Cap Gemini Ernst & Young
Business Benefits and ROI from
Oracle 11i iProcurement
Cap Gemini Ernst & Young UK ~ No 1 Forge End, Woking Surrey GU21 6DB
Tel: 44 20 74 34 21 71 ~ www. cgey. com
One of the world’s largest consulting firms
providing world class
management consultancy, IT design and
integration and
systems outsourcing services
on a global basis.
CGE&Y has over 6,500 employees based in
UK & Ireland.
© 2002 Cap Gemini Ernst & Young - All right reserved
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Services
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Competitive Advantages
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Management and technology consulting
Systems transformation
Systems management (outsourcing)
Local professional services
Customised Services and Solutions
Industry Experience & Documentation
Seamless approach to strategy, operations, and
information technology
Revenues: €1.1bn
© 2002 Cap Gemini Ernst & Young - All right reserved
“Our culture is one which
encourages people
to aim high,
to exceed expectations,
and
to have fun while doing it!”
© 2002 Cap Gemini Ernst & Young - All right reserved
Executive Conclusions
“CGE&Y’s initial project with Oracle 11i
Financials was extremely successful. We
have continued this progress with the
Procurement and HR modules. This has
made CGE&Y a more effective organisation,
better able to deliver superior solutions to our
clients.”
Brian Bodsworth, CIO
CGE&Y, UK & Ireland
© 2002 Cap Gemini Ernst & Young - All right reserved
© 2002 Cap Gemini Ernst & Young - All right reserved
Executive Conclusions
“CGE&Y had four strategic requirements to improve
our sourcing operations
 Reduce the cost of our external purchases through
strategic sourcing
 Use highly integrated systems to support the
simplification of our purchase to pay processes
 Produce management information to monitor and
enforce compliance for sustained cost savings
 Web enabled technology for low maintenance
cost, whilst allowing access for all staff to allow decentralised purchasing processes.”
Brian Bodsworth ,CIO
CGE&Y, UK & Ireland
© 2002 Cap Gemini Ernst & Young - All right reserved
Cap Gemini Ernst & Young UK & Ireland
Procurement Challenges
Develop Strategic Sourcing Expertise
Improve Relationships with Suppliers
Eliminate Localised Procurement Process
Correct Inefficient Procurement Systems
- Not integrated
- Manual workarounds
Achieve a Competitive Advantaged Cost Structure
© 2002 Cap Gemini Ernst & Young - All right reserved
Cap Gemini Ernst & Young UK & Ireland
Procurement Challenges
Develop Strategic Sourcing Expertise
Solution:
Improve Relationships with Suppliers
Strategic Sourcing &
Business Process Change
Eliminate Localised Procurement
Process
Correct Inefficient Procurement
Systems
Not integrated
Manual workarounds
Oracle 11i
iProcurement
Enabled
System to Sustained
Process Improvements
Achieve a Competitive Advantaged
Cost Structure
© 2002 Cap Gemini Ernst & Young - All right reserved
Responses to Procurement Challenges
Solution :
Oracle 11i
iProcurement
One Stop Shop for all Procurement
 Web enabled Application
Offers spend Analysis and Supplier performance tracking
Increases strategic focus by automating and simplifying
routine transactions
Enables discipline around the purchasing process
eliminating non preferred vendor spending
Control & Visibility of Spend before Commitment is made
© 2002 Cap Gemini Ernst & Young - All right reserved
Procurement Pre-Oracle 11i
Resulted In
• Disparate Systems & Processes
Various Prices Realized
• Localized Buying
Discounts Based on “Local Volume”
Economies of scale lost
• Manual Purchasing & Approval
Processes
• Poor Service
Manual Administration Effort
• Lack of Standardisation
Low account focus and priority
Poor Supplier Management: Loss of
leverage through proliferation of
products & service standards driven by
supplier variances.
NO Visibility of Spend before Commitment was made!!
© 2002 Cap Gemini Ernst & Young - All right reserved
Post-Oracle 11i - Procurement &
Business Process Re Engineering
Results!
