Intesource Innovation ’13: Raley’s (Procurement) Comet

I just spent the last two days in Phoenix for Intesource’s annual user conference, Innovation ’13. Intesource is a provider of cloud-based sourcing solutions and sourcing services that has a strong client base in the retail vertical. The conference had a nice blend of customer case studies, best practices, and provider updates; additionally, the group at Innovation ’13 was among the most open and collaborative that I’ve ever seen in such a setting. I delivered a presentation, sat in on a panel discussion, and had many interesting conversations. One of those conversations was with Ken Mueller, SVP, Chief Financial Officer of Raley’s, who delivered a main stage presentation (with Rob Patterson, Director of Accounting) on the “Evolution of Procurement” at his company. I will share the highlights of Ken’s story below.

Raley’s is a regional grocery store chain with 129 stores located in Northern California and Nevada, operating the following stores: Raley’s, Bel Air Markets, Nob Hill Foods, and Food Source.

The Raley’s procurement story begins in more difficult times, just a few years ago – 2010 – when the company was forced to reduce the staff at its corporate office, including the procurement and finance teams. The cuts were necessary and significant as they left more and new work to be done by a team that was less familiar with sourcing and procurement. In the midst of these times, the executive team developed what it refers to as its “20/20 Vision” the plan that would take Raley’s into the next decade. This plan has three legs – become more customer-centric, build the talent to execute, and develop a world-class supply chain.

For the supply chain improvements to occur, Ken believed that the procurement function would have to evolve from a focus on PO’s and compliance to more strategic initiatives. To improved profitability, procurement would need to improve its communication with other departments, help maximize efficiencies across the company, reduce unnecessary risks, gain more favorable pricing from suppliers, and drive innovation. To get there, they would need the right technology and people. Intesource was to play a big role in this evolution so much so that Ken noted, “We are in the grocery business – we have good processes and systems; 2010 was a big step back, but we’re where we are today because of our work with Intesource.”

With its blend of sourcing technology and services, Intesource was able to help Raley’s revamp its approach to procurement, leverage eSOurcing technology, gain access to a new set of vendors that it would not normally have used, develop best practices, and drive savings.

But this was an evolution, not a revolution – there were challenges at the start. Once Ken and the team set a policy on when to use and engage Intesource, they found that significant change and people issues had to be addressed. Ken and his team saw were that the silos that existed within the company had to be broken down. They also had to face down the people and change challenges.

In a single slide, Ken highlighted the major ways that people can slow down an eSourcing initiative (or any initiative, really) as captured by the bullets below:

• Reluctance to change practices – all change is bad
• Fearful of being out performed in their job – new savings identified by eSourcing may highlight the thought that money has been left on the table in the past
• Existing vendor relationships – eSourcing introduces new suppliers who may offer superior bids than incumbents, we are comfortable with our incumbents
• Too busy to try something new – no time to advance up a learning curve, even if it saves time in the long run
• Lack of belief – eSourcing won’t work
• Personal limitations – unable to adopt new technology and processes
• Not everyone is a great negotiator – this is a skill set possessed by few

As we have discussed previously, new eSourcing initiatives are often viewed skeptically and there are certain myths or pushbacks must be overcome. With the help of Intesource, Ken and his team were able to drive the new eSourcing intiative forward with significant results to date from both in a sourcing volume and savings standpoint.

Raley’s story is yet more evidence of the great value of cross-pollination of procurement and finance teams and its CFO, Ken Mueller, becomes one of the growing number of CFOs who benefit from having direct experience and expertise in procurement; he’s also technically, a CPO on the Rise.

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