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Best Electronic Procurement practices in Public & Private Sector

March 17, 2009
The Financials Day
Koit Puusaag
Master Principal Consultant, EE & CIS region
Agenda
Introduction to Advanced Procurement
Best Practices and Trends in Electronic Procurement
Save with Shared Services
Streamline with Employee Self Service
Avoid Errors with Contract Management
Take Tendering On-line
Analyze with Business Intelligence
Deploy Supplier Collaboration


Agenda
Introduction to Advanced Procurement
Best Practices and Trends in Electronic Procurement
Save with Shared Services
Streamline with Employee Self Service
Avoid Errors with Contract Management
Take Tendering On-line
Analyze with Business Intelligence
Deploy Supplier Collaboration


Procurement Transformation
High
S
t
r
a
t
e
g
i
c

V
a
l
u
e

Maturity
Cost Procurement
Tactical Buying
Strategic Procurement
Low
High
Low
Touchless Buying
Policy Enforcement
Contract Negotiation
Spend Management
Create Manual Orders
Answer Supplier Queries
Help Requesters
Manage Content
Value Creation
Collaborative Procurement
Supply Optimization
Full Process Automization
Supply
Optimization
Answering
Supplier Queries
Helping
Requesters
Managing
Content
Creating
Manual Orders
Spend
Analysis
Contract
Negotiation
Project-
Based
Procurement
Internal
Benchmark
Delivery
Monitor &
Review
Controls
Strategic
High
Medium
Low
V
a
l
u
e

eProcurement Adds Value!
Routine Tasks Hinder Strategic Activities
Oracle Advanced Procurement

Demand
Collection
Indirect
Goods
Direct
Materials
Engineered
Goods
Services
Approval
Routing
Touchless
Buying
Automated
Payment
Enforce Policy Compliance
Budget-Based
Procurement
Contract
Management
Supplier
Performance
Reduce Spend on Goods and Services
Category
Management
Online
Sourcing
Spend
Analysis
Streamline Procurement Processes
Supplier
Collaboration
Settlement
Orders
Profile
Management
Supplier
Network
Logistics
Supplier
Portal
End to End Electronic Procurement
Free Staff for High-Value Activities
Send Electronic
PO to Supplier
Receive Electronic
Invoice
Create
Purchase Order
Identify & Qualify
Vendors
Evaluate
Bids
Create & Approve
Requisition
Negotiate Master
Purchase Agreement
Pay Supplier
(EFT)
Analyze
Performance
Receive Goods or
Services; Inspect
Select Vendor
Adjust
Contracts
Sourcing
Strategy
Purchasing
Execution
Add Structure to Strategic Activities and
Execute Routine Transactions Automatically
Agenda
Introduction to Advanced Procurement
Best Practices and Trends in Electronic Procurement
Save with Shared Services
Streamline with Employee Self Service
Avoid Errors with Contract Management
Take Tendering On-line
Analyze with Business Intelligence
Deploy Supplier Collaboration


Save with Shared Services

- Many organizations have complicated organizational
structures, operate across countries, industries etc.,
leading to a number of purchasing units
- Increasing purchasing volumes means more purchasing
power to negotiate with the suppliers
- Centralized purchasing means more transparency and
visibility into the procurement process
- Companies realize savings by avoiding duplications in
the purchasing process
- Proper IT solution ensures that each organization unit
will be provided with localized services
- Shared services also means savings in IT investment
BU 1
Source Request Buy Pay
BU 2
BU 3
Decentralized
BU 1
Source Request Buy Pay
Shared
Service
BU 2
Central Sourcing, Local Execution
BU 1
Source Request Buy Pay
Shared
Service
BU 2
Automated
financial
reconciliation
Complete Shared Services
Save with Shared Services
Utilize Full Purchasing Power Shared Services Model
BU 1
Source Request Buy Pay
Shared
Service
BU 2
Automated financial
reconciliation
Transfer to Local Business Unit
Centralised Purchasing
Accounting Office
Land Forces
IT Department
Procurement Department
Supplier 3
Supplier 1
Supplier 2
Laptops
Plane tickets
Uniforms
Accomodation
Office
Supplies
CD ROMs
Laptops
Mainframe
CD-ROM
Office Supplies
Accomodation
Uniforms
Centralized Purchasing
View exceptions across multiple applications and operating units
Create, implement, and execute agreements
Analyze performance of procurement & suppliers
Exceptions
Agreements
Performance Analysis
Negotiations
Contracts &
agreements
Invoicing &
payment
Supplier
Management
Requisitions
PO
execution
Professional Buyers Work Center
Single Access Point for All Responsibilities
Professional Buyers Work Center
Enable Command & Control for the Procurement Professional
Professional Buyers Work Center
Command and control for the procurement professional
Multi-Org Access
Reduced pop-ups and
duplicate screens
Re-designed and
streamlined entire
workflows
Reduced the number of
steps to complete key
tasks
Improved overall look &
feel and visual style
Increased
personalization
capabilities
Streamline with Employee Self Service

