Collaborative Sourcing: Unlocking Greater Savings and Value for You and Your Supply Chain

B Collaborative Sourcing –
Unlocking greater savings
and value for you and your
supply chain

ABN AMRO - Peter Potters, Head of Business Management
ABN AMRO - Hielke Posthumus, Development Manager
Oriflame - Loic Fresne, Purchasing Director, New Product
Development

© 2012 Ariba, Inc. All rights reserved.

Agenda

Introduction

Customer Story
ABN AMRO
Oriflame
Q&A

2 © 2012 Ariba, Inc. All rights reserved.

Procurement Gains Recognition as a Strategic
Function but Expectations Are Higher than Ever
Expectations of today’s purchasing organizations

Visibility and Cost Transparency of actual spend,
Management visibility into sourcing pipeline
and resourcing requirements

Improve process
Effective common process applied to
efficiencies all procurement activity, with
appropriate approvals

Deliver fast Faster turnaround times and rapid
results transitions to new supply with
sustainable long-term relationships

…all on a limited
budget Full payback in 4 – 8 mos.

Add more value… More spend under management,
more process coverage, more
strategic impact

There’s Savings…and Everything Else

Top 2 CPO Pressures
Source: Ardent Partners, 2011

Evolution of Sourcing
Community
Technology
Capabilities

Collaborative
Business Sourcing
Value

Strategic
Sourcing
eSourcing

Manual Sourcing
Time frame


Collaborative Sourcing Framework

Spend
Sourcing
Analysis
Technology
Contract
Management SIPM


supply chain

ABN AMRO - Peter Potters, Head of Business Management
ABN AMRO - Hielke Posthumus, Development Manager


ABN AMRO: A Leading Bank in the
Netherlands with Selective Presence
in International Growth Areas

“Our clients’
success is our
success”

2011FY data
 Revenue: € 7.8B
 Ext spend: € 2.5B
 Net profit: € 689M
 FTE: 24,225


ABN AMRO Overview


External Pressures Have Driven
the 2007-2012 Procurement
Agenda at ABN AMRO
Challenges for the Procurement Agenda
Financial Industry •Significant contribution to reduce the
•Limited top line growth bank’s Cost/Income ratio
•Higher Capital Ratio requirements •Integrate Procurement processes
•Loan restructuring (loss) and systems
•Reduce TCO of systems landscape
•Create transparancy in supply base
Additional challenges for (incl. CSR performance)
ABN AMRO + “Normal” development
•Multiple Separations and •Category Management
Divestitures (2007-2011)
•Supplier Relationship Mgt
•State take-over •P2P integration
•Integration NL parts ABN AMRO •Etc…
and Fortis


Much Improved Alignment with
Business Stakeholders
•
9
Miljoenen

8

7
Spend Analysis
6

5
Spend deep dives with senior
4
Business Mgt
•
3

2

1
Sourcing Projects
0
2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 Active participation in Events
Business Audit Legal Business Professional
Consulting
(non IT)
Services Services Consulting IT Services
Business approval on award
and savings
• Contracts
Contract Mgrs (business) actively
involved in maintaining records
• Suppliers
Basis for SRM program

11

Much Improved Alignment with
CFO Organization
• Spend deep dives aligned Order2Invoice
with CFO
Spend deep dives aligned with
responsible CFO
• Benefits tracking and validation
integrated in Sourcing projects
Pipeline/Done Deal savings recorded
on dForm Strategic
Sourcing
Approvals by Business owner and Financial
Category Head control
Supporting evidence in Sourcing
Project
Validation by CFO
Monitored by Audit
Performance reporting


Granularity of Spend Analysis as Unique
Selling Point of Procurement to Business and
Driver for Compliance Management

BU/Dept xyz • Analyse Spend
Spend Analysis

9 Start at BU/Dept level
Miljoenen

8

7

6 Trend per category/year
Drill down to cost center,
5

4

3

2

1
supplier, product.
If needed, to invoice level!!
0
2010 2011 2010 2011 2010 2011 2010 2011 2010 2011
Business Audit Legal Business Professional

•
Consulting Services Services Consulting IT Services
(non IT)

+ Top-20 suppliers Compare with contracts
Contracts per category
Analyse discrepancies
Category 123 • Create shared action plan
Contract Mgt

Contract
CW21963220
Supplier
ABC123
Value
62216
Redirect spend to preferred
CW21963221
CW21963222
DFJ 377
KWE262962
500151
40000
contracts
CW21963223
CW21963224
KAAW73
OEWGB
200066
543000
Contract additional suppliers
CW21963225
CW21963226
VKEEU
VKKOGJ
67220
522200 Re-tender
Etc.


