The key to buying IT goods and services in an extremely cost-competitive environment: Involve purchasing. Early.

This is especially true for electronics manufacturing services providers (EMS) like Celestica. There, purchasing works closely with the organization's information technology (IT) operation to negotiate agreements for IT hardware, software and services.

As an EMS provider, Celestica produces computer and communications equipment for such high-tech customers as Hewlett-Packard, IBM, Lucent, Motorola and Sun Microsystems. In 2001, the company's revenues were more than $10 billion (U.S. dollars).

Based in Toronto, Celestica has more than 40 locations in 17 countries (North America, South America, Europe and Asia) so its IT function is critically important to the company's success. IT supports the company's supply chain management and global purchasing activities, two core competencies. What's more, IT is one area earmarked for further financial investment.

"Given this context, IT is a very important customer of mine," says Laird Gray, manager, global nonproduction commodity management. He has worked for the past 25 years in purchasing positions with increasing responsibility at IBM and Celestica where he was a buyer and a contract administrator before assuming his current post.

While Gray is currently responsible for purchasing a host of indirect goods and services, he and his team spend a good part of their time focused on IT.

For the IT buy, Gray has assembled a team of commodity managers who negotiate global and regional contracts for hardware, software and services on behalf of all Celestica locations. (Some buys are sourced by the locations themselves. Such "site specific purchasing" is governed by a "rules document" that guides the sites as to when to purchase on their own and when to approach corporate with their requirements for IT goods and services.)

Celestica's hardware purchases include servers, desktop and laptop PCs and telecom equipment. Software application buys run the gamut from basic desktop operating systems through more complex packages that manage the company's MRP (Manufacturing Resource Planning) and SCM (Supply Chain Management) systems.

As Celestica's IT operation drives to be the industry benchmark in performance and cost measures, it's critically important that purchasing has responsibility for the buy. As such, purchasing's role is to provide expertise during the RFQ (request for quotation) and negotiation processes, consistent with company audit processes. In addition, purchasing brings capability in terms of the supplier selection process, using internally developed comparative evaluation metrics. Another purchasing strength: Managing internal and external resources. "Our experience managing relationships with suppliers translates into superior contracts," says Gray.

The commodity managers are involved in the IT buy in one of two ways: The first occurs when the team receives site-specific requirements based on the rules developed by the organization from the locations. The second is when they receive corporate requirements for a specific product or service from the IT organization (i.e., IT program manager, IT manager or IT vice president) in Toronto.

The team works closely with IT at all levels (manager through executive). "We clearly understand IT's goals and work closely on larger purchases to ensure that we align together exactly to accomplish them," says Gray. "Our success comes with planning, relationship building and integrity, all of which are built over time." (A low-dollar item doesn't entail as comprehensive a bid process as a more complex product.)

As for IT's role in the purchasing process, the operation typically selects a representative to work with the commodity managers. Typically, purchasing is the negotiating team leader. IT takes the lead when the purchase is considered extremely technical. Says Gray: "Together we present a powerful negotiating tool."

Benefits to Celestica of using skills of both purchasing and IT in the buying process for hardware and software include substantially improved contract terms and conditions which include world-class pricing, technology upgrades, flexibility of supply and standardization of IT hardware on a global scale.

Developing standards for both hardware and software is important to Gray and his team. With the breadth of Celestica, the number of locations and recent acquisitions, there's a clear need to assimilate and maintain common tools and platforms across all the sites, he says.

As leader of the multifunction IT buy team, the commodity manager focuses on the RFQ process to ensure that the company maintains a competitive environment throughout. It is extremely important to Celestica to conduct fair and equitable bids.

"That's one of the more important reasons purchasing is involved early in the process," says Gray. "We want to ensure that we are not going to compromise the competitive arena by showing preference to one supplier or another before we have gone through all due diligence."

As an EMS provider, Celestica often purchases IT hardware from some of its customers. One instance involved a purchase of computer servers. "Such situations really reinforce the rigor of our supplier selection process, the fairness and completeness of our RFQ process and how well the team controls communications, extremely critical during these types of transactions," he says. "Ultimately the decisions the team recommends are decisions the company acts upon."

Purchasing involvement begins once an internal requester (in this case, IT) has approval to proceed with a project. "It's at this point that we know there is a firm intent to purchase," says Gray. "Once we have that initial meeting with IT, we discuss evaluation methodology, qualified suppliers and, depending on complexity of the deal, whether to engage a third-party benchmarking company with the market evaluation."

Next the team develops strategy for issuing a RFQ that incorporates the detailed specifications. "We decide on suppliers capable of performing the product or service that's needed, conduct the RFQ and negotiations processes and then formalize and execute the contract," he says.

For a complex deal, executive supply chain management and executive IT management make the final supplier selection decision jointly.

Consistent with corporate strategy (devised in light of the fact that the company is in an extremely cost competitive environment), Gray's team of commodity managers works to ensure that every purchase aligns with similar cost and performance benchmarks—and not only at the time of purchase. "My team adds value not only by negotiating the agreement at the front end, but also by having a vision to negotiate terms and conditions that are cost competitive over time."

And with the quick pace at which technology evolves (particularly in contract manufacturing), Gray and his team don't hesitate to go back to the negotiating table with suppliers. "We will renegotiate contracts on which the ink is literally just starting to dry if we believe we can get a better deal."