Securing the Mandate to Achieve Cost Leadership and Build a … · 2017-07-10 · Steve Coleman •...
Transcript of Securing the Mandate to Achieve Cost Leadership and Build a … · 2017-07-10 · Steve Coleman •...
PG&E Confidential 1
October 21, 2009
Securing the Mandate to Achieve Cost Leadership and Build a Leading Procurement Organization
PG&E Confidential 2
Introductions
Name Company Experience
Steve Coleman
• Director of T&D and Corporate Services Sourcing • Manages $2.8B+ spend, including utility engineering and construction services,
gas and electric distribution and transmission materials, IT/telecom goods and services, and professional services
• Previous director-level positions in materials distribution, strategic sourcing, and corporate real estate
• Program management roles in strategic sourcing, supply chain transformation, material delivery optimization, eProcurement, and Y2K contingency planning
Richard Sheinfeld
• Leads PRTM’s Strategic Sourcing practice • Over 20 years of experience working with clients to execute major cost reduction
initiatives with a focus on procurement • Industry experience: energy, aerospace, automotive, high-tech, healthcare, and
financial service clients • Frequent presenter at SIG and SCNA conferences
Conrad Snover
• Co-leads ProcureAbility’s Utilities practice • 13+ years of experience in supply chain consulting • Industry experience: utilities, oil and gas, high tech, banking, and insurance • Focus areas: supply chain strategy design, category management, strategic
sourcing, supplier development, and organizational sustainability • BBA: finance and information systems
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PG&E Is a Gas and Electric Utility That Services Clients in Northern and Central California
Key facts • Incorporated in California in 1905
• One of the largest combination electric and natural gas utilities in the United States
• 70,000 square mile service area in Northern and Central California
• 5.1 million electric customers, 4.2 million gas customers
• 20,000 employees
• Over 120,000 circuit miles of distribution lines and 18,000 miles of transmission lines
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PRTM’s Competency Is Operational Strategy
PRTM is the premier operational strategy consulting firm • Marketplace realities have created new operational requirements
• Without the right operational strategy, even strong business strategies fail
We focus on the critical link between business strategy and execution • Operational strategy structures your business operations and economics for competitive
advantage; execution is key to driving financial results
• We not only work with you to formulate a winning operational strategy…we work side by side with you to deliver the financial results
Business Strategy - - - - -
Where and why you’ll win
Operational Strategy - - - - -
How you’ll win
Operations - - - - -
Executing to win
PRTM Focus Area
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ProcureAbility Is Entirely Focused on Supply Chain
ProcureAbility includes: • ProcureAbility Consulting - Supply chain management consulting
- Strategic sourcing, procurement transformation, logistics optimization
• ProcureAbility Intelligence - Market intelligence for sourcing professionals
- Web-based subscription service and custom research
• ProcureAbility Recruiting and Staffing - Supply chain recruiting and staffing
• ProcureAbility Sourcing Services - On-demand sourcing execution services
“Helping Our Clients Transform Their Supply Chains Since 1996”
The ProcureAbility is a Certified Woman-Owned Business by WBENC and the CPUC
Formed in 1996, Our Only Focus Is Strategic Supply Chain Management
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HOW WE KNEW THE TIMING WAS RIGHT
Background
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PG&E Spends Almost $4B a Year on External Goods and Services
PG&E $3.8B
IT/ Telecommunications
• IT services • Software • IT hardware • Telecom equipment • Telecom services
Transportation Management
• Vehicles and equipment • Fuel • Rentals • Freight • Parts
Environmental Health and Safety
• Vegetation management • Environmental testing
Corporate
• CEE and advertising • Benefits • HR/staffing services • Professional services • Facilities
ED Materials
• T&D electrical equipment • Maintenance repair and ops • Meters • Wire and cable • Pipe valve fittings • Other materials
Generation
• Newgen • Nuclear • Hydro
• Project services • Construction services • Engineering and
technical services • Backfill and patch paving
ED Services
Estimated Annual Spend
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In 2008, There Were Four Major Factors Putting Tremendous Stress on the Sourcing Organization
Budget pressure across the enterprise
LOB request for sourcing to be more strategic Transmission
reliability
The impact was above what the sourcing organization could support with existing infrastructure
Hydro-generation re-licensing
Volatile market
conditions
