EPRC Berlin November 8-9, 2010 Swiss Federal Railways SBB-CFF-FFS John M Walker Chief Procurement +...

EPRCBerlinNovember 8-9, 2010

Swiss Federal RailwaysSBB-CFF-FFSJohn M WalkerChief Procurement + Supply Chain OfficerPurchasing ¦ Supply Chain ¦ Production

© SBB • Infrastruktur • I-ESP • Konzerneinkauf • 09.11.2010 1

45. Symposium Einkauf und LogistikBerlinNovember 10-12, 2010

Swiss Federal RailwaysSBB-CFF-FFSJohn M WalkerChief Procurement + Supply Chain OfficerPurchasing ¦ Supply Chain ¦ Production

2© SBB • Infrastruktur • I-ESP • Konzerneinkauf • 09.11.2010

Purchasing Production Supply Chain

An integrated approach...


SBB Swiss Railways - Purchasing ¦ Supply Chain ¦ ProductionOrganisation

Supervisory Board

CEOAndreas Meyer

Finance

Human Resources

HSEQ

IT

Communication &Public Affairs

CorporateDevelopment

Legal &Compliance

PassengerDivision

Urs Schlegel

Cargo Division

Nicolas Perrin

InfrastructureDivision

Philippe Gauderon

Real EstateDivision

Laurent Staffelbach

Purchasing, SupplyChain & Production


Leiter Einkauf, Supply Chain + Produktion

John M Walker

FinanzenSandro Michelotti

Human ResourcesBettina Filli Zeller

Konzerneinkauf und Top Lieferanten

Urs Matti

Warengruppen-ManagementAdrian Zaugg

Einkauf Infrastruktur

Martin Koch

Produktion Bahntechnik

Jo Haller

Logistik

Rolf Kaufmann

KommunikationGabriela Vrecko

Konzernfunktion enthalten

Stv. L I-ESP

Risiko Sicherheit Qualität Umwelt

Saskia Günther

Projekte

Leitung Beschaffung+ SC Personenverkehr

Dietmar Gessner

Leitung EinkaufCargo

Urs Müller

Leitung EinkaufImmobilien

Alexis Leuthold

Leitung EinkaufKonzern IT

Jacqueline Klaiss Brons

Führungs-Unterstütung

Thomas Liechti

SBB Swiss Railways - Purchasing ¦ Supply Chain ¦ ProductionOrganisation


xx

Firmly establish Role of Corporate Procurement

DivisionsDivisions

Challenges: 2010Purchasing ¦ Supply Chain ¦ Production

Integration of ‘new’ production facilities

Define and Test Make-or-Buy Process

Drastically reduce Working-Capital

Team Developmen + Succession Planning

Supplier Assessment System

Identify incremental Cost Reductions

Integration of ‘new’ employees

Harmonize SCM Processes

Optimize Warehousing

PurchasingSupplyChain

Production


Material + Rolling Stock availability Keep the trains running! We don't want construction projects to be idle!

before 2008before 2008

Portfolio Optimization Do we really need 300 different

kinds of cheese? Phase II Supply Chain Optimization

2011 - 20122011 - 2012

Project 100(+50) Category Management to drive Cost Reductions Cross-division Purchasing Cooperation

2008 - 2009

Cross-Functional Teams We can (and will) do more as a Team Phase I Supply Chain Optimization

2010

SBB Supply ManagementCooperation – internal and external – will intensify


197

324

542

803

3'581

1'715

Our external spend (2009: ~3.6 BCHF) is heavily concentrated across 7 categories und 50 suppliers

External Spend per Division (2009: MCHF)

SupplierBreakdown

Spend Categories

Passenger

Cargo

Real Estate

IT

Infrastructure

thousands 54%

Top 21-50

10%

Top 2036%

Others

4%

IT

2%

Signalling

4%Telco / Energy

5%Services

10%

MRO12%

Rolling Stock

20%

Construction + Track Projects

43%


54%

Top 21-50

10%

Top 2036%

Top Supplier Management Goals: Reduce costs by identifying efficiencies

and leveraging synergies Develop true partner-relationship for

additional cooperation

Key Initiatives Supplier-suggested continuous

improvements Pooling of volumes Transparent Raw Materials and Energy

management Productivity targets Payment terms


SupplierBreakdown

thousands


Category Management Goals: Less reliance on bidding and instead

promote development of transparent “should cost" models

Key Initiatives Bundling + Pooling of volumes Promote more sourcing opportunities to

international suppliers Reduce complexity of portfolio Risk mitigation Simplify specifications

