Five Steps to Supply Chain Success Dr. Abe Ninan, Manager (Procurement Analysis) Program Procurement Branch Program Development and Management Division Queensland Department of Transport and Main Roads

Presentation’s Outline 1. Program Data Management and Governance 2. Program Demand Research 3. Supply Chain Market Research 4. Cost Escalation Indexing and Forecasting 5. Top Level Economic and Market Analysis

1. Program Data Management and Governance Data Quality: Evaluation Framework, Strategy & Governance Model

Data quality dimensions

•

Data profiling

Data quality scorecard

•

Data cleaning

Metrics

•

Data monitoring

1. Program Data Management and Governance Value Add – Improve Evidence Quality, Rigour, Risk Management & Decision Better data sourcing, evaluation frameworks and governance strategies 1.

Help improve quality of evidence informing research, analysis, modelling, reporting & policy

2.

Improve the researcher’s application of rigour while delivering projects and informing policy

3.

Reduce uncertainty, better manages risk and significantly improve business/enterprise, governance and policy decisions

Data evaluation framework

Data quality strategy

1.

Data quality dimensions

1.

Data profiling

2.

Data quality scorecard

2.

Data cleaning

3.

Metrics

3.

Monitoring

Governance maturity model

2. Program Demand Research Queensland Transport and Roads Investment Program (QTRIP) Demand Analysis The QTRIP Demand Analysis breaks down the projects listed in the published Queensland Transport and Roads Investment Program (QTRIP) by region, work type and other categories. State-wide - number of projects by $ bracket 2,500

2,000

Number of projects

Provides stakeholders access to relevant information about DTMR projects and is used as a reference by Transport and Main Roads staff, including management and regions.

1,500

1,000

500

0 $0-$1m

$1-$5m

$5-$10m

$10-$20m

$20-$50m

$ Bracket 2010-11

Example of QTRIP demand analysis

2011-12

2012-13

Post 2012-13

>$50m

2. Program Demand Research Product Demand Forecast Reports Procurement Analysis provides reporting of annual product demand forecasts, to help industry with forward planning activities. The reports are prepared by bulk data collation, analysis and presentation. The forecasts cover state-wide demand for cementitious and pavement products.

Example of Cementitious Products Demand Forecast

3. Supply Chain Market Research Critical item analysis – Supply market snapshots Supply market snapshots provide details of the market conditions that are affecting the price of materials TMR needs for transport and road projects. Current markets studies are steel, cement, lime, and aggregate Investigates: 1. Supply Market 2. Major players 3. Prices 4. Other significant impacts on production/usage

Extract Australian cement and lime market snapshot

3. Supply Chain Market Research Commodity analysis The commodity update is analysis undertaken ad-hoc, as and when the market dictates, focusing on TMR impact points. Current commodity analysis include: 1. Copper 2. The impacts of the 2011 floods 3. The carbon tax

Extract Copper commodity analysis

4. Cost Escalation Indexing and Forecasting Indexing – Cost Escalation Road Input (CERI) index method 1. 2. 3. 4. 5. 6.

Based on Australian Bureau of Statistics (ABS) economic data but informed by Departmental data to produce a more robust and accurate measure of cost escalation Weightings determined using a combination of critical item spend data and a multiple regression Matched the six “top spend items to ABS indices via cross matching with Australian and New Zealand Standard Industrial Classifications (ANZSIC) codes 87 ABS indices identified as significant upstream and downstream economic lead indicators and are used to inform a Principal Component Analysis (PCA) The results of the PCA are indexed to produce the three additional index inputs for the CERI These 3 PCA components capture volatility in the economy (minimum of 85% of all movement within indices captured)

4. Cost Escalation Indexing and Forecasting Forecasting - CERI index forecast The CERI Forecast is a twelve month forecast from the date of the most recently released CERI Index. Effectively, this forecasts the CERI Index up to the current time period and provides six months of indicative future rates. CERI Actuals and 12 Month Forecast 220 210 200 190 180 170 160 150 140 130

12/11

164

169

12

-1 2

09/11

174

-1 2

06/11

158

De c

03/11

162

Se p

12/10

156

M

09/10

156

D ec

06/10

150

Se p

03/10

150

Ju n-

12/09

148

M

09/09

152

D ec

06/09

151

Se p

03/09

158

Ju n-

12/08

170

M

09/08

154

D ec

06/08

143

Se p

03/08

146

Ju n-

12/07

Ju n-

ar -1 2

-1 1

-1 1

11

ar -1 1

-1 0

-1 0

10

ar -1 0

-0 9

-0 9

09

ar -0 9

-0 8

M

-0 8

De c

08

Se p

ar -0 8

Ju n-

CERI Index - Actual

M

D ec

-0 7

120

03/12

06/12

09/12

12/12

CERI Index - Forecast

169

172

175

178

181

CERI Index - Upper 95% Confidence Level

169

186

196

204

212

CERI Index - Low er 95% Confidence Level

169

158

156

154

153

Reference base September 2003 = 100.0 Source: PAT

CERI Index - Actual

CERI Index - Forecast

CERI Actual and Forecast Annual Rate

CERI Index - Upper 95% Confidence Level

CERI Index - Lower 95% Confidence Level

Forecast

Actuals 09/11

12/11

CERI - Actuals and Forecast

5.40%

5.27%

BENCHMARK

5.01%

4.82%

4.70%

4.63%

CERI - Upper 95% Confidence Level

5.40%

5.27%

WORST CASE

5.96%

7.03%

8.34%

9.83%

CERI - Lower 95% Confidence Level

5.40%

5.27%

BEST CASE

4.11%

2.78%

1.37%

-0.07%

Example CERI forecast outputs

03/12

06/12

09/12

12/12

5. Top Level Economic and Market Analysis Top level market analysis - Road and bridge construction Pricing update 1. Data from the Australian Bureau of Statistics (ABS) is analysed to form a snapshot of indexes relating to the products and services that are primary to Australian road and bridge construction specifically, and engineering construction generally. 2. Knowledge of pricing trends for products and services critical to program delivery in the public and private sector is provided with a view to better procurement of critical items and program planning.

Extract Road and bridge construction pricing update

5. Top Level Economic and Market Analysis Top level market analysis - Road and bridge construction Activity update 1. Data from the Australian Bureau of Statistics (ABS) and Deloitte Access Economics is analysed to form a snapshot of the construction sub-types that are included in, or in competition with the road and bridge construction and engineering construction sectors. 2. Knowledge of competitive activity in the public and private sector across construction sector sub-types is provided with a view to better procurement and programming.

Extract Road and bridge construction activity update

For Further information

Dr. Abe Ninan Member, TMR Procurement Reform Implementation Team, Finance & Manager, Procurement Analysis, Program Procurement Branch / Program and Project Delivery, Program Development and Management Division E-mail address: [email protected]