HO CHI MINH CITY OPEN UNIVERSITY UNIVERSITÉ LIBRE DE BRUXELLES SOLVAY BRUSSELS SCHOOL OF ECONOMICS & MANAGEMENT MBQPM5 DO THI DIEU THUONG IMPROVING INDIRECT PROCUREMENT PERFORMANCE AT SUNTORY PEPSICO VIETNAM MASTER FINAL PROJECT MASTER IN BUSINESS QUALITY AND PERFORMANCE MANAGEMENT Ho Chi Minh City (2016) STATEMENT OF AUTHENTICATION I certify that this work "Improving indirect procurement performance at Suntory PepsiCo Vietnam" is my own work and has not been published in any assessments before All materials used in this work has a clear and correct source for acknowledgement and reference Student's confirmation Do Thi Dieu Thuong 22 April 2016 ACKNOWLEDGEMENT First of all, I would like to say thank you to SOLVAY BRUSSELS SCHOOL OF ECONOMICS & MANAGEMENT and HO CHI MINH CITY OPEN UNIVERSITY for designing and organizing this master course I would like to show my deep appreciation for Professor Jacques Martin and all other Professors for all their care, support and guidance throughout the course for me to have knowledge and background to complete this report I would like to say thank you to all facilitators of both schools to help organize and arrange our classes during the year I also would like to say thank you to all my classmates who are willing to share with me many helpful experiences and information to enrich my learning And last but not least, I deeply appreciate my family for their love, continuous encouragement and support for me to dedicate time in the study and completing this work Table of Contents Introduction Chapter - Analysis of current procurement performance 1.1 Customer satisfaction for Indirect (ID) Procurement service in 2015 1.2 SWOT analysis of Indirect (ID) Procurement performance 1.3 Reasons for unsatisfactory Indirect Procurement performance 1.4 Strategy mapping on Balanced Scorecard model Chapter - Design of a performance management system for procurement department 10 2.1 Employee Learning & Growth 10 2.2 Internal Process 11 2.2.1 Operation 11 2.2.2 Compliance 12 2.2.3 Innovation 12 2.3 Customer 13 2.4 Financial perspective 13 Chapter - Challenges of the implementation of performance management system 14 Chapter - Recommendation for improving Indirect Procurement performance 15 4.1 Capability and collaboration 16 4.2 Process 24 4.3 Technology & Innovation 25 Conclusion 28 REFERENCES 29 LIST OF ABBREVIATIONS SPVB: Suntory PepsiCo Vietnam Beverage IP: Indirect Procurement 3PL: Third-party logistics EDI: Electronic Data Interchange PR: Purchase request PO: Purchase Order KPI: Key performance indicator SRM: Supplier Relationship Management P&L: Profit & Loss HR: Human Resource OHS: Organization Health Survey FMCG: Fast moving consumer goods IT: Information Technology MNC: Multi-national company BI: Business Intelligence CSR: Corporate Social Responsibility VPO: Volume per outlet EBIT: Earnings before interest & taxes PMS: Performance management system RFQ: Request for Quotation CPO: Chief Procurement Officer ERP: Enterprise Resource Planning BPA: Blanket Purchase Agreement E-RFI: Electronic-Request for Information E-RFQ: Electronic-Request for Quotation E-RFP:Electronic-Request For Proposal E-RFS: Electronic-Request For Solution BI: Business Intelligence LIST OF TABLES Table 1: Satisfaction with Indirect Procurement Service Quality KPIs Table 2: Satisfaction with Indirect Procurement Buyer Service Quality KPIs Table 3: Strategy map in the balanced scorecard model Table : Procurement’s priorities from study of The Hackett Group (2015) Table 5: Market Intelligence and access Table 6: Framework of human resource development Introduction Company Suntory PepsiCo Vietnam (SPVB) is a joint venture between Suntory and PepsiCo to establish a strategic alliance in Vietnam from 2013 Before the joint venture, PepsiCo had 20 years operating business in Vietnam Our business is currently focusing on beverage basing on PepsiCo’s current portfolio and new products from Suntory brands Vision It is to continue strengthening and maintaining the leading position in Vietnam beverage industry while continuing to pursue sustainable development objectives, bringing benefits to our stakeholders, employees and business partners, and contributing to the communities Mission It is to provide consumers quality, convenient and good-for-health soft drinks And in everything we do, we strive for honesty, fairness and integrity Strategic objectives:  Become a billion USD revenue company in 2018 with profit at least from 10%  Offer variety of products to meet customer’s demand with committed quality by launching new products every year  Ensure 100% products meeting PepsiCo’s global quality standard  Simplify internal processes and increase automation level of all function’s operations to reduce processing time of all administrative works by 20% by 2017  Develop next generations of management from local source to take more than 90% of management positions in the company by 2018 Chapter -Analysis of current procurement performance 1.1 Customer satisfaction for Indirect (ID) Procurement service in 2015 In December 2015, IP took a survey to get internal customer's feedback relating to IP service quality in 2015 This is the first time IP processed to get customer's feedback and the result of this survey is summarized in two below tables Table 1: Satisfaction with Indirect Procurement Service Quality KPIs The overall customer satisfaction level for procurement service in 2015 is quite low The highest result is just at 42% for the cost criteria, while the lowest result is at 25% for the lead time criteria of the whole sourcing and procurement process.It shows the big dissatisfaction from stakeholder for supply lead time Even for the traditional criteria - cost, the satisfaction level is also not high Table 2: Satisfaction with Indirect Procurement Buyer Service Quality KPIs The satisfaction for buyer service is even lower when the highest score is just at 38% It shows clearly that there is a problem in IP's buyer capability to fully understand products/ services being purchased and the market to provide helpful advice for end-users The effectiveness of communication and buyer’s response time is also a hot spot to be improved more 1.2 SWOT analysis of Indirect (ID) Procurementperformance Strengths IP is a big team divided in both function and location IP has centralized all indirect activities since October 2014 to handle a big business scale with high complexity and in urgency environment With the annual business growth at 20% and management of an annual spending at 300 million USD with approximate 500 15 implementation of performance management system is a continuous progress requiring a high level of self-consciousness to always challenge the current good things to look for more opportunities of improvement Without following up, the PMS implementation will definitely be in failure as no checking leads to no improvement actions The following up needs to come from both sides: top down from management and bottom up from each employee to look through their own works and raise for management's support to remove all obstacles and close performance gaps to achieve the organization's objectives Lacking collaboration across functions; unclear role and responsibility of each function: This obviously is a big challenge to manage an effective collaboration among functions It's also crucial to define clearly role and responsibility of each function and in detail for each employee at the very first stage of the project The more employees get motivated in their works, the more effectively they can collaborate, exchange ideas, and work consciously to achieve the common objectives together Chapter - Recommendation for improving Indirect Procurement performance In order to improve the performance of any department, the first thing to think about is people's capability and collaboration to deliver functional objectives and meet stakeholder's satisfaction I also make a reference from a study of The Hackett Group conducted in late of 2014 with participation of executive management and leaders of finance, HR, IT and procurement of midsized and large companies, which show some priorities and key focuses Procurement need to improve as showed in the below table It's a kind of benchmarking with the world to find common points that IP at SPVB should improve more 16 Table : Procurement’s priorities from study of The Hackett Group (2015) From this study, we can see that while reducing cost is always the key priority as Procurement's responsibility, other new focuses which are elevating procurement's role as a trusted advisor and improving procurement's business agility are also highlighted Business is requiring procurement to more actively widen business scope and have an overall business look for the whole organization's benefit In order to that, people perspectives have to be listed on the 1st priority for SPVB to invest more 4.1 Capability and collaboration Beyond the traditional role as supply agent, the new key objective for Procurement to achieve is becoming a trusted advisor for other functions It's especially suitable for IP, where many stakeholders not know clearly about market, vendors, procurement process, or even they cannot provide a clear specification but a conception Stakeholder's expectation is to receive wise advice or instruction from Procurement for them to achieve the expected result in while still being compliant with the company's procurement policy From the analysis, many stakeholders not 17 satisfied with procurement's support, and it will be an effort process to change the way other functions evaluate about Procurement's contribution positively Cross function collaboration In a complex organization like SPVB, collaboration has become a crucial element to deliver business result Procurement no longer was a silo function just focusing on cost saving, but be an integral part of the supply chain from customer demand to product delivery to customer So how to collaborate effectively? There are many ways, in which I myself am interested with the Brittany Wickerson’squote in her article “Don’t Just Communicate – Collaborate with Stakeholders” (21 August 2014)on the website (http://nextlevelblog.smarttech.com): “It (collaboration) requires us to go from presenting to engaging; from talking to listening; from hearing to interpreting.”With a large number of stakeholders across functions, the way IP is doing is just communication, and even some employees have problem in communication and make information confused After improving to have an effective communication, we need to think about how to engage more with stakeholder’s activities We can’t stand by to wait for stakeholders to come and ask for help, but we need to proactively engage and support them Procurement should get their whole year planned agenda at the early of year to define suitable Procurement plan for key categories, and share with stakeholders to align the approach A helpful way to effectively engage with stakeholders is selling Procurement’s value for stakeholders and asking for the opportunities to coordinate with them at the initial stage of project Bringing Procurement’s ideas, market knowledge, process mastering will help project run smoothly with the consultancy of all relating functions and build a collaborative environment for the whole team’s success Capability Market intelligence: As Procurement's role has changed from price reducing and other transactional works to being an advisory agent to add more value for stakeholders It requires