Ariba Modules Used for All
Strategic Sourcing Activities in NL
Sourcing
200 projects
NL 75 events (RFx)
€ 60-70M savings
Spend Vis Contract mgt

€ 2.0B spend 1300 active contracts
200,000 invoices with 800 suppliers
>10,000 suppliers 200 >85% coverage
3 source systems managed
suppliers Outside NL:
700 contracts
SI&PM

60 Users (Create project)
250 active team members

Majority of the Procurement Agenda
Realized, but Still Plenty to Be Done

Procurement Agenda Status / Work to be done

• Significant contribution to  Granular spend analysis
reduce the bank’s  Shared sourcing pipeline
Cost/Income ratio  Validated savings tracking

• Integrate Procurement  One sourcing process
processes and systems  One procurement system
 P2P integration

• Reduce TCO of systems  Migrated from CD to SaaS
landscape  Decommissioning program

• Create transparancy in  Integrate supplier data
supply base (incl. CSR  Shared platform
performance)


Implementing a Strategic Sourcing
Tool Is Only Successful as Part of
an Overall Change Program
Services strategy
• Who are your main stakeholders
• What are the services you will provide
• What are your targets/KPI’s

Processes Systems
• What is the end-to-end process • What is the to-be architecture
• What are supporting processes • Where to start (Business case)
• Where can you improve • Data management

People Governance
• What skills are present/required • Align with your stakeholders
• Be aware of the culture • Clear RASCI
(Change!)


supply chain

Loic Fresne, Purchasing Director, New
Product Development, Oriflame


Oriflame
Purchasing

2012-05-23 Copyright ©2011 by Oriflame Cosmetics SA

Agenda

• Oriflame Business
• Global Supply
• Purchasing
• Ariba for Oriflame


Introduction to Oriflame
Revenues by Geography 2011
• Founded in 1967 in Sweden
EMEA
• International cosmetics company selling 28%

direct
• Sells direct in more than 60 countries1 Latin
America
6%
• €1.5 billion in annual sales1
Asia
• #1 direct sales company and largest CIS & 10%
Baltics
cosmetics brand in the CIS Region 55%
Manufacturing &
• 3.6 million active sales consultants1 Other
1%

• 7,900 full-time equivalent employees1
€ million 2011 2010
• Portfolio of approx. 1000 products1 Sales 1 494 1 514
Gross margin 67.9% 66.2%
• Catalogues distributed in 40 languages1 EBITDA 182 184
• Market Capitalization: app. €1.5 billion Adjusted operating profit (2 164 168
Adjusted operating margin (2 11.0% 11,1%
Cash flow from operating activities 135 95
Net interest-bearing debt 233 201
1 Data as at Dec 31, 2011
2 2010: Before restructuring costs in the EMEA region of €0.7m and the effect from the Iran impairment of €10.1m

2011: Before restructuring costs of €5.9m

21
Copyright ©2012 by Oriflame Cosmetics SA

A Long-Term Growth Company

1990 – 2011: CAGR organic sales of over 15%
€m
1,600 1,514 1,494

1,400 1,320 1,317

1,200 1,109

1,000 918

800 766
652 671

600 544
447
395
400 355 327 333
325
242
181 188
200 132
77 90

0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Copyright ©2012 by Oriflame Cosmetics SA 22

Brands and Products Sales by Category 2011
Wellness
4%
Acc.
• Oriflame Sweden: Wisdom of nature and the best of 10%
Fragrances
science 20%

• 40+ years of skin care expertise
Skin Care
21%
• 1000 products of which 450 new or re-launched per year

• Advanced formulations developed in Oriflame’s Global R&D
Personal &
Hair Care
Centres by over 100 scientists 21%
Colour C.
24%
• Products targeted to men are 10% of total product range

