SCM Project Report

8/22/2019 SCM Project Report

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MOTOROLAREINVENTING THE SUPPLIER NEGOTIATION PROCESS AT MOTOROLA (PART 7B)

Submitted by: Group 71. Meghana Katiki (P

2. Priyanka Gupta (A3. Ashok Patsamatla4. Mansi Dhamija (P5. Vipul Banthia (PG6. Arun Ginjala (PGP


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PRESENTATION OUTLINE

1. Motorola Background

2. Problem Statement

3. Strategic sourcing complexities

4. Transforming supplier negotiation using MINT

5. Internet negotiation process using mint

6. Shift in the negotiation paradigm after mint

7. Capabilities provided by MINT8. Optimization in strategic sourcing

9. Savings due to MINTs adoption

10. E-sourcing benefits

11. E-sourcing Decision Criteria

12. E-sourcing: Ingredients for success

13.Negotiation Cost Savings


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MOTOROLA BACKGROUND

1928 - Foundedas Galvin

ManufacturingCorporation to

produce batteryeliminator

1930Commercializedcar radios underthe brand name

Motorola

1947 - Companyname changed to

Motorola

1959 Becamemarket leader inmilitary, space

and commercialcommunications

1980 Becameworldwidesupplier of

cellulartelephones

1996 Mergerwith GeneralInstrument

Corporation tobecome marketleader in cable

modems and settop terminals

20


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PROBLEM STATEMENT -PERFECT STORM

In the wake of telecommunication downturn in 2001Motorola faced multiple challenges

Purchases, direct and indirect made up over 50% of Motorolas costs

Market Collapse

Non Competitive ProductInternal Complication

Sharp drop in demand Fall in revenues

Extreme overcapacity

Lack of key featuresAging products

Too expensive

Inefficient supplier negotiation pro Limited Resources

Key challenge - Cut cost and increase margins by leveraging purchasing power more eeffectively


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STRATEGIC SOURCING COMPLEXITIES

Motorola

250 commodity mangers 51 direct material commodities 26 indirect commodities

300,000 active parts Many manufacturing locations Complex cost quality tradeoffs

Suppliers 44000 Suppliers Complex pricing structures Different cultures and languages


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TRANSFORMING SUPPLIER NEGOTIATION USING MIN

Motorola selected Emptoriss ePASS (renamed MINT Motorola InterTool) to provide end to end Internet-enabled negotiation capability

Integration between buyers and suppliers, Work load reductioprocess e-RFQ>>e-auction>>Award analysis

Integrated work flow

Reverse e-auction, Online competitive bidding, Multistage negnegotiation

Multiple online negotiation format

Multiple line items, Hundreds of suppliers, Complex pricing foAbility to manage

Supplier submit bids to give buyer lucrative optionsExpressive bidding

How competitive their offers are and how they can win more bOnline feedback to suppliers

To help identify the lowest total cost of ownershipOptimization based bid analysis

To enable trade off analysis of different purchasing strategiesBusiness constraint modelling

Using complex formulas for analyzing TCO and optimization bSupport for evaluating suppliers

Giving bid flexibility to suppliers, smooth data importing and ereporting

User friendliness and integration with existinginternal systems


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INTERNET NEGOTIATION PROCESS USING MINT

Step 2Developsourcingstrategy

Step 3

Collaborate withsuppliers

Step 4Supplier

negotiation

Step 5Analyzescenarios

(optimizationbid analysis)

Step 6 - Awardthe business

Step 1Communicaterequirements

Using MINTs flexible data

model, the commodityteam builds a model of

TCO to which the suppliersrespond with initial bids.

MINT enables thecommodity team to se

the best negotiatioapproach - electron

reverse auction, electsealed bid request quote (eRFQ), or bo

MINTs emand comm

the comcollabora

iteratively ehow the s

Motorolas

Suppliers use onlifunctionality to offeoptions for the com

to evaluate. Usinsolution, suppliers any number of bid

include rebates

discounts, bundsubstitutio

Leveraging MINTs embeddedoptimization-based bid analysis,the commodity team evaluatesdifferent sourcing strategies to

see the effect on the TCO andsupplier award distribution. Theteam can run and compare anunlimited number of what if

scenarios against all bids in thesystem and the system

recommends line-by-line whatsupplier to buy from and provides

the reasoning analysis

The commodity teamselects the scenario thatbest meets their needs

based on the total cost ofownership and chosen

purchasing policies


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SHIFT IN THE NEGOTIATION PARADIGM AFTER MINT

Old negotiation model

Manual part-by-part Price-based only

Face-to-face, one-to-one Imperfect information Gut feel

New negotiation mode

Automated and aggregate Based on TCO

Internet-based, many-to-many Transparent Quantifiable trade-offsDriv


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CAPABILITIES PROVIDED BY MINT

