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1 Reengineering the Indirect Spend Compaqs Business Case for Taking it to The Web Paul Box Director, General Procurement Compaq Computer Corporation Paul.

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Presentation on theme: "1 Reengineering the Indirect Spend Compaqs Business Case for Taking it to The Web Paul Box Director, General Procurement Compaq Computer Corporation Paul."— Presentation transcript:

1 1 Reengineering the Indirect Spend Compaqs Business Case for Taking it to The Web Paul Box Director, General Procurement Compaq Computer Corporation Paul Box Director, General Procurement Compaq Computer Corporation

2 2 Todays agenda Compaq today Procurement overview and opportunity Solution selection Expected return Project rollout & status Q&A

3 3 Compaq achieving profitable growth Q Financial Results Revenue was $11.5 billion – up 10 percent year-over-year Gross margin increased 1.5% to 23.7% Operating expenses down more than a full point to 17.1% of revenue Operating profit was $757 million, up 80% from same qtr last year EPS nearly doubled to 30 cents

4 4 Profitable growth being achieved by Developing innovative products Integrating them into compelling solutions Serving a global marketplace

5 5 We were smart enough to recognize the Internet was not a fad...

6 6 Procurement at Compaq Total spend is forecast at ~$32B Indirect goods and services ~$6B (19% of total) 60,000+ Employees WW (our internal customers) N.A. General Procurement FT staff = 50 33,000+ Indirect Suppliers ~80% of Spend with < 2000 suppliers General Procurement issuing 75,000+ POs year Benchmarking results - World class at maverick buying! Suppliers generating 336,000 invoices a year for indirect! 40% of spend ($2.5B) touched by General Procurement If theres a way around the system, our internal customers have found it!

7 7 CHR $1.8B 31% MarCom $1.2B 21% Software $882M 15% REOS $700M 12% MRO $350M 6% Travel $300M 5% Telecom $250M 4% Uncategorized $232M4% P-card Spend $42M 1% Other/Misc $30M1% 2001 General Procurement Pareto by Commodity $5.7 - $6.1 Billion Total All figures approximate based on best available data

8 8 Estimated Spend by Region EMEA 25% APD 10% AMER 65% $5.7 - $6.1 Billion Total

9 9 Why Procurement automation was needed at Compaq: Purchasing process paper bound Approvals cycle non automated - slow, bureaucratic No systemic process to point employees to preferred suppliers Spending outside Procurement with non-contract suppliers is a profit leak (6k NPRs a month to 28k invoices a month!) Lack of information warehouse to facilitate opportunity identification

10 10 Our reengineering goals A self-service, distributed purchasing model to: Automate via a procure-to-pay process - users go online to locate, request, approve, order & receive, seamlessly linked to A/P Capture all WW indirect procurement spend utilizing a single tool - reduce fragmented view of our total spend Report and Identify savings opportunities / analyze spend (to whom, when, and for what) - in UNSPSC defined Commodity Groupings Reduce supply base, item prices, and total cost of acquisition Eliminate off contract spending, rogue solutions, paper processes

11 11 Critical selection elements – software provider/package Easy end user operation - lure spenders into process Robust catalog search / requisition / approvals Comprehensive info query and reporting Ease of integration with ERP system(s), , HR system(s) Allows attachments (Word, Excel, PP) through workflow Support procurement card strategy Support ad hoc purchases (non-catalog items) Vision match / collaborative minded

12 12 Inventoried 30+ Providers Selling Solutions Interviewed 15 6 Considered Viable Developed / Received RFP Roadmap & Financial Review Review and Analysis - Evaluation Criteria Path to solution Ariba Aspect (SAP) Commerce One Elekom (Clarus) Oracle SAP RFP Recipients

13 13 Resulting recommendation is the Solution Met RFP requirements Solid financials & resources for long term success Vision match - strategic vision Committed to delivering optimized NT and Tru64 performance, tuned to Compaq hardware

