Indirect Procurement.Value. Delivered.

Procurement Outsourcing – The BP Experience

Indirect Procurement.

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BP - OverviewBP - Overview

BP- SnapshotBP- Snapshot

Indirect ProcurementIndirect Procurement

Why OutsourceWhy Outsource

Indirect Procurement (IP) manages ca. $6B spend annually and is the organisation that outsourced procurement

IP was formed in 2005 and faced the challenge of consolidating fragmented spend and building a long term delivery model

• Build Sustainable delivery model

• Scalable operations

• Quality

• Lower cost

2008 turnover of $ 367B and profit of $ 26B

Employing approximately 90,000 people in more than 100 countries

9th largerst company in the world

18.1 billion barrels of oil and gas equivalent, 3.8 millions barrels oil equivalent a day.

23,389 service stations; 17 refineries and exploration activities in 29 countries

Indirect Procurement.

What is procurement outsourcing - and what has BP outsourced

Understand Business Strategy and Need

Develop P&SC Strategies

Settle Invoice

Strategic Sourcing

Purchaseto Pay

Manage Supplier

Performance

Receive Invoice

Understand Supply Markets

Raise Requisition

Receive Products and Services

Issue Purchase Order

Approach mkt/select supplier

Award contract

The Source to Pay CycleThe Source to Pay Cycle

Activities that can be outsourcedActivities that can be outsourced

BP- Level of outsourcingBP- Level of outsourcing

Procurement App HelpdeskProcurement App Helpdesk

Order ManagementOrder Management

Spend ReportingSpend Reporting

Spot BuyingSpot Buying

Vendor Mgmt SupportVendor Mgmt Support

Category ManagementCategory Management

e-Sourcinge-Sourcing

Contract WritingContract Writing

Tactical SourcingTactical Sourcing

Spend Analytics & Mkt IntelSpend Analytics & Mkt Intel

SignificantNot Outsourced Medium

Incre

asin

g C

om

ple

xity

Contract AdministrationContract Administration

Indirect Procurement.

BP Journey & Experience

• Created the Procurement Operations Centre in 2006

− Outsourced to a 3rd party service provider

• Started with less complex processes

− Corresponds to move from P2P to Sourcing activities

• Have moved from a pure offshore delivery model to a hybrid onshore-offshore model

• Have focussed heavily on separation of transactional and knowledge based activities within an overall activity or process

− For e.g Contract Writing is 50% transactional

• Initial Business Case validated

− Savings in three categories: Operational, Negotiated, Compliance

− Being expanded to other business segments within BP160 FTEs ; ca. $2B annual spend flow-through

Indirect Procurement.

• Relative immaturity of Procurement BPO

• Not a volume game for suppliers

− has its own challenges

• Hiring continues to be a challenge

− not ‘standard’ BPO profiles

• Fairly high proportion of activities are unscripted and involve judgment e.g. negotiation

• Transition happens from typically from a non process driven environment

• Customer side change management issues

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Challenges

Indirect Procurement.

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