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ORMS Carolyn DePalmo Program Manager (408) 527-0639 cdepalmo@cisco.com

Web-Ordering Project. ORMS Carolyn DePalmo Program Manager (408) 527-0639 cdepalmo@cisco.com. 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

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ORMS Carolyn DePalmo Program Manager (408) 527-0639 cdepalmo@cisco.com

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  1. Web-Ordering Project ORMS Carolyn DePalmo Program Manager (408) 527-0639 cdepalmo@cisco.com

  2. 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

  3. CCO Cisco Connection Online Networked Commerce for Cisco’s Customers

  4. Cisco Commerce Agents - Growth in Use • Tool Oct Jan April %² • Status 47,439 59,401 103,170 +74% • Pricing 28,587 33,194 52,046 +57% • Config 14,386 14,536 40,902 +181%

  5. Cisco Networked Commerce: Ordering

  6. Next: Automate the “Buy” Side Networked Commerce for Cisco’s Suppliers

  7. 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)

  8. Transaction Types Appropriate and Affordable Solutions for Every Buying Scenario $DOLLARS$ Catalogs Value Add, RFP, Contracts, Negotiations Purchase Order Purchase Order HIGH Procurement Card Program Direct Order Programs LOW LOW HIGH V O L U M E

  9. Supplier Alignment First 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

  10. Why Change? Feed Forward Loop Feed Forward Loop Process “Customers”: Cisco Employees Vendors - POs/COs Process “Suppliers”: Cisco Employees Vendors - quotes, specs Inputs: P/R’s Outputs: P.O.’s P/R P.O. Process Feed Back Loop Feed Back Loop • Customer Issues: • “Black Hole” • Cycle Time • Routing • Total Process • PO’s to Vendors Late • Process Issues: • Cumbersome • Highly Manual/Paper • Manual Data Entry • Backlogs+Faxing POs • Status Inquiry Replies • Input Issues: • Incomplete Data • Inaccurate Data • Illegible Data • Routing Cycle Time • Lost Paper

  11. One Stop Web “Order” Entry Universal Interface Requesters 55% ARIBA ORMS Direct Order D.O. Suppliers Buyer 25% True Reqs Supplier Population Autocreate PO in Oracle Visa Procurement Card 20%

  12. Purch R Transacting Transforming Purch Tools R Old Model: How Purchasing got into the transaction business Tools: Visa, Web-Req (D.O.) with “intelligent agents”, wizards, public and private catalogs

  13. Web-Ordering Project Goals • Cost 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

  14. Cost Savings Sales Offset Formula 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.

  15. Requisition & PO Cycle Time Analysis Overall Average Weighted by Distribution: Total: 12.84 Days; Signature 4.75 = 37% of Time

  16. 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 • 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 • Interprocess Management • Between Processes • Between Systems • Link and Leverage existing Applications • Cross Functional Communication

  17. Requestors Payment Catalogs EC Approvers Receiving Buyers Distribution Suppliers Paperless Interprocess Solution Purchasing - A/P - Receiving

  18. Cisco EC Projects Universal Interface Cisco Receiving Single Ent. Shipment Confirm. Direct Order Catalogs Ordering Approving Status ARIBA ORMS Cisco Supplier Population Request EDI 862 E-Mail ERS Cisco Accounts Payable Invoice Purchase Order Purchasing Oracle EDI 810 Req EDI 850 Payment EDI 820 * Yellow = Ariba

  19. Process - How We Got Here 1.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

  20. Implementation Key Functional Activities Policy/Operating “Practices” Kickoff/Education/Bene’s Renew Requirements Follow-up/CIF Content Ariba Document for Coding EC Agreement 1.Business Rules Definition2.Supplier Alignment 3.Catalog Organization 4. Adapter Interfaces CIFintegration into Ariba Sources (Accts, Depts…) Map items-SPSC-Com-Structure Filters/Data Validation 5. Product Knowledge 6. Cheerleader Familiarization - Detailed Usability/Unit Testing Conference Room Pilots Promotion /Excitement Change Management Corporate Support

  21. Phase 1 • Assess Project Scope Phase 2 • Finalize Work Plan / Map Requirements Phase 3 • Install Software / Adapters / Catalogs Phase 4 • Customize & Test • Acceptance & Feedback Phase 5 Phase 6 • Upgrade/Production Roll-out Timeline - Planned Phases June July Aug Oct May Sept Nov Introduction Planning Installation Implementation Deployment Roll-out System ‘Live’

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