Procurement to build strong background and market intelligence for indirect categories From the fact at SPVB that Procurement team lacks of guidelines or directions to process work efficiently in a standard, especially for new members who have background from other functions like Engineering or Finance The consequence of lacking market intelligence is buyers will lose competitive advantage with suppliers and other competitors, and cannot mitigate supply risk Getting reference from Accenture's article "The Market Intelligence Opportunity", I summarize key points 18 which buyers need take into consideration and explore to increase market intelligence: Supply market: - Overall information about the market (PESTEL analysis) - Key drivers of the market which can impact critically on quality, supply, cost or future development - Porter's forces to understand the buyer position in the market - Who is the leader in the market and their willingness to our business? This information can be found publicly through many kinds of communication Supplier information: - Financial situation - Production capacity (total and spare) - Capability, especially for professional services - Past performance - Market reference This information can be acquired by supplier interview, supplier's documents, and historical data of buyer organization, evaluation from their customers, or articles / research in specific categories However, buyers need to cross check with various information sources to ensure the information provided by supplier reflects their reality Commercial information: - Cost breakdown - Pricing trend and price forecast - Average discount of the industry - Other practices in the market, such as: pricing formula, rebate scheme, how the cost is charged for customers (cost per case, or cost per kg) Having an industry's commercial understanding will bring a great advantage and when combined with market and supplier information, the organization will have outstanding advantages in negotiation to achieve bigger benefits instead of being led by suppliers Contract information: 19 Main contract terms for each category to mitigate risks for buyer organization and agreed with seller organizations Below table shows more in detail each element of market intelligence and its access Table: Market Intelligence and access Source: The Market Intelligence Opportunity - Accenture Another element to improve IP performance is talent development It includes how company can improve staff's capability and how to motivate employees by defining a clear career road map for each employee at each level Capability is a broad definition including functional skills, soft skills and business agility In the above part, I mention specific points IP staff needs to improve basing on the stakeholder's feedback in the satisfaction survey In this part, I would like to discuss more about how Procurement, namely Indirect Procurement can build a long-term plan for talent development with HR's support to have a strong resource for challenging agenda ahead In a research Deloitte analyzed for a customer, they proposed a process model to help Procurement equip full and relevant talents for growing businesses Basically, 20 this process is a framework which is applicable for talent management of all organizations Therefore, I use this framework as a guideline to develop more about specific actions SPVB should to build a strong force for IP Table 5: Framework of human resource development Source: Procurement talent management: Exceptional outcomes require exceptional people (Deloitte) Design of procurement organization and workforce planning: Firstly, the design of procurement organization has to be in line with the whole organization structure to deliver the company’s vision and mission IP’s structure has been changed times during last years to find the most appropriate structure to improve the work efficiency and stakeholder’s satisfaction With a clear objective to become a billion USD revenue company in 2018 with profit at least from 10%, the company has been executing some changes in the organization restructure across all functions The procurement and logistics role has been recognized as a crucial link in an end-to-end supply chain to get products available for customers Therefore, Procurement no longer belonged to Operation or Finance, but was 21 merged with Logistics to become Supply Chain function In 2015, HR conducted an analysis of IP's workload and with the consultancy of PwC, HR applied a new structure for IP since January 2016 by dividing workforce in locations and specialization to serve better for each type of customers Roles and responsibilities are also defined clearly for each staff at each level It is the 1st process we have applied according to above framework, and it needs time to evaluate the effectiveness of this structure through measuring the work efficiency and customer's satisfaction Attract, acquire talent and prepare them for new job This is the phase for Talent Acquisition to show their performance how well they can attract and acquire talents for company, specifically IP To support for the human resource fulfillment, we need to source and develop from fresh graduates of universities as just relying on the talent hunting from other companies will never meet the requirement of robust business growth That's why many management trainee programs were organized, especially in FMCG It has created a talent war among companies, and how well companies can attract talent depends on how the company can position its employer brand It requires a long term strategy to identify and proposition the employer values to be in line with the company's vision, mission and the prerequisite is to have utmost management's commitment in the talent