Vic Venettozzi, vice president of purchasing and real estate, Schneider Electric North America (SENA) likes to talk about the beautiful simplicity of his company's buying structure. Success achieved by the purchasing operation, he says, is a result of "the speed by which we can build leverage and consensus."

Global suppliers (defined by Schneider as those that sell goods and services to more than one of the company's three regional divisions: the Americas, Europe, Asia) provide SENA with up to 50% of the company's production purchases. International suppliers (those that sell goods and services from one region—Europe or Asia—to North America) provide SENA with another 10% of its annual buy. Domestic suppliers provide the rest. "I'd like to see my competition even come close to that," says Venettozzi.

Headquartered in Paris, France, Schneider Electric is a global electrical parts manufacturer with 2001 sales of approximately $8.7 billion. The company's North American division, headquartered in Palatine, Ill., had sales of $2.7 billion in 2001. Schneider brands marketed by SENA in the U.S., Canada and Mexico include Square D, Telemecanique, Federal Pacific, Federal Pioneer, and Merlin Gerin. Schneider Electric's global annual spend is $3.7 billion.

In his post, Venettozzi is responsible for purchasing real estate, transportation and for incoming supply chain management for the U.S., Canada and Mexico. With experience in operations, he began his career in purchasing at the Micro-Devices Division of Emerson Electric in 1985 before moving to Square D in January 1991 as purchasing manager—new business development. (Schneider purchased Square D about 10 years ago.) He was named vice president, purchasing and real estate for SENA in January 2001, and is currently based in Nashville, Tenn.

Venettozzi reports to Joellyn Willis, senior vice president of operations, SENA . Formerly vice president of purchasing, she is responsible for creating SENA purchasing's organizational structure and developing an initial purchasing strategy about six years ago. Her five-year plan was completed about two years early, then updated by her successor, Wes Hawkins, vice president of purchasing and transportation.

Says Venettozzi of the organizational structure: "Everyone from my administrators on up through the commodity managers and directors report in one big pyramid, which is a big part of our ability to do things very quickly."

Venettozzi's responsibilities also include serving as representative to the Schneider Electric purchasing council, which consists of his counterparts who represent the company's European and Asian divisions. These counterparts hold positions similar to Venettozzi in their respective regions. (The company is working on standardizing the organizational structure across its purchasing operation.)

The purchasing council guarantees that best-practice processes are used worldwide, and the company throughout the world is adopting many of the processes used in North America. Still others are adapted from other Schneider divisions.

Bernard Delvallee is vice president, corporate purchasing, Schneider Electric based in Grenoble, France. Corporate purchasing is, in the words of Venettozzi "a lean group designed to ensure that the company is using its leverage to its best advantage." It also maintains a global decision support system and corporate level performance reporting.

The company's global buy is divided into four markets that the organization calls Type 1. These markets—raw materials and production means, services, fabricated components, and electronics and electrical—are headed by market directors based in Grenoble.

Reporting to the market directors are Type 1 global commodity managers. There are about a dozen of these managers, based all over the world. For example, there is a global commodity manager responsible for the company's ferrous metals purchase. He reports to the raw materials and production means market director. Says Venettozzi: "If we at Schneider Electric North America are not buying commodities corporate purchasing considers 'global' on a worldwide basis we are immediately placing ourselves at a disadvantage."

Global market analysis determines into which category a commodity falls. Remaining commodities purchased by Schneider are divided into regional (Type 2) markets and local (Type 3) markets. Corrugated packaging is a regional commodity. Local market commodities are buys handled typically by individual plant locations.

For suppliers categorized as Type 1 markets, Schneider Electric corporate purchasing has created a "global supplier club." Importance to suppliers of being asked to join the club (and it is a club that a supplier can be asked to join and to leave) can be compared with being asked to participate in the company's new product development activities.

There are about 60 companies that service Schneider in at least two of its three purchasing regions, which places them in the global supplier club. These suppliers are not simply exporters, Venettozzi stresses. "They are truly interactive with the company's plants located in these regions, and recognize Schneider as a global entity."

