GSMS provides real-world advice on hot issues

Staff -- Purchasing, 11/3/2005

Can procurement provide competitive advantage? "Absolutely," said Alcoa CFO Richard Kelson in the keynote presentation at PURCHASING's Global Supply Management Symposium in October. "Almost everywhere we turn I can see the purchasing organization providing competitive advantage."

The keynote entitled Your Next Job—Chief Procurement Officer was hosted by chief editor Paul Teague and focused on the relationship between the CPO and the CFO, using Alcoa as a best-practice example. Alcoa's CPO Christie Breves spoke about how the executive-level sponsorship of commodity councils helps Alcoa's procurement group drive initiatives and ensure supply.

Kelson also addressed the issue of capturing and tracking cost savings within Alcoa. "The controllers of each business group sign off on what's been captured and reported in the global database. It requires that everyone understand how well we've done vs. a set of agreed upon metrics." Breves also pointed out that Alcoa has internal audits on all savings numbers, which adds another degree of integrity.

"But what's most important is being more involved in the planning and designing process to identify and understand the opportunities early on at the businesses," said Breves. "For example, we buy a lot of resins. We want to partner with suppliers that can provide an innovative solution that will help our customers meet their needs."

The Alcoa executives also highlighted the company's emphasis on "globally competitive sourcing" in which the company strives to push $200 million each year to low-cost regions. "The real measure is what you are sourcing from low-cost countries to bring into high-cost regions," Breves said. "We track that measure separately. Alcoa is becoming more global, instead of just multi-regional."

Low-cost Country Sourcing is a hot topic for buyers and was the focus of an session at the Global Supply Management Symposium. Ron Torten, vice president of global sourcing technologies at the semiconductor products group of Agilent Technologies, described his organization's goals and strategies for moving to low-cost regions, including Agilent's risk mitigation strategy for moving to low-cost regions. Also in this session, Wally Krey, president of global services at Leggett & Platt, provided a deep-dive on his organization, which is a key to Leggett & Platt's global sourcing and distribution strategy. In his session, Krey discusses the vision, goals and deliverable for the Global Services organization as well as some specific challenges around inbound materials from global regions.

Another hot topic at the Global Supply Management Symposium was addressed in a session entitled How to Survive Energy Price Spikes focused on the erratic nature of energy prices, notably in the wake of hurricanes Katrina and Rita. But, Derek Burleton, associate vice president and senior economist for TD Bank in Toronto, has some bad news for buyers: The days of cheap crude oil are over. "Damage to the U.S. energy infrastructure by the two hurricanes has added to the substantial jitters about supply that had been present already for some months," he said in the session. "The laws of the oil-price cycle have not been repealed. The demand has been robust for crude oil, the tight supply is an issue and we need to think about what we can do if we cannot maintain supply."

Procurement professionals interested in How Lean Improves Supplier Performance were given detailed advice from Phil Krotz, director of lean supply at avionics firm Rockwell Collins in Cedar Rapids, Iowa. The session provided a look at how Rockwell Collins embarked upon the Lean journey in the 1990s and what the company has done to become PURCHASING magazine's Medal of Excellence winner for 2005.

"Lean is all about reducing waste and delivering value to our customers," said Krotz. "We started in the late 1990s with the Lean toolsets and by end of the 1990s we were looking at core processes like design and development and manufacturing at a very high level. From that, we went into value-stream mapping to drive the waste out and target areas for improvement."

Under the initiative, Rockwell Collins leverages 21 commodity teams in both direct and indirect supply. Suppliers have improved product flow by as much as 90%, identified and reduced nonvalue-added activities by 67%, reduced cycle time by 60% and reduced work-in-process by $150,000.

Suzanne Puccino, vice president and director of corporate services for Parsons Brinckerhoff, described the process of centralizing purchasing processes in a session entitled Spend Control for Distributed Organizations. Puccino was joined by Scott Hays, manager of product marketing for Epicor Software to discuss how Parsons Brinckerhoff has reined in maverick buying by focusing on process improvements, accelerating buying processes, and leveraging technology to reach across physically distributed plant operations and office locations.

In moving to a new system from Epicor Software, Puccino described how Parsons Brinckerhoff targeted suppliers that were large enough to handle its requirements, and could process pcard transactions.

"We wanted to decrease the number of vendors we used," says Puccino. "For example, in IT, we were buying hardware from almost every vendor there was. We wanted strong national contracts and reduced time and labor in contracts. We wanted standard policies that were common across areas. We were getting invoices and could not tell who had signed them so we needed to standardize that process somehow."