Oracle Projects: Value of a Project-Driven Supply Chain

2. Oracle Projects:Value of a Project-Driven Supply Chain Selva Mudaliar, Master Principal Consultant Engineering & Construction Industry Special Teams Susan Rawlings, Director, Product Management Oracle Applications Development

3. Safe Harbor Statement 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 decisions. The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle.

4. Program Agenda • Why does managing a project’s supply chain matter? • Supply chain management for Engineering & Construction • A new approach for project driven supply chains • Oracle EBS Project Supply Chain Management

5. A Widening Chasm 72% of CEOsidentify the ability to manage projects as critical to the future growth of the business… just 11%are very confident of their ability to manage business critical projects Source: IPMA Study Sept. 2010

6. Manage Your Supply Chain Procurement Spend as % of Revenue Pharmaceuticals 56% Financial Services 22% Aerospace & Defense 47% Semiconductor 56% Indust. Mfging. 55% Chemical 53% Utilities 39% Metals & Mining 44% DOE/NNE Contractors 46% Other Industries 48% Petroleum 43% Eng. & Const.53% Procurement is a fundamental part of the Project Source: CAPS Research

7. ENTERPRISE PROJECT PORTFOLIO MANAGEMENT (EPPM) Oracle E-Business Suite RESULTS Strategic Alignment Project Financial Management Project Analytics Performance, Governance, and Control Single Business System Procurement Resource Management Risk Management Change Management SUPPLY CHAIN WIDE RESOURCES COO/CIO/CPO/PMO Corporate Finance Business Unit Executives Suppliers Ecosytem Buyers Planners Project Managers Resource Managers Program Managers EPPM Evolution Business Value PROJECT PORTFOLIO MANAGEMENT (PPM) RESULTS Programs Resource Management Risk Management Change Management Plan and Schedule Complex Projects DIVISION/LOB RESOURCES Resource Managers Program Managers Planners Project Managers Project Controls PROJECT MANAGEMENT (PM) RESULTS Plan and Schedule Complex Projects DEPT./GROUP RESOURCES Planners Project Managers Project Controls Strategy

8. Less than 10% of Finance executives believe in procurement savings Reported savings are discounted by >30% Gulf Between Claimed Savings & Financial Impact Procurement vs. Finance “Savings claimed by procurement are falling to the bottom line and can be proved” Perception Gap Source: Hackett Closing the Gap Between Claimed Savings on Indirect Spending

9. By Itself, Marginal Cost Reduction Has Limits • LOBs resist procurement’s involvement because • Lack domain expertise outside of negotiating deals • Fears that procurement will focus on cost to the exclusion of other critical success factors • Limited alignment with MBOs • Suppliers resent procurement as an adversarial agent of margin transfer

10. Procurement’s Disproportionate Margin Impact Small Changes. Big Difference. 5% Reduction in Spend Increases Profit by 50% Profit +50% • Increase Sales by 50% • Cut Overhead by 20% Spend -5% In order to obtain an equivalent impact, a firm would have to...

11. Typical Project Profitability • Typical Net Margins 4% • Wastage 40% • Engineering & Construction Source: Construction Standards Institute

12. Engineering and Construction Project Processes Process is identical but inputs and outputs are variable by project Sub-process methods and practices are similar but documents artifacts and data are variable by project Result of 1&2 above is RISK in every project • OUTPUTS • Deliverables • Engineering • Procurement • Construct • Start up & Commissioning • INPUTS • Labor • Materials • Equipment • Others

13. Project Risk and Attributes Risk is attributable to Cost Schedule Procurement/subcontractor Customer Environment Good Risk Management is Good Project Management!

14. Contributors to Wastage • Engineering & Construction • Materials not available on time • Productivity loss • Quality issues • Other

15. Traditional approach: Is There a Better Way? Disconnected plans, long planning cycles, high decision making latency BUYER SUPPLIERS PROJECT MGR CUSTOMERS Marketing Forecast Tier 1 Tier 2 Project Plan ? Acquisition Plan Budget & Forecast Mfg plans Sales Forecast Delivery Actuals Paper Supply Chains built on INVENTORY Unpredictable Project Delivery • Response 1: Maintain excess inventory • Response 2: Reserve production capacity • Response 3: Expedite everything!

16. Contributing factors to higher Margins • Engineering & Construction • Lower Administrative Costs • Lower Procurement Costs • Deliver earlier that schedule

17. Transforming from Cost to Value Driven Builds on Transaction & Cost Management • Customer Driven • Strategy • Planning • Execution • Integrated across and within organization • Networked – based on knowledge • Strategic Sourcing • Total Cost Reduction • Finance Collaboration • New Categories • Shared Services • PO Management • Overhead Reduction

18. Real Time Strategy, Planning and Execution Strategic Alignment, Collaborative Planning & Integrated Execution BUYER SUPPLIERS PROJECT MGR CUSTOMERS Project Specification Tier 1 Tier 2 Portal Operations Forecast Project Plan Customer Drivers Supplier commit Budget & Forecast SOV Acquisition Plan Forecast & Delivery Actuals Collaboration REDUCED LATENCY, FULL VISIBILITY • Benefit 1: Reduced planning cycle time • Benefit 2: Faster and better decision making • Benefit 3: Closed-loop planning and execution • Benefit 4: Enables best-in-class processes Supply Chains built on INFORMATION

