Proc Intro 1 © The Delos Partnership 2005 Procurement Masterclass Introduction – the challenges

Proc Intro 2 © The Delos Partnership 2005 Workshop List out the key procurement challenges facing your company today

Proc Intro 3 © The Delos Partnership 2005 Workshop Examples of some of the KEY PROCUREMENT CHALLENGES: Costs Up Low Savings Supply Risks Dissatisfied internal and external Customers Poor User Requirement Specifications No clear Policies or Processes Unmanaged and uncontrolled Suppliers Lack of Leadership Lack of Processes Strategic Sourcing Poor Product & Service quality Long lead times and Poor On Time in Full performance Weak agreements Inadequate Measures Poor Supplier Management Cost Reporting

Proc Intro 4 © The Delos Partnership 2005 Pressures on Procurement Inflation Risks to Supply Global competition People management

Proc Intro 5 © The Delos Partnership Business Environment INCREASING COSTS & PRICES Inflation – Interest Rates increasing Raw Materials and Energy costs sharply up – Oil, Gas, Coal, Steel, Chemicals, Plastics, Paper Growing regulatory pressures Supplier market consolidation & dominance Increasing professionalism of Sales & Marketing (CRM and e-enablement)

Proc Intro 6 © The Delos Partnership 2005 Cost Increase - Oil

Proc Intro 7 © The Delos Partnership 2005 Cost Increase - Steel

Proc Intro 8 © The Delos Partnership Business Environment INCREASING SUPPLY PROBLEMS AND RISKS War & Terrorism – Another Sept 11? Iran, Korea, Africa…. Higher Capacity Utilisation rates –China growing % per annum Expansion of and Sourcing from the Asia Market

Proc Intro 9 © The Delos Partnership Business Environment INCREASING COMPETITION Intensifying Globally Suppliers, Customers and Competition investing in Supply Chain & Procurement New & Better Products and Technology coming from all directions

Proc Intro 10 © The Delos Partnership Business Environment PEOPLE MANAGEMENT Global job market and accelerating people turnover Harder and increasingly expensive to retain and attract talent High Quality education and career progression expected

Proc Intro 11 © The Delos Partnership 2005 Customers want –On time –In full –100 % of the time –Faster –At lower costs –With higher value –Support for innovation

Proc Intro 12 © The Delos Partnership 2005 Corporate Requirements Stock Market expecting higher growth and higher dividends Internal targets being set at challenging levels - 20 % ROCE Pressure on direct head count Requirements for dramatically lower cost

Proc Intro 13 © The Delos Partnership 2005 Delos ROCE model ROCE Profit Capital Sales Costs Material Labour Overhead Fixed Current Stocks Creditors Debtors Projects

Proc Intro 14 © The Delos Partnership 2005 Workshop In order to be effective in procurement, what are the key requirements that you need from other functions ?

Proc Intro 15 © The Delos Partnership 2005 The Delos Model For Business Integration Innovation Innovation Vision Strategy Prioritisation Prioritisation Demand Support Supply

Proc Intro 16 © The Delos Partnership 2005 Delos ROCE model ROCE Profit Capital Sales Costs Material Labour Overhead Fixed Current Stocks Creditors Debtors Projects SUPPLIER RELATIONSHIP MANAGEMENT

Proc Intro 17 © The Delos Partnership 2005 Supplier Management Create strategic relationships Create reliability Remove non value adding activities Focus on strategy not placing orders Minimise your inventory Bind them into you Encourage innovation

Proc Intro 18 © The Delos Partnership 2005 Traditional Approach Reduce your prices by 10 % or else I'll go to your competitor

Proc Intro 19 © The Delos Partnership 2005 Traditional Procurement Focus

Proc Intro 20 © The Delos Partnership 2005 New Financial Focus

Proc Intro 21 © The Delos Partnership 2005 The Delos Core Measures 1.Customer Order Delivery – the “Perfect Order” 2.Demand Forecast Accuracy 3.Lead Time Reduction - Demand, Supply and Change 4.Quality, Right First Time – Demand, Supply and Change 5.Schedule Achievement – In-house and outsourced 6.New Product Introduction 7.Velocity – all processes

Proc Intro 22 © The Delos Partnership 2005 The Value Chain Stores User Consumer Company DC Company Factory Customer DC Minimise Total CostMinimise Total Cost Assure Highest QualityAssure Highest Quality Minimise InventoryMinimise Inventory QuickerQuicker

Proc Intro 23 © The Delos Partnership 2005 Procurement Hierarchy 1 Supply & Procurement – Integration & Leadership Cost, Cash & Spend – Management & Control Process & Tools – Awareness & Use Strategic Sourcing – Process & Capability 5 Negotiation & Agreements – Skills & Type 6 Supplier Management – Relationships & Results