A few items to highlight from CombineNet’s “Sourcing Visionaries” event held yesterday in Chicago.

(1) P&G Purchases

Uldis Sipols, VP, Global Product Supply Purchases at Procter & Gamble delivered the event keynote and, as usual, more than delivered the goods. Although he’s not technically part of the CPOs on the Rise in 2011 series, he should be because he’s doing great things. Uldis began by presenting an overview of “P&G Purchases” which is the name used to refer to its procurement department. With $42 Billion of spend and nearly all of it under management, P&G’s procurement story is very compelling and offers a great example of a very large department operating at a world-class level. The group has a vision statement that is to identify, engage, and strategically manage world class external partners (i.e. suppliers) to drive value for its internal stakeholders. While often aspirational, I believe a procurement department vision or mission statement can be a very useful organizational tool – internally to align a department; and externally to promote the department. Uldis says that P&G Purchases functions to link our “internal business needs to the external capabilities of our suppliers” and has five operating principles which I will paraphrase (1) Seek best total value (2) Deal honestly and ethically (3) Identify/leverage externally linked solutions (4) Drive collaboration and competition (5) value incumbency.

A few highlights from Uldis’ presentation

• Uldis went on to provide a very detailed look at how his department organizes itself (direct v indirect and by category or what P&G calls ‘spend pools’)
• P&G has 24 different brands that generate $1 Billion in revenue
• P&G has a huge focus on innovation – Uldis called innovation P&G’s lifeblood
• P&G has a goal to drive 50% of its innovation from external sources (i.e. from its suppliers). [Sidebar: The opportunities from procurement-led innovation from the supply base is gaining greater awareness. Those that are interested may find our Harvesting Supplier Innovation series of interest]

(2) Optimization-based Sourcing

P&G has been using CombineNet’s advanced sourcing solutions for almost nine years. Uldis presented two great case studies that highlighted how P&G has leveraged CombineNet’s sourcing solution to great value.

1. Logistics – (an area that Uldis recently took over for P&G) P&G uses CombineNet to source its nine-figure logistics spend in Europe for highly complex bid capture and evaluation. P&G sees value in having a solution that can both manage and evaluate 44,000 bids (often referred to as lines) and do so in a way that suppliers (and buyers) find easy to use.

2. Plastic Films – P&G utilized CombineNet to drive savings and simplification as it moved from 3,000 unique film formulations (think product wrappers) to 300. One key aspect to this initiative’s success was having a solution that allows flexible bidding. [Sidebar: Flexible bidding solutions enable suppliers to (a) modify buyer-defined bid packages and suggest alternative specifications or substitute materials that can reduce costs or increase value (b) vary order quantities to define volume tiers and (c) develop a distinct bundling of items to offer a unique bid offers.

Tagged in: Case Study, Chief Procurement Officer, CPO, CPO Shop Talk, Sourcing