19. Procurement Business Process Value Driven Procurement: Supporting Complete Cycle Supplier Management Cost Savings 3. Supplier Identification 2. Supplier Assessment 1. Spend Analysis 4. Sourcing 7. Order Fulfillment (Services Procurement) 8. Electronic Invoice Presentment and Payment Process Efficiency 5. Contract Lifecycle Management 6. Procurement Supplier Collaboration

20. Institute Supplier Management Improve Supplier Data, Qualification & Compliance

21. Procurement for Complex Services Managing Supplier Contracts Author Contract Track Progress Request for Service 4 Process Payment Advance Payment Source

22. Transforming from Cost to Value Driven Builds on Transaction & Cost Management • Customer Driven • Strategy • Planning • Execution • Integrated across and within organization • Networked – based on knowledge • Strategic Sourcing • Total Cost Reduction • Finance Collaboration • New Categories • Shared Services • PO Management • Overhead Reduction

23. Align Plan Report Analyze Execute Monitor Oracle Projects Supply Chain Strategic Alignment RESOURCE MANAGEMENT ENTERPRISE ENTERPRISE MANAGEMENT Collaborative Planning CAPITAL PERFORMANCE HUMAN Integrated Execution MANAGEMENT SUPPLY CHAIN MANAGEMENT

24. Project Driven Supply Chain Reduce Planning Cycle Time • Plan your entire value chain • Reduce the number of plans Make Better Decisions Faster • Improve planning decision making • Align operational and tactical decisions to strategic decisions Execute to Plan • Integrated planning and scheduling • Enforce planning decisions when promising orders Enable Best in Class Processes • Design collaborative planning processes • Plan demand and supply simultaneously and interactively

25. Align Plan Report Analyze Execute Monitor Oracle Projects Supply Chain Strategic Alignment RESOURCE MANAGEMENT ENTERPRISE ENTERPRISE MANAGEMENT Collaborative Planning CAPITAL PERFORMANCE HUMAN Integrated Execution MANAGEMENT SUPPLY CHAIN MANAGEMENT

26. Projects Supply Chain Alignment of the Supply Chain Decisions Project Planning/ Detailed Design Procurement Execution • Define products / technologies • Execution Strategy • Evaluate SC configuration • Risk Management Strategic Decisions • Order long lead time products • Make or buy products • Selection of subcontractors and suppliers • Risk Allocation via Contracts • Risk mitigation via capacity( material, suppliers) Tactical Decisions • Order commodities • Risk mitigation via inventory and time buffers • Inventory and time buffer sizes • Locate inventory buffers • Risk mitigation via capacity buffer (subcontractors) Operational Decisions

27. Aligning Project Strategies • Enable Supply Chain Planning • Enable collaborative project procurement planning • Insure your PMs and Buyers have the same insight about strategic objectives and decisions • Align your strategy to tactical and operational decisions by using objective-based criteria to filter supplier, project and planning information

28. Align Plan Report Analyze Execute Monitor Oracle Projects Supply Chain Strategic Alignment RESOURCE MANAGEMENT ENTERPRISE ENTERPRISE MANAGEMENT Collaborative Planning CAPITAL PERFORMANCE HUMAN Integrated Execution MANAGEMENT SUPPLY CHAIN MANAGEMENT

29. Plan, Design and Procure Engage all stakeholders in the planning process with integrated information and collaborative tools. Financial Planning WorkplanManagement Sourcing andProcurement

30. Align Planning Strategies and Schedules • Planning Center • Project Manager and Buyer have a complete view of the procurement plan and current status • Buyer uses selection criteria to ensure the right supplier is chosen • Project Manager incorporates lead times and negotiated prices into project schedule and financial plans

31. Improve Strategic Sourcing Outcomes • Predictive Decision Making • Analyze products, services and suppliers and supplier bids using strategic criteria • Insure the right decisions and reduce planning time • Select the best as sources of supply or to award bids

32. Align Plan Report Analyze Execute Monitor Oracle Projects Supply Chain Strategic Alignment RESOURCE MANAGEMENT ENTERPRISE ENTERPRISE MANAGEMENT Collaborative Planning CAPITAL PERFORMANCE HUMAN Integrated Execution MANAGEMENT SUPPLY CHAIN MANAGEMENT

33. Project Execution Align project, subcontract and procurement schedules to ensure on-time delivery Sub ContractManagement ChangeManagement Cost, Revenue,Billing and ProjectAccounting PhysicalProgress Forecasting

34. Reduce Schedule Delays • Execution Center • Monitor resource usage and availability • Reduce inventories by aligning supply chain planning with the project delivery schedule • Track supplier delivery schedules and performance • Quickly evaluate the impact of material shortages

35. Financial Control Aggregate information across applications for a full view of project performance Asset andEquipmentManagement PerformanceManagement FinancialManagement

36. Project Results • Project and Task Summaries • View financial summaries that measure performance against budgets or forecasts • Progress and schedule information allows you to monitor project results • View measures across projects or for individual tasks • Measure results based on key objectives to insure strategic alignment • Drill down to analyze supplier performance or product and service quality measures

37. Key Take-Aways • Cost containment approaches do not leverage an organization’s procurement expertise or promote collaboration with suppliers • Supply chains built on inventory contribute to wastage and reduce profitability • Information and decision driven supply chains that connect inputs to outputs insure strategic alignment with customer objectives and support collaborative planning and integrated execution • Powerful, information-driven applications like Endeca Extension for EBS and Oracle Project Supply chain tap unrealized value and contribute to successful and profitable projects

38. Q&A

39. Sessions to Attend

40. Oracle DEMOGROUNDS • Location Moscone West – W-068 Moscone West – W-089