Increased demand for service and support from across the company
Organization capabilities and resources
Processes, e.g., strategic sourcing
Transactional technology and policy support
Market Pressures That Catalyzed Change
1 2 3 4
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BUILDING A COMPELLING BUSINESS CASE
How We Secured Trust and Funding
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The Stakes Are High
The leadership team is faced with non-stop problems
• Setting company direction and expectation of stakeholders
• Managing state and regulatory agency expectations
• Planning and executing operational growth
Stakes are high professionally and personally
• Most executives have significant compensation tied to their performance
• There is tremendous turnover in the executive level
Typical decisions the leadership team will make from your insights include:
• Funding your project
• Changes to core business operations
• Capital investment decisions
• Organizational alignment decisions
• Budget decreases and or increases
• Positions with state and regulatory agencies
• Acquisitions
They need to be able to understand, measure, and trust you because you are closer to the details than they are…
As you know, the stakes are high for the leadership team…
They are expecting to use your insights to execute key policy
decisions
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Practical Insights
Adherence to a few core, practical insights will help secure leadership support for your initiative
• “Make them an offer they can’t refuse” financially
• Propose a comprehensive program focused on people, process, and technology
• Focus on long-term improvements and the sustainability of new concepts
• Execute the fundamentals well
• Build trust with the leadership that they have firm control over their investment
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Funding for the Program Came from the Business Lines
PG&E, with PRTM/ProcureAbility support, designed and implemented a staged, enterprise-wide program to build a high-performing and sustainable sourcing organization
Business lines (via a corporate efficiency fund) provided the funding • Funding covers consulting fees, external hires, training, and other investments
• Funding levels taper off over time as internal knowledge and skills are developed
• Savings are clearly documented and signed off by LOB executives and finance
Assessment Wave I Wave II Wave III Timing May 08–Sept 08 Oct 08–Mar 09 Apr 09–Sept 09 Oct 09–Mar 10
Scope
• Business unit (BU) engagement/buy-in
• Diversity potential • Savings outlook • Business case to
capture benefits
• Governance • Innovative sourcing
strategies • Process design
• Staffing • Skills development • Supplier management • Category management
• Sustainable as a leading utility
Consulting Dependence • 90% • 75% • 50% • 0%
Cost • $ • $$$$ • $$$$ • —
PG&E Confidential 13
The Team Actively Engaged Leaders across the Entire Enterprise
Corporate Relations (1)
Terry Stelling
Corporate Communications (1)
Renee Parnell
Customer Care (16)
Jan Berman Chris Bober Helen Burt Debra Ervin Ila Homsher Felecia Lokey Lynn Morrison Jenna Olsen Jonathan Seager Shelly Sharp Jodi Stablein Andrew Tang
Al Torres Wendy Trotter Vicki Watts Brad Whitcomb
Diversity (1)
Bill Harper
Energy Delivery (19)
Tara Agid
Fernando Aquilar Bill Arndt Chris Baker Jane Evans Tom French Gayle Hamilton Lorene Harden Bill Hayes
Greg Kiraly PJ Martinez John Meade Bruce Mosly
Terry Morford Greg Starnes Morgan Swisher Ronald Whyte Geisha Williams
Bob Woerner
Engineering and Operations (13)
Kevin Dasso
Joel Dixon David Gilbert Bob Howard Mark Johnson Marie Jordan J.C. Mathieson Peter Ng Charles Poston Daran Santi Ken Wells
Mark Wilhelm Donald Willoughby
Finance (21)
Barbara Barcon Michael Burger
Gabe Caorsi Joe Dioletto Ana Duffy
Jay Dore Trung Ha Dean Heatherington Romi Kaur
Tanya Moniz-Witten Joe Noya Joe Osborn
Kathleen Patten Betty Phillips
Matthew Putnam David Ramos Karen Roth Lupe Roush Sarah Seibert George Vaughn Chris Winter
General Counsel (5)
Kathleen Brown Elizabeth Collier Sandy Hartman Peter Ouborg Nancy Stamm
Human Resources (9)
Mary King Kevin Leach Steve Leder India McClellan Chris Pickett Robin Rasmussen Tim Silvera John Simon Robin Wythe
Investor Relations (1)
Gabriel Togneri
ISTS (22)
Brian Abrahamson Diane Ayers Jeff Bennett Jim Black Ralph Cable Ken Connally Robert Dieterich Ronald Dunford Bob Glynn Silvio Gordillo Joe Hearney Barbara Horanic Pat Lawicki David Liang Brandon Maio Chris Maturo Eugene Park Pete Pence Valerie Tigert Toby Tyler Stephen Whelan Malia Wolf
Nuclear (3)
John Conway Cary Harbor Bob Oldenkamp
Power Generation (16)
Aaron Adams Tom Allen Steven Anderson Jim Barrett Steve Bennett David Bergmann Steve Broach Stacy Evans Chris Herrala Carol Lathrop-Riboli Steve Royall Randy Livingston
John Maring
Rob Potter Joe Sutton
Alvin Thoma
Shared Services (6)
Des Bell Dave Meisel Chris Piacentini Mark Rozario Gerry Young Corey Wong
Sourcing and Supply Chain (31)
