Making Collaboration Work Key Considerations, Challenges & - - PowerPoint PPT Presentation

SLIDE 1

Making Collaboration Work – Key Considerations, Challenges & Pitfalls Ian Conner CPO – Strategic Procurement Service Southwest One February 16th 2011

SLIDE 2

Agenda

• Southwest One – who are we?
• Collaboration – It‘s the next big thing
• Procurement Transformation within Southwest One
• Embedding Category Management within the Client

Organisations

• Some examples of Collaborative Procurement in practice
• Where next?
• Q&A

SLIDE 3

Southwest One Structure

The vision of Southwest One is to enable the social transformation of Taunton, Somerset and the South West to deliver better value for money for council taxpayers and improve access to services for local residents, namely:

• Create efficiency savings
• Develop new ways for people to

access public services

• Help the councils and the police

improve services to the community

• Support the development of the

local economy

75% 25% DELIVER SERVICES TO SCC AND TDBC FROM 11/07, ASC FROM 06/08 FRAMEWORK AGREEMENT ALLOWS DELIVERY OF SERVICES TO >38 OTHER AUTHORITIES WITHOUT COMPETITIVE TENDER

SLIDE 4

A comprehensive Services Catalogue bringing the best partner ecosystem to the region

SLIDE 5

Collaboration – The New Shangri La

― Shangri-La has become synonymous with any earthly paradise but particularly a mythical Himalayan utopia — a permanently happy land, isolated from the outside world.‖ (wikipedia) ―Public Sector People Managers' Association president calls for collaboration‖ ―Senior civil servants on course for pain, cuts and collaboration‖ (Guardian)

The Reality is Collaboration is hard, difficult to establish and requires significant skill (and patience) to make work

―More councils look to shared services to keep them afloat‖

SLIDE 6

Collaboration – what it means in Southwest One Procurement

There are three principal outcomes arising from collaboration which apply to the procurement shared service in Southwest One:-

• Bringing IBM in as a partner leverages expert knowledge and wide

experience of identifying improvement strategies in Procurement, providing the catalyst needed to embed new methodologies and deliver value

• Aggregated demand across two levels of Government and the Police to

generate cost reduction opportunities

• Builds a central procurement team which is stronger and more capable than

the sum of it‘s parts The shared service structure enables the recruitment of skilled category procurement specialists and a focus on developing close working relationships and driving strategic initiatives that just wouldn‘t have been possible for any of the three organisations without the partnership

SLIDE 7

Collaboration – Making it work

• Governance - Board of Directors drawn from all 4 partners.
• Issues arising from perceived lack of focus on any one party are easily

addressed and resolved at senior level before dissent grows

• Close alignment to stakeholders is key - hearts and minds engagement is

crucial - Stakeholders are mapped and strategies aligned with them well in advance of key decision boards.

• Generate a Sourcing Council of the ―Great and the Good‖ to sign off

strategies and avoid subsequent arguments

• Detailed and extensive Customer satisfaction surveys are deployed to

understand and obtain users views of how procurement is performing, looking at Tactical; Category Management and Business Advisory aspects

SLIDE 8

Collaboration – Making it work

• The Southwest One model is based on seconded employees from

the original teams with additional resource coming from direct hires and IBM specialists.

• Category Teams have been established from a mix of secondees

(staff previously part of the old buying teams), new hires and some IBM resource.

• Apart from high level technical skills, key attributes are soft skills….

the ability to engage closely with stakeholders at all levels, winning ‗hearts & minds‘ Equally comfortable debating key economic issues with the CEO or having a chat and a cup of tea in a church hall in Hatch Beauchamp

SLIDE 9

From Beat the supplier up and take his wallet! To Partnership Collaboration Aligned goals

Procurement – Evolution or revolution?

SLIDE 10

How should procurement support the drive for spending reductions? Within the 3 Client organisations that comprise Southwest One the key drivers are:-

• Maintain front line Police presence
• Safeguard as many key council provided services as possible
• ―More for less‖
• Drive efficiency
• Reduce waste
• Support the local economy
• Green Agenda

Procurement is perfectly positioned in the current economic climate to demonstrate it‘s worth in delivering ―more for less‖ for the Authorities and not simply acting as a processor of tenders

SLIDE 11

“Southwest One Strategic Procurement Service to deliver £200 million in cost savings over 10 years”

• Combined addressable spend of £500M per annum across the 3

Authorities

• Move procurement from a back end process driven service to a

front end advisory service, influencing and informing key commissioning decisions

• Deploy ―Category Management‖ as a core methodology that

analyses supply markets and demand trends to focus on best value delivery (not just cheapest price)

