Today we continue with Part Two of the H.J. Heinz procurement story as told in three parts (two presentations and one, one-on-one interview all by/with Christopher Yope, Heinz’ Global SRM & eSourcing Manager) at the SAP Insider Procurement & Supplier Relationship Management (SRM) 2012 event that took place in Orlando last month (Part One is here).
As you may recall from Part One, Heinz made an executive decision to move to SAP as the company’s primary business operating system for all areas, including procurement, in a program it called “Keystone: Keys to One.” The Procurement leadership team saw an opportunity to use the global technology transformation project (i.e. Keystone) as a way to drive a global indirect business ($4.5 Billion in spend) transformation. They began with SAP’s eProcurement system (known as “SRM”) as noted last time. Next, they progressed to eSourcing and Contracts.
Strategic Sourcing Project
Heinz’ high-level system requirements included an eSourcing tool that could manage a variety (not “57 varieties,” however) of sourcing project types (from RFI to Auctions to events that utilized Collaborative Scoring) and included project management capabilities that would allow the team to map its seven-step sourcing process into project templates, and a contract repository today and contract authoring capabilities in the future.
As part of the eSourcing implementation, the Heinz team consolidated its activity from two eSourcing tools to a single system; they also reduced the number of RFx types it would use to four, consolidated spend categories to align with material groups as a way to streamline reporting, and leveraged a “daily sync” functionality to manage exchange rates for global sourcing events that had bids in multiple currencies. They also utilized a questions library, a content library, and standardized legal terms and conditions to ensure that global sourcing standards were met.
Heinz utilized SAP’s Project Management tool to capture its intricate/detailed seven-step sourcing process. Their robust sourcing process leads user through a series of steps “designed to engage with the business, identify the current situation, develop a new vision for the future then implement that vision.” Each step contains a number of tools that provide “insight and help suggest approaches which can be used to adapt and improve existing sourcing approaches, to deliver sustainable competitive advantage for Heinz.” Heinz takes its sourcing processes seriously and established four gate reviews within the project templates to ensure that the right sourcing strategy is developed. Procurement leadership either approves or challenges the strategies during the gate review process. Heinz established two types of projects: (1) “Strategy” projects to manage the sourcing process where procurement leadership functions as the primary set of approvers and (2) “Sourcing” projects to track the savings from sourcing activity, where the procurement finance team approves all financial/savings information.
Heinz needed to manage four contract types in its system (Indirect Master Agreement, Direct Master Agreement, Master Service Agreement, Confidentiality/NDA Agreement) and expected to utilize sub-agreements to a very large degree. It developed templates and clause libraries and set up approvals based upon total contract value.
Chris told me that the US team adopted the eSourcing tool very quickly and began driving significant throughput while the European team took a little longer to come around to the “new” tools. All told, there has been more than $1B in eSourcing throughput since July 2011. The Contracts solution which really began to be used in September, 2011 has gotten good traction and the system is shaping up to be the ‘source of truth’ for all contracts over $500K in value. Chris noted that a mandate to use the Contracts system begins next month (May 2012). With strong adoption and a move to a single eSourcing system, Chris noted that Heinz gained great visibility and reporting benefits that aided in the management of categories, the sharing of best practices across the global team, and the execution of sourcing strategies to drive more savings.
Thank you Chris for sharing the Heinz procurement transformation story with CPO Rising!