procurement transformation jan elfving, head of nordic procurement unit

Procurement transformation

Jan Elfving, Head of Nordic Procurement Unit

NPU | Nordic Procurement Unit

Cross Nordic network organization dedicated to supporting the line

Win projects

Lower costs and risks

Source nationally and internationally

Cooperate with suppliers

Develop competence

Expertise and insight

Focus of NPUs efforts

Presence in NO, SE, FI, Purchasing office in Poland

220 employees in NPU

Nordic spend 40 BSEK

75% revenue spend external

43.000 suppliers

50% purchasing volume via NPU

900 Framework agreements

6500 project specific agreements

2

Skanska in short

− Founded 1887 in Sweden

− International business since 1897

− Quoted on the NASDAQ Stockholm

− 2014 revenues: €16 billion

− 58,000 employees

− Member of UN Global Compact

March 2015 Skanska Corporate Presentation

3

We are active in selected home markets

United States

Sweden

Finland

Norway

DenmarkUnited Kingdom

Poland

Slovakia

Hungary

Czech Republic

RomaniaRevenue by geographic areas

Nordic countries 43%Other European countries24%North America 33%


4

Our four business streams

United Nations, New York, USA Pilestredet Park, Oslo, Norway

City Green Court, Prague, Czech Republic Antofagasta Highway, Chile

Infrastructure Development (ID)

Residential Development (RD)Construction (C)

Commercial Property Development (CD)

5Meeting ABB SkanskaMay 7 2012

Our unique business model

Dividend of profit

Revenue clients

Construction Project Development

Free working capital

EBIT

Investmentopportunities

Internal contracts

ROCE

Return on equity


6

Qualitative targets – the five zeros vision

7

0 0 0 0 0Zero loss-making projects

Zero environmental incidents

Zero accidents

Zero ethical breaches

Zero defects

The 3 phases

− Rapid geographical expansion and entrance into new business areas

− Accelerated US presence through acquisitions

− Several acquisitions (incl. Kvaerner, Exbud, IPS, Selmer, Breitner, Elitfönster, Ericsson Services, Sade, Karl Steiner Holdings)

− Several exits made (Sandvik, Graninge, Drott, Scancem, Essmanngruppen)

Expansion1997-2002

Consolidation2003-2008

Profitable growth2009-2015

Construction Industry Features

1. Low productivity

2. Decentralized business

3. Project driven business and culture

4. Local rather than global competition

5. Easy entry, low margin & high risk business

6. The Game - to solve problems and avoid risks to materialize

ProductionWaiting

Moving

40%30%

30%

The 3 phases





− Focus on risk management, earnings stability

− Restructuring and consolidation

− Launch and implementation of the Home market strategy

− Increased capital efficiency through cash management and debt consolidation

− Exits of (Gammon, Skanska Services, Skanska Cementation, Danish contracting, Cementation India, Myresjö, Contiga, Mining Contracting in South Africa and Canada etc)

− Smaller acquisitions in CEE, Yeager (US), McNicholas (UK)

Expansion1997-2002



From procurement view what would you have done in order to consolidate?

NPU | The Procurement transformation

12

Procurement 2004 - 2006•Spend and cost

•Transparency

•Overview prices

13

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80% of total spend

The top 10 categories represent some 48% of the spend and 22 categories represent 80% of the total spend

Source: Spend extracted from Oracle BI tool for 2010 including Skanska owned companies

Thorough review of current procurement strategy

Target & Strategy

Organization

Process &tools

Incentivies

People &Compentence

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Here is an opportunity...

Installationstarts

Installation

P.O.

Shipping list

Shipping

Manufacturing

Procurement

Detailing

Site logistics

Product development & Standardization

Supply chain installed

Strategy FinlandThree main flows:

1. Make-to-Stock• Focus on purchasing power and efficient logistics

2. Make-to-Order/Engineered-to-Order• Focus on cost-effective design solutions, efficient manufacturing & installation

3. International supply chains• Focus on AB purchasing power, shared resources, logistics

Procurement is not competitive bidding

Procurement is responsible for an efficient (cost & agile) supply chain

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Strategy Sweden

2004 2008Sverigeavtal

Regionala avtal

Projektspecifika Inköp

Project

Project

Project

Supplier

Supplier

Supplier

IBX

IBX:Call-off tool

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Did not get full leverage, every country “sub-optimized”

Felt bureaucratic and expensive

What would you have done?

SKANSKA AB PROCUREMENT

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

GSU HeadBert-Ove Johansson, SVP

Kerstin El Ouali, ControllerWiveca Karlin, Secretary

Portfolio CivilSvein Gunnberg, VP

Dino LeistenschneiderTomas Wolf

Allan Everum

Portfolio Indirect & JobsiteThomas Henriksson, VP

Ester BoogaardMita Sawjani-Palm

Portfolio BuildingOla Billing, VP

Kim GrandellSara Thiele

Timo KuoppolaMikko Puttonen

Skanska AB Procurement Organization

What did we do 2006-2008

• Identified Sourcing Opportunity areas

• Launched Success Stories program

• Built the “opportunity platform”

• Create Sense of Urgency with SET

• Monthly Global Purchasing Board

• Developed Spend Management System (SMSS)

• Defined Governance & KPI’s

• Competence Mapping

• Global Purchasing Process

• Training Program (Skanska Procurement Academy – SPA)

• BU Management Workshops

What happened end of 2008-2009?

