Optus Procure to Pay Transformation - The Journey 26 June 2013 Karen Carmichael
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Optus Procure to Pay Transformation
The Journey
26 June 2013
Karen Carmichael Raj Dhawan
Director, Senior Manager,
Procurement Operations Management Consulting
SingTel Optus Accenture
Karen.Carmichael@optus.com.au Rajat.Dhawan@accenture.com
1
Optus Procurement Transformation
AGENDA
Procurement @ Optus
Fix the Basics
Procure to Pay
Drive Value
Enhance capability
Change Management
2
Optus Procurement Transformation
Our Procurement
10,000 Staff requesting over...
...$3.5bn in goods and services each year...
...with more than 3000 Suppliers.
All to ensure we deliver daily service and products to more than 10 million
consumers services along with Wholesale and Business customers.
Our procurement team delivers one of the industries lowest cost to spend model,
supporting sourcing across a diverse range of goods and services.
From Stickers To Satellites
We are almost at our goal, it hasn’t always been easy but we have come along way in
our transformation journey.
3
Optus Procurement Transformation
Why Transform?
Our Situation 2010
A reactive transactional procurement capability that was seen as complex and
confusing along with inconsistent and disaggregated supplier management. We were
seen as a roadblock
Innovative Our Goal
Sourcing
To lead our business in the development and execution of innovative sourcing and
Solutions purchasing strategies in an advancing digital world.
Our Approach
• Fix the basics: standardise our processes
• Procure to Pay: improve effectiveness and efficiency
• Drive value: enable cost benefit to the business
• Enhance capability: continuous improvement, upskilling, buy talent
4
Optus Procurement Transformation
AGENDA
Procurement @ Optus
Fix the Basics
Procure to Pay
Drive Value
Enhance capability
Change Management
5
Optus Procurement Transformation
Fix the Basics
The Goal The Change
New Process
Be streamlined
and efficient #
100
80
60
40
Tendersin Progress $mil
$1,400
$1,200
$1,000
$800
$600
$400
20
$200
0 $-
Nov Dec Jan Feb Mar Apr May June
Direct Indirect Value ($mil)
New Engagement & Governance
Have effective governance
and compliance
New Tracking and Analytics
Deliver sustainable
cost management
strategies
New Supplier Governance
Ensure superior
performance
Deliver Quick Win Value
Enable business strategy
6
Optus Procurement Transformation
Fix the Basics
New process A new ‘Top Gun’ process was introduced across procurement to deliver an efficient and effective
sourcing strategy. Phase II intends to focus on the automation of this embedded process.
Embedding new Tender process and delivering Efficiency. Delivering Procurement Efficiency
Intensive coaching model and Key metrics and processes are in Results are being seen in compliance to Top Gun
weekly measurement to embed place, allowing us to pro-actively process and process timelines
Top Gun process manage our business 40%
reduction in
time to
#
100
80
60
40
20
Tendersin Progress $mil
$1,400
$1,200
$1,000
$800
$600
$400
$200
market
0 $-
Nov Dec Jan Feb Mar Apr May June
Direct Indirect Value ($mil)
A rigorous governance and tracking of the process allows us to ensure it is operating effectively.
Accountability Collaboration Champion Empowerment Development
Tender boards promote Tender on a page allows for Post
healthy competition and Implementation reviews to continue
Roll Up view allows us empower to succeed. development
Individual tracker for every Visual Tender Wall with to Champion the most
Top Gun tender measures Fortnightly ‘Round Wall’ critical cases.
timeline and marks the meetings ensure challenge
CLOSER
completion of every step. areas are discussed as a
team. 7
Optus Procurement Transformation
Fix the Basics
Process efficiency We also ensured active tracking was in place to allow for the appropriate and timely management
of the process.
Active Management of Aged
Tenders and Expired agreements
88% Reduction in WOC’s >2 Weeks
of Age.
