Organization Transformation

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Organization Transformation

• Truly Global Procurement

Craig Laudadio Procurement Solutions
Manager Xerox Corporation
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Xerox Global PurchasingOrganization
Transformation, Agenda
Xerox Overview
Business Environment and Challenges
Developing a Solution, Planning and Implementation
Transformation and Globalization of Procurement Transformation and Globalization of Procurement
The Results Benefits The Results Benefits
Wrap-Up Wrap-Up
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Xerox Overview

• Xerox Corporation is the world's leading document
  management technology and services enterprise.
• It provides the document industry's broadest
  portfolio of offerings.
• Digital systems include color and black-and-white
  printing and publishing systems, digital presses
  and "book factories," multifunction devices,
  laser and solid ink network printers, copiers and
  fax machines.
• Xerox's services expertise is unmatched and
  includes helping businesses develop online
  document archives, analyzing how employees can
  most efficiently share documents and knowledge in
  the office, operating in-house print shops or
  mailrooms, and building Web-based processes for
  personalizing direct mail, invoices, brochures
  and more.
• Xerox also offers associated software, support
  and supplies such as toner, paper and ink.

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Xerox Mission

• Our strategic intent is to help people find
  better ways to do great work -- by constantly
  leading in document technologies, products and
  services that improve our customers' work
  processes and business results.

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Xerox Corporation at a Glance

• CEO Ursula M. Burns
• 2008 revenue 17.6 billion
• 2008 income 230 million
• Employees 57,100 worldwide.
• Operates in 160 countries
• Founded In 1906 as The Haloid Company named
  Haloid Xerox in 1958 named Xerox Corporation in
  1961
• Fortune 500 ranking No. 147
• NYSE XRX
• Headquarters 45 Glover Avenue, Norwalk, CT 06856
• www.xerox.com

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Xerox Global Purchasing Organization
Xerox Corporation is a 17.6 Billion Technology
and Service Enterprise
Global Purchasing 7.8B
Global Purchasing Ken Syme 7B
Global Purchasing Ken Syme 7B
Global Purchasing Ken Syme 7B
Indirect Goods and Services 4.3B
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Organizational Design for Sourcing inEmerging
Regions Business Environment

• Xerox Global Purchasing established ICM
  (Integrated Commodity Management) office in Hong
  Kong in 1995.
• Obtain quotes
• Point negotiations
• Quality Surveys and audits
• Expedite and problem solve

Supplier Base Management and Commodity Strategy,
Remained in the USA. Most of our sourcing was
in USA and European Union.
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Business Environment Challenges Early 2000s

• Disruptive Technology in Products.
• Fiercely Competitive industry.
• Negatively Sloping Product Cost Curves.
• Formidable Global Competitors.
• Mostly Asian Manufacturing.
• Strong Financially.
• Moving Assembly Plants to low cost countries.

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Xerox Global Purchasing Business Environment,
Sourcing Trends
Sourced in Asia (product related)
Sourcing Southeast Asia
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Global Purchasing Business EnvironmentDollars
Spent by Supplier Location
Indirect Goods and Services 4.3B Supplier Spend
Production 3.5B Supplier Spend
Europe 4 North America 10
Other 3
Canada/Brazil 7
14 Other
59 U.S.
31 Europe
86 Asia
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Xerox Global Purchasing Organization
Pre-transformation
Global Purchasing 7.8B
Global Purchasing Ken Syme 7B
Global Purchasing Ken Syme 7B
Global Purchasing Ken Syme 7B
Business Process Outsourcing
Xerox Designed Products
Fuji Xerox Procurement Operations
Corporate Procurement Services
OEM Designed Products
Product Cost Engineering
Supplier Quality Assurance
CPS / BPO 4.3B
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Organizational Design for Sourcing inEmerging
Regions Solution development

• Global Purchasing Senior Staff team
• Checked Job Titles and Current roles at the door.
• Used Good to Great approach.
• Posed the question, If we started this all over
  again and didnt have the limitations of the
  existing infrastructure around us, how would we
  do this?

