Procurement transformation Jan Elfving, Head of Nordic Procurement Unit.
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Transcript of Procurement transformation Jan Elfving, Head of Nordic Procurement Unit.
Procurement transformation
Jan Elfving, Head of Nordic Procurement Unit
NPU | Nordic Procurement Unit
Cross Nordic network organization dedicated to supporting the line
Win projects
Lower costs and risks
Source nationally and internationally
Cooperate with suppliers
Develop competence
Expertise and insight
Focus of NPUs efforts
Presence in NO, SE, FI, Purchasing office in Poland
220 employees in NPU
Nordic spend 40 BSEK
75% revenue spend external
43.000 suppliers
50% purchasing volume via NPU
900 Framework agreements
6500 project specific agreements
2
Skanska in short
− Founded 1887 in Sweden
− International business since 1897
− Quoted on the NASDAQ Stockholm
− 2014 revenues: €16 billion
− 58,000 employees
− Member of UN Global Compact
March 2015 Skanska Corporate Presentation
3
We are active in selected home markets
United States
Sweden
Finland
Norway
DenmarkUnited Kingdom
Poland
Slovakia
Hungary
Czech Republic
RomaniaRevenue by geographic areas
Nordic countries 43%Other European countries24%North America 33%
March 2015 Skanska Corporate Presentation
4
Our four business streams
United Nations, New York, USA Pilestredet Park, Oslo, Norway
City Green Court, Prague, Czech Republic Antofagasta Highway, Chile
Infrastructure Development (ID)
Residential Development (RD)Construction (C)
Commercial Property Development (CD)
5Meeting ABB SkanskaMay 7 2012
Our unique business model
Dividend of profit
Revenue clients
Construction Project Development
Free working capital
EBIT
Investmentopportunities
Internal contracts
ROCE
Return on equity
March 2015 Skanska Corporate Presentation
6
Qualitative targets – the five zeros vision
7
0 0 0 0 0Zero loss-making projects
Zero environmental incidents
Zero accidents
Zero ethical breaches
Zero defects
The 3 phases
− Rapid geographical expansion and entrance into new business areas
− Accelerated US presence through acquisitions
− Several acquisitions (incl. Kvaerner, Exbud, IPS, Selmer, Breitner, Elitfönster, Ericsson Services, Sade, Karl Steiner Holdings)
− Several exits made (Sandvik, Graninge, Drott, Scancem, Essmanngruppen)
Expansion1997-2002
Consolidation2003-2008
Profitable growth2009-2015
Construction Industry Features
1. Low productivity
2. Decentralized business
3. Project driven business and culture
4. Local rather than global competition
5. Easy entry, low margin & high risk business
6. The Game - to solve problems and avoid risks to materialize
ProductionWaiting
Moving
40%30%
30%
The 3 phases
− Rapid geographical expansion and entrance into new business areas
− Accelerated US presence through acquisitions
− Several acquisitions (incl. Kvaerner, Exbud, IPS, Selmer, Breitner, Elitfönster, Ericsson Services, Sade, Karl Steiner Holdings)
− Several exits made (Sandvik, Graninge, Drott, Scancem, Essmanngruppen)
− Focus on risk management, earnings stability
− Restructuring and consolidation
− Launch and implementation of the Home market strategy
− Increased capital efficiency through cash management and debt consolidation
− Exits of (Gammon, Skanska Services, Skanska Cementation, Danish contracting, Cementation India, Myresjö, Contiga, Mining Contracting in South Africa and Canada etc)
− Smaller acquisitions in CEE, Yeager (US), McNicholas (UK)
Expansion1997-2002
Consolidation2003-2008
Profitable growth2009-2015
From procurement view what would you have done in order to consolidate?
