TAKE THAT LITTLE STEP

How pilot projects can be the beginning of a long and successful engagement

XCHANGING PROCUREMENT SERVICES

Xchanging provides Procurement, Processing and Technology services internationally for customers across multiple industries ! $1B+ company founded in 1999 with more than 8300 staff supporting customers in 50 countries.
XPS at a Glance

! Practitioner Procurement Organization; led by former CPOs and Senior SMEs. ! Ranked #3 globally (Everest Research Group). Annual sourcing Spend Under Management: $4.4B and transactions of $21B processed ! More than 5,000 sourcing initiatives completed that have delivered savings in excess of $800M to our customers ! Customers in the USA, UK, Europe and Australia. Presently serving Aerospace & Defense, Banking, Fast-moving Consumer Goods, Food & Beverage, Manufacturing, Real Estate, Retail and Logistics industries.

Horses for Sources Blueprint 2013 HIGH PERFORMER for Procurement Outsourcing Identified as a LEADER and STAR PERFORMER by Everest Research PEAK matrix (Performance, Experience, Ability, Knowledge) for Procurement Outsourcing
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MARKET TRENDS
! ! ! Procurement outsourcing rapidly growing since 2000 2013: Procurement outsourcing represented a US$ 1.7B market; CAGR 13% Service providers manage over $220B of spend for their customers

!! Mega trends
! Revenues flat or declining " focus on cost management ! Regulatory pressures " need greater controls and improved compliance measures ! Globalization "demand for knowledge and capacity in multiple geographies

!! Macro procurement trends

! Indirect Procurement is an under-exploited area of shareholder value ! 10-30% of savings in indirect generate 2-3 margin points improvement ! Many companies only manage 50% of non-core spend ! 40% of negotiated savings never hit the bottom line

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THE CFOS OBJECTIVES

Reduce operating expenses
! ! ! Increase return to shareholders Increase top line Decrease bottom line

Improve business outcomes

Any money saved has to be visible in the P&L increase operating profit, earnings per share and working capital

Tangible savings

Savings need to be: ! Tangible need to be viewable on a balance sheet ! Measurable should be able to calculate them easily ! Auditable the calculation needs to be verifiable

Who can the CFO call upon to deliver this value?

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THE CPOS CHALLENGE

The view from the executive leadership
! ! ! Increased role and higher profile of the CPO in strategic operations Increased impact of procurement on corporate effectiveness Procurement has the potential to influence up to 80% of operating costs

Direct Materials and supply chain

! ! !

Critical to the companys business High level of maturity Already on the radar of CFOs and CPOs

! ! ! ! !

Indirect Procurement

Indirect categories managed at the department level Finance executives do not have visibility to the magnitude of spend in each category Individual category spend seems very low compared to direct materials Spend is fragmented across business units, locations and functions; large number of end users Organizational challenge to implement a program and provide results by combining: ! Expertise and skill needed for specialized sub-categories ! Best in class processes ! Technology ! Market Intelligence

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DIY VS. PROVIDER

Criteria Do it yourself ! Recruitment, training can take between 6-12 months ! Realization of benefits can take between 18 -24 months ! Initial recruiting costs high ! High operating costs, but suboptimal utilization ! Savings only generated through individual sourcing events ! Savings remain in budget and not visible ! Success of the program dependent on procurements relationships and capabilities of getting buy-in from stakeholders ! Compliance depends on end users and not a procurement function Provider / Partnership ! Team ready from day 1 ! Benefits can be realized quickly, in 3-6 months, impacting business outcomes ! Self funded, P&L positive ! Higher level of savings achieved through a partners global infrastructure, talent and relationships ! Savings can be strategically redeployed ! External programs have high level of visibility in the organization acts as a powerful change and compliance agent ! Providers have proven model for stakeholder engagement

Timeline

Cost & Savings

Process & Governance

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CHOOSING A PROVIDER
Engage an advisor Build a business case Get internal buy-in RFI / RFP process Selection and due diligence Contracting Implement ation

Competitive process

Engage supplier (s)

Analyze current state

Build business case

Present business case

Approval to proceed

Contracting

Implement ation

Sole sourced process

! ! ! ! !

