Moving from Transactional to Strategic Procurement

Jerker GunnarssonJerker GunnarssonMarch 9th, 2012March 9th, 2012

SSOW Orlando 2012 – Jerker Gunnarsson Page

Deutsche Post DHL - Our strength in numbers

We are a logistics powerhouse with a phenomenal worldwide presence

220 5%

500,000 1million

We have a truly global operation, with locations in

different countries and territories

We touch approximately

of the global trade volume through our extensive network and infrastructure

We employ more than

Employees, and are one of the top ten biggest employers worldwide customer interactions every hour

We manage more than

2


Deutsche Post DHL Facts & Figures

Global Business Services (GBS)Global Business Services (GBS)

MAIL•82 high-tech mail sorting centres•80,000 mail delivery staff•34,600 vehicles for mail delivery•~ 3,300 delivery bases•~ 54,700 delivery districts•Nearly 40 million households•108,000 letter boxes•69 million mail items every day•930,000 P.O. boxes•More than 12,500 retail outlets

EXPRESS•Operations in 220 countries and territories•More than 124,000 Express employees•36 express hubs worldwide•More than 4,700 express facilities worldwide•420 aircraft operating on behalf of DHL Express•Around 72,000 express vehicles

GLOBAL FORWARDING

FREIGHT•~ 11,000 employees•More than 40m tons transported per year•More than 160 Freight terminals in Europe

SUPPLYCHAIN

•Facilities in over 3,000 locations with more than 148,000 employees•Around 1,400 logistics centres, terminals and warehouses worldwide•35,000,000 sqm warehouse storage capacities worldwide•More than 30 countries covered

Corporate Center (CC)Corporate Center (CC)

DP DHL FinancialKey Indicators (2010):Revenue: 51.5 bn €Net Profit : 2.5 bn €

3


Key enablers for a successful Purchasing organization

How we organize ourselves to be cost efficient while improving Business Value




The Processes we implement to optimize performance of the organization

The Processes we implement to optimize performance of the organization

11 22

33

BUSINESS PROCESSES

ORGANIZATIONAL STRUCTURE

TECHNOLOGY

Success Depends on Us Covering ALL THREE of These Areas!

4


Global Business Services –Powering Business from the Inside

5

DP DHL bundled in 2006 all major internal support functions in a new division “Global Business Services” to streamline and strengthen service and efficiency.

GBS – a worldwide

organization

• ~10,000 FTE Europe (incl. Germany)

• ~2,000 FTE Americas• ~1,000 FTE Asia Pacific

220 Countries

• ~10,000 FTE Europe (incl. Germany)

• ~2,000 FTE Americas• ~1,000 FTE Asia Pacific

220 Countries

Global CoverageGlobal CoverageGlobal Coverage

• IT Services• Finance Operations• Real Estate• Procurement• HR Operations• Legal• Risk & Insurance• Fleet• Business Consulting• Global Customer Solutions

• IT Services• Finance Operations• Real Estate• Procurement• HR Operations• Legal• Risk & Insurance• Fleet• Business Consulting• Global Customer Solutions

10 Service Lines 10 Service Lines 10 Service Lines

• 3 Global Data Centers• 5 Regional Accounting Centers• 350 milo square feet properties• >90,000 Fleet managed

• 3 Global Data Centers• 5 Regional Accounting Centers• 350 milo square feet properties• >90,000 Fleet managed

Basic VolumeBasic VolumeBasic Volume


Building the House of Procurement

The

Who

The W

hat

Climbing Trees

Steven R CoveyThe 7 Habits

of Highly Effective People

6


Align Complimentary Roles

• Conduct standardized sourcing process

• Perform spend analytics/benchmarking

• Utilize advanced eSourcing platform

• Leverage volumes and best practices

•• Establish demand Establish demand requirementsrequirements

•• Define initial specificationsDefine initial specifications

•• Transfer technical Transfer technical understanding understanding

•• Communicate customer Communicate customer needsneeds

PROCUREMENTBUSINESSBUSINESS

faster decision making supplier bid management templates

documented audit trail supported end-end solution contract management

standardized sourcing process risk database spend analytics

7


Cost Levers from Shared Services

• Process harmonization• Best practice integration• Deployment of end-to-end process

view• ERP deployment• IT system standardization

• Process harmonization• Best practice integration• Deployment of end-to-end process

view• ERP deployment• IT system standardization

Standardization and AutomationStandardization and AutomationStandardization and Automation

• Deployment of efficiency-enhancing innovative technologies

• Simplification of the organization and effective governance

• Service management drive

• Deployment of efficiency-enhancing innovative technologies

• Simplification of the organization and effective governance

• Service management drive

ConsolidationConsolidationConsolidation

• Leverage of off-shore / lower cost location

• Leverage of off-shore / lower cost location

Wage ArbitrageWage ArbitrageWage Arbitrage

Cos

t Bas

elin

eC

ost B

asel

ine

Futu

re

Bas

elin

eFu

ture

B

asel

ine

Wage Arbitrage

Standardization and Automation

Consolidation

Sources: Accenture – Raising the bar – Accenture’s Global Service Center Organization

8


Purchasing MonitoringPurchasing Monitoring

Procurement Solution – Strategic and Operational Procurement

Demand

Sourcing(Strategic procurement)

4

3

2

1

5

1 2 3 4 5 6 7Contract & CatalogueManagement

(Demand Identification)Requisitions Approval Purchase

OrderDelivery InvoiceInvoice ReconciReconci

liations*liations*PaymentPayment

Get ToolPurchasing

(Operative procurement)Transactional Transactional MarketplaceMarketplace

The Procurement process consists of two major parts. These are Sourcing (strategic Procurement) and Purchasing (operative Procurement).Where Sourcing comprises five steps that are considered continuous prerequisites to the following seven steps of Purchasing.

