Purchasing and Logistics Christer Hagberg 2013-02-06

1. Purchasing and LogisticsChrister Hagberg2013-02-06

2. Agenda • Background • The road map to world class procurement • The Purchasing Organization • Volumes • Challenges ahead

3. Agenda • Background • The road map to world-class • The Purchasing Organization • Volumes • Challenges ahead

4. Through the merger of National Rail Administration (BV) and the Swedish Road Administration (VV) strategic purchasing were given high focus • The National Rail Administration and the Swedish Road Administration were merged 2010-04-01 into the newly formed authority Transport Administration • One of the reasons for the merger was to identify and realize cost savings • In the new organization, strategic sourcing has been given high focus • To reach the target “The best Purchasing and Procurement in the world" the projects SISU 2013 was initiated

5. Agenda • Background • The road map to world-class • The Purchasing Organization • Volumes • Challenges ahead

6. Strategy Process Organisation IT During the summer of 2010 the Purchasing organisation was analysed in four dimensions; strategy, process, organisationand IT • Strategy • Goals and vision for the sourcing and procurement activities • Overall purchasing strategy • Category Strategies • Purchasing policy and regulations • Monitoring of internal purchasing performance • Procurement Strategy • Vendor Strategies & Policies • Process • Review of all aspects of the purchasing process and its main activities, e.g.: • Category Strategy Development • Assortment and vendor management • Supplier selection • Procurement and contracts • Ordering • Follow-up and development of purchasing organization • Vendor Monitoring and Development • Organisation • Overall responsibility and roles in regard to the process, purchasing categories, etc. • Reporting requirements and structure • Design of organization • Competence profile • Education and training • IT • Available IT support, tools and templates • Access to integrated information and data • Ability to extract quantitative data for monitoring and evaluation

7. Based on the gap analysis a transformation map was created in order to reach the goal “a world class procurement organization” 2013 H2-2010 2011 2012 Processkarta nivå 3-4 framtagen Mallar och rutiner kopplat till processaktiviteter etablerade Dokumentation av processen genomförd Kommunikations- plan framtagen Inköpsprocessen implementerad i hela organisationen Utbildning av inköpsprocessen genomförd World Class Procurement Visualisering av processen på intranätet Ansvarsfördelning kopplat till processaktiviteter Kartläggning av processer Processkarta nivå 1-2 framtagen Kategoriteam våg 3 etablerat Process Kategoriteam våg 2 etablerat Kategoriteam våg 1 etablerat Implementerad upphandlings-planering inkl. systemstöd Implementerad produktionsplan Reviderad kategoristruktur Utbildning genomförd Beslutad vågplan Pilotkategoriteam Bemanning: Besparingar Identifierade & levererade Process för produktionsplan framtagen Reviderad /utvecklad process för upphandlings-planering framtagen Systemstöd för uppföljning implementerat Uppföljning av alla delar Pilotkategoriteam för ”Bemanning” etablerat Etablerat leverantörsteam för A & B leverantörer Kategoristruktur etablerad Systemstöd för avrop implementerat, go live Uppdaterade ramavtal i CTM Etablerat operativa planeringsgruppen Uppdaterad spendanalys genomförd Uppföljningsmall (integrerad med FIA) upprättad och i bruk Process för mätning och uppföljning av besparingar Automatiserad rapport för nyckeltal framtagen Kommunikation förändringsledning genomfört Rutin för upphandlingstidplan framtagen Spendanalys genomförd Strategy Genomförd och utvärderad pilot i Investering Nord Genomförd mappning av kategorier mot avropssätt & inköpskategori-strukturer Avtalsdatabas implementerad Utbildning för ramavtals- ansvariga genomförd Etablerad ramavtalsorganisation & ramavtalsförvaltning Inköpsråd och inköpskommitté etablerat Besökt 5 st handelskammare Kravspecifikation för inköpssystem framtagen Leverantörsteam etablerade Riktlinjer för ramavtalshantering framtagna Nöjdleverantörs-index (NLI) framtagen och i bruk Ramavtalsindelning genomförd Matchning av TRVs kravställning mot ESVs kravställning, avstämning med verksamheten pågår Leverantörs- segmenteringsmodell framtagen Kravställning mot PLS2 genomförd IU:s roll och mandat etablerad i hela organisationen Avropsmall + kommentarer/ anvisningar framtagna Upprättat riktlinjer för leverantörsuppföljning och utveckling UCLG och UCSG etablerat Upprättat riktlinjer för att attrahera utländska leverantörer Ny inköpsorganisation utvecklad inkl. roller & ansvar, dimensionering, struktur etc. Marknadsundersökning (analys) avseende inköpssystem Implementering av befintliga ramavtal Översatt upphandlingstidplan CTM – utbildning genomförd Beställar- och upphandlarstrategi framtagen CTM implementerad Supplier management Structure and working methods System support and tools