Time: Drawn out process, sometimes over 12 months Cost: Consulting engagements are typically investment heavy Unclear on providers real capabilities Complicated decision making process Loss of focus

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DECISION MAKING PROCESS

C-Suite, Business stakeholders, Functional Heads, Procurement support

Federated decision making process

Key challenges

Mitigation strategies

! ! ! !

Cultural fit Disruption to the business Nervousness of the retained organization Fear of the unknown

! References ! Risk management ! Executive mandate

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START SMALL WITH A PILOT

Demonstration in principle, whose purpose is to verify that some concept or theory has the potential of being used in a larger scale

Definition

Activities

! Defined scope, defined end date, expected results

Types

! Category; initiative; location;

End game

Definite Conditional Undecided

! Leads on to a full-fledged engagement ! Will expand only if pilot is successful ! May not lead to a larger engagement, but can lead to other projects

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SELECTING THE RIGHT CANDIDATE

Categories Locations
! Similar language and market ! Stakeholders eager for change ! Important enough for the overall business Property and facilities IT & Telecoms

MRO Manageable category Contracts up for renewal Projects in-flight Suitable stakeholders Industry environment Critical mass spend Ease of implementation Availability of resources

Transportation

Function

! ! ! ! ! ! ! !

! Central function ! Established relationship with procurement ! Commoditized

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ORGANIZATION AND GOVERNANCE

Project Lead

Regular communication and updates

Category manager

Steering committee

Sourcing analyst

Project Team

Finance manager
Provider Customer

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TYPICAL TIMELINE
Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9 Week 10

Review Spend Data/Contracts Needs Formalization

Market Analysis/ Supplier List Development

Finalize Strategy
Launch eRFX

Bid Analysis Negotiations Supplier Selection

Contract Execution
Internal Communications
Savings Calculations
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EVALUATION CRITERIA
Criteria Cultural fit Language and location support Business and Geographical differences Thriving in a complex environment Description ! Does the provider fit into the organization ! Are they flexible and adaptable? ! Do they manage change well? ! Can the provider handle local requirements? ! How do they deal with stakeholders at a local level? ! Did they leverage their regional presence? ! How does the provider manage conflict across regions? ! How do they ensure stakeholders are always aligned? ! How does the provider deal with in-flight projects? ! How do they deal with incomplete data? ! How do they deal with changing requirements? ! ! ! ! How much savings did the provider generate? How visible were they, during the process? Did the customer see them as an extension of their organization? Were they seamless in the way they implemented and transitioned their services within the customers organization?

Savings and visibility

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BENEFITS
Risk Reduction ! Customer and provider understand each others processes ! Risk mitigation occurs both ways

Financial

! Benefits are realized in an accelerated time-frame for pilot projects ! Customer is more confident in the overall business case

Validate Capabilities

! Provider demonstrates capability ! Exposes customer to best-in-class talent ! Customer experiences providers research and benchmarking capabilities

Implementation

! Validates implementation strategy ! Provider aware of internal organization and constraints of the customer

Cultural Fit

! Establish relationships with stakeholders ! Establish relationships with customers suppliers ! Projects deliver immediate value and builds confidence in the program

Systems & Technology

! Provider understands customers system landscape

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KAUSHIK DASBISWAS

Director of Solutions at Xchanging 14 years of experience in procurement, IT and business process outsourcing. Managed solutions, implementation and change management for engagements in procurement, financial services, IT services and insurance services. Managed service delivery programs of up to $20M. Experienced in setting up, training and managing offshore service centers. Organizations Kaushik has worked with organizations like BASF, Cushman & Wakefield, and GEP. Defining process and solutions for full cycle source to pay processes as well as discrete projects; determining strategy and standardization for delivery onsite/onshore, near shore, offshore; defining multi-year solutions to increase process efficiency and effectiveness; create business case, cost models and commercial models for outsourced services; help customers select best-ofbreed technology solutions for spend analysis, sourcing, contract management and procure-to-pay processes; Bachelors degree in Computer Engineering from the University of Mumbai and a certified PMP from the Project Management Institute.

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THANK YOU
For further information please contact: Kaushik Dasbiswas Director of Solutions E: kaushik.dasbiswas@xchanging.com M: +1 (973) 452-2015