UTC puts supply managers through tough basic training
By Anne M Porter -- Purchasing, 4/23/1998 2:00:00 AM
There's a big change brewing at United Technologies Corporation. The Hartford Conn.-based multinational is making major changes in supply management at its Carrier, UT Automotive, Otis Elevator, Pratt & Whitney, Hamilton Standard, and Sikorsky divisions.
UTC's chairman and CEO George David has identified integrated supply chain management (SCM) as a superhighway to long-term corporate competitiveness and he has empowered Kent Brittan, vice president of supply management, to integrate sourcing activities across the six major divisions and to make SCM a core competency for the corporation. The battle call: "Supply chains--not companies--compete."
For corporate procurement at UTC, this represents a major departure from history. Until recently, the group had approached supply chain integration through cross-divisional purchasing councils. But while the councils were very effective at leveraging information and knowledge among the business units, they continued to operate within a highly decentralized procurement structure (meaning they could create corporate supply agreements but couldn't always deliver volume to suppliers). The councils were also focused mainly on nonproduction aspects of supply, for example, MRO, energy, capital equipment, and travel.
Now this is changing. David, for one, suspects that the company is leaving money on the table by failing to act as a unified whole. Noting that UTC spends well over $10 billion per year with suppliers, Sam Farney, senior manager of education and training for corporate purchasing, says "We wanted to see what could happen if we began to integrate our supply chain management efforts at the corporate level and to extend our efforts to include production purchasing."
To demonstrate the seriousness of this undertaking at UTC, Farney notes that Brittan was asked this year to address the New York financial crowd--a task usually reserved for only the senior-most operating and financial executives. "This was a highly unusual step," Farney says. "It demonstrates the high level of priority that UTC has assigned to SCM."
Making it happen
Strong support from the CEO is certainly a critical prerequisite to so great an endeavor. But big culture changes don't come by fiat alone. To drive the transition, Farney says, the firm has built aggressive cost savings goals into its business planning system, a move that has provided strong incentives for plant and process managers to join major SCM initiatives.
The firm has also seen fit to deploy an extensive supply management training process to equip UTC personnel with skills specific to its articulated long-term strategy. "The skills required to implement our supply management strategy are very different from those needed in the past," Farney says.
Spearheaded by Farney, the training plan for 1997-1998 has been to educate approximately 1,000 persons for an average of five days each. Core training modules include:
* A four-day course in strategic sourcing (for example, gathering detailed market intelligence, analyzing supply chain capability, rendering intelligent sourcing decisions).
* A three-day course on the company's supplier rationalization process (a key early segment of the company's strategy roadmap).
* Two days of training in cost analysis and management.
* Three days of negotiation training.
* Courses in benchmarking and ethics.
To make SCM into a core competency, the company will need to involve many persons outside of procurement, so training covers (to varying degrees): commodity team leaders, sourcing group teams, divisional sourcing group teams, executives, senior purchasing advisory board, purchasing departments, supplier development personnel (for example, financial, engineering, operations), and what Farney calls the "global population" (anyone else who might be involved in or affected by sourcing decisions).
Other key education elements include CPM and apics certifications, skills assessments, development of a proprietary supply management handbook, plus leadership training (for appropriate personnel), and a two-day strategy briefing on the "move to core competency" for commodity team leaders, members of the senior purchasing advisory board, and other key corporate executives. An entire day of the CEO's annual three-day executive gathering was devoted to SCM last year, Farney says. For the senior execs, he adds, much of the training has been focused on the human resource implications of the firm's SCM strategy, for example, the redeployment of personnel, reallocation of resources, and changes in skill sets required for various jobs.
Sourcing knowledge
Because United Technologies sees SCM as a potential competitive weapon, Farney has created a training matrix comprising both proprietary and off-the-shelf training. Some examples: For training in detailed market analysis, Farney says the organization selected a nontraditional training source. "We went to a marketing consulting company because we thought they had the greatest expertise in gathering market intelligence."
For training on supplier selection, the firm benchmarked several leading companies and designed proprietary training based on the results of its study. For cost analysis and management, UTC uses napm's cd-rom -based self-training course featuring pre- and post-testing capabilities to ensure that results can be measured. For ethics training, Farney goes in house to the company's vice president of business practices. "You can't find a more knowledgeable person for this topic," Farney observes.
For benchmarking education, Farney says the firm is likely to pursue its own methods and course offerings. To establish proprietary training modules Farney says the firm often uses consultants to lay the groundwork. "We engage experienced professionals," he says, "learn from the experience of working with them, and leverage it to people within our organization."
UTC's heavy investment in training could well make the difference between success and failure in creating a competitive supply chain. A study published last December by Purchasing Magazine suggested that "only a tiny percentage [of procurement professionals] had received the types of training that might be said to prepare them for the challenges of: transforming the procurement function, comprehending and supporting overall corporate strategy, or applying advanced supply chain management techniques." Meantime, a recent study by consulting house kpmg finds that "optimized supply chains--linked to business objectives, built around core processes, enabled by technology, and integrated with suppliers and customers--have not yet been fully realized by most companies."
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