Empower purchasing to leverage opportunities

David Hannon -- Purchasing, 11/4/2004

Packaging giant Greif of Delaware, Ohio is transforming its supply chain operations to focus on reducing costs, streamlining purchasing activities and integrating supply chain operations more closely with other workstreams in the company.

As part of that transformation, Greif is managing its purchasing operations as a separate business unit, instead of a function within its individual business units. To help drive that process, Greif recently named Ronald Brown, a 32-year company veteran, as its vice president of global sourcing and supply chain, a new position within the company with responsibility for supply chain and procurement activities.

"Typically, purchasing is a staff function within a business unit and acts as a buying agent to purchase an established specification at the lowest possible price," says Brown. "Purchasing is not empowered in many cases. What we envision in approaching purchasing is an empowered unit that can leverage the opportunities of the entire enterprise. Instead of top-line growth and increased earnings being the goal, the opposite would apply with a reduced spend for goods and services across the enterprise, which would lead to increased and sustainable earnings. Today, many companies attempt to purchase globally but few actually do because they aren't empowered. It takes a lot of discipline, coordination and most of all empowerment to approach purchasing as a business."

Brown will report directly to chairman and CEO Michael Gasser. Brown began his career with Greif subsidiary Down River in 1972. When Greif divested Down River's wood operations assets in 1997, Brown moved to Greif's headquarters, where he was later selected to head the company's Industrial Packaging & Services North America business.

Brown sees two keys to transforming Greif's purchasing operations—one in place now and the other in the works. The first was the development of an internal spend database to provide detailed visibility into its $1.2 billion spend. Greif developed the tool in-house, connecting it to the two ERP systems in use globally. Currently, about 70% of its spend goes through the spend database now and the company is looking to increase that amount each year.

The second major step is the recruitment and development of a world-class team of purchasing and supply chain professionals.

"I started with a clean-slate organizational assessment," Brown told PURCHASING recently. "We're seeking to fill our organization with world-class professionals."

As a major player in the steel drum and plastic container markets, Greif's major materials spend areas include steel and resins.

"Since steel is our single largest spend and is in such tight supply worldwide, we are now exploring ways to insulate Greif from such market trends," says Brown. "Insulation can come from integration, in what form we are not sure yet. Certainly, ways for Greif to participate in the process upstream back to the mills or downstream through the distribution system are areas that we will investigate to push cost out of the supply chain and share in the savings."

Brown says Greif has always been a strong proponent of price benchmarking in these spend areas and has more recently been leveraging the Elemica online marketplace for chemicals and resins buying.

Another area of focus for the new supply chain chief is the logistics and transportation spend, where rates have spiked recently, according to Brown. Transportation has become such a big factor in Greif's overhaul that the company CEO is monitoring it closely under Brown's leadership.

Supplier consolidation and rationalization is another strategic goal for Greif. The company has developed a detailed supplier scorecarding system to analyze which suppliers are providing the most value to the company.