The structure of many global sourcing organizations starts at the top and moves downward through an organization chart. While this traditional model works well for companies with one business, it can be somewhat limiting to diversified companies with multiple business units. And worse, it fails to capitalize on the individual strengths that each division or business unit can bring to the table.

More companies today are looking into a custom-designed procurement strategy to give its individual business units the flexibility they need while centralizing certain functions or aspects that make sense.

One organization that realizes the value of a custom-designed procurement strategy is Tyco International in Princeton, N.J.

Tyco is a large corporate conglomerate that has been developed through numerous acquisitions. "There was a time when Tyco was acquiring four to five companies a week, but it wasn't devoting a lot of resources to integrating those companies," says Russ Davis, senior director of corporate sourcing at Tyco. Because of that, the ability to have clear integration of all these segments and divisions became a challenge. When Shelley Stewart, senior vice president of operational excellence and CPO, and Davis joined Tyco four years ago, there was no real corporate sourcing organization in place—each of the very diverse business segments did its own sourcing.

"We began working with A.T. Kearney to set up a number of sourcing processes and initiatives," says Davis. When Stewart and Davis began to run these, though, the differences between Tyco's many business units and companies began to show themselves. One difference that became clear was that some of Tyco's companies had well-integrated sourcing teams, while others did not. In addition, each company had a number of divisions, some of which had multiple locations. This meant that getting to the actual stakeholders was a challenge. For these reasons, running a corporate-wide initiative became very challenging.

"We realized what we really needed to do first was to create a team that could work in this environment, so that we could begin to leverage our spend," continues Davis. This led to looking at the concepts of visibility, stakeholder mapping and team development.

Gaining spend visibility meant mapping how products were sourced and how decisions were made. From this evolved a standardized strategic sourcing process that involves seven steps. These are:

Davis: “There’s no standard formula [for creating sourcing teams]. Each and every team requires the appropriate amount of analysis, stakeholder mapping and identification of spend.”

2.Create a go-to-market approach.

3.Open the supply base and identify all viable suppliers.

4.Decide the most appropriate execution strategy.

5.Conduct aggressive negotiations, and select suppliers.

6.Operationalize supplier agreements.

7.Monitor the market and supplier performance.

Once the standardized process was in place, Tyco worked to customize the process to each segment. Tyco refers to this as stakeholder mapping. Stakeholder mapping has a number of steps:

* Determine who the stakeholders are and what their needs and concerns are.

* Identify the key decision makers and methodologies.

* Review the measurement and reporting structure.

* Assess the maturity of the existing team, activities and structure; then address skill and resource gaps.

* Identify the best team players.

* Drive synergistic opportunities.

The next stage centered on development of customized sourcing teams based on the information gained during the previous processes.

"There was no standard formula," says Davis. "Each and every team requires the appropriate amount of analysis, stakeholder mapping and identification of spend. This led to the creation of a number of different types of teams."

To put it another way, while Tyco worked to create a standard process for its reporting, it was very flexible with team creation and the company ended up with a number of different types of successful teams.

For example, in the IT spend, "We created a team using a model that allows the stakeholders, who are the subject matter experts, to coordinate and run the sourcing activities with minimal sourcing support," reports Davis. Stakeholder mapping showed that the stakeholder base was very knowledgeable and engaged. Four sub-teams were created: hardware, telecom, software, and resellers. Subsequently, the first initiatives designed at harvesting the low-hanging fruit proved the team's ability to be successful.

Another example is the energy sourcing team. Stakeholder mapping showed that the stakeholder base was also very knowledgeable and engaged. These individuals were often at the plant and business levels. In fact, several segments already had sourcing teams in place.

Since its inception, the company's custom-designed energy sourcing team completed bids and projects that will achieve $17.5 million in savings over a four-year period.

In addition, commodity prices are decreasing as project savings are increasing.