GROUP

PROCUREMENT
ACCENTURE CONSULTING

OIL & GAS CONGLOMORATE - PROCUREMENT
Dhruv Misra
CURRENT SCENARIO
5 BUs / Individual Companies

Group procurement Centralise Purchase Function
1. 8 % Savings 40 Mn
2. 3bn Total Spend




Assumptions
ERP is not in place at this moment of time
Each BU has his own budgeting practices
Each BU has its own procurement cycle
Compliance issues are because of slow procurement
cycle
ISSUES & PROBLEMS
Overlapping Vendors , Items , Contract & Payment
Terms
50-60 % Compliance
60,000 vendors & 120,000 Items procured
Maverick Spend of approx 1.2 bn

Spend Analysis
Spend analysis will segregate the overall spend by
each BU in following categories
No of vendors giving major items
Major items with repeat demand
Will help in segregating the items under various heads like
capex, contracts, commodities, consumables, services

After this we will combine the spend analysis report of
all the 5 BUs and this will help us in segregating the
above heads on a group level

Kraljic Matrix



Kraljic Matrix will help in following
ways
Define which items heads fall
in which quadrant of the
matrix
Give an opportunity to
understand which items are in
bottleneck state

After this we can work on getting
the items out of bottleneck and
moving them into other
quadrants based on the analysis
of Porters 5
Porters 5
Use of Porters 5 forces
To analyse Supplier Power
and Buyer Power for each
item

Will not concentrate on
threat of new entry as the
investment levels are very
high
Will not concentrate on
the threat of substitute as
there is none


ACTION PLAN
Exploit
High buying Power High Volume Commodity
Balance
Middle Path Moderate buying power Medium Volume
& lower Suppliers
Diversify
Reduce Supplier Risk CAPEX items
CONSUMABLES ABC
Analysis
Manage Inventory Levels for consumables & Stocked
commodities.
Classify under ABC.
Target reduction in inventory levels of Slow moving C
Category Items.
Ensure consistent availability of A category items to
reduce maverick spend.
Value Stream Mapping
VSM will show the full system flow of the procurement
cycle
Will display the cycle time, throughput time of the
system
Will let us understand the information flow in the
system
VSM will help identifying areas which are bottleneck
operations
Will identify non-value added activities which we can
remove to make the system flow streamline
GROUP PROCUREMENT STRUCTURE
ACROSS BUs
CPO
CAPEX
CONTRACTS COMMODITIES
CONSUMABLES SERVICES
Respective BU Purchase Officer will forward Purchase
Requisition to relevant Buying Head.
Specialised Buying Function will lead to domain expertise
and reduced buying time.
System & Process driven buying. System built checks that
cannot be by-passed to ensure compliance.
What Accenture can do to
help
Look for opportunities to install ERP systems
Look into the procurement cycle of the organization
from a consultants point of view and investigate the
weak links using VSM
Once the non-value added activities and bottlenecks
are removed
Standardize the master-data and remove junk so that
ERP implementation is successful
Help this organization to reorganize their central
procurement cell in a robust manner