The Critical Role of Procure to Pay (P2P) in the New Economy: Hidden - PowerPoint PPT Presentation

Go to View>Master to Update Pres. Title The Critical Role of Procure to Pay (P2P) in the New Economy: Hidden Value Levers Bill Dempsey Director, Procurement and Strategic Sourcing

Today’s Agenda Introduction P2P at MillerCoors Definitions of the “New Economy” Hidden Value Levers – Shareholder Value and Strategic Sourcing – Integrating with Others in P2P – Strategic Alliances – Cash Conversion Cycle – Non-Recurring Expenditures Where do we go from Here? May 2010 Page 2

Who am I? • Director of Indirect Procurement and Sourcing at MillerCoors • Background in Industrial Engineering, Supply Chain and Consulting • Team that Manages ~$2.0B in spending; 8,000 suppliers, too many PO’s • Live in Golden, CO… wife, 3 boys… skiing, outdoors, hiking and a little golf May 2010 Page 3

Today’s Agenda Introduction P2P at MillerCoors Definitions of the “New Economy” Hidden Value Levers – Shareholder Value and Strategic Sourcing – Integrating with Others in P2P – Strategic Alliances – Cash Conversion Cycle – Non-Recurring Expenditures Where do we go from Here? May 2010 Page 4

How Procurement fits into the MillerCoors supply chain To ensure that MillerCoors’ receives the RIGHT quality materials and services at the RIGHT place, at the RIGHT time, for the RIGHT cost. MillerCoors Supply Chain Plan Suppliers Purchase Make Deliver Sell Customers May 2010 Page 5

Procurement in the P2P Process Strategic Sourcing Select Analyze Develop Manage Supplier Assess Customer Develop Conduct Spend Suppliers & Implementation Performance Requirements Supply Category Strategy Analysis Negotiate Markets Plan Agreement PEOPLE • PROCESSES • TOOLS Supply and Risk Management • Commodity Risk Mngt • Introduction of Innovation • Supplier Diversity Progr. Mngt • Supplier Performance Mngt • Supplier Development • Corporate Social Responsibility • Supply Chain Modeling • One-off Requirements • Maverick Spend Monitoring Operational Procurement Requisition Invoice & Pay Purchase Order Receive May 2010 Page 6

Our Definition of P2P Who Does the P2P Process Involve? - Procurement - Central Receiving - Accounts Payable/Shared Services - Other Purchasers outside of Procurement - Requestors/Stakeholders - Internal Audit and Internal Controls - Suppliers What Does the P2P Process Entail? Requestor Supplier PO Creation Invoiced Pay as late as Make • Requisition • Invoice Need Selection we can Payment Approval Approvals • Find the • Checks • Contract • Get rid of “right” • ACH negotiation manual work suppliers • Credit Card • Data Integrity • Vendor set up • Get rid of • Get rid of manual work manual work There are five methods to buy How do you know which one to use? – SAP SRM 5.0 (APEX or MiBuy) – All you need to know is what commodity your – Request-to-Buy Form items falls into…. And then use the Sourcing Buying Guide – Corporate Credit Cards (department p-card or your own T&E card) – Intranet/Website Requests – Contact Functional Department (transportation group) Note: The sixth method is MRP. Not user generated May 2010 Page 7

Formation of a P2P Team 1. Ensure processes that involve all 4 functional areas are established and documented in each organizational area 2. Ensure procedures are interpreted and implemented consistently across organizations 3. Act as governing body to propose changes to procedures and ensure adherence to policy 4. Establish links among key functional areas involved in P2P process 5. Pursue continuous improvement 6. Communicate changes 7. Reduce gaps in processes due to changes 8. Participate in forum for discussion and perform as interface role among the organizational areas (learn what’s on each other’s plates ) 9. Report progress on a regular basis 10. Meet with the Sponsor group and raise issues to high level management as needed May 2010 Page 8

Opportunities List for our P2P Team 1. Reporting – MRBR/Tolerance reports, ATF reports 2. APEX/MiBuy issues – open PO’s, confirmations 3. Signature Authorization/Approval Process – Request to Buy, Business Cases 4. Receiving 5. Buying Guide 6. Paying – invoices, approvals, payment terms, HP 7. Suppliers – Ownership of supplier relationship, who can communicate what to them 8. Vendor Set Up Process – standardize process between location, clarify functional area roles 9. Red/Green PO’s 10. P-Card applications and use 11. T&E Card use in the Field 12. Check Requests 13. Receivable and Non Receivable PO’s 14. Split PO Report 15. Score-carding May 2010 Page 9

