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IronStar Consulting
IRONSTAR CONSULTING
Company Profile
Collectively built on years of procurement experience and innovation
in a number of sectors.
Focused on protecting and improving the bottom line, profit and
value for shareholders and clients.
Motivated to ensure sustained value protection to achieve long term
goals.
Long term business relationships are built with our customers to
achieve a Win – Win outcome.
An experienced Procurement team in the area of best in class
business improvement and financial strategy..
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IRONSTAR CONSULTING
Why IronStar
In this environment organisations need to assess all parts of their
business to ensure that value and efficiency is maximised. IronStar
can assist.
IronStar has considerable experience in assessing and improving all
facets of business expenditure
IronStar is able to undertake an assessment of either a discrete or
complete areas of expenditure or operations and implement best
practice improvements. That is:
Work on discrete individual categories; or
Look at a total solution (outsourcing model).
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IRONSTAR CONSULTING
ROIC Model
IronStar provides a very cost effective alternative for organisations to tackle
the procurement sphere.
With similar companies, we have found the most cost effective and efficient
way forward, (ROIC which most CFOs and CPOs favour) is for IronStar not
add to the costs of an organisation but to get remunerated from the savings
generated. Therefore we always provide a positive ROIC solution.
The ROIC model is very simple, we come in do the analysis for free and
without any obligation. Other payment options and full details are in the
Appendix 2.
1. We present potential solutions to you. If you are happy to accept our
recommendations and when your firm achieves savings we get paid a
percentage (that is when you-win we-win).
2. Hence cost to you is nil and we only get part payment from the savings you
achieve. “In simple terms we are willing to back ourselves.”
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IRONSTAR CONSULTING
Procurement Engagement Strategy
Step by step engagement process is outlined in Appendix 1.
however, below we provide in simple terms the Strategy.
We know you are busy, as a result we simply:
1. Based on the agreed selected categories, we come to your office for a
couple of days collect the relevant information and then leave. This
data is used to establish a base line (including price and quality). The
data will be used to establish the benchmark or base line starting point
of cost, technical and material scope on the agreed categories.
2. We will then present a report to you to consider the potential savings
solutions. New saving initiatives are compared to the relevant base
line.
3. Companies can implement the solution presented; Or you can
outsource the entire function to us.
4. Provide ongoing reports savings reports of the result.
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IRONSTAR CONSULTING
Potential Categories for review
Some of the potential categories that we are able to assist Companies with
have been listed below. Please note that this list is not exhaustive and is simply
a start. We will be happy to understand from you which areas are of immediate
concern for you. In addition, IronStar is happy to cover all areas of expenditure.
Travel and Accommodation.
Stationery.
Uniforms (Low Cost Country Sourcing)
Printing (Low Cost Country Sourcing)
Cleaning - Consumables and Equipment.
Utilities – Electricity, Gas, Water.
IT – Hardware (POS, computers, printers, etc) and Software.
Office Furniture.
Food and Beverage.
Construction.
Subcontracting (R&M)
Freight, delivery; Couriers etc
Other head office discrete expenditure.
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We are confident that we can offer you the service and skills needed
to improve the areas and operations that are needed.
We value a new relationship we hope that we will work to meet your
criteria. Be assured that we intend to work together with all our
vendors to guarantee that the products we purchase are sustainable
to your needs and yielding the life cost cycle results.
Next steps;
1. Letter outlining work (Categories for review); and
2. Data Collection.
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IRONSTAR CONSULTING
Summary
Appendix 1
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Procurement Engagement Strategy Framework
Assessment Snapshot
Spend Analysis
Category Sourcing
Implementation
Procurement Engagement Strategy Framework
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Strategic sourcing will allow you to realise significant savings.
This document details a 4-phase framework to Procurement Strategy, outlining
time frames, activities, and outputs.
1 2 3 4
LEVERAGE
High-expenditure area
Many existing alternate products and services
Many qualified supply sources
Goods and services are readily available
STRATEGIC
Strategic to profitability and operations
Few qualified supply sources
Large expenditures
Design to quality critical
Complex specifications
ROUTINE
Many existing alternate products and services
Many sources
Low value
Small individual transactions
“Anyone” could buy it
Unspecified items for everyday use
LEVERAGE
Very complex specifications requiring complex
manufacturing or service process
Few alternate products available
Few qualified sources of supply
May have a big impact on ongoing operations or
maintenance
New technology or untested processes involved
in provisioning of the product of service Low
High
Low High
BUSINESS IMPACT
SUPPLY MARKET CHALLENGE
Considerations
• % of Expenditure
• Relationship to strategic imperative
• Time sensitivity
Considerations
• Product substitution • Number of sourcing options • Buyer leverage/power
Savings Opportunities through Procurement fall into 4 distinct
buckets-dependent on business impact and supplier situation.
