Tech Mahindra’s Sourcing and Procurement Solutions Leveraging Ariba On Demand Spend Management Suite Copyright © 2013 Tech Mahindra. All rights reserved. 1 Agenda Challenges, Trends and Business Imperatives driving Sourcing Transformations Our Solution Sourcing Investments Our Capabilities and Experience Our Value Proposition Challenges, Trends and Business Imperatives driving Sourcing Transformations Objectives of the Sourcing and Procurement Organization To be successful, Procurement organizations must develop capabilities and allocate resources effectively to manage across a wide range of critical processes Strategic Sourcing Analyze Demand Analyze Supply Market Develop Sourcing Strategy • Sourcing process feedback and improvements • Sourcing opportunities • Performance management requirements Supplier Management Monitor Contract Compliance Price data Service performance data Off-contract spend data Customer satisfaction levels Process cost and compliance data • Purchasing trend data Request • • • • Contract commitments Service level agreements Process changes Policy changes Track Evaluate Measure Identify and Evolve Savings Supplier Customer Address Supplier Capture Performance Satisfaction Leakage Relationships • • • • • Transaction Management Negotiate Execute Select Terms and Supplier Supplier(s) Conditions Contracts Order Purchase • Performance management process • Standard metrics • Issue escalation support Service Track Report • Focused on reducing non personnel cost base • Periodic – typically every 1-5 years • Selects supplier solutions and negotiates contract terms and conditions • Ensures contract compliance • Manages integration of new supplier solutions and purchasing processes • Identifies sourcing opportunities • Supports continuous improvement focus • Ensures purchasing process transaction efficiency • Manages day-to-day supplier relationship • Addresses customer satisfaction issues • Captures/reports transaction and process information to support Strategic Sourcing and Supplier Management activities Market Trends: The New Normal in Spend Spend in Cloud Vs Spend under Management You will operate with: Fewer people, Less infrastructure Lower cost structure Higher volatility & risks Success will require: More agility Variable & flexible operating models Greater responsiveness and collaboration across your value chain Technology platform for automating and optimizing commerce processes shared among trading partners Community of pre-enabled trading partners to quickly discover, connect, and collaborate Capabilities to augment internal resources with alwayson category expertise and commerce services Companies will increasingly rely on a technology-enabled business process where technology and capabilities are managed outside their enterprise and where collaboration between various parts of the value chain will become even more important. Forces Driving Business: Voice of Customer What are customers demanding and business drivers Improved operational efficiencies Enhanced business value Reduce sourcing and procurement costs Increase spend under management Procurement Landscape rationalization Rationalize vendor base Address unconventional spend categories Viz. Services, Packaging and Marketing, Fuel and Energy, Logistics and Travel Improve Contract Compliance Normalize and Improve Spend Visibility Rapid, low-cost; low-risk deployment of supply management solutions and services Significantly Cheaper Pay as you go model compared to behind the firewall solutions Our Solution Spend Management in Cloud Tech Mahindra’s Sourcing Solution Technology platform for automating and optimizing commerce processes shared among trading partners Community of pre-enabled trading partners to quickly discover, connect, and collaborate Capabilities to augment internal resources with always-on expertise and commerce services Ariba a leading provider of collaborative business commerce solutions and provides the technology and community platform for business-to-business commerce, delivering the most efficient and effective way for Tech Mahindra a leading provider of Spend Management Solutions brings in capabilities and experience in Sourcing, Contract Management, Procurement, Invoice Management and Spend Analytics services Tech Mahindra’s Sourcing Solution Virtual Center of Sourcing and Procurement Excellence – How it Works? Review Demand and Supply Strategy TechM Consultant – Client Location Develop specifications and Conduct Market Analysis Evaluate Bids and Conduct Negotiations Implement, Savings and continuous improvement TechM BPO TechM IPO China Direct TechM– Technology + In direct Global Supply Base - Indirect IPO India - Direct India Supply Base - Direct Global supply base Data Services Transactional Procurement Develop RFP and Solicit Bids China supply base Client Sourcing & Procurement Mgr Procure -2-Pay Process Outsourcing Our Solution - Approach Tech Mahindra team will utilize its proven Strategic Sourcing approach to address your sourcing requirements 4 weeks Review Demand and Supply Strategy Gather current category spend and volume Review contracts and commitments 2 weeks 6 weeks Develop Specifications and Conduct Market Analysis Develop RFP and Solicit Bids Create spec sheet Draft RFI/RFP Develop industry and vendor overview Distribute and support supplier questions and responses 