Management of supplier partnership

Scope of workshop

Focus and actual processes of Supplier management

List of selected manufacturers

Presenter: Mr. David Sojka

Necessary developments on the actual process

On-line pre-qualification
HSE requirements

Supplier management in SRM 5.0 system

2
 Introduction of SHS Supplier Management

Shared Services
Supplier Management Team
MOL-Group has more than 10000 active suppliers!
The Supplier Management team’s main objective are to keep the contact with them
additionally managing and evaluate their supply ability, MOL Group point of view!

The Supplier Management team

in MOL Group’s Purchasing department

Ágnes Jenei

MOL NyRt. TVK Slovnaft

Zsolt Bársony Piroska Ferkó David Sojka
Klára Pataki (US P)

We also cooperate and provide services for: Gas, LUB, ISSC

 Procurement – Supplier evaluation

Invoicing / Payment Determination of requirements

Continuous evaluation

Suppliers’ selection - prequalification

Procurement

Tendering

Goods receipt / Service acceptance

PO processing
 Supplier management processes

Maintenance of ERP Suppliers’ database: 3 different ERPs within MOL

Group – SAP, Oracle and BPCS
Supplier evaluation and classification:
► Prequalification process (new supplier) – common process and common
prequalification questionnaire
► Continuous evaluation (contracted supplier) – common criteria but different
methodology and different IT tools
► Classification – common grades (A, B, C, D) based on evaluation score
Consequential processes:
► Rationalization of supplier master database in ERPs – common process
► On site audit at supplier – common process
► Suppliers Block List – common process and list
► List of Selected Manufacturers – in progress to be common process
► Create the possibility to meet our suppliers in scope of the yearly Supplier
forums
► KPIs and Reporting – shall be implemented and developed to common process
 Potential partner or supplier’s pre-qualification

When a supplier pre-qualification?

► New supplier
► 3 years non active supplier
► Unblocking supplier
► Company data or activity update
Pre-qualification requirements?
► Pre-qualification questionnaire
► Tax office certification
► Custom and finance certification
► Signed questionnaire confirmation
►Technical documentation (catalogue)
► ISO certification, if available

Data input to database - BMR?

► Registry court data of company
► Contact data of company
► Pre-qualified activities
► Qualification grade (A, B, C, D)
► ISO certification data
► Questionnaire uploading
 Potential partner or supplier’s pre-qualification (Actual process)
management

YES
Supplier

Notify
NO supplier
NO
Incoming PQ Q>95? Q>55?
YES YES
Is further Onsite audit/
assessment First sample/ Satisfactory
needed? Piloting
Purchaser

YES NO YES
Proposal for
Send PQ NO
New supplier
to new supplier
(market research)
System- BMR

Load Load
Upload into
assessment report Assessment report
database
Into database Into database
Document

Completed PQ,
Prequalification Prequalification ASSESMENT
BLOCK LIST
questionnaire Documents, REPORT
Certification sheet
 Supply performance evaluation

When a supplier continuous evaluation

► Every closed order – after goods receipt / service acceptance

The „edge“ of satisfaction

► „C“ satisfactory supplier – corrective actions must be applied
► „C“ supplier within two consecutive quarters = „D“ unsatisfied supplier
► „D“ unsatisfied supplier – proposal for Blocking

Evaluated supplier is quarterly informed about its evaluation by scorecard

Blocked quarterly
D Less than 50 points
Keep in database just in special cases,
improvements or be blocked
Evaluation Score: 50 - 74
C
A: 90 – 100
A/B B: 75 - 89
 Evaluation scorecard of supplier’s performance evaluation

Price: Customer satisfaction:

• Price • Active cooperation
• Payment terms • Flexibility
• Supplier’s efficiency • E-procurement

Evaluated by Requestor (Services)

Evaluated by Purchaser by Purchaser (Material)

Supply ability: Quality:

• Meeting deadlines • Quality performance
• Meeting ordered quantity • Quality Management System
• Packaging • HSE system

Evaluated by Requestor (Services) Evaluated by Requestor (Services)

by Purchaser (Material) by Warehouse (Material)
by Warehouse by Supplier management
 Current cooperation of IT SM tools in MOL Group

