Organization Transformation 11-5-09

Xerox Third Party Confidential

Organization Transformation

Truly Global Procurement

Craig LaudadioProcurement Solutions Manager

Xerox Corporation

Presented by Craig Laudadio @ Xerox 585-265-5131

Xerox Global PurchasingOrganization Transformation, Agenda

• Xerox Overview

• Business Environment and Challenges

• Developing a Solution, Planning and Implementation

• Transformation and Globalization of Procurement

• The Results & Benefits

• Wrap-Up


Xerox Overview

• Xerox Corporation is the world's leading document management technology and services enterprise.

• It provides the document industry's broadest portfolio of offerings.

• Digital systems include color and black-and-white printing and publishing systems, digital presses and "book factories," multifunction devices, laser and solid ink network printers, copiers and fax machines.

• Xerox's services expertise is unmatched and includes helping businesses develop online document archives, analyzing how employees can most efficiently share documents and knowledge in the office, operating in-house print shops or mailrooms, and building Web-based processes for personalizing direct mail, invoices, brochures and more.

• Xerox also offers associated software, support and supplies such as toner, paper and ink.


Xerox Mission

• Our strategic intent is to help people find better ways to do great work -- by constantly leading in document technologies, products and services that improve our customers' work processes and business results.


Xerox Corporation at a Glance

CEO: Ursula M. Burns

2008 revenue: $17.6 billion

2008 income: $230 million

Employees: 57,100 worldwide.

Operates in: 160 countries

Founded: In 1906 as The Haloid Company; named Haloid Xerox in 1958; named Xerox Corporation in 1961

Fortune 500 ranking: No. 147

NYSE: XRX

Headquarters: 45 Glover Avenue, Norwalk, CT 06856

www.xerox.com


Global Purchasing Ken Syme $7BGlobal Purchasing Ken Syme $7BGlobal Purchasing Ken Syme $7BGlobal Purchasing $7.8B

Business Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsPresident Ursula BurnsBusiness Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsBusiness Group Operations Ursula BurnsPresident Ursula BurnsPresident Ursula Burns

Office of President and CEO

Jim Firestone & Ursula Burns

Xerox Corporation is a $17.6 BillionTechnology and Service Enterprise

Paper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloXerox Strategic Services Group Wim AppeloPaper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloPaper Supplies & Supply Chain Wim AppeloXerox Strategic Services Group Wim AppeloGlobal Business and Services Group

Xerox Global Purchasing Organization

Product Related Purchasing $3.5B Indirect Goods and Services $4.3B


Xerox Global Purchasing established ICM (Integrated Commodity Management) office in Hong Kong in 1995.• Obtain quotes• Point negotiations• Quality Surveys and audits• Expedite and problem solve

Organizational Design for Sourcing inEmerging Regions –Business Environment

Supplier Base Management and Commodity Strategy, Remained in the USA.

Most of our sourcing was in USA and European Union.


Business Environment & Challenges Early 2000’s

Disruptive Technology in Products.

Fiercely Competitive industry.

Negatively Sloping Product Cost Curves.

Formidable Global Competitors.• Mostly Asian Manufacturing.• Strong Financially.• Moving Assembly Plants to low cost countries.


Xerox Global PurchasingBusiness Environment, Sourcing Trends

0102030405060708090

100

2003 2004 2005 2006 2007

Sourcing Southeast Asia

% S

ourc

ed in

Asi

a (p

rodu

ct r

elat

ed)


Global Purchasing Business EnvironmentDollars Spent by Supplier Location

Production$3.5B Supplier Spend

14%Other

86%Asia

Europe 4%North America 10%

59%U.S.

31%Europe

Canada/Brazil 7%Other 3%

Indirect Goods and Services$4.3B Supplier Spend


Xerox Global Purchasing Organization Pre-transformation

CPS / BPO $4.3BProduct Purchasing $3.5B

Xerox Designed Products

Product Cost

Engineering

Fuji Xerox Procurement Operations

Business Process

Outsourcing

Corporate Procurement

Services

Supplier Quality

Assurance

OEM Designed Products







Organizational Design for Sourcing inEmerging Regions – Solution development

• Global Purchasing Senior Staff team

• Checked Job Titles and Current roles at the door.

• Used “Good to Great” approach.

• Posed the question, “If we started this all over again and didn’t have the limitations of the existing infrastructure around us, how would we do this?”


We studied the activities of Global Purchasing personnel.– Buyers/Supplier/Commodity Managers– Supplier Quality Assurance Engineers– Advanced Manufacturing Engineers– Product Cost Engineers

– We studied their roles and identified activities that should be located with Product Delivery Teams and Business Teams and activities that should be located with suppliers.

