Cap Gemini Ernst & Young Business Benefits and ROI from Oracle 11i iProcurement
Cap Gemini Ernst & Young UK ~ No 1 Forge End, Woking Surrey GU21 6DB Tel: 44 20 74 34 21 71 ~ www.cgey.com One of the world’s largest consulting firms providing world class management consultancy, IT design and integration and systems outsourcing services on a global basis. CGE&Y has over 6,500 employees based in UK & Ireland.
Services • Management and technology consulting • Systems transformation • Systems management (outsourcing) • Local professional services • Competitive Advantages • Customised Services and Solutions • Industry Experience & Documentation • Seamless approach to strategy, operations, and information technology • Revenues: €1.1bn
“Our culture is one which encourages people to aim high, to exceed expectations, and to have fun while doing it!”
Executive Conclusions “CGE&Y’s initial project with Oracle 11i Financials was extremely successful. We have continued this progress with the Procurement and HR modules. This has made CGE&Y a more effective organisation, better able to deliver superior solutions to our clients.” Brian Bodsworth, CIO CGE&Y, UK & Ireland
Executive Conclusions • “CGE&Y had four strategic requirements to improve our sourcing operations • Reduce the cost of our external purchases through strategic sourcing • Use highly integrated systems to support the simplification of our purchase to pay processes • Produce management information to monitor and enforce compliance for sustained cost savings • Web enabled technology for low maintenance cost, whilst allowing access for all staff to allow de-centralised purchasing processes.” • Brian Bodsworth ,CIO • CGE&Y, UK & Ireland
Cap Gemini Ernst & Young UK & Ireland Procurement Challenges • Develop Strategic Sourcing Expertise • Improve Relationships with Suppliers • Eliminate Localised Procurement Process • Correct Inefficient Procurement Systems • Not integrated • Manual workarounds • Achieve a Competitive AdvantagedCost Structure
Cap Gemini Ernst & Young UK & Ireland Procurement Challenges • Develop Strategic Sourcing Expertise • Improve Relationships with Suppliers • Eliminate Localised Procurement Process • Correct Inefficient Procurement Systems • Not integrated • Manual workarounds • Achieve a Competitive Advantaged Cost Structure Solution: Strategic Sourcing & Business Process Change iProcurement Enabled System to Sustained Process Improvements Oracle 11i
Responses to Procurement Challenges Oracle 11i Solution : iProcurement • One Stop Shop for all Procurement • Web enabled Application • Offers spend Analysis and Supplier performance tracking • Increases strategic focus by automating and simplifying routine transactions • Enables discipline around the purchasing process eliminating non preferred vendor spending • Control & Visibility of Spend before Commitment is made
Procurement Pre-Oracle 11i Resulted In Various Prices Realized Discounts Based on “Local Volume” Economies of scale lost Manual Administration Effort Low account focus and priority Poor Supplier Management: Loss of leverage through proliferation of products & service standards driven by supplier variances. • Disparate Systems & Processes • Localized Buying • Manual Purchasing & Approval Processes • Poor Service • Lack of Standardisation NO Visibility of Spend before Commitment was made!!
Post-Oracle 11i - Procurement & Business Process Re Engineering Results! • Information Available to • Negotiate Lowest Price • with Key Vendor Lower Prices for Products & Services 1 Instance Complete Procurement Information Spending diverted (Controlled) to Preferred Vendors • P.O. Mandatory Administrative savings with automated business process enabled by iProcurement • Automated Purchasing • & Approval Process
Executive Conclusions • “Strategic sourcing in CGE&Y has been enabled by Oracle iProcurement. We now have better visibility into our detailed spend, commitments & supplier contracts. • CGE&Y is now enabled to strategically source, leveraging our expenditures through fewer suppliers improving terms. Supplier consolidation promotes our technology governance strategy, whereby we determine the best technological solution to a particular type of problem. • We use these products and services wherever possible rather than starting with a ‘clean sheet of paper’ on each project.” • Wendy Irvin, Chief Purchasing Officer • CGE&Y, UK & Ireland
PROJECT RAINBOW Strategic sourcing delivers benefit but eProcurement sustains benefit over time eProcurement must be implemented as part of a Sourcing Transformation programme in order to deliver sustainable benefit Typical benefits achieved (as % of prices) • Using eProcurement as part of an Sourcing Transformation project • Increase benefit • Increase speed to benefit Plus 40-50% of the cost of buying the goods/services The total opportunity for large companies could be around $1bn + • Total Cost Management, e.g. Lifecycle costing/total cost of ownership Transaction costs (requisition, order, approve, pay) Payment terms management Tax / customs optimisation 3-5% Sourcing Transformation • Demand Management, e.g. Standardised items Reduced contract “leakage” Visibility of contracts Policy compliance and measurement Item substitution Requirements and specification management Additional value 5-10% Benefit Commodity/ Supplier Management alone Speed • Supply Base Management, e.g. Volume leverage/redistribution Bid-based re-negotiation Price/performance benchmarking Enhanced competition Supply base consolidation/preferred suppliers 5-10% eProcurement alone Source: CGE&Y Time
