Procurement plan: process*Wx+3Wx+2WxWx+1Wx+1Wx

Objectives Procurement PlanScan of current procurement (department)BenchmarkOpportunitiesBarriers to changeOptionsAdviceMission, incl. potential ()StrategyProcurement Organisation structure incl. R&R

*

Process*Step 2: options and advice

Mission procurement department (LT measurabel goals)Strategy to achieve missionOrganisations structure, R&R and function profileShort-term action plan

Executive SummaryMax 3 bullet points (examples)If client does not invest in procurement, they will be outperformed by competitors*There is no procurement department, merely an order departmentxxx

Strategic procurement will lead toComulative DCF of xxx, which will double(?) the current marginImproved risc management by process driven as opposed to current ad-hoc appraochxxx

Current procurementIs operational, not strategic nor tacitcal Manages only 18% of total expenditureLacks essential procurement knowledge and support for new role. There will be external recruitment

* = Status quo scenario*

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*INTRODUCTION: METHODOLOGY USED

*SiPM procurement benchmark: main view0%5%10%SavingsTime= 10% net reductionin total expenditure

Benchmark is based on WINS programWorld-Class Innovative Sourcing programYearly Objectives setting in function of long-term planEvolution as opposed to revolution (continuous improvement)Simultaneously, disciplined and ruthless execution of 2 main steps:

*What % of expenditure is being influenced by procurementHow professional do we *1 manage expenditure (people - process - systems, Measured on 8 segments). * 1: throughout the company2. procurement coverage1. Skills

WINS program** 94% of other companies worldwide in catching-up phase

Definitions Procurement process can be splitted into strategic/tactical/operational

*

Copyright 2008 SiPMwww.sipm.com

*INTERNAL ANALYSIS

Scan: Skills and Coverage*1. Skills2. procurement coverage

SkillsStrategic intent

Max 3-5 bullets based on interviewsIn absence of plan, lack of accountability and focus:xxxNo sense of urgencyConservative culture, difficulties with change

Leadership Procurement

xxxXx

*

Support of Tactical procurement process

Mainly ad-hoc, few structureXxx

4. Supplier Selection process

Xxx

*Skills

Supplier relationship management

Xxx

Strategic Cost Management

xxx

*Skills30%70%Here is the prize to be taken. Seems easy but many companies fail.

Current focus

Capital productivity

Xxx

Operational Process

xxx

*Skills

TopicTime spend %Strategy0%Selection process20%Continuous Improvement0%Operational tasks80%100%

*GoldSilverBronzeSkills: summarySummary (max 3 bullets)

Scan: Skills and Coverage*1. Skills2. procurement coverage

x% of turnover is being spent with suppliers*Conclusion:xxx 25%38%xM

xM is relative easy/difficult to manage There are x suppliers x % suppliers x% expenditure *Conclusion/advice:20 leveranciers = 64% uitgaven

xM is relative easy/difficult to manage x categories cover y % of expenditure *Conclusion/advice:

Coverage of total spend*Conclusion:

WINS: combination Skills and Coverage*

Conclusion Internal AnalysisProcurement Client has relative low/high benchmark scorexxx

xxx**: reduction workingcapital, kaizen, performance measurements)

Copyright 2008 SiPMwww.sipm.com

*OPTIONS & ADVICE

*SkillsCoverage0%40%80%BronzeSilverGoldSiPM has developed 3 options

Options*

1. Logistic partner 2. Strategic Procurement 3. Supply Chain leadershipObjectivexxxLowest total costsXxxInnovative netwerk of suppliers: fast TTM, product developmentOutput Procurement will diliver:Xxx Procurement will diliver:Supplier selection and improvementXxx Procurement will diliver:XxxOrganisation HybridXxxTitle: replenisher Central procurement xxx Title: Procurement Manager:Senior buyer Central procurement > 80% of spend via procurement XxxTitle: Director of SupplyTime to implement 2 year 3-4 year 5 - year

Option 1: Logistic partner*Mission: By 2012, xxx

Strategy: xxx

Organisation: xxx

*Mission: By 2012, xxx

Strategy: xxx

Organisation: xxx

Option 2: Strategic Procurement

Mission: By 2012, xxx

Strategy: xxx

Organisation: xxx

Option 3: Supply chain leader *

NPV and Discounted Cash Flow option 1, 2 and 3*Investment in organisation limited return in jaar 1Option 1 mainly process improvement: traditionally savings are difficult to measureOption 3Option 2

Impact on nett margin option 2 and 3*Current xkOption 3Option 2

Pro & Cons 3 options*

1. Logistic partner2. Strategic Procurement 3. Supply Chain leadershipPro xxx Investment: x xx Investment: y xxx

Con xxx xxx xxx Investment: z

*Advice SiPM xk cumulative DCF * on 5 years

Investment : 1 manager, 2 buyers and 1 assistent.

Simultaneous improvement of skills and coverage (3-4 yr evolution revolution)

SkillsCoverage0%40%80%BronzeSilverGold* = nett, including investment in new organisation

Short-term actions (6-9 months)Recruitmentxxx

Next:

xxxXxx*ComplexityHighLowHighLowPotentialStart with these categories

APPENDIX*All calculations are in excel file

Option 2: Profile Procurement Managerxxx

Xxx

xxx

Xxx

*

*Financials

*Financials- Gross and nett = exc. and inc. costs of new organisation Savings = bottom line impact. Only 34% of traditional savings calculations are visible at the bottom line, hence multiply the figures times 3 to compare them with other companies.

*Financials

*Financials

*Double of current profitSavings: 2nd benchmark Next to WINS benchmark, there is a 2nd detailed benchmark Results are similar: in year 5, the margin would xxx

Coverage: definitions and methodologyDefinitions

Which of the following tactical steps can be influenced by procurement?

Methodology

Source: buyers (Interviews and questionnaire)

*

Definition

By buying smarter, you will be buying more efficient, cheaper and be protected against market fluctuations. We have been measuring your procurement against a benchmark on 8 different topics, ranging from strategic intent to supplier relationship management.

Methodology

Interviews + questionnaire

*Skills: definitions and methodology

*Central organisation: tactical process mainly (>60% of spend) driven by procurementDecentral organisation: tactical process mainly (>60% of spend) driven by local departementsHybrid organisation: For a number of categories, the tactical process is managed by procurement, for other categories by the local departmentsAll structures but the central structure are suboptimal in terms of efficiency. However, this does not imply that other structures are not good. A hybrid structure for example is the most desirable options for most multinationals, as this currently fits better with the culture of the company.Organisation: definitions

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