With a company as big as Vodafone, shifting how the company buys is no small change. But this year, the London-based telecommunications giant with operations in 60 countries and $60 billion in revenue did exactly that. After rigorously reviewing its spend, Vodafone made the switch from decentralized buying to a center-led commodity-based structure.

Rewind a few years to March of 2003 when Detlef Schultz, Vodafone's global supply chain management director, came aboard. At that time, each of Vodafone's companies had its own supply chain management department, which acted on its own. "In the past everyone was working independently," Schultz says. "They were very successful and were under the impression that they didn't need to do anything with anyone else."

That's not how the company wanted to continue, though. Schultz was hired in the then-new global supply chain group to make the most of Vodafone's huge global presence and scale in purchasing. As an example, Schultz cites Vodafone's first attempt at more globalized buying. It had a strong supplier relationship for a key commodity, so the idea was that it should take the lead in the entire company in procuring that commodity and negotiate one price for all Vodafone companies, instead of each company forging ahead on its own.

This approach, however, "only gave limited success," says Schultz, since it was too broad to work with all purchases. The company decided to take a good look at what it was buying across its global supply chain and retool its strategy according to what made sense to buy globally, and what made sense to buy locally. There were still many commodities that could be bought more efficiently by one purchasing representative for the whole company, but some items and services—like concrete for a building foundation or warehouse management tools and services—made a lot more sense when bought and managed locally.

"We established centers of competence globally, with people who really knew their stuff in each category," says Schultz. These global centers managed the 200 categories Schultz and his team defined after poring over spend data they'd gathered since implementing an e2open spend analysis tool in 2004. At the time, no one in the company was really sure how much money each supplier was paid, not even the CFO. Schultz started tunneling the spend data through the analysis tool, which "helped Vodafone to start to look into category management, because up until that point we only had anecdotal evidence on how our suppliers did," says Schultz.

The software Vodafone used allowed the company to conduct biannual performance reviews of its top suppliers and provide metric-based feedback to the suppliers. "The suppliers appreciated getting clear and concise feedback on what they had to do better," Schultz says. Measuring suppliers' performance also allowed Vodafone to have a clearer understanding of who would work best as a supplier for global-scale purchasing.

As soon as the company defined its procurement categories, it set up four procurement models for specific tasks within company-wide purchasing:

• Global catalog team—Works globally to set up a catalog for all operations centers to use.
• Best practice sharing team—Shares approaches for buying local commodities or services from an operating company that has established the best practice.
• Purchasing council—A category manager-led buying group that does supplier selection as well as overall category strategy.
• Project taskforce—For projects that span both local and global procurement needs, manages cooperation between the two levels for a specific project.

The next step was to get all the operating companies on-board with this new procurement plan and have them sign a service level agreement. In order to do that, Schultz in turn asked the COO of each company what they wanted to get out of procurement in terms of savings, operational excellence, and governance. That way it wasn't just an organization change being pushed onto each company, but rather a give-and-take.

In essence, Vodafone established one procurement organization to work for all its companies, instead of having smaller satellite operations working independently. The pieces have all recently fallen in place for this reorganization plan, and already procurement is working much more smoothly than before. "There's a level of cooperation, which gives us the opportunity to take some risks and go new ways," says Schultz. "Instead of buying just hardware and negotiating prices, we developed one operational company and developed a model where suppliers bid electronically based on one total solution."

Every 30 days, Schultz and his supervisor report to the Vodafone executive committee on savings obtained through the supply chain, sourcing decisions made in the past 30 days and what will happen in the next 30. The board has liked what they've seen, says Schultz, and "now there is high interest in supply chain activities."

This is already pushing Schultz to take the company's supply chain strategy to a new level. Schultz is currently getting ready for a move to Luxembourg, where he will join all the material category managers in a new procurement organization, created exclusively for Vodaphone. "We will negotiate on behalf of all the operating companies, which makes the processes leaner and more cost efficient," he says. "Suppliers love it because they only have one customer to deal with."



Performance bonuses are only awarded when all category leaders deliver results jointly, which fosters teamwork. “The spirit of being one organization is the spine of a successful team,” says Schultz. “When you win awards, it makes everybody proud.”