orms carolyn depalmo program manager (408) 527-0639 [email protected] web-ordering project
TRANSCRIPT
Selling Costs
Intrinsic Value
Buying Costs
Electronic Commerce Goal: Reduce the Cost of Buying and Selling
Buying Costs Make up 2-10% of Product Cost
Selling Costs Make up 14-40% of Product Cost
CCO
Cisco Connection Online
Networked Commerce for Cisco’s Customers
Status
Pricing
Config
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
Q3 Q4 Q1 Q2 Q3
Hit
s
Tool Oct Jan April %²
• Status 47,439 59,401 103,170 +74%
• Pricing 28,587 33,194 52,046 +57%
• Config14,386 14,536 40,902 +181%
Cisco Commerce Agents - Growth in Use
7/96 9/9611/96 1/97 3/97 5/97
Rate
0%
5%
10%
15%
20%
25%
Ord
erin
g Ra
te
Cisco Networked Commerce: Ordering
Next:
Automate the “Buy” Side
Networked Commerce for Cisco’s Suppliers
Corporate Procurement Profile:Spend handled by Procurement Programs: $403 M
Number of Transactions through Procurement: 90 K
Overall Average Transaction Value: $4,500 _________________________________________Breakdown: Dollars Volume
Purchase Orders $375 M (93%) 22,500 (25%) ($17K Avg Tx Value)
Direct Orders $24 M (6%) 49,500 (55%) ($485 Avg Tx Value)
Procurement Card $4 M (1%) 18,000 (20%) ($222 Avg Tx Value)
PO'sDO's
VISA
Volume
Dollars
93%
6%
1%
25%
55%
20%0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Cisco Corporate Supply ManagementTransaction Types by Volume and Dollars
Transaction TypesAppropriate and Affordable Solutions for Every Buying Scenario
LOW
LOW
HIGH
HIGH
$DOLLARS$
V O L U M E
Direct Order Programs
Procurement Card Program
Purchase Order
Purchase Order
Value Add, RFP, Contracts, Negotiations Catalogs
Supplier AlignmentFirst Phase Catalog Suppliers - Include:
Boise Cascade - Office Supplies Comkyl - Mfg Tools
GE/Compucom - Desktop HW US Tech - phones/telecom
Anixter - Cabling/Networking Andataco - HW/Terminals
BT Redwood - Forms Sun Micro - HW
ElectroRent - Rentals BRG - Furniture
Pagenet - Pagers Metricom - Modems
Telepress - Bus Cards Wood Associates - promo
Why Change?Why Change?
Process “Suppliers”:
Cisco Employees Vendors - quotes, specs
Inputs:
P/R’s
Outputs:
P.O.’s
Process “Customers”:
Cisco Employees Vendors - POs/COs
P/R P.O. Process
Feed Forward Loop Feed Forward Loop
Feed Back Loop Feed Back Loop
Input Issues:
• Incomplete Data
• Inaccurate Data
• Illegible Data
• Routing Cycle Time
• Lost Paper
Process Issues:
• Cumbersome
• Highly Manual/Paper
• Manual Data Entry
• Backlogs+Faxing POs
• Status Inquiry Replies
Customer Issues:
• “Black Hole”
• Cycle Time
• Routing
• Total Process
• PO’s to Vendors Late
One Stop Web “Order” Entry
D.O. Suppliers
Requesters
ARIBA
ORMS
Direct Order
Universal Interface
True Reqs
Autocreate PO in Oracle
Supplier Population
20%Visa Procurement Card
25%
55%
Buyer
TransformingTransforming
RR
Purch Tools
Purch
Tools: Visa, Web-Req (D.O.) with “intelligent agents”, wizards, public and private catalogs
Old Model: How Purchasing got into the transaction business
TransactingTransacting
Web-Ordering Project GoalsCost Reduction• Process Cost ($100+)
• Product Cost
• Transaction Processing to Negotiating
• Sales Offset Formula
Control Improvement• Automatic Enforcement of Cisco Policy
• Via System Enforced (invisible) Controls
• Accuracy in Data via up front audits
• Visibility
Customer Satisfaction• User Friendly Interface
• One Stop Shopping
• Better Status and Communication
• Better Supplier Communication
• Enhance Purchasing Jobs
Cycle Time Reduction• Error Reduction - quick picks, etc..