John Buckley Perry Bumanlag Mario Cassettari Steve Coleman Kathleen Elliott Joe Germanetti Roy Green Paul Hann Gary Kaufmann Elizabeth Krieg Mary Kruchten Yonnie Leung Michael Lohr Glenn Lopez Art Madson Manny Meister Mike Meko Judith Olney Alan Porter Rudy Promani Jocelyn Quintana Del Ritchie Michael Ritter Rick Saverien Ronald Schoenfeld John Skerry Christopher Snyder James Sprecher Charles Twamugabo Victor Villar Susan Wells
Suppliers (8)
Don Mundy, Black & Veatch Nancy Hendrickson, CH2M Hill Richard Weeks, Core Staff Howard Bowles, Davey Tree Dave Locke, GE Carol Lee, IBM Patrick Nash, Okonite Roger Snow, Richard Heath
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To Ensure Alignment with LOBs, Key Principles Were Locked Down Early
Key principles for benefits realization were developed jointly with finance to guide category teams and manage savings consistently
Planning for Benefits Capture
• Savings resulting from strategic sourcing will support LOBs’ efforts to achieve plan targets and will not be deducted from operating plan targets
Benefits Allocation • Business owners will determine how to take advantage of direct spend cost reductions
• Charge-back organizations will work with affected LOBs to determine impact of savings on charge-backs
Benefits Tracking and Monitoring
• Sourcing and lines of business must jointly agree on savings results
Program Principles
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Path Forward—Delivering Sourcing Results Wave I (Oct 08–Mar 09) Wave II (Apr 09–Sept 09) Wave III (Oct 09–Mar 10)
IT and Telecom
• IT services: computer programming and consulting
• IT services: ongoing projects • Telecom equipment • Commercial printers, copiers,
MFDs • Servers and storage • PCs and peripherals • Software: strategic vendors
• Software: other • Telecom services
Corporate Services,
Transportation, and EHS
• Advertising, media, direct mail • Staff augmentation • Management consulting • LIEE (energy partners) • P- and c-card • Office supplies • Travel agency fees
• Facilities • Transportation vehicle and
equipment • Transportation rental • Print
• Legal • Transportation parts • Environmental site remediation
services • Accounting and audit • Licensing and permitting
services
T&D and EHS
• T&D electrical equipment • T&D services: EPC current
awards
• MRO • T&D services: EPC
incremental awards
• Vegetation management • Construction services • Engineering and tech services
• Pipes, valves, and fittings • Wire and cable • Backfill and patch paving • Helicopter fixed services
Generation • Hydro: program management • Nuclear engineering, design
• Nuclear labor brokerage
Sourcing Commitment to
Efficiency Fund Leadership Team
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Path Forward—Embedding Sustainability
Sourcing Implement Strategic Sourcing in Three Waves to Reduce Spend
Organization Design
Organization Model Design and transition to an appropriately staffed, center-led organization structure
LOB Engagement Model
Define a line of business engagement model between sourcing and each LOB
Skills and Capabilities
Increase sourcing and procurement skills within client and the sourcing organization
Process and Tool Improvement
Category Management Improve category management and sourcing capabilities
Supplier Relationships Implement supplier tiers and the corresponding relationship model
Procurement Process Streamline the requisition to pay process, tools, and support
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Path Forward—Formal Process for All Categories
Our sustainability plan included the implementation of forward-looking category plans, which defined the category roadmap for 2010–2012 A category plan has four sections:
1. Internal analysis
2. External assessment
3. Goals and strategies
4. Initiatives to implement strategies
A category plan requires collaboration with the business unit and finance
Category plans became the basis for sourcing’s annual operating plan PG&E Confidential 6
Key Suppliers:
Plan Deliverable: 1. Executive SummaryCategory Profile/Scope:Generation Supply Chain supports the sourcing of key materials and services to our Hydro facilities located within 48 counties of northern and central California. Key areas of focus are in professional engineering, O&M and construction services catering to Hydro Power Generation service and project-based nature. Internal:Hydro Power Generation is a vital component of the Generation portfolio. PG&E has implemented program management to address the increase in capital and expense projects, equipment asset management and FERC relicensing.External:Professional engineering service suppliers are at or near resource capacity, their ability to obtain capital is now more challenging due to the downturn of the financial market.Risk:•CPUC approval for project-related rate filings could be delayed.•Lack of resources and capital to support safe maintenance operations.•Inability to keep up with increase in capital and expense programs.