Pre-qualification
questionnaire
ORACLE
database

BMR in MOL SAP

database
SEM ->SN
Supplier
Group

(Generally used for

Pre-qualification at
BPCS
database all affiliates)

Issofice ->TVK Supplier

Supplier BMR ->MOL Rt,

MOL LUB, ISSC,
MOL Romania
 Blocking of suppliers

Supplier can be blocked:

► Based on prequalification questionnaire, if MOL Group requirements not reached
► Based on serious findings during the external audit, or not fulfillment of requirements for
improvements identified within audit
► Based on poor performance of services, breach of ethical behavior or HSE requirements,
repeated low quality of product, etc.
► Company is in liquidation or bankruptcy process

Blocking period of suppliers can be from 1 year to forever in serious cases based on
Executive Board decision

11
 List of Selected Manufacturers (LSM)

► Unified Electric equipment, Instrumentation and Mechanical Equipment (Rotary machines and
Stationary equipment) – company standards
► LSM implementation to prequalification process

Just to be a MANUFACTURER, registered on the List of suppliers and meeting with:

• production scope – in comparison with manufacturers from the Lists,

• technical and metrological parameters of relevant products – in comparison with manufacturers product from the Lists,
• fulfillment of valid legislation requirements and valid standards for relevant products,
• fulfillment of relevant product (special) requirements - requirements which manufacturers from List are not able to fulfill,
• manufacturers quantity in List from the unification point of view,
• manufacturers quantity in List from the competition during selection process point of view.

Technical specifications To identify the manufacturers for

(company standards) for Electric, Instrumentation and
relevant equipment.
LSM Mechanical machines, equipment
and their spare parts.
List of
suppliers
To identify satisfactory suppliers,
their contact and commodity
information Potential
Worldwide companies
suppliers base
and entities
Supplier Management

Questions and Comments

13
Scope of workshop

Focus and actual processes of Supplier management

List of selected manufacturers. (Vendor list)

Presenter: Mr. David Sojka

Necessary developments on the actual process

On-line pre-qualification
HSE requirements

Presenter: Mr. Zsolt Bársony

Supplier management in SRM 5.0 system

14
 Opportunities of the actual and the on-line systems
BMR system
Advantages:
- Controlled supplier registration
- Automatic score calculation in the questionnaire
Disadvantages:
- Multilanguage problem due to
supplier pre-qualification at activity classification
- Uneasily manual registration
- Missing automatic up-to-date possibility at
Supplier’s main data (i.e.: attention, name etc.)
- Supplier can not check the result of their own
quarterly evaluation
On-Line pre-qualification
Advantages:
- Solved multilanguage problem due to
supplier pre-qualification at activity classification
- Automatic registration, and activity classification
- Supplier can up-to date the company details
due to an controlled process
-Up to dated supplier master database in ERP
systems
- HSE requuirements can be published
Disadvantages:
- Manually controll required due to registraion
15
 Proposed developments for the optimization
Required developments in BMR
► Connection between BMR and GIP
► Automatic upload possibility of
exported file from GIP
Required developments on GIP portal
► Connection between BMR and GIP
► Define pre-qualification categories at
registration part of the web page
► Made this categories changeable by lead-
buyers
► Possibility to send negative feedback to
supplier in case of declined registration
► HSE requirement in refinery and it’s plant
releated activities will be presented.
► Plant shutdown releated activities will be
implemented to the pre-qualification
questionnaire.
► List of Selected manufacturers process
16
 On-line pre-qualification process
management
Supplier

Passwrod for Export the

Import the
SUPPLIER accepted Inform the
CSV file into
questionnaire Lead-buyer
YES the BMR system
from GIP
Is the
Database Password to
increasement supplier
required?
Purchaser

Proposal for
New supplier
(market research) NO
Supplier

Request for On line

On-line pre-qualification
pre-qualification with the same
process
like to original
System

The pre-qualification The pre-qualification BMR system data

controlled via GIP portal controlled via GIP portal impoprt interface
Document

Negative note to Positive note to Informative note to the

Supplier Prequalification Lead-buyer of the
Supplier Exported CSV file
that the refistration questionnaire Pre-qualification result
With the user rights
not required

17
 Required developments in the actual system

Proposal for connection between BMR and GIP

Brief logical shame for safe connection

File integration server

MOL
- Registration
Internet
- Pre qualification possibility
- Supplier data query
Client Supplier
management BMR
Web page