Area From To
Aged Tenders No emphasis on the age of tenders, no age targets, We report weekly on aged tender progress, with
no visibility to age a target of a 50% reduction in tenders over 1 yr
age. Monthly reporting to MDs
Expired Agreement No visibility to contract expiry, managed on Interim manual reporting established, all expiring
reactive basis as the business realised contracts had contracts evaluated and renewal work kicks off
expired where required
PO Compliance No visibility to the portion of POs below $100k that Regular audit has kicked off to drive the right
complied with Procurement policy behaviour and educate
Tender Communication Each Cat Mgr running a disparate process, with Standardised, documented process being rolled
different communications, folder format etc. out based on consistent dropbox format and
Difficult to arrange cover during absences comm’s templates
WOC’s Average 25 WOCs over 2 weeks, no visibility or Average 3 WOCs over 2 weeks, KPIs in place, aged
management of aged WOCs WOCs actively managed
CLOSER 8
Optus Procurement Transformation
Fix the Basics
Governance A new governance framework was embedded to make our buying decisions easier whilst
providing clarity to the Business.
Supplier relationship Model Supplier Segmentation
Understand their
importance
External Governance Internal Governance
External Supplier
Governance
9
Optus Procurement Transformation
Fix the Basics
Performance Mgmt New Performance Dashboards and Saving Trackers are in place to ensure we are on track to
realise our benefits to Optus.
Addressing all these have demonstrated the ability to
save $$.
As seen in the Mobile E2E Planning Tender
$333K savings based on average of
BAFO responses less final price
CLOSER 10Optus Procurement Transformation
Fix the Basics
Spend Analytics We have aligned our spend and suppliers into the relevant categories and now have a new
taxonomy to perform spend diagnostics
Understanding our spend and the new
taxonomy it aligns to.
Allows for Strategic positioning
for cost and delivery efficiency.
CLOSER 11Optus Procurement Transformation
Fix the Basics
Vendor Mgmt A monthly Supplier dashboard provides us with detailed information to ensure we are maximising
the vendor relationship.
Detailed scorecards for our Strategic
Suppliers performance across
common criteria:
- Quality / Safety & Sustainability
-.Delivery
- Cost Mgmt & Pricing
- Service Responsiveness
- Capabilities & Innovation
Ensuring our suppliers are
delivering to our expectations in a
consistent and standardised
evaluation framework.
12Optus Procurement Transformation
Fix the Basics
Engagement The key to communicating change and process to the business is our new and interactive Portal
In addition to improvements in usability,
the site introduces;
• sourcing procedures for each spend
bracket (how to buy)
• Refreshed Procurement policies
• Download packs for key processes
• Comprehensive
help functions.
And our Customers Love It
Just a quick note of positive feedback on your Portal – it
is outstanding!
From a project delivery perspective, the site offers
everything we need to know and more – great work!
13Optus Procurement Transformation
AGENDA
Procurement @ Optus
Fix the Basics
Procure to Pay
Drive Value
Enhance capability
Change Management
14Optus Procurement Transformation
Procure to Pay – Context
• No clear framework to buy
• Manual, sub-optimal processes;
inefficient workflows and duplicate
approvals
• Lack of clear policies
• Poor user experience – for both
business as well as procurement
Benefits
Process &
Technology
• Crude way of linking contracts with • Annualised benefits of $9.5M
Operating
Model purchase orders. • Compliance increase by 11%
• No supplier integration. • Better relationship with
Reporting & • No catalogues.
• Underutilisation of current system
vendors
Compliance
• Poor usability. • Quick and accurate reporting
• No longer seen as a roadblock
• Improved usability
• Specialised/assisted buying
• No spend categorisation
• Lack of compliance reports
• Overheads with time spent on admin
activitiesOptus Procurement Transformation
Procure to Pay – High Level Buying Model
A new buying framework was defined that introduced compliance, made buying easier and provided
category specific flexibility
Category Manager
Suppliers Contract Manager
Reactive Buying/Sourcing Sourcing
POP
>$200k²
Free-Text Determine Supplier
On MM
Request Approach and Engagement Develop/Update
/Catalogue
Single Point of Entry
No
Procurement Portal
Execute Strategy (Sourcing/Variation) Contract
Business Requestors
?