8. The transformation was conducted through nine sub-projects SUB-PROJECTS IN SISU 2013 • The following sub-project are running within SISU 2013: • Process development – a common process and templates for the purchasing organization • Procurement planning– long and short term planning and packaging of tender requests • Supplier development– evaluation and development of suppliers • KPIs– follow up of the purchasing area • Framework management – database and organization for framework agreements • Implementation of an ordering and follow up system – IT-solutions and support to the process in order to generate better follow up • Competence analysis and training – analysis of the competence and skills within the organization and development of training program • Category management– reduce the costs for selected categories (e.g. technical consultants) • Change management– communication to the employees regarding SISU 2013 1 2 3 4 5 6 7 8 9

9. Process development – A common process and templates for the purchasing organization A process-oriented approach • Creates a uniform approach towards the market • A platform for continuous improvement and sharing tools and templates within the Transport Administration • Clarifies responsibilities between the different roles in the process and describe the connections to the main processes • Descriptions of activities and responsibilities as well as templates and tools can be fund on the Intranet

10. Procurement planning – The purchasing schedule is being improved Time frame Purchasing schedule Focus 1 year Focus 18 months Level of planning Procurements Goals: 80% of the procurements will be presented in the plan along with correct information (18 months). The schedule is updated each month and can be found on the Administration's website Forward planning within the plan • Forward planning within the plan will be increased to 12 months for contracts and 4 months for services Flexibility / Security • Level of certainty • regarding times • specified in the plan Certain +/- 2 months Approximately +/- 6 months Times not definite Packaging and time coordination • Packaging of procurements to increase competition and time coordination in order to meet market needs and the opportunities to deliver.

11. The procurement volume has been categorized into four category families Category families Category class/category ~SEK 3 billion ~SEK 3 billion ~SEK 25 billion ~SEK 5 billion Goods Services Contracts Technical consultants 27 category teams: railway-specific material Staffing Base contract road Planning & design IT Meetings & travel Base contract rail Project administration Info & communication Paving Specific technical areas of expertise Facility management Construction work Office equipment BEST Infrasystems Land

12. Cross-functional category teams have been established in order to generate savings Responsibility for category family Purchasing Director Category team Direct materials and services Purchase development Responsibility for the category Category team members (Procurement Officer, Project Manager, Specialist, Operations or other position) Material provision Indirect materials and services Purchasing South District Purchasing West District Purchasing East/Stockholm District Purchasing North District Purchasing Central District Category team

13. All teams follow a pre-defined work cycle • Evaluation of suppliers • Analyse category profiles Work cycle for the category teams • Compilation of savings • Set goals for the category • Ongoing information to important stakeholders • Revise/develop and decide on strategy for the specific category • Procure/renegotiate according to the new strategy • Monitoring of savings • Monitoring and development of suppliers • Introduction of new contracts/suppliers/policies • Establish a plan for suppliers (development plan, KPI, etc.) • Determine and implement mechanisms for measurement of savings