BEA
Internet

Firewall 1. Firewall 2.
 On-line pre qualification test system

Supplier registration:

-In case of potential

supplier registration
-Supplier is able to get
authorization to pre-qualify
itself on the GIP portal by
e-mail and providing
basic company data
 On-line pre qualification test system

- Controll on registration
- Due to the pre-qualification
the relevant partners must
accept the relevant HSE
requirements!
-The Suppliers will able to review
It’s pre-qualification and evaluation
Results.
-There will be the possibility to
update it’s company master data.
Scope of workshop

Focus and actual processes of Supplier management

List of selected manufacturers. (Vendor list)

Presenter: Mr. David Sojka

Necessary developments on the actual process

On-line pre-qualification
HSE requirements

Presenter: Mr. Zsolt Bársony

Supplier management in SRM 5.0 system

Presenter: Ms. Ágnes Jenei / Mr. Zsolt Bársony
21
 The Three Pillars of the Procurement Transformation

1. Reorganization of Group Procurement

(create competent specialists in strategic sourcing,
contracting and transactional sourcing in all cost categories)
2. Implementation of an IT solution
(Group Spend Management System-GSMS that is capable of
synthesizing all necessary purchasing information out of the
different ERP solutions is key to really integrated purchasing
operations)
3. Professional knowledge, competency and capability
building (ensure realization of efficiency improvement
potential supported by the new organizational set-up and the
proposed IT solution)
 NON-HC PROCUREMENT organisation
Group Corporate
Services

Shared Group Local US

Services Procurement Coordinators Procurement

General
Maintenance Engineering International
Central-
General Production Materials& European
Materials & & Energy Communication Procurement
Services Materials Procurement
Services Construction Services
Mechanical Mechanical Logistics Electricity Biofuels General Russia Public procurement
Services equipment Material I. procurement of investment
HSE Petchem Natural Gas Refining projects
"White”
Technology Architectural Catalyst Oman
HSE Refining & Other utilities R+D, Upstream
Operation & work General procurement
Upstream Petchem Laboratory services
Maintenance Material II.
EPC / Refining Catalysts and Pakistan procurement, surface
Telecomm. "Blue”
Electrical Technological procurement & services (public)
EPC / Logistics Services materials procurement
Services General procurement
Retail IT / Consulting & Material III. control
Pipes, fittings, Refining Small projects (COP)
other services Corporate
pipe bundles, Process Additives Kazakhstan procurement, well-
Communication
hoses control & IT / Software, procurement & site logistics, oil-gas
Petchem materials &
instrumentation licences and & procurement related services
Electric Additives & services
maintenance control, Yemen
materials, Basic design & Chemicals Field operation
General procurement
protective licence IT / Materials & Chemicals and related service
Material IV.
materials assets water (public) procurement
Technological Marketing
Compressors work HR services treatment Communication
& other rotating materials &
Gas business Security Services Packaging &
equipment services
Laboratory
Facility Materials
Mechanical
Management
materials &
fittings Financial &
Insurance
services
System-Independent Holistic Business Model - Used for the SRM Concept

Procurement Knowledge

Analysis of Supplier
Requirement Requisition
needs and evaluation
definition approval
markets

Definition of Selecting
Strategic Creating
strategy for suppliers, Selecting Operative
Supplier Contract procurement
selecting closing products Order
Selection Management order
suppliers contracts and services Cycle
Cycle

Deliver,
Invoice
List of acknow-
RFx reception
possible ledgement
processes and payment
suppliers

„It’s in the air.” „It’s on the table.” „It’s in our pockets.”

(identified savings) (prepared savings) (realised savings)

Source: Capgemini 2005

 Projects of the GSMS Program (SAP SRM implementation)

New Organization structure and category

management

I. Phase III. Phase

MOL Subsidiaries

II. Phase
Operative & strategic Extending new
processes, service processes to materials Roll out new processes
procurement, contract to subsidiaries
and implementing new
management functions

3S non-CH project GSMS project

3S: SAP Standard Solution, Non-CH team GSMS: Group Spend Management Solution

GSMS PROGRAM
Main Development Areas: „Group Level” instead of „Corporate Level”

2006 2007 -2010

TVK ERP xyz ERP TVK ERP xyz ERP

Strategic Operative Strategic Operative

Procurem.Procurem. Procurem.Procurem. Operative Operative
Proc. Proc. Proc. Procurem.
Lo Procurem.
Lo
Proc. Proc. Proc.