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Savings
Time
Final implementation of strategies
Secure potential and sustainability over time, by continuously addressing:
Procurement Processes
Procurement organization
IT infrastructure
Development of commodity strategies
Start implementation activities, quotations
Start delivering on the business case potential
Volume Analysis
Procurement Behavior Analysis
Potential & Business Case
Potential
”Find the money”
”Deliver the savings”
”Keep and identify new savings”
Strategies, processes, organisation and IT infrastructure is crucial to realise, sustain and develop the potential over time
Overview – Savings through Time
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Procurement Engagement Strategy – Approach
Assessment Snapshot
Spend Analysis
Category Sourcing
Implementation
1 2 3 4
KEY ACTIVITIES
Kick-off the project
Determine primary sources
of data and assess their
qualities
Create a baseline snapshot
of spend across spend
categories
Develop a high-level
sourcing plan
Gather, clean, and validate
spend data
Develop and load spend
data into analysis tools (e.g.
database cube, Excel
spreadsheet)
Review and analyze data
Generate savings estimates
Define user requirements
Develop a Procurement/Buy
Strategy
Select suppliers;
(Pre qualification to meet
Clients supply chain needs)
Negotiate LOU
Implement plan
Client relationships with
suppliers
ISC and Client spend and
savings against projections
Client Enforce buying
compliance across
organization and with
suppliers
Procurement Engagement Strategy is outlined in this document
follows a 4-phase approach
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The assessment snapshot allows development of a fine tuned plan to achieve sourcing objectives.
Assessment Snapshot – Overview
Assessment Snapshot
Initiate Project
Spend Analysis
Market Analysis
Strategy Development
Spend Analysis
Category Sourcing
Implementation
1 2 3 4
Assessment Snapshot phase, the organization’s spend is assessed
to determine the potential savings benefit
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Assessment Snapshot
Spend Analysis
Category Sourcing
Implement- ation
1 2 3 4
Initiate Project
Spend Analysis
Market Analysis
Strategy Development
Mobilize Team
Request sample or macro-
level data around:
– Spend
– Contracts
– Related initiatives
– Process flows
Identify key stakeholders
and schedule Interviews
Collate macro-level Spend
Data and validate for
accuracy
Investigate data sources:
– Volume
– Quality
– Level of Detail
– Coverage of total spend
within organisation
Estimate time for full spend
analysis (within scope)
Investigate sourcing maturity
through interviews
– Organisation capacity
and capability issues
– Processes and
compliance controls
– Systems/tools in use
– High level contract
review for opportunities
Review of current sourcing
initiatives and recent wins
Estimate size and ease of
implementation for each
sourcing opportunity
Prioritise process and
systems opportunities with
respect to organizational
need
Develop high level
recommendations for
organization to adopt leading
practices
Document approach
Spend analysis output (e.g.
spend breakdown by
category, by business unit,
by supplier, by product)
Category list with high level
range and size of
opportunities
High level organisation
development and process
re-design opportunities
Prioritised list of
opportunities based on
speed to value and
organisational need
High level time line and
effort for implementation
ACTIVITIES
PRIMARY OUTPUTS
And, at the close of this phase, we will have a prioritised list of
opportunities based on speed to value and organizational need.
Assessment Snapshot – Activities & Deliverables
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The Assessment Snapshot phase assesses 4 primary area’s
Assessment Snapshot
Spend Analysis
Category Sourcing
Implement- ation
1 2 3 4
Ease of Implementation of Sourcing Opportunities
Size of Opportunities Capacity / Staffing Assessment
Organizational Capabilities
• Assessed through stakeholder interviews to understand level of sophistication and depth of initiatives completed in the past
• Assessed through macro-level spend analysis
• Utilise benchmarks where available—however, ensure benchmarks are comparing “apples to apples”
• Assessed using results of macro-level spend analysis, transaction volumes, and complexity of product category
• Utilise subject matter experts opinions on product category
• Assessed through stakeholder interviews
• Capabilities to evaluate include processes for sourcing, procurement, and compliance; systems/tools enabling the procurement processes; and skill levels within the organisation
Performing these initial assessments upfront will optimise speed to value.
