Another day, another article, another event, another great presentation from a leading procurement group…..
This time, we focus in on the H.J. Heinz procurement story as told in three parts (two presentations and one, one-on-one interview) at the SAP Insider Procurement & Supplier Relationship Management (SRM) 2012 event that took place in Orlando last month.
Readers of last year’s CPO Rising 2011 report will recall that the Heinz executive team, led by Bill Johnson, the Chairman, President, and CEO of the company, is one group that regularly talks about the future success of their businesses in the context of procurement and supply chain operations. Obviously then, the procurement/supply chain leaders at Heinz share that view… as Bob Ostryniec, Heinz’ SVP and Chief Supply Chain Officer said,“Heinz is taking a truly global approach to reducing costs and growing margin to become even more competitive. Frankly, this is a step change for our company, and it’s an important one that we believe will produce tangible improvements in cost and margin and rapid return on investment.” So with the procurement emphasis coming from the top, it is no surprise that Heinz has a comprehensive procurement strategy.
Technology at Heinz follows the same pattern – it is important, viewed by executives as a keystone to overall success. Similarly, procurement technology is viewed by the procurement department as the keystone to its success. Christopher Yope, Global SRM & eSourcing Manager, who pulled triple duty at the conference shared Heinz’ story.
Keystone, The Keys To One
H.J. Heinz (Ticker: HNZ) is a global food company that has its products in 200 countries and is headquartered in Pittsburgh, Pennsylvania. It refers to itself as “The First Name in Ketchup” and says that it “sells 650 million bottles of ketchup every year and approximately two single-serve packets of ketchup for every man, woman and child on the planet.” The company also offers condiments and sauces, frozen food, soups, beans and pasta meals, infant nutrition, and other food products. Annual sales were $10.7 B in the last fiscal ending April, 2011 and total global indirect spend is $4.5 B.
Several years ago, Heinz decided that it would move to SAP as the primary business operating system across the entire company (they called this project “Keystone” and subtitled it Keys to One). The drivers behind this decision were to increase Heinz’ ability to compete by improving its capabilities and better leveraging its scale. Heinz believed that if it could standardize processes on a single system, it could improve its agility and increase internal collaboration while streamlining IT costs and support.
As this initiative was taking shape, Heinz’ procurement did a self-evaluation and saw that it had three “buckets” of spend:
- Spend with no level of procurement engagement (44% of all spend), which was sourced by non-sourcing professional and often had large price discrepancies within a category
- Spend with limited procurement involvement (32% of spend), where procurement’s involvement was generally too late to impact negotiations; this bucket also had multiple suppliers for same category
- Spend that was strategically sourced (24% of all spend), where procurement led stakeholders through a 7-step sourcing process across
Procurement saw the global technology transformation project (aka Keystone) as a way to drive a global indirect business transformation. From both a technology and business process standpoint, they began with eProcurement (SAP SRM) and undertook a global deployment. The Heinz procurement team believed that by moving to a single platform, they would gain efficiencies that would enable them to be more responsive, they would be able to leverage their global indirect spend in its largest markets, and they would gain real-time visibility into spend and performance metrics.
It has been 26 months since the launch and here’s what Chris has reported to date:
- The system is live in 42 sites within 6 countries
- All told, there are close to 2,00 users (1,250+ requesters, 650+ approvers)
- The system supports 135,000 shopping carts
- The system manages $1.25B in spend
- Overall, 60% transactions are on catalogs
Beyond these impressive adoption stats, Chris says that overall compliance has gone up dramatically as has spend under management. And in anticipation (any 1970’s commercial fans?) of next time, he also notes that improved visibility helped improve sourcing and contracts.