Top VendorsTTM Aug '09, INR Crores

Spend by TimelineTTM Aug '09, INR Crores

4.3 4.2

3.4

4.1 4.2

3.3

4.8

3.8

2.9

4.84.4 4.5

Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09Apr-09 May-09Jun-09 Jul-09 Aug-09

Spend by PO StatusTTM Aug '09, INR Crores, % of Total

PO

25.7

(54%)

Non PO

22.2

(46%)

Spend by BUTTM Aug '09, INR Crores

Airtel spent about INR 49 Crores on Courier & Postage Services. The spend is highly fragmented amongst

a large number of courier companies

31.8

10.9

1.9 1.2 0.8 0.6 0.6 0.4

Mobility Telemedia AES Airtel DTH UASL-TS-KKUASL-TS-TN TNG Corporate

Total Spend: INR 49 Crores Total Number of Vendors: 423

Top 5 Vendors

= 29% of Total

Spend

Total Spend: INR 49 CroresTotal Spend: INR 49 Crores

Vendor Spend (INR Crores)

Blue Dart Express Ltd 3.6

Express Deliveries 3.5

Blazeflash Couriers Pvt Ltd 2.5

First Flight Courier Ltd 2.5

Modern Mailing Services 2.3

Under Syndication


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Spend by Type of Courier/Postage

Spend by CategoryTTM Aug '09, %

Bill postage is the key demand driver for this category accounting for more than 70% of total spend

Bills

Postage

34.8

(71%)

Courier &

Postage -

General

14.2

(29%)

1. Mobility Business Units (MO) are classified per Circles while Telemedia Business Units (B&T) are classified per regionsSource: Oracle AP data dump, Opera analysis

Circle/ Region1Spend

(INR Crore)

MO Delhi 2.3

MO President's Office 1.9

AES Internet 1.3

Airtel DTH 1.3

MO Karnataka 1.2

MO U.P. East 1.0

MO Bihar 0.9

LDS NLD 0.4

B&T Tamil Nadu 0.4

MO U.P. West 0.4

SA 0.4

B&T NCR 0.3

Bharti Group Corporate 0.3

MO West Bengal 0.3

Comtel AES 0.3

Circle/ Region1Spend

(INR Crore)

MO Karnataka 4.5

B&T Karnataka 2.9

B&T NCR 2.4

MO Tamil Nadu 2.1

MO Mumbai 2.1

MO Chennai 2.1

B&T Tamil Nadu 1.8

MO Andhra Pradesh 1.8

MO Delhi 1.8

MO Punjab 1.5

MO Gujarat 1.1

MO Kolkata 1.1

MO Kerala 1.1

B&T Madhya Pradesh 1.1

MO Maharashtra 1.1

Under Syndication


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Agenda

Category Overview

Analysis Summary


Opportunity Summary

Appendix


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Analysis Summary

Using the limited data provided by Airtel, we have uncovered several opportunities for reduction in

Courier and Postage spend for Airtel

O b s e r v a t i o n

2. Price Dispersion

1. Vendor Fragmentation

4. DemandManagement/

Spec Rationaization

3. PO Non-Compliance

Large number of vendorslocal purchasing at circle

level

Bill postage and other titems postage is not being

coordinated - thus losing out on volume based

discounts

Low coordination among mobility and Telemedia

resulting in spend fragmentation

High usage of one-off vendorsbypass spend

Consolidated volume with fewer vendors at least

at the circle level to enjoy prompt delivery and

bigger discounts

Coordinate amongst various BUs and demand

centers to drive lower costs

Enforce compliance to reduce bypass spend to non

contracted vendors

Instances of significant rate variance across vendors,

as well as by the same vendor

Contracted rate card with 1-2 large vendors toensure better prices

Enforce compliance mechanisms to audit vendor

invoices to ensure excessive charges are not paid

Enforce mechanisms to reduce bypass spend to

non contracted vendor

More than 45% of the spend is done without the

issuance of a Purchase Order making

Some large circles have an high PO Non-Compliance

Enforcing better Purchase Order compliance to

avert contract variance and aid governance

Some circles are spending disproportionately higher

on courier and postage

Strategic demand management across circles

through a deep dive into the causes of these

variances

Align SLAs (e.g. same day delivery vs. 2 days

delivery) with business requirements and achieve

cost reduction

D e s c r i p t i o n O p p o r t u n i t y / S o l u t i o n

Note: Detailed analysis and examples for each opportunity to followSource: Oracle AP data dump, Opera analysis


