Our “Procurement Experts on CPO Rising” series continues today with an excerpt from my 2022 episode of the Procurement Rising Podcast – Jim Polak, former Director of General Purchasing at PPG Industries (click to listen to the full interview). Note that this excerpt has been edited for readability.
This article recap is part two of a two-part series exploring how Polak built credibility for indirect procurement through commodity teams at PPG.
Andrew Bartolini: When you achieved great success with your spend data, you rewarded that of course. However, what was the feeling of the category or commodity managers who’d been managing these categories for years? Was there some ambivalence around that expectation of driving 2% savings but instead generating significantly higher results? How did the team take that? More importantly, how did you manage it?
Jim Polak: Reflecting back on those early days and events, they were still skeptical for the most part. If you’re buying a certain commodity six to eight different ways across the country, but now purchasing it as a single corporate entity for all your facilities, there’s going to be savings there. When suppliers see the volume, they also see efficiency, which drives their own numbers down. All those early commodity teams greatly exceeded the 10% savings goal because we were buying as a single entity for the first time rather than a regional one. The significant volume within a certain commodity from one region helped support all the spend in the other regions. So, they were getting the benefit of not only the small portion of it but the large portion as well.
One of the fears that people had as we moved from regions to commodity spend orientation was losing their job if the job didn’t get done. As we become more automated, there won’t be a need for as many people and I’ll lose my job. In response, I went out on a limb and more or less promised that nobody was going to lose their job. Yes, there will be a need for fewer people as we buy from a national commodity standpoint and move away from a regional focus, but people will get promoted, they will retire, or move into other functions outside of procurement. In the meantime, we’d use those opportunities to reduce the ranks rather than anybody losing their job. Once they became comfortable with the fact that we were not out to cut their job if they were successful, they became more and more supportive. They would see that (A) I’m not going to lose my job and (B) I’m getting recognition throughout PPG for the amount of savings we’re driving. And there would be celebrations at the end of the 90 days. Once the event was over and the successes were known, they were shared throughout PPG.
AB: We’ve been talking about the commodity teams that you’ve put in place and how this was part of a larger strategy to win over the full organization. Can you talk a little bit about the structure as well as the idea and how you executed it?
JP: There were some within PPG that thought indirect procurement spend was maybe $200 million at best. Once we identified our spend in the function and realized how significant it was, we went back and said its $1.3 billion. They were shocked at the size. But think about everything that falls under it, not just usual indirect procurement items, but also contingent labor and packaging that people don’t necessarily think of. All the IT spend was in there. You’re talking about a huge amount of dollars that were part of indirect purchasing.
So, there were these large areas that we were going to form commodity teams around, whether it was contingent labor, MRO, or IT spend on the enterprise level. We would begin to form these commodity teams. And because I spent a good amount of time in other functions, I had several contacts throughout PPG. I would contact them and explain that we’re forming a commodity team and the commodity has a 90-day deadline. I would like you to volunteer someone from your organization to be on this team and participate in holding the event and driving the spend down and seeing how much savings they could get.
At first, they said we can spare this person and put them on the team. However, what would happen is after the initial teams were generating these savings, team members would go back and talk about their experiences and what they learned and what procurement was doing, and how great it was to be able to save 50% in a certain commodity area. Word would get back within these various functions like manufacturing, sales, and HR, with other people responding that they heard we’re holding these commodity teams. I’m your best person, why wasn’t I given an opportunity to be on the team?
Following the first few teams, we had plant managers, sales managers, and vice presidents contacting me about an ideal choice for the team and giving that person the experience of participating. Can I make that happen? So, we went from them grudgingly giving us someone to the point where they saw it as a career development activity for one of their best people to be on our commodity teams. They viewed it as an opportunity for their people to gain success and learn from it. From that standpoint, it became a sort of shadow marketing opportunity to sell to the rest of the organization how valuable this was. They used it to develop their best people. And by getting their best people, the whole commodity team benefitted from it as well.
