EVOLUTION OF INDIRECT PROCUREMENT

THEORY OF CHANGE

SUSTAIN

SPREAD DEEPEN

SHIFT

Awareness & Inclusion

Ownership & Adoption Permanence

Culture & Behavioral Norms

Lead top-down; Set the mandate and

organizational need for change

Drive adoption bottom-up; Shifting individual ownership

of the change

Align underlying cultural principals and change behavioral norms

Establish ecosystem and controls needed to sustain the change

2 Source: A.T. Kearney - Organization & Transformation Practice - Theory of Change

CONSIDERATIONS FOR ORGANIZATIONAL CHANGE: SPREAD

SUSTAIN

SPREAD DEEPEN

SHIFT

• Is there a clear vision of the future state and path forward for the organization?

• Is there an understanding of the need for change across the organization?

• Is there commitment from the senior leadership to champion the change?

• Are there clear aspirational targets and goals that the organization is aligned to achieve?

• Are there mechanisms and resources in place to engage across the organization and enable the appropriate amount of focus throughout the organization?

Lead Top-Down

3

CONSIDERATIONS FOR ORGANIZATIONAL CHANGE: SHIFT

SUSTAIN

SPREAD DEEPEN

SHIFT

•What specific processes, roles, and structures will be changing at the local level?

• Are there communication and engagement mechanisms in place to cascade the case for change across the organization?

•Who are the leaders who will drive the change at the front-line?

•Who are the key stakeholders and how should messages be targeted to address resistance?

• Is the organizational infrastructure in place to support the desired future state behaviors?

Drive Bottom-Up

4

CONSIDERATIONS FOR ORGANIZATIONAL CHANGE: DEEPEN

SUSTAIN

SPREAD DEEPEN

SHIFT

•What type of organizational culture is needed in the end-state?

•How do efforts uphold underlying organizational values?

•How do you exemplify and embed the behavioral shifts required?

•How can the organization capture people’s emotional commitment to the change?

•What are the structural drivers of non productive behaviors and how can they be eliminated?

Ingrain into Culture & Behaviors

5

CONSIDERATIONS FOR ORGANIZATIONAL CHANGE: SUSTAIN

SUSTAIN

SPREAD DEEPEN

SHIFT

Embed into the Organization

• What is the plan to address challenges as the program matures beyond the transformation period?

• What is the plan to maintain urgency as new priorities emerge?

• How will the organization embed the responsibility for driving the vision into day to day leadership objectives and plans?

• What is the organization’s reaction or level of adoption to the change?

• How will change capabilities be transitioned and embedded within the organization to enable self-sufficient management?

6

TEAM STRUCTURE: 2011

VP GEMS

TRAVEL GLOBAL

UTILITIES IT/DTC

TRAVEL AGENTS

7

$150MM+ SPEND UNDER MANAGEMENT

TEAM STRUCTURE: 2012

VP GEMS

TRAVEL GLOBAL

UTILITIES IT/DTC STORE SUPPORT SUSTAINABILITY

HOME OFFICE SUPPORT

TRAVEL AGENTS

8

$300MM+ SPEND UNDER MANAGEMENT

TEAM STRUCTURE: 2013

VP GEMS

TRAVEL GLOBAL

UTILITIES IT/DTC STORE SUPPORT SUSTAINABILITY

EUROPEAN UTILITIES

IT/DTC HOME OFFICE

SUPPORT TRAVEL AGENTS

9

$300MM+ SPEND UNDER MANAGEMENT

TEAM STRUCTURE: 2014

VP GEMS

TRAVEL GLOBAL

UTILITIES IT/DTC STORE SUPPORT SUSTAINABILITY

EUROPEAN UTILITIES

VENDOR SETUPS

IT/DTC HOME OFFICE

SUPPORT TRAVEL & EXPENSE

TRAVEL AGENTS

TRAVEL & EXPENSE

10

$500MM+ SPEND UNDER MANAGEMENT

OUR SOURCE-TO-PAY MODEL

Supplier Registrations

(NMVPS)

Supplier Management

(TBD)

Spend Analytics (Ariba)

7-step Sourcing (Ariba)

Contract Management

(Ariba)

Procurement (ePro)

Pay (PeopleSoft,

others)

GEMS

Challenges: •Need more usage •No templates for commodities

Challenges: •Data sources not clean

Challenges: •New tool •Need to develop

processes

Challenges: •Tool not currently owned •No process in place for indirect expense •IT has program started

Challenges: •Writing requisitions not standardized •Little or no line item detail •Garbage in, garbage out

Challenges: •Significant complexity given multiple payment methodologies

Challenges: •Process is very manual •No integration with Ariba •Partial integration with PeopleSoft •NMVPS needs further development