development The communication way and time also have high impacts to the success of the management trainee programs If the program is not communicated widely and effectively or the program deployment time is later than other companies, there is a high likelihood of losing top talents into other competitors With the more important role of procurement in business operation, it is the advantage for procurement to attract more talents and help strengthen the procurement workforce After recruitment phase, it's important to help new members get acquaintance with company's culture, environment, work flow, structure in overall and specific policy, procedures in procurement department One of procurement's problem in SPVB is having no online resource pool where new members can easily find information With the high turn-over in 2015, it was very challenging for IP to transfer knowledge for replacement staff when hand-over documents were mostly hard copy Thus, tracking historical data is very hard From January 2016, SPVB has applied SRM (Supplier Relation Management) system to keep track all data of purchasing transactions including communication emails, internal approval documents, contracts, POs, relating issues, supplier performance evaluation Therefore, I'd recommend to utilize SRM system as a knowledge transferring tool by creating a knowledge pool on SRM system where Procurement staffs store documents/ templates for each spending category, including: 22  Process flows  Market information/ Supplier profiles/ Distribution certificates/ Supplier credential  Cost models/ formulas  RFQ templates  Negotiation plan/ Purchase Recommendation  Contract templates By using SRM as a knowledge transferring tool, it will help new members to quickly understand internal procedures and provide available information as a reference source for other team members to learn more and save time in similar purchases Develop talents After on boarding phase, the important thing is how to develop talents to fit with business requirements It first starts with identifying competency model for each role and skill assessment for staff, then HR can build competency development plan to support employees to have enough competency to fit with job requirements in a soonest time Therefore, it is important to refine job requirements and competencies employees must have to handle a specific role so that employees can have a clear view in their career path, and increase their motivation as well There are many ways to improve employees' capability, such as training, coaching, mentoring In Procurement department of SPVB, we have some official training courses organized by HR for common soft skills, and an official training course for functional skills per year However, the most popular and effective type is on the job training Coaching is also provided by senior managers in some projects with big spending and business impacts Mentorship is fewer used despite its great benefit to foster and develop talents in their career path and help them more engaged and committed with the organization Procurement work includes mastering process and the art of collaboration with stakeholders and cooperating with suppliers It's not so hard to master the whole process of procurement, but it's not enough to bring talents to become high performers According to many CPOs (Chief Procurement Officers), their success comes from valuable experience they had chance to learn by working along with mentors, or by supporting skilled colleagues in the apprentice form Mentorship may not be applied for all employees; however, managers should consider to apply with some potential talents who can become future leaders Another way of training is stretch assignments for potential ones to have 23 opportunities to challenge themselves, find motivation and excitement in new assignments and enrich their critical experiences It is a kind of practical training for talents, and managers, thank to it, can evaluate talent's capability to orient the career development for them In addition, Procurement of SPVB should consider to provide staff more opportunities of internal rotation and build it up as a rule for all employees to have chance to learn new things, to find new challenges, to grow further and to be more satisfied with their work It is to prove for the slogan of Suntory PepsiCo employer brand - "Grow fully, live truly" Retain talents The last stage in the talent management process model is retaining talents If an organization performs well in all previous stages, but fails in competing with other companies in a remuneration package, will make all efforts the organization did previously become useless For retaining talents, there are some below highlights: Remuneration: It is one of the key factors to retain talents The talent war happens quite often in FMCG, especially for top performers To avoid the brain drain, SPVB has taken salary survey during last years to benchmark and bring the salary level competitive with other top companies in this industry This strategy shows how the management perceive the importance of procurement in the organization With the progress to adjust salary level and add more healthcare benefits during last years, SPVB's package for procurement is now competitive enough to retain and attract new talents However, this position will not sustain in a long time as other companies are also well aware of this issue and are willing to pay higher for key positions they would like to attract Yet, apart from the remuneration, motivation is another advantage to retain talents Job motivation: Some people may care about the compensation package, but a large number of others also care about learning and development opportunities It's also a key factor as if the