– In late 2006 we transferred ALL activities to Asia that could / should be managed from Asia.

Organizational Design for Sourcing inEmerging Regions – Solution development


Total Acquisition Cost

Unit Cost + Duty Insurance & Freight + Hurdle rate = Total Acquisition Cost

Hurdle rates includeCommunication & travel cost.

Premium Freight.

Increased Inventory Holding.

Scrap, rework, obsolescence.

Compliance Monitoring.

IP protection.

Business Resumption Plans.


Other Considerations and related decisions

• We purchased and studied research by Aberdeen, Everest, Forrester and Gartner on procurement outsourcing.

• We commissioned a Study at Portland State University.

• Considered whether to further Invest in Asia or whether to outsource procurement and buy the service.

• Had to decide on which side of the procurement outsourcing movement Xerox should be positioned.

• We concluded that Xerox had the necessary scale, scope and some unique processes and expertise (particularly in product related purchasing) that made internal investment prudent.

Before we restructured


Xerox Global Purchasing Asian Procurement OpsXerox Global Purchasing Asian Procurement OpsProject TimelineProject Timeline

GP Management Strategy May 06

GP Management Business Plan Formulated July 06

Corporate officer approval Aug 06

Communicate to GP employees Worldwide Sept 06

Begin Hiring in Asia and restructure Oct 06

Complete Restructuring Dec 06

Complete Hiring in Asia 1Q 07

Canvas Stake- holders July 06


Global Purchasing Realignment of Product Purchasing Resources (headcount) to Asia

Europe 8

Portland65

Rochester85

*266 heads in 2006 *266 heads in 2008

Rochester 122

Portland 79

Asia47

Europe12 Brazil Canada 6

* Does not include Indirect Purchasing headcount

Asia 108

Before After


Xerox Global Purchasing Organization Pre-transformation

CPS / BPO $4.3BProduct Purchasing $3.5B


Product Cost

Engineering


Business Process

Outsourcing


Services

Supplier Quality

Assurance

OEM Designed Products







CPS / XGS / BPO $4.3BProduct Purchasing $3.5B

Asian Procurement Operations

Global Purchasing for

Production Systems Group


Global Purchasing for

Xerox Office Group

Procurement Outsourcing

Services

Business Process

Outsourcing

Global Purchasing for Xerox Global

Services


Services

Xerox Global Purchasing Organization Post-transformation







Xerox Asian Procurement Operations (APO) own Xerox Global Sourcing Strategy.

ICM Offices Previously

Project manage ( new and resourced)Expedite and Problem SolveObtain QuotesNegotiate CostsSome PCE EstimatingSQA Survey approvals Audits

APO Currently also

Develop Global Commodity StrategyManage the supplier base Contracting for Asian suppliersPCE estimating for Asian sourcingAll SQA and AME support for AsiaAll sourcing activities in Asia

Key message: Supplier base management decisions and Contract approvals will be in Asia.

Xerox Global Purchasing Team Co-Located with Suppliers

Acronym Footnote:PCE – Product Cost Engineering; SQA – Supplier Quality Engineering; AME – Advanced Manufacturing Engineering


Design Centers and APO Office LocationsXerox Global Purchasing Asian Procurement

Webster, NY

Shenzhen

Hong Kong

Singapore

Wilsonville,OR

Welwyn, UK

Korea

Japan

India

Malaysia

Design Centers

APO Offices


Global Purchasing,Xerox Office Group Organization

Administrative AssistantSue Leavenworth

Welwyn Garden City(Europe)

Dan Sullivan

Samsung(Webster)

John Mostyn

Cost, Operations, OEM Suppliers

(Wilsonville)

Electronics Procurement(Wilsonville)

Chris Campbell

Solid Ink Materials(Wilsonville)Eric Walters

APO Engagement Processes(Wilsonville)

Charley Burnett

Global Purchasing for XOG

Marty Annas

FX & Contracts(Wilsonville)

Kevin Hoffman

Administrative Assistant

Welwyn Garden City(Europe)

Strategic OEM

Cost, Operations, PCE (Wilsonville)

Electronics Procurement(Wilsonville)

Solid Ink NPI(Wilsonville)

Solid Ink Purchasing(Wilsonville)

Global Purchasing for Xerox Office Group

FX & Software(Wilsonville)

Other OEM Suppliers

Global Purchasing for PSG

Diane O’Connor

Judy Taylor

Acquired ProductsBob Zeman

Xerox Designed ProductsMike Ryan

Procurement Engineering Ernest Wilson

SuppliesTom Viola


Judy WilliamsGlobal Purchasing for

Production Systems Group

Contract Manufacturing & Spares

Acquired Products


Procurement Engineering Consumables


Global Purchasing,Production Systems Group Organization

Early Supplier Engagement for New Technologies

Procurement for prototype development hardware

Coordinate material procurement activities

Design change management with suppliers

Transition to RPP management.

