market intelligence as a strategic weapon - pesamarket intelligence as a strategic weapon | case...

PESA SUPPLY CHAIN SEMINAR | FEBRUARY 18, 2015

Edward J. KovalChief Procurement Officer & Vice PresidentGlobal Supply Chain & ProcurementSpectra Energy

Market Intelligence as a Strategic Weapon

Market Intelligence as a Strategic Weapon |

Agenda

Spectra Energy at a Glance

The Transition to Category Management

Attributes of World Class PSCM Organizations

Critical Skills Needed

Our Process and Examples of MI & BILeveraging Market Intelligence as a Competitive AdvantageSpectra Energy Case Studies

Q&A

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Spectra Energy at a Glance

• Spectra Energy, a FORTUNE 500 company, is one of North America's leading pipeline and midstream companies

• For nearly a century, Spectra Energy and its predecessor companies have developed critically important pipelines and related infrastructure connecting supply sources to premium markets

• Approximately 5,700 employees

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The Power of Our Portfolio

Gas storage facilityGas processing plantPropane terminalNGL storageShale gas formationsCrude storageMajor oil pipeline terminal

Natural Gas Transmission Pipe: 19,000 mi Natural Gas Storage Capacity: ~300 Bcf

Natural Gas Gathering Pipe: 70,000 mi Crude Transmission Pipe: 1,700 mi

NGL Transmission Pipe: 1,500 mi SE Gas Processing Capacity: 3.7 Bcf/d

4Q14 DCP Gathered and Processed: 6.7 Tbtu/d

4Q14 DCP NGLs Produced: ~450 MBbl/d Distribution Pipe: 39,900 mi

Union Gas Retail Customers: 1.4 million

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The Transition to Category ManagementIn

crea

sing

Org

aniza

tiona

l Val

ue

Future

Transactional Buying – PSCM As Order Taker

TCO and Strategic Sourcing

Category Management

Advanced Strategies

• Introduction of consistent go-to-market process

• Leveraged spend and buyer influence

• Focus on value

• Continual process improvement

• Cross-organizational collaboration

• Deep market knowledge and dynamic value taking

• Supplier Relationship Management

• Demand Planning • Dynamic Sourcing

PSCM: Procurement and Supply Chain Management

PSCM organizations continue to evolve and seek out new ways to extract value from their supply activities

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The Promise of Category Management

Aligns PSCM activities with enterprise stakeholder objectivesMaximize impact on the enterprise via total cost vs. price, speed vs. reliability, cost vs. quality

Increased Business Unit engagementPositions PSCM as a core member of the team, orchestrating activities to deliver maximum value

Ensures that supply chain is leveraging all weaponsUtilize SRM, demand planning, market intelligence, etc., rather than relying exclusively on Strategic Sourcing

Allows supply chain to react effectively to market eventsDynamic and volatile markets require real-time adaptive solutions that Category Management can provide…- The Hackett Group

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World Class PSCM

SRM: Supplier Relationship Management

Attributes of World Class PSCM organizations who have adopted a category management approach:

Centers of Excellence/

Expertise & Market Intelligence

Category Segmentation

→ SRM Sector

Strategies

Governance PSCM Competencies

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Critical Skills Needed

1. Ability to engage and influence stakeholders

2. Experienced in conducting research

3. Solid foundation in technical and analytical skills

Strategic Business Acumen

Supply Chain ManagementFinancial and market analysis

Creativity/InnovationPlanning

Relationship Manager

CredibilityActive listening ability

Consensus-BuildingInfluencing

InterpersonalCommunication

Subject Matter ExpertIndustry

Products/ServicesCost drivers

Market conditionsSupply BaseRegulations

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Our Process

Examples of Market Intelligence• Markets, industries, and structures• Goods, commodities, and services• Cost Structures/value drivers• Supplier alternatives• Trends, indices, general information• PESTLE analysis• Contract benchmarking• Financial/risk assessment

Examples of Business Intelligence• HSE requirements• Sustainability considerations• Spend/demand outlook• Regulatory requirements• Performance/quality expectations• Technology/specifications

Identify NeedDetermine

Requirements & Market

Conditions

Conduct Sourcing

Implement Contract

Sustain Category Transition

•Category Management/ Strategic Sourcing drives the process•The Business retains control

Analyze information and test hypotheses to identify business value, risks and develop strategic options

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COE

Financial impactCost modelingBest practicesBusiness reportingIndicesConsultant viewM&A Info

Leveraging Market Intelligence as a Competitive Advantage

COE: Center of Expertise

Category Mgr.Strategic Sourcing Mgr.

Multi-year strategies

Marketintelligence

Business intelligence

Bestpractices

Marketupdate

Analytics

Suggested strategies

External and internaldata sources

Market Intelligenceanalyst

OutputsBenchmarking

Multi-year strategies

The use of Market Intelligence extends beyond PSCM to influence Business decisions and strategies

Triangulate informationand using it to identify

strategic advantage

Supplierrelationship

3rd party research

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Case Study:Market Intelligence in Line Pipe Sourcing

• The MI function forecasted an increase in steel prices, which was the basis for accelerating the RFP process timeline

• MI for logistics, steel and pipe mills, along with cost models was the basis for negotiations

Initial Quote Round 1Negotiated

Cost Reduction

Round 2Negotiated

Cost Reduction

AdditionalNegotiated

benefitsFinal Cost

Benefits due to accelerating the timeline

Budget based on recent purchaseExample of first pipe purchase using Market Intelligence and Category Management

$

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Case Study:Cost Modeling for Globally Performed Professional Services

• Algorithms

• Assumptions

• Should cost

• Sensitivity analyses

• Hundreds of benchmarks– Normalized job classifications– Current data– Geography specific– Service (scope) specific

• Man-hour histograms• Proposal pricing, markups, etc.

DYNAMIC COST MODEL OUTPUTSINPUTS

Identified gaps betweenproposalsand the market

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Case Study:Health Care Program Administration

- Convert incumbent contracts so that profit is tied to performance measures- Address past performance issues- Enter into a 3-year contract usingMarket Intelligence as the basis for single source negotiation

Company provides guidance on health care plan for active and retired employees

OBJECTIVES OUTCOMECONTEXT

20% reductionin transaction cost

Implemented Key Performance Indicators

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Conclusion

Catalyst for innovation Helps manage supplier risk more effectively

Market Intelligence is a critical driver of world-class PSCM organizations

Provides a powerful tool to influence Business

stakeholdersRequired for cost modeling

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market intelligence as a strategic weapon - pesamarket intelligence as a strategic weapon | case...

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