Microsoft's procurement reboot delivers millions in savings

11 May 2012

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11 May 2012 | Rebecca Ellinor in Baltimore, US

An overhaul of Microsoft's procurement team structure is helping to deliver millions of savings to the technology giant.

Speaking in a session at the Institute for Supply Management's (ISM) 97th annual conference in Baltimore in the US, procurement director John Stephens said when he started at the company 17 years ago there was no procurement department.

Stephens, who is now senior director in Microsoft’s employee experience category, which includes facilities management, cafés, business travel, real estate and vehicle fleet, said prior to the overhaul purchasing had a centralised team but three years ago it was decided a new set-up was required to make it more effective.

The company has eight business divisions, more than 92,000 employees, operations in 112 countries and made almost $70 billion (£43 billion) in revenue last year. In terms of procurement, 160 full-time employees in 33 countries manage around $16 billion (£9.8 billion) of spend. Stephens said with contract labour and outsourced partnerships, the procurement organisation touches around 100+ countries, and the “old model didn’t work very well”.

“It’s a fairly significant challenge to connect and collaborate across all of these, and there’s things that we want our global procurement organisation to be and how we want to be perceived so we can create the most value,” he said.

It set about changing its structure to focus on three key areas – market expertise, being aligned to the business and functional excellence. Jobs were reorganised with three key titles introduced – global category managers, procurement business partners and procurement managers. That meant a change to the jobs of around 70 per cent of the team, which necessitated a huge change management programme.

Over three months, buyers were helped to become accustomed to their new posts in part by using role-play scenarios to clarify what they would be responsible for. While Stephens admitted there was a dip in satisfaction among both staff and stakeholders during this period of uncertainty, only a handful of procurement staff left as a result and surveys carried out since have seen a rise in satisfaction levels.

Another key change, he said, was the introduction of ‘Sync Week’, during which the whole procurement staff comes together and at the end of a few days together they have a clear plan for their categories that will add the most value to the business. The most recent of these annual events, held this month, led to 196 projects having been identified and agreed upon across the globe. These plans will feed into the company’s business plan for its new financial year, which begins in July. Stephens said savings was just one of the value drivers and projects from the 2011 sync week are on track to save the company $700 million (£433 milion).

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