According to the MoneyTree Report by PricewaterhouseCoopers and the national Venture Capital Association based on data by Thompson Financial, in the first quarter of the year 2007, venture capitalists invested $7.1 billion into 778 deals, which was the highest quarterly dollar amount since the fourth quarter of the year 2001. Compared with the fourth quarter of the year 2006, deal value actually declined in the quarter, which indicates venture capitalists' eagerness to put more dollars into each round.
While Biotechnology ranks as the number one industry for investment, the Life Science sector had an extremely strong quarter. Since the fourth quarter of the year 2002, later stage investing also jumped in the quarter to the highest dollar level. First time financings remained quite stable, increasing slightly over last quarter.
Tracy Lefteroff, the global managing partner of the venture capital practice at PricewaterhouseCoopers said, "This quarter, the breadth of investing in a wide variety of industry segments and in companies across varying stages of maturity indicates a healthy balance between short- and long-term opportunities".
According to Mark Heesen, the president of the National Venture Capital Association, right now the Life Science sector is getting a lot of attention but it is an industry that is indeed scalable. To get through the regulatory process, biotech and medical device companies needs a large amount of capital and the Venture Capital industry is responding to this demand.
Investments in Later Stage companies augmented considerably in the first quarter of the year 2007 with $3.0 billion dollars going into 245 deals. In over six years, this was the highest dollar level. Funding dollars for Early Stage companies declined 30% in Q1 to $1.1 billion in 259 companies. Investments in Expansion Stage companies experienced a modest increase in dollar in Q1, growing nearly 9% to $2.9 billion invested into 274 deals.
Compared with the preceding quarter, fewer companies received funding for the first time in Q1 2007. Nevertheless, the dollar value of the rounds was collectively higher. In the first quarter of the year 2007, US based venture capitalists invested $83 million into 2 deals in India and $137 million into 18 deals in China.
Sourced from Big4.com
Thursday, May 31, 2007
Monday, May 14, 2007
Reverse brain drain for Auto R&D
Excerpts sourced from Business World
According to the Society of Indian Automobile Manufacturers, there are already over 250 Indian expatriates who have returned to work on R&D in domestic automobile companies Mahindra & Mahindra, Ashok Leyland, Tata Motors and Hindustan Motors. SIAM predicts that their numbers will double in two years.
With investments of over Rs 100,000 crore lined up in the Indian automobile industry, and European and US car majors making an aggressive push into India, Indian car companies have begun to understand the significance of R&D. Investments are small -- R&D budgets are just 1 to 2 per cent of domestic car makers' turnover -- but are expected to grow rapidly. "The return of expatriates is helping the Indian companies to overcome their human resource challenge in the field of research. The significant development of the automotive industry is now a magnetic proposition for qualified people to return and harness their knowledge," said Dilip Chenoy, director general, SIAM.
SIAM has set up a society in the US known as the Association of Scientists of Indian Origin that taps Indians working in the automobile majors there and provides access to domestic firms to identify and recruit talent in engineering and R&D. There are numerous examples.
=> Arvind S Bharatwaj, for instance, took a 50 per cent cut in his salary in General Motors in the US to return to India and now heads the advanced engineering unit of Chennai-based Ashok Leyland. He has been blending the use of electronics and engineering (infotronics) in commercial vehicles to come out with new high-tech products for the company.
=> Pawan Goenka, also returned after a 14-year stint with General Motors' global research and development centre in Detroit. He now heads the automotive division in Mahindra and has been the force behind the introduction of Scorpio, the most successful SUV ever launched in India. He has also prepared the blueprint to sell the Indian SUV in the US.
=> V Sumantran, who was closely associated with GM's futuristic EV1 electric cars project and then played a key role in Tata Motors' small car before he quit, now advises Ashok Leyland on developing battery-operated hybrid trucks and buses.
=> Raja Pant left the design development facility of Ford Motor Company in the US and is now with the body fabrication business of Tata Motors.
=> Sudhir Rao, who was with General Motors engine development operations in Detroit, now works with Avtec Engines, a unit of Hindustan Motors, which supplies engines to Mitsubishi Motors and General Motors India.
According to the Society of Indian Automobile Manufacturers, there are already over 250 Indian expatriates who have returned to work on R&D in domestic automobile companies Mahindra & Mahindra, Ashok Leyland, Tata Motors and Hindustan Motors. SIAM predicts that their numbers will double in two years.
With investments of over Rs 100,000 crore lined up in the Indian automobile industry, and European and US car majors making an aggressive push into India, Indian car companies have begun to understand the significance of R&D. Investments are small -- R&D budgets are just 1 to 2 per cent of domestic car makers' turnover -- but are expected to grow rapidly. "The return of expatriates is helping the Indian companies to overcome their human resource challenge in the field of research. The significant development of the automotive industry is now a magnetic proposition for qualified people to return and harness their knowledge," said Dilip Chenoy, director general, SIAM.
SIAM has set up a society in the US known as the Association of Scientists of Indian Origin that taps Indians working in the automobile majors there and provides access to domestic firms to identify and recruit talent in engineering and R&D. There are numerous examples.
=> Arvind S Bharatwaj, for instance, took a 50 per cent cut in his salary in General Motors in the US to return to India and now heads the advanced engineering unit of Chennai-based Ashok Leyland. He has been blending the use of electronics and engineering (infotronics) in commercial vehicles to come out with new high-tech products for the company.