Assessment Snapshot – Primary Assessments
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Assessment Snapshot
Spend Analysis
Category Sourcing
Implementation
1 2 3 4
Source Data
Clean and Validate Data
Develop Spend Data Analysis Tool
Review and Analyze Data
Generate Savings Estimate
In most organisations, this phase requires the help of IT to extract spend data from ERP and other systems.
Spend Analysis – Overview
The Spend Analysis phase requires significant data analysis, requiring
the development of a Spend Analysis Tool (typically in Access)
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Spend Analysis involves 5 phases, ending with the estimation of
projected savings.
Approach – Phase 2 Spend Analysis Assessment Snapshot
Spend Analysis
Category Sourcing
Implement- ation
1 2 3 4
Source Data
Clean and Validate Data
Develop Spend Data Analysis Tool
Review and Analyze Data
Generate Savings Estimate
Determine data
sources and collect
data
Potential data
sources:
– Financial ERP
(AP, GL modules)
– P-Card
– Cash
disbursements
– Existing suppliers
(a last resort)
Clean source data
– Remove
duplicates
– Re-categorise
“other” spend
category
Map GL codes to
coding hierarchy for
spend analysis tool
Leading practice to
use standard
categorization (e.g.
DUNS, gov’t db)
Select a tool to
conduct Spend
Analysis and develop
it
Tool selection
dependent on quantity
of spend data:
– e.g. Excel for
small data sets,
Data warehouse
for large data sets
Load spend data
Develop and run
scenarios using
Spend Analysis Tool
Conduct interviews to
review outputs and
validate observations
Validate with existing
contracts and metrics
Continue to validate
analyses
Generate detailed
savings estimates
Spreadsheets of raw
spend data
Cleansed spend data Data Analysis Tool Spend scenario
outputs
Savings estimate
projections over
specified timeframe
(e.g. 2-years)
ACTIVITIES
PRIMARY OUTPUTS
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Approach – Phase 3 Category Sourcing
Assessment Snapshot
Spend Analysis
Category Sourcing
Implementation
1 2 3 4
Define User Requirements/ Specifications
Profile the Commodity
Develop Procurement/ Buy Strategy
Select Suppliers
Negotiate LOU
Plan
Implementation
Commodities are non-strategic and follow an easily repeatable process that be accelerated.
Define User Requirements/ Specifications
Profile the Category
Develop Procurement/ Buy Strategy
Select Suppliers
Negotiate LOU
Plan Implementation
COMMODITY CATEGORY
SPECIALTY CATEGORY
There are 2 types of Products that can be sourced; a Commodity
Product or a Specialty Product.
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Approach – Phase 3 Category Sourcing
Assessment Snapshot
Spend Analysis
Category Sourcing
Implement- ation
1 2 3 4
Define User Requirements/
Specifications
Profile the Commodity
Develop Procurement/ Buy Strategy
Select Suppliers
Negotiate LOU
Plan
Implementation
REPEAT CATEGORY
Week 1 activity Week 2 activity Week 2 activity Weeks 3-5
Note: Assuming
suppliers given 2-
week response
time
Weeks 6-8 Week 8 activity
Team on-boarding
Kick-off
documents
Market basket
specifications
Spend analysis
Opportunity
confirmation
Porter’s 5 Forces
model
Supplier lists
Assess auction
suitability
Procurement/Buy
Strategy
Transmitted RFX
Auction set-up (if
applicable)
Evaluation criteria
RFX analysis
LOU plan
Supplier meetings
LOU
Benefits
realisation
document
Implementation
plan
TIMEFRAME
DELIVERABLES
There are number of ways to accelerate this sourcing process—e.g. utilise digital RFX process, use an auction method to receive low bids, or our preference is to work with known supply base.
Sourcing a Commodity Product will follow an accelerated, 8-week
process
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Approach – Phase 3 Category Sourcing
Sourcing a “Specialty” category is expected to take longer due to the complexity impact on product, available supplier base, and internal stakeholders.
