ProcureCon attendees swap ideas, lessons, business cards

Paul Teague -- Purchasing, 11/3/2005

Want to know how to beat the competition? Follow an "E3" approach.

That was the message Saqqara CEO Keith Scott gave to attendees at the 2005 ProcureCon Conference, held in late September in Scottsdale, Ariz. He delivered the opening address on Day One of the three-day event.

You have to Execute through supply-chain integration, be Effective in bringing about low-cost operations and Excel in bringing together process, technology and people, he said, invoking the three "E"s he was promoting.

Sounds basic, but he added that there's plenty of room for improvement in several areas of purchasing, and the E3 approach can help. For example, Scott said that less than 50% of spend is under contract and less than 10% of spend runs through e-procurement systems in year one. "Users can find products only 46% of the time in online catalogs," he asserts. "Purchase accuracy could improve by 39% if product content was accurate and current."

Scott was one of about 30 vendors and purchasing practitioners to address the more than 200 attendees at the conference. Those attendees came from high-tech companies such as Hewlett-Packard and SPX, as well as major manufacturers such as PPG and Caterpillar. They were there, most said, to learn best practices and get new ideas. They also swapped business cards so they could stay in touch long after the conference ended.

Among the many sessions at the conference were discussions on competitive benchmarks, home-grown vs. off-the-shelf technology, spend consolidation, risk management, globalization, and indirect spend.

The latter session featured Matt McGinnis, director of global procurement at American Express; Stewart Clarke, director of material management at Siemens Medical Solutions USA; and Jim Polak, director of general purchasing at PPG Industries. Rather than making formal presentations, they asked for questions from the audience and built the session around their answers.

McGinnis told the audience that American Express uses a variety of e-procurement tools and has visibility into 98% of its spend. Clarke said he felt that controlling indirect spend is more challenging than controlling direct spend because there are no drawings or part numbers to track. "You have to really understand the spend," he said. He said a third of his indirect spend involves IT. "That's where the biggest opportunities are for me," he said.

Polak, of PPG, agreed that indirect spend has more challenges, but asserted that direct-material spend has bigger challenges. "The difference lies in the size of the challenges," he told PURCHASING after the conference. "When the budget for natural gas is $7.00 per million BTU and the market price is over $12.00, that's a challenge."

He also encouraged others to automate their indirect spend transactions since they are inherently high volume and low dollar. "Neither an enterprise nor a supplier can afford to be manually dealing with indirect spend information," he said. Where should they start? He recommended starting with spend analysis to leverage for savings, then move to e-sourcing tools and then to e-procurement tools to automate the manual requisition/PO and procure-to-pay transactions.

Polak also stressed the need for cleaning data, but added that companies can use e-tools without clean data. "As an enterprise's data becomes cleaner over time, the speed with which an enterprise can source, procure and collaborate with suppliers increases dramatically."

The panel's advice on indirect spend struck a note with at least one audience member. Tracy Daugherty, who manages part of the indirect spend at Caterpillar, told PURCHASING that she believes controlling indirect spend can improve a company's financial position and even its stock price. But among the sessions at the conference that she enjoyed the most was one on how to brand procurement. The most important thing she learned in that session: Develop a value proposition for procurement.