• Requisition Creation Time - Catalogs
• Approval Routing (immediate e-mail)
• PO Creation - ERP Integration
• Supplier Receipt of Order - EC
Cost Savings
If Purchase $400 Million/Year
If negotiate extra 3% off prices = $12 Million Savings
If Corporate Profit Margin = 10%
Then:
$12M/10% = $120 Million in Sales you DON’T need for the same bottom line.
Conversely, in a 10% gross margin business, you’d need an extra $120M in sales to generate the same bottom line as a 3% decrease in payments.
Sales Offset Formula
Less Than $1K
$1K - $5K
$5K - $10K
$10K - $25K
$25K - $50K
$50K - $100K
$100K - $250K
$250K - $500K
$500K Plus
0 5 10 15 20 25 30 35
Calendar Days
Less Than $1K
$1K - $5K
$5K - $10K
$10K - $25K
$25K - $50K
$50K - $100K
$100K - $250K
$250K - $500K
$500K Plus
Series2
Series1
Approval Cycle Time
Purchasing Process
Requisition & PO Cycle Time AnalysisOverall Average Weighted by Distribution:
Total: 12.84 Days; Signature 4.75 = 37% of Time
Electronic Commerce - Purchasing Critical Components
Catalog Management• Supplier Web Site up to date but user must know where to go on crowded internet
• Custom Reformat of supplier catalogs but suppliers resistant
•Keep frequently ordered items on local, high speed database on intranet with searching and links to internet
Interprocess Management• Between Processes
• Between Systems
• Link and Leverage existing Applications
• Cross Functional Communication
Requisition Management• Automate Process; manual nightmare of lost paper and bad data
• Minimize keystrokes: user profile info, pick and populate from catalog, quick picks, account codes auto assign, etc.
• Approval Routing - accommodate business rules through existing tool (email, intranet)
Transaction Management• Place orders directly with Suppliers
• No need to re-key into other systems
• Information - status and visibility
• Reporting - value of knowledge
CatalogsCatalogs
ApproversApprovers
BuyersBuyers
SuppliersSuppliers
DistributionDistribution
RequestorsRequestorsPaymentPayment
ReceivingReceiving EC
Paperless Interprocess SolutionPurchasing - A/P - Receiving
Cisco EC ProjectsCatalogs
Ordering
Approving
Status
ARIBA
ORMS
Universal Interface
Request
Direct Order
Purchase Order
Oracle
Req
EDI 850
Cisco
Accounts
Payable
Purchasing
EDI 862
Shipment Confirm.
ERS
EDI 810
Invoice
Cisco Receiving Single Ent.
EDI 820
Payment
Cisco
Supplier
Population
* Yellow = Ariba
Process - How We Got Here1. Business Process Analysis (As-Is)
2. Interview Stakeholders (Desired To-Be)
3. Requirements Document
4. Analyze Industry (Bus, Functional, Technical)
5. Make Vs. Buy
6. Award Contract
7. Implementation
Implementation
1. Business Rules Definition 2. Supplier Alignment
3. Catalog Organization 4. Adapter Interfaces
Key Functional Activities
Policy/Operating “Practices” Kickoff/Education/Bene’s
Renew Requirements Follow-up/CIF Content
Ariba Document for Coding EC Agreement
CIF integration into Ariba Sources (Accts, Depts…)
Map items-SPSC-Com-Structure Filters/Data Validation
6. Cheerleader Promotion /Excitement
Change Management
Corporate Support
5. Product Knowledge Familiarization - Detailed
Usability/Unit Testing
Conference Room Pilots
Timeline - Planned PhasesTimeline - Planned Phases
IntroductionIntroduction
PlanningPlanning
InstallationInstallation
ImplementationImplementation
DeploymentDeployment
Roll-outRoll-out
System ‘Live’System ‘Live’
MayMay JulyJuly AugAug
• Acceptance & FeedbackAcceptance & FeedbackPhase 5Phase 5
JuneJune OctOctSeptSept NovNov
• Upgrade/Production Roll-outUpgrade/Production Roll-out
Phase 6Phase 6
Phase 1Phase 1 • Assess Project ScopeAssess Project Scope
Phase 2Phase 2 • Finalize Work Plan / Map RequirementsFinalize Work Plan / Map Requirements
Phase 3Phase 3 • Install Software / Adapters / CatalogsInstall Software / Adapters / Catalogs
Phase 4Phase 4 • Customize & TestCustomize & Test