1 Instance
Complete
•Information Available to
Negotiate Lowest Price
with Key Vendor
Lower Prices for Products &
Services
•P.O. Mandatory
Spending diverted (Controlled) to
Preferred Vendors
•Automated Purchasing
& Approval Process
Administrative savings with
automated business process
enabled by iProcurement
Procurement
Information
© 2002 Cap Gemini Ernst & Young - All right reserved
Executive Conclusions
“Strategic sourcing in CGE&Y has been enabled by
Oracle iProcurement. We now have better visibility
into our detailed spend, commitments & supplier
contracts.
CGE&Y is now enabled to strategically source,
leveraging our expenditures through fewer suppliers
improving terms. Supplier consolidation promotes our
technology governance strategy, whereby we
determine the best technological solution to a
particular type of problem.
We use these products and services wherever
possible rather than starting with a ‘clean sheet of
paper’ on each project.”
Wendy Irvin, Chief Purchasing Officer
CGE&Y, UK & Ireland
© 2002 Cap Gemini Ernst & Young - All right reserved
Strategic sourcing delivers benefit but
eProcurement sustains benefit over time
eProcurement must be implemented as part of a Sourcing Transformation
programme in order to deliver sustainable benefit
Using eProcurement as part of an Sourcing
Transformation project
• Increase benefit
• Increase speed to benefit
Sourcing
Transformation
Speed
Lifecycle costing/total cost of ownership
Transaction costs (requisition, order,
approve, pay)
Payment terms management
Tax / customs optimisation
Typical benefits
achieved (as %
of prices)
3-5%
 Demand Management, e.g.
Additional value
Benefit
 Total Cost Management, e.g.
Commodity/
Supplier
Management
alone
eProcurement alone
Standardised items
Reduced contract “leakage”
Visibility of contracts
Policy compliance and measurement
Item substitution
Requirements and specification
management
5-10%
 Supply Base Management, e.g.
Volume leverage/redistribution
Bid-based re-negotiation
Price/performance benchmarking
Enhanced competition
Supply base consolidation/preferred
suppliers
5-10%
Source: CGE&Y
Time
Plus 40-50% of the cost of buying the goods/services
The total opportunity for large companies could be
around $1bn +
© 2002 Cap Gemini Ernst & Young - All right reserved
Procurement Delivered Cost Reduction
2002 2003 2004
0%
Actual Forecast Forecast
-1.1%
External
Spend
-2%
-4%
-4.8%
-6%
-8%
-8.7%
-10%
These are REAL Benefits, not contracts. These savings are DELIVERED, IN
PLACE and are CONSISTENTLY MONITORED
Savings are extracted to the P&L or used to selectively to Drive Revenue Growth
© 2002 Cap Gemini Ernst & Young - All right reserved
Executive Conclusions
“Before iProcurement we did not have a formal
procurement team and much of the purchasing
was done locally, in an uncontrolled manner.
With Oracle 11i, procurement is now centralised.
The system has excellent management
information, enabling a more disciplined process
which allows us to consolidate purchases with key
vendors to acquire lower prices. Our purchase
order mandatory process achieves compliance
with approved vendors.”
David Strickland
Purchasing Consultant
CGE&Y, UK & Ireland
© 2002 Cap Gemini Ernst & Young - All right reserved
Procurement Contract Yearly Savings
Delivered to P&L
Savings are Cumulative
2002
€4.8M
2004
€ 36.9M
2003
€ 20.1 M
Enabled by Oracle11i iProcurement
© 2002 Cap Gemini Ernst & Young - All right reserved
Procurement - Where have we
received the Benefit?
2002
€4.8M
100%
Communications
80%
60%
IT
71%
Other
29%
Print
40%
Cleaning
20%
0%
2002
© 2002 Cap Gemini Ernst & Young - All right reserved
Electricity
Couriers
Stationery
Procurement - What Benefits are
Forecast and Targeted?
2003 Cumulative Gains
€20.1M!
100%
Data Comms
80%
IT
62%
Other
17%
Print
60%
Cleaning
Flex Resourcing
40%
21%
Pensions
20%
Electricity
Office Consumables
Couriers
0%
2003
© 2002 Cap Gemini Ernst & Young - All right reserved
Procurement Areas of
Contract Savings
2004 Cumulative Gains
€ 36.9M
Flex
Resourcing
IT
60%
11%
-6%
Cost
Reduction
Other
29%
-11%
-7%
Cost
Reduction
Cost
Reduction
© 2002 Cap Gemini Ernst & Young - All right reserved
Executive Conclusions
“When CGE&Y-UK &I made the
decision to implement a strategic
sourcing process using purchasing
best practices, Oracle's iProcurement
module was an enabler and allowed us
to pin down the change.
