Supply Chain Transformation Strategy Technology Update ...

Supply Chain Transformation Strategy

Current Focus

Technology Update

Strategic Sourcing Results

WSSC 2016 Procurement Spend was $550M 780 Active Suppliers 1300 Department requests 1020 POs Processed 200 Solicitations 530 Change orders 160 Task Orders $6.5M in P Card spend on12,000 transactions Complaints about The process – “Infinite” Our commitment – “Continuous Improvement”

• Aggressive Stretch Objectives • Total Cost of Ownership

Perspective • ROIC / ROE goals • Objectives Shared Across Entire

Organization • Incentives / Consequences • Supplier Performance Metrics

• Spend Analysis & Category Management • Demand Aggregation • Electronic RFIs, RFPs • Reverse Auctions • Optimization & Decision Support • Contract Mgmt & Compliance • Results Tracking & Reporting • Supplier Performance Evaluation • Project Mgmt & Executive Dashboard

• Structure that works in your culture • Cross-functional involvement • Speaking with One Voice • Commitment to Continuous Learning • Professional Career Track • Governance

• Strategic Sourcing • Negotiations Management • All Spend Categories in Scope • Risk Management • Partnerships with Suppliers • Supplier Recognition • Contract Management & Supplier Centric Strategies • Cost Reduction Planning / Tracking • Budget Adjustments to Preserve Cost Reductions • Low-Cost Country Sourcing • Consortium Buying • Asset Recovery • Selective Outsourcing

• Core Part of Corporate Strategy

Objectives Best Practices

Optimized Organization

Innovation & Technology

Procurement Role

Good Leadership

• The Right Leader • Leadership Culture at all Levels • Bias to Action and Results

$

Blue = Underway Red = To Be Completed Black = Not planned

Transformation Initiatives Across Six Key Dimensions for Sustainable Supply Chain Management Transformation

The “Transformation Roadmap” has brought us through three years of change and development. Evaluating where we are - “now is the time” to evaluate - what has happened and what needs to happen next.

Prudent Financial Management

Reduce/Mitigate Rate Increases

Find resources for service and system improvement

Communicate credibly with stakeholders

Reinforce Public Trust

Increase process efficiencies through elimination, simplification, & standardization of procurement activities

Foster organizational behaviors designed

towards cross-functional collaborative teams with common procurement goals

Reduce the Total Cost of Operations for WSSC to help ensure financial stability and to minimize rate increases

• Benchmark procurement best practices • Set continuous improvement goals • Engage stakeholders in the decision making process

• Assess existing supplier relationships • Evaluate supplier performance • Assess and promote employee development

• Simplify and streamline procurement • Manage total cost of operations • Leverage client collaboration

• Support WSSC Strategic Priorities • Align with individual goals • Support SLMBE goals • Support local commerce

• Identify possible cost reduction opportunities • Target strategic suppliers • Assess supply needs

Best In

Class

Operational Excellence

e-catalogs & Electronic approvals

Procure-to-Pay Technology Contractor Performance

Evaluation

Strategic Sourcing | Contracting Officer Representatives I Cross functional

Collaboration

Supply Chain Transformation (proof of concept)

Sustain

Evaluate

Leverage

Align

2014 2013

2016 2015

2017

2019

2018

Assess

• Enhance strategic and tactical skillset

• Lead strategic sourcing teams with seamless execution of sourcing strategies

• Contracting Officer

Representatives (CORs) emerge as Subject Matter Experts

• Facilitate professional certification

• Refine Intake Process

• Reduce cycle times

• Improve supplier performance

• Support SLMBE goals & process efficiencies

• Identify new sourcing/cost savings opportunities

• Integrate strong data analytics

• Implement Oracle Procure-To-Pay

• Implement Procurement Dashboard

• Implemented Contractor Performance Evaluation Tool

People Process Technology

Strategic Sourcing

Solicitation

Forecasting

Measure

47 Business Units

-Commodity Profile -Benchmarking -Sourcing Strategy -Market Analysis

-Solicit requirements -Market test -Develop RFx, IFB, etc. -Negotiations -Contract award

-Procurement Planning -Demand Management -Resource Prioritization -Risk Mitigation

-Contract Compliance -Supplier Scorecard -CPE Tool -Realize Savings

ORACLE Procure to Pay

In Take Process

Procurement Dashboard

Contract Repository

Cycle Time Reduction

SLMBE Goals

Spend Analytics

Process Improvement

Cost Optimization

Leverage Technology

eProcurement E-catalogs

Seamless document management and transparency from procurement planning to invoice payment.