Identified Need
Spot Buy Team
Yes $3k Market
above $5K Define Approach Engagement
and Execute (Quote/Auction)
RequestOptus Procurement Transformation
Procure to Pay – Simplifying Buying
We introduced a process that would make purchasing easier for goods and
services that were on contract.
Step 1 Step 2 Step 3
Start at our Portal Search & Select the Product & POP places order in SAP
Populate request Form
Requestor POP’s
We now show our contracted products through a search and select engine. Easy for the user and
enables powerful spend reporting.
Based on the analysis of 46,000 PO’s from Jan 2011 to Dec 2011 we expected ~60% to flow through this
process. Remaining volumes will be through one of the 3 Alternate PR processes.
17Optus Procurement Transformation
Procure to Pay – Assisted Buying
No Contract When there is no contract or contracted material we have sourcing
teams that support a Purchase Request..
Team of 18
Requisition The SOURCE4U Team
will approve and trigger
PO
Raise a PR
The SOURCE4U Team
will work with you to
source the best vendor
and product and
approve for you to raise
a PO
Category Managers will
work with you to
determine the best
18sourcing approach.Optus Procurement Transformation
Procure to Pay – Spend Taxonomy
Allowing Optus to get better visibility of spend and enabling the identification of sourcing opportunities
• Telco specific • GL accounts impacted
materials (PO Historical data) ~300 Optus customised
• Optimal level of • Optus categories categories
spend accuracy (Optus doc. &
Discussions)
UNSPSC list Customised List of unique
4 Levels:
UNSPSC list categories
Segment Optus categories’
Preliminary analysis Mix of UNSPSC Customised mix
Family customisation
levels 1, 2 & 3 of UNSPSC levels
Class
1, 2, 3 & 4
Commodity
Procurement
39,000 general 900 telco specific validation & update of
categories
categories categoriesOptus Procurement Transformation
Procure to Pay – Need for better governance
Governance & operational challenges Capability Technology
Challenge
Lack of sophisticated reporting system Contract Introduce
Lifecycle
Only 6% of available SAP procurement
Management
CLM
reports utilised
SAP BW not used for procurement / spend
reporting
Spend
We need a Enhance
Reporting largely a manual and time- Taxonomy
powerful reporting
consuming task
capability
and improved SAP
buying
Limited contract reporting available and no
alerts for contract renewal
Purchases not linked to contracts – not Enhance
possible to track contract spend High quality
analytics BW
No material master and therefore no product
categorisation
No meaningful information on what has been
bought
=
Lack of a hierarchical sub-category structure
20Optus Procurement Transformation
Procure to Pay – Closing the Loop
The business architecture helped close the loop between sourcing and buying helping with category
management, contract management and vendor management.
C4 C5 C6 REPORTING RP
Initiate Authoring Collaboration Finalise Contract
CLM Reports
• Choose and edit template • Negotiate Contract • Completed legal contract
• Add contract header level data • Finalise with Business • Scan signed copy and attach
• Identify vendor • Materials setup
Acknowledgement
Interface C7 Publish C9
C1 C3 from CMS
Master Data contract to CMS
SAP CLM
Trigger for
contract
creation REPORTING RP REPORTING RP
• Contract expiry CMS Reports BW Reports
• Strat sourcing/
tendering C2 C8
Set-up Master Data Outline Agreement Created
b) create materials
, • Contract header
a) set up vendor c) map to taxonomy
• Line items
• Price and pricing conditions
Vendor Material Material
Master Catalogue Group
SAP CMS Master Data
R1 R2 R3 R4 R5 R6
Need for Create Requisition Generate PO Seek Approval Receipt Reconcile Invoice
Product /
• Raise free-text request if not • Link PO to Contract or ,
• Financial line of • Goods/services • Three-way match
Services on contract PR business • Make payment
• Generate and send PO
• Requestor to vendor
SAP CMS SAP BW
• PoP Requisition to Pay
New capability C Contract Creation Steps
Existing – Change Anticipated R Requisition to Pay
Existing – No Change Anticipated 21 RP 1 ReportingOptus Procurement Transformation
Procure to Pay – Implementation Timeline
The implementation followed a typical systems lifecycle, however it was business led rather than
technology led. The focus was on business benefits (compliance, savings, user experience,
simplification) rather than technology.
