Indirect spend management nets Cameron unexpected benefit: Close ties to suppliers
By William Atkinson -- Purchasing, 11/13/2008 2:00:00 AM
Like a lot of companies, getting its indirect spend under control provided Houston-based Cameron savings benefits via improved spend management and leverage. But the manufacturer of flow equipment for oil, gas and process industries also saw some unexpected benefits, such as closer relationships between internal customers and suppliers, as well as some creative ideas from internal customers and suppliers working together.
Cameron's indirect spend management journey began in 2003, when the company recognized some opportunities in its indirect goods and services spend to reduce costs, increase savings, and strengthen supplier relationships. The reason for the project was simple, says Jill Efford, procurement manager for indirect goods and services. "Our business growth meant our indirect goods and services spend would grow, as well as the opportunity to leverage that spend, reduce cost, and improve vendor partnerships."
From the beginning, though, management realized that reining in indirect spend would not be easy. "For example, we needed to prove that a solution in the southern U.S. would be applicable in western Canada and that, while those solutions may not be mirror images, the overall process would still be the same." In sum, the department needed to demonstrate that it was not looking for a cookie-cutter solution, but rather a process-driven initiative.
Rather than attempt to embrace everything at once, the department started small, focusing on areas where it knew it could be of assistance, and then growing from there. Initial categories included temporary labor, office supplies and MRO. "These were areas where we knew that we would be able to see quick benefits," states Efford.
One key to success was ensuring that the department involved the internal customers and other stakeholders. "This wasn't intended to be a corporate initiative, but rather a resource for the plants and facilities," she explains.
Since being launched in 2003, the effort has continued to expand. Over the last five years, the department has expanded the efforts to include all indirect goods and services and logistics spend globally. "Along with that growth, we have developed reporting tools, including executive level scorecards and detailed reports," she adds.
Part and parcel with the reporting tools are different meetings designed to make the most of the synchronicity. Once a quarter, for example, the department meets formally with its stakeholders at the facilities to share successes and opportunities.
In addition, it created an Executive Level Steering Committee and a Savings Council. The Steering Committee is tasked with oversight, support, and marketing responsibilities. It provides feedback, growth opportunities, and strategic support for the projects. The Savings Council, a newer entity, is part of the Steering Committee. "It is a sounding board, prior to meeting with the steering committee, to ensure that we are meeting and will continue to meet executive level requirements," states Efford.
The department also sets up quarterly supplier meetings. "We also invite internal customers to these, to review progress, ensure that we are on target, and offer our support and assistance to both groups," she continues.
The department also introduced Best Practices Meetings. During these, it brings suppliers and Cameron stakeholders from multiple facilities together, then arranges to have the suppliers present opportunities for process improvement and cost reductions that are specific to those facilities. The supplier prepares, in advance, a presentation and an opportunity analysis of ideas on what the specific facility can do to accomplish things such as reducing print costs, reducing spindle time (the time in which a machining operation is actually being performed), and improving total cost of ownership. That is, the supplier doesn't come in with generic presentations that could be used at any facility. "Not only does this generate discussion between Cameron and the vendors, but also generates discussion and idea sharing between and among the plants that they may not otherwise have the opportunity to do," reports Efford. One example involved the company's strategic partners who assist in the management of Cameron's tool cribs, who came up with some cost reductions and process improvements.
According to Efford, the obvious overall benefits of managing indirect spend have been significant savings and cost reductions. "This is what our original goals were," she states. "In addition, though, we have also been able to improve internal customer and vendor relationships through our focus on developing partnerships."
Cameron has also benefited from process improvements and best practice sharing in the indirect goods and services categories. "These range from reducing spindle time when making our products, to how we place a requisition for temporary labor, to how we order MRO products," she notes.
Another benefit, although one that has been slower to materialize, is that internal customers are beginning to view the indirect goods and services department as a resource they can contact as appropriate. "We hope that one of the benefits the stakeholders see is assistance with their workload," she explains. The goal is for internal customers to use the department not only as a resource for indirect spend department-generated projects and initiatives, but also for their own projects.
There is more to do in the future. Recently, for example, the department introduced a new version of an e-procurement tool that will allow it to simplify the purchase of indirect goods and services. This tool will also give all Cameron users access to the company's preferred agreements and catalogs.
"We also plan to continue to expand our initiatives," says Efford. "It started with a North American focus. We are now expanding into Europe."
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