Driving global adoption of procurement technology - A Cargill Approach

Presented by Derek Batchlor Global COE & Sourcing Operations Leader Strategic Sourcing

Agenda
1. Who is Cargill? 2. Sourcing transformation the catalyst for iAnalyze 3. Driving adoption 4. Early successes 5. Summary

Who is Cargill?

Who is Cargill
We are an international producer of food, agricultural, financial and industrial products & services. Founded in 1865, Cargill is privately held & employs 142,000 people in 67 countries.
We buy, process & distribute grain, oilseeds & other commodities to makers of food & animal nutrition products. We also provide crop & livestock producers with products & services. We provide food & beverage manufacturers, foodservice companies & retailers with high-quality ingredients, meat & poultry products, and health-promoting ingredients & ingredient systems.

AGRICULTURAL

FOOD

FINANCIAL

We provide our agricultural, food, financial & energy customers around the world with risk management & financial solutions.

INDUSTRIAL

We serve industrial users of energy, salt, starch & steel products. We also develop & market sustainable products made from agricultural feedstocks.

Cargill Video

From our modest roots in the US Midwest,

Cargill has grown to be a global leader in food & agriculture

2012 FORTUNE 500 1. 2. 3. 4. 5. 6. 7. 8. 12. Exxon Mobil Wal-Mart Stores Chevron ConocoPhillips General Motors General Electric Berkshire Hathaway Fannie Mae Valero Energy 452,926 446,950 245,621 237,272 150,276 147,616 143,688 137,451 125,095 119,4691 115,074

Annual ranking of the largest U.S. public companies

Revenues (U.S. $ millions)
1 . For fiscal year ended May 31, 2011
Source: FORTUNE magazine, July 23, 2012

Cargill
13. Bank of America Corp.

Sourcing transformation
the catalyst for iAnalyze

In 2010 Cargill embarked on a transformation

of its Global Procurement Function into a

Strategic Sourcing Function

The transformation focused on 3 areas of improvement: 1. Realigning and re-staffing the organization 2. Adopting a rigorous standard approach to category sourcing 3. Implementing supporting tools, processes and technology to make efforts more efficient and appropriately focused

Cargill Strategic Sourcing Organization

CPO

5 Category Leads (PM&S, CM&S, Chemicals, Packaging, Ingredients

Global COE/Ops

NA Businesses

LA Business

EMEA Businesses

APAC Businesses

NA BSSTs

LA BSSTs

EMEA BSSTs

EMEA BSSTs

Because Cargills roughly $9 billion in indirect spend is controlled by 75 independent Business Units it was imperative that Strategic Sourcing closely manage BU relationships. For this reason Strategic Sourcing was organized first by Business Unit and second by category.

10

Cargill Strategic Sourcing Organization

Define the Need
*Define

Research &
Diagnostics

Strategy
Development

Strategy Implementation
*Marketing

Ongoing Category Management

Needs *Identify Stakeholders *Establish Team *Establish Charter

*Internal

Research External Research Cost Modeling *Hypothesis Generation

Hypothesis Testing *Strategy Development Implementatio n Roadmap

Testing (RFx) Structured Negotiations Operating Model Modifications *Policy Changes

Value Management *Strategy Refinement

*On-going

*Access

to accurate spend date is critical at many points in the process

iAnalyze

11

Process, Tools and Technology

As the organization was being transformed it was clear there were a few gaps in process, tools and technology availability or use including: Value Measurement in order to drive credibility a robust value measurement tool & process was required Supplier Database in order to allow decentralized buyers to access strategic suppliers a comprehensive supplier database was leveraged eSourcing to make supplier selection and evaluation more efficient an eSourcing tool was employed Spend Analysis in order to define opportunities & prioritize projects iAnalyze was selected & implemented

12

Driving Adoption

Setting the stage for broad adoptions started well before iAnalyze was live
Cargills success in implementing was based on 3 factors
Early and ongoing efforts on communication and change management Open and complete transparency on project decisions Significant focus on training and support structures for end users

14

Communication & change management

Focusing on communication and change management ensure all key stakeholders understand the project and are appropriately managed through the change process Cargill staffed a dedicated internal Change Consultant to ensure change management received the focus and priority it deserves Additionally, a change network of team members was created to gather and address informal feedback such as rumor mill and water cooler talk Leadership was given specific talking points and activities to support change efforts