=> Pawan Goenka, also returned after a 14-year stint with General Motors' global research and development centre in Detroit. He now heads the automotive division in Mahindra and has been the force behind the introduction of Scorpio, the most successful SUV ever launched in India. He has also prepared the blueprint to sell the Indian SUV in the US.
=> V Sumantran, who was closely associated with GM's futuristic EV1 electric cars project and then played a key role in Tata Motors' small car before he quit, now advises Ashok Leyland on developing battery-operated hybrid trucks and buses.
=> Raja Pant left the design development facility of Ford Motor Company in the US and is now with the body fabrication business of Tata Motors.
=> Sudhir Rao, who was with General Motors engine development operations in Detroit, now works with Avtec Engines, a unit of Hindustan Motors, which supplies engines to Mitsubishi Motors and General Motors India.
Transformation of Tata Motors
A very interesting interview was published by McKinsey Quarterly in form of case study on transformation of Tata Motors that represents one of India's most remarkable corporate-turnaround stories in recent times.
"...Drastic measures were needed to cut costs following record losses in 2001, but the subsequent change program has also involved a new strategic orientation emphasizing less cyclical products and a determined push into overseas markets."
In this McKinsey interview, the managing director of Tata Motors, Ravi Kant, describes the stages of the transformation and explains how cutting through management layers helped overcome resistance and unleash new ideas.
"...Drastic measures were needed to cut costs following record losses in 2001, but the subsequent change program has also involved a new strategic orientation emphasizing less cyclical products and a determined push into overseas markets."
In this McKinsey interview, the managing director of Tata Motors, Ravi Kant, describes the stages of the transformation and explains how cutting through management layers helped overcome resistance and unleash new ideas.
Wednesday, May 9, 2007
Top Procurement Transformation Leaders
Discussed below are the profiles of some of the top procurement transformation leaders worldwide: -
Greg Shoemaker, Vice President Procurement, Hewlett-Packard
Greg had responsibility during the pre-merger integration of HP and Compaq to identify the best procurement practices of both companies and then make them work for the combined company. With more than 23 years experience, of which 18 years has been spent with Compaq and HP, Mr. Shoemaker is integral in driving cost savings and efficiencies throughout the procurement process for HP. In his role on the Procurement council for HP, he drives the development of HP's procurement policies, best practice implementation, and creation of strategic supplier programs. During the integration process of pre-merger HP, Mr. Shoemaker was directly responsible for identifying the best procurement practices of both companies and developing strategies for the successful integration and value capture for the new procurement team. Leveraging his expertise extending partner relationships deeper into the supply chain, improving HP's influence over quality, security and information processes, Mr. Shoemaker will speak to best practices and key learnings from HP's collaboration with supply chain partners in a way that will bring value to OEMs of all sizes.
Thomas T. Stallkamp, Chrysler Corporation
Thomas T. Stallkamp changed the traditional paradigm or purchasing when he introduced the SCORE program at Chrysler in 1992. SCORE created a framework in which suppliers submitted cost reduction ideas and received a percentage of the reward. In the traditional model of supplier relations in Detroit, the Big Three use their leverage to beat up their suppliers and play one off against the other. Thomas T. Stallkamp is currently vice chairman and chief executive officer at MSX International, a global provider of collaborative enterprise services. Parts of this bio were taken from that company.
During almost 20 years at Chrysler Corporation, Stallkamp helped lead the company to new stability and growth in the uncommonly competitive automotive industry. During his tenure as president, Chrysler was the most profitable company in the auto industry. Indeed, many thought he would be tapped to replace Bob Eaton. His last position in Chrysler was as vice chairman and a board member of DaimlerChrysler Corporation; he left in 2000. Stallkamp became known for developing new business processes and enhanced partnerships with the automotive supply community, thereby improving product quality and cost efficiencies. As an example, Chrysler's SCORE (Supplier Cost Reduction Effort) program was a successful, structured approach by which suppliers sought ways to reduce cost or to improve product or process performance for the same cost. He pioneered the development of a unique partnership approach to corporate supplier relations under Chrysler's Extended Enterprise concept. These programs focused on reducing overall cost rather than simple parts costs.
Stallkamp serves on the boards of Visteon Corporation, K-mart Corporation and Baxter International. He is also on the board of advisors of Georgetown University's McDonough School of Business and teaches at Babson College's Graduate Entrepreneurship Center. Stallkamp holds a bachelor's degree in industrial management and economics and a master's degree in business administration from Miami University (Ohio).
For more information on Tom, please visit:
http://www.whartonsp.com/press/press_releases_detail.asp?promo=2399&rl=1
http://waw.wardsauto.com/ar/auto_nice_guys_dont/
http://globalcpo.com/_wsn/page17.html
R. Gene Richter (1937-2003)
Mr. Richter was the former chief procurement officer at IBM, Hewlett-Packard, and Black & Decker, who created the modern concept of the chief procurement officer.
With degrees from Maryland and Michigan, Gene worked at Ford Motor Company in a variety of purchasing management positions for 23 years. In 1984, he became vice president of purchasing at Black & Decker, and four years later his team won Purchasing Magazine’s Medal of Professional Excellence for leading-edge procurement programs. It was at B&D where Gene fine-tuned his strategies of global sourcing, long-term agreements and centralization of key commodities.
