Suzanne Bily is purchasing manager for Unified Foodservice Purchasing Co-Op, the procurement and distribution organization for Tricon Restaurants. Her job is to make sure that not one of the some 8,200 pizza restaurants that are part of an instantly recognizable chain ever run out of tomato sauce. Bily, who is a CPA by trade with several years experience to her credit, has of course many other responsibilities. But first and foremost, let there always be enough tomato sauce.
It's a simple enough goal. Hitting it, however, is not as easy as it seems. Deciding how much business to give any one supplier a process called supplier business allocation is an incredibly complex matter and in Bily's case is compounded by the fact that these restaurants are located in just about every American city and town. Bily has to weigh exactly how much business to award each supplier, against several criterion which include product availability, specification, freight expenses and distribution patterns. Price is a consideration too of course, but ultimately it doesn't matter what you pay. You have to ensure supply, she says.
Until recently Bily had few tools at her disposal to help her make these decisions. Basically she had to create her own model for each sourced product or service. It's a very difficult process, takes a lot of time and has a lot of room for error, she says.
These frustrations are now in the past though. Unified Foodservice Purchasing Co-Op has begun using one of the new e-business applications for strategic sourcing that have just started to appear in the market; in UFPC's case it's a system called ProcureMind developed by MindFlow Technologies in Plano, Texas. ProcureMind's business model provides tools to help users choose the right supplier based on corporate criterion and goals, manage costs, of course, and collaborate with other corporate divisions and suppliers during product development. It's a fairly new product, and Bily, who estimates a savings of $2.4 million using the system so far, is excited about it. I cut my supplier business allocation process from four weeks to three days and increased the number of negotiation rounds from two to four.
Missing LinksBesides the initial cost savings of automating the procurement process one of the main benefits of e-procurement is that it frees up procurement staff to pursue more strategic sourcing opportunities, says Judy Priest, director of procurement services for CoreHarbor, an ASP that hosts the Ariba B2B platform. She would know. Priest, who in a past life was a procurement manager at both Coca-Cola and Pepsi, remembers spending most of her day chasing down missing requisitions, following up with suppliers on missing orders, pricing purchase orders, fielding questions from requisitioners and suppliers, tracking down delinquent payments and, in my spare time, negotiating strategic agreements.
But here's the rub: most of the e-procurement tasks Priest once oversaw can now be automated by one of many excellent systems on the market except the strategic sourcing piece. With all the hoopla over the transaction capabilities of the Aribas and Commerce Ones in this new era of e-procurement, this point often gets lost.
Slowly this is changing though in bits and pieces. Auction services that allow companies to quickly set up competition among suppliers are proliferating. FreeMarkets is just one example. TelecomRFQ, a B2B marketplace for telecom services, is another.
Not that any procurement professional would scoff at these advances. I can remember in my career when pricing was changing very rapidly, and we could not keep up, says Gayle Hayes, director of solutions product management for i2 Technologies. Daily business issues would get in the way. We would know that the pricing was falling, but it was not as high a priority as keeping production running steadily. Now, a company can do a RFP as often as needed.