Government of Alberta Energy Supply Chain Development Seminar Delivering Efficiencies in Supply Chain Management - An International Perspective Colin Oddoye November 29, 2012
kpmg.ca
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Agenda
1. Market Overview
1. Alberta Oil & Gas Industry Participant Company Profile
2. Recent Market Developments
3. Perspectives from south of the border
2. Implications for Alberta manufacturers that support the industry
3. Similarities and Differences between Canadian and International Manufacturers (KPMG Manufacturing survey results)
4. Managing Business to Business relationships in competitive times
1. Managing the supplier relationship
2. Fiege Logistics Example
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Alberta Oil and Gas Industry Participant Company Profile – 1H 2012
0 1000 2000 3000 4000 5000 6000 7000
Total
Indeterminate Employees
Total with Employees
0
500
1000
1500
2000
2500
1 to 4 Employees
5 to 9 Employees
10 to 19 Employees
Conventional O&G Extraction
Non-conventional O&G Extraction
Contract Drilling
O&G Services
0
10
20
30
40
50
60
100 to 199 Employees
200 to 499 Employees
500 plus Employees
Conventional O&G Extraction
Non-conventional O&G Extraction
Contract Drilling
O&G Services
0
50
100
150
200
250
20 to 49 Employees 50 to 99 Employees
Conventional O&G Extraction
Non-conventional O&G Extraction
Contract Drilling
O&G Services
Source: Alberta Enterprise and Advanced Education
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Some Thoughts on Family Business
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
4
Recent Market Developments
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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The perspective from south of the border
Source Short-Term Energy and Winter Fuels Outlook, October 10, 2012 US Energy Information Administration
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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A New Reality?
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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SUPPLY CHAIN OPERATIONS MODEL
Plan and Manage
Source
Return
Coordinate and Collaborate
Make Deliver
Return
Sup
plie
rs
Cus
tom
ers
Supply Chain Relationships – An Overview
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Core Supply Chain Management Activity
Supply chain system
selection
Supplier risk management
Procurement transformation
Transportation management / optimization
Inventory management / optimization
Supply chain strategy
SKU rationalization
Retail operations
improvement
Lean operations
Sales & operations planning
Sustainable (green) supply
chain
Logistics management / optimization
Strategic sourcing
Cost optimization
Distribution centre design &
development
Retail loss prevention
Spend analysis
Customer service
transformation
SUPPLY CHAIN OPERATIONS MODEL
Plan and Manage
Source
Return
Coordinate and Collaborate
Make Deliver
Return Sup
plie
rs
Cus
tom
ers
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Priorities Over The Next 12 To 24 Months
• The top three priorities over the next one to two years for Canadian respondents are improved productivity/efficiency, top-line growth, and bottom-line growth
• Improved risk controls for global respondents is double in focus in comparison to Canadian respondents
Q2. What are your organization’s priorities over the next 12 to 24 months? Select up to three.
3%
9%
10%
11%
17%
19%
19%
23%
25%
45%
47%
50%
Other
Reduced operation complexity
Improved risk controls
Greater speed to market
Reduced input costs
Extension of existing product lines
Increased cash or liquidity
Development of new product lines
Increased competitiveness compared with industry peers
Bottom line growth
Top line growth
Improved productivity/efficiency
Canada (n = 150)
2%
8%
20%
17%
12%
9%
25%
11%
29%
47%
45%
36%
Global (n = 241)
The other priorities include Global expansion, acceptance of renewable energy initiatives, inventory management and building a plant.
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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1%
0%
12%
23%
22%
22%
18%
31%
46%
40%
41%
Global (n = 241)
Factors Considered In Selecting Another organization For Innovation Collaboration
• Nearly half of the Canadian respondents feel that the availability of skills is the most critical factor in selecting another organization to collaborate in innovation
• Processes and technology innovation and financial stability are also important factors
Q10. Which factors are most critical for selecting another organization with which to collaborate in innovation? Select up to three.
6%
0%
19%
16%
18%
25%
28%
29%
31%
37%
46%
Not currently collaborating
Other
Parity
Transparency of communication and information exchange
Shared ethical values/common approach to treatment of employees and other stakeholders
Contracts/relationships within a particular market/territory
Desired geographic location
Appropriate mix of products and/or services
Financial stability
Processes and technology to innovate
Availability of skills
Canada (n = 150)
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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0%
12%
47%
54%
29%
43%
48%
49%
21%
46%
54%
Global (n = 241)
Strategies To Become More Efficient In The Next 12 To 24 Months
• 62 percent of the Canadian respondents plan to improve manufacturing technologies/processes to become more efficient in the next 12 to 24 months
• Increasing supply chain collaboration, shorten the overall product development lifecycle and improve logistics distribution are important areas to gain efficiencies
Q18. What strategies do you plan to deploy to become more efficient in the next 12 to 24 months related to your supply chain and operations? Select all that apply.
23%
9%
27%
33%
43%
47%
49%
50%
51%
51%
62%
Don't know
Shifting of functions or operations to low-tax jurisdictions
Consolidate production/manufacturing sites
Improve visibility and transparency across the supply chain through greater IT investment
Standarized key inputs/components
Upgrade IT systems
Improve logistics planning to reduce time to market
Improve logisitics distribution
Shorten overall product development lifecycle
Increase supply chain collaboration
Improve manufacturing technologies/processes
Canada (n = 150)
Managing Business to Business Relationships
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Year-End Start-up
Monthly Review
Quarterly Review
Managing the supplier relationship
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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• Accrue costs, receive invoices and authorise payments for month
• Monitor budget Vs year to date (YTD) costs
• Review project progress and milestones
• Review supplier service performance
• Maintain high-level update on market developments
• Quarterly budget reviews with management [Restate targets, budgets, review YTD costs Vs budget]
• Detailed review of market developments
• Agree SRM strategy and plan (Category specific)
• Align annual objectives with business requirements
• Sign-off on budget • Define on-going projects, project
start-ups, project wind-downs that impact budget
• Schedule internal customer review sessions
• Schedule supplier performance review meetings
• Review market developments [Mergers, acquisitions, joint ventures, new products, new developments, new market entries, etc.] Ongoing
• Accrue costs, receive invoices and authorise payments for month
• Year end budget review [Review YTD costs Vs budget]
• Review full year ( Objectives, Market developments, Supplier performance)
• Commence definition of targets and budgets for next period
• Share results and future plans with BUs/suppliers
• Identify new suppliers and carry out acceptance/RFx process
• Renew existing supplier agreements
• Close off existing relationships where relevant
Year-End Start-up
Monthly Review
Quarterly Review
A Year In the life of a supplier relationship manager
The Fiege Logistik Example
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Fiege Logistik Example
FIEGE key figures Founded in: 1873 Employees: 11,000 in 18 countries Trainees: 400 Branches: 200 Warehouse and logistics areas: 3 million m² Turnover in 2011: EUR 1.5 billion (updated June 2012)
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Fiege Logistik Example
"Fiege is family-run - and remains family-run." This statement voiced by the owners is manifested by enlarging the management by the fifth generation: Jens Fiege, son of Heinz Fiege, has been managing the international business segment - initially as CEO - since 2004 and became a member of the Executive Board of Fiege Logistik Holding Stiftung & Co. KG in 2009. Felix Fiege, son of Dr. Hugo Fiege, joined the management of the Fiege Group in 2008 as the managing director of FIEGE Engineering and became a member of the Executive Board of Fiege Logistik Holding Stiftung & Co. KG in 2012
Thank you
Presentation by Colin Oddoye