8 weeks Evaluate Bids and Conduct Negotiations Analyze responses Vendor negotiating/feedback 4 weeks Implement and Achieve Savings Draft Contract Implementation and Roll Out Usually multiple rounds Review forecasts or major future changes Identify demand management opportunities Identify potential opportunities Develop target and vendor list Recommend sourcing/ negotiating strategy Develop scoring and analytical templates Develop target SLAs Vendor selected? The timelines presented above are indicative . We would need insights into the commodities being sourced, current stage of vendor development, technologies being used to source etc Key Definitions & Understanding “Project” means a specific sourcing project in a particular services or commodity category initiated by Subscriber for Subscriber’s internal use and benefit, and can consist of any one event or more related events An “Event” include: (a) on-line auction, (b) sealed bid, (c) e-negotiation, (d) a RFQ, RFI, or RFP, or (e) Quick Survey. A Project will be counted for purposes of Usage Limits only in the Month in which the Project is created within the Solution A monthly Project cap is assumed and calculated at 5X the licensed User count. “User” means an individual Subscriber employee or contractor who is provided with access to the Ariba Sourcing solution which permits the User to perform any activities and access any functionality available to Subscribers on the Solution, and permits the User to receive Enablement Services as described in the applicable Documentation. “Team Member” means an individual Subscriber employee or contractor who is provided access to the Ariba Sourcing Professional solution to perform limited activities on the Solution (contrasted with Users who are provided with access to additional functionality). Team Members do not include suppliers or other third parties (other than Subscriber’s contractors) interacting with Subscriber via the Ariba Sourcing Solution. The minimum Subscription Term for this package is three years. Our Capabilities & Experience TechM can bring together procurement and supply chain competencies of multiple groups to maximize impact of Client’s procurement transformation Operations and Supply Chain Strategy • Belgium-based management consultancy specializing in Supply Chain and Logistics • Experience in Supply Chain planning, network design and performance improvement • Around 65 Consultants Business and Procurement Strategy A Chicago based Business Consulting Group Company • Deep expertise in category management, strategic sourcing and Procurement organization transformation Around 50 Consultants Sourcing Group • 120 Procurement specialists based primarily in China and India • Multi-industry Procurement expertise in Engineered Products and Manufacturing Services • Network of 300+ pre-qualified suppliers Procurement Center of Excellence Procurement Operations Group • India-based group providing outsourced Procurement, Customer Support, FAO and other services to customers worldwide • Expertise in Managed Procurement Services • 10000 + member group Procurement Technology Services Group Over 10 years experience and more than 150 associates More than 5 million person hours of experience Partnered with best of breed spend management application providers like Ariba, SAP SRM, Oracle, BasWare, Zycus Sourcing Group Expertise: TechM’s International Sourcing and Procurement offices in China and India TechM Program management Product sourcing Component / subsystem sourcing Raw Material sourcing • 120 + Sourcing Engineers with Technology & Quality Background - China and India • Sourcing worth > US $ 300 Mn / yr • 20-25% savings on sourcing from China • Average of 6+ years experience from different industry verticals • 100% localization of resources with Bilingual skills • 300+ qualified suppliers Engineering Change Management Labs Qualification Tech Mahindra’s broad range of categories expertise Sample Areas of Competence Direct Materials Metals – – – and Plastics Steel Aluminum Rare Metals Machined Components – Castings – Extrusions – Stampings – Forgings – Roll-forming Plastics – Polyethylene – Polystyrene Plastic – – – Components Injection Molding Compression Molding Plastic Extrusion Other – Electronics/Embedded Design – Motors – Pumps – Tires – Glass – Gases and Chemicals – Heat Treatment – Paint Indirect Materials MRO Pallets Packaging Utilities Cleaning Supplies Chemicals Safety Supplies Fasteners Corporate & Overhead Telecomm-Related – Long-Distance / Local – Cellular IT-Related – LAN/Desktop – Data Centers – PCs and Peripherals Media/PR-Related – Media Buying – Public Relations Overhead and Administrative – Office Supplies – Furniture & Fixtures – Temp Services Facilities-Related – Security – Signage – Property Management Professional Services – Consulting – Legal HR and Benefits – Pension – Relocation Tech Mahindra’s experience across Strategic Sourcing, Technology and Procurement operations Function Representative Experiences Strategic Sourcing Technology Low Cost Country Sourcing Procurement Process outsourcing experience For a leading provider to the Nuclear Industry, conducted comprehensive Strategic Sourcing and Supply Management initiative for direct material and MRO categories For a Large US based brewery company, helped establish Strategic Sourcing group , helped source