r12 sourcing

Sourcing and Procurement Contracts: Strategy, Update, and Roadmap

Mark Peachey

Director, Product Strategy

Collaborate 2013

Denver


The following is intended to outline our general product

direction. It is intended for information purposes only, and

may not be incorporated into any contract. It is not a

commitment to deliver any material, code, or functionality,

and should not be relied upon in making purchasing decision.

The development, release, and timing of any features or

functionality described for Oracle’s products remains at the

sole discretion of Oracle.

Safe Harbor Statement


Opportunity: Transform to Value Driven Procurement


0

25

50

75

100

Before After

Profit

Payroll, Tax, &OtherExpenses

Purchases

Spend -5%

Profit +50%

Procurement’s Disproportionate Margin Impact Small Changes. Big Difference.

5% Reduction in Spend Increases Profit by 50%

In order to obtain an equivalent impact, a firm

would have to...

• Increase Sales by 50%

• Cut Overhead by 20%


Classic eSourcing Playbook Transfer Margins From Supplier’s Bottom Line to Your Own

Common Denominator for Requirements

Lowest

Price Benchmarks from Emerging

Markets

Bid Wins the Business

Prices from Transparent

Bidding (Auctions)

Pick low hanging fruit

Shake up incumbents

Rationalize pricing

Generate CxO support

Standardize agreements

Consolidate suppliers

Create EPS impact


Stand Alone Contracts to the Rescue? Hindered by Isolation

• Limited price enforcement

• Resistance from Legal Dept

• “Walled Garden” repository

• Meaningful analytics ?


What About Successful Companies?

Corporate

Strategy

Sourcing

Strategy

Program

Design

Talent & Knowledge

Management

Formal Metrics &

Measurement

Project

Management

Change

Management

Consultation &

Process

Facilitation


Leading CPOs Are Diversifying Playbook To Better Align with Enterprise Goals

Source: AT Kearney Excellence in Supply Management 2011

Align with the

Business

Manage Risk

Systemically

Consistent

Supplier

Relationship

Management

Tailored Procurement and Sourcing Strategies

Adopt Technology Win War for Talent

Contribute to the

Top and Bottom

Lines “…leading procurement organizations are

becoming more strategic, playing an active role

in developing and executing top-line strategies

for growth.”


Value-Driven Procurement Seizing the Larger Opportunity

Complexity

Reduction

Reduce Asset

Intensity

Revenue

Growth

Product &

Service

Differentiation

Best Practices Next Practices

Risk Quality Cost Innovation

Corporate

Social

Responsibility

Procurement

Value

Supplier

Development

Supply

Assurance


PRODUCTS

ASSETS SUPPLY

DEMAND

RISK

SUPPLIERS

SPEND

Creating Alignment Via Key Value Drivers Extend Reach of Procurement Knowledge


Multiple Business Models

Standard

Process

Varying

objectives

Upstream

planning and

scheduling

Coordination &

Execution


Sourcing and Contracts


Streamlined Negotiation Sourcing & Contract Negotiation in Sync

Tactical / StrategicRequirements

Conduct On-Line Negotiations

Analyze & Monitor

Compare & Award

Define Strategies & Key Components

Establish Standards & Org, Policies

Create Re-usable Components

Incorporate in Negotiation

Capture Deliverables & Supplier Variables

Dynamic Rules & Word Sync

Monitor, Track & Update

Use Standalone Contracts

Re-use & Configure

Re-negotiate & new round

SOURCING & SOURCING OPTIMIZATION

PROCUREMENT CONTRACTS


• Supplier & Risk Management

• SCM, PLM, Projects, etc.

