1A.T. Kearney 37/comshape/yk2A.T. Kearney 37/comshape/ykChinfonA.T. KearneyStaffTimingConsulting Budget RequirementsProjects422222222 22111111101 11125125125808080125125 125125Phase I 1. Improve customer service and plan other operational improvements 2. Develop auto package and cross- sell to existing customers 3. Align credit card portfolio and develop young family credit card 4. Develop information technology plan for lifestage marketing 5. Develop consumer banking risk management process and systems 6. Develop consumer banking organization Phase II 7. Develop newly wed card and home package 8. Implement changes to credit card operations Phase III 9. Develop young singles card 10. Develop consumer lending business processes 11. Develop established family card and investors packageMarket Research Budget Requirements3030303030(US$ 000)(US$ 000)Q3 97Q4 97Q1 98Q2 98Q3 98Q4 983A.T. Kearney 37/comshape/yk4A.T. Kearney 37/comshape/ykOctagonAAA BBB CCCOptimize component cost111222777888333555666AAA BBB CCCAAA BBB CCCAAA BBB CCCAAA BBB CCCAAA BBB CCCAAA BBB CCCAAA BBB CCC4445A.T. Kearney 37/comshape/ykConsolidate number of suppliers Pool volume across units Redistribute volume among suppliers Combine volume from different commodity categoriesCompare “total” costs Model “should-costs” Renegotiate prices Unbundle pricingConduct service/product value analysis and engineering Substitute service/commitments Pursue system buying alternativesReengineer joint processes Share productivity gains Integrate logistics Support supplier operations improvementEstablish/develop key suppliers Employ strategic alliances/partnering Examine strategic make versus buy Develop integrated supply chainExpand supply base Develop new suppliers Profit from global supply/demand imbalancesStrategic SourcingService/product Specification ImprovementJoint Process ImprovementRelationship RestructuringGlobal SourcingBest Price EvaluationVolume Concentration6A.T. Kearney 37/comshape/yk1. Improve customer service and other card operations2. Develop auto package and cross-selling3. Align card portfolio, develop young family card4. Develop lifestage marketing IT plan5. Develop consumer banking credit risk management6. Develop consumer banking organizationProject coordinator Chinfon Mr. Liu A.T. Kearney Shanley LeeSteering CommitteeTBDPhase I7A.T. Kearney 37/comshape/ykPreliminaryIllustrativeExampleDRAFT1XXXX 5YYYYXXXX YYYY8A.T. Kearney 37/comshape/yk6539A.T. Kearney 37/comshape/yk410A.T. Kearney 37/comshape/yk53611A.T. Kearney 37/comshape/yk12A.T. Kearney 37/comshape/ykChapter 1) SSSSSSSS TTTTTTTTTT AAAAA BBBBB CCCCC UUUUUUUUUU DDDDD EEEEEE FFFFFFF Chapter 2) VVVVVVVV GGGGGG HHHHHH IIIIIIIIIII JJJJJJJJJJ Chapter 3) WWWWWWW KKKKK LLLLLL MMMMM NNN OOO PPPPChapter 1) SSSSSSSS TTTTTTTTTT AAAAA BBBBB CCCCC UUUUUUUUUU DDDDD EEEEEE FFFFFFF Chapter 2) VVVVVVVV GGGGGG HHHHHH IIIIIIIIIII JJJJJJJJJJ Chapter 3) WWWWWWW KKKKK LLLLLL MMMMM NNN OOO PPPP13A.T. Kearney 37/comshape/ykForeign supermarket Country / Name / Year of entryU.S.A.AA1994JapanBB1984HKCC1995Japan DD1995DutchEE1996Foreign Mega-martsJapanFF1996FrenchGG1995Local supermarketShanghaiHHShanghaiIITurnover per store (US$ million)N umber of stores14A.T. Kearney 37/comshape/ykXXXYYYBBBAAAPurchased Materials 20%-55%Manufacturing 15%-20%Logistics 10%-20%Other(e.g., Marketing G&A, Profits, Fixed Costs) 15%-25%abcde15A.T. Kearney 37/comshape/ykXXXNo. of Lines (million)Yearly growth rate (%)Source: Hongkong Telecom annual reportsYYYAbcde (units)16A.T. Kearney 37/comshape/yk17A.T. Kearney 37/comshape/ykDatabase ConstructionNotes: (1) Efficiency Ratio Interest Expanse + Operating Income (2) Average Cost of Funds = Interest Expense _ Average Interest Bearing Liabilities Source: A.T. Kearney analysisThe objective of building the sourcing database is to determine “who purchases what from who at what price” which provides the baseline for commodity sourcing teamsWhat do we purchase? Categories CommoditiesWho Purchases? Subsidiaries Business unitsWhom do we purchase from? Vendors18A.T. Kearney 37/comshape/ykA.T. Kearney & EDSHighLowHighStrategy and Operating CapabilityTechnology Capability