ingredients, marketing equipment , indirect material, and logistics Ocean Freight) functions. Accelerated capture of savings, established and trained new organization, and navigated regulatory issues. Savings exceeded $150 million. For an RV manufacturer, conducted comprehensive manufacturing and spend assessment and defined sourcing strategy for major commodities For a leading steel manufacturer performed spend analysis and sourced MRO items resulting in savings upto 10% For a leading oil major in US currently support ing their global Ariba instances Level 1 functional help desk, Level 2 production and Level 3 application support For a Large Indian steel conglomerate implemented complete suite of Ariba spend management solutions For a Large Pharmaceutical company currently providing upgrade and application support services Helped qualify 3rd party plastics labs in China for US consumer major Supplier qualification for an AutoTier 1 Electronics customer in China LCCS for motors for a US based consumer durables major for their washing machines and been able to source 1.5 Million motors worth $14.5 Million and helped save 10% on the spend US based Truck OEM – Sourced finished goods from India – Savings 22% on TCO basis For a large US based contract procurement provider provided procurement order processing and RFQ processing support For a large large US and UK based expense software provider supported their procurement research, spend analytics and expense management processing support Our Proposition Our Value Proposition We work closely with our clients and leverage internal staff and build internal skills Key Tech Mahindra Differentiators Structure work and relationships around how clients want to be served. We almost always have a client team who works alongside of us in order to build client experience. We firmly believe the clients must own the sourcing process and lead all negotiations. We support the sourcing group and use our expertise and tools to shorten the time to vendor negotiation and selection. Leverage a repository of tools and methodologies that can help speed the process. These include: - Category overviews and vendor profiles that can be used with clients - Category sourcing strategies that can be used as a foundation for client specific opportunities - Standard RFIs and RFPs for all the direct commodities (Auto Components, Metal Sheets, Castings, Forgins, Fuel Cells, Wafers, Electrodes, Indirect goods and services categories etc that will provide the baseline for Client’s RFPs Employ seasoned professionals with a unique blend of sourcing and technical skills from across the Mahindra family of companies. We can call upon our technical experts as necessary to speed the RFP development process. Provide the experience of blue-chip firms, but more flexibly and cost-effectively and deploy smaller, more experienced teams than do other top-tier firms. The team serving customers has sourced these services multiple times before and can shorten the time to RFP and to contracting Sourcing Projects Key Activities and Deliverables Sourcing Event Support Services - Work Breakdown Structure Steps Activity Sub-activity 1 Supplier Research TechM will provide Customer with an initial list of suppliers and a projectspecific RFX for use as a tool to understand suppliers’ capabilities • Supplier Research will target the appropriate number of suppliers and regions, based on the commodity being sourced and Customer’s unique requirements within the following regions: • Maximum of 5 suppliers will be targeted to receive the RFX event 2 Data Management TechM will provide Customer with data and specification management Execution support for creating a data package that is comprehensive, commodityspecific, and logically lotted. • Data Collection Template - TechM will provide a commodity-specific Data Collection Template for Customer, explain the definition and relevance of all fields, and advise Customer on how to populate the template. • Data Collection – TechM will conduct regular meetings to facilitate this stage. • TechM will conduct up to three missing data reviews. The first review will occur following TechM’ receipt of 90 percent of the requested items/information. After each review, TechM will compile a detailed ‘missing data’ report. • This service does not include collection by TechM of Customer’s data, for example: pulling drawings/specs/prints from a Customer location or repository; accessing and pulling information from Customer ERP, MRP, or other data repositories; contacting incumbent or other suppliers to collect tooling information or other data Sourcing Projects Key Activities and Deliverables Sourcing Event Support Services - Work Breakdown Structure Steps Activity Sub-activity 3 RFX Creation and • TechM will manage the RFI distribution, collection and verification for Management Customer • Access to the project documentation • Navigating through the project site • Understanding the project timeline and key supplier steps • Knowing the major project milestones • Obtaining answers to all project-related questions • When necessary, TechM will add an RFx Addendum that provides information on TechM’s role in supplier coordination and instructions for contacting TechM to ask questions 4 Auction and Price Negotiations • Supplier troubleshooting • Surrogate bidding services • Proactive supplier management 5 Project Close out TechM will prepare a document for Customer that summarizes project knowledge, such as the strategy employed, supplier responses, and other information gained during the project. This document will be provided to Customer in a standard TechM format. TechM will conduct a close-out call to review results of the project. A Case in Example- Strategic Sourcing @ Global Soft drink and Beverage Company e-Sourcing Strategic sourcing process using an electronic tool Execute, expedite, support & optimize sourcing TCCC eSourcing Center of Excellence (CoE) Established in 2003 Part of the Global Procurement Best Practices initiatives Implement best practices of eSourcing and Gain Total Cost of Ownership benefits using eSourcing eSourcing imperative at TCCC Develop procurement process efficiencies Produce tangible cost savings Build a world class procurement organization by 2006 Implement best practices A Case in Example: Tech Mahindra’s Role • Part of The Client Company’s e-Sourcing CoE team • Consulting around Mindflow eSourcing suite & Sourcing process • Requirements gathering in consultation with Category managers • Mapping the requirements in Sourcing tool • Suggesting suitable sourcing strategies, if needed • Training Category managers and Suppliers in Sourcing • End to End Event management (RFI / RFQ / RFP / RA) • Run what-if optimization scenarios (Business Constraints) as needed by category managers • Testing Sourcing application and suggesting suitable enhancements • Managed 150 events per year both on direct & indirect A Case in Example: EVENT SNAPSHOT Juices USD 500 mn • Apple, • Orange, • Pineapple, etc Recruitment Agency (Reduced Cycle time 30%) Meeting and Events Planning (Spend approx USD 25 mn) Direct Spend Cycle time pressure Freight Sales & Marketing Equipment •Spend approx USD 40mn •Spend approx USD 1bn • Savings USD 4.8 mn • Savings USD 50mn) Indirect Spend Indirect Spend Client Corporate Consumers Bottlers and Mfg Plant Direct Spend Ingredients• Caramel, • Ascorbic, • Salt, etc Indirect Spend Service DCs Indirect Spend Customers Indirect Spend •Coolers, Small Package Dist •Truck, •Spend approx USD 13 mn •Ocean Freight •Vending Machines, • Fountain, • Savings USD 1.2 mn) •Payment Systems Cycle Time Pressures Custom Specialty Merchandise (Reduced cycle time by 30%) Strategic Sourcing Framework Define User Requirements/ Specifications “Profile” the Commodity Develop the Sourcing Strategy Supply Agreements Define Supplier Metrics Develop Metric Tracking Process Select Suppliers Transition Collaborate with Supplier on Perf. Mgt Negotiate & Contract Implement & Monitor Performance Steady-State Agreements and Supplier Management Execute Supplier Relationship Mgt. Monitor Supplier Performance Workshop-Strategic Sourcing Process Define User Requirements/ Specifications Identify Stake holders Identify Requirements Analyze Requirements Validate with Stake holders Profile the Commodity Spend Analysis Demand Management Build Total Cost Model Analyze Supply Market Develop the Sourcing Strategy Identify Sourcing Objectives Analyze Supplier Perspectives Develop Sourcing Strategies Build a Business Case Validate/Gain Approval Select Suppliers Identify all potential suppliers Develop Evaluation approach Develop Supplier shortlist Engage Supplier Evaluate Responses Negotiate & Contract Negotiate Supplier Contract Sign Agreements Implement & Monitor Performance Sign Agreements 1 Define User Requirements/ Specifications Identify Stake holders Identify internal Stake holders Identify who determines the buying criteria and specifications. Identify who makes the buying decisions. Define User Requirements & Specifications Profile the Commodity Identify Requirements Interview stake holders to collect purchase requirements, criteria, and specifications. Consolidate all stake holder requirements. Prioritize requirements. Develop the Sourcing Strategy Analyze Requirements Evaluate customer requirements Assess criticality and risks to business in meeting the requirements Select Suppliers Negotiate & Contract Implement Validate with Stake holders Check findings with relevant stakeholders Agree on priorities Challenge customers to determine “needs”, “wants” and “nice to haves” Objective – Definition, Validation and Freezing of Stake Holders Requirement 2 Define User Requirements/ Specifications Profile the Commodity Spend Analysis Define Data Elements Develop a data collection process Analyze data across supplier, category, customer and other dimensions Develop the Sourcing Strategy Demand Management Define communication Process of key demand events to procurement Consensus forecasting process between procurement and the customer Monitor forecast against actual spend Profile the Commodity Select Suppliers Build Total Cost Model Identify the different cost components – Product cost, acquisition cost, maintenance cost, inventory carrying cost, administrative costs etc Negotiate & Contract Implement Analyze Supply Market Conduct Market Research – key players, trends Supplier’s value chain analysis Analyze supplier – customer bargaining power. Apply frameworks like Porter’s 5 forces etc Objective - Proactively develop global view of Demand & Supply Sources 3 Define User Requirements/ Specifications Identify Sourcing Objectives Assess category business impact – category sourcing matrix Analyze sourcing objectives Profile the Commodity Analyze Supplier Perspectives Analyze attractiveness of the buyer account Understand relative value of the buyer’s business Develop the Sourcing Strategy Develop Sourcing Strategies Review best practices Evaluate applicability of each sourcing tactics Select strategies for each category Develop Sourcing Strategy Select Suppliers Build a Business Case Negotiate & Contract Validate/Gain Approval Assess the baseline total cost of ownership Validate strategies and business case with stakeholders Estimate the improvement potential Gain approval from senior management and stakeholders on the chosen strategies & priorities Document sourcing opportunities Implement Objective – Freeze on a Sourcing Strategy Plan for Optimum Benefits 4 Define User Requirements/ Specifications Identify all potential suppliers Profile the Commodity Develop Evaluation approach Develop the Sourcing Strategy Develop Supplier shortlist Identify sources to locate suppliers Develop framework Obtain a list of all possible suppliers Determine evaluation & Review supplier process criteria data & performance expectations Research and obtain supplier capability data Evaluate capabilities & develop shortlist Engage Supplier Select Suppliers Select Suppliers Negotiate & Contract Evaluate Responses Receive and Determine compile supplier methods to engage suppliers responses Draft the RFQ/RFP document to exchange information w/ suppliers Check responses for completeness Organize data for analysis Evaluate data Issue RFQ/RFP Summarize the results Objective- Holistically Evaluate various suppliers Implement 5 Define User Requirements/ Specifications Profile the Commodity Develop the Sourcing Strategy Negotiate Supplier Contract Select Suppliers Negotiate & Contract Negotiate & Contract Sign Agreements Develop negotiation strategies & plans Prepare for the agreement award Form negotiation teams & meeting schedule negotiations Conduct negotiations (eSourcing, Reverse Auctions) Develop Negotiation Feedback Conduct meeting to make final decision Gain relevant approvals Notify suppliers of award decision Sign agreement Objective- Arrive at the best possible supply agreement Implement 6 Define User Requirements/ Specifications Profile the Commodity Develop the Sourcing Strategy Select Suppliers Implement Negotiate & Contract Sign Agreements Develop transition plan Develop communication plan Manage risk Objective- Arrive at the best possible supply agreement Implement Typical Strategic Sourcing Diagnostic Exercise High Level Project Plan Approach – detailing stages, t asks, milestones, benefits Stage 1 – Classification of Services and Products 2- Map Current Supply Base 3- Identify and Plan Efficiency Opportunities 4-Implement Plan (phased) 5- Delivery (phased) Objectiv e Define a structure to classify Products and Services Map current suppliers to the defined classification structure Analyse Supplier mix to identify efficiency savings. Prepare a delivery plan Implement Contract Plan Implement Supplier Adoption Plan Implement Contracts Implement e-tools Task(s) Each Service Area to define a two tier structure to classify products and services Merge service structures into a common definition for Products and Services Sign off Structure Review AP Supplier spend data and map current suppliers to product and services structure Identify contracted suppliers Identify non contracted suppliers Identify Strategic Suppliers (dependency) Identify “at risk” spend Sign off mapping Analyse ratio of suppliers within each category to identify opportunities for aggregation Identify opportunities for contracting of non-contract spend Identify opportunities to remove maverick spend (compliance to contract) Identify opportunities for transactional savings (ecatalogues, p-cards, e-invoicing) Sign off plans Develop specifications Undertake tender exercise Implement Supplier Adoption Plan oSeminars oInterviews oTraining) Implement Contracts Supplier Management Implement e-tools Benefits measurement Benefits Awareness & Understanding of Products and Services used by the Business A defined common structure for definition of products and services Understand the Supplier mix for each product and service Understand contracts in operation Understand non contract & non compliant spend Understand the dependencies and risks within the supply chain. Identify contract saving opportunities Identify transactional efficiency savings Prioritise Savings Prepare Contracting plan Prepare Efficiency Plan (supplier adoption) Develop Framework Contracts Supplier Adoption to e-tools Benefit realisation Target 4 Weeks 4 Weeks 2 Weeks Dependent on 3 Dependent on 4 Thank you Visit us at www.techmahindra.com Disclaimer Tech Mahindra Limited, herein referred to as TechM provide a wide array of presentations and reports, with the contributions of various professionals. These presentations and reports are for informational purposes and private circulation only and do not constitute an offer to buy or sell any securities mentioned therein. They do not purport to be a complete description of the markets conditions or developments referred to in the material. While utmost care has been taken in preparing the above, we claim no responsibility for their accuracy. 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