As such, global suppliers have special privileges. Schneider provides them with their own Web sites on the company intranet and holds annual supplier events solely for club members. The company invites the suppliers to new global product development programs and informs them first of capital expansion projects (i.e., new plant openings). It also provides the suppliers with early news on the company's business conditions.

An example of a Schneider global supplier is EMS (formerly Texas Instruments). The company supplies materials (bonded metal) to all three of Schneider's divisions, has negotiated a global contract with the company, and participates in new product development in Europe and North America. Other global suppliers are Lati, which provides the company with thermoplastic resins all over the world, and American Express. In fact, about half of the global supply club members are U.S.-based companies that have grown from the North America base to worldwide Schneider sources.

Schneider Electric also has a fairly broad IPO (international purchasing office) organization. International purchasing managers located throughout each of the company's three regions—Hungary, Bulgaria, Poland and the Czech Republic in Europe; India, China, Taiwan and Singapore in Asia and Mexico and South America in the Americas—have responsibilities for such activities as sourcing, research and market analysis. "It keeps us from having to go all over the world to do sourcing," says Venettozzi. "Although we visit the regions, the IPOs do the bulk of the work."

Each year Schneider's corporate purchasing organization profiles the world market for commodities the company buys every day. As such, "we ask the international PM in Europe about commodities in his or her region which could be low cost to North America," says Venettozzi, pointing out that labor and tariffs can shift and change these scenarios. "Then, we create an opportunity matrix which shows that a flow can be established. We pursue these as annual goals for each region and each country in which Schneider operates."

While each plant works directly with the supplier, the IPO has an immediate response team that handles issues that may crop up from time to time.

Working with the IPOs, SENA purchasing directors analyze world markets and determine instances in which North America has capability to establish a low-cost international flow from another region, say, Taiwan for fasteners. "We actually get to that level of detail," says Venettozzi. "Then, we turn the analysis over to the corporate commodity managers who identify specific projects to which the international flow may apply." For 2002, there are internationalization projects in process for such commodities as castings, powdered metal, cable assemblies, coils and molded parts, among others.

While there are all kinds of opportunities to establish international flows, commodity managers go after and attack distinct projects. "Every year, there's a list," says Venettozzi. "Because of the cost, complexity and availability of resources, we optimize the number of internationalization projects we undertake each year, typically pursuing about 20-25."

International suppliers can very rapidly become global suppliers. An international supplier, Venettozzi explains, is established by purchasing for the good of one country or region. A global flow, for its part, is for the benefit of multiple regions. "Say, for example, that we find a good supplier of printed circuit boards (PCBs) as we did in China. Initially, this supplier was 'international' with a flow established between China and Europe. Then North America added its requirements and the supplier became classified as 'global.'"

Directors analyze worldwide market trends and forecasts and report their findings each month to the commodity managers. In addition, there are quarterly conference calls/Net meetings between Type 1 directors and Type 2 global commodity managers.

To help facilitate this, Schneider's purchasing organization has built a set of tools:

• PUMA, a Web-based application that helps commodity managers prepare for global negotiations. "So, when a Type 1 commodity manager calls a play on steel, every Type 2 correspondent needs to use PUMA to ensure the data in the system is negotiation quality," explains Venettozzi. "Then, with one push of a button, PUMA will roll up the negotiation script. It's a tremendous time saver. PUMA is probably preparing a dozen global negotiations simultaneously at any given time."
• SYMPA, a worldwide material price trend and productivity accounting tool that enables the executive committee to track progress of the corporate purchasing organization.
• SMS, a supplier management system where information on all primary suppliers worldwide is kept.

Venettozzi's counterparts in Europe and Asia work with similar organizational structures. "We are reengineering the European operation to look more like North America. We have Europe split up a bit too much into individual countries. We want it to have more of a regional look like North America. Once that is done, we'll move that much faster and each of these tools will be used everywhere."