- Typically the purchasing process was initiated by phone
or e-mail
- Handling such administrative tasks wasted purchasing
professionals time and kept them away from true value
add activities
- There was no single trace of the process and requestor
was never sure what was happening with the purchase
request
- Self service purchasing environment allows the person
to search for the goods and services on line, initiate
the approval process for the purchases and have a real
time overview of the status of the purchase requistion
- Security rules and content management can be used to
make sure that people can only purchase the goods they
are supposed to

Items are
organised by
Stores


Approval hierarchy
Notes can be
added

User checks whether funds are
available
Avoid Errors with Contract Management

- One of the hardest challenges organizations face is
making sure that correct legal paperwork goes out with
every purchasing document
- Errors from poor contract management can be costly
and lead to potential fines and regulation violations
- Typically, contract management has been a manual task
and there has been no real collaboration between
different counterparts
- A modern contract management solution automizes the
whole process making sure that correct legal paperwork
is included with every purchasing transaction


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Contract Templates
Automatically Import Redline Changes for Superior Compliance
Review each
change in detail
Accept or Reject
offline changes
Identify modified
clauses at a glance

Application can fetch data from database
tables (i.e supplier name, address, terms
etc)
Terms can be made
mandatory

No

Industry
Segment?

Yes

Add Clauses
High Value
Insurance
Over $50k?

Commercial


Government

Responses Drive
Clause Selection
.
.
.
Template
Contract
Contract
Draft
Expert-Based Authoring
Produce Compliant Contracts
Configurable rules
drive terms selection
for complex contracts
Clauses default based on
product, supplier, contract
value, etc.
Author high quality
contracts with minimal
legal supervision
Take the Tendering On - Line

- Paper based tendering is time consuming, in many
cases lack transparency, restricted to limited suppliers
only
- On line tendering reduces the tender times, allows the
user to define specific qualification and evaluation
criterias, use powerful tools for negotiating and
evaluating the tenders
- Links to external websites (like TED) allow the user to
work with much wider supplier base
- All transactions are completely transparent, comply with
EU and local legislations and leave behind a complete
audit trail
- Public Sector is to be ready for full electronic tendering
based on EU directives
Take Tendering On-line
Slash Cycle Time by Eliminating Manual Processes
Quickly create new rounds
& amendments
Instantly create new event
from previous agreement or
requisition
View responses & monitor
bids in real-time
Reduce Preparation Time and Manual Effort
View status and
incoming supplier
messages
Team Scoring of Requirements
Each team member
scores the assigned
section
Oracle Sourcing
calculates average of
individual score
sheets to determine
section score
Sum of team scores
determines overall
response score (as
input to optimization)
Quality Control Team
Technical Team
Technical Capabilities (40% weight)
Commercial Team
Price (40% weight)
Past Performance (20% weight)
Quote ABC
John = 90
Mary = 85
Sue = 80
Sue = 75
Doug = 80
Tina = 85
Alan = 90
Mark = 80
Technical Capabilities = 34

Price = 32

Past Performance = 17
TOTAL SCORE : 83
Optimized, Policy-
Compliant Award
Recommendation
Multiple Sites
Dozens of Bid Lines
Company Policy Complex Bids
Maximum of
5 Vendors
Minimum 60%
to incumbent
supplier
$100k Annual
Maximum
Sourcing Rules
Budget Constraints
Supply Base Rules
Multiple
Suppliers
Model multiple business
constraints and supplier inputs
Award Optimization Engine
* Requires Sourcing Optimization
System Generated Recommendations*
Eliminate Time-Consuming Manual Analysis with Sourcing Optimization
Oracle On-Line Negotiation Event Example: Supplier Bid Monitor
Oracle Sourcing Customer Example

