20160916_EGP DITX Summit 2016 V3

Driving value with data.A feedback loop between Data – Processes - CustomersGROSSFURTNER, ChristofWOHLETZ, BernhardDITX Conference

Erste Group at a glance• 46,700 employees serve

15.7 million customers with over 2,700 branches in 7 countries in the eastern part of the EU

• More than 100 individual operational entities

• Among the TOP 3 banks in our core markets in AT, CZ, SK, RO, HU and HR

Key financials H1 2016Net Profit 0,84 bn EUR

Total assets 204.50 bn EUR

Total equity 15.98 bn EUROperating result 1.34 bn EUR

Footprint

The multiverse of Erste Group and EGP

How EGP moved from an outsider position to being a trusted and appreciated partner

… the big bangBoard decision with the mandate to manage the procurement process in Erste Group as a Group FunctionImplementation:- Moving all buyers out of the Bank into the new

entities- Creating a centrally led organization based on three

separate departments- Hire an outside company to implement procurement

processesResult: Fail

A star is born

Mandate of EGP is renewedA journey of 8 years starts

A star is born

Financial data to procurement information

m1

Starting pointFI-Data access Data pre-classification (3rd party, intragroup, not spend relevant,

personnel)

Challenge:Data is not usable for procurement/sourcing activities

• Creation of „Meta-data-data“ managed by EGP

• Assignment of spend to categories • De-duplication of vendor records by BI• Introduction of “Global Master & Domestic

Master” concept

Milestone IFinance data to procurement informationData

Internal structure/process

Customer/Service

Success• Buyers check/map suppliers• Buyers check/map categories• Measurement of “unmapped” spend

• Presentation of findings in customer business reviews

• Challenging suppliers in business reviews

• First entity to provide group wide data based on golden source (drill down to SAP-transaction).

• Cross entity• First acknowledgment of procurement

providing value

eRFX and eAuction utilisation

m2

Starting point:eRFX/eAuction system implemented

Challenges:Highly heterogeneous processesHigh level of freedom for our local subsidiaries

• Analysis of tender statistics• Measurement of target achievement

Milestone IIeRFX and eAuction utilization

Data


Customer/Service

Success• Mandatory usage of eRFX implemented• Individual targets per country for tender

statistics• Internal conflicts = gain of knowledge• Next level of standardization

• Insight in customer specific behavior

• Clear separation of duties – customers, suppliers

• Higher level of standardization

Maverick Spend

m3

Starting point:Spend dataContractsPartially PO coverageProjects

Challenge:To increase the penetration of EGPTo gauge our involvement in the procurement processKnowing about existing problem (missing involvement!), but not knowing where to start

Creation of Maverick spend logicFI transaction with PO-referenceFI transaction with calculated contract coverage

• vendor, customer, category, timeframe

Milestone IIIMaverick spend

Data


Customer/Service

Success• Buyers check Maverick spend and correct

underlying mapping (if applicable)• Targets per country for Maverick spend

reduction

Defined process rolled out:Step 1 Communication to buying entity (and option to explain/identify mistakes on our side)Step 2 Presentation to top level management

•Increased collaboration with entities•Strengthening the governance role of EGP

(Legal aspect/coverage) •Awareness created through reporting

The “NEO” approachm4NEO

Starting point: Certain level of standardization achievedNot enough focus on (strategic) sourcing“Lots of excuses”

Challenge: Strengthen strategic sourcingFurther standardization between the countriesHave the right people for the right task

•Analysis of KPIs to define thresholds for activities

Milestone IVThe NEO approach

Data

Internal structure/process• Definition new roles & clear split (Sourcer

never = Tactical), different targets…• Measurement of execution according to

new definition

• New, standardized services• “Customized procurement” to drive

behavior• Push back based on data

Customer/Service

Success• Increased governance in group• Increased governance within EGP - Data,

measurability

Supplier scanning & audit m5

Starting point: Financial screening in place Emerging topic: non-financial reportingSustainability (social, environmental aspects)Operational Risk

Challenge:How to implement in existing operations?

Milestone V: Supplier Scanning & Audit

• Scan suppliers against sanction lists • Flag suppliers for exclusion in all

systems

Data


Customer/Service

Success• Supplier self audit process

(structured)• Standardized for whole group

• Risk reduction• Covering of regulatory requirements

(reporting)

• Accepted and appreciated non monetary contribution• Governance• Reporting

Future: Risk focus instead of savings

take awayDon‘t strive for perfection!

Dare to go with imperfect dataBut be explicit on imperfection and measure it

Don‘t trust anybody!Go for the „golden source“

Don‘t reinvent the wheel!Use existing internal and external standards

You want it – you do itDon‘t rely on business partners (you might not be important enough)

But: eat the elephant one bite at a time

THANK YOU!

Erste Group ProcurementProcurement Services GmbH

Am Belvedere 11100 Wien

Austria

Appendix

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Erste Group Footprint• Erste Group:

• > 1.000 companies, with• 16 million customers, in• 2.800 branches, in • 12 countries, with• 50k employees• Keiretsu business setup

• EG Financials YE 2015

• Total Assets $ 231.0B• Operating result $ 3.3B• Mkt cap $ 14.0B

Erste Group Holding Board DecisionErste Group Holding Board decision on the Erste Group Purchasing Policy (2011-05-10)*:

The central and single competence for procurement activities within Erste Group lies in Erste Group Procurement (EGP).

