Oriflame Purchasing Management Workshop Module 5 – Sourcing Process Stages • Cost & Cash Data gathering • RFI • RFP • Market Evaluation • Supplier Scorecards
Jan 20, 2016
Oriflame Purchasing Management WorkshopModule 5 – Sourcing Process Stages• Cost & Cash Data gathering• RFI• RFP• Market Evaluation• Supplier Scorecards
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© The Delos Partnership 2005
Sourcing Process Stages
Risk & Risk & Value Value
Analysis Analysis
Cost & Cost & Cash Data Cash Data CaptureCapture
Scope, Scope, URS, URS,
Market Market TestingTesting
Supplier(s) Supplier(s) RFI, RFI,
RFQ, & RFQ, & PerformancPerformanc
ee
Leverage Leverage & &
DealmakiDealmaking ng
Supplier & Supplier & Results Results
ManagemenManagement t
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Sourcing Project Scope
•Projects need to have defined and agreed Scope and Boundaries – some projects may be vetoed “Sacred Cows”
•Timing and prioritization is determined by factors such as risk, cost avoidance or impact, savings opportunity, customer importance, impact on the business etc.
•Resources and ease of implementation are also key factors
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Project Scope Examples
A top down Board imperative to immediately reduce inventories & then achieve further sustained improvement
An integrated Supply Chain & Procurement project to improve Customer Service levels & improve ROCE (Cost, Cash and Assets)
Finished Product Stocks
Raw Material
& WIP Stocks
ERP & Systems
Integration
Inventory Reduction
ProjectSales & Operations Planning Process
Sea, Rail & Road Into Europe, Out of Europe, Within Europe
Warehousing
Insourcing
Outsourcing
Workflow Costs
Logistics Project
All Logistics Charges & Invoices
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Cebal
& Other Tube
Supplier Manageme
nt
Cebal
& Other Tube
Supplier Manageme
nt
Tubes Supply Demand
Tubes Supply Demand
TubesTotal ValueManagemen
t
TubesTotal ValueManagemen
t
Produce a detailed Strategy paper for
the Oriflame Business
leadership with
recommended sourcing
options
Produce a detailed Strategy paper for
the Oriflame Business
leadership with
recommended sourcing
optionsDefine best value approach under the existing planned future contract & Total Value Plan goals.
Define best value approach under the existing planned future contract & Total Value Plan goals.
Define current & projected HSE, Quality, Net Cost, Delivery, Service and Innovation in all Oriflame user plants.
Define current & projected HSE, Quality, Net Cost, Delivery, Service and Innovation in all Oriflame user plants.
Develop a Request for Proposal for the new Tubes contract (RFQ).
Develop a Request for Proposal for the new Tubes contract (RFQ).
Define Oriflame future specification needs & choices, forward demand plans & current contract supply performance gaps.
Define Oriflame future specification needs & choices, forward demand plans & current contract supply performance gaps.
Complete a risk analysis on Cebal
& other key suppliers –
Tupack, Norden, Soupletube
Complete a risk analysis on Cebal
& other key suppliers –
Tupack, Norden, Soupletube
Define near & long term Tube Supply Demand position,
options, developments, risks & balance
Define near & long term Tube Supply Demand position,
options, developments, risks & balance
Create Strategic Sourcing share & cost options for each supplier& define partnership types & structure
Create Strategic Sourcing share & cost options for each supplier& define partnership types & structure
Define the optimum current & future Tubes Supply Chain & Logistics strategy & benchmark
Define the optimum current & future Tubes Supply Chain & Logistics strategy & benchmark
Prioritise the Top Value goals by supplier and select areas for 2005 and 2006 action & implementation
Prioritise the Top Value goals by supplier and select areas for 2005 and 2006 action & implementation
Tubes – Strategy Plan Overview
Element Element Oct 05 Oct 05 Nov 05 Nov 05 Dec 05 Dec 05 Jan 06 Jan 06
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• Engage all Oriflame stakeholders to ensure all key issues are covered and internal customer needs are met
• Complete a global Cebal Supplier Assessment
• Assess new supplier capability through both a quality and supply chain audit.
• Conduct detailed supplier Interviews to verify information
• Gather data from Plants and Finance on current Cebal Tubes Cost, Cash & process baseline
• Gather data to allow a complete strategic analysis of the Cebal business
• Gather global data on Tubes supply sources, specifications, quantities and complete a Tubes Market evaluation (Consultant support?)
• Gather data on the current Cebal supply risks and ensure the supplier completes an RFI & risk assessment.
• Ensure the Financial Status & Stability of all potential suppliers is known.