MOL ERP Strategic SN ERP MOL ERP SN ERP

Procurement
StrategicOperative Processes StrategicOperative
Procurem.Procurem. Procurem.
Procurem.
Operative
Procurem.
Lo
Operative
Procurem.
Lo
Proc. Proc. Proc. Proc.
Proc.
Proc.

SRM SRM

Operative Strategic Operative

Procurem. Procurement Procurement
Proc. Processes Processes
 Main Development Areas: „Electronic Channels” instead of „Paper”

2006 2007-2010

R/3 SRM

PReq PO Req. PO Del.

Buyer Supplier Self

Service
(SuS)
email email
B2B,
XML
Supplier Supplier Supplier Supplier
Supplier’s system Supplier’s system
 Main Development Areas: „Supply Base” instead of „Suppliers”

2006 2007-2010

R/3 R/3

Supplier Supplier
Master Master

SRM SRM

Operative Suppliers
Supplier Contracted Suppliers
Master
Prequalified S.

Registered S.
Supplier identification

Register
Registration
Send Questionnaire(s)

Web Survey
Response

Create
Supplier
Database Approval
Send Bid Invitation

Send Bid
RFQ/Auction

Change Vendor Data

Self Editing
 Details of Supplier Identification

• Supplier Identification
– Ability to complete Web-based registration process for new potetnial
partners
– Customizable registration forms
– Flexible, customizable questionnaires with Web survey tool from
SAP®
• Category-dependent and category-independent questionnaires
– Supplier prescreening for accepting newly registered suppliers
– Monitoring of supply base changes:
• New suppliers created in SAP Enterprise Buyer (mySAP SRM)
(via OPI or manually)
• Supplier data change in via SAP supplier self-services or mySAP
SRM
• Blocked suppliers

 Supplier Identification closes the loop between the initial search and qualification and the
operational use of suppliers
mySAP SRM SAP Supplier Self-Service

 WEB based, hosted application for Suppliers where the supplier can connect to
procurer’s purchsasing modul (SRM, MM).

 Ensure functions for suppliers to set up purchasing documents in a close

system Together with procurer. The possibility of overview, modification and
set up purchsasing documents expanded to both operative and strategical
processes:
 Purchse Order (PO)
 SA release orders
 Advise Note (ASN)
 Confirmation
 Invoice
 Credit Note
 Invitation to Bid
 Bid
 The connection to SRM ensured by SAP Exchange Infrastructure (SAP XI)

 Supports the suppliers to manage and maintain it’s relevant Master data:
 System user management from Supplier side
 Supplier cataloge
 Supplier master data (IBAN code, SWIFT code, VAT number etc.)
Supplier Self-Services advantages

 Easy to use, customizable surface for Suppliers

 User management for suppliers Communication

due purchseing documents (i.e.: Purchase Order,
Goods Receipt)

 Allerting function, special workplace for open

tasks
SAP Supplier Self-Service Start-Page
 MOL Group Business expectation: Invoicing

Financial transaction requirement:

- Purchase Order issue can be covered by only orders or contracts where the SAP/SRM (partely from MM system) uniqe ID
implemented on the documents in case purchasement of undertaking, material, tool and services.

-Therefore those partners don’t indicate the above detailed relevant ID’s on their invoices should calculate that these
invoices will be sent back without processing.

-The received invoices must fit with legally required forms and contents additionally the proof of delivery must be attached to
the invoices. The Purchase Order’s SAP/SRM/MM identification number must be implemented on the invoice!

-The relevant Purchase Order ID shoud be implemented in the delivery note and each goods receipt documents also. The
delivered goods must be listed according the item numbers of the purchase order. Without these information the not identificable
Invoices (w/o order orcontract ID) the Procurer is going to handling as a false document and it will be sent back without
compensation. In this case the agreed peyment term begins when the missing information completely corrected.

If a Partner of us accomplish without receipt of relevant Purchase Order it is doable only it’s own RISK!
Strategial partnership by SRM…

Traditional way… … by SRM…

Thank you for your attention!