PROJECT RAINBOW 2002 2003 2004 Actual Forecast Forecast 0% -2% -4% -6% -8% -10% -1.1% External Spend -4.8% -8.7% Procurement Delivered Cost Reduction These are REAL Benefits, not contracts. These savings are DELIVERED, IN PLACE and are CONSISTENTLY MONITORED Savings are extracted to the P&L or used to selectively to Drive Revenue Growth
Executive Conclusions • “Before iProcurement we did not have a formal procurement team and much of the purchasing was done locally, in an uncontrolled manner. • With Oracle 11i, procurement is now centralised. The system has excellent management information, enabling a more disciplined process • which allows us to consolidate purchases with key vendors to acquire lower prices. Our purchase order mandatory process achieves compliance with approved vendors.” • David Strickland • Purchasing Consultant • CGE&Y, UK & Ireland
PROJECT RAINBOW 2002 €4.8M 2004 € 36.9M 2003 € 20.1 M Procurement Contract Yearly Savings Delivered to P&L Savings are Cumulative Enabled byOracle11i iProcurement
PROJECT RAINBOW IT 71% Other 29% Procurement - Where have we received the Benefit? 2002 €4.8M 100% Communications 80% 60% Print 40% Cleaning 20% Electricity Couriers Stationery 0% 2002
PROJECT RAINBOW Other 17% IT 62% Flex Resourcing 21% Procurement - What Benefits are Forecast and Targeted? 2003 Cumulative Gains €20.1M! 100% Data Comms 80% Print 60% Cleaning 40% Pensions 20% Electricity Office Consumables Couriers 0% 2003
PROJECT RAINBOW Procurement Areas of Contract Savings 2004 Cumulative Gains € 36.9M -6% Cost Reduction Flex Resourcing 11% IT 60% Other 29% -11% Cost Reduction -7% Cost Reduction
Executive Conclusions “When CGE&Y-UK &I made the decision to implement a strategic sourcing process using purchasing best practices, Oracle's iProcurement module was an enabler and allowed us to pin down the change. The system prevents employees from reverting back to the old way of doing things over time. The sourcing gains will continue, and not be a one time occurrence.” Jeff Clarke, Project Manager CGE&Y, UK & Ireland
PROJECT RAINBOW Example of Process Improvement World Class end-to-end automated flexible resource process for our external contractors! “Before Oracle iProcurement, each business would cut its own deals, clearly not an optimal situation. An additional benefit enabled by Oracle Technology is the Self Billing function for our Flexible Resource Process. We eliminated a weekly invoice for each contract worker saving €670k annually.” Nicholas Mabin Director Recruitment & Resourcing CGE&Y, UK & Ireland
PROJECT RAINBOW 16,200 Flexible Resource Self BillingImprovement Administrative Savings of € 670k per year!! Yearly Invoices 0 Pre Oracle Post Oracle 11i Self Billing via Timecard 360 contractors 45 invoices/Yr
Using the Benefits Achieved to Direct Business Growth In today’s extremely competitive marketplace, pricing flexibility with the lower cost structure enabled by the Oracle Implementation and outstanding execution gives CGE&Y the ability to be more aggressive in obtaining profitable new business.
PROJECT RAINBOW Strategic Procurement strategies with our key IT Suppliers have fuelled growth “We developed an innovative contracting approach which is allowing us to drive incremental growth and increased earnings of €10.4m across 4 years. This is a complex contract process and Oracle eProcurement allows us to manage and monitor progress. Top-notch execution and Oracle have allowed us to achieve a competitive edge..... enabling us to win extra business” €15M Revenue 12..0 Shareholder Value Impact + € 7.7M €10M 9.0 6.0 4.2 €5 Earnings 3.0 3.1 2.1 1.0 €0 2003 2004 2005 2006
iProcurement Initiative Financial Summary
Financial Performance MeasuresiProcurement Initiative Project NetPresent Value (Increase in Shareholder Value) = € 118.1M IRR >500% infinite ROI >100% (6515%)(Oracle Definition) Pay Back Period <1 Year
NPV € 118.1 Productivity & Growth Benefits NPV (€M)iProcurement Initiative € (M) Incremental Growth Cost Productivity Project Costs
Economic Value Measures Total Business Value Effect! Economic Profit Change vs. Base Case € 45M 33.1 32.4 31.7 €30M 17.9 € 15M Successful Strategic Sourcing Upfront Effort enabled Project to be Self Funding 2.9 € 0M 2002 2003 2004 2005 2006 Economic Profit is a complete measure that takes into account earnings, as well as the assets employed to generate those earnings.
iProcurement Executive Conclusions
Executive Conclusions “The strategy of implementing Oracle 11i iProcurement really paid off. The low system implementation cost meant that we were more than able to fund the whole project, including strategic sourcing and process simplification, from year one savings alone!” Brian Bodsworth , CIO CGE&Y, UK & Ireland
Executive Conclusions • “The Rainbow initiative was led by the • Uk & Ireland Purchasing Team, But the real key to success was facilitated to all of the areas of the business in a joined up way. • Rainbow touched every facet of CGE&Y. We used cross functional teams from many disciplines (PRM, consulting, accounting, legal, facilities...). Without this teamwork we would not have achieved these sizable gains so quickly.” • Wendy Irvin • Chief Purchasing Officer • CGE&Y, UK & Ireland