Later, as executive director of procurement at Hewlett-Packard, he worked with a team to develop written sourcing strategies and to negotiate strategic alliances with worldwide leading-edge suppliers. In 1992, HP won Purchasing Magazine’s Medal of Professional Excellence.
IBM convinced Gene to help revamp their global procurement operations in 1994. He centralized purchasing though commodity councils, saving millions of dollars. Gene’s team also formed customer solutions procurement, set up a technology convergence office to tap into suppliers' technical know-how, and moved the purchasing process to the Internet. IBM won the Medal of Professional Excellence in 1999.
In all, Gene led three completely different corporate teams that earned the Medal of Professional Excellence during his career. No one else can claim this achievement.
For further details on his work in companies like IBM, Black & Decker, HP, please read http://dot-richterfoundation.org-1143892.namezero.com/sitebuildercontent/sitebuilderfiles/genetributearticle.pdf
http://www.purchasing.com/article/CA337311.html
Jon Beers, Associate Director of Worldwide Purchases, The Procter & Gamble Company
Mr. Jon Beers is an associate director of worldwide purchases at Procter & Gamble (P&G). Jon has worked at Procter & Gamble for more than 30 years, and one of his key focus areas is to standardize and improve contract management for P&G. Jon's experience includes manufacturing, research and development, quality assurance and purchases.
Garry S. Berryman,Chief Procurement Officer, Sara Lee Corp.
Faced by rising costs and sagging stock values, on Mar 29, 2005, Sara Lee Corp. appointed Garry S. Berryman to the new position of chief procurement officer. In this role, Berryman, 52, will be responsible for the company’s global procurement operations. He will report to L.M. (Theo) de Kool, executive vice president and chief financial and administrative officer. Berryman joins Sara Lee from Applied Materials, Inc., where he served as vice president of global materials and supply chain management. Prior to that, Berryman was at Harley-Davidson for eight years as vice president of materials management and product cost and helped lead a major transformation at the American icon Harley-Davidson. Berryman introduced a unique approach to product engineering that incorporated use of procurement engineers trained at MIT and other top schools as well on-site engineers from supplier-partners. Berryman will face a different set of issues at Sara Lee, which has suffered due to retail price constraints and lack of brand focus. The company named a new CEO earlier this year and launched a restructuring.
Berryman has more than 20 years of experience that includes positions of increasing responsibility at Honda of America Manufacturing, Inc. and Deere & Company. Berryman received his bachelor’s degree in accounting from the University of Northern Iowa and is a certified public accountant.
Scott Allen, Former Chief Procurement Officer, H.J. Heinz Company
Scott Allen is a 25-year veteran of procurement and logistics. Scott Allen has 25 years of experience in procurement, working his way up through the food industry, holding positions at Carnation Company, Star-Kist Foods/Heinz Pet Products, Nestle Foods, and most recently H.J. Heinz. As chief procurement officer at H.J. Heinz, Allen was responsible for $5 billion in annual direct materials, indirect materials, and services spending. He led the global procurement business, centralizing procurement organizations and facilitating 10 percent savings globally.
Kent L. Brittan, Vice president, Supply Management, United Technologies Corp
Kent Brittan is leading a supply management transformation at United Technologies that began with a major electronic initiative and is now focused on meeting a lean manufacturing mandate. Kent L. Brittan became vice president of Supply Management at United Technologies Corp. in 1997 and has participated in a corporate transformation at UTC under CEO George David that consistently delivers double-digit annual earnings growth. In the past ten years, UTC’s total return to shareholders has outstripped General Electric by 50%. UTC was an industry leader in Internet buying with its leading-edge use of reverse electronic auctions through FreeMarkets and outsourced e-procurement transactions through IBM Global Services. UTC is now forging ahead in the Lean Aerospace Initiative and is breaking new ground in indirect sourcing, called general procurement at UTC. In 2001, UTC launched UT500, which set a $500 million savings goal for three years.
Pierre Mitchell, Director in Procurement and Supply Chain Management, Hackett Group Advisory Services
Pierre Mitchell is a Director in Procurement and Supply Chain for The Hackett Group's Advisory Services. As a member of the client service delivery team, he is responsible for advancing the procurement and supply chain practice and tools, which propel companies toward world-class performance in supply chain management. He has seventeen years of industry and consulting experience in procurement, supply chain, manufacturing, and information technology.
Most recently, he was the VP of SRM research at AMR Research, where he provided executives with objective business counsel. As an industry expert in supply management technologies, Mr. Mitchell has been recognized as one of the practitioner "Pros to Know" by Supply & Demand Chain Executive magazine. He is frequently quoted by the business press and regularly speaks at industry events. Previously, Mr. Mitchell was a manager at Arthur D. Little, where he led a number of procurement and supply chain transformations at Fortune 500 companies. Other industry positions include manufacturing project manager at The Timberland Company, materials manager at the Krupp Companies and engineer at EG&G Torque Systems.
Mr. Mitchell holds a degree in engineering management from South Methodist University and an MBA from the University of Chicago.