• Understand Supplier Strategies and Tubes growth rates
• Understand Tube market shares and relative status of each supplier.
• Put together a view of the best Oriflame Strategic Supplier options
• Define M&A Strategies
• Complete a list of preferred short and long term Oriflame Tube suppliers
• Sign off on the list with the Tubes stakeholders
• Agree when to start to issue the Tubes RFQ and Total Value Plans.
Gather Inputfrom Oriflame Stakeholders
Gather Inputfrom Oriflame Stakeholders
EstablishCebal & Supplier
key criteria
EstablishCebal & Supplier
key criteria
Form Listof future supplier
RFQ recipients
Form Listof future supplier
RFQ recipientsProject
Data gathering
Project Data gathering
Cebal & Supplier Management
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• Meeting / Disk / CD
• Electronic / Mail
• Oriflame Intranet
• Completion timelines
• Obtain key stakeholder sourcing goals & needs
• Utilise Oriflame current tubes knowledge
• Use Market/Industry Information
• Oriflame Business Open-ended questions
• Oriflame Business Closed-ended questions
• Oriflame Business current specifications included?
• Oriflame Business deal making & supplier relationship strategy
• Key Oriflame performance measures
• Summarise supplier RFQ content
• Focus on the RFQ Supplier Candidates
• Visit the Supplier Sites
Determine RFQ
TransmissionFormat
Determine RFQ
TransmissionFormat
DetermineTubesRFQ
Format
DetermineTubesRFQ
Format
Analyse Tube RFQ
Analyse Tube RFQ
EstablishTubes Key
Criteria
EstablishTubes Key
Criteria
Develop a RFQ for Cebal & Others
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Oriflame long term commitmentSupplier Strategic alignmentCompetitor AlignmentTechnical service capability
HSE ComplianceNew product supply & developmentOverall Capacity availableOriflame specification / grade capacity Multiple plants Financial StabilityGeographic locations, distanceCapital Investment Process Innovation Electronic CommerceOriflame Integration - Inventory, Cash, SFDM
Tubes Schedule Achievement100% On time in fullSupply Chain / Logistics Mgt.Inventory Management
Tubes Right First Time Quality (ppm) Defective Product ProcessISO accreditation & process
Percentage of supplier turnoverOriflame ERP system integrationTPM & EngineeringTransport/packaging qualityInsurance coverIndemnity Warranty – acceptance of penalties
Deal type & cost transparencyLowest cost producer status Price strategy & stabilityLowest “total cost”
Purchasing & Consultant Expert Data Oriflame Stakeholder Input Other Market Knowledge
Establish Tube Evaluation Criteria
Tubes Supply Sources – Future Trends / 5 Year View / Supplier CriteriaTubes Supply Sources – Future Trends / 5 Year View / Supplier Criteria
OriflameLong Term
SupplyCapability
Delivery
Quality
Oriflame Alignment
Cost
Others
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Oriflame Tubes RFQ Scorecard
See Delos Procurement
ExcelWorkbook
Supplier A Supplier B Supplier C Supplier D Benchmark
HSE HSE Compliance 15 3 45 30Q RFTQ - 100% of the Time 14 3 42 14D Schedule Achievement - 100% On time in Full (OTIF) 13 3 39 26D Supply Chain/Logistics Mgt 12 3 36 0I On Time New Developments 11 3 33 11C Price (Total Cost) 10 3 30 12
C/D Inventory Management (SMI) 9 3 27 9I Strategic Alignment 8 3 24 8C Payment Terms 7 3 21 7C ERP / e Commerce 6 3 18 0I Investment in Product Specification used by the Business 5 3 15 0I Investment in end Customer / Business Product Development 4 3 12 0S Is responsive to the Business immediate needs 3 3 9 0S CRM (Customer Relationship Management) in place 2 3 6 2
C/S Self Performance Measurement / Assessment 1 3 3 0Total Value Total 45 360 119
33%
Stakeholder RFQ Scoring Levels Current Supplier (Benchmark) score is an example0 Fails to meet the Business needs1 Entry level - RFI & Supplier Project Plan are required2 Underperforming / Development Supplier - Improvement / Approval actions required 3 Approved Supplier - Meets Business needs and is approved for use 4 Preferred Supplier - Delivers significant added value &/or low cost 5 Strategic Supplier - Joint Strategic Value agreements & Investments
Weighting would need to be agreed by the stakeholders as would the levels and the
score that would be allocated to the current benchmark.
Total Value Element RFQ Key Measures Weight Average
Request for Quotation (RFQ) Scorecard Supplier Scores
Percentage versus Approved Supplier Average Score
Scores
© The Delos Partnership 2005
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• Put together the Tubes negotiation plans & agendas
• Ensure that the Cebal agreement has been thoroughly reviewed.
