iasta's "procurement leadership in the perfect storm," featuring officemax
TRANSCRIPT
Copyright © 2010 Iasta, All rights reserved
Presented by:
Procurement Leadership in the “Perfect Storm”
Copyright © 2010 Iasta, All rights reserved
Introducing IASTA
Introducing OfficeMax
The “Perfect Storm”
The OfficeMax Executive Mandate
The Approach
Mining the Opportunities
Sustainable Procurement Excellence
AGENDA
Procurement
Leadership
in the
Perfect Storm
Welcome
Copyright © 2010 Iasta, All rights reserved
SmartSource SRM®
SmartSource SRM combines critical sourcing components into one
application and include auction and RFx, award analysis &
decision optimization, contract management, supplier
management with supplier self-registration
SmartAnalytics®
On demand technology that delivers spend visibility, spend
analysis and compliance monitoring to a user’s fingertips. Users
generate reports and analyze spend from the single, centralized
repository of spend data that is classified to a common language.
SmartServices™
The Iasta Consulting Group brings together experienced PEOPLE,
proven PROCESSES and powerful TECHNOLOGY to help clients
optimize every dollar they spend on goods and services anywhere
in the enterprise.
“After a
thorough review,
we found
that Iasta
offered
Nordstrom the
best solution set,
combined with
highest value for
our money.”
Keys to the OfficeMax Transformation
Copyright © 2010 Iasta, All rights reserved
Iasta works with over 150 global companies of various
sizes and international locations.
"After a
thorough review
of the e-Sourcing
market, which
included over 10
vendors, we
found that Iasta
offered the best
solution set,
combined with
highest value for
Burlington Coat
Factory.”
Iasta’s Global Footprint
Copyright © 2010 Iasta, All rights reserved
Passionate
Innovative
Fun
► OfficeMax is a leader in both business-to-business and
retail office products distribution.
► OfficeMax customers are served by approximately
31,000 associates through direct sales, catalogs, the
Internet, and retail stores.
► Common stock trades on the New York Stock Exchange
under the ticker symbol OMX.
► Corporate headquarters is in Naperville, Illinois.
► Markets OfficeMax serves
Enterprise-Level Organizations
Mid-Size Businesses
Small Businesses
Home Offices and Individuals
OfficeMax Profile
Copyright © 2010 Iasta, All rights reserved
2009 Top line revenue of $7.2B
(source: OMX 2009 annual report)
Passionate
Innovative
Fun
OfficeMax manages its business using three reportable segments:
► OfficeMax – Contract
Markets and sells office supplies and paper, technology products and solutions, office furniture and print and document services directly to large corporate and government offices, as well as to small and medium-sized offices.
2009 Revenue: $3.7B
► OfficeMax – Retail
Markets and sells office supplies and paper, print and document services, technology products and solutions and office furniture to small and medium-sized businesses and consumers through a network of retail stores.
2009 Revenue: $3.6B
► Corporate and Other
Operating expenses that cannot be allocated to the Contract or
Retail segments
OfficeMax Organizational Profile
Copyright © 2010 Iasta, All rights reserved
Contract Footprint
Copyright © 2010 Iasta, All rights reserved
Retail Footprint
Copyright © 2010 Iasta, All rights reserved
The “Perfect Storm”
Copyright © 2010 Iasta, All rights reserved
The “Perfect Storm”
$9.2 $9.0 $9.1
$8.3
$7.2
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
2005 2006 2007 2008 2009
Sale
s (
$ B
illio
ns)
Year
The Great Recession
OfficeMax revenues declined more than 20 percent from 2005 to 2009; vast majority of the decline occurred during The Great Recession
Remained profitable by reducing fixed annual costs by over $400 million since 2005
Not making expense cuts in areas that would be a detriment to customer service
“55% of all adults
in the U.S. labor
force say that in
the past 30
months, they have
suffered a spell of
unemployment,
a cut in pay, a
reduction in hours.
or have become
involuntary part-
time workers.”
Pew ResearchJune 30, 2010
Copyright © 2010 Iasta, All rights reserved
Increase EBIT and market share
► Procurement’s role –Transform how direct and indirect goods and services are procured by transitioning into a Global Procurement function.
► The Four-pronged mandate –
1. Aggressive, cumulative 5-year savings targets
2. Implement an enterprise wide, best-in-class procurement process model
3. Implement an enterprise wide, best-in-class contract compliance process
4. Centralize spend in an enterprise-wide Source2Pay program concurrent with a multi-year ERP systems upgrade
“Our team
remains highly
focused on the
successful
execution of our
five-year
strategic growth
plan.”
