H2O Supply Opportunist

You're only as strong as your weakest link, or so the saying goes, and Bruce Beavis, vice president of strategic sourcing for US Filter, is maximizing opportunity, making sure his company's supply chain is made of only the strongest, most efficient...


We see this tool as a price discovery vehicle, too. If you're one of the four or five industrial suppliers we select and you want a bigger share of US Filter's business, you need to reduce prices to win more of that business. And that's the way we'll get to the right level of pricing. We've created a marketplace and our prices will seek the appropriate level by virtue of the competition created. What's more, it allows us to control the data. If we had let our buyers go to different selling sites, we could never have obtained the detailed data we now have.

iSource: How do these new tools relate to the company's spectacular growth?

Beavis: Of course, we've made many acquisitions. And that means acquiring the supply base of all those companies. Now, we're in the process of consolidating it all. But our approach is to be very decentralized, since it would probably not have been possible to consolidate everything into one, big headquarters operation. And we're using technology to make it work. For example, with our catalog, everyone can switch over to the right suppliers themselves, without having us hire a giant, centralized staff to hassle employees all over the country to make sure they get it right.

From a management point of view, it's something of a virtual company our corporate headquarters is very small, with offices all over the country and we really rely heavily on e-mail, voice mail and video conferencing to run things.

iSource: How have suppliers reacted to your initiatives?

Beavis: Well, with our catalog, I think those that have participated find we've increased their business, because we consolidated our buying onto just a few suppliers in each category. But it was more difficult to get our suppliers on board than we'd imagined. We've had to do a major job of selling them on why it was in their interest to participate. Even knowing we could increase their business five to 10 times, they worried they would set a dangerous precedent that instead of our participating in their e-commerce strategy, they were being forced to participate in ours. It's a major change in the way they deal with customers.

iSource: What about your own people and their reactions?

Beavis: For everyone, there's a great fear of making a mistake, the fear of doing something that will have a cataclysmic, unforeseen result. After all, one of the most difficult tasks in working with e-commerce partners is to try to pick places that will last. You would hate to put a large amount of money and effort into something that won't be around in a year. So, there's a certain amount of risk internally for people trying to push e-commerce. If a project fails, it's difficult to divorce the failure of that project from  e-commerce in general, from the idea that e-commerce is something we should do. It's difficult to figure out how to manage the real and perceived risk.

iSource:  What do you do about that problem?

Beavis: We've taken on a philosophy of, Don't let perfect be the enemy of better. Everything we do makes us smarter; the worst thing we could do is sit on the sidelines and not try anything. At the same time, we always pilot and test things as much as possible in live mode. We're very leery of placing all our money on one bet. The more experimentation you can do, the better off your final rollout will be.

But it's very important that we build an internal constituency at the user level that understands the technology and supports it, versus having corporate people in strategic sourcing coming up with what they think is the real answer and imposing it on them.

Let me give you an example. We're using Metalnet.com to help us consolidate our metals buy, which has been very fragmented. We've used it at five of our business locations and ran about $1 million worth of pilot transactions. From that, we accomplished a few things. We asked for a whole series of enhancements, so they could improve things in their next release. At the same time, a group of our steel buyers were able to test the site and understand what worked well, what didn't work so well and how best to use the tool. Based on the successful completion of that pilot, we are rolling it out to the rest of the organization. It's very powerful to have a half dozen managers in a meeting say that they doubted this tool at first, but found later that it really works.

iSource: What other risks have you faced?

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