Develop supplier tooling cost budget and controls

Tooling spend approval and PO issue

Best of Breed benchmarking

Participate in Global Commodity Strategy development

Key Activities for

Co located Teams-

Xerox Global Purchasing Team Co-Located with Business Groups



Rose Chng


David Partridge

Singapore OfficeMalaysia / Singapore Supplier Base

Choo Swee Hock

Japan OfficeJapan Supplier Base

Jerry Hatch

Flextronics Contract and Asia Procurement

GovernanceCrystal Martin

Hong Kong OfficeChina / Taiwan Supplier Base

Mike Krasnozon

India OfficeIndia Supplier Base

Dinesh Raghav

Korea OfficeKorean Supplier Base

Jae Nam Cho

Financial Planning and Analysis

Silvia Fung


Rose Chng


David Partridge


Choo Swee Hock


Jerry Hatch




Mike Krasnozon


Dinesh Raghav


Jae Nam Cho


Rose Chng


Rose Chng


David Partridge


Choo Swee Hock


Jerry Hatch




Mike Krasnozon


Dinesh Raghav


Jae Nam Cho


Choo Swee Hock


Jerry Hatch




Mike Krasnozon


Dinesh Raghav


Jae Nam Cho


Silvia Fung

Develop Global Commodity Strategy

Manage the Supplier Base

Contracting for Asian Suppliers

PCE Estimating for Asian Sourcing

Identify Benchmarks and Drive Productivity

All SQA and AME Support for Asia

All Sourcing Activities in Asia

Expediting and Problem solving

Xerox Asian Procurement Operations own Xerox Global Sourcing Strategy.

Key Message: Supplier base management decisions and Contract approvals will be in Asia.

Xerox Global Purchasing Team Co-Located with Suppliers

Key Activities for

Co located Teams-


HEADCOUNT LOCATION BASED ON:

•SPEND PROFILE

•SUPPLIER PROXIMITY

•INDIA (ASIAN EXPANSION)

•MALAYSIA NEW OFFICE

•SHANGHAI CLOSED END DECEMBER 2006

•KOREA POSITIONED TO SUPPORT SAMSUNG/FXK/SR

Singapore(32)

Hong Kong(25)

India(10)

China(12)

Malaysia(15)

Korea(9)

Japan(5)

TOTAL HEADCOUNT 108

Xerox Global Purchasing Asian Procurement OpsHeadcount Location Profile


Rose Chng


David Partridge


Choo Swee Hock


Jerry Hatch




Mike Krasnozon


Dinesh Raghav


Jae Nam Cho


Silvia Fung


Rose Chng


David Partridge


Choo Swee Hock


Jerry Hatch




Mike Krasnozon


Dinesh Raghav


Jae Nam Cho


Rose Chng


Rose Chng


David Partridge


Choo Swee Hock


Jerry Hatch




Mike Krasnozon


Dinesh Raghav


Jae Nam Cho


Choo Swee Hock


Jerry Hatch




Mike Krasnozon


Dinesh Raghav


Jae Nam Cho


Silvia Fung

Contract manufacturing and Asia Procurement

Governance


CM(34)

INF(13)

PCE(17)

SQAE(23) AME

(21)

• OFFICE EXPANSION AVAILABLE IN BOTH CHINA AND MALAYSIA OFFICES

Headcount Functional Profile 08 Plan

TOTAL HEADCOUNT 108

NEW EMPLOYEE DEMOGRAPHICS DEGREE LEVEL, AVERAGE AGE 32 YEARS, AVERAGE EXPERIENCE 9 YEARS, AVERAGE SALARY $30KPREVIOUS EXPERIENCECELESTICA, SANMINA SCI, DELPHI, FLEXTRONICS, TREND, PANASONIC,HP, RICOH, EPSON, FOXCONN, DELTA, JOHNSON MOTORS