-Sam Duncan
OfficeMax CEO
Executive Mandate
Copyright © 2010 Iasta, All rights reserved
The OfficeMax Indirect Procurement Model
There are three conventional approaches to Indirect Procurement:
► Centralized Procurement
► Decentralized Procurement
► Hybrid Procurement
OfficeMax selected the Hybrid model
In the Hybrid model Procurement assumes a consultative
role that enables all functions to leverage & optimize
existing subject matter expertise
Hybrid Model
Framework
Refine existing hybrid model processes
Integrate effective functional processes
Establish and execute on deliverables
Copyright © 2010 Iasta, All rights reserved
Savings = Budget reductions (Who wants to help
that cause? It might include my job.)
Perception that procurement was only focused on
the bottom line
Relationship issues
In many cases, functions had strong, long running
relationships with suppliers (It wouldn’t be “fair”)
In some cases, suppliers were also significant
customers of ours! (Who wants to be the one to
lose revenue?)
Multiple process disconnects
General inertia
Challenges
Any type of
significant
change in an
organization will
present
challenges.
Being able to
overcome those
challenges is key
to procurement
transformation
success.
Copyright © 2010 Iasta, All rights reserved
The Approach - SIMS
“Spend Information Management System (SIMS) Team”
Grass roots implementation of Hybrid Procurement Model
Upstream reporting
Track and report deliverables
Procurement delegates tactical support
Business-function delegates strategic advisory support
Establish the Hybrid Procurement Model Framework
Refine existing Hybrid Model processes & establish deliverables
Integrate and leverage existing effective functional processes
Synergize Existing Expertise
Sourcing Wave Strategies
Centralize Contracts, Spend Analysis and Supply Base
Cross-Functional development of
◦ Procurement Opportunities
◦ Policies/Procedures
◦ Communication Network
Procurement can
serve as the
catalyst for
positive change
when the
approach is based
on collaboration
and the focus is
centered on
shareholder
value.
Copyright © 2010 Iasta, All rights reserved
Strategic Sour\cing\
\\
Store Operations
Marketing & Advertising
Information Technology
LegalHuman
Resources
Finance
Supply Chain
Procurement
FinanceEPMO
Indirect Budget Savings
Hybrid Procurement
Model
Spend Analysis
Supplier Consolidation
Governance
Contract Compliance
Contract Call
SIMS Framework
Copyright © 2010 Iasta, All rights reserved
Budget Savings Hybrid Model
Contract Compliance Source2Pay
Process Core
Process Foundation
Copyright © 2010 Iasta, All rights reserved
STEP 1
Opportunity Identification
STEP 2
Strategy Development
STEP 3
Source & Negotiate
STEP 4
Contract & Implement
STEP 5
Invoice & Pay
STEP 6
Monitor & Manage
Category
Knowledge
Stakeholder
Alignment
Sourcing
Methodology
TCO
LCC Sourcing
Target Setting
Standardized
Process
Template Mgmt
Vendor Database
RFx
Knowledge Mgmt
Collaboration
Template Mgmt
Codify T&Cs
Price Compliance
Eliminate Paper
Implement
Purchase Order
Feed Institutional
Knowledgebase
Enablement
Automation
Rate compliance
Tactical process
control
Dynamic
discounting
Define approach
Facilitation
Score-carding
Supplier
development
PLAN LEVERAGE
Spend Visibility
Contract Visibility
Supplier
Assessment
IDENTIFY SUSTAINCONTROL EXECUTE
Establishing a Common Language
Copyright © 2010 Iasta, All rights reserved
Progressively Winning Heart and Minds
Tactical administration
of RFx events
Help desk support for
software & process questions
Manage supplier self-
registration & NDA mgmt
Supplier communications
Tactical Administration On Demand Support
SME Resources Fully Managed Category
Ownership: Business Function Ownership: Business Function
Ownership: Shared Ownership: Procurement
Tactical administration
of RFx events
Strategic advisory support
of RFPs, scope & spec documents, bidding structure
Award scenario
development & analysis
Contract implementation
support
Dedicated Subject
Matter Expert
Category & market
analysis
Award scenario development &
analysis
Stakeholder collaboration for
procurement strategy Full
administration of RFx events
Full administration of RFx events
Dedicated Sourcing
Managers
Real time mgmt of supplier
relationships
Monthly KPM reporting to
business functions
Tacti