LOB Business Priorities:
• Cost management - avoid engineering and project cost/schedule overruns.
• Permitting - rely on strong EPC Partners to adhere to strict FERC guidelines.
• Planning - meet all Helms pumped storage facility emergent work demands.
• Streamline powerhouse outage schedules.
• Focus on Strategic Alliance Partners with proven reliability, technology and project management experience.
• Address all capital and expense projects with defined timelines.
Key Strategies:•Establish uniform process for LOB involvement in sourcing.•Target diverse supplier outreach with Strategic Alliance Partners.•Focus on integration with Parsons for program management.•Streamline project management workshop initiative.•Strengthen partnerships with engineering alliance partners.
Key Initiatives:•Implement Parsons program management roadmap.•Supplier collaboration and performance management.•LOB engagement projects:
•Category plan and sourcing process coordination •Engage and understand Hydro Power Generation business process and requirements.•Market intelligence coordination.
The Executive Summary is the first Category Plan deliverable but is completed last
Top 3 Suppliers in 2009
Vendor A
Vendor B
Vendor C
All Others
PG&E Confidential 18
WHAT WE ARE COMMUNICATING BACK TO THE EFFICIENCY FUND
Our Commitment to Results
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Results to Date—Savings and Diversity
Sourcing will exceed its savings commitment to the efficiency fund by over $47M and deliver $192M in diversity spend*
Sourcing Initiative Annualized Savings Results
Sourcing Initiative Diversity Results
$79M
Total Wave II
$113M
Wave I
$40M$40M
$65M$62M
+63% +55%
Wave II Wave I
Actual Target
* Wave II results are not finalized yet
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Organization Training Skills Transfer
Results to Date—Establishing a Leading Organization
Nearly 25 new hires were added and extensive training was provided to strengthen PG&E’s overall sourcing capabilities
• 23 new positions approved • Hiring included two directors
and 12 category leads • Recruited senior external
resources to build capabilities and bring new perspectives into the organization
• Sourcing “boot camps” attended by all category team members
• Boot camp training delivered by sourcing professionals
• Customized training (e.g., analytics) delivered by consultants
• Transition from consultant-led to PG&E-led in Wave II
• Focus on analysis and communication skills
• PG&E responsible for leading analysis and developing executive presentations
PG&E Confidential 21
OUR PROGRAM APPROACH TO ENSURE WE ACHIEVED THE RESULTS
Execution
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Q1 2008 Q2 2008 Q3 2008
Develop Wave Plan
Conduct Strategic Sourcing
Assessment
Strategic Sourcing—
Wave I
Sustainability
The Program Roadmap Balanced Sustainability with Sourcing and Diversity Goals
Transition and Ramp up Suppliers
Sign Contracts and Plan Implementation
Conduct Negotiations and Select Suppliers
Execute Sourcing Events and Define Negotiation Strategies
Develop Sourcing
Strategies
Assess Marketplace
Create Category Profiles Ramp
up Wave I
Roll out Tools to Larger Organization Implement Strategic Sourcing Process
Develop BIC Tools Assess Tools
Procurement Excellent
Assessment Profile Spend
5–6 Weeks
6–9 Months
Roll out Model to Larger Organization Pilot LOB Engagement Model Develop
LOB Engagement Model
Assess LOB Needs
Upgrade Skills (Training, Coaching, Select External Hiring, etc.) Create Plan to Bridge the Gap
Assess Skill Gaps
Execute and Continuously Improve Program Implement Program
Develop Communication
Program Analyze
Audiences
Strengthen Sourcing
Organization
Deploy an Effective
Communication Program
Partner with LOB
PG&E Confidential 23
All Categories Went through a Structured Sourcing Process
Each spend category went through a gated sourcing process that consisted of four milestones and achieved business case sign-offs from officers in sourcing, LOBs, and finance