Greg Shoemaker, Vice President Procurement, Hewlett-Packard
Greg had responsibility during the pre-merger integration of HP and Compaq to identify the best procurement practices of both companies and then make them work for the combined company. With more than 23 years experience, of which 18 years has been spent with Compaq and HP, Mr. Shoemaker is integral in driving cost savings and efficiencies throughout the procurement process for HP. In his role on the Procurement council for HP, he drives the development of HP's procurement policies, best practice implementation, and creation of strategic supplier programs. During the integration process of pre-merger HP, Mr. Shoemaker was directly responsible for identifying the best procurement practices of both companies and developing strategies for the successful integration and value capture for the new procurement team. Leveraging his expertise extending partner relationships deeper into the supply chain, improving HP's influence over quality, security and information processes, Mr. Shoemaker will speak to best practices and key learnings from HP's collaboration with supply chain partners in a way that will bring value to OEMs of all sizes.
Thomas T. Stallkamp, Chrysler Corporation
Thomas T. Stallkamp changed the traditional paradigm or purchasing when he introduced the SCORE program at Chrysler in 1992. SCORE created a framework in which suppliers submitted cost reduction ideas and received a percentage of the reward. In the traditional model of supplier relations in Detroit, the Big Three use their leverage to beat up their suppliers and play one off against the other. Thomas T. Stallkamp is currently vice chairman and chief executive officer at MSX International, a global provider of collaborative enterprise services. Parts of this bio were taken from that company.
During almost 20 years at Chrysler Corporation, Stallkamp helped lead the company to new stability and growth in the uncommonly competitive automotive industry. During his tenure as president, Chrysler was the most profitable company in the auto industry. Indeed, many thought he would be tapped to replace Bob Eaton. His last position in Chrysler was as vice chairman and a board member of DaimlerChrysler Corporation; he left in 2000. Stallkamp became known for developing new business processes and enhanced partnerships with the automotive supply community, thereby improving product quality and cost efficiencies. As an example, Chrysler's SCORE (Supplier Cost Reduction Effort) program was a successful, structured approach by which suppliers sought ways to reduce cost or to improve product or process performance for the same cost. He pioneered the development of a unique partnership approach to corporate supplier relations under Chrysler's Extended Enterprise concept. These programs focused on reducing overall cost rather than simple parts costs.
Stallkamp serves on the boards of Visteon Corporation, K-mart Corporation and Baxter International. He is also on the board of advisors of Georgetown University's McDonough School of Business and teaches at Babson College's Graduate Entrepreneurship Center. Stallkamp holds a bachelor's degree in industrial management and economics and a master's degree in business administration from Miami University (Ohio).
For more information on Tom, please visit:
http://www.whartonsp.com/press/press_releases_detail.asp?promo=2399&rl=1
http://waw.wardsauto.com/ar/auto_nice_guys_dont/
http://globalcpo.com/_wsn/page17.html
R. Gene Richter (1937-2003)
Mr. Richter was the former chief procurement officer at IBM, Hewlett-Packard, and Black & Decker, who created the modern concept of the chief procurement officer.
With degrees from Maryland and Michigan, Gene worked at Ford Motor Company in a variety of purchasing management positions for 23 years. In 1984, he became vice president of purchasing at Black & Decker, and four years later his team won Purchasing Magazine’s Medal of Professional Excellence for leading-edge procurement programs. It was at B&D where Gene fine-tuned his strategies of global sourcing, long-term agreements and centralization of key commodities.
Later, as executive director of procurement at Hewlett-Packard, he worked with a team to develop written sourcing strategies and to negotiate strategic alliances with worldwide leading-edge suppliers. In 1992, HP won Purchasing Magazine’s Medal of Professional Excellence.
IBM convinced Gene to help revamp their global procurement operations in 1994. He centralized purchasing though commodity councils, saving millions of dollars. Gene’s team also formed customer solutions procurement, set up a technology convergence office to tap into suppliers' technical know-how, and moved the purchasing process to the Internet. IBM won the Medal of Professional Excellence in 1999.
In all, Gene led three completely different corporate teams that earned the Medal of Professional Excellence during his career. No one else can claim this achievement.
For further details on his work in companies like IBM, Black & Decker, HP, please read http://dot-richterfoundation.org-1143892.namezero.com/sitebuildercontent/sitebuilderfiles/genetributearticle.pdf
http://www.purchasing.com/article/CA337311.html
Jon Beers, Associate Director of Worldwide Purchases, The Procter & Gamble Company
Mr. Jon Beers is an associate director of worldwide purchases at Procter & Gamble (P&G). Jon has worked at Procter & Gamble for more than 30 years, and one of his key focus areas is to standardize and improve contract management for P&G. Jon's experience includes manufacturing, research and development, quality assurance and purchases.
Garry S. Berryman,Chief Procurement Officer, Sara Lee Corp.
Faced by rising costs and sagging stock values, on Mar 29, 2005, Sara Lee Corp. appointed Garry S. Berryman to the new position of chief procurement officer. In this role, Berryman, 52, will be responsible for the company’s global procurement operations. He will report to L.M. (Theo) de Kool, executive vice president and chief financial and administrative officer. Berryman joins Sara Lee from Applied Materials, Inc., where he served as vice president of global materials and supply chain management. Prior to that, Berryman was at Harley-Davidson for eight years as vice president of materials management and product cost and helped lead a major transformation at the American icon Harley-Davidson. Berryman introduced a unique approach to product engineering that incorporated use of procurement engineers trained at MIT and other top schools as well on-site engineers from supplier-partners. Berryman will face a different set of issues at Sara Lee, which has suffered due to retail price constraints and lack of brand focus. The company named a new CEO earlier this year and launched a restructuring.