NPU | The Procurement transformation
12
Procurement 2004 - 2006•Spend and cost
•Transparency
•Overview prices
13
2.000
1.500
1.000
500
3.000
2.500
5.04
Sca
ffol
ding
& F
orm
wor
k
1.09
Roa
d &
Gro
und
Mat
eria
l
5.10
Pro
fess
iona
l Ser
vice
2.05
Ins
ulat
ion
& B
oard
1.10
Fou
ndat
ion
Wor
k
1.03
Fos
sil F
uels
4.01
Doo
rs,
Fitt
ings
& L
ocks
2.02
Rei
nfor
cem
ent
2.08
Roo
f C
over
ing
1.04
Hea
vy E
quip
men
t In
vest
men
t
4.04
Tile
s &
Bat
hroo
m
4.05
Kitc
hen
& W
hite
Goo
ds
5.02
Cra
nes
& A
eria
l Lift
s
5.12
Log
istic
con
trac
ts*
4.02
Win
dow
s
5.11
Ins
uran
ce
2.06
Mod
ules
& W
ood
1.07
Wat
er &
Sew
age
Civ
il M
ater
ial
5.08
Tra
vel &
Acc
omm
odat
ion
3.04
Ele
vato
r &
Esc
alat
or
1.02
Cem
ent
1.13
Fle
et M
anag
emen
t
0
1.12
Gro
und
Wor
k
1.11
Roa
d S
urfa
ces
5.09
Con
sulta
nts
3.01
Ele
ctric
al I
nsta
llatio
n
2.04
Con
cret
e P
refa
b
2.01
Ste
el
5.01
Lig
ht e
quip
men
t
3.03
Hea
ting,
Wat
er,
Sew
age
& F
ire
1.06
Loa
der
& E
xcav
ator
s S
ervi
ce
5.07
Fac
ilitie
s M
anag
emen
t
1.01
Bitu
men
2.03
Con
cret
e
1.05
Con
stru
ctio
n H
aula
ge
1.08
Bal
last
& C
rush
ed
5.03
Too
ls &
PP
E
3.02
Coo
ling
& V
entil
atio
n
2.07
Fac
ades
5.06
IT
& C
omm
unic
atio
n
4.03
Flo
orin
g &
Cei
ling
5.05
Was
te M
anag
emen
t
4.07
Bui
lder
s H
ardw
are
Who
lesa
lers
4.06
Pai
ntin
g &
Wal
l Fin
ishi
ng
80% of total spend
The top 10 categories represent some 48% of the spend and 22 categories represent 80% of the total spend
Source: Spend extracted from Oracle BI tool for 2010 including Skanska owned companies
Thorough review of current procurement strategy
Target & Strategy
Organization
Process &tools
Incentivies
People &Compentence
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Here is an opportunity...
Installationstarts
Installation
P.O.
Shipping list
Shipping
Manufacturing
Procurement
Detailing
Site logistics
Product development & Standardization
Supply chain installed
Strategy FinlandThree main flows:
1. Make-to-Stock• Focus on purchasing power and efficient logistics
2. Make-to-Order/Engineered-to-Order• Focus on cost-effective design solutions, efficient manufacturing & installation
3. International supply chains• Focus on AB purchasing power, shared resources, logistics
Procurement is not competitive bidding
Procurement is responsible for an efficient (cost & agile) supply chain
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Strategy Sweden
2004 2008Sverigeavtal
Regionala avtal
Projektspecifika Inköp
Project
Project
Project
Supplier
Supplier
Supplier
IBX
IBX:Call-off tool
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Did not get full leverage, every country “sub-optimized”
Felt bureaucratic and expensive
What would you have done?
SKANSKA AB PROCUREMENT
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
GSU HeadBert-Ove Johansson, SVP
Kerstin El Ouali, ControllerWiveca Karlin, Secretary
Portfolio CivilSvein Gunnberg, VP
Dino LeistenschneiderTomas Wolf
Allan Everum
Portfolio Indirect & JobsiteThomas Henriksson, VP
Ester BoogaardMita Sawjani-Palm
Portfolio BuildingOla Billing, VP
Kim GrandellSara Thiele
Timo KuoppolaMikko Puttonen
Skanska AB Procurement Organization
What did we do 2006-2008
• Identified Sourcing Opportunity areas
• Launched Success Stories program
• Built the “opportunity platform”
• Create Sense of Urgency with SET
• Monthly Global Purchasing Board
• Developed Spend Management System (SMSS)
• Defined Governance & KPI’s
• Competence Mapping
• Global Purchasing Process
• Training Program (Skanska Procurement Academy – SPA)
• BU Management Workshops
What happened end of 2008-2009?
• The financial crisis struck hard with major lay offs
• The CPO was fired and the Global Purchasing initiative was stopped
• A Nordic Procurement Unit (NPU) was established headed by a new Senior Vice President
• None of the members of Global Purchasing were offered key positions in NPU…
NPU | The Procurement Transformation
25
Procurement 2004 - 2006•Spend and cost
•Transparency
•Overview prices
Procurement 2008 - 2009•Common sourcing process
•Frame work agreements
•Cross BU cooperation
Sourcing process and common training
Plan&
Mobilize
Define Sourcing/
RFx-strategy
Carry outRFx
strategyEvaluate Negotiate
Contract signing/
Implement.
