1Presented by: Sheila Finn, CPP, FPMAC PMMS Consulting Group (North America) Inc.

Creating An Effective Organization

And A Winning Team

At The University of Ottawa

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Abder’s Dream

How can we design a program thatwill put the procurement process

at the heart of the University of Ottawaso that we can maximize its impact on

the University’s performance?

What does “best in class” look like?

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Where Do We Start?

• What should a “best in class” procurement process and function look like?

• What steps need to be taken to become “best in class”?

• What is the health, effectiveness and contribution of procurement to our overall performance of the University?

• How do we know whether our people have the right skill level for today and in the future?

• How can progress towards our goals be measured?

• How do you build sustainable competitive advantage through strategic procurement?

We need to know:

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Why Measure Purchasing Performance?

To demonstrate your contribution to the organization.

....the added value of Purchasing

To monitor progress over time.

To identify areas for improvement and shape “going-forward” roadmap.

To help establish future goals and targets.

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How Do You Measure ‘Performance’?

The 3 ways of assessing purchasing performance:

1. Inputs - Manpower, transaction levels, costs (CAPS)

2. Outputs - Prices, quality, service levels

3. Process - Comparing how purchasing is undertaken

versus best practice

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How Do You Measure ‘Performance’?

1. Inputs

Relatively easy to do but …..

Tactical information

Focuses on operating cost…a very small proportion of total purchasing spend

Limited - emphasis on cost and efficiency not contribution

Often sponsored by those with little interest or insight into the strategic role of purchasing

Purchasing seen as essentially a tactical /administrative activity with little or no real business contribution

Headcount per $ million of spend Contracts handled per buyer per year Cost of Function as % of spend Time taken to satisfy a requisition

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How Do You Measure ‘Performance’?

2. Outputs

Does not address: “How good are we?” and “How can we improve?”

“Rear view mirror”

Very limited in response to real business needs

Dilutes effort through unproductive time in justifying ‘our’ performance

Does not help identify opportunities

Savings/Cost Avoidance Quality Supplier service levels Supply base reduction/rationalization

Weakness:

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The Balanced Business Scorecard

1. Contribution to the organization

2. Key Supplier Management:

3. Supply Base Rationalization

4. Low Value Purchasing

5. Internal Client and/or Customer Satisfaction

Consistency of performanceCustomer service levelsResponsiveness

Balanced Scorecard’ approach emphasizes Procurement’s wider role:

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How Do You Measure ‘Performance’?

3: Process and Practice

“If best purchasing practice is being adopted then the best possible results will be achieved”

• “World Class” Best Practice is defined and your performance measured - Benchmarked - against it

• Underlying assumption is……….

Emphasis on “How We Do Things”:

• Identifies opportunities - provides a forward road map

Purchasing Viewed As a Strategic Process

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PMMS Benchmarking Methodology

PMMS has realized through experience and extensive researchthat:

• no single company is “best in class” in every area of purchasing

• our benchmarking compares purchasing performance with world-wide “best practice”

• it is based upon our “Purchasing Excellence Model” and our “Best Practice Profile” of 120+ global and medium to large size organizations.

PMMS focus is “Process & Practice”

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PMMS Purchasing Excellence Model

2. Purchasing

and AuditFramework

4. Supplier

RelationshipManagement

3.Organization

& Internal Relationships

1. Contribution&

Influence

Enabling FoundationEnabling Foundation

Integrated Change ManagementIntegrated Change Management

6. Staff andTraining

5.

Use of Advanced Technology

Strategic PurchasingStrategic Purchasing

7. Planning

9.Results

8.Action

10. Permanence

of Change

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1. Contribution and Influence

• Position and focus of purchasing in the organization

• Extent of involvement in corporate strategy

• Influence over all areas of expenditure

• Extent of early involvement in purchasing cycle

• Clarity and type of authorities

• Extent and balance of performance measurement

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2. Purchasing and Audit Framework

• Quality of vision, mission and role statements

• Quality and coverage of policies and principles

• Position on commercial ethics

• Quality and coverage of procedural guidelines

• Quality and coverage of own terms and conditions

• Low value transaction processes

• Supply base – records and management

• Early recognition of commercial risk

• Audit standards, coverage and responses

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3. Organization and Internal Relationship

•  Purchasing organizational relevance with the business

• The attitude of Senior Administration towards procurement

• Internal customer relationships

• Quality of networking within the University

• Extent of effective cross functional team-work

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4. Supplier Relationship Management

• Understanding and exploitation of supplier relationship options.