Berryman has more than 20 years of experience that includes positions of increasing responsibility at Honda of America Manufacturing, Inc. and Deere & Company. Berryman received his bachelor’s degree in accounting from the University of Northern Iowa and is a certified public accountant.
Scott Allen, Former Chief Procurement Officer, H.J. Heinz Company
Scott Allen is a 25-year veteran of procurement and logistics. Scott Allen has 25 years of experience in procurement, working his way up through the food industry, holding positions at Carnation Company, Star-Kist Foods/Heinz Pet Products, Nestle Foods, and most recently H.J. Heinz. As chief procurement officer at H.J. Heinz, Allen was responsible for $5 billion in annual direct materials, indirect materials, and services spending. He led the global procurement business, centralizing procurement organizations and facilitating 10 percent savings globally.
Kent L. Brittan, Vice president, Supply Management, United Technologies Corp
Kent Brittan is leading a supply management transformation at United Technologies that began with a major electronic initiative and is now focused on meeting a lean manufacturing mandate. Kent L. Brittan became vice president of Supply Management at United Technologies Corp. in 1997 and has participated in a corporate transformation at UTC under CEO George David that consistently delivers double-digit annual earnings growth. In the past ten years, UTC’s total return to shareholders has outstripped General Electric by 50%. UTC was an industry leader in Internet buying with its leading-edge use of reverse electronic auctions through FreeMarkets and outsourced e-procurement transactions through IBM Global Services. UTC is now forging ahead in the Lean Aerospace Initiative and is breaking new ground in indirect sourcing, called general procurement at UTC. In 2001, UTC launched UT500, which set a $500 million savings goal for three years.
Pierre Mitchell, Director in Procurement and Supply Chain Management, Hackett Group Advisory Services
Pierre Mitchell is a Director in Procurement and Supply Chain for The Hackett Group's Advisory Services. As a member of the client service delivery team, he is responsible for advancing the procurement and supply chain practice and tools, which propel companies toward world-class performance in supply chain management. He has seventeen years of industry and consulting experience in procurement, supply chain, manufacturing, and information technology.
Most recently, he was the VP of SRM research at AMR Research, where he provided executives with objective business counsel. As an industry expert in supply management technologies, Mr. Mitchell has been recognized as one of the practitioner "Pros to Know" by Supply & Demand Chain Executive magazine. He is frequently quoted by the business press and regularly speaks at industry events. Previously, Mr. Mitchell was a manager at Arthur D. Little, where he led a number of procurement and supply chain transformations at Fortune 500 companies. Other industry positions include manufacturing project manager at The Timberland Company, materials manager at the Krupp Companies and engineer at EG&G Torque Systems.
Mr. Mitchell holds a degree in engineering management from South Methodist University and an MBA from the University of Chicago.
Transformation to a Centralized Procurement Model - Case Studies
The following selected vignettes offer a small glimpse into the power of leveraged spending that leading corporations around the world have experienced recently.
The Limited Brands
The company operates 3,700 domestic retail store locations under four separate brands (The Limited, Bath & Body Works, Victoria's Secret, and Express) and has a sizeable $3 billion annual spend. Until recently, it had its 40 procurement professionals located in Ohio, New York, and Hong Kong working for the brands separately. But over the last five years, the company began consolidating several functions—including procurement—into one centralized shared services organization. "Now, these four brands continue to develop, design and market individually, but all of their support functions are within a central, shared services organization," explains Chuck Dahlman, director of strategic procurement at the company.
In mid-2002, as part of this effort, the company consolidated all of the purchasing people into one organization, called the Strategic Procurement Organization. The goal was to transform the purchasing organization from being engaged in strictly tactical functions (eg. processing purchase orders) to more expanded strategic functions, including strategic sourcing. "While they would still be involved in some transactional activities, we installed some technology to handle a lot of this," Dahlman says.
To achieve this transformation, it was necessary to create a process and subsequent training program that would involve helping the procurement professionals understand best practices for a world-class strategic procurement organization. "We wanted them to be able to gather all of the relevant data for a project, understand what they were looking for, and realize what was happening in the specific markets where they were sourcing, so they could develop the appropriate procurement strategies," continues Dahlman. "In this way, we hoped they would be able to do better than the market as a whole."
To achieve this, the company created a proprietary in-house talent assessment called an Organization & Leadership Review Process (OLRP). The first goal of the OLRP was to redefine roles, job descriptions, professional competencies, and leadership behaviors. Next, it assessed work history, education, performance, and career interest. Finally, it mapped talent gaps, strengths, and developmental needs. "As part of the training initiative, we began to strongly encourage everyone to get their C.P.M. certification," Dahlman says. "We began offering some courses here to help them prepare."
Once buyers were certified, they began to participate in continuing education courses, such as off-site seminars. The benefits of the efforts are coming through today. For example, when the procurement functions first consolidated, procurement management realized that the new department would need to market itself to its internal customers. Company policy did not mandate that people go through procurement when they were engaged in non-merchandise sourcing initiatives.
"For example, in a large project, businesses can go about sourcing any way they want," states Dahlman. To begin marketing themselves, the procurement professionals first became involved in some small projects, or got involved in large projects in small ways, such as taking care of the requisitions and purchase orders. "Gradually, they began making suggestions," he notes. "As a result, more people are coming to us when they have projects and are asking us for help in terms of qualifying suppliers, negotiating, creating better terms and conditions, and so on." For example, procurement professionals have become successful at creating price caps so that, when prices increase, the company doesn't see increases as significant as it might have otherwise seen.