Toll-gate 1
Toll-gate 2
Toll-gate 3
Toll-gate 4
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
1. Structural Materials
1. 2 - Concrete
1. 3 - Structures
1. 4 - Construction steel
1. 1 - Steel
1. 5 - Trusses
ment materials and equipment
Steel materials and equipment
Prefab Concrete element
Steel element
Wood element
Steel profiles
Castings
Forgings
Surface treatment
Por
tfol
io
Ca
tego
ry
Gro
upS
ub-C
ate
go
ry No Sub-Category No Sub-Category
Send
NPU – Nordic Procurement Unit
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
SET – Senior Executive TeamSET – Senior Executive Team
Skanska SwedenSkanska Sweden
Nordic BUPsNordic BUPs
IT Nordic IT Nordic
NPU is part of One Skanska
28
Nordic Procurement Unit
Nordic Procurement UnitSkanska FinlandSkanska Finland
Skanska NorwaySkanska Norway
Commercial Development NordicCommercial Development Nordic
Skanska 2015 aspirations
2015 Aspirations
− Consecutive track record of industry leading shareholder value creation: >20% annual TRS
− Global footprint with substantial part of portfolio in high growth markets
− Best-in-class profitability in all priority segments
− World class in People Development
− Leading in Safety, Risk Management, Green and Ethics
− Rapid geographical expansion and entrance into new business areas
− Accelerated US presence through acquisitions
− Several acquisitions (incl. Kvaerner, Exbud, IPS, Selmer, Breitner, Elitfönster, Ericsson Services, Sade, Karl Steiner Holdings)
− Several exits made (Sandvik, Graninge, Drott, Scancem, Essmanngruppen)
− Focus on risk management, earnings stability
− Restructuring and consolidation
− Launch and implementation of the Home market strategy
− Increased capital efficiency through cash management and debt consolidation
− Exits of (Gammon, Skanska Services, Skanska Cementation, Danish contracting, Cementation India, Myresjö, Contiga, Mining Contracting in South Africa and Canada etc)
− Smaller acquisitions in CEE, Yeager (US), McNicholas (UK)
− Establish global leadership in 1-2 key growth slivers
− Enter 1-2 high growth geographies
− Establish world class risk and performance management systems
− Business model adapted to global growth units (new units) and local entrepreneurial outperformance units
Expansion1997-2002
Consolidation2003-2008
Profitable growth2009-2015
What would you have done now?
NPU | Procurement transformation
31
Procurement 2004 - 2006•Spend and cost
•Transparency
•Overview prices
Procurement 2008 - 2009•Common sourcing process
•Frame work agreements
•Cross BU cooperation
Procurement 2012 - 2014•Supplier performance
•Supplier management
•New matrix organization
NPU | Roles of Organization
32
Suppliers
Projects
Region
BU
Nordic
•Site teams•Project purchasers
•Local mgt teams•Purchasers
•BU Head of procurement•Category teams and analysts•BU steering groups
•Nordic Sourcing•Supplier Mgt•Competence Mgt•Sourcing Board•NBUP
• Targets and demands• Common way of working• Sourcing strategies
• Requirements and needs• Purchasing plans
• Call-offs• Performance evaluation• Project purchases• Feedback
Supplier Management - Preferred supplier program
On-site performance evaluation
– Assess actual supplier project performance in
a fact based manner
Pre-qualification – Secure Skanska basic
requirements before negotiations of entire
supply base
Supplier development -Segment the supplier
base and support prioritized suppliers to
develop
1 2
3
Handle risk
Improve performance
Reduce cost
Pre-qualification 2015/5
In 2012 the # or pre-q suppliers were 959 and today +5 000
…Supplier clubs
Supplier development| Kick off Skanska supplier teams- new ground!
What do you think we will gain & what challenges do we have a head?
NPU | The journey of procurement
38
220 employeesworking across 3 BUsin four countries..
PROGRESS
•International procurement
•Supplier Relationship management
•Global Expert group
Procurement 2004 - 2006•Spend and cost
•Transparency
•Overview prices
Procurement 2008 - 2009•Common sourcing process
•Frame work agreements
•Cross BU cooperation
Procurement 2012 - 2014•Supplier performance
•Supplier management
•New matrix organization
Tested puzzle pieces for success
Procurement Strategy
Structure & Organization
Alignment
Staff & SkillsSourcing
Supplier Relationship Management
Systems
(Spend data)
Procurement Performance
Conditions & Enablers Processes Results
Governance Risk Management and control
Category Management
Why & How
41
BU specific priorities
Sweden1.Governance , Risk mgmt and control2.Supplier relationship management3.Organisational alignment
Norway1.Governance, Risk mgmt and control2.Supplier relationship management
Finland1.Governance , Risk mgmt and control2.Supplier relationship management3.Supply / Category management
Poland1.Organisational alignment2.Governance , Risk mgmt and control3.Supply / Category management
USB1.Systems (spend data)2.Procurement strategy3.Supply Relationship management4.Organisational alignment
USC1.Systems (spend data)2.Procurement strategy3.Category management4.Organisational alignment
Czech1.Organisational alignment2.Governance , Risk mgmt and control3.Category management
UK1. Supplier relationship management2. Category management
This is Skanska NPU…
42
…Thank you