Coors Brewing continues on procurement transformation path
By William Atkinson -- Purchasing, 2/15/2007 2:00:00 AM
Through the 1990s, Coors Brewing Co. of Golden, Colo., like so many other consumer packaged goods companies, hadn’t placed a lot of focus on procurement and supply management as a key business driver. Companies were continuing to grow and build revenue in the marketplace without an emphasis on managing supply costs.
But by the early 2000s, Coors shifted its focus to effectively managing its assets and cash, a strategy that would require major overhaul of its procurement.
“Coors realized it was spending a lot of money with a lot of suppliers,” says Ron Schnur, vice president of strategic sourcing and supply. “Management wanted to make sure it was getting the best quality, service and cost from these suppliers, so it began to look at procurement as one of the important business drivers, in addition to the usual manufacturing, sales, marketing, and finance.”
Schnur was recruited from Eaton Corp. in 2003, where he was vice president of supplier resource management. His new goal in coming on board at Coors was to initiate procurement transformation and change management, shifting the company’s procurement and supply management function from a traditional transaction-oriented department to a key driver of results for the business.
Currently, Schnur has responsibility for procurement and supplier management functions for brewing materials, packaging materials, corporate sourcing services, and supplier diversity. This covers an annual spend of about $2 billion, which is managed by a global staff of 75.
The first step in the transformation was to create a transition team and identify what a best-practice procurement organization looked like. The team did this via benchmarking, plus the experience that Schnur and some of the other team members already had.
“We created a vision of what we wanted to look like, and we created four foundational goals,” he recalls. Those goals were defined as: build a high-performing organization, attack total cost, demand best-in-class supplier performance, and execute disciplined processes (which may be enabled by technology).
“The next step was to decide what changes we needed to make related to people, processes, and technology to achieve these goals,” he adds.
As a result of that review, Coors now has three procurement and supply management processes. The first is a strategic sourcing process, which includes spend analysis, supply market analysis, internal customer requirements, and external customer requirements. It looks at inputs and deliverables.
 First, you need to create a compelling vision and roadmap. Then, you need to spend a lot of time getting people to see and follow it.” — Ron Schnur |
The second is a supply management process. This focuses on implementing supplier continuous improvement initiatives, performance management scorecarding, reward and recognition of suppliers, and early supplier involvement.
The third is an operational transactional process, which includes e-procurement for managing high-volume, low dollar categories. “We have worked to make the requisition, PO creation, invoicing, and payment process as easy as possible,” he explains.
As of late 2006, the team had effectively implemented all three of these processes. Recently, in fact, they implemented e-procurement and a supplier relationship management (SRM) tool. “We currently have about 150 suppliers involved with the SRM, but we want to get up to about 1,000,” Schnur adds.
Schnur is the first to admit that it can be difficult to sell change to some people. While senior management was behind the transformation from the beginning, some people at other levels and in other departments preferred to adopt a more “wait and see” attitude. For example, prior to Schnur’s arrival, the manufacturing department had selected suppliers and negotiated contracts. The purchasing department simply issued purchase orders and dealt with problems. It took some time to change this mindset and for manufacturing to see the value of procurement’s involvement.
One key to success was listening to everyone in the organization. This included people Schnur worked with, as well as internal customers, to get them to describe what they needed and what their “pain points” were.
“If you can make someone’s pain points go away, or at least make them better than they were, you can start to build a relationship based on cooperation, trust, and credibility,” he explains.
Another key was achieving some early wins. When these occurred, senior management became even more interested in seeing additional progress. A third key was that people in Schnur’s department began to see that the concepts that were once just part of a slide presentation were actually in place and were working.
Over the last three-plus years, supplier quality performance has improved about 60%, and annual cost savings are about 2-3% each year. In addition, corporate and social responsibility is very important to Coors. As a result, its minority and women-owned spend has increased 50% in the last three-plus years.
In reflecting over the progress, Schnur realizes that it takes two things to succeed. “First, you need to create a compelling vision and roadmap,” he states. “Then, you need to spend a lot of time getting people to see and follow it. Right now, I have 75 people who all own a piece of driving this new way of doing business.”
Now Playing: 