Go-Live
Functional Designs
Sign off Trial Taxonomy IA & Solution
Migration Plan (Custom)
Detailed Business
Processes
Tue 21/02/12
Project Charter RTM Taxonomy IA & Solution
(Standard)
Start
Mon 26/09/11
October November December January March April May June
Plan Build Warranty Support
Mon 26/09/11 - Mon 21/11/11 – Fri 27/01/12 Mon 23/04/12 - Mon 16/07/12
Thu 20/10/11
Deploy
Mon 30/01/12 - Fri 23/04/12
Design Test
Mon 17/10/11 - Fri 23/12/11 Mon 23/01/11 - Mon 23/04/12
Data Testing Strategy Test Plan SIT 1
Migration Completion Handover
Approach Fri 17/02/12 Documentation
SIT 2 Thu 19/04/12
Test Scripts Taxonomy Completion
Technical SIT Fri 2/03/12 UAT
Contract Designs Completion Completion
Master List Thu 9/02/12 Thu 23/03/12
22Optus Procurement Transformation
Procure to Pay – Support Structure
A post deployment support structure has been established as follows, the details of which are currently
under discussion:
CMS Team
23Optus Procurement Transformation
AGENDA
Procurement @ Optus
Fix the Basics
Procure to Pay
Drive Value
Enhance capability
Change Management
24Optus Procurement Transformation
Procure to Pay – Summary of Business Benefits
Savings Estimated
Key Highlights
Category Annual Benefits
• The result has been a 11% increase in contract compliance, when
compared to FY11
• Central repository for supplier contracts established
• Strong governance of an agreed purchasing process
• Ability to enforce linking of purchases to the contract terms and value Estimated @
• Ability to buy off a list of standard goods and services; enables centralised and $5.5M per annum
specialised buying
• Ability to link purchases to contracts at the time of purchasing thereby providing
improved visibility of purchasing activity on and off contract across Optus
• Competitive sourcing process of obtaining 3 quotes for all purchases
between $5K -$200K
• Purchase requisitionsOptus Procurement Transformation
Drive Value
Reporting Optimus has allowed for the introduction of process control and
powerful reporting.
Understanding our Spend
All the work behind the scenes that has gone into
converting our process into a standardise system based
process .
A standardised Taxonomy for
materials, whether contracted or
not, will allow a greater level of This allows for new and exciting reporting and analytics.
reporting by Material Spend. Ensuring we can help the wider business meet it’s
strategic goals.
Linking that spend and materials
with Contracts provide and even
greater level of spend analytics.
26Optus Procurement Transformation
Drive Value
65%
reduction
Total tenders has fallen from 86 in Feb 2011
to ~30 in June 2012. The aging profile has
also improved dramatically.
Performance
Old New Performance
Actual against old
process target against target
process
‘Tenders in progress’ has fallen due to an 49%
improvement in median time reduction Simple 203 88 80 -9% -60%
from 187 to 95 calendar days… Medium 210 151 119 -21% -43%
Complex 545 217 150 -31% -72%
…and because we’re cancelling or pipelining Tenders
tenders earlier.
Cancelled 44
Pipeline 4
27Optus Procurement Transformation
Drive Value
We now take accountability for shared KPIs to drive down $100m
costs in our business for FY13
$100m
$0m
FY13 Incremental FY13 Incremental FY13 Incremental FY13 Existing OPEX Final FY13 Cost
OPEX Target CAPEX Target Target Stretch Expectations Benefit Target
28Optus Procurement Transformation
AGENDA
Procurement @ Optus
Fix the Basics
Procure to Pay
Drive Value
Enhance capability
29Optus Procurement Transformation
Enhance Capability
New Teams We introduced 3 new support teams for our system and process
change.
