E-Sourcing Today

1. e-Sourcing Today A Perspective on the Role and Scope of e-Sourcing and the State of the e-Sourcing Marketplace

2. Today we are going to discuss�

3. Importance of Purchasing Decisions

4. Purchasing decisions directly effect a company�s bottom line, pressuring companies to continually enhance procurement operations

6. e-Procurement is rapidly becoming a required set of business practices

7. Strategic Sourcing Defined

10. Reduces the total cost of ownership through: Consolidation of spending and vendor base Product standardization Partnering for volume discounts and improved negotiations Procurement and vendor process improvements Improves supplier relationships and purchasing processes Considers and compares factors other than price in purchasing decisions: Supplier reputation Production capability Delivery schedule Product quality Improves the overall performance of a company�s value chain

11. e-Sourcing Defined

13. e-Sourcing enables the sourcing functions of the purchasing process Spend Analysis � How much, on what, with who Strategy � Make versus buy, category prioritization, type of buy (contract / spot), allocation, bundling, supplier selection, method of negotiation Order planning � when and how much Order execution � req through pay Monitoring & improvement � benchmarks, measures, feedback, improvement planningSpend Analysis � How much, on what, with who Strategy � Make versus buy, category prioritization, type of buy (contract / spot), allocation, bundling, supplier selection, method of negotiation Order planning � when and how much Order execution � req through pay Monitoring & improvement � benchmarks, measures, feedback, improvement planning

15. E-Sourcing is an opportunity for companies to transform purchasing personnel from information gathers to strategic decision makers

17. The e-Sourcing Market

18. Although the e-Sourcing market is in its infancy; its evolution is expected to occur rapidly

19. The e-Sourcing market is estimated to more than triple in size over the next four years

21. To date, the market has been dominated by small, mostly private companies with no single vendor appearing to offer a complete solution�

22. Currently, e-Sourcing companies differ in their approach, depth, complexity, simplicity, and breadth of features

23. Business Case: Merrill Lynch

24. How Do Organizations Take e-Procurement Globally ?  A Merrill Lynch Case Study

25. Project Background Centrally led Purchasing Org. in U.S. � fragmented globally Procurement standards & policies existed, but BU�s not always in compliance � policies varied widely by region Requestors were frustrated, as orders often took months to fulfill Suppliers were frustrated, as payment often took months to process 5 separate regional instances of Oracle Financials currently exist Redundant purchasing programs exist (and others are being developed) across our various regional locations Ariba Buyer is currently implemented throughout the U.S. Centrally led P-Org � was well-established in the U.S., but newly formed regional outposts required development Procurement standards & policies existed, but most business units were not familiar with their content and therefore, not always in full compliance Requestors were frustrated with their inability to determine the status of their orders, which often took months to fulfill because (for most commodities), the requisitioning process cycle times were extended due to extraneous activities Redundant technology solutions were being developed by various organizations (i.e. online tech requests), especially the technology support organizations, which have stand-alone asset management systems that needed to be integratedCentrally led P-Org � was well-established in the U.S., but newly formed regional outposts required development Procurement standards & policies existed, but most business units were not familiar with their content and therefore, not always in full compliance Requestors were frustrated with their inability to determine the status of their orders, which often took months to fulfill because (for most commodities), the requisitioning process cycle times were extended due to extraneous activities Redundant technology solutions were being developed by various organizations (i.e. online tech requests), especially the technology support organizations, which have stand-alone asset management systems that needed to be integrated

26. e-Procurement Objectives Achieve greater efficiency and reduce the overall cost of procurement throughout Merrill Lynch Standardize the procurement processes on a global scale, while simultaneously allowing for specific regional requirements Implement an e-procurement solution that would incorporate best practices and provide an immediate ROI Focus selection and design efforts on ease of use, flexibility, and scalability, all of which were critical considerations given the size and decentralized structure of the Merrill Lynch environment Design and implement a solution in the U.S. that could be leveraged across Merrill Lynch�s International Regions

27. Manage the procurement processes of the organization within globally consistent policies and procedures Easily enable all employees to buy from established, corporate agreements and reduce costs Identify efficiencies that were achieved in the area of buyer intervention and customer satisfaction Encourage a one company, one organization culture Offer seamless procurement services through a common portal Operate within a common procurement system platform Defining Success

28. Merrill�s Global e-Business Strategy Step 1: Manage our spend and optimize our regional procurement processes through the implementation of an e-procurement system (Ariba Buyer) Step 2: Gain access to a more global supply base and reduce our enterprise-wide procurement costs by leveraging the value of other developing e-services (ACSN, e-markets, etc...) Step 3: Enable corporate-level strategic sourcing, while simultaneously allowing for regional & local procurement requirements Step 4: Extend our e-business efficiencies across other parts of the organization by integrating separate ERP instances and consolidating various applications into a single portal

