May 20, 2014
We hear a lot these days about the need for Procurement organizations to do a better job of creating and validating stakeholder value; as the “low-hanging fruit” and “big win” projects become few and far between, this can be easier said than done.
As a new addition to the Shelby team, and a first-time contributor to this blog, I’d like to share an example from my recent past that illustrates innovation and value creation from a stakeholder-savvy Procurement organization.
Before joining Shelby, I worked as a Global Supply Chain Manager for one of the world’s largest advertising and marketing conglomerates. In this role, I had the opportunity to be part of a team that helped to create a new source of supply that not only saved money and reduced cycle times, but also improved competitive differentiation and generated revenue. To be clear, I am by no means claiming credit for these accomplishments, but as the Procurement expert on a talented team of specialists, I was able to witness first-hand what can happen when cross-functional teams are motivated and empowered to instigate change.
Problem: Several business units were purchasing the same service from 5 preferred vendors globally, with disparate levels of quality, service, and negotiated pricing. An internal group also provided the same service at competitive pricing with consistently high ratings for quality, turnaround, and satisfaction.
Challenge: How could we normalize standards and processes, negotiate savings through consolidation, and improve quality in an environment where existing supplier relationships (2 in North America (NA) and 3 in APAC/EMEA) were well established. No formal MSA existed with the internal supplier and we lacked a supplier for meeting diversity requirements in APAC/EMEA.
Objective: Through extensive analysis and deliberation, we set out to meet diversity requirements globally, and leverage the strength and track record of the internal supplier to change the competitive landscape, while adding a new source of revenue.
Method: To help advance this objective, we conducted sourcing events for NA and APAC/EMEA, and negotiated a rate card with the internal supplier using the existing preferred supplier rate cards as a minimum to meet threshold. Next, we facilitated internal discussions with stakeholders and the internal supplier to identify concerns and sources of resistance to insourcing.
Solution: After extensive engagement with business stakeholders in each step of the sourcing process, we consolidated the preferred supplier base to include the in-house supplier in NA and APAC/EMEA along with a preferred MWBE supplier in NA and a new supplier that met diversity guidelines for the APAC/EMEA region.
Communications: A multi-pronged, internal communications campaign was launched to promote the in-house supplier and its offerings, highlighting achievement of preferred supplier status and alignment with corporate goals for decreased spend and increased revenues. We used spend analytics to identify business units utilizing these services and targeted messages for CEOs/CFOs to drive awareness of savings, and separate communications to business unit stakeholders to drive awareness of internal quality advantages.
Meetings: Individual business unit meetings were conducted to talk through opportunities, concerns and possible “test” projects with the potential to take on additional, larger projects if successful. Each business unit had the opportunity to buy-in without the initiative being forced upon them. Additionally, the business units were encouraged to introduce the in-house supplier to clients for other non-agency projects to generate additional revenues.
Results: Launched (officially) in October 2013, this initiative is expected to deliver an estimated 35% in savings, but the big win has come in the form of “intrapreneurship.” In less than 12 months, the internal division grew 37 percent, generating more than $1M in revenues. Through up-front stakeholder engagement and a coordinated communications campaign to facilitate change management, Procurement played an important role in delivering and documenting value to business units. This example sets the stage for the Procurement organization to be viewed as a strategic partner on future initiatives.
For information about how Shelby can help your Procurement organization create and validate stakeholder value, contact us at firstname.lastname@example.org.
Manager, Procurement Optimization
The Shelby Group