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General Session Dennie Norman, WW Director Supply Chain Intelligence SAS Institute

Demand Driven Sourcing - Manage Uncertainty. General Session Dennie Norman, WW Director Supply Chain Intelligence SAS Institute Date September 2, 2004 Time 9 AM. Global Reach & Local Presence Connecting with Customers. 238 offices in 53 countries 9,100 employees

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General Session Dennie Norman, WW Director Supply Chain Intelligence SAS Institute

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  1. Demand Driven Sourcing - Manage Uncertainty General Session Dennie Norman, WW Director Supply Chain Intelligence SAS Institute Date September 2, 2004 Time 9 AM NCMA 4th Annual Commercial Contract Management Conference Tools, Jewels, and Rules: Leveraging the Contract Management Process

  2. Global Reach & Local PresenceConnecting with Customers • 238 offices in 53 countries • 9,100 employees • 3.5 million users worldwide • 40,200 sites • 113 countries • 90% of Fortune 500 • 97 of Forbes Super 100 • Hundreds of local user groups globally • Largest privately held software company NCMA 4th Annual Commercial Contract Management Conference Tools, Jewels, and Rules: Leveraging the Contract Management Process

  3. The Mandate … ...reach 5-10% cost savings and still satisfy our customers. NCMA 4th Annual Commercial Contract Management Conference Tools, Jewels, and Rules: Leveraging the Contract Management Process

  4. Current forecasting situation… You need to see what is behind you, but… NCMA 4th Annual Commercial Contract Management Conference Tools, Jewels, and Rules: Leveraging the Contract Management Process

  5. This is what “true” analytics can do for your forecasting process – see it all! Challenges Are Ahead… NCMA 4th Annual Commercial Contract Management Conference Tools, Jewels, and Rules: Leveraging the Contract Management Process

  6. Leverage demand to reduce price Price/ Unit $100/unit $90/unit $80/unit Volume 3000 1000 2000 Leverage spend saves $40,000 (14%) NCMA 4th Annual Commercial Contract Management Conference Tools, Jewels, and Rules: Leveraging the Contract Management Process

  7. $/Volume A B Contract C Today Time (yr) Demand driven strategic sourcing • Understand demand drivers • Leverage market demand • Increase forecast accuracy • Become a predictable customer • Increase negotiated volume • Long term contracts • Form strategic partnerships • Maximize volume for fixed price NCMA 4th Annual Commercial Contract Management Conference Tools, Jewels, and Rules: Leveraging the Contract Management Process

  8. Forecaster Leads to… The impact of poor forecasting… Profit Margin erosion Management Purchasing Forecaster Distributor Poor Planning Dissatisfied Cust. Unsynch. Capac. Low OTD Forecasting Problems Simplistic Erroneous Missing Bad Inventory Policy Overstocks Out-of-Stocks Obsolescence Poor Sourcing Higher prices Higher risk Unreliable Leads to Leads to… Leads to… Missed expectations > Contract disputes NCMA 4th Annual Commercial Contract Management Conference Tools, Jewels, and Rules: Leveraging the Contract Management Process

  9. RROI How can I act on this insight? What is the best that could happen ? What will happen ? Why did it happen ? What happened (hindsight)? Insight Vs. Hindsight Analytics Drive the Power of Information Scenario modeling & root cause analysis Enterprise Performance Optimization Predictive modeling Descriptive modeling Reports & OLAP Data Cleansing & Classification ROI Raw data Data Information Knowledge Intelligence NCMA 4th Annual Commercial Contract Management Conference Tools, Jewels, and Rules: Leveraging the Contract Management Process

  10. How much ? From whom ? What is purchased ? Volume ? eSMART (ABB SRM) Functionalities Who purchases (BAU) ? Business Intelligence NCMA 4th Annual Commercial Contract Management Conference Tools, Jewels, and Rules: Leveraging the Contract Management Process

  11. Supplier Base Profile • Today without eSMART • Must send out surveys to otherBAUs to obtain information • Must follow up with eMails andtelephone calls to obtain data • Must manually assemble into spreadsheet for analysis • Issues • Time & resource consuming • Data incomplete • No common supplier number • Future with eSMART • Data is available on mouse click • Data is combined for all locations of a supplier • Data is supplied by all ABB locations on eSMART • Profiles can be supplied by Division, by BA, by BAU, or by region • By click you get a bar chart profile NCMA 4th Annual Commercial Contract Management Conference Tools, Jewels, and Rules: Leveraging the Contract Management Process

  12. Click the “Reach-through” button in the Viewer. A new window will be opened. Reuse of Contracts • Today without eSMART • Must request information from other ABB locations using e-mails & telephone calls • Time & resource consuming Future with eSMART Reach through functionality from eSMART to CAFÉ SCM where contracts are stored NCMA 4th Annual Commercial Contract Management Conference Tools, Jewels, and Rules: Leveraging the Contract Management Process

  13. The Strategy! (Enabled by an Analytical SRM Solution) • Leverage total buying power • Commodity Segmentation • Pool and move volumes to fewer suppliers • Partnership contracts, for critical commodities • Premium Partners, to receive 80% of total volume • Prices based on 2-year forecasted volume, no guarantees • Management • Change program • Commodity teams • Cost savings metrics • Goals for cost savings • 15% >10% >5% NCMA 4th Annual Commercial Contract Management Conference Tools, Jewels, and Rules: Leveraging the Contract Management Process Drive your future!

  14. Supply Manager Benefits • Ad-hoc reporting that answers the five basic questions: • What? How Much? From Whom? By Whom? From Where? • Provides intelligence, “one version of the truth”, for decision-making • Links to Contracts • Dependency Ratios • Supplier Performance Monitoring • Risk exposure • Ensure corporate governance for contracts, compliance and spend • Improve quality and quantity of information • Move from awareness to knowledge in a repeatable process • More accurately forecast actual demand An SRM system will make you the most informed person at the negotiating table able to deliver sustainable growth under control NCMA 4th Annual Commercial Contract Management Conference Tools, Jewels, and Rules: Leveraging the Contract Management Process

  15. A B Contract C Why demand driven strategic sourcing Consider the impact of the following on your organization? • 10% better forecasting accuracy • Advance knowledge of peaks & valleys • Accurate long term cash flow predictions • True insight to demand drivers • Supplier partnerships directly supporting your business goals $/Volume Today NCMA 4th Annual Commercial Contract Management Conference Tools, Jewels, and Rules: Leveraging the Contract Management Process Time (yr)

  16. Who said risk is good - Where is Lady Luck when I need her? Make uncertainty your friend “Gambling is the fastest growing industry in the world” New York Times – September 25, 1995 NCMA 4th Annual Commercial Contract Management Conference Tools, Jewels, and Rules: Leveraging the Contract Management Process

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