The procurement organization used to be a back-office function, considered of little strategic value to the company. But with the Chief Procurement Officer now taking a seat at a company's helm and supply management increasingly becoming a bottom line issue, it's finally getting the respect it deserves.
And it's the work of pioneers like R. Gene Richter that helped make that so. Mr. Richter led the supply management organizations at such industry leading organizations as Black and Decker, Hewlett-Packard, and IBM. Mr. Richter saw the strategic value in procurement and helped raise its profile in the organization.
Each year, the R. Gene Richter and Nancy D. Richter Foundation in conjunction with the Institute of Supply Management (ISM) honors those carrying on this legacy. The awards include a scholarship for students attending one of many programs at universities around the country training tomorrow's supply management leaders and honors those companies that show leadership in technology, people, and process.
Here are this year's business winners and the best practices that landed them the award.
Technology: The procurement and logistics team at Alltel Wireless, a $7.9B telecommunications company, designed a workflow management tool without the assistance of IT. The tool provides visibility from budgets to sourcing to forecasting. It tracks projects, savings, and has run more than 490 sourcing events.
The tool helped the team improve margins with budget forecasting and spending and savings aggregation. The icing on the cake for this team was recognition by the company's CEO that strong 4Q results last year were because of the work of the procurement organization.
People: British Petroleum (BP), the $245B energy giant, established the "Rapid Sourcing Team" as part of its efforts to not only find and recruit new people, but also give them skills that greatly enhance BP's efforts while cultivating a new generation of valued employees. The program was designed to answer two questions BP and many other companies are trying to address:
1. How to recruit, develop, and retain new talent in support of long-term succession plans?
2. How do you effectively manage sourcing of goods and services across the spectrum of spend categories, particularly "low value" spend, while meeting resource and budget constraints?
The program is for new sourcing professionals out of college less than three years and focuses on the following:
Ownership--Delivering on low-value spend to foster a sense of responsibility and hone skills useful to more strategic spend later on
Collaboration--Working with more strategic sourcing teams on projects to learn higher skills and processes
Capture/transfer--Seeing that knowledge among older professionals is not lost and shared among the new generation BP expects $40M in annual value out of the program.
Process: Johnson and Johnson, the $5.3B consumer products company, concentrated on lean sourcing initiatives. The company rallied 30 leaders from across its organization, representing all the operating companies of J&J in North America, to help focus spending management and create a sourcing process. The result was a "standardized process to understand the spending, a process to source consulting, and the basics for supplier relationship management. J&J created a competitive advantage by improving the sourcing and commercial competence of procurement, and procedures to make and manage business commitments."
The team, which created a toolbox for category specific practices, was broken down into three sub teams with specific areas of concentration:
Find It Team--Clear focus on spend visibility and the leverage of the spend
Get It Team--Created benchmarking templates to solidify the opportunity
Keep It Team--Cultivated and sustained the initiatives
The result: before the initiative, only 27% of spending was actively managed by the procurement organization. Now, 45% is under management and climbing.
Continuity of supply and the future: Supply management has come along way from the days of purchasing, materials management and into the supply and value chains of today. This award and these companies illustrate the strategic value it can have to the bottom line of your company. Want to make next year's list? AMR Research's best practice research could help you reach that goal. Let us know at firstname.lastname@example.org or email@example.com. For more on the ISM conference and lessons learned, see "Turning Procurement into Strategic Supply".
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