Automation & Process Improvement Strategies

Onno Maliepaard The Goodyear Tire & Rubber Company

Agenda

• Intro Goodyear Tire & Rubber Company • Organisational design principles behind Purchasing

set up • Automation as lever to increase effectiveness &

efficiency of purchasing • Business Intelligence as outcome of automation • New measures of efficiency and effectiveness

Our Early Years

• Founded:

– In 1898 in Akron, Ohio by industrialists Frank and Charles Seiberling.

• Named:

– In honor of Charles Goodyear, discoverer of the vulcanization process for natural rubber.

• Products:

– Bicycle and carriage tires and rubber goods. Developed the “Straight-Side” tire and first tire building machines.

– Developed pneumatic airplane tires in 1909 and began work on airships (“blimps”) in 1910.

Frank Seiberling

Early Milestones

• Became the world’s largest tire company on the basis of sales in 1916.

• Opened its first plant outside the U.S. in 1910 in Bowmanville, Canada.

• Sales reached the $100 million mark in 1917

• $1 billion in 1951

• $5 billion in 1974

• $16 billion in 2009

In 2011…

72,000

180 million

$343 million

$22.7 billion

Tires Sold

Worldwide Associates

Net Income

Net Sales

Global Facilities…

World Headquarters: Akron, OH

Global Technical Centers: Akron, Luxembourg, Hanau

Global Manufacturing Facilities: 57 Manufacturing Footprint: 23 countries, 5 Continents

Global Consumer & Commercial Sales with Leading Brands

Overview Leading Market Positions and Brands

Brands

European Union Latin America

Asia Pacific North America

Market Position #1 #2 #1 #2

Goodyear Purchasing Org

Strategy and Compliance § Supply Management Strategy & Leadership § Compliance

Expertise-based Activities § Sourcing: Category Management and Spend

Analysis § Sourcing: Supplier Evaluation and Negotiation § Supplier Performance Management § Contract Management § Supplier Collaboration

Transactional Activities § Requisitioning § Order Processing § Material Receipt § Financial Settlement § Supplier Data Management § Supplier Enablement

Drive Efficiency

Drive Effectiveness &

Efficiency

Drive Effectiveness

Leadership STRATEGY

Expertise Based Activities

Transactional Activities

Operational support

3 Pillar Organization established

Goodyear Internal Business users

Suppliers

2) Regional Operational Procurement* LUXEMBOURG SSC + COUNTRIES, WHEN -no language leverage - continuous local supplier engagement

1) Expert Sourcing & Category Management*

REGIONAL OFFICES

LUXEMBOURG

2) Local Operational Procurement

3) Transactional Procurement* Near Shore Intramural

Source-to-Pay Process Automation

Request Source Contract Order Receive Pay

Strategic Transactional

Operational

eProcurement eSourcing

Supplier Portal

eInvoicing eProc / MRP

VMI / VMOI

Procurement Requester A/P Requester

SIS

A/P Workflow

CLM / eCat

eProcurement tightly links Requester with Procurement

Business Intelligence to drive Process Performance Optimization

Request Source Contract Order Receive Pay

Monitor Shopping Carts (SCs) Monitor Requisitions

Define Strategy Plan Provide Sourcing Support Provide eSourcing Services

Define SRM Strategy Optimize Contracts Perform Contract Admin

Define P2P Strategy Manage Cost Center

Optimize Supplier Performance Receive Goods and Services

Optimize User Compliance Perform Invoice Processing

ü Overview of approved SCs ü SCs by requester ü SC approval steps and approval time ü Overview of overdue MRP requisitions

ü Key Performance Indicators (commercial + process)

ü Spend classification based on standardized product hierarchy at line item level

ü Vendor performance evaluation (commercial)

ü Vendors per product category, per POrg ü RFx and Auction documents per product

category, per Porg ü Elemica Optimizer tool for raw materials

ü ABC vendors via VMD spend analysis ü Contract Lifecycle Management ü Elemica Optimizer tool for raw

materials

ü Performance cycle KPIs ü Workload per POrg ü SCs/POs per cost center ü PO document details ü Elemica VMI/VMOI reporting for raw

materials

ü Vendor performance evaluation (process) ü OTIF “on time in full” tracking (late PO

deliveries) ü Tracking of quantity mismatches ü Goods Receipt document details

ü Invoice-PO compliance reporting

ü Tracking of price mismatches

ü Invoice document details

Circle back input for Sourcing: avg payment days, avg cycle time, avg pricing, etc

Process KPIs to drive Continuous Process Improvement

KPI Target Actual

Spend concentration (Indirects)

>60% spend covered by 300 suppliers

65% spend covered by <300 suppliers

Portal usage (Indirects) Note: RMs via VMI Portal

80% actively managed suppliers defined on portal 75% of PO transactions via portal

25% actively managed suppliers defined on portal 65% of PO transactions via portal

Handsfree procurement Indirects: >70% Raw Materials: 100%

Indirects: 72% Raw Materials: 100%

eSourcing usage Note: RMs via offline process

50% hands-on shopping carts 20% hands-on shopping carts

eInvoicing usage 28% Jul 2013 49% Jan 2014

30% Jul 2013

Compliance Indirects: 97% Raw Materials: 100%

Indirects: 97% Raw Materials: 100%

Transactional Center Balanced Scorecard to industrialize shopping cart handling

Focus Area KPI Target Actual

Efficiency Transaction cycle time

<3 work days per PO avg <1.5 work days

98% processed <3 days <1 day avg cycle time

FTE loading >25/FTE/day 18/FTE/day

Effectiveness Handsfree >70% 72%

Price errors <5% <0.3%

Sustainability Turnover rate <30% <10%