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GLOBAL 5 - New Strategic Procurement Initiative
SUPPLIER FORUM 2006 – MOL GROUP23 May 2006
NEW EFFICIENCY IMPROVING INITIATIVE: GLOBAL 5 2006 - 2008
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MOL GROUP – WHO WE ARE
1991 - Established from National Oil & Gas Trust, and other Enterprises
1995 - MOL was privatised
1999 - New Strategy: regional expansion
2000 - Slovnaft became a regional strategic partner
2002 - MOL became the major shareholders of Slovnaft
2001 - Refinery and petrochemical industry cooperation: TVK
2003 - MOL acquired 25% of INA
2004 – MOL acquired Roth Heizöl GmBH.
2004- 2005 - Integrated operation with Slovnaft and TVK; acquisition of SHELL Romania2005 - Network expansion in Southern Region: Creation of the Baltic-Adriatic Corridor
Strategy of 2006 - 2010: „New Europe”
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THE COMPANY OF CHOICE FOR VALUE-CREATING PARTNERSHIPS IN „NEW EUROPE” AND BEYOND
Stable high oil price and refining marginsStable high oil price and refining margins
Continuing convergence of Continuing convergence of „„New EuropeNew Europe”” frontier frontier
•Outstanding growth rate (EBITDA >10% CAGR)•Profitability above peers
•Maximising return of the portfolio with quantified and managed risks
• USD 285 m improvement
• Maximise integration potential
• High utilisation of good quality assets
• Outstanding returns
• Tripledhydrocarbon production
• Double refined product sales
• Become key player in Balkans
• Retail network of 1500
• Leverage transformation and integration experience
• Maintain Quality leadership
• Capital discipline
• Commitment to Sustainable Development and Corporate Governance
Obj
ectiv
eP
illar
sFu
ndam
enta
ls
EFFICIENCYEFFICIENCY GROWTHGROWTH CAPABILITIESCAPABILITIES
SETTINGSETTING THETHEPACE PACE FROMFROM NEW EUROPENEW EUROPE
I. VISION AND VALUES
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ProcessProcess andcost reductionRevenue
-����-Team player and partner
-
-
����
����
-
����-Quality and company ofchoice
����-Health, safety,
environmental andsocial commitment
--Dedication and
continuous self-improvement
--Pace setter and agent ofimprovement
-����Drive for value-creating
growth
G5*Vision
is to maximisethe growth potential
in „New Europe”while providing superior returns.
1.
2.
3.
4.
5.
6.
PSO
* GLOBAL 5
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Relationship:„Cooperation with Mutual Benefit under Market
Tension”Dr. Uwe Schulte,
Vice President Global Supply Management, Unilever
Aim:To improve results achieved during PSO initiative
WHAT DOES RELATIONSHIP MEAN?
EFFICIENCY IMPROVEMENT WAVES
• Achieve cost savings of more than 10 % in all cost categories but HC
• Create purchasing spend transparency
• Introduce an integrated measurement and reporting system
• Identify specific measures to meet SPP and Futura commitments
• Improve Group-level coordination and communication
• Achieve further min. 5% efficiency improvement / cost savings in cost categories
• Brainstorm improvement opportunities with suppliers
• Utilize more sophisticated analytical tools to support efficiency improvements
• Create long term relationships with selected suppliers in cost categories
• Support cost category management structure within Procurement
PSO ”INTERNAL FOCUS” –Integrating cross-divisional purchasing processes
GLOBAL 5 “EXTERNAL FOCUS” –Developing integrated, cross-divisional strategic supplier relationships
“FURTHER INTEGRATION” –Realise further value creation through other cross-divisional processes
Achieve additional efficiency improvements by working on the integration of other major processes, building on results of the cross-divisional purchasing / efficiency improvement initiatives
2 years 2–3 years 2–3 years2004 2010
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HOW IMPORTANT IS THE OVERALL PICTURE?