company cannot provide a clear roadmap for talent to develop, they will feel uncertain about their career path It's the fact happening in Procurement of SPVB and it requires a close cooperation between HR and Procurement at top level to build a clear roadmap for talents to be nurtured, mentored and invested to become leaders in the future Corporate culture and working environment: This is an invisible factor but has a great impact to employees' performance and commitment As a performance driven company, SPVB's objective is to build a cooperative and open corporate culture where everybody can promote their creativity the most However, as a company in FMCG with rigorous competition, it's unfeasible to create a stress-free environment, but how the company can help employees to balance between work and life, provide 24 programs to take care of employee's health and spirit, create a cooperative rather than aggressive environment will make employees more engaged with the company as a place for their long-term career 4.2 Process A common objective in all big corporate relating to process is the simplification and standardization It is also a must for SPVB in order to achieve the objective to become a billion USD revenue company in 2018 Everyone is aware of the complication of SPVB's process and wants to have a more simple process The point is that it is just not easy to what we want That's why SPVB is currently using KPMG's consultancy service to help identify problems in the current processes and propose recommendations to make them more simple and effective However, in principal, below are some ideas we need to carry out if we want to implement a successful simplification project Top management must understand the importance and urgency to conduct a simplification project as complexity will gradually decrease SPVB's flexibility, agility and competitiveness Complexity creates workload for all employees and be a burden for business and a barrier for SPVB's path to achieve its strategic objectives, vision and mission It is a top down process to cascade simplification objectives from the management to apply in all functions Simplification is also a bottom up process where it needs to gain all employees' alignment and determination to study, find out and execute changes to create a simplification of internal processes The starting point is always the most challenging barrier which is how to overcome the different competing interests of each function/ team for them to work together in one team with only one objective simplification It's not easy to because all functions have to change their normal ways of doing business although they may have done in that way for many years The key is to get employees' engagement in the company's vision and objectives and help each individual understand each of their small contributions brings a great benefit for the whole business All activities and processes need to be reviewed, examined, and evaluated the necessity of their existences in consideration with risks which may impact to SPVB With the expertise as a consultancy agent for many kinds of customers, KPMG can bring in new perspectives from other companies' practices or customer's requirements so that SPVB can find directions for its simplification journey The key point to make this project successfully is the project leader must have a determination, fearless and uncompromising attitude in the approach and deployment It's critical to prioritize for what is important and brings value to your 25 customers and organization and have courage to pare away extraneous activities out of core process to make operation become leaner and need shorter time to produce and deliver products to customers Using 3rd party for logistics or other services is one of the way SPVB tries to focus more on its core business and there are still many other categories to be outsourced to reduce the complexity and workload in management The current structure of Procurement at SPVB is vertical with many middle layers but the purchase approval centralizes on only one position whatever the amount of spending However, the nature of simplification is cultivating empowerment and support for all employees to work independently and responsibly With too many approval layers, the whole process becomes micromanaging as every layer has to add value in each step Finally, the result is adding more requirements, taking more time to complete and adding no or very little value Therefore, it's very important to review policy, organization structure periodically to reduce middle layers and increase span of authority A factor to facilitate for simplification progress is the standardization It can be the standardization for process, lead time, requirements, forms, materials, equipment for the same activities in different locations or plants In order to that, it requires the consensus of all functions to put away their own difficulties to focus on the ultimate objective The supporting role of management is very important to follow up, encourage, motivate and push different teams to go in line with the objective Simplification is not only a one-off project but a ongoing progress Therefore, the company should have a tool or channel for all employees to provide initiatives which can bring simplification or constructive feedbacks to senior managers who have bad managerial habits, over-controlling processes, unnecessary requirements With the purpose to make process more simple and effective, it needs to have an aggressive approach, execution and maintenance from all levels of the organization 4.3 Technology& Innovation Technology is contributing more and more in increasing procurement's value to business through relevant systems and softwares SPVB just completed the