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Agenda

Category Overview

Analysis Summary


Opportunity Summary

Appendix


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1. Vendor Fragmentation: Overall

The category is being served by more than 400 vendors and Top 10 vendors contributing to just 47% of

the total spend thus indicating potential vendor fragmentation and bypass spend

Vendor LandscapeTTM Aug '09, INR Crores Number of Vendors Vs. Cumulative Spend (%)TTM Aug '09, %

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 51 101 151 201 251 301 351 401

> 200 vendors

comprise less than1% of spend base


Vendor NameSpend

(INR Crore)% of total

Blue Dart Express Limited 3.6 7%

Express Deliveries 3.5 7%

Blazeflash Couriers Pvt Ltd 2.5 5%

First Flight Courier Ltd 2.5 5%

Modern Mailing Services 2.3 5%

Post Office 2.2 4%

BSA Citi Couriers Pvt Ltd 1.8 4%

Speedmail Deliveries 1.8 4%

City Express Services 1.6 3%

Onex Courier & Cargo Pvt Ltd 1.3 3%

Top 10 2.3 (Avg.) 47%

Top 20 1.6 (Avg.) 66%

Top 100 0.5 (Avg.) 95%

Total 49.0 100%

Under Syndication

Source: Oracle AP data dump, Opera analysis


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Vendor Fragmentation: Circle/Region Level

Some of the circles (e.g. Karnataka, Gujarat etc) have much higher number of vendors than required

as indicated by a low average spend per vendor


Spend By Circle/Region1

(Top 20)TTM Aug '09, INR Crores

# of Vendors by Circle/ RegionTTM Aug '09

Average Spend per Vendor by

Circle/ RegionTTM Aug '09, INR Crores

0.8

1.1

1.1

1.1

1.2

1.2

1.2

1.3

1.5

1.6

1.6

2.2

2.2

2.2

2.2

2.3

2.8

2.9

4.4

4.8

UASL-TS-KK

B&T Madhya Pradesh

MO Kolkata

MO Maharashtra

MO Kerala

MO U.P. East

Airtel DTH

MO Gujarat

MO President's Office

AES Internet

MO Punjab

MO Andhra Pradesh

MO Mumbai

MO Tamil Nadu

B&T Tamil Nadu

MO Chennai

B&T NCR

B&T Karnataka

MO Delhi

MO Karnataka

21

37

11

27

15

10

4

62

4

15

27

21

11

17

30

16

18

38

14

86

UASL-TS-KK

B&T Madhya Pradesh

MO Kolkata

MO Maharashtra

MO Kerala

MO U.P. East

Airtel DTH

MO Gujarat


AES Internet

MO Punjab

MO Andhra Pradesh

MO Mumbai

MO Tamil Nadu

B&T Tamil Nadu

MO Chennai

B&T NCR

B&T Karnataka

MO Delhi

MO Karnataka

0.04

0.03

0.10

0.04

0.08

0.120.31

0.02

0.37

0.11

0.06

0.10

0.20

0.130.07

0.14

0.15

0.08

0.32

0.06

UASL-TS-KK

B&T Madhya Pradesh

MO Kolkata

MO Maharashtra

MO Kerala

MO U.P. EastAirtel DTH

MO Gujarat


AES Internet

MO Punjab

MO Andhra Pradesh

MO Mumbai

MO Tamil NaduB&T Tamil Nadu

MO Chennai

B&T NCR

B&T Karnataka

MO Delhi

MO Karnataka

Under Syndication


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Vendor Fragmentation: Business Unit Level (1/2)

