How purchasing uses cross functional teams to source indirect goods and services
Purchasing leads cross functional teams to business success for Xerox, Cessna and Boston Scientific
By Susan Avery -- Purchasing, 11/19/2009 2:00:00 AM
If the recession has taught us anything, it's that it's important for people to work together for the good of the company.
Perhaps nowhere is this more evident than at companies where purchasing routinely leads cross-functional teams to source indirect goods and services.
Cross-functional teams are not new: Purchasing operations at world-class companies have been leading teams of people representing different functions—human resources (HR), finance, engineering—to source direct and indirect spend categories for decades. But there are signs that cross-functional teams led by purchasing pros have come into their own and have become fully ingrained in the corporate culture. A few notable examples:
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Based on its experience with teams for indirect sourcing at Xerox in Norwalk, Conn., the company's North American sales group invites Tom Roberts, vice president, indirect purchasing, to meet with its executives each quarter to discuss opportunities to better manage costs, often within the terms of contracts negotiated by purchasing. "It's just being smart about how we use suppliers," he says. "Unless we get into the business and point it out, people may not see that."
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At Cessna, a Textron company, Ryan Doerksen, director of strategic sourcing and supply management, leads cross-functional teams not only for Cessna in Wichita, Kans., but also for other business units within Textron. Recently, a team extended out across multiple business units an agreement with a janitorial services supplier that significantly reduced costs for the company. Says Doerksen, "We can see the success of the team reflected in our measurement of the supplier."
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As teams evolve at Boston Scientific in Natick, Mass., the global sourcing operation now has embedded sourcing managers physically and organizationally within two business functions. "Developing a deep understanding of the commodity and the business organization significantly improves the quality, speed and success of sourcing processes," says Ken Hartman, manager of indirect and global sourcing operations and technology.
These sourcing managers agree that cross-functional teams for indirect sourcing are critically important to the success of their companies, and that this is especially true now as the economy begins its recovery.
"From a benchmarking perspective, we find higher-performing organizations tend to use cross-functional teams to a higher degree," says Chris Sawchuck, procurement advisory leader at The Hackett Group in Atlanta. "It's the very foundational type of things like cross-functional teams and partnering internally that drive long-time value contribution not only of procurement but other functions as well."
What it takes to lead
Cessna's Doerksen's puts it succinctly: "What we in supply chain do affects the entire company, so we need to get people involved." He is speaking in general of sourcing processes for such services as travel, fleet management, print, HR benefits, contract labor, transportation, facilities, technology, capital equipment—any goods or services used by most employees. Purchasing operations at companies like Cessna, Xerox and others also use cross-functional teams to source direct materials.
For the indirect spend, teams typically are made up of representatives of end user groups, budget owners, business units and subject matter experts in finance, operations, HR and other areas. In most cases, because of its understanding of sourcing methodology and ability to manage within a reasonable timeline, purchasing leads the team.
Purchasing also has a holistic view of the company and a good grasp of what it buys based on its work in spend analysis, adds Diane O'Connor, vice president, post sale and supply chain procurement, at Xerox. "We have visibility, in some cases to the item level, that our partners simply don't have," she says.
If purchasing doesn't lead the team (sometimes facilities or IT, two functions with strong project management skills, may take the lead), it plays a strong second to the lead role and is tapped for its skill, at analyzing the market, sizing up the pool of potential suppliers, negotiating price and other contract terms, implementing the agreement, tracking compliance and managing the relationship with suppliers.
When companies first started using teams 10 or 20 years ago, purchasing enlisted assistance of an executive sponsor to help break through silos built up within the company. Roberts at Xerox recalls his early days in purchasing working with the company's chief staff officer preparing a presentation and making sure he was on board with what was going on. "If we needed a letter sent out to reinforce behaviors, he would sign off on and deliver it," Roberts says. "This was an enabler to get teams off the ground and be successful. We got in the doors. Now we are partners."
Internal workings of teams—and roles and responsibilities of those serving on them—have changed over the years too. "Although we've always had users and subject matter experts on the team, we used to be driven by these folks who would say, 'This is who I want to buy from and what I want to buy.' Now, they communicate their requirement to us and ask for our help finding the right supplier to fill it," says Doerksen at Cessna. "All of our roles have really changed." Getting input from other groups within the company also helps ensure compliance to agreements with suppliers, which helps to meet cost-savings and other objectives of teams.
“The most important measure of success is their recognition of the value of the partnership.” —Tom Roberts, vice president, indirect purchasing, Xerox
The new purchasing pro
As the teams have matured and become more accepted by end users and internal business groups, so too have the purchasing professionals who lead them. Purchasing operations take a more strategic approach to sourcing now than they did 20 years ago and are able to bring together an understanding of the economy with knowledge of the company to arrive at the best result for the team.
"In purchasing now we're attracting a high level of professionalism," says Roberts at Xerox. "Most of the people in the purchasing organization have masters degrees or MBAs and/or Six Sigma black or green belts. I think it goes with corporate recognition of the importance of purchasing and of doing it well. The caliber of people is very good and it affects how the team operates."
Hartman at Boston Scientific says that indirect purchasing has gotten better at leading and that its skill set has improved in some non-traditional areas. "Whereas we were always very strong at the strategic sourcing process and guiding teams through that, we have added such skills as performing financial and risk analysis, market research and supplier capability assessments," he says. At the same time, others on the teams have become more comfortable with the role of purchasing and its strengths.
Other strengths that purchasing brings fall under the category of soft skills such as flexibility, communication, facilitation (ability to bring people together and lead the group through a process) and ability to influence.
It's these soft skills that purchasing can call upon when faced with challenges of leading a team through the sourcing process. One is that teams tend to move slowly. This can discourage users and businesses from seeking purchasing help. To overcome this challenge, some purchasing operations work through only critical steps of the sourcing process, while others will do much of the work behind the scenes.
Another challenge is finding consensus with so many competing voices. "It is important to be able to rise above that and get everyone to listen to each other and give everyone an opportunity to be heard," says O'Connor at Xerox. "In my experience, it is the rare exception when listening to everyone on the team did not result in a better solution."
Instant messaging has role
“Now, they ask for our help in finding the right supplier.” —Ryan Doerksen, director of strategic sourcing and supply management,Cessna
Given that users and business groups serving on teams may be situated just about anywhere in the world these days—and have exceedingly busy schedules—it may be difficult at times for a team to meet face-to-face. Teams meet and communicate by telephone, video conference, webex and e-mail. Cessna's Doerksen is starting to use instant messaging and expects acceptance of the tool to continue to grow.
Software that automates the sourcing process is another good communication tool. Purchasing uses sourcing software to prepare requests for proposal (RFP) and shares the document with the team for input before sending it out to the supply base.
As critical is whether the key operational stakeholder is satisfied with the team's performance. "The most important measure of success is their satisfaction with us, achieving results they're looking for and recognizing the value of the partnership," says Xerox's Roberts.
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