14 14 GP Online process flow PeopleSoft & SigAuth Catalog feed from supplier User logs into GP Online Requisition is created by selecting items from catalog or entering description of products/services Cost Center Charge P-Card Charge Compaq Firewall Catalog updates moved to Compaq server Requisition Approved? Returned to requisitioner Catalog items auto sent to supplier. Buyer creates PO for non-catalog items. PO is sent to supplier. All PO data is fed into SAP. Supplier XYZ Product shipped & delivered to Compaq User posts receipts into GP Online A/P enters invoice in SAP. System matches invoice to PO and receipt. Payment made to Supplier Hierarchy approval on line

15 15 Search Browse Monitor Review Create Punch-out

16 Industry benchmarks show that up to 20% of annual spend can be saved through implementation of a well integrated System… Infrastructure support - network computing architecture 3% Process improvement - Self service procurement Aggregation volume buying - consolidation of vendors & contracts Contract leakage reduction - enforcement of available discounts 3% 7% Key Components: 3Integration to ERP 3Transaction system 3Decision support 3Automated workflow and sourcing processes Benefit to the bottom line Source: Savings based on Arizona State University Center for Advanced Purchasing Studies (Summary of Aerospace and Defense Industry Purchasing Benchmarks), 1997

17 17 Implementation status & value over time Implementation Integration Information Fully Leveraged S/W Installation High ROI Low Where we are today April 2000November 2000June 2001 Time to Benefits January 2001

18 18 Implementation status & value over time Implementation Integration Information S/W Installation High ROI Low Key Milestones Proof of concept April 17, 2000 (down rev product) December 29 th –– live with 100 users New technology stack deployed (SSP5, 11i, 8i) Rollout to ~4000 on January 31st April 2000November 2000June 2001 Time to Benefits January 2001

19 19 GP Online goals / objectives USGEO Catalog / non-catalog (ad hoc) requisitions, workflow driven approvals, auto PO launch Basic reporting P-Card / CC charging enabled HR, Supplier, COA Integration Supplier PO ack Function ality Roll out to ~4000 US employees 5 catalog suppliers Automate requisition process for all P-Card holders GP Online Goals / Objective 1Q01 US Q1 functionality plus: Integration to SAP or Oracle AP Enhanced reporting Supplier website link-out Enhanced catalog mgmt. AMEX interoperability Single sign-on login Supplier transaction query Supplier PO ack, ASBN Roll out to all US employees 20 catalog suppliers Retire GP Store Commence NA, EMEA implementation 2Q01

20 20 GP Online goals / objectives cond. NA, EMEA GEO 1Q US functionality for Canada, EMEA SAP Custom Integration Enhanced reporting across multiple systems Function ality Limited roll out to Canada, EMEA All US indirect purchasing via GP Online Retire IPA GP Online Goals / Objective 3Q01 NA, EMEA 2Q US functionality for Canada EMEA Expanded roll out Canada, EMEA All EMEA, Canada purchasing via GP Online 4Q01

21 21 Catalog content strategy Order Mgmt. Order ReceivingReceiving Sourcing & Approval Approval Source and Procure Pay on Receipt Pay on Receipt Invoicing Financial Reporting Financial Reporting LocalCatalogLocalCatalog PayRequest EC Gateway EC Gateway Procurement Catalog Server Electronic Documents Orders & Schedules Schedules Receipts & Payments Payments Posted RFQs Supplier Self-Service Suppliers Direct Supplier with XML, EDI, OBI, etc Managed inside Compaq REQUISITE Catalog Content Management Services Compaq Unified Catalog Catalog Files for Aggregation Compaq pays Requisite for Service Compaq

22 22 Utilizing Oracle Exchange Supplier Catalogs Compaq Specific Catalogs XML Catalog Feeds to Exchange Compaq Contract Pricing Volume Leverage Items Approved Configurations GPOnline End Users Sourcing with Non- Contracted Suppliers Professional Buyers Suppliers End Users

23 23 Compaq Alpha Tru64 Unix system App Server Clustered DB Server Standby DB (SDS) Server Reporting (ODS) Server GPOnline user SAP PeopleSoft SigAuth AMEX Interface (IPC) Server

24 24 What We Believe... The Oracle Internet Procurement suite - a standard by which others will be judged –Management and Development focus is intense –Financial commitment / depth of resources significant –Vision and thought-leadership –Collaboration with Compaq on features and function The Compaq Implementation is a Success ! Compaq - Oracle working relationship excellent Roll-out accelerating ROI compelling


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