The teamwork between procurement and internal customers has been paying off: The original goal was for purchasing to help reduce cost for the enterprise by $200 million over five years. "We are only in our fourth year, and we have already helped save between $320 and $350 million," he states.
While things are moving along smoothly, the department is not done fine tuning its efforts. "Before we made the transition, procurement people were aligned with a specific brand," states Dahlman. "When we made the transition, we trained them to become specialized subject matter experts who could support several different brands as needed." Now, there is an initiative to blend the best of both; where the department will continue to have subject matter experts but will also have some people dedicated to the specific brands in order to maintain internal customer relationships. "We are already getting pretty close to this ideal balance," he concludes.
(Ref: “Centralized procurement: Success breeds success”, William Atkinson, Purchasing, June 15, 2006)
Sanmina--SCI Corporation
As an electronics contract manufacturer within a $125B market, Sanmina embraced the core concepts of supply chain management and increased its focus on the global supply base. In 2001, by emphasizing supplier selection, supplier management, supplier development, and technology convergence through a dedicated core of procurement and commodity experts, Sanmina reduced the corporation's inventory by almost 90 percent and nearly tripled its inventory turns. By continuing to attack the islands of centralization at its factory level, Sanmina projected continued improvements of approximately the same magnitude over the next year. The benefits of centralized procurement and integrated supply chain management are readily apparent, as its supply chain vice president testified, "We don't do a lot of part shortage meetings anymore."
(Ref: Jim Sutherlin, vice president, supply chain, Sanmina--SCI Corp, "Global Inventory Management," 7 Feb 02)
ChevronTexaco Corporation
In 2001, ChevronTexaco (CT) created a center led strategic procurement organization with decentralized operational procurement organizations reporting directly to it and expanded the center-led focus from materials-only procurement to materials, services, and logistics procurement. Utilizing strong top management support from the CEO downward, the resulting corporate leverage enabled CT's procurement organization to save 34.3 percent in oilfield trucking costs, 39.3 percent in office supply costs, 22.4 percent in office furniture costs, 31.1 percent in telecommunications expenses, and more than $10.3M in information technology hardware. By consolidating suppliers, creating competitive threat with their incumbent suppliers, negotiating heavily, and obtaining tremendous consensus with its supply chain partners, CT also was able to save 18.5 percent in its refinery maintenance costs for its six US refineries. Notably, CT executed its consolidation and improvement efforts while also achieving outstanding goals in supplier diversity and small business utilization.
(Ref: Renee Lagorio-French, business manager, ChevronTexaco Corp, "ChevronTexaco Procurement," 8 Feb 02)
Motorola
Beyond the obvious advantages of leveraged buying power, strategic procurement is a key enabler of effective supply chain management (SCM). Motorola's Personal Communications Sector, the world's second largest cell phone manufacturer, acknowledged this often-overlooked fact as it placed Theresa Metty, one of the nation's top-ranked purchasing professionals, in charge of its SCM function in 2000. Through Metty's campaign to reduce supply chain complexity and leverage centralized purchasing power, Motorola PCS successfully increased its market share, "squeezed $2.6B in costs out of its supply chain, reduced inventory by $1.4B, and improved its customer response time 40 percent" in the following 2 years.
Metty, who was promoted in 2003 as Motorola's senior vice president and chief procurement officer, introduced the centralized commodity council concept at Motorola PCS, better equipping the organization to stay ahead of economic developments, technology shifts, changing demand, supply restrictions, and bottlenecks.
(Ref: Bolaji Ojo, "Motorola's Master Plumber," EBNonline, 31 Mar 03; James Carbone, "Motorola Simplifies to Lower Cost," Purchasing, 18 Oct 01)
The Limited Brands
The company operates 3,700 domestic retail store locations under four separate brands (The Limited, Bath & Body Works, Victoria's Secret, and Express) and has a sizeable $3 billion annual spend. Until recently, it had its 40 procurement professionals located in Ohio, New York, and Hong Kong working for the brands separately. But over the last five years, the company began consolidating several functions—including procurement—into one centralized shared services organization. "Now, these four brands continue to develop, design and market individually, but all of their support functions are within a central, shared services organization," explains Chuck Dahlman, director of strategic procurement at the company.
In mid-2002, as part of this effort, the company consolidated all of the purchasing people into one organization, called the Strategic Procurement Organization. The goal was to transform the purchasing organization from being engaged in strictly tactical functions (eg. processing purchase orders) to more expanded strategic functions, including strategic sourcing. "While they would still be involved in some transactional activities, we installed some technology to handle a lot of this," Dahlman says.
To achieve this transformation, it was necessary to create a process and subsequent training program that would involve helping the procurement professionals understand best practices for a world-class strategic procurement organization. "We wanted them to be able to gather all of the relevant data for a project, understand what they were looking for, and realize what was happening in the specific markets where they were sourcing, so they could develop the appropriate procurement strategies," continues Dahlman. "In this way, we hoped they would be able to do better than the market as a whole."