Benefits: ◦ Improved coordination between Procurement and User

Departments ◦ Improved alignment of SLMBE process ◦ Reduced errors in processing requests ◦ Reduced cycle time ◦ Simplified invoicing process ◦ Better data

Business Need Intake Requisition Sourcing Contract Purchase Order Receiving Invoicing Pay

Category Priority Matrix

CCTV, & Trunk Sewer Inspection

Engineering Consultation

Services

Water Meters

Street Paving

Fleet IT

Consulting

Emergency Plumbing Services

Valve Inspection

Tank Rehabilitation

Miscellaneous Industrial Supplies

Construction Management Inspections

Water Main Replacement

Fleet Parts & Equipment

Uniforms Office Supplies

Chemicals

Travel & Expense Management

$

$200

$400

$600

$800

$1,000

$1,200

2.20 2.40 2.60 2.80 3.00 3.20 3.40 3.60 3.80 4.00

Ease of Implementation

Savi

ngs

Pote

ntia

l $ (0

00's

)

Easy Hard

Wave 1 Wave 2 Wave 3

IT Maintenance

MRO

PCCP

Ductile Iron Pipe

Illustrative: Not Drawn To Scale

Annualized - Expense Awarded - Capital

Cost Reductions 9,437,624$ 7,982,968$ Cost Avoidances 4,735,404$ 12,877,030$ Total Value Add 14,173,028$ 20,859,998$ Market / Currency Impacts (+ / -) -$ -$ Total Net Benefits (CR / CA) 14,173,028$ 20,859,998$

New Discounts Taken (CR)Improved Net Terms (improved cash balances)

Inventory ConsignmentInventory Min / Max reductions

Other Revenue Enhancement (sale of scrap, etc.)

Inve

stmen

t Total Investment, comprised of: Advisors (training, coaching, best practices, communications, transformation initiatives across six dimensions, etc.) + Team Costs (internal, part-time WSSC costs supporting SCM Transformation)

Ultra conservative: Only Cost Reduction on Expenses compared to Investment

CR

/ C

A

Cost Reduction / Cost Avoidance

Supply Chain Management Transformation: NOV 1, 2013 TO DEC 31, 2015

Inve

ntor

y Inventory Management (Improved Cash Balances)

Paym

ent

Term

s Payment Terms (Improved Discounts & Improved Cash Balances)

$2,964,984.00

318%

Return on Investment - alternatives

RO

I


Cost Reductions 1,155,592$ 6,985,233$ Cost Avoidances 1,397,709$ 6,180,465$ Total Value Add 2,553,301$ 13,165,698$ Market / Currency Impacts (+ / -) -$ -$ Total Net Benefits (CR / CA) 2,553,301$ 13,165,698$




Inve

ntor


FY 2016

CR

/ C

A


Paym

ent

Term


Key Projects: 1. South Adelphi 60" Transmission WMR & Relocation 2. Bradmoor Drive 20" Transmission Water Main Replacement 3. Refuse Removal Services

Key Projects: 1. Baltimore Avenue 16" Transmission Water Main Replacement 2. Broad Creek Water Waste Treatment Plant Improvements 3. Rocky Gorge Pumping Station Upgrades


Cost Reductions 193,281$ 6,975,233$ Cost Avoidances 7,696,198$ 27,763,927$ Total Value Add 7,889,479$ 14,921,815$ Market / Currency Impacts (+ / -) -$ -$ Total Net Benefits (CR / CA) 7,889,479$ 14,921,815$




Inve

ntor


Paym

ent

Term


Year-To-Date FY 2017

CR

/ C

A


Objectives

Key Strategies

Results

• Streamline and improve the acquisition process for acquiring fleet vehicles • Develop replacement strategy that optimizes fleet vehicle’s life and usability • Standardize the fleet based upon job function and impact on repairs and

maintenance • Reduce the total cost of ownership for each vehicle • Develop a Total Cost of Ownership (TCO) to track TCO on a ongoing basis

• Review the vehicle acquisition process for opportunities to reduce purchasing times

• Develop a methodology to standardize the fleet by job function and class of vehicle

• Mapped processes and reduced acquisition timeline by six months • Completed Total Cost model for all elements of Fleet management –

acquisition, operation, maintenance, repair • Completed strategic sourcing of CCTV and Jet Rodder trucks resulting in $1M

in savings • Optimization has generated an additional $8M in savings

Fleet

Our Team Our Leadership Procurement Cycle Times Reduction Activities Strategic Sourcing Teams Successes The Supply Chain Steering Committee Our SLMBE Partners Continued staff and leadership development Our Technology Partners Our Customers Our Company