Courier/Postage Spend in MobilityTTM Aug '09, INR Crores

The vendor base for Mobility and Telemedia is significantly different thus indicating poor coordination

between various BUs and fragmenting spend with more vendors

Courier/Postage Spend in TelemediaTTM Aug '09, INR Crores

Vendor NameSpend



Blazeflash Couriers Pvt Ltd 2.3 7%


Post Office 2.1 7%



Speedmail Deliveries 1.6 5%

Manikanta City Net Couriers (P) Ltd 1.2 4%

Speednet Couriers 1.1 4%

Gee Arr Courier Pvt Ltd. 1.1 4%

Total Business Unit Spend 31.8 100%

Vendor NameSpend



Samanthu Business Forms Pvt Ltd 0.8 7%

Express deliveries 0.7 7%


Avancer Couriers Pvt Ltd 0.6 5%


Quick-n-Fly Courier (P) Ltd. 0.5 4%

Times Express 0.4 4%

CMS Computers Limited 0.4 4%

Swift Air Express Courier Service 0.4 3%


Under Syndication



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Vendor Fragmentation: Business Unit Level (2/2)

Even within the same circle or region, Mobility and Telemedia use different set of vendors for courier

and postage

Karnataka RegionTop 10 VendorsTTM Aug '09, INR Lakhs

NCRTop 10 VendorsTTM Aug '09, INR Lakhs

Vendor Mobility Telemedia

Speednet Couriers 114.3 -

City Express Services 84.3 71.3

Mrs Express Private Ltd 69.8 -

The Professional Couriers 35.7 8.6

Sms Courier Ltd. 33.7 -

Post Office 29.8 -

Blue Dart Express Limited 12.1 0.0

First Flight Courier Ltd - 9.6Samanthu Business Forms Pvt Ltd - 69.5

Onex Courier & Cargo Pvt Ltd - 99.8

Vendor Mobility Telemedia

Blazeflash Couriers Pvt Ltd 168.5 -

Bsa Citi Couriers Pvt Ltd 118.8 3.1

Modern Mailing Services 78.4 -

Ncer Courier Services 51.3 -

Prakash Air Freight Pvt Ltd 4.2 11.9

Sigma Express Courier (p) Ltd - 33.7

Times Express - 36.9

Swift Air Express Courier Service - 37.5

Quick-n-fly Courier (p) Ltd. - 38.7

Avancer Couriers Pvt Ltd - 54.9

Illustrative Examples

Under Syndication



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Vendor Fragmentation: Commodity Level (1/2)

The vendor base for Bill Postage and General Courier is significantly different providing further evidence

of vendor fragmentation

Spend on Bill PostageTTM Aug '09, INR Crores

Spend on General CourierTTM Aug '09, INR Crores

Vendor NameSpend



Post Office 2.2 6%Speedmail Deliveries 1.8 5%




Gee Arr Courier Pvt Ltd. 1.2 3%

Speednet Couriers 1.2 3%

Manikanta City Net Couriers (P) Ltd 1.1 3%

Samanthu Business Forms Pvt Ltd 1.0 3%


Vendor NameSpend


Blue Dart Express Limited 3.5 25%

Blazeflash Couriers Pvt Ltd 2.5 18%First Flight Courier Ltd 2.4 17%


WCS Logistics 0.8 6%

XPS 0.7 5%

Prakash Air Freight Pvt Ltd 0.6 4%

Overnite Express Limited 0.2 1%

Vector Courier & BPO Pvt Ltd 0.1 1%

JMD Enterprises 0.1 1%


Under Syndication




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Vendor Fragmentation: Commodity Level (2/2)

Different vendors are being used in the same circle for Bills and General Postage presenting an

opportunity for vendor consolidation


MO KarnatakaTop 10 VendorsTTM Aug '09, INR Lakhs

MO DelhiTop 10 VendorsTTM Aug '09, INR Lakhs

Vendor Bills Postage

Courier &

Postage -

General

Speednet Couriers 114.0 0.3

City Express Services 84.3 -

Mrs Express Private Ltd 64.3 5.4

The Professional Couriers 24.2 11.5

SMS Courier Ltd. 33.7 -

Post Office 25.2 4.5

Blue Dart Express Limited - 12.1

Sandesh Agencies 11.7 -

Minit Media 11.6 -

Shreee Ganesh Agencies - 11.6

Vendor Bills Postage

Courier &

Postage -

General

Blazeflash Couriers Pvt Ltd 168.5 -

BSA Citi Couriers Pvt Ltd 118.1 0.7

Modern Mailing Services - 78.4

Ncer Courier Services 51.3 -

Dr I T Planets Limited 9.9 -

Prakash Air Freight Pvt Ltd 0.0 4.2

Man & Machine 3.6 -

Saiba Supplies Management Ltd. 3.4 -

Goyal Services 2.6 -

Post Office 0.5

Under Syndication



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25

2. Price Dispersion

We found multiple instances of price variance within the same region during our analysis thus