Assessment Snapshot
Spend Analysis
Category Sourcing
Implement- ation
1 2 3 4
Define User Requirements/ Specifications
Profile the Category
Develop Procurement/ Buy Strategy
Select Suppliers
Negotiate LOU
Plan
Implementation
SPECIALTY CATEGORY
Week 1 activity Weeks 2 Week 3-4 activity Weeks 4-5
Note: Assuming
suppliers given 1-
week response
time
Weeks 6-7 Weeks 8-9
Team on-
boarding
Kick-off
documents
Market basket
specifications
Spend analysis
Opportunity
confirmation
Porter’s 5 Forces
model
Supplier Quadrant
analysis
Assess auction
suitability
Procurement/Buy
Strategy
Transmitted RFX
Auction set-up (if
applicable)
Evaluation criteria
RFX analysis
LOU plan
Supplier meetings
LOU
Benefits
realisation
document
Implementation
plan
TIMEFRAME
DELIVERABLES
Specialty Products follow a more detailed tracking, lasting upwards of 9
weeks
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Approach – Phase 4 Implementation
Assessment Snapshot
Spend Analysis
Category Sourcing
Implementation
1 2 3 4
Enforce Governance
Track Benefits
Manage Suppliers
Re-source Category
Implementation is where the rubber meets the road!
Our prime objective is to remain with the
current supplier.
However we understand the cruise line
complexity as a result should an alternative
supplier be selected the, implementation is
the most important phase and where true
savings are realised.
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Approach – Phase 4 Implementation Assessment Snapshot
Spend Analysis
Category Sourcing
Implement- ation
1 2 3 4
Enforce Governance
Track Benefits
Manage Suppliers
Re-source Category
• The key to achieving savings through strategic sourcing is proper governance and compliance
• Business divisions must buy to new contracts and procurement policies
• Rogue and maverick spending must be controlled or eliminated
• It is equally important to ensure suppliers comply to policies as well (e.g. supplier should only deal with 1-person/1-contract within organization and not take orders from multiple business divisions)
• There should be a dedicated team or person for Supplier Relationship Management—to act as the intermediary between the Suppliers and internal stakeholders/users
• Suppliers should be managed to maximize and continuously improve their performance
• Savings and other expected benefits are continuously tracked and measured against initial projections
• A spreadsheet should be used to capture benefits realization to plan
• This should be shared with management on a regular basis
• To maintain the pricing competitiveness, the product category should be re-sourced by going through this process again regularly—usually at the end of the contract term (e.g. 2-years)
• In the contract, there should be a clause to re-evaluate the pricing of the product to the existing market on an six month basis—and adjust if market conditions have changed significantly
- This is more relevant to technology-related products
There are multiple parallel streams within the Implementation phase-
the most important is Governance
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Savings
Time
Potential
”Find the money”
”Deliver the savings”
”Keep and identify new savings”
Approach
Successful Procurement requires an iterative process of identifying
savings opportunities and re-executing Procurement Strategy process
Assessment Snapshot
Spend Analysis
Category Sourcing
Implement- ation
Assessment Snapshot
Spend Analysis
Category Sourcing
Implement- ation
Assessment Snapshot
Spend Analysis
Category Sourcing
Implement- ation
Assessment Snapshot
Spend Analysis
Category Sourcing
Implementation
1 2 3 4
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Appendix 2
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Negotiable Payment Options
Below are three options for charging, and the table at the end sets out the
figures.
1. Per day rate. We perform the work required and bill for the day spent.
2. Discounted day rate plus a sharing of the savings actually achieved.
3. Just a share of the savings actually achieved, no other fees are payable
by you (except interstate/overseas travel, if applicable).
We prefer option 3 because of the following, among other reasons:
You can ensure that our objectives are aligned with yours, i.e. achieve
savings;
No need for regular billing of the hours spent, plus no concern for you in
relation to value from each hour spent;
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Negotiable Payment Options
We only get paid if you achieve savings;
Our payment is not an additional cost to the business; and
We can also consider an option where we get paid from the suppliers and thus head office does not incur the full cost. In addition to the rebate from suppliers that is paid to you.
In summary, under option 3 we simply collect the information from your systems and report back with a potential solution (saving option). We get paid when you achieve the savings (i.e. over time).
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Negotiable payments options
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Rate
Per Day Per DayPercentage sharing
of savings*Per Hour
Percentage sharing
of savings*
Associate $500 $350 Scale $0 10.00%
Manager $650 $455 Scale $0 10.00%
Senior Manager $750 $525 Scale $0 10.00%
A/Director $850 $595 Scale $0 10.00%
Director $1,000 $700 Scale $0 10.00%
Divisional Director $1,200 $840 Scale $0 10.00%
Recovery of Expenses 100% 60% Air Fare and Accommodation only
* Negotiable to take into account size of the saving pool.
Scale
Savings Per AnnumLess than
$10,000*
$10,000 to less
than $30,000*
$30,000 to less than
$100,000*
$100,000 to less
than $500,000*
$500,000 and
above*
Percentage 30% 28% 23% 19% 10%
Per Hour Plus Share in Savings achieved Share in Savings achieved Only