system upgrading to ERP (Enterprise Resource Planning) system since end of 2015 and now it is in the progress of customization for each function's requirement, including procurement, to reach a higher automation level in operation Technology plays a key role in these aspects: reducing lead time, increasing accuracy, ensuring compliance, managing supplier performance Detail is described more for each aspect Reduce lead time from PR - PO (purchase requisition to purchase order) 26 The must-win battle of IP at SPVB in 2016 is improving stakeholder's satisfaction by reducing lead time from PR-PO Therefore, the utilization of technological advance is aggressively pushed from top management With IT's support, IP is applying some tools to create BPA (Blanket Purchase Agreement) to reduce lead time of creating and approving call-off PO, and also ensure the price accuracy However, there are still huge opportunities for IP to improve the lead time By spending analytics, IP can identify strategic categories belonging to only 20% suppliers but taking more than 80% spending From the analysis result, IP can set out different sourcing strategies to apply for each category The current sourcing process at SPVB is still manual Thus, there is a high potential of saving, reducing sourcing lead time and increasing spend under management by applying e-sourcing tools including E-RFI (Electronic-Request for Information), ERFQ (Electronic-Request for Quotation), E-RFP (Electronic-Request For Proposal), E-RFS (Electronic-Request For Solution), E-auctions and so on Maersk Group is an example of utilizing these tools to make their sourcing process more efficiently The explanations for these tools are shown clearly on their website: “E-sourcing is used in the Maersk Group as a facilitator in our sourcing process The e-Sourcing tool gives vendors an opportunity to bid and compete fairly for Maersk business Eauctions are negotiations conducted via an online platform Suppliers get the possibility of improving their proposals based on market feedback (e.g rank in negotiation) and are considered to be the most transparent way of conducting negotiations E-auctions include both price and non-price (service level, quality, etc.) parameters to ensure the result of the auction reflect the overall best total value for Maersk.”These tools are obviously not new with other companies with best-in-class system, but it will be a breakthrough if deployed at SPVB in the customization to fit with our business situation and market Increase the management of supplier performance, spending data and compliance “SRM is to develop two-way, mutually beneficial relationships with strategic supply partners to deliver greater levels of innovation and competitive advantage than could be achieved by operating independently or through a traditional, transactional purchasing arrangement” (Wikipedia) It is important to get all employees to be fully aware of SRM’s benefits, and the urgency to apply SRM in their work SRM will change their traditional working way to add more value in supporting sourcing team and business to achieve a lower cost, reducing risks, and establishing a partnership with suppliers to drive for innovation Without SRM, negotiated savings from sourcing team may never be realized 27 In the first stage of applying SRM at SPVB, supplier performance tracking and evaluation is one of the key priorities If procurement in the following steps after sourcing and negotiation don’t involve in the real business of delivery, issue solving, two-way feedbacks, the suppliers may lose enthusiasm to contribute more initiatives to improve mutual business SRM can be used to gather and track supplier performance data across sites to provide a comprehensive picture for supplier capability, reliance and response The analysis result will not only help sourcing team to make more appropriate selection, but also improve the stakeholder’s satisfaction level for procurement service The problem now is that SRM is currently a stand-alone system which should be connected with other systems like ERP and contract management It also requires management’s support to reinforce the practice of applying SRM to capture all data, information, incidents as a prerequisite to make SRM really useful and bring actual value to business Another option for SPVB to consider is BI solution If the system can support to provide accurate data in real-time for indirect materials/ services, it will help much in improving supplier performance by providing our feedback in real-time and performance level is recorded in system instead of doing manually as current In the future, basing on historical spending data on system, and real-time & reliable supplier performance evaluation, IP can create a pool of highly qualified suppliers for consumables, ad-hoc items or routine items with standard and simple specification Accordingly, IP also need to change the working practice to utilize system to automatically sourcing by sending RFQ for qualified suppliers in this pool and get online approval for PO and delivery also will be managed on line If this approach is applied, it will reduce procurement staff’s workload in routine yet timeconsuming transactions However, the journey to achieve expected objectives may take several years and need great effort from all functions, and it requires a strong leadership to get all employees buy-in and follow up the progress strictly 28 Conclusion Together with the world growth trend when the resources now become scarcer and scarcer, all organizations have to find their own ways to solve the optimization calculation in operation costs Traditional understanding about procurement as an administration function no longer fits with the current circumstance which requires