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When Tom Cicale, vice president of procurement at MilliporeSigma, a division of Merck KGaA of Darmstadt Germany (Merck Group), approached WNS Denali to help his global business get a handle on tail spend, he had the full backing of his chief financial officer. In fact, the CFO constantly questioned procurement about supplier proliferation and challenged them to do something about it. What did Tom do to have such great upfront support? Let’s explore their story together in greater detail.
First, a closer look at spend data among MilliporeSigma’s three business arms – Life Sciences, Healthcare and Performance Materials – revealed that 80% of their activity was with 20% of their suppliers. The classic tail spend ratio. MilliporeSigma and WNS Denali analyzed the spend patterns and decided to initially focus on the key reason that caused the tail to develop in the first place…transactions that flew below procurement’s radar. So, the starting point was to look at all spend below $100,000 per transaction and happening on a recurring/frequent basis.
In an Art of Procurement webinar, Tom and I talk through MilliporeSigma’s approach to tackling tail spend and getting it under control. Just as you’d expect, gaining buy-in from stakeholders was an initial challenge. Tom was met with a host of objections, some of which might sound familiar to you, including stakeholders who said:
“This is my job.”
“You’ll put us in a bad light uncovering spend that we should already have a handle on.”
“We tried this 7 years ago and it didn’t work.”
“I know where to get my stuff, I don’t need your help.”
“I don’t want to change my supplier.”
Tom and his team knew they had to reassure stakeholders that procurement wasn’t going to point fingers or shame them for not having everything locked up. Assuring them it was completely normal to have smaller spend that wasn’t yet closely looked at was the first step. It was important that they saw what was in it for them -- how procurement could help save money and streamline the buying process.
Finding a Partner You Can Trust and Collaborate With
Just as it was essential to establish a partnership mindset with business stakeholders at the onset, Tom will tell you that finding the right service provider to partner with – in this case WNS Denali – was a key factor. Working on this project alongside Tom and his team has been a revelation in how companies and their service provider can feed off each other’s energy and enthusiasm to create success.
…the difficult part for us is we didn’t just want someone to manage it. We wanted someone to partner with us,” said Tom. “Because we don’t have one ERP system; we don’t have two; we have many. Managing those ERP systems and having someone act as your partner means we gave them [WNS Denali] laptop computers. We gave them access to our systems, so they could run reports and analyze data. We do it together.
Fortunately for us at WNS Denali, Tom was open to true collaboration…and the results of this team approach continue to speak for themselves:
Over $1.7 M in realized savings
50+ new supply agreements executed with high volume suppliers
Every purchase requisition greater than $5,000 reviewed and optimized where possible
Tips For Setting Up Your Organization for Success – the 3 C’s
Intrigued and wondering how you can replicate these results for your organization? There is a lot of strategic thinking that went into the program, and a lot of behind-the-scenes work from the team at MilliporeSigma and my colleagues at WNS Denali. But perhaps I can quickly summarize the highlights centered around the 3 C’s – Conviction, Communication and Change Management.
Conviction – Building It and Keeping It Rising
Knowing that gaining buy-in was a make-or-break situation, Tom went directly to his counterparts to sell his idea. MilliporeSigma has a procurement board of seven other executives (in addition to Tom), plus the CPO. When Tom shared his plans to get a handle on tail spend, thoughts immediately reverted to a failed effort seven years prior. To help build momentum based on his conviction, Tom shared his new approach. He announced a pilot program within his own categories.
“I’m going to start in my own team’s categories because I want be able to prove the results first,” Tom said. “Then when you see what happens, you decide if you want to join in.”
Tom started with a small pilot in his Life Sciences division where there were eight entities on the same ERP system. He didn’t want different ERP systems to be that barrier, so they did it with just one initially.
An advisory board made up of select members of the procurement board was established. WNS Denali was invited to come in quarterly to report on how things were going.
“The ones that had the most questions in the beginning were the quietest in the end,” Tom said. “I think they saw the benefit and value…but that’s procurement. That was the easy one [to convince].”
As positive results started to roll in, other categories had confidence that we were on the right track and were eager to get involved. The results spoke for themselves. Tom’s conviction was catching on across the organization.
Communication – Open Dialogue and Continuous Feedback Improved the Program
Having the right communication plan in place was another key to the success of the program. The team spent time figuring out how to get buy-in upfront. And we were strategic about it. After convincing the procurement board, the next stop was to the division heads to secure their confidence in the plan through effective communication skills. Then it was on to the site heads where it was explained that their end-users and stakeholders were spending unnecessary time buying supplies when that time could be better used doing the real work of the business unit.
Tom invited the WNS Denali team to join him at roundtables at the larger sites to explain the process directly to stakeholders. MilliporeSigma also employed end-user satisfaction scores and sent out surveys after three months, and then again after six months. They allowed for comments on the surveys, not just closed responses, and then shared the good and the bad comments at the next roundtable to acknowledge them and let stakeholders know they were being heard. As a result, the user satisfaction scores improved dramatically.
After the pilot, MilliporeSigma implemented a phased approach. In the United States, they rolled out with the Life Sciences division, then about six weeks later they rolled out with Healthcare, and then shortly after MilliporeSigma brought on the Performance Materials division. All U.S. divisions are now up and running and they are getting requests from Europe to implement the tail spend management program there next.
Change Management – Showing What’s in It for the Stakeholder
As we progressed within the pilot and rolled it out to other categories and sites, we helped empirically demonstrate that we were saving money and increasing efficiency, freeing up valuable time for stakeholders to do other, more targeted activities. Some stakeholders immediately saw the benefit and were eager to offload the extra work and others wanted to continue to be in control of it. Our goal was to help them understand the tools available to them – electronic catalogs and procurement cards, etc. – and to make the process of going outside approved suppliers just a bit cumbersome to bring them onboard.
Next up is a push for automation through chatbot functionality and robotics. We are constantly looking to build upon our progress and find easier ways to conduct some of these transactions. The success of the current tail spend management program has inspired other stakeholders to share conviction for the program. The support and collaboration have hopefully earned enough goodwill to make this next push even smoother.
Too often organizations avoid getting into tail spend management because it is so vast and seemingly complex. Tail spend management is wrongly perceived as offering too little value for the effort. We hope sharing a little about the cost savings, efficiencies, and successes from MilliporeSigma has got you thinking about what a similar effort could mean for your company. Where to start? Start somewhere, control it, learn from it and have a closed loop. There will be hiccups. There will be challenges. But stay committed, learn through the challenges, and keep focused on the end goal.
For more inspiration, check out The AOP webinar here.
Director, Client Delivery Services
Sameer Sharma is a client engagement leader in Denali’s delivery organization. Sameer is responsible for developing and implementing solutions to drive sustainable process and system transformation needed to meet client goals. He has over 20 years of international experience and has worked for global organizations like American Express, Accenture Management Consulting, Ariba and FreeMarkets.