29. Global Deployment Plan

30. The Application Architecture Dilemma On one hand, only centrally managed systems can coordinate and serve a worldwide user base and provide efficient database management and economies of scale However, users will demand personalized local service consistent with the culture, language, time zone, laws, currencies, and business practices of their own region

31. Globally defined information: Common Supplier Codes (DUNS Standard) Common Commodity Codes (UNSPSC Standard) Roles and Permissions Locally defined information: Accounting information Approval hierarchy information User and address information Workflows & approval rules Our Global Architecture

32. Some information is defined on both the global and local level: Catalog Content Units of measure & currencies Supplier information Commodity Codes Varying degrees of ERP/legacy system integration Reporting will allow for global visibility and spend management Tax calculations will be handled outside the core system Custom reports will be generated to facilitate back-end VAT calculations Our Global Architecture

33. It is critical that the organization perform a vendor consolidation exercise prior to implementing a global e-procurement system Adopt the DUNS Standard for defining Common Supplier IDs Attempt to standardized business processes as much as possible and pushback on region-specific business rules To optimize an e-procurement implementation, legacy systems need preparation in several selected areas Supplier Data Account Codes Commodity Codes User and Hierarchy Data Global Architecture Lessons Learned Preparing Legacy Systems: To optimise the an e-procurement implementation, legacy systems need preparation in select areas. Many companies are performing a �harmonization� of all the existing legacy systems, which standardizes data across the organization. All companies should at a minimum perform data cleanup. Harmonization and data cleanup should include: Supplier Data Standardize naming and numbering conventions � Have consistent standards or cross-references and the processes to maintain these standards Remove any duplicates � Eliminate the IBM, I.B.M., Int Bus Mac, problems in the system (if existing) Create a proper hierarchy - Capture the relationships in your supplier data, especially division of companies. These could be used in leveraging better discounts Remove outdated suppliers Add a DUNS number to each supplier � Account Codes Ensure account structures are in place so a valid account combination in Ariba is also valid in the ERP system. Cleanup account codes and remove duplicate codes, if any exist. Commodity Codes Remove unnecessary commodity codes. Ensure correct description and remove duplicates. User and Hierarchy Data Load all users into the source system; ensure all users in the source system are still employed. Load approval hierarchies into ECS Cleanup addresses, phone numbers and e-mailsPreparing Legacy Systems: To optimise the an e-procurement implementation, legacy systems need preparation in select areas. Many companies are performing a �harmonization� of all the existing legacy systems, which standardizes data across the organization. All companies should at a minimum perform data cleanup. Harmonization and data cleanup should include: Supplier Data Standardize naming and numbering conventions � Have consistent standards or cross-references and the processes to maintain these standards Remove any duplicates � Eliminate the IBM, I.B.M., Int Bus Mac, problems in the system (if existing) Create a proper hierarchy - Capture the relationships in your supplier data, especially division of companies. These could be used in leveraging better discounts Remove outdated suppliers Add a DUNS number to each supplier � Account Codes Ensure account structures are in place so a valid account combination in Ariba is also valid in the ERP system. Cleanup account codes and remove duplicate codes, if any exist. Commodity Codes Remove unnecessary commodity codes. Ensure correct description and remove duplicates. User and Hierarchy Data Load all users into the source system; ensure all users in the source system are still employed. Load approval hierarchies into ECS Cleanup addresses, phone numbers and e-mails

35. Change Management Completing the Technical Implementation is often the EASY part � without an effective Change Management program the Project will never truly succeed Anticipate �Push Back� and remain committed to implementing �Best Practices� Ask the question � �Why can�t this work for you ?� instead of asking � �What will work for you ?� �Seeing� is often �Believing� � Create Demo�s and Presentations that are tailored to your audience Sometimes �Best Practice� is not immediately achievable and an effective compromise must be reached (i.e. Distributed Tech Example)Completing the Technical Implementation is often the EASY part � without an effective Change Management program the Project will never truly succeed Anticipate �Push Back� and remain committed to implementing �Best Practices� Ask the question � �Why can�t this work for you ?� instead of asking � �What will work for you ?� �Seeing� is often �Believing� � Create Demo�s and Presentations that are tailored to your audience Sometimes �Best Practice� is not immediately achievable and an effective compromise must be reached (i.e. Distributed Tech Example)

36. What We�ve Learned Benefits don�t just happen; they must be deliberately targeted and managed Organizational changes will occur - systems people become business partners Implementing an e-procurement solution is not just a technology project Benefits and capabilities build over time as experience grows The �one size fits all� approach doesn�t always apply globally The quality of the delivered system reflects the quality of the resources you apply Organizational resistance is often directed at the system, but the resistance is really about process change

37. Questions & Answers