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Organizational Design for Sourcing inEmerging
Regions Solution development

• We studied the activities of Global Purchasing
  personnel.
• Buyers/Supplier/Commodity Managers
• Supplier Quality Assurance Engineers
• Advanced Manufacturing Engineers
• Product Cost Engineers
• We studied their roles and identified activities
  that should be located with Product Delivery
  Teams and Business Teams and activities that
  should be located with suppliers.
• In late 2006 we transferred ALL activities to
  Asia that could / should be managed from Asia.

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Total Acquisition Cost
Unit Cost Duty Insurance Freight Hurdle
rate Total Acquisition Cost
Hurdle rates include Communication travel
cost. Premium Freight. Increased Inventory
Holding. Scrap, rework, obsolescence. Compliance
Monitoring. IP protection. Business Resumption
Plans.
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Other Considerations and related decisions
Before we restructured

• We purchased and studied research by Aberdeen,
  Everest, Forrester and Gartner on procurement
  outsourcing.
• We commissioned a Study at Portland State
  University.
• Considered whether to further Invest in Asia or
  whether to outsource procurement and buy the
  service.
• Had to decide on which side of the procurement
  outsourcing movement Xerox should be positioned.
• We concluded that Xerox had the necessary scale,
  scope and some unique processes and expertise
  (particularly in product related purchasing) that
  made internal investment prudent.

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Xerox Global Purchasing Asian Procurement
OpsProject Timeline
Complete Hiring in Asia 1Q 07
GP Management Strategy May 06
Corporate officer approval Aug 06
Begin Hiring in Asia and restructure Oct 06
Canvas Stake- holders July 06
GP Management Business Plan Formulated July 06
Communicate to GP employees Worldwide Sept 06
Complete Restructuring Dec 06
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Global Purchasing Realignment of Product
Purchasing Resources (headcount) to Asia
After
Before
Europe 8
Brazil Canada 6
Europe12
Asia 47
Rochester 85
Asia 108
Rochester 122
Portland 79
Portland 65
266 heads in 2006

266 heads in 2008
Does not include Indirect Purchasing headcount
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Xerox Global Purchasing Organization
Pre-transformation
Global Purchasing 7.8B
Global Purchasing Ken Syme 7B
Global Purchasing Ken Syme 7B
Global Purchasing Ken Syme 7B
Business Process Outsourcing
Xerox Designed Products
Fuji Xerox Procurement Operations
Corporate Procurement Services
OEM Designed Products
Product Cost Engineering
Supplier Quality Assurance
CPS / BPO 4.3B
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Xerox Global Purchasing Organization
Post-transformation
Global Purchasing 7.8B
Global Purchasing Ken Syme 7B
Global Purchasing Ken Syme 7B
Global Purchasing Ken Syme 7B
Business Process Outsourcing
Asian Procurement Operations
Fuji Xerox Procurement Operations
Procurement Outsourcing Services
Corporate Procurement Services
Global Purchasing for Xerox Global Services
Global Purchasing for Production Systems Group
Global Purchasing for Xerox Office Group
CPS / XGS / BPO 4.3B
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Xerox Global Purchasing Team Co-Located with
Suppliers
Acronym Footnote PCE Product Cost Engineering
SQA Supplier Quality Engineering AME
Advanced Manufacturing Engineering
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Xerox Global Purchasing Asian Procurement
Design Centers and APO Office Locations
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Xerox Global Purchasing Team Co-Located with
Business Groups
Global Purchasing, Xerox Office Group Organization
Global Purchasing, Production Systems Group
Organization
Global Purchasing for PSG
Global Purchasing for XOG
Global Purchasing for Production Systems Group
Global Purchasing for Xerox Office Group
Administrative Assistant
Administrative Assistant
Administrative Assistant
Administrative Assistant
Judy Williams
Sue Leavenworth
Diane O