Governance milestones
Kickoff
• Identify potential suppliers • Define sourcing strategy
and levers
• Shortlist suppliers for negotiations
• Negotiation strategy defined
• Negotiations completed • Award recommendation
developed • Savings defined
• Annualized savings approved from finance
• Implementation plan defined
2
Sourcing Strategy
Incumbent Negotiations
( Vendors A and B)
1
Issue RFP to Select
Manufacturers(e.g. Vendors C, D
and E)
2
Issue RFP To Distributors
(e.g. Vendors F and G)
3
Manufacturers in ScopeSourcing Strategy
Manufacturers withIncumbent Relationships
Manufacturers with NoIncumbent Relationships
Manufacturers withIncumbent Relationships
Manufacturers with NoIncumbent Relationships
• May or may not supply PG&E currently
• Primary focus on LCC manufacturers
• Relationships with multiple distributors in region
All manufacturers Serving PG&E
(Pursue if #1 and #2 do not meet objectives)
Products in Scope
EstimatedSpend 2010 Comments
• All products $xx.xM
• PG&E requires value-added services for most products
• PG&E largely satisfied with services (pipe yard, VMI, forecasting, etc.)
• Large and smalldiameter pipe
• Standard pipe fittings
$x.xM
• Vendor D is in YYY, CA; lowers logistics costs ~5%
• Quantify opportunities to work directly with manufacturers - balance savings potential with implementation costs
• Use information to support incumbent negotiations
$xx.xM
• Standard pipe fittings $ xx.xM
• Pursue only if sourcing strategies #1 and #2 do not meet objectives
• Consider alternative distributors for defined portion of spend
3
Evaluation of supplier capabilities shortlisted five suppliers however, Vendors A and B will be considered for negotiations as they are the only 2 suppliers bidding for Bus bar• Only Vendor C committed to diversity contribution, discuss with other suppliers during negotiations
9
Vendor W
22
20
2
Vendor A
25
23
2
Vendor Q
26
22
4
Vendor L
27
25
3
Vendor E
30
28
2
Vendor P
30
27
3
Vendor O
31
28
3
Vendor M
33
31
2
Vendor X
36
32
4
Vendor T
37
34
3
Vendor G
38
35
3
Vendor B
40
38
1 2
Vendor C
52
40
3
CapabilityDiversityOther
RFP Evaluation Results
Other includes Exceptions and RFP Completeness
CUT OFF
• Cannot meet all service requirements• Limited value added services• No locations in PG&E territory
Poin
ts (M
ax: 7
0)
Shortlisted Supplier
4
Wire & Cable Award Scenarios Overview
The team has identified three potential award scenarios based on two rounds of negotiations with Wire and Cable suppliers:
Option 1 Option 2
Estimated Savings $5.1M $5.6M
Diversity $22.4M $20.2M
Suppliers
• Vendor A• Vendor B• Vendor C• Vendor D
• Vendor A• Vendor C• Vendor D• Vendor E• Vendor F• Vendor G
(Recommended) (Recommended)
$22.4$20.2
Option1 Option2
Millions
$5.1 $5.6
Option 1 Option 2
Mill
ions
Estimated Savings Diversity
Recommended
5
Wire and Cable Business Case Estimated Annual Savings Overview
Portfolio T&D Materials
Affected LOBs(% of spend) 75% Elect Distribution 25% Elect Transmission
Contract Details Establishing new contracts with incumbent suppliers
Key Suppliers Vendors A, B, C, and D
Award Detail (2010 Year)
Supplier Award Estimated Savings ($)
% of Total Savings % Diversity
Goal (2010)
Planned Results (Projections for 2011 & 2012) Vendor A $xx.xM $x.xM 94% 60%
Spend $xx.xM $xx.xM in 2011$xx.xM in 2012 Vendor B $xx.xM $x.xM 3% 12%
Savings $x.xM 10.9% $x.xM in 2011$x.xM in 2012
11.2% in 201111.2% in 2012
Vendor C $x.xM $x.xM 2% 0%
Vendor D $x.xM $x.xM 1% 0%
Diversity $xx.xM 44% $xx.xM in 2011$xx.xM in 2012
44% in 201144%In 2012 Total $xx.xM $x.xM 100% 44%
Expense Capital Non-Earning Core Team
Savings % 0% 100% 0% Lead: Paul Hann/ Pat GeoffreyCore Team: JC Mathieson, Carlos Araquistain, Dan Quinn, Rose Poquiz, Nick Bhatt
Business Case Summary Approval Signatures & DateSummary: Achieve 10.9% savings across $xx.xM (2010) in Wire and Cable spend, while improving supplier diversity participation through an RFP for multiple categories and negotiating with the incumbent for medium voltage cable.