Spend Categories

Others

4%

IT

2%

Signalling

4%Telecom / Energie

5%Services

10%

MRO12%

Rolling Stock

20%

Constuction + Track Projects

43%



Our Concept:3 Basic Strategies + 10 Focus Activities

Product Management Strategies (PM)

Purchasing Strategy + Execution

SCM ProcessStrategies

(SCM)

What do I really need to buy? Integrated Product Management:

– functional specifications– Life Cycle Cost– Total Cost of Ownership

How do I purchase and take delivery? Integrated Demand Planning

– reduce internal waste (buffers)– Lean SCM– Project-specific actions

Leverage Procurement Competencies Standardize KPIs

– International sourcing– Frame agreements– Competitive Bidding– Volume Pooling– Post-Award Savings Incentives

oror

?

?

?

?

© SBB • Infrastruktur • I-ESP • Konzerneinkauf • 09.11.2010

Plan Do

CheckAct

low Potential high Potential

11

?

A Product Group strategy is defined in iterative circles by cross-functional teams, and implemented after Board sign-off

Executive Board

Corporate Sourcing /Lead Buyers

CrossFunctionalTeams (CFTs)

PCStrategyBasics /

Research &Analysis

PC Strategy Plan

Sign-off

PCStrategy

Deployment

Def

ine

Implem

ent

PC = Product CategoriesTS = Top Supplier

xxx xxx xxx xxx

xxx xxx xxx.

Competitive arena

Supplier competitiveness intensity

Availability of substitutes

Internal rules and regulations

(External) regulations, law

Influence external stakeholders

Duration of use

none many

little high

tight lose

high little

long term < 1year

tight lose

SBB grip / influencing powerSBB grip / influencing power

xxx xxx xxx xxx

xxx xxx xxx.

Nov. Dec.

44 514645 47 5248 49 50

Label

Label

Label

Label

11/2/10

Label

Label

Label

Label

Label

Action

19

4

Label Label Label

3

2

6

Label

4

Label Label


Complexity ReductionExample: turnout / switch manufacturing


Complexity ReductionExample: tie / sleeper procurement

Example Sourcing Process (wooden sleepers ¦ ties)

– Timber industry requirements are defined

– Lumber is ordered from the Timber industry

– Wood is cut, dried and placed in storage to dry (several weeks)

– Cut wood is chemically treated– Treated wood must be stored– Mounting hardware requirements

are determined– Hardware tender is placed– Assembly of complete ties– Transport to trackside– Material management on-site

Top 20Lieferanten Top 20Lieferanten


Complexity ReductionExample: tie / sleeper procurement

Example Sourcing Process (wooden sleepers ¦ ties)

– Timber industry requirements are defined

– Lumber is ordered from the Timber industry

– Wood is cut, dried and placed in storage to dry (several weeks)

– Cut wood is chemically treated– Treated wood must be stored– Mounting hardware requirements

are determined– Hardware tender is placed– Assembly of complete ties– Transport to trackside– Material management on-site

Top 20Lieferanten Top 20Lieferanten Top 20Lieferanten Top 20Lieferanten

Advantages for SBB and Suppliers

– Reduced complexity

– Bundling effect

– Logistics optimized

– Warehousing optimized

– Public-tendering regulations fulfilled

New Sourcing Process

– fully-assembled components ordered from the supplier

– supplier manages value-chain and transport to trackside


Sourcing Processes within SBB --- how do we really compel supplier cooperation?

Since 2002 SBB has been obliged to adhere to public tender laws and regulations.

The laws were intended to create transparency and ensure a more competitive playing field.

All purchases of goods + services > KCHF 640 and construction > MCHF 2 must be publicly tendered.