Manage supplier information and track performance

Ensure compliant procure-to-pay cycle

on a daily basis

Create, store, search contracts & track

compliance

Use this information to source efficiently

THE SOURCE-TO-PAY PROCESS SOURCE

GEMS PROCURE

AP PAY

AP

Spend Classification

(TBD)

Commodity Management

(TBD)

eSourcing (Ariba)

Contract Management

(Ariba)

Supplier Registration

(NMVPS)

Spend Analysis (Ariba)

Opportunity Identification

(N/A)

Strategic Sourcing (7-Steps)

Supplier Enablement

(TBD)

Requisition Management

(PeopleSoft)

Invoice Exceptions

Catalog (PeopleSoft)

Supplier Collaboration

(TBD)

Payment Gateway

ERP (PeopleSoft)

Supplier Collaboration

(TBD)

Invoice Imaging & Workflow

(Ikon)

Vendor Portal (NMVPS)

Payment Audit (TBD)

Supplier Performance Management (Visibility, Compliance) (TBD)

Support Functions (Finance PMO, IT, Supplier Diversity, Treasury)

12

EUROPEAN ENERGY SELECT MARKETS: 2012 SUPPLIERS

Gazprom Energy Npower

Multi-Energy

Southern Electric

Lambert Smith Hampton

Stratford Utilities Limited

Retail Utilities Solutions

British Gas Services

EDF Energy

Energies Strasbourg EDF France

Edison Energia

Tradecom

Enel Energia

Enel Servizio Elettrico AceaElectrabel Elettricita

A2A Energia

Unibail-Rodamco Inversiones

Union Fenosa Comercial

Endesa

Iberdrola

Stadium Management

SWM Versorgungs

Mainova Aktiengesellschaft

RheinEnergie

Envia Mitteldeutsche Energie

GETEC net

Stadtwerke Bonn

Stadtwerke Dusseldorf

Vattenfall

SPEND BY SUPPLIER

SITES BY SUPPLIER

Energies Strasbourg EDF France

Tradecom

Edison Energia AceaElectrabel Elettricita

Enel Servizio Elettrico

A2A Energia

Enel Energia Unibail-Rodamco

Inversiones

Union Fenosa Comercial

Endesa

Iberdrola

Envia Mitteldeutsche

Energie

RheinEnergie

SWM Versorgungs

Mainova Aktiengesellschaft

Stadium Management Stadtwerke Dusseldorf

GETEC net

Vattenfall

Stadtwerke Bonn

Lambert Smith Hampton

Npower

Multi-Energy British Gas Services

Southern Electric

Gazprom Energy

Retail Utilities Solutions

Stratford Utilities Limited

EDF Energy

Germany United Kingdom France Italy Spain

13

EUROPEAN ENERGY SELECT MARKETS: 2012 & 2014

NUMBER OF SITES, 2012-2014

SAVINGS

• Between 2012 and 2014, over $1MM in savings delivered to company operating expense, equivalent to almost $1 EPS.

NUMBER OF SUPPLIERS, 2012-2014

KEY POINTS

• Additional savings are expected from efforts in France.

• Significant consolidation of suppliers; better relationships with fewer suppliers with potential of improved energy efficiency.

• Uninterrupted service

• Willing partner open to testing additional savings tools.

• Investigating additional contract savings opportunities UK, and Germany.

CONSOLIDATED CONTRACT SAVINGS: UK, DE, IT, ES

Year Countries Contract Savings

2012 UK Over $50k

2013 UK, DE, ES Over $250k

2014 UK, IT, ES Over $500k

0

20

40

60

80

100

120

United Kingdom

Italy Spain Germany France Overall

2012 Sites

2014 Sites

0

5

10

15

20

25

30

35

United Kingdom

Italy Spain Germany France Overall

2012 Suppliers

2014 Suppliers

14

R&M DOMESTIC GENERAL MAINTENANCE RFP

POST-TEST UPDATE: OCTOBER 2014

Supplier A Supplier B Supplier C

Supplier B Supplier D

POST-RFP AWARD PLAN: FEBRUARY 2014

STRATEGY

• Partnered with internal customers to manage Repair & Maintenance spend.

• Focused on the 34% of maintenance spend that goes towards general maintenance.

• Conducted RFP to vet new suppliers and reduce pricing for incumbents.

RESULTS

• Post-RFP award plan was modified based on supplier performance during test period.

• Two incumbents were awarded the business, at rates that were driven down by the RFP process (~$1M savings).

• Shortcomings in the on-boarding process were identified, which will be corrected for future events.

15

PATH FORWARD: 2015 & BEYOND SOURCING PROCESS

• Further drive the adoption of our 7-Step Sourcing Process within the company.

IDENTIFY SCOPE ANALYZE BUILD SOURCE EXECUTE MAINTAIN

TEAM DEVELOPMENT

• Opportunities to develop and test presentation skills.

• Further development of project management skills

• Increased exposure to Contract Management process

16