Decision Summary: Approval to proceed with contract awards to incumbent Wire and Cable suppliers
Business Implications: Minimal risk by negotiating with incumbent suppliers
Assumptions : (See appendix of Business Case Milestone presentation)
Sourcing (Steve Coleman)
Elect T&D (PJ Martinez)
Elect T&D (Greg Kiraly)
T&D Business Ops (Bill Arndt)
T&D Business Ops (Alynn Delisle)
Business Finance (Matt Giesecke)
Projected Savings
Timeframe Q1 ‘10 Q2’10 Q3 ‘10 Q4 ‘10 Q1 ‘11 Q2 ‘11 Q3 ‘11 Q4 ‘11 Q1 ‘12 Q2’ 12 Q3 ‘12 Q4 ‘12
Projected Savings $x.xM $x.xM $x.xM $x.xM $x.xM $x.xM $x.xM $x.xM $x.xM $x.xM $x.xM $x.xM
$xx.xM$xx.xM
Spend 2010 Adjusted
Savings 2010
Baseline 2010
-10.9%
Business Case
Sourcing Strategy
Award Scenario
Negotiations Strategy
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Program Results Were Tracked through a Weekly Dashboard
Category Weekly Status/ Trend
2009 Targets Results to Date Milestones
Savings $M
Diversity %
Savings $M
Diversity %
Sourcing Strategy
Negotiation Strategy
Award Scenario
Business Case
Approved
Hydro $5.0 5% $10.1 25% Comp. prior 11/13/08 12/03/08 01/26/09
T&D Materials $8.0 25% 10/28/08 11/13/08 A:02/17/09 A:03/03/09
T&D Services $3.0 25% 11/13/08 12/18/08 03/04/09 03/19/09
T&D Const. Services Civil $0 20% 12/18/08 12/18/08 02/03/09 03/04/09
T&D Const. Services Electric $0 20% 12/18/08 02/03/09 03/04/09 03/19/08
IT Services $10.0 28% 12/18/08 02/11/09 03/12/09 03/30/09
Marketing $3.0
29%
$10.6 32% Comp. prior 10/24/08 11/13/08 12/18/08
Staff Augmentation $3.0 12/18/08 02/03/08 03/19/09 03/19/09
Office Supplies $1.0 $1.3 92% 10/14/08 11/13/08 01/15/09 01/29/09
Management Consulting $3.0 12/11/08 02/03/09 03/04/09 03/19/09
Target $38.0 25.0% $22.0 32.8%
Issues Impacting Goals On track Potential Issues
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To Ensure Success, We Established a Collaborative, Cross-LOB Leadership Team
Disciplined project management is about teaming and cadence, not bureaucracy and status reporting
Benefits Realization
§ Finance § Internal Audit
Critical success factors § Small, cross-functional core
teams § Program management
meetings led by senior leaders—PG&E Directors and PRTM/ProcureAbility Partners
§ Significant finance involvement
§ Flexible stakeholder involvement mechanisms
§ Clearly defined decision points (milestones)
Steering Committee/BU Officers § Set diversity and savings targets § Track results § Provide project funding
Leadership Team § Own overall program results § Make key sourcing decisions at milestone meetings
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Difficult Topics This Team Addressed
The governance structure was put in place to address difficult topics along the way that could interfere with the program’s success
• Willingness to consider other suppliers
• Willingness to test different pricing models and contract terms for best value
• Commitment to utilize the full strategic sourcing process
• Willingness to challenge existing specifications and business processes
• Willingness to evaluate scope and challenge internal and external cost for best total value
• Willingness to work cross-functionally and collaboratively
• Business unit willingness to help realize savings and allocate budgets accordingly
• Managing and mitigating key risks
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We Built Alignment with the LOBs and Momentum by Requiring Formal Signatures
Results • Successfully met marketing’s
requirements and sourcing’s goals
• Realized 22% in overall savings, significantly exceeding 5% savings target
• Reduced media commissions by 2%
• Awarded multiyear, multimillion-dollar contracts to two Tier 1 contracts with mirror capabilities, ensuring supplier performance and business continuity over the contract term
