Purchasing Strategies Case Study: Blending services and technology
Telecom giant Lucent Technologies of Murray Hill, N.J. came to procurement outsourcing in a roundabout way.
Staff -- Purchasing, 3/16/2006 7:00:00 AM
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Telecom giant Lucent Technologies of Murray Hill, N.J. came to procurement outsourcing in a roundabout way. The company began its relationship with its current outsourcing partner, Ariba, in 2000 when it began using Ariba's e-procurement solution. Around the same time, Lucent also began working with outsourcing firm Alliente, which began handling Lucent's category (commodity) management of indirect procurement areas including administrative supplies and equipment, industrial supplies and equipment, global travel, equipment leasing and energy.
According to John Weidner, senior manager for outsourced procurement and e-sourcing for Lucent, in 2002, the company extended its outsourcing arrangement with Alliente to Europe. In addition, Alliente took on more responsibility for indirect procurement categories. "We also outsourced our transaction processing to them and were able to move from seven transaction centers down to one," notes Weidner.
In 2003, Ariba bought Alliente, bringing together two of Lucent's suppliers and making it a natural progression to begin working with Ariba as its procurement outsourcing partner for direct and indirect materials.
Since then, the relationship has flourished into a blend of e-sourcing and outsourcing services.
"We are very happy with the technology that Ariba brings to the table and applies to the categories they are managing for us," says Weidner. So much so, that Lucent recently extended its contract with Ariba through September 2008.
Three years ago, while Alliente was still managing Lucent's category areas, Ariba formed a buying consortium with the Martini Group and Lucent became one of its initial members, because, "As the transition in our industry occurred, we ended up reducing our indirect spend by almost 70%," states Weidner. This, of course, potentially reduced the company's leveraging ability. However, by being part of the consortium, Lucent was able to expand its leverage by a factor of five.
"Right now, we are looking to expand the consortium, and we assist the Martini Group in identifying those potential customers," he continues. "In fact, we are looking at the idea of extending these services to some of our customers."
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