indicating bypass spend outside of contracts, and/or poor compliance


Circle/Region Vendor Unit Price (INR) Invoice Amount (INR)

Mobility U.P.

FMC Express 5.00 350,033

Jaypee Express 5.00 26,350

Saiba Supplies Management Ltd. 6.64 71,990

Saiba Supplies Management Ltd. 7.50 48,930

Mobility West Mumbai

Express Deliveries 4.00 2,317,413

Pride Courier 4.25 512,050

Pride Courier 4.00 1,494,410

Vichare Courier Services Pvt Ltd. 7.00 2,497,361

AES Internet (All

Consignments from

Mundka to Pune)

Blue Dart Express Limited 25 25







Same vendorcharging different

rates for courier

delivery within the

same circle


rates for courier

delivery within the

same circle


rates for courier

delivery within the

same circle

Note: Even in the absence of specifications for each item, we are reasonably confident about the similarity of these items across various invoicesSource: Oracle AP data dump, Opera analysis

Under Syndication


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3. PO Non - Compliance

Many of the top circles have very low PO compliance this may potentially be resulting into higher

than contracted rates being charged by the vendor

Circle/ Region Non-PO Purchase (%)

MO Karnataka 28.0%

MO Delhi 0.5%

B&T Karnataka 88.4%

B&T NCR 66.0%

MO Tamil Nadu 48.6%

B&T Tamil Nadu 95.8%

MO Mumbai 52.9%

MO Chennai 40.2%

MO Andhra Pradesh 1.6%

MO Punjab 16.3%

AES Internet 69.6%

MO President's Office 0.0%

Airtel DTH 87.1%

MO Gujarat 36.1%

MO Kerala 43.9%

PO Compliance by Circle/ Region (Top 15)TTM Aug '09, INR Crores PO Compliance by Vendors (Top 15)TTM Aug '09, INR Crores

Vendor Non-PO Purchase (%)

Blue Dart Express Limited 66.4%

Express Deliveries 55.7%

First Flight Courier Ltd 44.5%

Modern Mailing Services 11.8%

Post Office 89.7%

Blazeflash Couriers Pvt Ltd 17.8%

BSA Citi Couriers Pvt Ltd 7.9%

Speedmail Deliveries 44.2%

City Express Services 40.6%

Onex Courier & Cargo Pvt Ltd 100.0%

Gee Arr Courier Pvt Ltd. 7.0%

Speednet Couriers 16.6%

Manikanta City Net Couriers (p)ltd 0%

Samanthu Business Forms Pvt Ltd 100.0%

The Professional Couriers 25.1%


Under Syndication


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4. Demand Variance Across Circles/ Regions

Some circles have a disproportionately high spend on Courier and Postage thus indicating potential

demand management opportunity to rationalize demand from circles with disproportionate demand

Mobility, Courier & Postage SpendTTM Aug '09, % of total Revenue for circle (bps)

Disproportionate demand for Courier and Postage

Under Syndication


21 21

19 19 19

17

13 13

12 12

11

9

8 8

7 7 7

5 5

4

2 2

Delhi

Mumbai

Kerala

TN&Chennai

Karnataka

Kolkata

Gujarat

Punjab

U.P.West

NorthEast

HimachalPradesh

Haryana

U.P.East

Maharashtra

Assam

AndhraPradesh

WestBengal

MadhyaPradesh

Bihar

Rajasthan

Jammu&Kashmir

Orissa


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Agenda

Category Overview

Analysis Summary


Opportunity Summary

Appendix


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Opportunity Summary

Based on our diagnostic assessment, we envisage significant cost savings (10-20% based on prior