Xerox Global Purchasing Asian Procurement OpsEmployee Functional Profile

Buyer AME SQAE PCE Inf / AdminMalaysia 4 2 5 3 1 15 15 0

Singapore 8 7 6 6 5 32 27 5Hong Kong 10 7 0 5 3 25 24 1

China 3 2 5 1 1 12 12 0Japan 3 0 1 0 1 5 4 1Korea 3 1 4 0 1 9 9 0India 3 2 2 2 1 10 10 0

Total 34 21 23 17 13 108 101 7

ExpatSite Total Local Function

CM


Description of Job Functions

Commercial

Buyers/Commodity Managers

Industry Research Negotiation Business Reviews

Commodity Strategy Contracting Productivity Management

Sourcing Supplier Management EOL Support

Sourcing Includes

Prototype/Preproduction parts Lead CSI Activities Procure Production Tooling

Support TTM Deliverables Enable Spares Procurement Negotiate Design Change Impacts

Procurement Engineering

SQA (Supplier Quality Assurance) PCE (Product Cost Estimating) AME (Advanced Mfg. Eng.)

MQA Supplier Surveys Cost Estimating Part Introduction/Qualification

Process Certification Target Setting Sourcing Support

Process Audits Competitive Analysis Drawing Translation/Interpretation

Performance Management Best of Breed Specification Study

Warranty Opportunity Identification Design for Manufacture

Acronym Footnote:EOL – End of Life; CSI – Continuous Supplier Involvement; TTM – Time to Market; MQA – Materials Quality Assurance


Xerox Procurement - Transformation Results

•Clock Speed Time to Market

•Better Supplier Relationships

•Access to Emerging Technology

•Increased Supplier productivity

•Reduced Procurement Operation Costs

•Transfer of procurement functions to suppliers’ time zone

What we planned to Achieve What we Actually Achieved




•Increased Supplier productivity ($2-3M in yr 1 )

•Reduced Procurement Operation Costs (>$3M/Yr)

•Transfer of procurement and other functions to suppliers’ time zone

•Increased Supply Chain Flexibility / Responsiveness

•Tax Optimization Opportunity

•More robust supervision of suppliers

•Business Growth Opportunity


Rochester, NY

Shenzhen

Malaysia

Hong Kong

Singapore

Korea

Japan

India

Xerox Global Purchasing Asian Procurement OpsXerox Global Purchasing Asian Procurement Ops

APO Legal Entities

XC Trading Singapore PTE. LTD. (Incorporated in Singapore, Aug 2007)

XC Trading (Shenzhen) Co., Ltd. (Incorporated in China, Plan 2Q08)

XC Trading Hong Kong Limited (Incorporated in Hong Kong, Oct 2007)

XC Trading Japan GK (Incorporated in Japan, Nov 2007)

XC Trading Korea (yuhan hoesa) (Incorporated in Korea, Feb 2008)

XC Trading Malaysia Sdn Bhd (Incorporated in Malaysia, Dec 2007)

No new Indian Entity was required


Xerox Procurement - Transformation Results




•Increased Supplier productivity

•Reduced Procurement Operation Costs

•Transfer of procurement functions to suppliers’ time zone

What we planned to Achieve What we Actually Achieved




•Increased Supplier productivity ($2-3M in yr 1 )

•Reduced Procurement Operation Costs (>$3M/Yr)

•Transfer of procurement and other functions to suppliers’ time zone

•Increased Supply Chain Flexibility / Responsiveness

•Tax Optimization Opportunity

•More robust supervision of suppliers

•Business Growth Opportunity


Procurement Outsourcing

Aberdeen Group in their 2006 Procurement Outsourcing Benchmarking Report noted:

• “Large enterprises led the way” 38% outsource now and 13% plan to within two years leaving those who don’t in the minority at 49%.

• Medium 24% now and 21% plan.• Small – 20% now and 16 plan.

Gartner drew a “Hype Cycle” and noted that “steady growth will make BPO non-controversial eventually”


Procurement Outsourcing; What do companies want out of it?

Aberdeen Noted drivers of outsourcing as:• Access to Improved pricing• Lower transactional processing costs and fewer burdens• Access to supplier intelligence.• Fewer Full time Procurement employees.

Gartner Noted Cost as the primary motive (through transaction and vendor leverage).

The Everest Institute noted that the impact of procurement outsourcing can be up to five times the benefit of other BPO’s…”a game changer”

Aberdeen also noted that while Enterprises are more apt to outsource management of indirect spend categories, the outsourcing of direct materials was also coming into play.


Procurement Outsourcing at Xerox unanticipated benefit of our Transformation

• Because of scale, scope and unique capability Xerox had elected not to outsource.

• Soon after establishing our infrastructure we received an unsolicited request from one of our own suppliers to help them source.

