MVPs
Meet the leaders in MRO purchasing. The editors selected these seven champions—from a variety of industries—based on nominations from colleagues, managers and suppliers. They all have one thing in common—they listen to internal customers to be sure they understand what they need from suppliers.
By Susan Avery -- Purchasing, 8/17/2006 6:00:00 AM
Meet the leaders in MRO purchasing. The editors selected these seven champions—from a variety of industries—based on nominations from colleagues, managers and suppliers. They all have one thing in common—they listen to internal customers to be sure they understand what they need from suppliers.
''At Gerdau Ameristeel, Paul Ford is driving a strategic procurement process for the MRO category which has net more than $8 million in savings. He’s now working on an optimization program which will engage our suppliers in Kaizen-type events as part of operational excellence.'' —FROM THE NOMINATION
With Gerdau Ameristeel for about 18 months, Paul Ford, director of procurement operations, is part of a team led by Mike Christy, vice president of procurement and logistics, working to centralize the purchasing operation in Tampa, Fla. The team is focusing its energy on areas of spend that make sense to consolidate and leverage. One of these is MRO commodities, a $250 million annual buy.
In doing so, Ford helped create internal user group teams made up of individuals representing procurement, maintenance and production at each of Gerdau Ameristeel’s 16 primary steel mills in North America. Using strategic sourcing to consolidate and leverage the MRO buy, the team ultimately reached agreement with primary suppliers in a dozen spend categories, including bearings and power transmission, hydraulics, electrical and safety supplies. The team has implemented national contracts at the steel mills, which are still responsible for their own MRO buying. “It’s our feeling that the facilities are more attuned to the immediate needs of the organization and responsive to the ultimate customer,” says Ford. “We have them do that within the framework of an agreement we negotiated centrally.” Regional managers who report to him regularly interface with the buyers at the plants.
 Paul FordDirector of procurement operations Gerdau Ameristeel, Tampa, Fla. Purchasing responsibility: Bearings and power transmission, hydraulics, electrical supplies, safety supplies, a $250 million annual buy |
Contract compliance is Ford’s greatest challenge. He travels extensively to meet with both internal customers and suppliers to form stronger partnerships. Distributor suppliers say they are impressed that Gerdau Ameristeel is able to execute on its commitments, regarding sales volumes. In turn, they and their manufacturer suppliers are contributing cost-reduction ideas, and are participating in Lean events.
So far, Gerdau Ameristeel has reduced costs by about $8 million, but perhaps more important, “we have a clearly identified process and supply management organization through which we can leverage the capabilities of our suppliers,” says Ford. “As we become significant to them, they will work with us on our flows and usages and get to the point where we hold less inventory in our stores area.”
''Randy Clark is truly instrumental in assuring that Volvo Group Non-Automotive Purchasing has a common and consistent approach to manage the MRO spend at its North American sites. In addition to hard savings, Clark leads improvements in payment terms as well as inventory with use of vending machines, Kanban and VMI.''—FROM THE NOMINATION
At Volvo, a three-pronged strategy for MRO that encompasses cost reduction, supplier consolidation and payment-terms improvement is played out through a hybrid model of integrated supply management. Under this model, outside integrators handle such administrative aspects of the MRO purchasing process as ordering, while Volvo personnel manage such storeroom duties as receiving. The buy includes industrial consumption materials, hand tools and supplies.
 Randy Clark Strategic buyer Volvo Group Non-Automotive Purchasing, Greensboro, N.C. Purchasing responsibility: Industrial consumption materials, a $32 million annual spend |
Randy Clark, strategic buyer, Volvo Group Non-Automotive Purchasing, meets his biggest challenge of understanding requirements of internal customers by walking the factory floor every week, talking to operational buyers, supply room personnel, facility managers and engineering staff. “Without that face to face, I don’t think you can [understand and meet customer goals] effectively,” he says. “You can be the greatest administrator in the world and fail miserably in this particular area.” Volvo has eight sites in North America.
Clark also spends time on training and developing suppliers. For example, he regularly communicates requirements of his internal customers to the integrators that provide MRO items to Volvo plants in North America. “Our expectation is for the supplier to communicate what they would be doing if they were in our shoes and to identify trends for us rather than just hand us reports,” he says. “That’s the real expertise from a supplier that I need at this level.” His efforts have resulted in documented cost savings of 12% on a $32 million annual spend.