Skin Care Colour Cosmetics Fragrance Personal & Accessories
Hair brushes Wellness
Facial Moisurisers Lipsticks Men Hair Care Vitamins
Hair care Hand bags
Anti-ageing Foundations Women Nutritional shakes
Bath & Shower Sunglasses
Face & Body Eye shadows Home fragrance
Deodorant Belts
Mascaras
Foot care Jewellery
Powders
Feminine Hygiene Towels
Nail
Oral Hygiene Gifts

23

The Oriflame Catalogue

• Oriflame’s “shopping window”

• 17 campaigns per year
– 12 campaigns in Asia
• New offers and catalogue every third week
– 40 languages

• A dynamic combination of product and
catalogue development in Stockholm


Our Business Model Incentives

Consumer Independent sales consultants Oriflame

Order Order

Products Products

Payment Payment


Direct Sellingchannel categories
Direct selling Industry - Product
Categories

Source: WFDSA 2010


THIS IS ORIFLAME
Our Logotype &
Slogan

Our Vision To be the #1 Beauty Where we’re going
Company Selling Direct

Our Mission To Fulfil Dreams Our reason for being

Our Offer Look Great Make Money Have Fun What we offer

Our Business What we should be
Opportunity best in the world at
concept

Brands & Network World Class People & How we create and
Our Strategy Products Marketing Service Culture build the business
opportunity concept

Our Values & Togetherness, Spirit & Passion How we work
Operating Respect People, Focus on Customers, Demand Quality, together
Principles Seek Simplicity and Cost-efficiency, Pursue Long-term Growth

Oriflame Organisation
Purchasing Is Part of Global Supply

CEO

Marketing & CFO Global Supply COO HR
R&D

Group Group Group
Finance Group
Planning & Manufacturing Quality Process
Global Supply Purchasing
Logistic Warsaw & Projects


Our Supply Strategic Direction

Better align supply- and
Cut lead-times and
sales in the
increase flexibility in
group, sourcing locally
the end-to-end supply
where appropriate
chain

Build capacity to support Make the Oriflame
growth and increase share experience easy, reliable
of in-house manufacturing and friendly for the
consultant


Purchasing Organisation
Edwin Koehler
VP Purchasing

Johan Gillbro
Purchasing Development
manager

Louise Jerneborg
Project Manager &
Analyst

Ivana Peijec
Contract
coordinator

Charlotte Haggren
Project coordinator

Tony Igoe Therese Westerlund
Loic Fresne
Director Global Director Global
Director NPD Indirect Spend
Strategic Sourcing
Purchasing

Ed Mc Phillimy VACANT VACANT Viannei Hermes
Abishek Mishra
Johan Gillbro Acting Jennie Ahl Ashima Enjeti Travis Natt Sr Sourcing SR Sourcing Sourcing Category manager
Stina Granberg Sourcing Manager Global Conferences
Purchasing Category Purchasing Category Purchasing Manager Manager Manager
Purchasing Category India/Asia
Manager Manager Category Manager Manager Sr Buyer Components Finished Goods
Raw Materials
FRA CCS PHC SKC Wellness
Petra Dernhagen
Category Manager
Colin Cowrey Marek Kowalski Global Print
Jaspal
Anna alvemo Sanna Ruponen Elena Bayeva Anna Xavier Buyer Sr Buyer
Components Buyer India
Sr Buyer Sr Buyer Sr Buyer Buyer Raw Materials
FRA CCS PHC SKC Laura Eckback
Coordinator
Indirect Spend
Yi Ling Admass Badeen
Buyer Buyer
CCS PHC


Sourcing Requirements Hierarchy

AQSCIE
A Assured Supply
Responsiveness

Q Quality C Cost

S Service

- II
Innovation
+

Environmental & Ethical

Sustainability Focus

• End 2009 Oriflame employed a senior CSR advisor
reporting directly to the CEO
• Objective during fist half 2010 to develop a strategy for
CSR with the Oriflame business
• Projects and next steps will be defined as a result of
strategy investigation
• One of the priorities will be to share experiences with
our key suppliers and see how to move forward
together