Connor
Marty Annas
Solid Ink Materials
FX Contracts
Solid Ink NPI
FX Software
(Wilsonville)
Contract Manufacturing Spares
(Wilsonville)
Xerox Designed Products
(Wilsonville)
Xerox Designed Products
(Wilsonville)
Eric Walters
Kevin Hoffman
Judy Taylor
Mike Ryan
Electronics Procurement
Samsung
Electronics Procurement
Strategic OEM
(Wilsonville)
(Webster)
(Wilsonville)
Procurement Engineering
Supplies
Procurement Engineering
Consumables
John Mostyn
Chris Campbell
Ernest Wilson
Tom Viola
Welwyn Garden City
APO Engagement Processes
Solid Ink Purchasing
Welwyn Garden City
(Europe)
(Wilsonville)
(Wilsonville)
(Europe)
Dan Sullivan
Charley Burnett
Acquired Products
Acquired Products
Bob Zeman
Cost, Operations, OEM Suppliers
Cost, Operations, PCE
Other OEM Suppliers
(Wilsonville)
(Wilsonville)
Early Supplier Engagement for New Technologies
Procurement for prototype development hardware
Coordinate material procurement activities
Design change management with suppliers
Transition to RPP management.
Develop supplier tooling cost budget and controls
Tooling spend approval and PO issue
Best of Breed benchmarking
Participate in Global Commodity Strategy
development
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Xerox Global Purchasing Team Co-Located with
Suppliers

• Xerox Asian Procurement Operations own Xerox
  Global

Sourcing Strategy.
Develop Global Commodity Strategy Manage the
Supplier Base Contracting for Asian Suppliers PCE
Estimating for Asian Sourcing Identify Benchmarks
and Drive Productivity All SQA and AME Support
for Asia All Sourcing Activities in
Asia Expediting and Problem solving
Key Message Supplier base management decisions
and
Contract approvals will be in Asia.
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Xerox Global Purchasing Asian Procurement
Ops Headcount Location Profile
Hong Kong (25)
Singapore (32)
China (12)
India (10)
Malaysia (15)
Korea (9)

• HEADCOUNT LOCATION BASED ON
• SPEND PROFILE
• SUPPLIER PROXIMITY
• INDIA (ASIAN EXPANSION)
• MALAYSIA NEW OFFICE
• SHANGHAI CLOSED END DECEMBER 2006
• KOREA POSITIONED TO SUPPORT SAMSUNG/FXK/SR

Japan (5)
TOTAL HEADCOUNT 108
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Xerox Global Purchasing Asian Procurement
Ops Employee Functional Profile
Headcount Functional Profile 08 Plan
INF (13)
CM (34)
PCE (17)
SQAE (23)
AME (21)

• OFFICE EXPANSION AVAILABLE IN BOTH CHINA AND
  MALAYSIA OFFICES

• NEW EMPLOYEE DEMOGRAPHICS
• DEGREE LEVEL, AVERAGE AGE 32 YEARS, AVERAGE
  EXPERIENCE 9 YEARS, AVERAGE SALARY 30K
• PREVIOUS EXPERIENCE
• CELESTICA, SANMINA SCI, DELPHI, FLEXTRONICS,
  TREND, PANASONIC,
• HP, RICOH, EPSON, FOXCONN, DELTA, JOHNSON MOTORS

TOTAL HEADCOUNT 108
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Description of Job Functions

• Commercial
• Buyers/Commodity Managers
• Industry Research Negotiation Business Reviews
• Commodity Strategy Contracting Productivity
  Management
• Sourcing Supplier Management EOL Support
• Sourcing Includes
• Prototype/Preproduction parts Lead CSI
  Activities Procure Production Tooling
• Support TTM Deliverables Enable Spares
  Procurement Negotiate Design Change Impacts
• Procurement Engineering
• SQA (Supplier Quality Assurance) PCE (Product
  Cost Estimating) AME (Advanced Mfg. Eng.)
• MQA Supplier Surveys Cost Estimating Part
  Introduction/Qualification
• Process Certification Target Setting Sourcing
  Support
• Process Audits Competitive Analysis Drawing
  Translation/Interpretation
• Performance Management Best of Breed Specification
  Study
• Warranty Opportunity Identification Design for
  Manufacture