''Danny Hemperley has championed supplier consolidation, product and commodity standardization, streamlining of purchasing practices and coordinated transition to national strategic sourcing throughout the more than 60 PPG plants in North America.'' —FROM THE NOMINATION
Taking a commodity-management approach to the MRO buy at PPG, Danny Hemperley, senior manager, strategic sourcing for indirect materials, PPG Industries, and his team have significantly consolidated the supply base using data they gathered through a spend analysis tool from Ariba. For the electrical supplies commodity, for example, they identified more than 300 suppliers. Using a strategic sourcing process to consolidate and leverage the purchase, they’ve reduced this figure to three suppliers that fill 90% of requirements.
 Danny Hemperley Senior manager, strategic sourcing, indirect materials PPG Industries, Pittsburgh, Pa. Purchasing responsibility: Such MRO spend categories as electrical, bearings and power transmission, industrial supplies, fasteners, pipes, valves and fittings |
The team also has reduced costs using PPG’s $AVE program (Supplier Added Value Effort). Through the program, preferred suppliers look at the company’s processes and make improvement suggestions, worth at least 5% of their total annual sales to PPG via $AVE. For example, they provide suggestions on use of alternate materials and removal of duplicate parts. Hemperley says that one key to the team’s success is including his internal customers in the spend analysis and the sourcing process. “This assures we have their requirements and gives them insight into the supply chain and what is required to make quality decisions,” he says. “As a result, we continue to receive a lot of support from the plants and businesses benefiting from the efforts.” Now, he and the team are implementing a series of tools from Ariba. As such, they are working to consolidate the number of purchasing systems currently used by the company.
''Mike Filitti is a champion in formalizing the Alliant MRO program and developing more than 14 strategic MRO supplier relationships since 2004.''—FROM THE NOMINATION
Three years ago, Alliant Energy put together a Lean Six Sigma team in which Mike Filitti, MRO buyer for e-spend and process management, examined MRO at its generation units to determine whether there was opportunity to leverage its spending, consolidate the supply base and reduce costs. From this effort, the company created an ongoing MRO team. The team started with five categories: pipes, valves and fittings, electrical, fasteners, bearings and power transmission and industrial supplies. They quickly realized savings of 10-48% depending upon the commodity.
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Mike Filitti Senior buyer—MRO for e-spend & process, Alliant Energy Corporate Services, Cedar Rapids, Iowa Purchasing responsibility: PVF, electrical, fasteners, miscellaneous industrial, bearings and power transmission, a $5.2 million annual spend |
The team developed an e-procurement tool based upon an Ariba platform for ordering MRO items. Through this ezBuy tool, users place orders for 14 categories of MRO supplies and other items using a purchasing card for payment.
As at many companies, communicating use of the tool and its benefits proved a challenge.
The team met with maintenance managers and traveled to the company’s 14 generating stations throughout the Midwest—often with suppliers—to speak with plant personnel and explain the advantages of leveraging and the use of tool. “The time invested may be significant, but it is a process that’s very important to making this work,” Filitti says.
The team tracks employee compliance to the contracts. Their goal is 90%, and most suppliers currently have ratings that are higher than 80%. One pipes, valves and fittings supplier, for example, has a rating of 89%. They’ve also started to use a scorecard to manage supplier relationships. “Our employees are getting used to the suppliers and are starting to understand the additional value they bring to the table,” he says. “I think our internal customers are thankful for the service they receive from the MRO team. Now they have someone to go to when they have an issue with an individual supplier.”
''Michael H. Gorsuch has had millions of dollars in savings, led his department corporate-wide in WMBE (spending with minority businesses), and has championed national agreements.''
—FROM THE NOMINATION
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Mike Gorsuch Senior buyer Pinnacle Foods Group, Fort Madison, Iowa Purchasing responsibility: All the MRO supplies that pass through the storeroom including uniforms, services, capital equipment and replacement parts |
Mike Gorsuch, senior buyer at the Pinnacle Foods plant in Fort Madison, Iowa, has more than 30 years’ experience in accounting and purchasing both ingredients and more recently MRO. The plant, which was recently acquired from the Dial Corp., primarily produces canned meat products such as Vienna sausages.
