The transformation of a procurement organization at a small company with a manageable spend should take several years. But how long would it take to transform the procurement practices at an $18 billion 130-year-old North American telecom giant that hadn't yet seriously addressed major cost management issues or created any really new initiatives in the area of supply chain and procurement?

Twenty-four months, if you ask Toronto-based Bell Canada.

As of late 2005, Bell Canada had a lot of long-standing supplier relationships and categories of external spend that hadn't been competitively evaluated, according to Jeffrey Gallant, vice president of procurement, who, along with some other procurement professionals from the outside, was brought in by Bell Canada in January 2006 to launch the transformation process to procurement excellence by reviewing the internal processes used by the procurement organization.

The new team was given a stretch goal for the ensuing 24 months that roughly translated into expected savings of about 12.5% from the total external spend budget. Gallant and his team had their work cut out for them and quickly set about creating and implementing plans for the first year. The first three steps involved staffing and team issues:

1. Reassessment of the entire procurement organization from a skills standpoint.
2. Reorganize procurement teams into process-focused sub-teams in sourcing, supply-base management, analytics, procurement tools and process improvement.
3. Retrain the procurement team members on strategic sourcing, expectations of how to manage the supply chain related to continuous improvement, compliance management, contract management and strategic cost management.

As a result of the first three steps, everyone in the procurement organization was speaking the same language. "Everyone was well-versed in a single process, how to manage the supply base, and how to strategically source new opportunities," says Gallant.

From there, Gallant's team began aggressively looking at every dollar that the company spent in order to determine where cost could be taken out, while at the same time either maintaining or improving service to the department's internal and external customers.

"We completed a full spend analytics review," says Gallant, which involved creating a single database with all of the company's accounts payable systems, categorizing the spend, and then reviewing the spend analytics for the company to determine what categories of suppliers should be addressed first.

Another focus at this stage was the indirect materials and services spend. Typically, according to Gallant, a lot of companies start with low-hanging fruit on the indirect side, such as office supplies. "We decided to focus on the big-spend categories first, such as commercial print and contract labor," he says.

On the direct materials side, the company began working with its large strategic telecom infrastructure partners, with which it spent hundreds of millions of dollars a year. "In some cases, we renegotiated business with them while in other cases, we looked for places where we could shift market share in order to create some competitiveness," Gallant says.

Also in 2006, Bell Canada created an offshore supply base initiative for the first time, including call centers, IT services and some back office functions. "During 2006, we spent virtually all of our time sourcing and negotiating large pockets of spend," he says. "We ended up being able to address about 65% of our external spend by the end of the year."

In January 2007, the department began the evolution to a more category/supplier management organization, working with the supply base to collaborate on finding the next opportunities that would achieve additional cost savings and improved efficiencies for all parties.

It was also critical to grow standardized business processes from a procure-to-pay standpoint in parallel with the other initiatives, so that the company could lock down the savings that it initially negotiated. Part of this involved utilizing e-procurement tools to place orders, on-line auctions, and electronic RFPs.

"While the whole two-year effort was initially cost-focused, it evolved into a strong business process, complete with electronic tool utilization, and standardizing all of the procure-to-pay process, to make sure that all of the negotiated savings would actually flow through to the bottom line," says Gallant.

By the end of the 24 months in December 2007, Bell Canada's procurement organization had addressed just over 82% of the company's entire external spend. "We hadn't dealt with some unique and specialized areas, such as some of the financial and audit relationships that the company has, as well as others that are negotiated by the board of directors," Gallant says.

Most importantly, the 12.5% goal was achieved.