cal R
ole
Str
ate
gic
Ro
le
Functional Trust Factor Functional Trust Factor
Functional Trust Factor Functional Trust Factor
Copyright © 2010 Iasta, All rights reserved
Total Indirect Spend
$x.xxB
Marketing($ xxxM)
Finance($ xxxM)
IT($ xxxM)
Store Ops($ xxxM)
Supply Chain($ xxxM)
Sales($xxxM)
Physical Products
($xx.xM)
Labor
($xx.xM)
E-Commerce
($xx.xM)
Media
($xx.xM)
Information
($xx.xM)
Level 2 = Strategic Spend Buckets
Level 1 = Top Line Spend by Function
Sample Indirect Spend Tree (Levels One & Two)
Copyright © 2010 Iasta, All rights reserved
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0
Rew
ard
Risk
Sample Spend Taxonomy Scatter Plot - Marketing
Paper
Ad Printing
Signage
Packaging
Letters/Envelopes
Catalog Printing
Brown Bag Printing
Uniforms
Sales Collateral
Ad Agency
Consulting
Graphic Design Labor
Photography
Logistics
Source Partner
Manage Risk
ManageTransactions
*Risk/Reward metrics in this plot are for illustrative purposes only
Procurement Strategy by Function*
Copyright © 2010 Iasta, All rights reserved
Progress and Results to Date
Completed Spend Analysis on $2.2B in spend
Completed Contract Call for top 97% supplier contracts
Fully engaged SIMS Team
Current savings 6 fiscal quarters ahead of plan
Breaking new ground in new areas of the business
Transitioning strategic sourcing to a global procurement
function
“Our team
remains highly
focused on the
successful
execution of our
five-year
strategic growth
plan.”
Sam Duncan
OfficeMax CEO
Copyright © 2010 Iasta, All rights reserved
Dimension of Procurement Management Description
Examples of Best Practice Applications
Strategy
Ability of Procurement to develop plan of action to achieve organizational goals and objectives
Capitalize on supply market opportunities as a part of strategy to drive value through cost leadership, innovation and revenue realization
Organization
Structured hierarchy of Procurement group focused on maximizing organizational opportunities
Embed procurement skills and knowledge in key business processes rather than functions; differentiated strategic (CM) vs. tactical (Buyer)
Culture
An integrated pattern of human knowledge, belief, and behavior supporting organization and Procurement strategy
Rotate high-potential professionals as ambassadors of procurement excellence across functions throughout the organization. Provide incentives for procurement process excellence
Performance Management
The process of assessing progress toward achieving predetermined goals
Link procurement metrics to strategic objectives and to corporate results and proactively control procurement processes
Roadmap to Savings Sustainability
Copyright © 2010 Iasta, All rights reserved
Dimension of Procurement Management Description
Examples of Best Practice Applications
Strategic Sourcing
A rigorous process of assessing all costs associated with a spend category and competitively bidding the category to identify suppliers that offer optimal total cost, quality and service performance
Apply advanced techniques (e.g. cross-functional specifications, demand management, eRFPs, eAuctions) to leverage full value potential
Supplier Development
A rigorous process of assessing all costs associated with a spend category and working with existing suppliers to reduce total cost, gain efficiencies and improve quality/service.
Effectively manage the tension between value creation and risk management
Procurement Automation
Streamlining operations as it relates to transactional facilitation of purchases
Automate and upgrade operating processes using e-business technologies (e.g. Order management software, trading exchanges)
Roadmap to Savings Sustainability
Copyright © 2010 Iasta, All rights reserved
Procurement
now has the tools
now has the voice
now has the credibility
Thank You
Conclusion
Copyright © 2010 Iasta, All rights reserved
For More Info…
www.eSourcingForum.comwww.eSourcingWiki.com www.Twitter.com/Iasta.com
Iasta European HQHartham Park
Corsham, Wiltshire
SN13 0RP
United Kingdom
Operations: +44 (0) 870 199 4060
Sales: +44 (0) 1249 700726
eSourcing |
forumeSourcing |
wiki
www.LinkedIn.com
Iasta Alliance Group
www.Iasta.com
Iasta Global HQ12800 N. Meridian St.
Suite 425
Carmel, IN 46032
United States of America
Operations: 317.594.8600
Sales: [email protected]