Operations & Category Contract
Performance Management Management
Current Structures remained as is and is the stage 3 of
transformation
Supports the Business Supports POP’s with a Ensures our Material
With ‘Off-Contract’ Unique ‘how to’ help and Vendor Data is
Purchases under desk for our new clean and up to date,
$200k process.
30Optus Procurement Transformation
Enhance Capability
Reporting Our new teams are critical to ensuring a smooth sourcing process.
Performing:
• Competitive sourcing of non contracted spend
($5K to $200K)
• Optimal pricing as per business specifications
and/or requirements
• Validation ofOptus Procurement Transformation
Enhance Capability
PEOPLE We have begun the final journey in transformation, we are
restructuring and retooling our workforce.
Aligned with Strategic Sourcing & Supplier Mgmt solution
Jun Jul Aug Sep Oct Nov Dec Jan
25/06
02/07
09/07
16/07
23/07
30/07
06/08
13/08
20/08
27/08
03/09
10/09
17/09
24/09
01/10
08/10
15/10
22/10
29/10
05/11
12/11
19/11
26/11
03/12
10/12
17/12
24/12
31/12
07/01
14/01
21/01
28/01
04/02
18/6
Contract Calibration
Enhance Contract Capability
Category Planning
Enhance our resource capability
Procurement Organisation Alignment
Restructure our Team
Full Strategic Sourcing
Educate and Enhance our resources.
32Optus Procurement Transformation
AGENDA
Procurement @ Optus
Fix the Basics
Procure to Pay
Drive Value
Change Management
33Optus Procurement Transformation
Change Management
We have introduced a lot of change to our business in a
very short period of time.
What was key to our success?
Firstly we created a brand and then got busy….
34Optus Procurement Transformation
Change Management
Change Mgmt We had a multi layer of change management. Wider Audience,
Detailed Engagement and Training.
Wider Communication Engagement Training
We performed regular communications drops and We continued to educate our Change Network We developed a unique Training Portal and face
highlighted our Category Mgmt in our Videos. and expanded to more targeted areas. to face training
Talking about OPTIMUS.
-Corporate Services Quarterly road show
presentation.
- VIRGIN SLT Update
- Networks SLT update
- VIRGIN POP Info Session
- Fixed Core GM Update
- MDSS Targeted Communication and Process
- UECOMM Walk through
35Optus Procurement Transformation
Change Management
Change Mgmt We drilled down on all previous spend to understand the highest
traffic areas and ensured tailored communications were developed
Business Unit Division Department Our People
Requestors
MDSS
POP’s
Mobile Core XXX
Networks Fixed Core XXX
Service Assurance
Consumer
OB Using Networks as an example we understood Networks to be a
Spending large user of our process and that Mobile Core Engineering was
Over 45,000 one of the largest divisions within this spend. Inside Mobile Core
over $3.5 SMB
PO’s Engineering a Department called MDSS was the largest contributor.
bn
We spent a lot of time with Mobile Core Mgmt and their Top
Corporate Requestors / POP’s ensuring they were comfortable and that any
unique needs were addressed.
T&P
OWS
Standard Process Unique Process Engage the Users
Base your requirements on a standard Understand any unique needs of the business Ensure those who use the
build and communicate high level areas that you may need to be flexible with and process the most understand
change 36
communicate in a more targeted fashion the overall change and any
unique processes for their area.Optus Procurement Transformation
Change Management
Change Mgmt We developed Information booklets as well as ebooks for our users.
37Optus Procurement Transformation
Our new dawn has come and we are ready for the future
Continue to Improve
New Brand
New ways to communicate
Drive Cost Efficiency
Enhance our Taxonomy
Interact Globally
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