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(26) Laboratory accessories(27) Facility Management(28) HR(29) IT accessories (30) Logistics(31) Travel and accommodation(32) Consulting, financial and legal(33) Insurance(34) Natural gas(35) Industrial water(36) Catalysts, packing and ceramic balls(37) Retail(38) Petchem additives(39) Single Service Companies
maintenance
(5) Civil construction(6) Additives (EU 2005
brands mainly)(7) Electrical material and
service (8) IT services ((9) PR and marketing I.(10) Process control/
instrumentation(11) Packaging(12) Electricity
III. SPEND CATEGORIES ANALYSED IN PSO ONE BY ONE, IN PROGRAMME STRUCTURE
Pilot (4 analysis units)
Wave 1 (8 analysis units)
Wave 2(13 analysis units)
Wave 3(14 analysis units)
(1) Valves, piping and fittings(2) Production chemicals(3) Technological construction(4) Environmental protection
services
(13) Facility management (14) HSE(15) HR, travel and
accommodation(16) IT accessories and office
material(17) Telecom, mail and
other infrastructure(18) Logistics (19) Pumps, compressors (20) Technical services (21) Steam(22) Refining lubes and
additives, methanol(23) Process control master
purchase agreement(24) PR and marketing II.(25) Mechanical materials
2004, April 2004, August 2005, February 2005, August
3,6 mn EUR 12,2 mn EUR 10,8 mn EUR 8,3 mn EUR
5,5 mn EUR 21,6 mn EUR 24,4 mn EUR 7,5 mn EUR
Savings Target:
Identified saving potential:
34,6 mn EUR
58,9 mn EUR
Total:
Scope: MOL, Slovnaft, TVKand MOL affiliates involved recurring OPEX and CAPEX spend*
* Raw material spend is excluded
EFFICIENCY IMPROVEMENT INITIATIVES- TWO DIFFERENT APPROACHES -
GLOBAL 5 PSO
Key levers Volume boundingHarmonization of specificationsInternal brainstormingTendering
Deep understanding of supplier markets and dynamics of the reviewed areaExploring TCO-concept potentials
MethodologyExtensive internal data gathering and harmonizationParallel technical and commercial processMajor focus on tendering, superficial analysis of markets
Building on the data already available, analysis intensive process, focused on improving bargaining power and insightEarly involvement of suppliers and potential suppliers followed by tendering to achieve benefits if applicable
ScopeCovering as many categories as possibleHarvesting the low hanging fruits across all cost categories
A more focused approach, focusing on all categories especially on those which have key importance
Major objective Cost savings driven mainly by volume bundling and internal idea generationCreating internal spend transparencyFacilitation of integrated operations
Efficiency improving through contacting all suppliers by new levers e. g. blank sheet modelling, linear performance pricing, etc.Involving selected suppliers in defining our requirements already in early phase. Develop value creating long term partnerships with key suppliersCreating deep cost category knowledge
Production capacity
Specifications
R&DDamaged field product
Transportation
Purchasing administration
Inventory carrying costs
Warehousing
Compliance
Purchase price
Warranty expediting
Demand management
Product / service purchase cost
Internalbusiness costs
Joint supplier / company / customer lifecycle costs
TOTAL LIFE COST NEEDS TO BE EVALUATE
PurchasingInstallationSet-up
Operaton costsFinancing costsTraining costsMaintenance costsInsurance costsTaxInventory carrying costsAdministrative costs
+
CATEGORIES TO BE REVISED IN GLOBAL 5 Result of category analysis
Originally proposed primary focus of GLOBAL 5
Siz
e of
the
cate
gory
Low
Hig
h
Impact on end-product/Difficulty of obtaining supply
Low High
Leverage Partner
Shop Manage Risk
Number of sub-categories: 36
Total value of sub-categories:
Number of: 36
Total value of sub-categories:
Number of sub-categories: 87
Total value of sub-categories:
Number of sub-categories: 39
Total value of sub-categories:
Initial categorization resulted in 36 potential partner categories, covering HUF 185 billion.
Value of categories in scope was increased after
Re-grouping categories
Cross-checking data
Revising importance
Revising relevance
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PROJECT ORGANIZATION, ROLES AND WAVE STRUCTURE
GLOBAL 5 WAVES TIMING
1. Electricity 2. Road transportation3. Retail I. / Visual
elements4. Process control5. Valves6. Technical supervision7. EPC **
1. Natural gas2. Environmental
protection services3. Retail II: / Washing
equipments4. Retail III: / Dispensers5. Casing, tubing, joints6. Refining catalyst7. Rotating equipment
1. Upstream services I. / Field operations, development and work over jobs
2. Technological construction
3. Retail IV. / Shop building
4. Methanol, ethanol5. Water transportation
/ Barge6. Technical design7. Packaging / Drums8. MSSC
1. Railway transportation2. Retail technological
construction3. Refining and lubricant
additives4. Telecom services5. Civil construction6. Building operation7. Upstream II. / Rotary
1. Electrical works and materials ( excl. Instrumentation)
2. RTC rental3. Technical studies,
analysis, expert work4. Small trucks and
personal cars leasing5. Mechanical materials6. Packaging / Foils7. Security defence
Categories included in the wave
* Minor changes can be expected in wave structure**EPC is being developed commonly with R&M affected Excellence 2008 project; highly depends on CAPEX project realisation
Wave structure may be fine tuned during the pilot phase
2007 20082006
Pilot
Wave 1
Wave 2
Wave 3
Roadshow
Wave 4
Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec.Jan. Feb. Mar. Apr. May.Jan. Feb. Jun. Jul. Aug. Sep. Oct.
LEVERS TO BE USEDDeeper analysis extended idea generation supported by various tools
make GLOBAL 5 different from PSO
Initiate Build fact base
Hypo-thesizeimprove-mentlevers
Validate and secure decisions
Deliver value
Monitor change, measure impact
sourcingstrategies
Develop
Engage stake-
holders
Strategic sourcing process overview
Team charter development TCO/value
framework and approach
Spend prioritization analysis
Supplier RFI and intelligence gathering
High impact RFX process
Value-based negotiation methods
Sourcing strategy development
Supply marketanalysis
Sourcing and contracting for performance
Productive user and supplier workshops
Supplier economics analysis
Idea generation methods
Design-to-cost/design-to-value
Linear performance pricing
Blank sheet modeling
Best-of benchmarking
Implementation management
Main tools
Levers already used in PSO – are maked with star**new levers to be used in GLOBAL 5 with the already used ones. - yellow coloured
Negotiateinternally
andexternally
Generateideas by using tools/analyses
„It is not the strongest of the
species who survive,
Not the most intelligent,
But those who are the most adaptiveto change”
(Charles Darwin)
Susan GadóMOLHead of Productivity CentreE-mail: [email protected]