Today’s Agenda Introduction P2P at MillerCoors Definitions of the “New Economy” Hidden Value Levers – Shareholder Value and Strategic Sourcing – Integrating with Others in P2P – Strategic Alliances – Cash Conversion Cycle – Non-Recurring Expenditures Where do we go from Here? May 2010 Page 10

What is the New Economy • Global Scope / Competition • M&A – Fewer, larger competitors • Commodity Fluctuations • Cash is King • Alternate Service-Delivery Solutions – Insource /Outsource… off -shore/on-shore • Social Responsibility – Green – MWBE May 2010 Page 11

What is the New Economy May 2010 Page 12

Today’s Agenda Introduction P2P at MillerCoors Definitions of the “New Economy” Hidden Value Levers – Shareholder Value and Strategic Sourcing – Integrating with Others in P2P – Strategic Alliances – Cash Conversion Cycle – Non-Recurring Expenditures Where do we go from Here? May 2010 Page 13

Today’s Agenda Introduction P2P at MillerCoors Definitions of the “New Economy” Hidden Value Levers – Shareholder Value and Strategic Sourcing – Integrating with Others in P2P – Strategic Alliances – Cash Conversion Cycle – Non-Recurring Expenditures Where do we go from Here? May 2010 Page 14

Linking P2P to Shareholder Value A holistic view of supply management and sourcing can improve cost, productivity, competitive advantage and shareholder value. New/enhanced products/services through alliances Increased customer recognition of product/service value Increased – Responsiveness – Delivery Revenue – Quality – Service – Technology – Reliability Increased Faster, more effective new product development & introduction Profit and Shareholder Value Reduced spend on external goods/services Elimination of low/no value added work Reduced and Avoided Costs Reduced cost of capital invested in raw materials and WIP Improved asset utilization and productivity Best in class companies influence both demand and supply behaviors through this integrated approach and invest in supply management as a core competency. May 2010 Page 15

Sources of Value in P2P • Efficient and Transactional 10% of Value accurate processing Efficiencies • Lower AP staff costs • Faster cash mgmt Sources of Value • Preferred Suppliers Creation Enable Strategic from Sourcing • Volume World-Class Consolidation P2P • Negotiated terms 90% of Value • SKU Reduction • Buying Behaviors Facilitate Demand Management – Supplier lockouts – Maverick buys May 2010 Page 16

Three phases of Procurement • Strategic Sourcing – Leads sourcing projects utilizing consistent tools and methodologies. – Responsible for supply market analysis, Strategic project leadership and commodity Sourcing management. • Supply Management Supply – Takes sourcing projects through to Management implementation and execution. – Responsible for supplier performance management, supplier continuous Operational improvement activities and ongoing business Procurement relationship. • Operational Procurement – Day-to-day tactical execution of buying, expediting and supplier administration May 2010 Page 17

MillerCoors Strategic Sourcing Process • Supplier presentations • Supplier ratings vs. needs • Supplier short list • Develop incentives • Prepare and send RFP • Develop scorecards • Decompose spend • Analyze results • Define market • Maintain market intelligence • Review spend with customers • Select supplier • Analyze trends / competition • Develop performance • Identify buying points • Negotiate terms • Market provider analysis management plan • Understand characteristics • Prepare agreement • Purchaser buying power • Establish performance • Rank / weight characteristics • Review with management • Supplier bargaining power accountability • Validate & finalize requirements • Sign agreement Select Manage Supplier Analyze Develop Conduct Spend Assess Customer Develop Suppliers & Performance Supply Implementation Analysis Requirements Category Strategy Negotiate Plan Markets Agreement • Prepare activity based analysis • Identify options • Identify key users • Understand future requirements • Complete cost benefit • Develop communication plan • Validate & finalize requirements • Review with management • Develop reporting & compliance • Assess total cost of ownership • Select category strategy • Develop transition plan • Prepare negotiation strategy Successful completion of the seven step process generates value but requires significant resource investment May 2010 Page 18