The sourcing team found that their inherent procurement skills and the competencies that they learned as a result of the training programs prepared them with the tools that they needed to go through, for instance, a standard make-versus-buy process for any given product. But they found they still had much to learn about which products could be sourced successfully from which regions or countries of the world.
Recognizing this challenge, Price and his team put together a process for learning about different countries and regions based on the economic drivers underpinning 15 core commodity groups. They chose 10 regions of the globe and looked at a fixed set of criteria to determine whether it was attractive to source those commodities in those regions. For example, for plywood, the sourcing team looked at Brazil, Malaysia, Chile, Mexico and China; for solid wood, they looked at Malaysia, China and Chile; and for glass, Mexico and China. The criteria included such factors as labor content, internal logistics, reliability of supply, intellectual property considerations, currency issues and political stability, among others.
The results of these learnings were filtered into a commodity opportunity matrix that helped the sourcing team understand where they would find the best opportunities for global sourcing. But the exercise also had the additional effect of preparing the sourcing staff to actually do business more globally. "The byproduct was that we started to learn more about the countries and what it took to do business there. For example, should we do business there ourselves directly, or should we go with a broker for 18-24 months to bridge a relationship?" Price explains. As a result, the sourcing team was able to identify an additional $5 million of spend as part of Kimball's import strategy for 2006, representing approximately a 25 percent increase in the company's import spend the previous year, with the total figure for imports expected to nearly double by the end of this year.
Building Success from the Ground Up
By Price's reckoning, the five initiatives that sourcing undertook have allowed it to increase the team's net impact on Kimball's bottom line (commodity increases-decreases less savings) from $200,000 in 2005 to more than $2.2 million in 2006, all with very little investment and no increase in staff. Saving projects implemented in 2006 accounted for $8.6 million, versus $5 million for the previous year. And the team generated creative cost reduction ideas valued at $4.4 million last year.
Asked about success factors for the projects, Price cites the "trickle-up approach" that the sourcing team took to implementing transformation. "The big key to executing a strategy is not involving the executives, it's involving the actual people that have to implement the strategy day in and day out," he says.
Of course, senior executive support is important, Price acknowledges, for setting strategic directions and goals, supplying resources, providing encouragement and recognizing accomplishments. But he says that the sourcing team autonomously took on the challenge of transforming the organization and went out into the enterprise as change agents to instigate transformation. Moreover, they drove the initiative for transformation down the organizational chart, talking to the product line managers rather than the director of the product line, or getting the materials manager at the company's plants involved instead of just the senior material manager for case goods.
"You need to lock the executive team out and get the commodity managers, the material managers, the product development engineers and the quality engineers in a room to iron out the actual execution strategy. The key is having the end users build that strategy themselves and present it to the executive team for their signoff. That was the big 'ah-ha' and success for us," Price concludes.