the great contribution of Procurement in delivering a sustainable platform in term of total cost of ownership, continuous supply, reliant quality to secure a competitive advantage for the company to keep up in its growth However, nothing or no one can secure our business in a constantly changing environment like today Therefore, it requires a sound consciousness and well preparation and long-term strategy in developing internal and external resources to walk alongside with the company in its journey from good to great SPVB also has the objective to turn from a good company to a great company in 2018 All functions are participating together in this journey and no function can stand alone Procurement department, specifically indirect procurement, needs to improve its weaknesses and utilizing its strengths to seize opportunities through improvement in people, process and system and contribute its value to the whole success 29 References Books Paul R Niven (2006), Balanced Scorecard Step-By-Step - Maximizing Performance and Maintaining Results, 19, John Wiley & Sons, Inc Deming (1997 ), Out of the Crisis, 214, MIT Press Articles Accenture (2014), "The Market Intelligence Opportunity", Deloitte (2015), "Procurement talent management: Exceptional outcomes require exceptional people", Patrick Connaughton and Christopher S Sawchuk (22 January 2015), "The CPO Agenda: Key Issues for Procurement in 2015", 3, The Hackett Group Websites http://nextlevelblog.smarttech.com/2014/08/dont-just-communicate-collaborate-withstakeholders/ http://www.maersk.com/en/the-maersk-group/procurement/e-sourcing https://en.wikipedia.org/wiki/Supplier_relationship_management [...]... support business operation to achieve the vision and strategic objectives In Procurement part, one of the highlights is the out of date status of Procurement policy The latest version was from 2010 while till now, there have been a lot of changes in both organization structure and scope of works but policy has not been updated yet One of the reasons stakeholders complain Indirect Procurement is the processing... Reasons for unsatisfactory Indirect Procurement performance 2015 is a very challenging for IP with high turn-over rate In addition, despite the huge effort and hard work of IP team, the stakeholder's satisfaction is not as management's expectation It made a red flag for HR and management team to have an analysis to simply understand what was going on in IP team, what were the obstacles and what was employees’... correct for IP IP was established in 2011, but Procurement at that time just took charge of some main categories in plants, about 10% - 15% of total indirect spending IP has step by step been in charge more categories in indirect spending, like Sales & Marketing, Logistics In Oct/ 2014, we officially announced the centralization of all purchasing activities in all categories, but for Marketing, we mainly... There is no official functional induction for Procurement new employees, and no instruction for which information need to be transferred The current practice is old employees in the team will brief some basic information relating to Procurement policy, procedure, provide mandatory templates, instruct manipulations in Oracle The lack of procedure for a systematic knowledge transfer from old employees to... in with Procurement' s initiative, help them understand that Procurement is supporting and adding value to business rather than doing admin works In a big corporate like SPVB, it will create more difficulties for buyers to work effectively in a cross function environment with many complex relations Learning and development: Learning is very important because no one can have knowledge in all categories,... compliant with the company's procurement policy From the analysis, many stakeholders do not 17 satisfied with procurement' s support, and it will be an effort process to change the way other functions evaluate about Procurement' s contribution positively Cross function collaboration In a complex organization like SPVB, collaboration has become a crucial element to deliver business result Procurement no longer... all relating functions and build a collaborative environment for the whole team’s success Capability Market intelligence: As Procurement' s role has changed from price reducing and other transactional works to being an advisory agent to add more value for stakeholders It requires Procurement to build strong background and market intelligence for indirect categories From the fact at SPVB that Procurement. .. business? This information can be found publicly through many kinds of communication Supplier information: - Financial situation - Production capacity (total and spare) - Capability, especially for professional services - Past performance - Market reference This information can be acquired by supplier interview, supplier's documents, and historical data of buyer organization, evaluation from their customers,... commercial understanding will bring a great advantage and when combined with market and supplier information, the organization will have outstanding advantages in negotiation to achieve bigger benefits instead of being led by suppliers Contract information: 19 Main contract terms for each category to mitigate risks for buyer organization and agreed with seller organizations Below table shows more in detail... system to keep track all data of purchasing transactions including communication emails, internal approval documents, contracts, POs, relating issues, supplier performance evaluation Therefore, I'd recommend to utilize SRM system as a knowledge transferring tool by creating a knowledge pool on SRM system where Procurement staffs store documents/ templates for each spending category, including: 22 