2005 Supply & Demand Chain 100 Case Study  Michael Foods / Iasta

Profiles in Supply Chain Enablement: Billion-dollar food distributor targets cost reductions using on-demand e-sourcing solution

Profiles in Supply Chain Enablement: Billion-dollar food distributor targets cost reductions using on-demand e-sourcing solution

Company: Michael Foods (Minneapolis, MN)
Company Size: Large
Company Sector: Food/Beverage
Area(s) of Enablement: Sourcing
Enabler: Iasta (Indianapolis, IN)

SDCE 100 2005Case Study:Michael Foods, Inc., a 75-year-old $1 billion diversified food processor and distributor, initiated a project to achieve cost reduction goals through the use of reverse auctions. The company was looking to achieve better competition for its business while increasing efficiency and obtaining better reporting/data analysis by using e-RFx and project management tools.

After looking at a number of vendors in the e-sourcing space, Michael Foods chose Iasta. Iasta's SmartSource solution is an "on-demand" application service provider (ASP) application for real time strategic sourcing. Targeted sourcing activities are processed through the system to achieve cost reduction and speed, the solution provider said. Michael Foods was able to begin using the system within a business day. Users began with a core group and expanded outward in a hub-spoke approach.

Timothy Larson, vice president of purchasing at Michael Food, made the decision to go with Iasta because, to his mind, it provided the best balance between functionality and ease of use. "Internal power users can master any e-sourcing tool, but Iasta is easily understood and used by our supply base — which increased both the number and percentage of suppliers who participated in our events," he said.

Participation directly impacts the bottom line, the purchasing executive noted. "Increased supplier participation means increased effectiveness. If invited suppliers get turned off by or can't figure out how to use the tool, event value and results fall short of their potential."

However, while companies like Michael Foods have discovered that application accessibility and ease of use are critical for sourcing success, organizations cannot ignore the need for strong functional capabilities. Iasta said it makes a range of bidding and RFx formats available to the user to ensure the right negotiation strategy for individual markets. In addition, this capability is wrapped around project management functionality and workflow designed to help organizations model processes and steps to improve results on an ongoing basis.

Michael Food has reported achieving consistent and verifiable savings by using the Iasta solution, and it now has plans to standardize more bids through the system for increased cost savings and consistency. The company also is looking to extend its use of the solution to more strategic and direct materials.

For more stories of successful supply chain implementations, read the "2005 Supply & Demand Chain Executive 100" article in the June/July 2005 issue of the magazine. Also watch the Today's Headlines section of SDCExec.com every Tuesday and Thursday for more in depth best practices drawn from this year's Supply & Demand Chain Executive 100.