• Procure-to-Pay

• Planning & Budgeting

• Program Management

• Project Management

• Knowledge Management

• Talent Management

Interoperability Functionality

• Master Data Management

• Transactional Data Management

• Forecasting & Scenario Planning

Intelligence

New Technology Requirements


Sourcing At-a-Glance

Key Components

• Strategic Sourcing

• Sourcing Optimization

• Supplier Lifecycle Management

• Procurement and Spend Analytics

• Spend Classification

Key Performance Indicators • Percent Purchases Negotiated

• Awarded Amounts

• Top Suppliers

• Projected Savings

• Realized Savings

• Parent Supplier Count

Strategic

Sourcing

Supply

Contract Award

Supplier

Lifecycle

Mgmt

Key Capabilities • Easy sourcing event creation

• Online negotiations and bids with automatic scoring

& recommendations

• Improve Supplier Performance Management

• Enhance Supplier Compliance Management

• Archive and reference


Contracts At-a-Glance

Request Approve and Sign

Execute Negotiate

and Author

Close-Out OR

Renew

Procurement

Legal

Buying Organization

Key Functions

Supplier Organization

Key Functions

Project Mgmt

Finance

Top Mgmt

Sales

Legal

Project Mgmt

Billing

Top Mgmt


Procurement

Research & Development

Suppliers Operations

Shorter time to market

Faster cycle times

Access to new technologies

Total cost reduction

Compliance to negotiated agreements

Improve Strategic Sourcing Outcomes


Gaining Leverage for Enhanced Impact


Execute on Category Strategies Center-Led Services

• Complete from Planning & Budgeting through Payment

• Integrated Financial and Procurement systems of record

• Shared Contracting, Ordering, & Payment Processes

• Multi language, currency, country support

• Centralize, standardize, and consolidate common processes

and suppliers

• Enable localization for unique categories and practices

• Generate cost, scale, and tax benefit


Organize Spend

Into Logical

Categories

Automate

Expensive Data

Management

Employee

Expense

Analysis

Spend

Analysis

LEGACY A/P

P-CARD FEEDS

OTHER

Adapt to Changing

Spending Patterns

Use Information as a Fundamental Enabler Classify Spend for Use by Procurement


• Prebuilt integration

• Best Practice library of over 250 reports and alerts

• Complete solution for

• Spend

• Procurement Performance

• Supplier Performance

• Employee Expenses

• Configurable & Extensible

• Suited to heterogeneous back-end applications

• Pinpoints and prioritizes savings opportunities

• Monitors key trends and period comparisons

• Measures key operational efficiencies

Create Insight and Understanding Procurement and Spend Analytics


Agenda Oracle Sourcing


Key Features in Oracle Sourcing

KEY FEATURES in R12 & R12+

• Access From Professional Buyer’s

Work Center

• Complex contract negotiation

• Automatic & team scoring

• Knockout of suppliers from shortlist

• Negotiation styles

• Collaboration team messaging

• Prospective & new supplier invitation

• Contractor buyer support

• Enhanced Spreadsheet support

• Price Tier Optimization

• Team Scoring

• Two Stage Evaluation of RFPs

• Cost Factor Enhancements

• Bid Response PDF

• Countdown Clock

• Supplier Incentives

• Supplier Reminder Notifications

• Earnest Money Deposit


Structured Sourcing Event Creation Greatly Reduce Preparation Time and Manual Effort

Instantly create new sourcing event from previous agreements

Expiring agreement

1-Click renegotiation

Renewal Driven

RFx, Auction

Aggregate requests across the enterprise to leverage buying power

RFx, Auction Requisitions

Request Driven

Sourcing template


Automatic Scoring of Requirements Quickly Identify the Best Qualified Suppliers

Requirements Weight Value (Score) Quote 990 Response

Score

Are you ISO certified? 25% Yes (100)

No (0) No 0

Number of years in business

35%

> 14 (100)

10-14 (75)

< 10 (0)

15 35

Number of shipping locations

40%

> 19 (100)

11-19 (50)

1-10 (25)

35 40

Total Score Calculated by Oracle Sourcing 75

• Automatically eliminate suppliers that score below minimum requirements

• Automatically exclude non-compliant suppliers from shortlists


Cost Factors and Bid Transformation Evaluate Tangible and Intangible Costs

Latin American

supplier

European

supplier

North American

supplier Asian

supplier

• Capture Total Cost - Tangible (eg. freight)

- Intangible (eg. switching costs)

- Buyer and supplier entered

• Evaluate Transformed Bids - View transformed or un-transformed

- Visible during analysis and award

NA $21 $21

Supplier

Bid

Transformed

Bid

Europe Asia LA

$16 $23 $20 $23 $14 $26

Example:

LA Supplier Bid $14

System Added

Freight $ 6

Tariff $ 4

Risk $ 2

Transformed Bid = $26


Sourcing Knowledge Capture Drive Optimal Results by Re-Using Best Practices

Knowledge from Sourcing Methodologies and Past

Events

• Leverage proven practices

• Replicate buyer expertise

• Retain knowledge across the organization

New Sourcing Event

Sourcing policy rules

Negotiation event style

Sourcing templates

Supplier lists

Pricing factors

Bidding rules

Scoring methods


Agenda Oracle Procurement Contracts


Global Terms Repository Use Terms “As Is” or Adapt to Local Requirements

•Legal Rqmts

•Best Practices

•Regulatory Policies

•Standard T’s & C’s

•Localized Versions

Legal

Procurement / Sales

Government Regulations

Policy Makers

Define Use

Business Units

Western Region

Corporate Headquarters

Eastern Region

Central

Terms

Library


Standardize Processes But Allow for Variations

Contract Terms Library

Contract

Terms

Library

Policy Deviations Clause Deviations

• Commercial terms

• Responses to questions

• User-defined variable values

• Standard contract templates

• Policy deviation rules

• Non-standard clauses

• Additions, deletions & section modifications

• Excluded expert-suggested clauses

Identify: Identify violations based on: Establish:


Systematically Track Threats and Vulnerabilities

Labor Action, Force Majeure / Natural Disaster / Security

Liens and Claims, Insurance Coverage

Product/Service Delivery Delay / On-Time Performance

Product Quality Issues – Out of Specification, Warranty Support

Negative Media – Code of Conduct, Product Safety Standards

Potential Criminal Investigations

OFAC / Suspect / Debarred Watch-list

Country - Potential for Civil Unrest/Military Action, Public Health

Code of Conduct / Hazardous Chemical Usage / Worker Cond.

Contract / SLA compliance

Financial stability - Ability to Grow, Credit Problems, Bankruptcy

Business Losses

Reputation

Compliance

Financial

Transaction

Operational

Other


Improve Cycle Time Expert-based Contract Authoring

Industry Segment?

Add Clauses

• High Value

• Insurance

Over $50k?

Government

Commercial

. . .

Template

Contract

Contract

Draft

• Configurable rules drive terms selection for complex contracts

• Clauses default based on product, supplier, contract value, etc.

• Author high quality contracts with minimal legal supervision

No Yes


Rule-Based Policy Approvals Tailor Approval Routing

• Accelerate approval cycles by highlighting standard thresholds

• Route approvals based on category, existence of non-standard terms, etc.

• View redline comparisons of modified terms to standard


Deliver Value through Continuous Development

Improve User Productivity

Streamline Business Processes

Strengthen Compliance and Control


R12.1.3 - Improve User Productivity

Applying multiple Contract Templates to a Sourcing or Purchasing

document

APIs to import Contract Templates, Rules, Questions and Constants

Display of Clause numbers and sorting by Clause numbers

Add new Requisitions to a draft Sourcing or a Purchasing document

Oracle Sourcing & Procurement Contracts


R12.1.3 - Streamline Business Processes

Deletion of Amendment Specific Clauses and Provisional Sections

Capturing and Printing of Multi-Row Variables

Allow and Track Offer Withdrawals

Support Attachments in Online Discussions



R12.1.3 - Strengthen Compliance and Control

Control Defaulting Section for Contract Expert added Clauses

Additional Descriptors for clauses in the contract terms page

eNDA process for displaying Terms and Conditions with attachments to

supplier users and configuring text based on Operating Unit

MS Word Synchronization



Product Roadmap

Sourcing Project Dashboard

Staggered Award of RFQs

Alternate Award post Order Cancellation

Standalone Contracts Enhancements

– Adding lines to repository contracts, linking to Procurement documents

Contract Expert Enhancements

Alternate Offers and Multiple Active Offers

Planned Enhancements


Oracle Sourcing and Procurement Contracts

• Standardize to meet category and business

objectives

• Collaborate across teams

• Maintain visibility, flexibility, and control

Driving Value Driven Procurement


Q&A

r12 sourcing

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