To achieve this, the company created a proprietary in-house talent assessment called an Organization & Leadership Review Process (OLRP). The first goal of the OLRP was to redefine roles, job descriptions, professional competencies, and leadership behaviors. Next, it assessed work history, education, performance, and career interest. Finally, it mapped talent gaps, strengths, and developmental needs. "As part of the training initiative, we began to strongly encourage everyone to get their C.P.M. certification," Dahlman says. "We began offering some courses here to help them prepare."
Once buyers were certified, they began to participate in continuing education courses, such as off-site seminars. The benefits of the efforts are coming through today. For example, when the procurement functions first consolidated, procurement management realized that the new department would need to market itself to its internal customers. Company policy did not mandate that people go through procurement when they were engaged in non-merchandise sourcing initiatives.
"For example, in a large project, businesses can go about sourcing any way they want," states Dahlman. To begin marketing themselves, the procurement professionals first became involved in some small projects, or got involved in large projects in small ways, such as taking care of the requisitions and purchase orders. "Gradually, they began making suggestions," he notes. "As a result, more people are coming to us when they have projects and are asking us for help in terms of qualifying suppliers, negotiating, creating better terms and conditions, and so on." For example, procurement professionals have become successful at creating price caps so that, when prices increase, the company doesn't see increases as significant as it might have otherwise seen.
The teamwork between procurement and internal customers has been paying off: The original goal was for purchasing to help reduce cost for the enterprise by $200 million over five years. "We are only in our fourth year, and we have already helped save between $320 and $350 million," he states.
While things are moving along smoothly, the department is not done fine tuning its efforts. "Before we made the transition, procurement people were aligned with a specific brand," states Dahlman. "When we made the transition, we trained them to become specialized subject matter experts who could support several different brands as needed." Now, there is an initiative to blend the best of both; where the department will continue to have subject matter experts but will also have some people dedicated to the specific brands in order to maintain internal customer relationships. "We are already getting pretty close to this ideal balance," he concludes.
(Ref: “Centralized procurement: Success breeds success”, William Atkinson, Purchasing, June 15, 2006)
Sanmina--SCI Corporation
As an electronics contract manufacturer within a $125B market, Sanmina embraced the core concepts of supply chain management and increased its focus on the global supply base. In 2001, by emphasizing supplier selection, supplier management, supplier development, and technology convergence through a dedicated core of procurement and commodity experts, Sanmina reduced the corporation's inventory by almost 90 percent and nearly tripled its inventory turns. By continuing to attack the islands of centralization at its factory level, Sanmina projected continued improvements of approximately the same magnitude over the next year. The benefits of centralized procurement and integrated supply chain management are readily apparent, as its supply chain vice president testified, "We don't do a lot of part shortage meetings anymore."
(Ref: Jim Sutherlin, vice president, supply chain, Sanmina--SCI Corp, "Global Inventory Management," 7 Feb 02)
ChevronTexaco Corporation
In 2001, ChevronTexaco (CT) created a center led strategic procurement organization with decentralized operational procurement organizations reporting directly to it and expanded the center-led focus from materials-only procurement to materials, services, and logistics procurement. Utilizing strong top management support from the CEO downward, the resulting corporate leverage enabled CT's procurement organization to save 34.3 percent in oilfield trucking costs, 39.3 percent in office supply costs, 22.4 percent in office furniture costs, 31.1 percent in telecommunications expenses, and more than $10.3M in information technology hardware. By consolidating suppliers, creating competitive threat with their incumbent suppliers, negotiating heavily, and obtaining tremendous consensus with its supply chain partners, CT also was able to save 18.5 percent in its refinery maintenance costs for its six US refineries. Notably, CT executed its consolidation and improvement efforts while also achieving outstanding goals in supplier diversity and small business utilization.
(Ref: Renee Lagorio-French, business manager, ChevronTexaco Corp, "ChevronTexaco Procurement," 8 Feb 02)
Motorola
Beyond the obvious advantages of leveraged buying power, strategic procurement is a key enabler of effective supply chain management (SCM). Motorola's Personal Communications Sector, the world's second largest cell phone manufacturer, acknowledged this often-overlooked fact as it placed Theresa Metty, one of the nation's top-ranked purchasing professionals, in charge of its SCM function in 2000. Through Metty's campaign to reduce supply chain complexity and leverage centralized purchasing power, Motorola PCS successfully increased its market share, "squeezed $2.6B in costs out of its supply chain, reduced inventory by $1.4B, and improved its customer response time 40 percent" in the following 2 years.
Metty, who was promoted in 2003 as Motorola's senior vice president and chief procurement officer, introduced the centralized commodity council concept at Motorola PCS, better equipping the organization to stay ahead of economic developments, technology shifts, changing demand, supply restrictions, and bottlenecks.
(Ref: Bolaji Ojo, "Motorola's Master Plumber," EBNonline, 31 Mar 03; James Carbone, "Motorola Simplifies to Lower Cost," Purchasing, 18 Oct 01)
Dell may quit direct to consumer model
Michael Dell says that under the leadership of Michael Cannon (see Dell Names New Supply Chain Chief), Dell will revamp its existing manufacturing, logistics and distribution strategies. “The direct model has been a revolution, but it is not a religion,” Dell said in a leaked internal memo to staff. This statement is being taken as an indication that Dell will eschew sticking with its direct sales model, which accounts for nearly all of its computer sales to both businesses and consumers. In that model, Dell sells to customers directly without intermediaries such as retailers and wholesalers. Orders are placed primarily through Dell’s web site, and computers are built to order. Dell, in turn, uses “demand shaping” strategies and technologies to guide buyers towards models and options for which it has the parts and capacity to deliver immediately.