• The financial crisis struck hard with major lay offs

• The CPO was fired and the Global Purchasing initiative was stopped

• A Nordic Procurement Unit (NPU) was established headed by a new Senior Vice President

• None of the members of Global Purchasing were offered key positions in NPU…

NPU | The Procurement Transformation

25


•Transparency

•Overview prices

Procurement 2008 - 2009•Common sourcing process

•Frame work agreements

•Cross BU cooperation

Sourcing process and common training

Plan&

Mobilize

Define Sourcing/

RFx-strategy

Carry outRFx

strategyEvaluate Negotiate

Contract signing/

Implement.

Toll-gate 1

Toll-gate 2

Toll-gate 3

Toll-gate 4

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

1. Structural Materials

1. 2 - Concrete

1. 3 - Structures

1. 4 - Construction steel

1. 1 - Steel

1. 5 - Trusses

ment materials and equipment

Steel materials and equipment

Prefab Concrete element

Steel element

Wood element

Steel profiles

Castings

Forgings

Surface treatment

Por

tfol

io

Ca

tego

ry

Gro

upS

ub-C

ate

go

ry No Sub-Category No Sub-Category

Send

NPU – Nordic Procurement Unit

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

SET – Senior Executive TeamSET – Senior Executive Team

Skanska SwedenSkanska Sweden

Nordic BUPsNordic BUPs

IT Nordic IT Nordic

NPU is part of One Skanska

28

Nordic Procurement Unit

Nordic Procurement UnitSkanska FinlandSkanska Finland

Skanska NorwaySkanska Norway

Commercial Development NordicCommercial Development Nordic

Skanska 2015 aspirations

2015 Aspirations

− Consecutive track record of industry leading shareholder value creation: >20% annual TRS

− Global footprint with substantial part of portfolio in high growth markets

− Best-in-class profitability in all priority segments

− World class in People Development

− Leading in Safety, Risk Management, Green and Ethics





− Focus on risk management, earnings stability

− Restructuring and consolidation

− Launch and implementation of the Home market strategy

− Increased capital efficiency through cash management and debt consolidation

− Exits of (Gammon, Skanska Services, Skanska Cementation, Danish contracting, Cementation India, Myresjö, Contiga, Mining Contracting in South Africa and Canada etc)

− Smaller acquisitions in CEE, Yeager (US), McNicholas (UK)

− Establish global leadership in 1-2 key growth slivers

− Enter 1-2 high growth geographies

− Establish world class risk and performance management systems

− Business model adapted to global growth units (new units) and local entrepreneurial outperformance units

Expansion1997-2002



What would you have done now?

NPU | Procurement transformation

31


•Transparency

•Overview prices




Procurement 2012 - 2014•Supplier performance

•Supplier management

•New matrix organization

NPU | Roles of Organization

32

Suppliers

Projects

Region

BU

Nordic

•Site teams•Project purchasers

•Local mgt teams•Purchasers

•BU Head of procurement•Category teams and analysts•BU steering groups

•Nordic Sourcing•Supplier Mgt•Competence Mgt•Sourcing Board•NBUP

• Targets and demands• Common way of working• Sourcing strategies

• Requirements and needs• Purchasing plans

• Call-offs• Performance evaluation• Project purchases• Feedback

Supplier Management - Preferred supplier program

On-site performance evaluation

– Assess actual supplier project performance in

a fact based manner

Pre-qualification – Secure Skanska basic

requirements before negotiations of entire

supply base

Supplier development -Segment the supplier

base and support prioritized suppliers to

develop

1 2

3

Handle risk

Improve performance

Reduce cost

Pre-qualification 2015/5

In 2012 the # or pre-q suppliers were 959 and today +5 000

…Supplier clubs

Supplier development| Kick off Skanska supplier teams- new ground!

What do you think we will gain & what challenges do we have a head?

NPU | The journey of procurement

38

220 employeesworking across 3 BUsin four countries..

PROGRESS

•International procurement

•Supplier Relationship management

•Global Expert group


•Transparency

•Overview prices




Procurement 2012 - 2014•Supplier performance

•Supplier management

•New matrix organization

Tested puzzle pieces for success

Procurement Strategy

Structure & Organization

Alignment

Staff & SkillsSourcing

Supplier Relationship Management

Systems

(Spend data)

Procurement Performance

Conditions & Enablers Processes Results

Governance Risk Management and control

Category Management

Why & How

41

BU specific priorities

Sweden1.Governance , Risk mgmt and control2.Supplier relationship management3.Organisational alignment

Norway1.Governance, Risk mgmt and control2.Supplier relationship management

Finland1.Governance , Risk mgmt and control2.Supplier relationship management3.Supply / Category management

Poland1.Organisational alignment2.Governance , Risk mgmt and control3.Supply / Category management

USB1.Systems (spend data)2.Procurement strategy3.Supply Relationship management4.Organisational alignment

USC1.Systems (spend data)2.Procurement strategy3.Category management4.Organisational alignment

Czech1.Organisational alignment2.Governance , Risk mgmt and control3.Category management

UK1. Supplier relationship management2. Category management

This is Skanska NPU…

42

…Thank you

procurement transformation jan elfving, head of nordic procurement unit

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