The system prevents employees from
reverting back to the old way of doing
things over time. The sourcing gains
will continue, and not be a one time
occurrence.”
Jeff Clarke, Project Manager
CGE&Y, UK & Ireland
© 2002 Cap Gemini Ernst & Young - All right reserved
Example of Process Improvement
World Class end-to-end automated flexible
resource process for our external contractors!
“Before Oracle iProcurement, each
business would cut its own deals,
clearly not an optimal situation.
An additional benefit enabled by
Oracle Technology is the Self Billing
function for our Flexible Resource
Process. We eliminated a weekly
invoice for each contract worker
saving €670k annually.”
Nicholas Mabin
Director Recruitment & Resourcing
CGE&Y, UK & Ireland
© 2002 Cap Gemini Ernst & Young - All right reserved
Flexible Resource Self Billing
Improvement
Yearly
Invoices
16,200
Administrative Savings of
€ 670k per year!!
0
Post Oracle 11i
Pre Oracle
360 contractors Self Billing via Timecard
45 invoices/Yr
© 2002 Cap Gemini Ernst & Young - All right reserved
Using the Benefits Achieved to Direct
Business Growth
In today’s extremely competitive marketplace,
pricing flexibility with the lower cost structure
enabled by the Oracle Implementation and
outstanding execution gives CGE&Y the ability to be more
aggressive in obtaining profitable new business.
© 2002 Cap Gemini Ernst & Young - All right reserved
Strategic Procurement strategies
with our key IT Suppliers have fuelled growth
“We developed an innovative contracting approach which is allowing us to drive
incremental growth and increased earnings of €10.4m across 4 years.
This is a complex contract process and Oracle eProcurement allows us to
manage and monitor progress. Top-notch execution and Oracle have allowed us
to achieve a competitive edge..... enabling us to win extra business”
€15M
€10M
9.0
12.. Revenue
0
Shareholder Value Impact
+ € 7.7M
6.0
€5
4.2
3.0
1.0
3.1
2.1
€0
2003 2004 2005 2006
© 2002 Cap Gemini Ernst & Young - All right reserved
Earnings
iProcurement Initiative
Financial Summary
Financial Performance Measures
iProcurement Initiative
Project Net Present Value
(Increase in Shareholder Value) = € 118.1M
IRR >500% infinite
ROI >100% (6515%) (Oracle Definition)
Pay Back Period <1 Year
© 2002 Cap Gemini Ernst & Young - All right reserved
Productivity & Growth Benefits NPV (€M)
iProcurement Initiative
€ (M)
NPV
€ 118.1
Project
Costs
Incremental
Growth
Cost
Productivity
© 2002 Cap Gemini Ernst & Young - All right reserved
Economic Value Measures Total
Business Value Effect!
Economic Profit
Change vs. Base Case
€ 45M
31.7
€ 30M
32.4
33.1
17.9
€ 15M
€ 0M
2.9
Successful Strategic Sourcing Upfront Effort
enabled Project to be Self Funding
2002 2003 2004 2005 2006
Economic Profit is a complete measure that takes into account earnings, as
well as the assets employed to generate those earnings.
© 2002 Cap Gemini Ernst & Young - All right reserved
iProcurement
Executive Conclusions
Executive Conclusions
“The strategy of implementing
Oracle 11i iProcurement
really paid off. The low system
implementation cost meant that we
were more than able to fund the whole
project, including strategic
sourcing and process simplification,
from year one savings alone!”
Brian Bodsworth , CIO
CGE&Y, UK & Ireland
© 2002 Cap Gemini Ernst & Young - All right reserved
Executive Conclusions
“The Rainbow initiative was led by the
Uk & Ireland Purchasing Team, But the real
key to success was facilitated to all of the
areas of the business in a joined up way.
Rainbow touched every facet of CGE&Y. We
used cross functional teams from many
disciplines (PRM, consulting, accounting, legal,
facilities...). Without this teamwork we would
not have achieved these sizable gains so
quickly.”
Wendy Irvin
Chief Purchasing Officer
CGE&Y, UK & Ireland
© 2002 Cap Gemini Ernst & Young - All right reserved