International suppliers must also be allowed to bid – we may not give preference to Swiss suppliers

Key Data

Transparence +Demand Planning

CategoryManagement

Porter’s 5-ForcesModel

SupplierProfile

KraljicMatrix

Public tender

BoeB / VoeBor

RFx ¦ RFi

Negotiationand Award

Contracting

The impact of Public Tenders


‚ ‚ ‚ ‚‚

Our category and supplier-management network is a fairly new concept, and requires significant effort and energy

SBB Divisions

‚‚

I P G IM IT

‚

Top Suppliers

Category Management

Supplier Management

‚

‚ ‚Examples:- Hardware + Software- Telecom Services- IT support

Categories

‚ Lead Category Buyer-

Buyer

Category Network

‚‚ Top Supplier Lead

Buyer

Network

‚

‚

‚Example:- Temporary Employees- Engineering Support- Project Analysis- Product + System Testing- Other Services


Vast majority of sites were not connected into our ERP-system

Situation ThenStorage and Reserves - Scattered and very often unstructured


TBDTemporary Material Storage Facilities

TBDTemporary Material Storage Facilities

85 5Equipment + Machinery

Assets

85 5Equipment + Machinery

Assets

30 6Production

Centers

30 6Production

Centers

19 6 Large

Warehouses

19 6 Large

Warehouses

16 5LogisticsCenters

16 5LogisticsCenters

Short- und Midterm-Plans:

Deploy regional asset optimization strategy

Radically reduce +78'000 part references

Ensure all facilities have ERP interconnection

Situation NowRationalization of Production, Warehousing and Logistics Centers


20

Evolution of Inventory Levels – Infrastructure Division

J

204

232

SJ D

217

N

221

O

222225

A

199

228

207

234

M

210

235

A

213

236

M

215

F

216

J

217

193

20102009

186

Stock [ Mio. CHF] Definition

Stock Level Gross amounts per

month end Rolling 3-months average


21

1,55

1,50

1,45

1,40

1,35

1,30

1,25

2010

2009

12

1,41

11

1,38

10

1,38

9

1,35

8

1,54

1,35

7

1,52

1,31

6

1,49

1,28

5

1,46

1,30

4

1,29

3

1,43

21

1,43

1,61

1,60

1,65 Stock Turnover Consumption / Stock Total consumption Rolling 12-months consumption Impact of internal transfers

neutralized

Stock Turnover Definition

Evolution of Inventory Turnover – Infrastructure Division


Year after year the Sourcing Team and its Cross Functional Interface Partners develop distinctive know-how and learning

Definestrategy

Lead Buyer & CFTRefine

strategyGroup Sourcing,

Purchasing Board Sign-offstrategy

ExecutiveBoard

Break downsaving targets

Purchasing Board

Define sourcingsaving targets

Executive Board

Define implementation

measuresLead Buyer & CFT

Implementmeasures

Lead Buyer & CFTQuarterly reviewsavings progress

Corp. Sourcing Lead Buyer

Yearly reviewsavings & strategy

Purch. Board Corp. Sourcing

Quarterly reviewsavings progress

Purch. Board Corp. Sourcing

HY reviewsavings progress

Corp. Sourcing Exec.Board

Yearly reviewsavings & strategy

Corp. Sourcing Lead Buyer

Strategy & Goals

Capabilities

Processes

Organization

Systems &Methods

CFT = Cross Functional Team

Def

ine

Capture



Our category and supplier-management network is a fairly new concept, and requires significant effort and energy

SupplierNegotiations

“Which opportunities

offers the market?”

“Which TL-targets do we

pursuit?”

Product CategoriesFocus Strategies

“Which PC-targets do we

pursuit?”

Supplier Management


Competitive arena

Supplier competitiveness intensity

Availability of substitutes

Internal rules and regulations

(External) regulations, law

Influence external stakeholders

Duration of use

none many

little high

tight lose

high little

long term < 1year

tight lose

SBB grip / influencing powerSBB grip / influencing power

SBB Supplier

Top-Supplier ManagerLead Buyer

Competitive arena / markets


Analysis of Savings by YearPreliminary Results


Preliminary Results

The SBB anticipates 4.2 BCHF in average annual external sourcing volumes (at today's rates that's roughly 3.1 BCHF).

Between 2011-2016 we plan to source more than 25 BCHF. Challenge: identify "significant" savings potential by challenging

the status quo – a long-term (2011-2016) strategy is necessary. About 3.6 BCHF is managed through our cross-division lead

buyer network. Preliminary Project Team results:

– 150 MCHF identified through traditional procurement improvements (squeezing the lemon)

– 300 MCHF through further improvements within the supply chain (inventory reduction, waste elimination)

– 600 MCHF through cross-functional cooperation by asking very tough questions : "Do we really need a Rolls-Royce? Would a Skoda be good enough?"


EPRC Berlin November 8-9, 2010 Swiss Federal Railways SBB-CFF-FFS John M Walker Chief Procurement +...

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