14. Four new procurement forums were established for early identification and evaluation of larger tenders • Procurement forums • Procurement Committee • Procurement Council • Procurement Managers-Large Group • Procurement Managers-Small Group • The Director General has responsibility for tenders larger than 300 MSEK • The Board has responsibility for tenders larger than 500 MSEK Board Committee Internal audit Director General Executive Council Central functions Operation UCLG UCSG

15. Agenda • Background • The road map to world-class • The Purchasing Organization • Volumes • Challenges ahead

16. As of 1 January 2013, Purchasing and Logistics has a new centralized organisation Purchasing Director Direct materials and services Purchase development Material provision Indirect materials and services Purchasing South District Purchasing West District Purchasing East/Stockholm District Purchasing North District Purchasing Central District Purchasing Manager Purchasing Manager Purchasing Manager Purchasing Manager Purchasing Manager

17. Agenda • Background • The road map to world-class • The Purchasing Organization • Volumes • Challenges ahead

18. The Swedish Transport Administration conducts procurements for more than SEK 30 billion annually. • SPEND ANALYSES Spend volume per category family Top ten suppliers (60% of total volume) 17.172 Maintenance construction 9.493 4% Technical services 4.745 External services 1.037 Track superstructure 1.024 IT & Telecom 815 Operation 611 Facility management 560 Not classified 545 Direct material 281 Electrical facilities 248 Travel 88% 216 Signal facilities 212 Vehicles and machines 164 Office supplies 145 Personal related costs 103 Telephone facilities 31 Standard products 25 Railway yard facilities 23 Other facilities 19 Transports 13 MSEK Other goods and services 3 37.485 TOTAL Source Agresso & M3, period 2010.04 – 2011.03

19. Around 100 tender request documents are sent per month Investments Profit centres Major Projects Maintenance Central Functions

20. There are few tenders, particularly with regard to rail Trend; average number of tenders for road and rail contracts respectively (broken line) and the number of procurements (bars) Number of procurements - Rail Number of procurements - Road Average number of tenders - Rail Average number of tenders – Road Trend line (Average no tenders - Rail) Trend line (Average no fenders - Road) Refers only to object-specific contract procurements. The bars show the number of completed procurements and the line shows the average number of tenders.

21. Important drivers for supplier market development • Long-term stability in business opportunities • Easy and reliable access to purchase plan • Distribute RFQ´s all over the year! • Open competition • Transparent tendering process • The fundamental principles for public procurement: • The principle of non-discrimination • … equal treatment • …. transparency • …. proportionality • …. mutual recognition

22. Further actions re. the supplier market… Regular meetings with suppliers • After tendering process; feedback and improvement • With all tenderers if possible • During contract period; supplier performance • With existing suppliers Trafikverket supplier forums • National • On an aggregated strategic level • Top 20 suppliers (selected by Trafikverket) • All suppliers (open for all) • Management level • Regional • Regional suppliers • Focus on actvities and business opportunities in the region

23. Road maintenance contracts • General provisions: Turnkey contract (ABT06) • The contractor is responsible for the planning • Technical description on code level of what should be done and priced according to the bill of quantities • Technical description in functional requirements • The contractor may decide production methods, materials, etc. within a certain frame. • Tender evaluation: 1. Qualification criterias 2. Lowest price • In total 120 road maintenance contracts • Appr. 25 contracts are tendered every year • Contract period: 4 year with 1+1 year optional

24. Agenda • Background • The road map to world-class • The Purchasing Organization • Volumes • Challenges ahead

25. Challenges ahead • Limited competition in the market • Few tenders, particularly with regard to rail • Large number of procurements – risk of mass production • The number of direct procurements • Lack of forward planning in projects • The internal planning process • Recruitment and competence supply • The age curve of the procurement employees

26. Thank you!