Exploit More Savings Opportunities
Improve Sourcing Effectiveness Without Increasing Staff
Time
V
o
l
u
m
e

o
f

S
p
e
n
d

U
n
d
e
r

C
o
n
t
r
a
c
t

Oracle
Enabled
Sourcing
Traditional
Sourcing
Approach
Learning
Curve
Average Improvement Through
eSourcing*
50% reduction in sourcing cycle
time
60% reduction in Admin costs
10-15% improvement in time-to-
market (NPI)
Enhanced market knowledge and
improved transparency
Dramatically improved ability to
identify and negotiate with new
sources of supply on a global basis
E-sourcing technologies deliver information visibility and globally
infrastructure to enhance and accelerate strategic sourcing*
*Source: Aberdeen
Structured Event Creation
On-Line Negotiation Support
Efficient Change Management

Category Benchmarks
Raw Materials 2 to 5 % & Better Risk Mgmt.
Packaging 10 to 20 %
Indirect Materials and Services 10 to 20 %
Information Technology 15 to 30 %
Professional Services 8 to 15 %
Logistics/Transportation 7 to 15 %
Media,Marketing,Promotional Items 10 to 20 %
Other Indirects 5 to 15 %
Capital Projects 7 to 15 %
2005 Greybeard Advisors LLC
Why The Interest In Sourcing?
Conservative Estimates Of Cost Reduction Metrics Through Sourcing

Analyze with Business Intelligence
- Purchasing reporting used to be purely transactional, it
lacked trends metrics and any kind of analytic
capabilities
- As a result of this approach mistakes were made, and
areas for improvement undiscovered
- Modern purchasing reporting solution takes the
transactional reporting but allows the user to add to it
analytical tools, metrics, KPIs
- Reporting solution should be in real time and allow the
user to drill down to the transaction levels, it should be
quick to implement and easy to change

Oracle Procurement and Spend Analytics
Supplier Performance
Oracle Procurement and Spend Analytics
Procurement & Spend Dashboard
Dashboard
Pages
Roles
Performance
Measures
Reports based on
Multiple Sources
Flexible
View Selectors
Prebuilt Reports
with over 5200 metrics
Conditional Navigation
Highlighting
Guided
Navigation
Configurable
Filters
Deploy Supplier Collaboration

- Commonly the most common communication channels
with the supplier are phone, fax and e-mail
- Many supplier related activities like entering invoices,
shipping notices, RFP responses etc. are purely
administrative and take procurement professionals time
away from true value add activities
- Modern eProcurement solution contains supplier self
service module allowing the supplier to carry out many
activities traditionally handled by the purchasing
department.
Supplier Management User-Interface
Streamlined supplier profile management
Create supplier
To Do List for requests
Search or drill down to supplier details

Real time overview of all actions
The Lives Of Procurement Professionals
Are Already Changing
Procurement Organization Focus**
(% of Time Involved in Strategic
Activities)
50%
67%
39%
52%
67%
79%
2 Years Ago Current 2 Years From
Now
Leaders
Followers
* Aberdeen Group, The CPO Agenda: Five Strategies for Organizational Transformation. **A.T. Kearneys Assessment of
Excellence in Procurement
The CPOs Agenda*

1. Improve supplier development
and collaboration

2. Enhance and integrate
procurement automation
infrastructure

3. Adopt low cost country supply
initiatives

4. Transition to a center-led
procurement organization

5. Increase spend under
management and improve spend
compliance
34%
3,512
0.74%
54
World Class
Purchasing
Organization
36% Increase 25%
% time spent on Risk
Management and
Decision Support
Activities
More
Buying Power
7,805
Suppliers Per $Billion of
Spend
27% Lower
Costs
1.01%
Total Cost of
Procurement
(as % of Spend)
48% Less Staff 104
FTE per $Billion of
Spend
Comparison
Summary
Typical
Purchasing
Organization
Performance Indicator
Shift investment in procurement to higher-value activities
Reduce staff by swapping labor for technology
Opportunity: Achieve World Class Procurement
Source: Hackett Group
Q U E S T I O N S
A N S W E R S