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Uncovering Hidden Costs Using Oracle's Agile Product Cost
Management (PCM)
Jayanth Pingili Sierra Atlantic
Senior Solution Architect
Agenda
Sierra Atlantic Introduction Agile PCM Overview VeriFone Business Scenario Sierra Atlantic Implementation
for VeriFone
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Sierra Atlantic
World class global delivery model for IT services
Deep focus in enterprise applications, business process integration and outsourced product development since inception
2000+ employees worldwide Over 200 active customers across
20 countries Superior process maturity: SEI
CMM Level 5, ISO 9001, ISO 27001 & SAS70
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Services Portfolio
Full Product Lifecycle Management
Focusing on the “New Oracle Economy”
4
Agile PLM Services Snapshot
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Agile Product Cost Management
Capabilities New Product Introduction Cost Management
Early Design Review of Cost & Supply Part & BOM cost & supply risk analysis Multiple Time/Qty based Scenarios Target Cost Analysis
Co-Sourcing Supplier vs Partner theoretical “best” price analysis BOM cost sourcing & usage aggregation
Commodity Price Management AML aggregation for volume leverage
Price Management and Change Control Manage price change process
Benefits Reduce product costs by 5-15% Ensure continuity of supply Reduces materials costs by 2-5% Speeds new product introduction sourcing cycles by 90%
Agile Product Cost Management contd…
Integrated Sourcing and Costing Integrating sourcing and product costing into product
development processes Better material selection on the front end - decisions based on
& analyze based on total product cost & impact of change Developing a stream-lined win-win supply chain of combined
strengths to uncover new areas for cost savings and risk reduction strategies
Material and Non-Material Costs Cost Knowledge Repository Analyze Item, BOM, Product level Costs Gather, Analyze & Challenge Costs across Suppliers,
Manufacturers, Manufacturing Partners Assess material costs, non-material costs and risk factors for
total cost analysis Measure Lifecycle Cost Projections vs. Target Costs
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About VeriFone
Revenue: $1B
Revenue Growth 10-12% over 2007
Headquarters: San Jose, Ca
Stock Exchange (NYSE): PAY
Acquisitions:
2006: Payment Systems Business of Trintech, Ireland; Lipman Electronic Engineering, Israel
2007: Peripheral Computer Industries, Australia
2008: Gazit Retail Solutions, Israel
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VeriFone: Products & Customers
Leading global provider of technology that enables electronic payment transactions and value-added services at the point of sale.
System solutions process a wide range of payment types, including signature and PIN-based debit cards, credit cards, contactless/radio frequency identification cards, smart cards, pre-paid gift and other stored-value cards, electronic bill payment, check authorization and conversion, signature capture and electronic benefits transfer, or EBT.
Customers are primarily global financial institutions, payment processors, petroleum companies, large retailers, government organizations and healthcare companies, as well as independent sales organizations (ISOs).
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A Sampling of VeriFone Payment Solutions
Consumer FacingConsumer Facing
Contactless ProductsContactless Products
CountertopCountertop
Unattended & OutdoorUnattended & Outdoor
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About VeriFone – A Culture of Urgency
FIRST …in quality, leadership, innovation
FAST … our culture, our processes, our responsiveness
FOCUSED … on local needs, customer growth, global solutions
12
About VeriFone
12
Honolulu
Sacramento
San Jose
Mexico City
ClearwaterMiami
Atlanta
Sao Paolo
Buenos Aires
Paris
WarsawLondon
Bangalore
Singapore
TaipeiHong Kong
Manila
Dallas BeijingSavannah Tel AvivSpain
Italy
China
TorontoNew York
Russia
India
Turkey
Australia
Dublin
Montevideo
Product Design Centers Platform Software Development Centers Application Development CentersFactories
Thailand
Kunshan
ShenzenShanghai
Over 2000 employees delivering POS solutions to over 120 countries worldwide!