15

Open & complete transparency on decisions

Given the complexity of Cargill numerous scope decisions had to be made to ensure project timeline and budget. A core operating principle was to be completely transparent about scope decisions & their rationale One possible source of resistance is credibility the tool may loose if it is not comprehensive. Clearly communicating scope decisions can head off some resistance if decisions are clearly explained We analyzed source systems to include in the final roll out and communicated those decision broadly to the organization
Visibility of Impact Category Maturity Length on iAnalyse Ease of alternati ves
Ref Gap Business unit(s)

Estimating Assumptions

Effort

Scope recommenda tion

EMEA-1 EMEA-2 GL-1 GL-2 GL-4 LA-1 NA-3 NA-2 NA-5 AP-3

Spend Originating in SAP CROE (CROE) Spend Originating in SAP CTS (CTS - EMEA) Packaging/Ingredients Detail in NIS Addressable Spend Filter - Object Account Level Addressable Spend Filter - Subsidiary Account L l JDE One World Item Description from ASAP Packaging/Ingredients Detail in Adage Spend Originating in Maximo APAC CTS CAN All All
CSS involvement required to identify accounts Substantial CSS effort required to identify the additional addressable spend account subsidiary codes per BU

Overall Value

Size of Spend

In scope In scope In scope In scope In scope In scope In scope In scope Defer Do not close Do not close Do not close Do not close Do not close Do not close
This is hosted as the same location as CTS - EMEA Two different instances - there might be opportunity to l l th EMEA t t W did t t f thi

Mexico, Assumption there might be some minor effort to bring all Brazil, data over V l Corn Milling, CTS, N t W k DSO, Specialty M lt CAP CTS CAN All
Assumption: only item description sourced from ASAP, no other preferred elements High BU effort required Assume the GL structure is sufficient for spend to be categorised

EMEA-3 Spend Originating in HT GL-3 GL-5 LA-2 NA-1 NA-4 LA-3 P-Card Spend

Spend Originating in SAP CFS (CFS) GOSC Spend Originating in FTS Brazil CPP Detail in Agrosoft AgHorizons Canada

Spend Originating in SAP CTS (CTS - NA) GOSC Spend Originating in SOT Brazil

Do not close

16

Focus on training and support

Significant effort was put into training team members how to use the tool and extensive documentation was created as a repository for how the system works. Several training sessions were offered both in person and virtually Teams travelled to each region to provide face to face training during the roll out process A network of Super Users was created to help end users better utilize the system

17

After go live a few success factors will ensure sustained adoption

1. Make clear the teams using the data own the data and play a key role in system maintenance 2. 3. 4. Solicit input on system enhancements and communicate the disposition of inputs Provide consistent and frequent updates Provide ongoing training for new team members & refresher for previously trained team members

18

Early Successes

Success Stories
A few early successes Improved understanding of payment terms Better spend categorization Greater visibility of managed spend

20

Payment Terms The opportunity

iAnalyze gave us visibility to the vast number of payment terms across our varied businesses (in excess of 80 different terms) ranging from Due Upon Receipt to Net 180 and everything in between. iAnalyze also gave us the data needed to calculate the working capital impact of moving from less favorable to more favorable terms, if we could move all suppliers with less favorable terms to more favorable terms we could free up about $200 million of working capital (best case)!

21

Spend Categories; What we found

Prior to implementing iAnalyze manual spend approximately $9 billion in annual indirect spend buildup indicated

iAnalyze confirmed the total indirect spend is $9 billion but where we thought we were spending the $9 billion turned out to be less accurate. For example, the spend in the following categories was significantly greater than we thought (collectively they are ~ $180 million) Lease and Rental Equip Waste Disposal Paint and Scaffolding

22

Managed Spend iAnalyze improved our understanding of managed spend

With iAnalyze in place we finally had a good idea of how much spend is strategically managed. Now we can focus efforts to increase managed spend where the biggest opportunities are!
11% Un-Managed 21%

55%

43% 75%
89% 79%

Managed

45%

57% 25%

PM&S

CM&S

PACKAGING

CHEMICALS INGREDIENTS

23

Summary

Summary
Setting the stage for broad based adoption starts during the implementation process and is facilitated by: 1. 2. 3. 4. Well executed project implementation Laser focus on change management Complete transparency in decisions made Significant investment in training and support

After go Live keep the pedal to the metal: 1. 2. 3. 4. Hold teams accountable for maintaining Their data Make enhancement to the tool based on end user input Keep end users well informed on the status and plans Provide ongoing access to training

25

Questions

26

Nourishing ideas. TM Nourishing people.