• Collaboration in procurement enables two prime goals:
• Aggregated and committed spend and the ability to leverage it
• Scale, specialised, professional procurement team, utilising a

leading edge methodology with focus on outcomes

• Development of existing procurement staff alongside bringing in

―fresh blood‖ was key to enhance skills and move procurement to a new ‗strategic‘ level

• Challenge demand within the Client organisations

SLIDE 12

Transforming the team

• Initial deployment of IBM procurement

Consultants

• First steps – focus on structure of the team
• Establish master categories and ―Tactical team‖
• Establish desired characteristics for each role
• Assessing team capability & identifying Gaps

against the role characteristics

• Agreeing Gap closure initiatives to upskill team to

required levels

• Procurement Capability Accelerator
• Importing key skills & expert practitioners to lead

by example

SLIDE 13

The “Wave Plan”

Savings potential Ease of Implementation

High Low Hard Easy 1 2 3 4

Office MRO Uniforms Police specific

Scientific services

Adult Social Care Social Care Learning Difficulties Social Care CYP Publications EBI Highways EBI Hard FM EBI Professional Services EBI Construction Tpt Fleet & Grey Fleet 3PST 3PST Public Tpt Professional Services Travel Waste s Communications/marketing IT Banking and finance Tactical procurement EBI Soft FM Fleet Inc ASP Adult Social Care Publications EBI Highways EBI Soft FM EBI Hard FM EBI Construction Fleet 3PST Social Care Professional Services Travel Leisure and public services Utilities

5 10 15 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

SLIDE 14

INPUT Agreed list of key stakeholders & comms plan Specifications, business plans, corporate

• bjectives,

budgets, historical spend data Forecast of future requirements identifying product function, volumes, & value Supply market data, trends, analysis on what other companies do Succinct report identifying future trends in supply market,

• ur view on best

practice Requirements market & best practice analysis, peculiarities of SW1 environment Agreed plan on how to take Category forward, considering sourcing, SRM, compliance, demand etc Agreed Category Plan Future estimated benefits When elements will be delivered & resources required Form a cross functional Team

Stakeholder Management Analysis Stakeholder Management Requirements Analysis Market & Analysis Category Strategy Balancing Benefits & Risks Timelines & Resource Form Category Management Team

OUTPUT Agreed Category Plan & KPI’s Team knowledge

     

Best Practice

Develop Options Draw Conclusions Gather Facts

The Category Planning Process

SLIDE 15

Industry Dynamics

BMS corrugated expenditure for the United States and Puerto Rico total $19 million

Market conditions — 1994 through 1997

Applying it to suppliers ... Exa m p le: Corrugated — pilot

• A. T . Kearn ey 1 7 / 5 3 5 3 / 2 4 ama
• High c

apita l require d to bu ild m ill/box pla nt ($1 billion)

• Dem

a n d exc eeds c urrent supply of raw m aterial source s New Entrant Thre at

• Most ope

ra ting at fu ll ca pacity (98%–99%)

• Capa

city gro wth e xp e cted to a verage 4% between 199 4–1997

• Pricin g of raw m

aterials sa m e for com petitors

• Ability to sell oversea

s at highe r ma rgins Power O f Supplie rs

• Line

rboard inve ntories a t rec

• rd lows
• Current dem

and exc eeds c apac ity

• Capa

city a dd e d in sma ll incre m ents Supply Market Riva lry

• Supp lie

rs desire to u pgrade ac count profile

• BMS na

m e/reputation

• Stron g BMS c

re dit ra ting/low risk

• $18MM bu y ac

ross 17 loca tions m a y not provid e im m edia te leverage with large inte grated suppliers Power O f Buy e rs

3

• Thre

at of no n-pape r a lternatives in c lude shrink wrap, pla stic

• Conv e

rsion to tra ys reduc es spe nd Substitute Thr eat Hig h M o d erate Lo w 5 3 1 Key

1 3 5

Cost Analysis

Cost structure comparison (aluminum)

Applying it to suppliers...Example: Cans/tubes * Other includes SG&A, taxes, insurance, interest, freight, warehousing and R&D Source: Company annual reports Vendor 1 Vendor 2 Vendor 3 Vendor 4 Raw Materials 45% Labour 18% Depreciation 19% Other* 18% Raw Materials 51% Labour 18% Depreciation 5% Other* 26% Raw Materials 38% Labour 43% Depreciatio n 3% Other* 16% Raw Materials 33% Labour 41% Depreciatio n 2% Other* 24%

Demand Segmentation

Our buy can be understood using four distinct segments

Includes:

• Capital equipment
• High-tech instruments

Includes:

• Sensitive supplies
• Sensitive chemicals
• Ongoing equipment

Includes:

• Flexible supplies
• Safety supplies
• Chemicals and Specialty gases

Includes:

• Table-top equipment
• Floor-stand equipment

Supplies which support routine day–to–day lab operations Common equipment which is key to the basic operations of most labs Items which satisfy the unique needs of specific departments Necessity to keep abreast of state-of-the-art capabilities for leading edge research % % Product Characteristics Procurement Process % % Generic Specialized Ongoing One-off Total Spend

Applying it to suppliers ... Example: Laboratory supplies and equipment

Supplier Portfolio

The supplier portfolio for this category is concentrated in major segments

Marketing functions Sales functions

• Users/Originators

Sales drivers — Informational items — Emotionally appealing items

• Purpose

Consumers/trade Professional/ institutional

• Audiences

Colours Art work Paper

• Pre-Press

Volume-run size Matching press to job

• Press

Finishing Packaging Distributing Expediting

• Post-Press

Selling aids/field literature Point of purchase materials Training materials Magazine/journal inserts Other sales and marketing materials Our View Specifications/ complexity — Paper grade — Number of colours — Bindery Volume — Average run size Supplier View

• TCO/Value Chain

Supply Market Business Model

The business model for plastic processing has several levers that we can influence to reduce cost

Pre-Conversion Costs internal Controllable

(Varies By Business)

• Resin (type, grade)
• Labor (skill, union)
• Design (gram wt., shape)
• Capacity utilization
• Process technology
• Tooling capital
• Set up
• Process control

Technology

• Decoration
• Packaging
• Distribution (inventory

freight expending)

• Resin choice
• Design complexity
• In-house design

capability

• Gram weight
• ptimization
• Tooling investment
• Choice of stock vs..

custom

• Order size
• Speed to Market
• Decorating complexity
• Vendor proximity
• Release quantity
• Order pattern

Conversion Costs Post-Conversion Costs

Supplier Capability

The supplier capabilities span a broad spectrum of capabilities

ID/ RX to CV Neuro IMM Onc Derm Other

Vendor 1 X X X X X X X Vendor 2 X X X X X X Vendor 3 X X X X X X Vendor 4 X X X Vendor 5 X X X X X Vendor 6 X X X Vendor 7 X X X X X Vendor 8 X X X X

Global US-Focused Supplier Experience/Capabilities

Supply market analysis

SLIDE 16

Embedding Category Management methodology

• Become an Evangelist – tell everyone and anyone
• Train the team! All SW1 procurement team (and some key people
• utside procurement) have been through a 2 year Procurement

Capability Accelerator programme focussed on explaining the philosophy and explaining ―How to‖ guides

• Get Finance involved…. Budget reductions focus minds and

incentivise non believers

• Develop a robust and credible benefits tracking process – avoids

scepticism

• Manage data… knowledge really is power! Where is the money

going? Who is buying what? If possible deploy an ERP system to strictly manage the buying process to identify Maverick spend

• Above all get high level stakeholder sponsorship and commitment

SLIDE 17

Embedding Category Management

• Procurement isn‘t something you can ‗do to‘ organisations….

You have to do it ‗with‘ them.

• ‗Local agendas‘ can drive strategies in a different direction….
• ‗we know best‘ mentality needs to be overcome – bringing

‗science‘ to the project helps to overcome this, but also developing ‗soft skills‘ within procurement professionals – we need to learn how to win ―hearts & minds‖

• Office politics can be a substantial block to progress – Senior

level support from the partner organisations is vital

• National frameworks without commitment have their place

but may not deliver best value - mandation can be hard to enforce

SLIDE 18

Some Examples of Collaborative projects developed from Category Strategies

• Soft FM (Cleaning and Catering)

provision:

• single, cross-authority long-term

prime Cleaning and Catering contract – aggregates up significant diversified spend

• Output based rather than input

based

• Temporary labour contracts
• Fragmented local supplier base

consolidated into tiered agreements

SLIDE 19

Examples

• Social Care
• Helping to focus on real cost drivers
• Delivering negotiated benefits
• Assistive Technology
• Equipment before Care
• Block booking beds
• Fleet

Changing how the Authorities manage demand questioning the specification and equipment levels actually needed and negotiating better rates

SLIDE 20

It is a hard road and there are difficult messages to communicate

But it is worth it….

• Delivery of savings is happening now. Projects have been

implemented that will reduce costs by more than £60m with lots more to come

• With a true Centre of Excellence for procurement, the three public-

sector organisations within SWOne will be better able to preserve front-line service delivery even as we face up to the ever growing need to cut costs - It‘s an exciting Journey and we are up for the challenge!

SLIDE 21

Questions?