Vision: Oriflame wants to work with sustainable suppliers

On what criteria do we award business
to suppliers?
Criteria for award: AQSCIE

– Capacity, lead time, MOQ and service level
(Planning, Manufacturing)

– Passed quality audit/technical visit (Quality,
Packaging Development)

– Technical feasibility and support (R&D scale up,
Packaging Development)

– Total cost : includes freight, duty, origination costs,
payment terms etc. (Purchasing)

– Supplier status and strategic importance
(Purchasing)


Critical Deadlines for Suppliers - NPD
Months
before
launch

• RFQ received: response time - 7 days from receipt of RFQ
13

• Business award – Work can begin!
12

• Tooling initiated
12

• Colour-matching initiated with component supplier: 10 working days from receipt of reference
12

• Artwork delivered to component supplier
7

• Component specification issued – Production of components can now start!
5

• First delivery of components into finished product supplier
4

• First collection of finished products from supplier –
2

Interactions with Suppliers

Component R&D
suppliers

Packaging Planning

Finished product
suppliers

Purchasing


Ariba Purpose and Scope

Purpose
• Implementation of an e-sourcing system for all
purchasing tenders sent to suppliers

Scope Not in scope

• Indirect spend • NPD Project management
• Direct spend • Packaging
• Accessories sourcing • Creation of structures
• Strategic sourcing


Ariba the New Sourcing Solution for
Purchasing
 A web service solution to replace our Excel template RFQs
 A Tool to drive system improvement and process alignment

• Direct Spend, NPD
– Emails and messaging to suppliers in one place, automated awards
– One to many easy to use internet web interface rather than excel
• Indirect Spends
Overall Benefits – Sourcing tool with eauction capabilities to maximize savings & increase spend coverage
• Accessories
– Emails and messaging to suppliers in one place, automated awards
• Raw Materials
- Sourcing tool with eauction capabilities to maximize savings & sourcing events

2012-05-23 Copyright 2011 By Oriflame Cosmetics SA

Organization Project Ariba
Loic
Fresne

NPD PUR Indirect spend Supplier Raw Material
WORK STREAMS DESCRIPTION management

• Define process requirements • Loic Fresne
• Patrick Botell • Robert • Colin Cowdrey
• Process Definition • Define RFQ requirements • Sabine Barth
Connolly
• Secure process are ready for go-live • Sanna Ruponen
• Business Readiness • Secure sign off solution (ACC)

• Ariba solution • Ariba • Ariba • Ariba • Ariba
• Application Design/Build • Secure interface with IFS • Jaroslav • Jaroslav • Jaroslav • Jaroslav
• Kratochvil Kratochvil Kratochvil Kratochvil
• IT set up Secure IFS modifications
• Hanna Bjelkevik • Hanna Bjelkevik • Hanna Bjelkevik • Hanna Bjelkevik
• Documentation of system design

• Lead execution of tests • Sabine Barth • Patrick Botell • Robert • Colin Cowdrey
• Identify all issues in business • Sanna Ruponen • Hanna Connolly • Hanna
Testing • Re-test issues found (ACC) Bjelkevik • Hanna Bjelkevik
• Hanna Bjelkevik Bjelkevik

• Identify master data that needs to
• Sabine Barth • Patrick Botell • Robert • Colin Cowdrey
be set up Connolly
Master data set up • Load all systems with correct
data

• Train users and super users • Hanna • Hanna • Hanna • Hanna
• Train suppliers Bjelkevik Bjelkevik Bjelkevik Bjelkevik
Training and Roles • Sabine Barth • Patrick Botell • Robert • Ed Mc Phillimy
• Secure security of IT roles
Connolly

• Loic Fresne • Therese • Robert • Ed Mc
Westerlund Connolly Phillimy


Indirect Spends and Raw Materials
Indirect Spends Raw Materials
No Data integration with
IFS enabled an earlier start Data to be integrated to
IFS, no import, different set
 Supplier self register on- up as Direct Spend, NPD
line to be invited for
bidding using generic SPQ
 1 RFP Template to be built
 3 Templates built  Commodity tender for
 Printing Tender running in different sites
Ariba, 10 suppliers invited
currently bidding  e auction as a likely useful
 Conference template, to be option
used for conference tenders
 Mobile tender with the aim
of running an eauction