VeriFone’s Early Days Cost Management Challenges 3 different procurement Silos independently quoting and
exercising price control for commodity and supplier selectionMinimal volume leverageGrowing Approved Supplier List (ASL) base
6 Supply Base Managers managing 290+ suppliers = ~70%-85% component spend ($450M - $500M)
No central ERP or data warehouse to collect RFQs and store historical or forward looking pricing
Manual process to derive leverageable component demand for outsourced assemblies
Approved Supplier List loosely controlled
Limited Supplier visibility to business share = supplier’s unwillingness to foster price collaboration
VeriFone’s Early Days Cost Management Challenges
Contract Manufacturers handling product cost management Minimal oversight from Supply Chain team No visibility to price variances or cost-cutting trends
over quarter Minimum Order Quantity, freight terms and price
cut-in loosely managed
No data collection & analysis tools Data captured & manipulated via spreadsheets RFQ process lengthy & error prone
VeriFone Cost Management Drivers
Streamline pricing process and control across all regions Manage centrally through Singapore office
Break the average cost reduction “ceiling” Average $1.3M cost reduction per qtr
Focus on quality and build supply assurance programs Increase RFQ coverage to all 1500 suppliers vs. just 290 Reduce RFQ process by 50%
Process taking 8-9 weeks Improve supplier relations
Increase leveraged spend across reduced number of common suppliers
Provide suppliers visibility to the spend horizon - sharing ASCP forecast quarterly with monthly updates
Collaborate to improve LT and allocation challenges
VeriFone Cost Management Drivers
Reduce Price Variance Manage CM price compliance and price cut-in dates Minimize contract-to-PO-price variance Ensure distribution centers and repair hubs purchase at
negotiated prices
Develop toolsets to enable automated data analysis & desired reporting Reporting very manual – Excel based Manual processes leave staff little time to perform any
analysis
PCM Implementation for Verifone - Highlights Sierra Atlantic Methodology
Requirements gathering and analysis Solution development and deployment Conference room testing Scope, design & develop custom extensions
PCM Deployment Application configuration Perform data loads Deploy custom extensions and ERP Integration Unit, end-to-end system testing
Project Management Aligned deliverables with VeriFone's timeline Optimized resource deployment – skills and duration for
Implementation, development & support Also used ERP functional and technical Center of Excellence
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Verifone PCM - Data Flows
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Enabling PCM for Verifone
Admin Change License Key Security (Roles & Privileges)
Add User Roles and Privileges Restricted access to suppliers Limit object discovery as needed for users, suppliers
Data load Suppliers Commodity codes Supplier users Mfr line cards Supplier RFQ routings Developed other custom load scripts as needed
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Configuration Highlights
PCM classes according to business processes Tightened security via Role/Privileges
Additional Role/Privileges, Criteria objects as needed Additional attributes to enable intelligent analysis of prices Attributes for automation and better management of RFQs
Commodity Codes, Buyer, Costing flag on all Items MPN lifecycle to enable filtering on RFQs Make/Buy to enable quoting of custom components
Attributes for Verifone-Supplier/CM Attributes to share additional information for accurate
responses Custom Requested/Required attributes to qualify &
award Additional attributes on Price object to track cost saving
information such as Order/Delivery base etc… Publishing of prices as quote history and/or use PE
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Customizations - Process Extensions
Populate Next Qtr Cost from PCM published prices to Item Master Page two (PLM) Identify and pick the best response using
Verifone’s business logic Extend Item cost tracking by propagating
Next Quarter Cost attributes to Current Quarter Current Quarter Cost attributes to Previous
Quarter Inbound - Populate Item demand quantity
for Next Quarter from ASCP(ERP)
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Customization – Process Extensions
Customization – Process Ext (MPN)
Customization – Process Ext (Item)
Customizations - Reports
Requirement Single-BOM Cost rollup report (optional by CM) Multi-BOM Cost rollup report given a subclass or product range Horizontal Gross Demand report (demand by month)
Solution Interactive UI prompting for user inputs Detailed (comp, custom attributes) cost rollup at each level Report data according to the BOM levels
Benefits Least/best price rollup of component cost for a given period Summary fields provide overall product cost and analytics Also enables computation of cumulative cost savings HGD report for planning by suppliers in advance for sourcing
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Customization - Reports
Customizations – Single BOM Rollup
Customization – Multi-BOM Rollup
VFI PN Desc FamilyMaterials OH / Scrap Rate
Curr Qtr BOM
Freight InBulk
Packaging Total Mat
Cost PQ BOM Var
PQ MMU cost
Var (CQ MMU) - (PQ
MMU)
Labour overhead
Asmly and testing
Mfg PQ MFG Var SGA PQ SGA Var Proft % Total profit -
CQ PQ Profit
- -
- -
- -
- -
- -
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Integration (PCMnet) – Overview
Invoke PCMnet Process Extension from Action
menu of Sourcing Project
Extract Item , MPN, Supplier , RFQ, RFQ
Response data and store in PCMnet Repository
PCMnetEngine
Validate data, perform best price analysis and
hand over Souring Project information to
Oracle APIs
APIs
Transfer Status
PCMnet Repository
PCMnet UI
Agile Product Cost Management
Create Souring Project , Send RFQs to suppliers , Receive RFQ Response
and close sourcing project
Oracle AppsPurchasing
SourcingQuotation
ASL
Data written to Oracle repository by APIs
Integration - ERP touch-points
Automates creation/maintenance of the following in Oracle from the Sourcing Project and RFQ in Agile Sourcing Rule for supplier (Global) Assignment Set
Item Assignment (item-supplier-best price combination ) Quotation
Header Lines
Price Breaks Currency & Terms
Approved Supplier List Item Setup Supplier's Key Attributes ASL and ASL document is created which will have linkage to
Oracle Quotation number and Line number
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Integration - Benefits
PCMnet eliminates the manual data entry of the above mentioned objects in Oracle.
Enables ERP users create POs with up-to-date pricing information thus eliminating any variances with quotations
All the touch points mentioned above are created to support multi-org in Oracle
The Users can then proceed with creating purchase requisitions in Oracle Supplier, Quotation, Price, Sourcing information is
automatically populated upon selection of an item number
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Key Takeaways
Agile Product Cost Management uncovers hidden cost reduction opportunities and delivers fast ROI
Sierra Atlantic offers experience and comprehensive services to ensure a successful deployment of Agile PCM Implementation Custom Extensions Integration Support and Maintenance
For Sierra Atlantic implementation services Contact [email protected]
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