• Executed both Tier 1 contracts within the three months, ensuring business continuity for marketing
Signed Marketing Business Case
Signatures from LOB, finance, and sourcing leaders
Example Business Case Summary Dashboard
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We Ensured Sustainability by Having Portfolio Leaders Deliver the Training
Training began with identifying skill requirements, assessing individual’s gaps relative to those requirements, and defining individual and group training to address the gaps
Individual Development Plans Capabilities and Skills Training Process Training
• Individual development plans for all category leads and procurement specialists − Training tied to developing specific
skills to advance from novice to proficient to advanced to master
• Analyst development program for sourcing analysts
• Negotiations workshops • Executive presentation
development • Business insights/analytics
− Spend analysis and baseline creation − RFP analysis − Business plan and budget analysis
• Strategic sourcing • Category plan development
150+ people trained 100+ people trained 200+ people trained
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Procurement ExcellenceSkills & Capabilities Improvement
Sourcing Skills and Capabilities Baseline Results
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LESSONS WE LEARNED THAT WILL MAKE YOUR PROGRAM MORE SUCCESSFUL
In Summary
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Wrap-up / Lessons Learned
Achieving lasting results was a result of a vigorous dynamic between management direction and organizational motivation—what we refer to as “push-pull”
LastingResults
Articulate the Goal
Identify the Organizational
Scope
Define the New
Operating Model
Maintain Momentum
and Excitement
Establish Sustainable Capability
PUSH
PULL
Lasting Results
• ~40% diverse spend based on award allocations
• ~$125M annualized savings
• All category leads “proficient” or “advanced” skill rating
• Project on budget, on time
Goals
• Defined comprehensive performance targets—diversity, savings, transaction productivity, skills enhancement
• Required signed-off business cases to close each sourcing event
Organization Scope
• Engaged utility officers, business units, and sourcing employees
New Operating Model
• Executed innovative sourcing strategies
• Defined ongoing processes—both strategic and tactical
Momentum and Excitement
• Ran disciplined and nuanced program management
• Engaged BU VPs and Directors in decision making
Sustainable Capability
• Developed individual skill development plans
• Conducted extensive training
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PG&E Partnership with PRTM/ProcureAbility
PG&E partnered with PRTM and ProcureAbility who have forged a relationship to address supply chain challenges in the utility industry
• Established track record for superior results across procurement and other facets of the supply chain - Over 1,000 assignments in procurement/supply chain management
- Over 200 projects in electric and gas sectors
• Clear understanding of the distinctive problems of the utility industry and its supply chains
• Deep experience with PG&E operations and strong relationships with senior management and LOB executives
PRTM/ProcureAbility had complementary skills that were leveraged to create value to PG&E
• ProcureAbility: Market intelligence and research services, supplier diversity element
• PRTM: Change management methodology to enable sustainability, organizational structure and performance
PG&E Confidential 32
Questions?
For additional information or follow-up, feel free to contact us:
Steve Coleman PG&E Sourcing Director +1 415.972.7177 [email protected]
Rich Sheinfeld PRTM Director +1 917.806.5756 [email protected]
Conrad Snover ProcureAbility Executive Vice President +1 415.806.6726 [email protected]