Acronym Footnote EOL End of Life CSI
Continuous Supplier Involvement TTM Time to
Market MQA Materials Quality Assurance
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Xerox Procurement - Transformation Results
What we planned to Achieve
What we Actually Achieved

• Clock Speed Time to Market
• Better Supplier Relationships
• Access to Emerging Technology
• Increased Supplier productivity
• Reduced Procurement Operation Costs
• Transfer of procurement functions to suppliers
  time zone

• Clock Speed Time to Market
• Better Supplier Relationships
• Access to Emerging Technology
• Increased Supplier productivity (2-3M in yr 1 )
• Reduced Procurement Operation Costs (gt3M/Yr)
• Transfer of procurement and other functions to
  suppliers time zone
• Increased Supply Chain Flexibility /
  Responsiveness
• Tax Optimization Opportunity
• More robust supervision of suppliers
• Business Growth Opportunity

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Xerox Global Purchasing Asian Procurement Ops

• APO Legal Entities
• XC Trading Singapore PTE. LTD.
• (Incorporated in Singapore, Aug 2007)
• XC Trading (Shenzhen) Co., Ltd.
• (Incorporated in China, Plan 2Q08)
• XC Trading Hong Kong Limited
• (Incorporated in Hong Kong, Oct 2007)
• XC Trading Japan GK
• (Incorporated in Japan, Nov 2007)
• XC Trading Korea (yuhan hoesa)
• (Incorporated in Korea, Feb 2008)
• XC Trading Malaysia Sdn Bhd
• (Incorporated in Malaysia, Dec 2007)

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Xerox Procurement - Transformation Results
What we planned to Achieve
What we Actually Achieved

• Clock Speed Time to Market
• Better Supplier Relationships
• Access to Emerging Technology
• Increased Supplier productivity
• Reduced Procurement Operation Costs
• Transfer of procurement functions to suppliers
  time zone

• Clock Speed Time to Market
• Better Supplier Relationships
• Access to Emerging Technology
• Increased Supplier productivity (2-3M in yr 1 )
• Reduced Procurement Operation Costs (gt3M/Yr)
• Transfer of procurement and other functions to
  suppliers time zone
• Increased Supply Chain Flexibility /
  Responsiveness
• Tax Optimization Opportunity
• More robust supervision of suppliers
• Business Growth Opportunity

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Procurement Outsourcing

• Aberdeen Group in their 2006 Procurement
  Outsourcing Benchmarking Report noted
• Large enterprises led the way 38 outsource now
  and 13 plan to within two years leaving those
  who dont in the minority at 49.
• Medium 24 now and 21 plan.
• Small 20 now and 16 plan.
• Gartner drew a Hype Cycle and noted that
  steady growth will make BPO non-controversial
  eventually

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Procurement Outsourcing What do companies want
out of it?

• Aberdeen Noted drivers of outsourcing as
• Access to Improved pricing
• Lower transactional processing costs and fewer
  burdens
• Access to supplier intelligence.
• Fewer Full time Procurement employees.
• Gartner Noted Cost as the primary motive (through
  transaction and vendor leverage).
• The Everest Institute noted that the impact of
  procurement outsourcing can be up to five times
  the benefit of other BPOsa game changer
• Aberdeen also noted that while Enterprises are
  more apt to outsource management of indirect
  spend categories, the outsourcing of direct
  materials was also coming into play.

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Procurement Outsourcing at Xerox unanticipated
benefit of our Transformation

• Because of scale, scope and unique capability
  Xerox had elected not to outsource.
• Soon after establishing our infrastructure we
  received an unsolicited request from one of our
  own suppliers to help them source.
• We are now partnering with HCL Technologies Ltd
  to provide procurement outsourcing.
• HCL Technologies Ltd already have an established
  BPO service for transactional procurement, Xerox
  will provide sourcing expertise for HCL.

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Key to Successful Transformation

• Planning
• Understand Scale, Scope and Capability
• Consider your relative strength and BPO
  opportunity
• Stake Holder Buy-in
• Calculated documented Business Case
• Detailed Transition Planning
• Flawless execution, backed by teamwork and
  genuine commitment.
• Governance, Ethics and Training.
• Corporate Culture transplant.