• Ensure an NDA is in place so that there is no market leakage of strategic Oriflame information.
• Analyse & evaluate completed RFQ’s
• Use/modify evaluation criteria
• Get key stakeholder input
• Discuss and develop Oriflame needs and wants.
• Discuss and agree the different Oriflame Negotiation roles & styles.
• Create the Oriflame
Tubes negotiation team (never alone!! and typically 3-4 people)
• Decide on Tubes negotiation team roles.
• Tubes Supplier Selection
• Legal Supply and Service level agreement and Total value plan,
• Performance Measures
• Supplier and Oriflame relationship management
• Communicate of results on a need to know basis.
Plan the Tubes Meetings
& new Oriflame
Agreement
Plan the Tubes Meetings
& new Oriflame
Agreement
DevelopTubes
Negotiation Strategy
DevelopTubes
Negotiation Strategy
Post Tubes Negotiation
Actions
Post Tubes Negotiation
Actions
DevelopTubes
NegotiationGoals
DevelopTubes
NegotiationGoals
Negotiate / Select the 2006+ Supplier(s)
See Delos Procurement
ExcelWorkbook
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P rocurem en tD irec t
P urchases
P rocurem en tInd irec t
P urchases
S upp lie rs
S upp lie rs
W arehouse
Receiving
Inven to ry
£
VISIO C O RPO RA T IO N
F inance£
£
A ccoun tsP ayab le
Q ua lityA ssu rance
Invo ices&
P aym ents
U nm atched Invo ice and P ON o P urchase O rde rP aym ent te rm s queriedM iss ing G oodsM iss ing invo icesS ta tem en t D iffe rencesM iss ing D iscoun ts
E R P S ys tem
Ind irec t S upp lie rO rder to C ash
S ys tem
In te rna lC us tom er
s
U nau tho rised R equ is itionsN ew supp lie rs unapp roved by P urchas inge -M a ils no t e -R equ is itionsInco rrec t lead tim esO rders launched on supp lie rs w ho canno t de live rO TIF
S upp lie rs w ith no p lann ing sys temS upp lie rs w ith no e capab ilityS upp lie rs w ith no rese rved capac ityS upp lie rs w ho accep t o rde rs bu t canno t m ee t da tesS upp lie rs w ho have p rob lem s w ith the ir supp lie rsS upp lie rs w ho have no d irec t flow
Paper Orders & PaperAcknowledgm ents
D irec t S upp lie rO rder to C ash
S ys tem
Workflow – Oriflame / Suppliers
Include Savings opportunities in Oriflame – Supplier Workflow
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Supplier Management involves the implementation of a formal program that focuses on current performance & continuous supplier improvement within the overall business Supplier Map.
Formality ensures;
• Joint Key Performance measures are defined
• There is focus on what is important to the customer
• The deliverables (service levels) in the agreement are measured
• Continuous improvement occurs
• The Business / Supplier relationship is improved versus competition
Final Stage – SRM
Supplier & Results
Management
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Supplier Management Tool
See Delos Procurement
ExcelWorkbook
PERFORMANCE ELEMENT Perfect Score Supplier PerformanceRisk & HSE Management 5 3RFTQ100%OTIF 5 4Cost (Price) Improvement 5 2On Time New Development 5 4Responsiveness 5 5Payment Terms 5 4Inventory Management 5 3ERP / Workflow Investment 5 2Product Investment 5 2Strategic Alignment 5 3
TOTAL 50 32
2= Below average performance (Underperforming)3= Acceptable level of performance (Approved) 4= High level of performance (Preferred) 5= The Benchmark - Outstanding level of performance (Strategic)
SUPPLIER PERFORMANCE ASSESSMENT TOOL
SCORING SYSTEM1= Unacceptable - Requires immediate action 0
1
2
3
4
5Risk & HSE Management
RFTQ100%OTIF
Cost (Price) Improvement
On Time New Development
Responsiveness
Payment Terms
Inventory Management
ERP / Workflow Investment
Product Investment
Strategic Alignment
© The Delos Partnership 2005
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• Sourcing or Category Manager
• Business Managers
• Key Users & Stakeholders
Total Value Elements
• HSE
• Cost
• Supply Chain
• Delivery & Service
• Quality
• Innovation
• Performance Measures
• Metrics
• Collection Methodology
• Business Standards
• Market Dynamics
• Industry Standards
• Best Practice
•Weighting & Scoring System
•Product / Service Classification
•Performance Incentives
•Performance Remedies
•Contractual Issues
•Publication frequency
•Raising the Bar
•Scorecard / Assessment
Supplier Management Considerations & Process Stages
Supplier Assessment
Assemble
Product /
Supplier
Team
Identify
Supplier
Participants
&
Performance
Goals
Agree
feedback,
Meet
Suppliers for
review & set
milestones
Obtain Inputs
against
agreed
Scorecard
Define
Scoring
System and
Verbiage
•Senior Level
•Business Update
•Vision & Strategy
•Competition
•Carrot / Stick
•Volume Impact
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First Stage of Sourcing Process
Risk & Value Analysis
Internal• Create cross-functional team, led by Sourcing, consisting of representatives from each stakeholder
• Sales & Marketing • Development • Supply Chain• Operations• Purchasing / Sourcing• Finance• Etc.
