An acquisition strategy is a good way to grow a business and improve bottom-line revenues, but it can sometimes wreak havoc in a purchasing department. Ametek of Paoli, Pa., a manufacturer of electric instruments and motors, had grown its business in the past few years through acquiring a diverse collection of businesses.

Today, Ametek has 16 divisions and 44 manufacturing sites in North America. The variety of materials and suppliers used by these diverse groups provided little chance for volume purchasing and increased the occurrence of the dreaded maverick spending. Ametek knew there opportunities were being missed and decided that implementing an e-procurement software tool could help. As Sue Eckel, director of e-procurement, explains, the purchasing operations are set up in a variety of ways.

"For example, in the motors group there is a more centralized approach to purchasing key commodities. But the other things like indirect and MRO items are handled on a plant-by-plant basis." There are some group-level purchasing efforts and some division-level purchasing, but a division can be made up of multiple locations, which complicates things even more.

Ametek was already using Oracle as its ERP system at about one-third of its sites and decided that it would go with Oracle's e-procurement application and move toward standardizing on the Oracle platform. Standardizing would allow all purchasing staffers to buy on contracts through one system and integrate the e-procurement system with the Oracle financial package.

In August 2000, the company started implementation of Oracle's Internet Procurement tool to handle requisitions and orders and replace a manual, paper-based requisition and payment process. The first phase of Ametek's e-procurement implementation was twofold. First on the priority list was the aggregation of indirect spending companywide across the geographically diverse divisions. So the early phase of implementation focused on indirect spend. The other goal was to get the company's contract management on-line across the business.

"The immediate goal was to develop a centralized process to procure goods and services so requisitioners could share in common contracts and all locations could buy from aggregated contracts," says Eckel. "Our second goal was to streamline the process and centralize the payment processing side. We wanted to streamline the procurement, take the paper out of the system, and reduce the time it takes to get the requisition out to a purchase order, but also to streamline the back-end payables side. And then to take the supply base and rationalize it."

Eckel says Ametek originally targeted a conservative 5-10% savings and wanted to put all $60 million of its indirect spend through the Oracle system when completed with the implementation. But like most businesses in today's recession, Ametek has seen a reduction in its spending habits.

"By halfway in 2002 we would like to see around $25 million flowing through the system because that would represent the routine, higher volume transactions," Eckel says. "That is where the real savings come from." So far, based on the contracted pricing it has seen, Ametek is reporting an average of 16% savings with 2,700 users across 27 sites.

In addition to the Oracle system, Ametek is using ICG Commerce for catalog management. ICG has integrated several of its prebuilt catalogs with Ametek's Oracle procurement software so Ametek could immediately access content and begin realizing savings. To date, AMETEK and ICG Commerce have implemented seven categories on ICG including electrical, industrial, janitorial, lab, office and safety supplies, and power transmission and bearings, with plans to add additional categories over the next few months.

"It would have taken us a significant amount of time to develop the catalog content in-house," Eckel says. "And because the categories had already been strategically sourced, ICG's catalogs helped bring significant hard-dollar cost savings."

The diversity of Ametek's divisions is evident in users' reactions to the new procurement system. The more computer friendly divisions have adopted the system with enthusiasm while some of the more traditional businesses have struggled with its use. For most of the first year, Ametek tried to encourage its requisitioners to use the system, but by the end of 2001, the plan was to issue a stricter mandate for use of the system.

Suppliers have been very supportive of the system and some are so advanced in working with e-procurement that they are assisting Ametek in its adoption instead of the other way around.

Later this year, Ametek plans to begin experimenting with reverse auctions in select businesses and decide how widely the technology can be applied. Also on the agenda is moving direct material acquisition to the Oracle system and more international adoption. But for now, it is indirect spending that gets the attention.

"We really want to drive compliance to the indirect because it's easier emotionally," Eckel stresses. "It's also easier to install. We want to get the adoption rate up and then we'll start looking at how we will handle direct materials."