Toyotas

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• Toyotas
• Contract Management
• Acquisition and Selection Process
• IACCM Conference 2004
• Samuel Barton CTPE

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Contract Management Acquisition and Selection
Process

• Building a Business Case
• Cost Justifications / Benefits
• Acquisition Process
• Evaluation Criteria
• Selection Process
• Enterprise Deployment

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• Building a Business Case

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Building A Business Case

• Central Repository
• Company/Contract Information and Image
• Visibility to contract events
• Create, collect, and distribute valuable
  knowledge on all business relationships
• Processes
• Eliminate manual business processes
• Eliminate manual reporting processes
• Streamline renewal processes
• Compliance
• Control contract deliverables
• Avoid redundant agreements
• Enforce SLAs and Remedies

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Building A Business Case

• Reports
• Report on and control corporate liability/risk
• Plan for obligated cash flows
• Report on critical legal obligations such as
  liability and indemnifications across all
  business units
• Relationship
• Assess/score supplier performance
• Improved relationship management
• Establish company-to-company relationships,
  partnerships, and alliances
• Leverage total supplier spend across
  relationships

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Industry Analysts Goldman Sachs

• Benefits of Contract Automation
• 50 acceleration in negotiation cycles
• 75-90 reduction in erroneous payments
• 10-30 reduction in operating and processing
  costs associated with managing contracts
• 10-20 percent headcount reduction

NOTE Goldman Sachs cautions that the ROI likely
will vary by industry
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Industry Analysts PWC

• Up to 2 Annual Savings through contract
  automation (E.g., 20M per 1Billion)

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Industry Analysts- Gartner Group

• Contract management must improve if business
  models are to change from monolithic to
  more-virtual models
• Contract life cycle management will be worth 20
  billion in software and services in 2007

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Cost Benefits

• Negotiation
• More favorable terms
• Volume discounts through reduction in the number
  of suppliers
• Relationship
• Report on relationships across parents, subs,
  affiliates, partners and distributors
• Productivity Gain
• Reduction in average contract lifecycle
• Reduce rouge purchases outside master

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Cost Benefits

• Cost Avoidance
• Redundant agreements
• Auto-renewal for products no longer needed
• Ensure online access to critical contracts
• Prevention of contract leakage
• Reconciliation between contractual obligations
  and vendor invoices

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Return on Investment

• Based on the Areas of Return, Toyota estimated
  savings of at least 3.75 million over a 5 Year
  Term
• ROI (Benefits(5yrs) Costs (5yrs)/Costs (5yrs)
• Estimated
• ROI (3.75M 2.45M) / 2.45M
• ROI 1.3M/2.45M 53
• Actual
• ROI (14M 2.45M) / 2.45M
• ROI 14M/2.45M 571

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• The Acquisition Process

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TOYOTA MOTOR SALES, U.S.A., INC

• Acquisition Process

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Evaluation Criteria
Operational/Business
Technical
Financial
Contractual
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Evaluation Criteria
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Evaluation Criteria

• Contractual Requirements

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Evaluation Criteria

• Corporate Viability and Market History

I. Financial Viability
II. Company History
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Selection Process

• Negotiate with Down Selected Vendors
• No less than two vendors
• Negotiate with each vendor
• Contract and SOW, etc. signed only by the vendor
• Review negotiated deals to determine the overall
  best deal
• Present to Management
• Management selects

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• Enterprise Deployment

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Enterprise Contract Management Deployment

• 1997 Windows Based Contract Manager
• 2000 Conversion to Web Based ASP
• 2000 Legacy Contract Conversion and Data
  Migration
• 2003 Deployment for Deal Manager
• 1997-2004 Active Participation in User Group and
  Steering Committees

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Enterprise Contract Management Deployment

• Enterprise Rollout to Toyota

TMS IS
TMS Procurement
Toyota Financial Services
North American Parts Organization
Toyota Motor Manufacturing North America
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• Realizing the Return on Investment

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Enterprise Success

• Facilitation of Best Practices in Supplier and
  Contract Management across IS
• Blueprint Development
• Maintenance Cost Control and reduction
• Vendor/Contract Management Training
• Better Warranties
• 1 year versus 90 days
• 90 days versus none
• Suppliers warranting own non performance
• Better pricing
• Established North America Discount pricing

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Enterprise Success

• Better Licensing and Services Terms
• Elimination of MIPS licensing
• Negotiation and enforcement of Caps
• Payments tied to Supplier performance
• Validating invoices to contract
• Not paying incorrect invoices
• Not Paying invoices for incomplete work
• Reduced unauthorized vendor contact
• Cost avoidance/savings over 14 Million dollars in
  5 years

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• Question/Answers