experience) in Courier and Postage through contract negotiation, demand management and effective

compliance

Vendor

Management

Demand

Management

Compliance

Category currently being served by more than 450 vendors

There is a widespread price dispersion because of ad hoc usage of multiple

vendors within the same circle

Negotiating central contracts with fewer number of vendors might yield better

rates and better contract structure including attractive tenure discounts

More than 46% of the total spend on Courier and Postage is without a formal

Purchase Order

In the absence of central contracts, effective price governance is difficult Once centralized contracts have been negotiated with select national vendors,

an elaborate compliance governance framework could be designed

Preliminary analyses reveal disproportionate spending by some circles

Substantial cost reduction is achievable through demand management across

business units

Based on our initial assessment and previous experience , we envisage a potential savings

opportunity of Rs.5-10 Crores in Courier and Postage

d


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Agenda

Category Overview

Analysis Summary


Opportunity Summary

Appendix

S d A l i b B i U i


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Spend Analysis by Business Unit

The major Business Units have a considerable vendor fragmentation and very low average spend per

vendor

Spend By Business UnitTTM Aug '09, INR Crores

0.1

0.1

0.1

0.2

0.4

0.6

0.6

0.8

1.2

1.9

10.9

31.8

UASL-TS-KER

UASL-TS-AP

Infratel

Foreign Entity

Corporate

TNG

UASL-TS-TN

UASL-TS-KK

Airtel DTH

AES

Telemedia

Mobility

5

4

8

10

8

11

20

21

4

17

132

379

UASL-TS-KER

UASL-TS-AP

Infratel

Foreign Entity

Corporate

TNG

UASL-TS-TN

UASL-TS-KK

Airtel DTH

AES

Telemedia

Mobility

0.01

0.01

0.01

0.02

0.05

0.05

0.03

0.04

0.31

0.11

0.08

0.08

UASL-TS-KER

UASL-TS-AP

Infratel

Foreign Entity

Corporate

TNG

UASL-TS-TN

UASL-TS-KK

Airtel DTH

AES

Telemedia

Mobility

# of Vendors by Business UnitTTM Aug '09

Average Spend per Vendor by BUTTM Aug '09, INR Crores

Spend isdispersed acrossmultiplevendors, thuslosing out onvolume basedbenefits

Under Syndication


PO C li S


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PO Compliance Summary

Most of the smaller vendors have been serving Airtel without PO issuance. PO compliance has been

steadily increasing in the recent months

PO Compliance by # of VendorsTTM Aug '09

PO Compliance by SpendTTM Aug '09, INR Crores

Non PO

Only, 341,

(65%)

PO Only,

55, (11%)

Both, 125,

(24%)

Both PO

and Non PO

40.1

(84%)

Non PO

Only

6.4

(13%)

PO Only

1.4

(3%)

65%

48%51% 54%

49% 51% 50%

35%

56%

39%33% 32%

Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09

Non PO Purchase

PO Compliance Over TimeTTM Aug '09, % of Non PO Purchase

Under Syndication


V d F t ti V d U Ti


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Vendor Fragmentation: Vendor Usage over Time

A large proportion of vendors supplies to Airtel very infrequently (less than 2 months in a year) thus

indicating a potential ad-hoc vendor selection for small business

30%

10%

5%

14%

8%

4%6%

3% 4% 3%

7%

6%

1 2 3 4 5 6 7 8 9 10 11 12

One off vendorscomprise almost half

of vendor base

Number of months a vendor supplied to AirtelTTM Aug '09, # of vendors

Regular VendorsOne-off vendors

Number of months a vendor supplied to AirtelTTM Aug '09, Spend %

1% 1% 1% 3% 3% 1%4% 3% 5%

7% 9%

63%

1 2 3 4 5 6 7 8 9 10 11 12

Most of the spendconcentrated with

regular vendors

Under Syndication


V d L d G l C i (M bilit )


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Vendor Landscape: General Courier (Mobility)

