Using a commodity team of representatives from each of its businesses—Aircraft, Fastening Systems, Industrial Products, Industrial Components and Finance—and its headquarters location in Providence, R.I., Textron Inc. has consolidated its copier buy, reducing purchase costs by 17%.

Led by Ryan Doerksen, manager, indirect materials and services and e-business, Cessna Aircraft Co., Wichita, Kan., the team used a five-step strategic sourcing process through which it determines a baseline spend, develops a commodity strategy, selects a supplier, negotiates an agreement and implements and monitors supplier performance. Use of commodity teams and the five-step sourcing process to consolidate the copier buy is part of Textron's plan to encourage its businesses to work more closely together to drive savings to the bottom line (PUR: Oct. 10, '02; p. 27). Cessna is Textron's largest business unit.

Textron's strategic sourcing process is unique in that it allows for input and approval of progress of its commodity teams after two of the steps by the supply chain council. The council, which is helping to consolidate the company's common purchases and acts as a vehicle for sharing best practices, consists of procurement leaders from each of the businesses.

Prior to formation of the office equipment and office supplies commodity team, the company had been purchasing copiers in a number of different ways. At some businesses, purchasing was responsible for the buy. At others, administrative or IT (information technology) personnel were involved. (Some copiers were connected to computer networks and being used as printers.) Most of the copiers, which were sourced from just about every manufacturer selling copiers in the U.S., were leased.

To begin, each member of the commodity team (an individual experienced at copier buying) had responsibility for collecting spend data and copier requirements for the business he or she represented. Team members also gathered information on the buy from suppliers. "Between these two activities we had a good snapshot of how much money we were spending on copiers and other purchasing information," says Doerksen, who considers this first step challenging, yet critical to the team's success.

One of the first things the team, which evaluated the company's copier, facsimile and office supplies purchases, learned was the importance of segmenting the copier buy into two groups: low- to mid-volume copiers and high-volume, or production, and color copiers. It focused first on the low- to mid-volume copier segment.

Next, the team developed a formal RFI (request for information) and conducted an analysis of the copier market. Based on the market information it gathered, the team sent the RFI to five copier manufacturers. "It was very detailed," says Doerksen of the document, which included specific questions on service capabilities of the manufacturers (i.e., can you service a remote location?).

Responses to the RFI helped the team narrow down the list of potential suppliers to three manufacturers. "At this point, we had a good understanding of where we wanted to take our commodity strategy," says Doerksen. "We learned about digital versus analog technology and all the benefits that come with using the new technology."

After sending out an RFP (request for proposal), the team invited the suppliers to Chicago for formal presentations. "We put together criteria to evaluate the suppliers' bids," says Doerksen. "We had a distinct list, and looked at supplier capability in such areas as product, pricing, productivity, account management, service performance levels, reporting and implementation." The team didn't stop there. It delved deeper into each of these capabilities by asking such questions as: Can the copiers be connected to a computer network? Do they have such capabilities as duplexing and stapling?

The team developed a spreadsheet with detail outlining each supplier's responses. "We looked at the criteria," says Doerksen. "Each of us judged how we thought the suppliers would perform based on the information they provided." This phase of the evaluation entailed a number of teleconferences as each of the team members worked for Textron locations throughout North America.

Once the team decided on a supplier, Doerksen and some of his colleagues at Cessna took the lead in negotiating the agreement. Other commodity team members were involved as well. For Textron, the team entered into a five-year agreement with Imagistics (formerly Pitney Bowes Office Systems) of Trumbull, Conn. The agreement is coterminous, which means that the businesses can add equipment anytime during the contract. At the end of the contract period, all the equipment expires on the same day, allowing Textron to leverage the entire spend during future negotiations. The agreement also includes service guarantees.

For the last stage of the strategic sourcing process, the supplier developed a generic implementation plan, which the business units, working with Imagistics account reps, can customize for their facilities. "The plan takes the businesses through the process of switching out copiers and getting all the new equipment up and running," says Doerksen.

Prior to implementation, the supplier visits Textron sites and conducts surveys on copier usage. "Our goal at a minimum was to exchange copiers currently in use for similar equipment," says Doerksen. "As such, we try not only to reduce costs, but also to upgrade our technology." An option in the agreement allows for the installation of digital copiers, which may be connected to the company's computer network. In so doing, the technology adds such functionality as printing, scanning and faxing, further helping to reduce costs. At Cessna, for example, nine digital copiers now are connected to the computer network.

Replacing equipment that was underutilized (a copier with capability to produce 70 copies per minute being used at, say, only 30% capacity) also helps to generate savings. Cessna, Bell Helicopter and other large business segments whose agreements were nearly expired, were in a good position for such "right-sizing," says Doerksen.

Another benefit: Under the agreement, some of the larger business segments now have onsite support, through which the supplier conducts daily preventative maintenance checks, including the stocking of necessary supplies.

Perhaps the most important benefit is that Textron is now paying only for the copies the equipment actually produces. "Cost per copy is a very valuable tool for us," says Doerksen, who recalls that some sites paid previously for use of machines even during two-week summer shutdowns when no one was using the copiers.

To measure supplier performance, the team has quarterly meetings with Imagistics where the two discuss such issues as copier volume, equipment uptime and supplier response time. Still in the implementation phase, the team has had one informal meeting with the supplier to date.