• We are now partnering with HCL Technologies Ltd to provide procurement outsourcing.

• HCL Technologies Ltd already have an established BPO service for transactional procurement, Xerox will provide sourcing expertise for HCL.


Key to Successful Transformation

• Planning

• Understand Scale, Scope and Capability

• Consider your relative strength and BPO opportunity

• Stake Holder Buy-in

• Calculated & documented Business Case

• Detailed Transition Planning

• Flawless execution, backed by teamwork and genuine commitment.

• Governance, Ethics and Training.

• Corporate Culture transplant.


• Business Ethics– 100% Trained using Xerox CD– 100% staff signed Xerox Code of Conduct

• Gift and Gratuity letter written and sent to suppliers (taken from Global Purchasing

Business Practices)

• Xerox Security– Contract Management – Distributed– Confidential Disclosure Agreement/Non-Disclosure Agreement – Training done– PC Security part of audit process

• Personal / Security and Safety– Safety training done– Safety audits performed at each office

• BRP (Business Resumption Plan) written and filed for each office.

• Financial & Budgetary Controls

– Travel

– Hiring

– Auditing

GovernanceXerox Global Purchasing Asian Procurement Ops


Key to Successful Transformation

Planning

Understand Scale, Scope and Capability

Consider your relative strength and BPO opportunity

Stake Holder Buy In

Calculated & documented Business case

Detailed Transition Planning

Flawless Execution backed by teamwork and genuine commitment.

Governance, Ethics and Training.

Corporate Culture transplant.


Hire International Students and Cycle through existing locations.Reduce Skills learning curveEstablish relationships between APO Staff and Value Chain

Partners Transplant Global Purchasing culture, tools and processesReduce our dependence on expatriates

Partnerships with local UniversitiesPortland State, Rochester, Buffalo and Syracuse. Purchasing modules added to MBA curriculum.

University of Rochester Example216 Full time MBA’s (720 apply 30% Acceptance)39% International StudentsAverage Student Age 27, work experience 4 ½ years

Highest Concentration of International:

1. India

2. China

3. South Korea

4. Japan

Highest Concentration of International:

1. India

2. China

3. South Korea

4. Japan

Xerox Global Purchasing Asian Procurement Ops International Talent Acquisition


If your are thinking about something similar..

Assess work that needs to be done and where it could best be accomplished.

Pay attention to your scale and expertise• Don’t just be in one offshore location, provide yourself options

and associated protection against future risk and economic changes.

• Don’t ignore the trends towards procurement outsourcing. • Decide, should you perform yourself or manage through a

provider?• Compare processes, skills, expertise and leverage.


Xerox Global Purchasing Asian Procurement Operations (APO)

We built a highly motivated, enthusiastic, skillful and empowered team in Asia.

They own our supplier strategy, and make key decisions locally. Same time Zone, no delays.

Happy Employees.

Better managed suppliers.

Better results.

Lower costs.

Improved velocity.

Better Supplier relationships

Identify best suppliers.

Manage supplier strategy.

Identify Benchmarks.

Drive productivity.

Drive improvements in quality.

Improve supply flexibility.

Negotiation support.

Technical support.

Contracting.

Qtrly Productivity Business Reviews.

Procurement Outsourcing alliance with HCL

APO Highlights APO Activities


Transition Planning – Making it Work• 10% Expatriates or Permanent Transfers• The right person to lead it.• The right skills balance in Expatriate team• Hire the best people• Buy in / strategy ownership at home.• Upfront and clear strategy communications.

Sustaining & Improving• Communicate, Communicate, Communicate• Sustain strong relationships between home teams and remote

locations.• Acquire talent and reduce dependency on expatriates.

Xerox Global Purchasing Asian Procurement Ops


• Business environment changed and we responded to it.

• Purchasing co-located with suppliers delivers benefits (same time zone, increased supplier productivity, lower purchasing operations cost).

• Senior / empowered staff located in the region.

• Rapid learning and continuity and synergy during restructure achieved through 7 expatriates support and 2 permanent transfers to Asia.

• On-going synergy across locations supported by student hiring strategy.

• Continuing to evaluate additional functions that could be more effectively managed when co-located with suppliers.

• Positioned Xerox as a provider in the Procurement outsourcing business in partnership with HCL Technologies

Xerox Global Purchasing Asian Procurement Ops Summary of Management Strategy


Thank you

Craig Laudadio

Procurement Solutions Manager

Xerox Corporation

585 265 5131

[email protected]

Organization Transformation 11-5-09

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