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Governance
Xerox Global Purchasing Asian Procurement Ops

• Business Ethics
• 100 Trained using Xerox CD
• 100 staff signed Xerox Code of Conduct
• Gift and Gratuity letter written and sent to
  suppliers (taken from Global Purchasing
• Business Practices)
• Xerox Security
• Contract Management Distributed
• Confidential Disclosure Agreement/Non-Disclosure
  Agreement Training done
• PC Security part of audit process
• Personal / Security and Safety
• Safety training done
• Safety audits performed at each office
• BRP (Business Resumption Plan) written and filed
  for each office.
• Financial Budgetary Controls
• Travel
• Hiring
• Auditing

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Key to Successful Transformation

• Planning
• Understand Scale, Scope and Capability
• Consider your relative strength and BPO
  opportunity
• Stake Holder Buy In
• Calculated documented Business case
• Detailed Transition Planning
• Flawless Execution backed by teamwork and genuine
  commitment.
• Governance, Ethics and Training.
• Corporate Culture transplant.

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Xerox Global Purchasing Asian Procurement Ops
International Talent Acquisition

• Hire International Students and Cycle through
  existing locations.
• Reduce Skills learning curve
• Establish relationships between APO Staff and
  Value Chain
• Partners
• Transplant Global Purchasing culture, tools and
  processes
• Reduce our dependence on expatriates
• Partnerships with local Universities
• Portland State, Rochester, Buffalo and Syracuse.
• Purchasing modules added to MBA curriculum.
• University of Rochester Example
• 216 Full time MBAs (720 apply 30 Acceptance)
• 39 International Students
• Average Student Age 27, work experience 4 ½ years

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If your are thinking about something similar..

• Assess work that needs to be done and where it
  could best be accomplished.
• Pay attention to your scale and expertise
• Dont just be in one offshore location, provide
  yourself options and associated protection
  against future risk and economic changes.
• Dont ignore the trends towards procurement
  outsourcing.
• Decide, should you perform yourself or manage
  through a provider?
• Compare processes, skills, expertise and leverage.

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Xerox Global Purchasing Asian Procurement
Operations (APO)
APO Highlights
APO Activities
We built a highly motivated, enthusiastic,
skillful and empowered team in Asia. They own
our supplier strategy, and make key decisions
locally. Same time Zone, no delays. Happy
Employees. Better managed suppliers. Better
results. Lower costs. Improved velocity. Better
Supplier relationships
Identify best suppliers. Manage supplier
strategy. Identify Benchmarks. Drive
productivity. Drive improvements in quality.
Improve supply flexibility. Negotiation
support. Technical support. Contracting. Qtrly
Productivity Business Reviews. Procurement
Outsourcing alliance with HCL
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Xerox Global Purchasing Asian Procurement Ops

• Transition Planning Making it Work
• 10 Expatriates or Permanent Transfers
• The right person to lead it.
• The right skills balance in Expatriate team
• Hire the best people
• Buy in / strategy ownership at home.
• Upfront and clear strategy communications.
• Sustaining Improving
• Communicate, Communicate, Communicate
• Sustain strong relationships between home teams
  and remote locations.
• Acquire talent and reduce dependency on
  expatriates.

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Xerox Global Purchasing Asian Procurement Ops
Summary of Management Strategy

• Business environment changed and we responded to
  it.
• Purchasing co-located with suppliers delivers
  benefits (same time zone, increased supplier
  productivity, lower purchasing operations cost).
• Senior / empowered staff located in the region.
• Rapid learning and continuity and synergy during
  restructure achieved through 7 expatriates
  support and 2 permanent transfers to Asia.
• On-going synergy across locations supported by
  student hiring strategy.
• Continuing to evaluate additional functions that
  could be more effectively managed when co-located
  with suppliers.
• Positioned Xerox as a provider in the Procurement
  outsourcing business in partnership with HCL
  Technologies

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Thank you

• Craig Laudadio
• Procurement Solutions Manager
• Xerox Corporation
• 585 265 5131
• craig.laudadio_at_xerox.com