EGP has to be involved in any external spend of any Erste Group majority owned entity. Any exception has to be agreed between EGP and the respective Erste Group entity.

All external spend should follow the principle of Total Cost of Ownership (TCO) and Quality, Cost and Delivery. In balance with socio-economic, ecological and customer relationship factors the assignment of a contract has to follow the highest added value for Erste Group principle.

EGP owns, defines and aligns the purchasing processes with the local entities within Erste Group.

EGP Cooperation with clients based on: Contract (SLAs) Responsibility (NDAs) Code of conduct (also CIPS Ethical Procurement & Supply) Purchasing Policy & Handbook Maverick Spend Policy Valuable Customer Policy

*Source: EGP Purchasing Policy PO 1008-PUR-A

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EGP Key Statistics 2016

Over EUR 1 billion third-party Indirect spend

150 categories (third level), 52 category strategies published

Service 80 entities, 102 customer business reviews over 35 major customers

10 countries and more than 10 different languages

107 FTE with over 250 degrees, professional certifications, and endorsements

Over 9 000 suppliers, 65 supplier business reviews across 50 suppliers, and 9 supplier strategies

Just over 3 000 tenders 2015

2015: CR 6,07%, CA 1,29%, GPCA 4,63% (18 categories), ROI 7,34, CoA 0,88%

EG Maverick Spend 5%

Contract coverage over 80% with over 6 000 active contracts

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EGP Categories

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Maverick Spend: IdentificationMaverick Spend is any spend of money to any external supplier/company covered by the EGP ‘In Scope’ definition, where EGP was either too late or not at all involved* in the set-up of the commercial agreement.

EGP Maverick Spend Report

Covered by Purchase

orders

Covered by contracts

Spend to be processed by EGP

Maverick spend

Maverick Spend Definition graph

1. Based on SAP/FI, Contracts, Purchase Orders2. Responsible is EGP3. Considering:

• Spend relevance• Involvement of EGP• Service Agreements

Maverick Spend Calculation

*currently not measuring late involvement

The numbers have to be understand in a full context.

Periodically reviews with the customers.

Ensures alignment and agreement on Maverick Spend data.

Reporting to show progress on data clean-up.

Agreement with customers, on concrete actions in order to

decrease the Maverick.

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EGP Services

EGP – World Class Procurement

SourcingInternational/Local

Purchasing Local/Tactical

Order Management

BPOBusiness Process

Outsourcing

Avoid and reduce costs based on TCO

Purchasing based on categories on international or local level

CR/CARisk Mitigation

Category MgmtSRMContract Mgmt

Spend based fee

Ensure on time and in place availability of 3rd party services and goods efficient

Operational management of POs. Spend from a locally defined lower limit (i.e. 5K) up to a limit of 30K

PO Coverage (Compliance)Internal execution of orders ≤ 5 daysPO/Boilerplate contracts

Ordering PlatformsTemplatesHotline

Spend based fee

Ensure convenient execution

Call-offs from existing contracts (unlimited) and purchases under the lower limit of Service B

Straight-forward execution

Done by business line

Purchasing Project

Contract Creation

Category MgmtVendor Mgmt

Contract Mgmt

Requisition &

Ordering

Documentation&

CR/CA Calculation

Receipting&

Evaluating

InvoiceProcessing

Purchasing Project

Contract Creation


Contract Mgmt

Requisition &

Ordering

Documentation&

CR/CA Calculation

Receipting&

Evaluating

InvoiceProcessing

Purchasing Project

Contract Creation


Contract Mgmt

Requisition &

Ordering

Documentation&

CR/CA Calculation

Receipting&

Evaluating

InvoiceProcessing

Provide cost-efficient services

Operations of support processes for the local banks

Separate feeper service

• ARIS PPM

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HYR/QBR Standardised

presentations Participants: Business

Line, Supplier and EGP Measuring the

cooperation Search out further

cooperation/collaboration

Business Reviews

Standardised Questionnaire for Assessment and Self Assessment

Document Management System, Reminders periodically and automatically

Scoring through BL

Risk Management Ethics

Supplier Audits

Similar to Category Management

Long Lists and Short Lists

SupplierStrategies

Escalation management

Initialising of Supplier-Blacklists

Single Point of Contact and coordination of all participants (BL, Legal, Countries, Suppliers)

Escalation

Supplier Relationship Management

• Identify and focus on key suppliers• Implement supplier relationship model in cooperation with BL

GOAL

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Supplier Relationship Management Risk Management

All supplier records from all systems are compared against the RPL list. A fuzzy algorithm returns a list of technical matches. The results are manually vetted and:

• False positives are marked to be excluded in the next run.• Positives are rechecked (on additional dimensions) and confirmed, escalated to Compliance Manager.

Part of the `know your business line resp. counterpart` process Flags a compliance issue against up-to-date information on embargoed country, restricted party, and business rules lists

Process

SAP & non SAPSuppliers

Other Contractors

Electool suppliers

Query List Restricted Party List

(RPL)

US ConsolidatedScreening List Dept. of Commerce Dept. of State Dept. of the

TreasuryEU FinancialSanctions

AT National Bank(Terror List)

EGP internal list

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20160916_EGP DITX Summit 2016 V3

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