• Baseline current spend and usage• Review current contracts (if any)• Internal supplier analysis• Map transaction processes – ERP and P2P process• Identify opportunities and project scope• Develop a source plan detailed workplan / timeline
External• Consider use of expert consultant for data gathering & data interpretation• Benchmark best practices with others (including e-commerce)• Supplier / Industry / Economic analysis• Investigate new technologies that are available
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First Stage of Strategic Sourcing
Risk Driver Example Consequence
Supplier HSE Risk Major Accident at main Supplying Plant
Disruption / Cancellation of Supply
Supply Risk Supplier declares Force Majeure No product – Production plants on stop
Quality Risk Raw Material Contamination Major Customer Claims
Lead Time Risk Lead Time increases to 8 weeks Customers buy elsewhere
Commercial / Trading Risk Supplier Corporate Fraud Administrators seize all
inventories
Cost Up Risk Price increase of 10% Customer supplied at a loss
Risk Management (Assurance of Supply, Cost Control)
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First Stage – Risk Analysis
Target Date for completion
SUPPLIER SCORE %
3 60%
3 60%
4 80%
3 20%
4 40%
2 40%
19 42%
RISK MANAGEMENT EVALUATION - SUPPLIER X
Date the Risk Management Evaluation started
Supplier Key Account Contact
Person Responsible for the Risk Management Paul Warrick
25th November 2005
14th December 2005
John Smith
IDEAL SCORE
Quality Assurance / Regulatory ScoreHSE Score
55
1510
Product or Service Score Commercial Score Development & Innovation Score Supply Chain & Procurement Score
TOTAL SCORE5
45
5RISK MANANGEMENT ELEMENT
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First Stage – Value Analysis
Example Freight Project Spend Scope
Finance P&L accounts
Define the Define the accounts that will accounts that will
be included in be included in value & spend value & spend
analysis so that analysis so that there is complete there is complete
understanding understanding and visibilityand visibility
Primary Accounts
Inbound Domestic
Outbound Domestic
Export
Demurrage
Duty
Lease Costs
Courier Costs
Secondary Accounts
Repairs
Samples
Storage
Repackaging
Fork Lift Hire
Printing
Baseline Current Spend
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Second Stage of Sourcing
Cost & Cash Data Capture
• Define service requirements/ understand individual business needs
• Define the scope
• Formalize sourcing strategy and objectives
• Build pricing models
• Draft RFQ
• Gain agreement from team on RFQ
• Define supplier base to receive RFQ
• Distribute RFQ
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Third Stage of Sourcing
Scope, URS, Market Testing
• Define internal customer needs – now and in the future
• Develop supplier evaluation criteria for RFQ’s
• Circulate draft RFQ to stakeholders
• Issue to all Suppliers
• Review and score supplier responses
• Decide on “short list” of suppliers
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Fourth Stage of Strategic Sourcing
RFI, RFQPerformance
• Supplier discussions with “short list”
• Negotiate pricing and service levels with final supplier(s)
• Develop savings methodology for on going saving tracking
• Gain management approvals
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Leverage and Dealmaking
Leverage & Dealmaking
•Decide on the deal that you want and the realistic chances of obtaining it.
•Work with legal on formal contract and service level agreement based on discussion during the RFQ process
•Develop communications plan to utilize vendor sourced
•Identify the key performance metrics for supplier management
•Develop scorecard process for on-going vendor management
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Supplier Management involves the implementation of a formal program that focuses on current performance & continuous supplier improvement within the overall business Supplier Map.
Formality ensures;
• Joint Key Performance measures are defined
• There is focus on what is important to the customer
• The deliverables (service levels) in the agreement are measured
• Continuous improvement occurs
• The Business / Supplier relationship is improved versus competition
Final Stage – SRM
Supplier & Results
Management
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Questions ?