CPOs reveal how to succeed in services procurement

9 May 2012

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9 May 2012 | Rebecca Ellinor in Baltimore, US

Strong communication with suppliers and stakeholders and taking an innovative approach to categories helps lead to success in services procurement, three CPOs have said.

In an executive panel session at the Institute for Supply Management's (ISM) 97th annual conference in Baltimore in the US, the CPOs outlined case studies of their work in marketing, facilities management (FM) and temporary labour. In each case they highlighted the importance of adding value to their business and internal customers, not just cutting costs.

Steven Miller, senior vice president, strategic sourcing and procurement and facility services and support at The Walt Disney Company said his team introduced 360 reviews in the marketing category to ensure suppliers, stakeholders and sourcing meet and exceed one another’s expectations.

Miller focused on three key areas of marketing spend at Disney: marketing research (10 per cent), creative (25 per cent) and media (65 per cent). With the top five agencies in each relevant category participating in the review process, it was an opportunity to ensure Disney was using the right agency in those spend areas and capitalizing on the company’s value-added opportunities. He said the semi-annual approach helped it to develop strategic relationships with partners, identify opportunities and demonstrate interest in the success of its agency suppliers.

Deborah Beavin, CPO at health company Humana, said her team could have saved “a zillion dollars” when it tackled the company’s contingent labour force, particularly given the large mark-ups it discovered through its research, but it had to balance the savings with meeting the needs of internal clients. Her team saved an average of 15 per cent on the category as a result of its work, and as much as 30 per cent in some areas.

She said one of the lessons learned was getting people involved in the process, including HR and senior management.

Dodie Fix, assistant vice president for procurement services at new and used car retailer CarMax said five years ago her team started work to improve FM services - a $25 million (£15.5 million) area of spend for the company.

This, she said, was a multi-year programme to address 10 categories of FM – including asphalt, cleaning, electrical systems, lighting and waste management. She urged delegates to have patience because changes can take “a lot longer than anticipated”. To make them, her team used a standardised sourcing methodology; created implementation and communication plans to keep everyone informed; and worked on change management – especially in areas where stakeholders had become attached to incumbent suppliers, such as the cleaner in their building.

Fix said her team has made more than 30 per cent savings in some categories and averaged more than 15 per cent. She added that it is continuing to leverage savings with ongoing management of the category. “We couldn’t just do the sourcing and hand it back,” she said. “It’s about continuous improvement.”

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