The Procurement process consists of two The Procurement process consists of two major parts. These are Sourcing (strategic major parts. These are Sourcing (strategic Procurement) and Purchasing (operative Procurement) and Purchasing (operative Procurement).Where Sourcing comprises five Procurement).Where Sourcing comprises five steps that are considered continuous steps that are considered continuous prerequisites to the following seven steps of prerequisites to the following seven steps of Purchasing.Purchasing.

9


Optimizing Operational Procurement –US & CA case study

Expanded eProcurement “light” with standardized Purchasing processCentralization of Operational staff to headquartersCatalog solutions for all high transaction itemsSuper users with authority to transact with preferred vendors under “sandbox”conceptP-card with spending limits and blocked merchants for all low value ad hoc transactionsReduction in Operational Purchasing cost by >50%

10


Internally – KPI Balance Scorecard

Development of KPIs need to consider the balance of the expected performance of the Procurement organization

Development of KPIs need to consider the balance of the expected performance of the Procurement organization

11


Externally – Procurement Dashboard

The Procurement Dashboard is an automated report pushed from a data warehouse to Business Partners

directly

The Procurement Dashboard is an automated report pushed from a data warehouse to Business Partners

directly

12


Procurement Solution – Tools

GeT GeT eProcurement eProcurement

SystemSystem

ee--MarketplaceMarketplace

Hosted Catalogs Hosted Catalogs / Punch/ Punch--out out

CatalogsCatalogs

Catalog & nonCatalog & non--catalog via catalog via

same same requisitionrequisition

Global Global Sourcing Sourcing

ApplicationApplication

Strategic Strategic SourcingSourcing

Reverse eReverse e--AuctionAuction

Supplier Supplier DatabaseDatabase

Procurement Procurement Data WarehouseData Warehouse

Reporting Reporting capabilities for capabilities for

the wholethe whole

““Procure to Pay Procure to Pay ProcessProcess””

Spend CubeSpend Cube

Information Information ManagementManagement

Document Document SharePointSharePoint

Contract Contract Repository/ManaRepository/Mana

gementgement

Supplier Supplier ManagementManagement

13


Backend ERPs

Procurement content and transaction management

https/OCI or cXML

https/cXML HTML

AS2

cXML

EDI

EmailCSV

cXMLPaper

• Item search/Punchout• eCatalog Management• Content Enrichment

• Item search/Punchout• eCatalog Management• Content Enrichment

Procurement ContentProcurement Content

• Transaction Routing• Vendor Self-Service Portal • Transaction Routing• Vendor Self-Service Portal

PO & Inv AutomationPO & Inv Automation

14


eProcurement “Small country solution”

eProcurement “Standard”eProcurement eProcurement ““StandardStandard”” eProcurement “Small Country”eProcurement eProcurement ““Small CountrySmall Country””

MasterdataMasterdata• Automatic synchronization of Master data

from Finance and ERP backend: Cost Centers, GL-coding, Approval workflow, Vendor Master data

• Manual generation and updating Master data into eProcurement tool. Manual mapping of master data between eProcurement and Finance backend

Invoice reconciliation

Invoice reconciliation

• Automated Matching of invoice with PO and Goods Receipt

• Solving of discrepancies

• Manual matching of POs to invoices and Goods receipts

InterfacesInterfacesAutomatic replication of:•PO document to backend•Goods Receipt documents

• No Materials mgmt module needed, PO and GR documents stored only in eProcurement database

Process coverageProcess coverage

• Non-stock• Assets The details of the PO (items, ordered

price, received quantities) will be displayed• Flexible Services• Fixed Services• Leasing• Stock reservations• Stock replenishment

• Non-stock• Assets• Flexible Services• Fixed Services

15


Conclusion

• Evaluate technology options and optimize usage of existing tools

• Redefine scope for eProcurement coverage to fit all all sizes of organizations and wallets

• Evaluate technology options and optimize usage of existing tools

• Redefine scope for eProcurement coverage to fit all all sizes of organizations and wallets

• Implement Shared Services Structure to drive cost efficiencies and synergies.

• Maintain Business Partner intimacy and clarify roles and responsibilities

• Implement Shared Services Structure to drive cost efficiencies and synergies.

• Maintain Business Partner intimacy and clarify roles and responsibilities

• Standardize product offering/processes

• Consolidate and Automate Operational Procurement (not necessarily outsource)

• Implement KPIs and scorecards to drive behaviour

• Standardize product offering/processes

• Consolidate and Automate Operational Procurement (not necessarily outsource)

• Implement KPIs and scorecards to drive behaviour

BUSINESS PROCESSES

ORGANIZATIONAL STRUCTURE

TECHNOLOGY

16


Continuously Improving on Our Priorities

17


THANK YOU

Questions

18