MINT reinforces the importance of Motorolas relationships with its suppliers

MINT identifies more opportunities for savings than traditional negotiation methods by motivating suto compete in areas beyond just unit price

MINT offers many formats for negotiation, like MINTs online reverse-auction capability and multisnegotiations enabling Motorola to negotiate with its suppliers online for up to 100 percent of its spe

MINTs seamless data flow and support for the entire Internet negotiation process improves negotifor both Motorola and its suppliers, reducing the time they devote annually to strategies and negoti

MINTs Web-based user interface and integrated work flow enable all Motorola buyers to model copurchasing strategies (such as sophisticated optimization problems) without a detailed understand

how to use an optimization model to structure these problems


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OPTIMIZATION IN STRATEGIC SOURCING

When selecting suppliers, the goal is to identify the best mix of suppliers to meet needs at the lowest TCO subject to a set of purchasing policies.

Purchasing Policies Budget LimitsAward Splits Switching costs Contractual obligations Preferred suppliers

Flexible Requir

S

Proprietar

Total c

Supplier Ratings Supplier, category and item level

Qualification and Quality On-time delivery Item attributes

Supp Bundling, Multiple price breaks a

S Quality and quan

Multiple delivery location

Role of optimizationbased bid analysis -

Minimize TCO


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OPTIMIZATION IN STRATEGIC SOURCING - BENEFITS

Lower total costs by evaluation of multiple supplierdriven creative discounting options simultaneously

Reduction in time taken to analyze awards byeliminating conventional spread sheet analysis

Improved supplier performance by enablingcommodity team to

Increased employee buy-in by using what-ifscenario analysis


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MINTS ADOPTION AT MOTOROLA

10 1520

30

30

43

50

60

2002 2003 2004 (proj) 2005 (proj)

Percentage of eligiblespend on eSourcing

e-Auction e-RFQ

271 311

600725

598

120

Number of

events - e-RFQand e-auctions

Number of

internal users

Numbe

suppli

Quick adoption of the Mprogram

2002 2003


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SAVINGS DUE TO MINTS ADOPTION

0

250

500

2002 2003

Savings of over 600 Million $

Savings in$ Milllions

0

2000

4000

6000

8000

10000

12000

14000

2002 2003

e-

e-A

Across 50% of total spend ($


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E-SOURCING BENEFITS

Benefits toSuppliers

Benefits toBuyers

Introduction to new businessopportunities

Low cost sales channelFair competition through a levelplaying fieldEase of quotingQuick buyer decisionUnparalleled MarketIntelligence

High cost savings greatethan the results of aggressivmanual negotiation

Compressed negotiation ctimeReduced travel time andexpensesBetter market pricingknowledgeCan create time-basedcompetition


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E-SOURCING DECISION CRITERIA

Market Attractiveness

Commodity product

Uniqueproduct

Sole sourceManysuppliers

Strategic

Generic

AuctionEnvironment

RFQEnvironment

Product

Attractiveness


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E-SOURCING: INGREDIENTS FOR SUCCESS

Switchingthreat from

buyer

Buyer is willing toswitch suppliers

or changebusiness share

Suppliers believethat the Buyer

will switch

Competition inthe

marketplace

Industry standardproduct

Excess capacityin the market

Many suppliersare qualified

Buyer sizerelative to

supplycapacity

Buyers businessis important tothe supplier


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NEGOTIATION COST SAVINGS

Strategy andPlanning

E-RFQ

E-Auction

Higher proportion Cost Savings (for 75%)

Lower proportion of csavings (for example

E- sourcing forces more careful planning andanalysis earlier in the negotiations process

Early supplier engagement on pricing and coststructure

Ensures each surequi


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THANK YOU

SCM Project Report

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