Shoot for aggressive targets—and produce!
Staff -- Purchasing, 6/21/2001 2:00:00 AM
What does it take to make an IT procurement group work? Greg Buchanan doesn't hesitate to list three success drivers: top-down commitment and support, solid processes and a systems sourcing strategy, and skilled professionals who want to work in a cross-functional team environment to influence positive change.
As director of strategic sourcing, information technology & gaming for Harrah's Entertainment, Buchanan is responsible for managing all of the company's centralized sourcing efforts for IT. He does this "by aligning IT & gaming and strategic sourcing and e-procurement strategy goals." In a nutshell, "what we do is establish an agreement which allows the company's properties to order against it."
Buchanan reports to Karen Spacek, VP—strategic sourcing, e-procurement and sourcing services. Spacek reports to the COO. Strategic sourcing, IT & gaming work out of the company's corporate services offices (which includes some IT, accounting and HR) in Memphis. Harrah's headquarters is in Las Vegas.
Buchanan comes to Harrah's from Federal Express, where he was manager of strategic software sourcing. He also has sourcing experience in manufacturing industries—Georgia Pacific and General Dynamics.
In the fall of 2000, after Harrah's had acquired a number of new assets, properties and locations, the office of the president (CEO, COO and CFO) took a serious look at the company's sourcing activities. At the time, there were two operations: food and beverage and a catchall category that included everything else the company was purchasing. Recognizing the benefits of consolidating its annual spend of more than $800 million annually with a few key suppliers, management put in place a new sourcing operation centered on commodity management: food and beverage, guest services, which includes hotel operations (and amenities), shared services (i.e., construction, facilities, MRO, temporary labor, etc.), and IT & gaming.
"We started putting more standards around products and systems and the way we run our operations to ensure we have a level of service and quality up to our requirements, says Spacek, explaining that until 2000 purchasing was decentralized at Harrah's. "Properties did their own contracts. National agreements were the exception, not the rule.
"Now we're centralizing functions where it adds value to the business. This means bringing on board highly skilled individuals with a lot of experience, education, and the right tool sets to leverage those capabilities across the organization. It would be too costly to put every one of these skill sets at every one of our properties. (Harrah's has 25 properties of varying sizes.)"
As Buchanan sees it, having a distinct operation for IT procurement provides multiple benefits to the company:
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A focal point for the buying organization to ensure "long-term contract continuity." This, in turn, yields numerous benefits such as standards (product/service) and allows for leveraging similar agreements.
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Capability for cross-functional team sourcing opportunities.
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A unique skill set of IT knowledge and sourcing negotiations and supplier-management experience.
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A record keeper of valued added. This includes non-cost elements (i.e., process improvements, participation with suppliers in new product development, other) as well as cost savings/avoidances.
Who should be involved in setting up such a group? Buchanan says that it varies within buying organizations. "Based on my previous experience, however, it is usually the highest purchasing/sourcing officer and/or the CFO, along with the major IT officers.
Among the objectives he's set for the group are measuring the value it adds—both non-cost and cost elements—constant communication, managing and monitoring of product/service standards, and managing suppliers to drive business unit value.
As with other new endeavors, Buchanan finds challenging resistance to change—either process or products—and winning over internal customers and suppliers to new and innovative ways of doing business.
Buchanan has staffed his operation with individuals with such qualities as project management, business/contract negotiation expertise, technology awareness, an understanding of financial concepts, good communication skills, and company business understanding, among others.
Their duties/responsibilities include:
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Developing processes and techniques for targeting sourcing efforts.
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Reviewing and assessing category needs and ensuring stakeholder alignment.
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Collecting and analyzing market intelligence to perform value analysis, establish baselines, make-buy decisions, and build total-cost-of-ownership models.
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Preparing RFPs, negotiating, analyzing, communicating, and implementing supplier proposals.
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Continually monitoring supplier performance.
The group has what Buchanan would categorize as "great relationships" with other functions in the company. "This is not to say that we always see eye to eye. However, we use a fact-based approach to support innovative ways to do business. And, many of our stakeholders are leaders from areas such as IT & gaming."
To be successful at IT procurement—in working with any individual or department internally or externally—the sourcing group must demonstrate these qualities: honesty, flexibility and a positive attitude. Says Buchanan, "We are results-oriented. We shoot for aggressive targets/goals and produce."
Training of individuals working in IT procurement should be two-fold: "On the IT side, they need to participate in conferences to keep up to date on new technology developments. On the sourcing side, they need a component that would have to include e-procurement.
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