Gorsuch has negotiated national agreements with suppliers of such MRO items as uniforms and bearings and power transmission products. To communicate benefits of these agreements, he speaks with his colleagues daily. He’s extended his success in this area to agreements with capital equipment suppliers. For example, he’s negotiated an agreement with a supplier of case packing equipment that has helped to reduce costs through improved efficiency. The supplier delivered the equipment quicker than its competition.
Gorsuch has set up consignment programs for electrical, power transmission and eight other categories of spending, helping to significantly reduce inventory, and helped increase spending with diversity suppliers in one year by $2 million.
''Beth Driskell has achieved significant accomplishments in the purchasing profession including regularly contributing more than $1 million in documented savings annually to the Robert Bosch Corporation and implementing continuous improvement programs with suppliers.'' —FROM THE NOMINATION
At Robert Bosch’s largest U.S. automotive plant in Charleston, S.C., Beth Driskell, senior buyer, manages the packaging, gauges, computer and services spend. She has more than 20 years’ experience in purchasing and quality and holds a Six Sigma black belt. Her managers are Roger Qualman, manager of purchasing, and Steve McLawhorn, director of purchasing.
 Beth DriskellSenior buyer Robert Bosch Corporation, Charleston, S.C. Purchasing responsibility: Services, packaging, computers and gauges. The Charleston plant spends $160 million annually on indirect materials |
A first-tier supplier to the auto industry, Bosch’s purchasing operation maintains a scorecard for every supplier, focusing on quality and on-time delivery. Purchasing, with its suppliers, works on continuous improvement through cost reduction. They extend the company’s Lean training to suppliers, which pass the savings on to Bosch.
In these price-inflationary times, Driskell sees cost management as one of her biggest challenges. She approaches the challenge through face-to-face meetings with suppliers; they set mutual objectives where they can. Working with Qualman, she helped develop a price increase form. The form must be completed by a supplier before Bosch accepts a price increase. It includes these points:
* Price increase justification, with documentation on market conditions.
* Cost reduction efforts within the supplier’s organization to offset the price increase.
* A date established in the future for reviewing the price and market conditions.
* Added-value services that will be provided at no charge to offset the increase.
Driskell also works with internal customers on cost reduction efforts. “We have to look at total supply chain cost and come up with what works best so we all reduce costs collectively,” she says. For example, she’s working with a supplier to develop new external packaging for a customer that could be used universally.
''After 14 years in manufacturing, Jesse Alexander now works in the healthcare industry. Trained in Six Sigma and Lean, he’s applied process improvement concepts, to a service business, Misys Healthcare System, reinforcing its focus on developing and empowering its staff. This would not have been possible without the help of suppliers.'' —FROM THE NOMINATION
As strategic sourcing manager at Misys Healthcare System, makers of software to manage medical offices, Jesse Alexander and Paul Brustofski, director of strategic sourcing, are working together to gain acceptance for their purchasing strategy of doing business with a few select suppliers throughout the company, which has resulted in the responsibility being expanded to international projects. Now he mainly manages an indirect buy for the U.S. and India that encompasses IT, temporary labor, advertising and maintenance service and spare and replacement hardware parts for the computers the company sells as a system with its software. Misys has 150 field engineers who service the systems it sells.
 Jesse Alexander Strategic sourcing manager Misys Healthcare Systems, Raleigh, N.C. Purchasing responsibility: Parts, equipment and repair services, a $6.4 million annual spend |
For the service and replacement parts spend, Alexander has streamlined the purchasing process reducing the number of transactions necessary for each purchase and worked to consolidate a supply base from 30 providers to two. He has implemented VMI. Through a rigorous strategic sourcing process, “we had to make sure that we partnered with a supplier comfortable with the model and with the financial stability to support it,” he says. Ultimately a cross-functional team selected two suppliers, a primary supplier responsible for 90% of the buy and a niche supplier. Under the agreements, the suppliers have agreed to buy back obsolete inventory. They are measured using stringent delivery metrics. “The most important part of the story is the team taking the bull by the horns and coming up with a process that’s revolutionary for this company, with amazing payback,” says Alexander. Executed late in 2005, the agreements reduce costs for Misys by about $2.5 million. Suppliers help with continuous improvement efforts by offering advice on inventory and in other areas.
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