 GO LIVE the 28th of April

2012-05-23 Copyright 2011 By Oriflame Cosmetics SA

Prior to Ariba Situation for Direct Spend
MS Excel MS Outlook

3 RFQ is sent in
Outlook mail

• Many activities
were performed
manually

1 Structures 2 Information
• Little time to
are kept in downloaded to evaluate and
IFS MS Excel manage RFQ
responses
• No
transparency, no
r history on
events in one
place

7 Structures 6 RFQ responses 5 RFQ responses 4 Suppliers receive
are selected are evaluated in are received in and responds to
and cost is MS Excel mail RFQ
approved • Internal
• External

System Overview for Direct Spend

Component Event Filling Event
Ariba Sourcing Automated Awards
5 templates 1 template
RFQ Process to suppliers
Step 1 Step 2

Customized Pack Brief Component EXW FG EXW Price
Integration with IFS Structures Prices, LT, MOQs… LT, MOQs…

IFS System / ERP Transactions OCSA set up

Manual duplication
of data ?

Planning
GM MRP, 4 Shifts ?
JDA


Potential Future Situation

• More suppliers can
compete for the
business

2 RFQ’s are • Reverse auction
published in functionality
Ariba
1 Structures
are kept in • Help Purchasing to
PLM move away from
manual work
• Intermediate interface
will be from IFS to Ariba
RFQ’s are • Long term from
4
evaluated in PLM
Ariba

5 Structures 3 Supplier enter
are selected Ariba and respond
and cost is to RFQ
approved • Internal
• External

Advantages with Ariba
• Automated and stored
communication instead of emails
– RFQ
– Awards
• Purchasing to get away
• Easy to use internet web interface from copying and pasting of
data in Excel
• e-Auction capabilities to maximize
savings
– Indirect Spends and Raw
materials

• Strategic Sourcing support
– Supplier Profile Questionnaires
on line

• Transparency of data negotiated and
agreement made with suppliers

Summary and Key Take-aways

Align Results Align Results to Objectives

Executive Obtain Executive Sponsorship from senior leadership
Sponsorships (e.g., CFO, Business Unit GM and or Functional Leaders)

Collaborative Work on building collaborative relationships with partner
Relationships functional groups (particularly Finance)

Be Flexible Be willing to make difficult choices and do more with less
Take on aggressive goals beyond sourcing

Add more value… More spend under management, more process
coverage, more strategic impact


Q&A

Contact info:
Sundar Kamakshisundaram: sundar@ariba.com


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Strategic Sourcing Suite Helps
Protect Bottom Line and Improve
Alignment during Crisis
Challenges Solutions Results
Company
• Pressure to return bank • Deploying Ariba’s full • Much improved alignment ABN AMRO
to profitability Strategic Sourcing suite with business stakeholders
on demand to minimize time through active participation in Profile
• Economic environment to savings and TCO events, contracts and spend Dutch bank dating back
limited ability to grow analysis to 1765
top line • Selected Ariba Spend
• Increased pressure to
Visibility™ to better • Much improved alignment Ariba Solutions
prioritize and quantify with CFO organization
manage costs effectively opportunities and maximize through the integration of
Ariba Spend Visibility
Ariba Sourcing
• Significant ownership and spend leverage benefits tracking and Ariba Contract Management
organizational changes up validation in Sourcing
• Selected Ariba Sourcing™ Ariba Supplier Information
to state takeover to reduce cycle time and • Granularity of spend analysis and Performance Management
• Opportunity to better increase savings seen as unique selling point
leverage spend, identify of Procurement to Business
• Selected Ariba Supplier and a driver for compliance
opportunities, and Information and Performance
manage suppliers management
Management™ to better
• Aim to be a leading bank manage total supplier base • Supplier 360
when it comes to (spend, sourcing, contracts, s
• Selected Ariba Contract upplier info) is developing
sustainability within the next Management™ to maintain
few years and embed into an integral view on a
company-wide visibility into supplier
sustainability in the bank’s supplier contracts and
strategy and operations improve due-date • Improved sharing of best
management practices and global visibility
into contracts


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