• Quality and application of supplier development process.

• Understanding of supplier capabilities and business strategies.

• Quality and effectiveness of supplier performance measurement process.

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5. Use of Advanced Technology

• Effectiveness and utilization of systems

• Quality of e-procurement strategy and effectiveness of implementation

• Innovative exploitation of core software tools

• Web exploitation for market and supplier information

• Exploitation of Intranet technologies

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6. Staff and Training

• Calibre of staff their experience and credentials.

• Career development and succession planning processes.

• People mix.

• Influencing capability.

• Quality and extent of skills development programs.

• Effectiveness and applicability of performance measurements.

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Strategic Purchasing Elements 7 to 10 (Planning, Action, Results and Permanence of Change)

• Quality of strategy development process.

• Understanding and application of core tools and techniques.

• Quality and extent of market intelligence gathering.

• Solidity and ambition of sourcing strategies.

• Breadth of sourcing strategy implementation.

• Extent of key stakeholder strategy buy-in.

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Sample Supply Positioning Model at a University

R

I

S

K

$$$

STRATEGIC SECURITYProprietary Software

Radio Active compounds

STRATEGIC CRITICALNatural Gas

Software License

Insurance

Food Services

TACTICAL ACQUISTIONCourier Services

Compress. Gas

Messenger Serv.

TACTICAL PROFITScientific Sup. Custodial Sup. Computers Printing Furniture Off. Equipment/Telecom Machines Travel Advertising Off. Sup. Audio Visual. Equip Scientific Eq.

Market Difficulty

ComplexityOf Switching

Business Impact

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Interim Review

Final Review

Pre-planning

StructuredInterviews

‘Diagonal slice’ Procurement staff Key internal clients Selected suppliers

Data collection& analysis

‘Snapshot’ of today’sprocurement operation

Performance benchmarked usingPMMS Best Practices Profile

Gap Analysis

Recommendations &Action Plans

Client Report

Metrics Processes Relationships

How Benchmarking Works

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Recommendations & Next Steps for University of Ottawa

Organization Structure- realign the resources (skills)- additional resources- educational program- enhance the communication plan

Strategic Direction- refine the role of Materials Management (clearly defines roles, responsibilities and accountabilities)

Training- implement training - J.I.T. and practical

Cost Reduction Opportunities- launched 3 initiatives using multi-functional teams

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Abder’s Dream….. Is on the road to becoming a reality

• Materials Management has visibility and leadership support.

• Key stakeholders are now getting involved in x-functional team initiatives.

• New procurement processes are being integrated throughout the University.

• Applied learning – tools and techniques are being applied into real life situations.

• New performance metrics will be linked to success of the University of Ottawa.

…. or is it a nightmare?

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The Journey To World Class

ENABLERS

LEADERSHIPSTRATEGY &

POLICYPEOPLE

MANAGEMENTRESOURCES PROCESSES

RESULTS

CUSTOMERSATISFACTION

PEOPLESATISFACTION

IMPACT ONSOCIETY

BUSINESSRESULTS

0 - 200 201 - 375 376 - 525 526 - 675 676 - 800 801 - 900 901 - 1000

Ignoring Exploring Installing Embedding Driving Integrating Sustaining

IMPLEMENTING DEVELOPING WORLD CLASS

Accelerated

Improvement

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What’s the Prize for the University of Ottawa?

Improved effectiveness of the procurement processes.

Improved supplier performances.

Highly skilled procurement personnel to maximize the opportunities for the University.

Finding new ways to improve efficiencies and decrease costs at the University.