Within Mobility, different vendors are being used for General Courier not just at an overall region level,

but even at the circle level

Top Vendors by Region

North % of Total

Bsa Citi Couriers Pvt Ltd 32%

Post Office 20%

Competent Synergies Pvt Ltd 10%

NCER Courier Services 9%

East % of Total

Blazeflash Couriers Pvt Ltd 67%

Overnite Express Ltd 14%

United Air Express 9%

First Flight Courier Ltd 4%

West % of Total

Blue Dart Express Ltd 37%

Flyking Courier ServicesJabalpur

20%


Shree Express 14%

South % of Total

WCS Logistics 48%


Blue Dart Express Ltd 10%

Shreee Ganesh Agencies 7%

Top Vendors at City/State Level

Delhi

Blazeflash Couriers Pvt Ltd

Modern Mailing Services

Prakash Air Freight Pvt Ltd

BSA Citi Couriers Pvt Ltd

UP

Modern Mailing Services

Prakash Air Freight Pvt Ltd

Saiba Supplies Management

Overnite Express Limited

HP


First Flight Courier Ltd

Punjab


Siddharth Courier & Cargo

Services

S.J. World Wide Express

First Flight Courier Ltd.

Bihar



West Bengal

Overnite Express Ltd

United Air Express

Blue Dart Express Ltd

Orissa


Express Logistics


Kolkata



Mumbai



Shree Express

Gujarat


Shree Maruti CourierService Pvt. Ltd

MP

Flyking CourierServices Jabalpur


Maharashtra

Shree Express

Meghdoot Couriers &Cargo Services

Karnataka

WCS Logistics


Shree Ganesh Agencies

Atlanta Business Services

Andhra Pradesh


Air Flight Couriers & Cargo

Team United Express


Tamil Nadu

The Professional Courier

Vector Courier & BPO Pvt Ltd

Desk to Desk Courier & Cargo

Chennai


Desk to Desk Courier & CargoLtd


The Professional Courier-

Coimbatore

General Courier

Even within the

same

geographical

regions, different

vendors are being

used for delivery

of general

Couriers

Under Syndication


Vendor Landscape Bills Postage (Mobility)


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Vendor Landscape: Bills Postage (Mobility)

Within Mobility, different vendors are being used for Bill Postage not just at an overall region level, but

even at the circle level

North % of Total

Bsa Citi Couriers Pvt Ltd 32%

Post Office 20%

Competent Synergies Pvt Ltd 10%

NCER COURIER SERVICES 9%

East % of Total

Gee Arr Courier Pvt Ltd. 56%

Khetawat InvestmentConsultants

21%

Routray & Associates 4%

Seven Huts Technosols 3%

West % of Total

Tej Couriers 17%

Express Deliveries 16%

Pride Courier 12%

Vichare Courier Services

Pvt Ltd.10%

South % of Total

Express Deliveries 15%

Speedmail Deliveries 13%

Speednet Couriers 10%

Manikanta City NetCouriers (P)ltd 9%

Top Vendors by Region

Delhi


NCER Courier Services

Dr IT Planets Ltd

Man & Machine

UP

Cent % Services

FMC Express

Kumar Printers

Falcon Services

Rajasthan

Post Office

Pushpak Courier- Jaipur


Bhawani Printers & Publisher

Punjab


Crown Associates

Competent Synergies Pvt Ltd

Post Office

Top Vendors at City/State Level

Bihar



West Bengal


United Air Express


Orissa


Express Logistics


Kolkata



Mumbai



Shree Express

Gujarat


Shree Maruti Courier

Service Pvt. Ltd

MP

Flyking CourierServices Jabalpur


Maharashtra

Shree Express

Meghdoot Couriers &

Cargo Services

Karnataka

WCS Logistics


Shree Ganesh Agencies

Atlanta Business Services

Andhra Pradesh


Air Flight Couriers & Cargo

Team United Express


Tamil Nadu

The Professional Courier


Desk to Desk Courier & Cargo

Chennai


Desk to Desk Courier & CargoLtd


The Professional Courier-

Coimbatore

Bills Postage

Even within the

same

geographical

regions, different

vendors are being

used for delivery

of bills Postage

Under Syndication

0 Airtel_Spend Diagnostic Findings_V17

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