22

QUESTIONS

Category Objective Strategy Results

Water & Wastewater Chemicals

• Ensure continuity of operations and reduce supply risk

• Establish alternatives for single sourced Polyaluminum Chloride (PACL)

• Develop sourcing options for Methanol

• Update specs & testing protocols • Expand supply base & identify

alternative products • Leverage volume to reduce cost • Negotiate with single source suppliers

• Bulk Chemicals – reduced costs by 9.5% resulting in $414K in annual savings

• PACL Sole Source – negotiated $340K reduction

Tank Rehabilitation

• Develop a Repair & Rehab Schedule • Reduce cost for tank inspection • Streamline contracting process • Increase contractor pool

• Establish a contracting approach to meet operating schedules

• Conduct a formal sourcing event to promote competitive pricing

• Execute a sourcing plan that focuses on a phased rehabilitation schedule

• Reduced lead times by 3 to 6 months

• Reduced inspection & design re-work

• Establish a pool of qualified contractors and sub-contractors

• Task 1: $440K savings • Task 2: $262K savings

Appendix

Category Objective Strategy Results

Water Main Replacement

• Reduce the costs of design and construction for water main repair, replacement & rehabilitation (WMR3)

• Streamline process and reduce time to award of WMR3 contracts

• Identify best practices in contracting • Evaluate potential for contracting with

a defined pool of prequalified suppliers • Implement processes to reduce

change orders, errors in design, and reduced cycle times from bid-to-award

• Drive competition to reduce costs

• 10 Qualified Suppliers to provide water main replacement services for two years.

• 12 Awarded tasks • $10.1M in cost avoidance to date • $753K in cost reduction to date • Procurement Cycle Time Reduced

from 180 days to 41 days.

Ductile Iron Pipe

• Seek value-added services • Ensure a reliable supply of pipe /

materials to support the program and emergency repairs

• Identify / specify new pipe materials – improving quality and reliability

• Identify & Evaluate pipe market through (RFI)

• Encourage bidders to present innovative approaches via RFP

• Leverage WSSC’s category spend

• Price Reductions – New Contract • On small diameter pipe @ 75% of

spend = $200K per year • On large diameter = $400K per

year • Pricing Stability - first 18 months

of contract • WSSC furnishes materials for

University City III project - immediate savings of $194K

Appendix

Low (3%)

Avg.(5%)

High(10%)

Street Paving & Repair 35,000,000$ 1,050,000$ 1,750,000$ 3,500,000$ Direct

Tank Rehabilitation 15,000,000$ 450,000$ 750,000$ 1,500,000$ Indirect

Fleet 14,819,000$ 444,570$ 740,950$ 1,481,900$ Indirect

IT Maintenance 5,000,000$ 150,000$ 250,000$ 500,000$ Indirect

MRO 4,800,000$ 144,000$ 240,000$ 480,000$ Indirect

Cleaning & Restoration 1,200,000$ 36,000$ 60,000$ 120,000$ Direct

Office Supplies 750,000$ 22,500$ 37,500$ 75,000$ Indirect

Uniforms 555,000$ 16,650$ 27,750$ 55,500$ Indirect

Travel Management(Displaced Customers & Employees)

480,000$ 14,400$ 24,000$ 48,000$ Direct

Total Spend 77,604,000$ 2,328,120$ 3,880,200$ 7,760,400$

Estimated Savings Range Category

Estimated Annual Spend

Customer Impact

1) $702K combined savings for Task 1 & Task 2. 2). Actual Fleet savings are $13.2M over a 5 year period.

2

Appendix

1

Objectives

Key Strategies

Results

• Increase competition via aggressive outreach events • Mitigate contract risk with the introduction of increased competition • Enhance operational efficiency by provided contractors with planned work • Modify paving specifications to enhance quality, and efficiency • Improve customer experience by shortening response time • Revising liquidated damage clause • Develop a Total Cost of Ownership (TCO) to track TCO on a ongoing basis

• Define a sourcing strategy that includes a plan to mitigate supply risk and to increase competition

• Identify cost drivers and develop a street paving cost model to understand suppliers’ material, tooling/equipment, labor, & overhead costs

• Compiled supplier data and completed spend analytics • Conducted outreach events with supply base • Developed cost driver model • Benchmarked against other like-sized entities • Issued RFI; 7 responses received. Incorporated response feedback into

solicitation. • Revised paving specification for construction contracts.

Street Paving & Repair

Appendix

Supply Chain Transformation Strategy Technology Update ...

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