Purchasing drives success for Con-way
Mitch Plaat tells of challenges, opportunities and successes he’s experienced in his first year at the helm of the purchasing operation at logistics giant Con-way.
By Nancy Hitchcock -- Purchasing, 2/15/2007 2:00:00 AM
It’s been one year since Con-way, the freight transportation and logistics services company, named Mitch Plaat as its first chief procurement officer. His charge: Improve efficiency and identify savings opportunities.
As many purchasing executives new to this post have experienced, Plaat has had his share of challenges. But there were also opportunities along the way for him and his team to make changes that already are helping Con-way be a more successful company.
“Our biggest accomplishment is the speed at which we’ve been able to hit the ground running and create savings in a short period of time,” says Plaat, who has worked in purchasing at Con-way since 1989, most recently as director of contract services, managing the indirect spend. He’s located at the company’s administrative and technology headquarters in Portland, Ore. “We’re really queued up perfectly for 2007 and 2008 to bring significant bottom-line impact to the company.”
That savings is partly a result of Plaat and his team strategically sourcing certain commodities or categories such as uniforms. Savings on these purchases average 20%, and are due mainly to consolidating the buy with fewer suppliers. Con-way spends about $500 million annually on a range of goods and services, from heavy-duty tractors, trucks and trailers to fuel, tires, computers and office supplies.
What’s more, savings like these are starting to open doors for the new procurement head and his team: Now Con-way’s businesses are seeking help from purchasing in areas such as human resources, marketing and legal services categories. Already, purchasing is leading efforts to consolidate the waste disposal buy.
Hybrid model
Until January 2006, Con-way, which had been known as CNF until April, had a hybrid purchasing model, with some centralized sourcing and some decentralized buying. Purchasing was focused on three silos: fleet (trucks and trailers), IT (computer hardware, software and services) and indirect goods and services. There were central processes for sourcing fleet and IT, both considered strategic to the transportation and logistics company. But, for indirect purchases, the company’s 500 locations did much of the buying, managing relationships with some 35,000 suppliers.
There was no real oversight or systems used by all three groups. Helping to break down hurdles that come when centralizing the purchasing function, Plaat has the full backing of the company’s new executive team. Management has approved his strategy to restructure the operation—and has made significant investments in it.
“The executive team has a vision for procurement,” he says. “They’ve allowed us to restructure, and they are willing to invest in tools and resources in order to achieve goals we’ve set forth,” says Plaat. “In the past, most investments were for customer-driven systems. Now, we’re investing in procurement and procurement’s ability to deliver competitive value and bottom-line impact.”
In the past year, Plaat and his team have worked to attract talented purchasing professionals to the new operation, tripling the number of people there to more than 100. Nine individuals are dedicated to strategic sourcing. Now, purchasers routinely receive training in negotiating, managing supplier relationships and strategic sourcing.
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As part of the restructuring, Con-way’s accounts payable operation now reports to Plaat, giving him responsibility over the entire procure-to-pay process, a best practice identified by purchasing consultants.
“Before, when purchasing and AP were separate entities, we had duplicate systems and disparate processes that we wanted to get into alignment. In one particular silo, billing was automated with its suppliers. In another, it was not. We’ve been able to streamline billing and ordering processes by automating procure-to-pay.”
Another investment management made in purchasing is for sourcing software and consul
ting services available from provider Emptoris in Burlington, Mass. With the new tools, Plaat (right) and his team now have a better handle on Con-way’s spending.
“As we started to view procurement differently, we saw that our ultimate goal is not only to deliver bottom-line savings to the corporation, but to become world class,” he says. “And to do that, we need to have visibility into our spending. If our CFO asked about our spending on fuel, we could get to that information, but it wasn’t something we had at our fingertips. We wanted tools to provide that insight.”
One category he and his team looked at strategically was uniforms. When the company changed its name, the entire fleet of less-than-truckload drivers needed new uniforms to display the new brand. Using data and analysis generated by the sourcing tools, the team decided to purchase the uniforms from a single supplier, for a savings of 26%.
Now Con-way is evaluating its waste disposal spend. “We’re in the RFP process and looking to consolidate as much as possible,” Plaat tells Purchasing. “We’re looking at various options—whether or not there’s a single supplier that can provide coverage over 500 locations—but we definitely think there’s leverage to be had by consolidating the spend with a fixed number of suppliers.”
In the past 12 months, Plaat has experienced something nearly every purchasing professional in his role has learned: “Even though we thought we were doing a good job, it wasn’t until we went through the process and really used the tools and negotiation tactics that we saw we really hadn’t been doing the best we could,” he says. “We know there’s potential for improvement, especially in areas that we hadn’t been involved in, such as HR services. For instance, we’ve never had a national contract for temporary labor services.” Other spend areas ripe for consolidation: computer hardware, corporate cards, hotels, and rental cars.
Another phase in Con-way’s initiative toward becoming a world-class purchasing operation: Developing processes for managing contracts and measuring supplier performance.
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