The consensus builder

Tyco's Shelley Stewart, Jr. named Purchasing magazine's first Supply Chain Manager of the Year

By Paul E. Teague -- Purchasing, 12/8/2005

It was bright and sunny that August day in 2003 when Shelley Stewart first walked into the Tyco corporate headquarters in West Windsor, N.J. as the new vice president of supply chain.

Sunny inside as well as outside.

A year earlier, a new CEO, Ed Breen, had taken over the reins and begun the process of restoring the company's good reputation. Now, Stewart would join Breen and other executives in their efforts to restore Tyco's financial credibility.

The company had been through a wringer of sorts: soaring debt, falling stock price, a series of investigations, firings and restructurings. But, where others may have been transfixed by the problems, Stewart saw the opportunities, particularly the opportunity to remedy a large unleveraged spend of about $15 billion. "The challenge attracted me," he says. And that attitude, as well as his experiences at Raytheon, UTC and Invensys, is what had attracted Breen and Naren Gursahaney to Stewart during the several interviews before his hiring. Gursahaney, the company's senior vice president for operational excellence, was the person Stewart would report to.

Two years and four months later, it's obvious that the optimism of that first day was justified. With an emphasis on driving value and a penchant for building consensus, Stewart and his team have built new systems to better manage the company's now $24 billion spend. And, through more strategic sourcing they are on their way to reducing the number of suppliers from the current 360,000, as well as achieving the goal of a billion dollars of savings by 2006.

"Shelley has done a great job of building a diverse and impactful global supply chain," says Breen.

Adds Gursahaney, "Under Shelley's leadership, we have assembled over 200 teams from around the world that have delivered significant savings to the bottom line."

For his efforts and accomplishments at Tyco, the editors of PURCHASING have named him the magazine's first Supply Chain Manager of the Year.

Those accomplishments, which Stewart credits to his leadership team and all of his extended sourcing teams, could fill volumes. Here is a partial list:

• Expansion of the Tyco sourcing teams, which among other things help pull together individual spend data from divisions throughout the company so the Leadership Team, composed of segment vice presidents and members of Stewart's key staff, could analyze it and find savings opportunities. Dario Santana, now the president of ADT Latin America, had started the team concept and had already made some progress before Stewart came on the scene. Says Gursahaney, "because of Tyco's decentralized history, bringing businesses together to develop sourcing strategies is an accomplishment in itself, and an unnatural act for us."
• Development of a cross-company data warehouse on spending, with data from 195 sources and 36 countries. Stewart and his team continue to work on the data to ensure its accuracy.
• Formation of Initiative Teams to source multiple commodities. There are now 229 teams sourcing 30 categories of spend.
• Establishment of low-cost-country sourcing teams in India and China, and in 2006 in Eastern Europe, which Stewart thinks is an area that holds great promise for sourcing.
• Initiation of e-sourcing to reduce costs. In the first nine months of 2004, he and his team put $500 million worth of spending through reverse e-auctions. In fiscal 2005, ended September 1, they added $800 million more. They have also trained some 500 employees in e-sourcing.
• Extension of procurement's oversight to nontraditional areas. For example, working with the company's chief counsel, Stewart and a cross-functional legal team cut the number of product-liability counsel from 200 to just one.
• And introduction of a series of diversity and training initiatives that are bringing new talent into the company while upgrading the skills of existing employees.

The results so far: $455 million in savings ($318 million net) in fiscal 2004, and $402 million (net $191 million) in fiscal 2005.

"Shelley has worked hard to strengthen his relationships with our key supply chain segment partners, generating cost efficiencies and adding value to our bottom-line results," says CEO Breen. "He emulates what great leaders do: He recruits diverse talent, develops his employees and moves them out to businesses to feed talent to the organization."

As a measure of his own trust in Stewart, Breen recently named Stewart the corporate winner of Tyco's Chairman's Award.

That will come as no surprise to Kent Brittan, chairman of Hartford, Conn.-based UTC's International Operations. Several years ago, when he was UTC's vice president of supply management, he hired Stewart, and together they and their team found ways to cut costs by a billion dollars over four years. "He is a purchasing pro down to the core, and has a terrific way with people," Brittan says. "He was my ambassador to other divisions as we enforced a major change in company behavior by leveraging the power of the corporation so we could buy as one UTC."

His success at UTC—and later at Raytheon and Invensys—came about, at least in part, because of his consensus-building talents, and they have helped him at Tyco too. "He works hard to find 'win-win' opportunities, even with our suppliers," says Gursahaney who teases Stewart about his 'priceberg' charts that highlight hidden costs. "He understands business implications beyond price."

And, say his colleagues, he works hard to instill a best-practices mindset. Benchmarking is part of that effort. Stewart benchmarks for cost-savings analysis and development of strategy, checking closely the data from the Procurement Strategy Council.

But Stewart doesn't restrict himself to the day-to-day strategy and tactics of purchasing. He is a leader in diversity and educational efforts in the profession. He has established a goal for Tyco to increase its spend with diverse suppliers 10% year over year starting in 2006, and established the tracking mechanisms to monitor progress.

He also organized the first Black Executives Supply Chain Summit with Howard University and ISM to discuss issues of career enhancement for African Americans and other minorities. Says Harriet Michel, president of the National Minority Supplier Development Council, "Shelley Stewart is a change agent who has pulled the diversity issue along with him throughout his career."

Since his days at UTC, he has worked closely with Howard University and helped develop a supply chain curriculum there, in cooperation with UTC, IBM, Eaton Corp., Raytheon, Dell, and Ariba. He is a guest lecturer in the program and reviews curriculum and courses. Additionally, he works with interns to get them jobs. The program has graduated over 30 students in its four years, and all have jobs in the industry.

Within Tyco, he created a Supply Chain Rotational Program, where select MBA students work full-time at the company on a two-year rotational basis.

And that's not all. He has co-authored "Straight to the Bottom Line," a new book to guide purchasing and supply chain professionals in how they can add value to corporations.

"Throughout this field, we have to continue to find ways to drive value," Stewart says. "We have to keep working at it." He certainly will.