The direct model has served Dell extremely well, but commentators have noted with regularity that the advantages it provides have dissipated in recent years, especially as the cost of components and machines have dropped, making the holding of inventory less risky. The model has served Dell extremely well, but the advantages it provides have dissipated in recent years, especially as the cost of components and machines has dropped, making the holding of inventory less costly.
Major competitors such as IBM and Lenovo have also made substantial supply chain improvements in recent years to reduce gaps in cost and responsiveness. In certain market such as China , customers are believed to be more concerned about seeing laptops before buying; and cultural and other factors in emerging markets are thought to also favor a retail distribution over direct supply strategy.
I found an interesting post on this latest shift in Dell's strategy on Dwight Silverman 's Tech Blog thats says:
The New York Times has gotten hold of an e-mail sent to Dell employees by its CEO and co-founder, Michael Dell, that's essentially a warning of big changes coming -- something he's already signaled via previous statements and personnel changes.
Times reporter Damon Darlin says the e-mail (PDF) also hints that Dell may expand further into retail operations, significantly altering the direct model of sales that it pioneered -- and which upended the personal computer business:
It is the first time that Mr. Dell or any other senior executive has publicly conceded that the business model that was crucial to the company's success could -- and should -- be altered. Until now, the company responded with an adamant no when Wall Street analysts or customers asked whether the company would consider other ways of selling.
While Mr. Dell's memo was short on specifics, he also told employees, "We will continue to improve our business model, and go beyond it, to give our customers what they need."
As Dell faced slower sales and increased competition, it experimented with minor variations of the model. For example, late last year it opened a showroom in a Dallas mall that displays, but does not sell, computers, printers and TVs. The products still had to be ordered for delivery.
Business Model of Dell
Dell sells all its products both to end-use consumers and to corporate customers, using a direct-sales model via the Internet and the telephone network. Dell maintains a negative cash conversion cycle through use of this model: in other words, Dell Inc. receives payment for the products before it has to pay for the materials. Dell also practices |just-in-time (JIT) inventory management, profiting from its attendant benefits. Dell’s JIT approach utilizes the “pull” system by building computers only after customers place orders and by requesting materials from suppliers as needed. In this way Dell mirrors Toyota by following Toyota Way Principle #3 ("Use 'pull' systems to avoid overproduction"). Since the original dominance of telephone ordering, the Internet has significantly enhanced Dell’s business model, making it easier for customers and potential customers to contact Dell directly. Other computer manufacturers, including Gateway and Hewlett-Packard, have attempted to adapt this same business model, but due to timing and/or retail-channel pressures they have not achieved the same results as Dell.
The direct model has served Dell extremely well, but commentators have noted with regularity that the advantages it provides have dissipated in recent years, especially as the cost of components and machines have dropped, making the holding of inventory less risky. The model has served Dell extremely well, but the advantages it provides have dissipated in recent years, especially as the cost of components and machines has dropped, making the holding of inventory less costly.
Major competitors such as IBM and Lenovo have also made substantial supply chain improvements in recent years to reduce gaps in cost and responsiveness. In certain market such as China , customers are believed to be more concerned about seeing laptops before buying; and cultural and other factors in emerging markets are thought to also favor a retail distribution over direct supply strategy.
I found an interesting post on this latest shift in Dell's strategy on Dwight Silverman 's Tech Blog thats says:
The New York Times has gotten hold of an e-mail sent to Dell employees by its CEO and co-founder, Michael Dell, that's essentially a warning of big changes coming -- something he's already signaled via previous statements and personnel changes.
Times reporter Damon Darlin says the e-mail (PDF) also hints that Dell may expand further into retail operations, significantly altering the direct model of sales that it pioneered -- and which upended the personal computer business:
It is the first time that Mr. Dell or any other senior executive has publicly conceded that the business model that was crucial to the company's success could -- and should -- be altered. Until now, the company responded with an adamant no when Wall Street analysts or customers asked whether the company would consider other ways of selling.
While Mr. Dell's memo was short on specifics, he also told employees, "We will continue to improve our business model, and go beyond it, to give our customers what they need."
As Dell faced slower sales and increased competition, it experimented with minor variations of the model. For example, late last year it opened a showroom in a Dallas mall that displays, but does not sell, computers, printers and TVs. The products still had to be ordered for delivery.
Business Model of Dell
Dell sells all its products both to end-use consumers and to corporate customers, using a direct-sales model via the Internet and the telephone network. Dell maintains a negative cash conversion cycle through use of this model: in other words, Dell Inc. receives payment for the products before it has to pay for the materials. Dell also practices |just-in-time (JIT) inventory management, profiting from its attendant benefits. Dell’s JIT approach utilizes the “pull” system by building computers only after customers place orders and by requesting materials from suppliers as needed. In this way Dell mirrors Toyota by following Toyota Way Principle #3 ("Use 'pull' systems to avoid overproduction"). Since the original dominance of telephone ordering, the Internet has significantly enhanced Dell’s business model, making it easier for customers and potential customers to contact Dell directly. Other computer manufacturers, including Gateway and Hewlett-Packard, have attempted to adapt this same business model, but due to timing and/or retail-channel pressures they have not achieved the same results as Dell.
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