Supply Excellence — Exclusive: Bootstrapping Supply Management Success

Exclusive: Bootstrapping Supply Management Success

January 22nd, 2007 · by Tim Minahan · No Comments · best practices, events, supply management

Late last year, I had the honor of moderating a track on best practices for supply management organization and process at ProcureCon Europe. Track presenters included supply management executives from Nokia, HH Print, American Express, and NAVTEQ. I previously posted on Nokia’s presentation on Center-Led procurement structures here.

I am happy to report that Rob Martens, Director of Purchasing EMEA for NAVTEQ, a leading provider of digital map information for navigation devices, has agreed to share more insights into his presentation: Building a Procurement Function from Scratch.

The first installment of this two-part interview appears below:

NAVTEQ is a company whose products everyone uses, but are often unaware of it. (Example: Just this morning I noticed that NAVTEQ is the source of map data for both Google Maps and Microsoft maps.) Can you give a brief background on Navteq?
NAVTEQ is a leading provider of comprehensive digital map information for automotive navigation systems, mobile navigation devices and Internet-based mapping applications. NAVTEQ maps fuel virtually every automobile manufacturer that currently offers a navigation system as well as all of the leading online mapping applications, major wireless, fleet and government applications. 60 million were used everyday in 2005 and NAVTEQ has equipped over 10 million vehicles since 1999. Today, NAVTEQ is headquartered in Chicago, IL, USA with approximately 2,100 employees in over 125 offices worldwide. NAVTEQ has major production facilities in Fargo, North Dakota, USA, and a support center in Yokohama, Japan. (for more information visit www.navteq.com)

Like many fast-growing companies, NAVTEQ didn’t always have a strategic focus on procurement or supply management. Can you describe the procurement organization and environment when you first arrived at NAVTEQ?
Due to the quick growth of Navteq, centralization and professionalism of the purchasing function was lagging behind to what was needed and purchasing activities were highly fragmented due to the nature of NAVTEQ and lack of central purchasing leadership. This resulted in various policies and procedures which were insufficiently harmonized within the company. My task became first to initiate a company-wide purchasing policy and procedures, based on a shared strategy. Next, we worked on improving spend analyses and reporting. We rolled out an existing ERP system across all departments and involved all other disciplines, such as Legal, whenever that was appropriate.

What were the business issues and objectives that caused NAVTEQ to put a focus on improvement procurement efficiency and effectiveness?
We quickly realized that vast improvements of procurement efficiency and effectiveness would contribute directly the financial performance of the company as a whole. There was a lot to be gained in that area. In addition, we wanted to contribute to reducing product liability and revenue risk. By creating a professional purchasing group efficiencies could be gained and expertise leveraged. ISO 9001 and ISO/TS 16949 stipulated certain purchasing and supplier management related requirements that were difficult to achieve when this would be left to the operational people entirely.

So you really had to bootstrap a procurement organization. Please describe the components of your supply management improvement plan?
First I started with analyzing the current situation and proposed a number of solutions. For I mapped the existing purchasing processes and analyzed the spend per category, per division and per supplier the spend under contract. The ratio of controlled vs. uncontrolled spend that flowed through the ERP system and were all purchasing activities were taking place. In combination with the requirements of the upcoming ISO 9001 and ISO/TS 16949 certifications this created the sense of urgency that was needed to lead change.

What were some of the business methods/tools you used to conduct your assessments and drive your improvement plans?
I used Van Weele’s 6 step purchasing process to depict the generic purchasing process in a simple way and Peter Kraljic’ Purchasing Portfolio Matrix to distinct the different spend categories towards supply risk and financial impact, leading to dedicated purchasing strategies. The DuPont analysis was a useful tool to show senior management the impact of purchasing savings on the return on investment of the company. The SWOT matrix revealed the strengths, weaknesses, threats and opportunities of the purchasing processes of that time. For implementing change I used the Change Acceleration Process (CAP) and tools that I have learned when working at GE. Thanks, Rob for sharing your experience. You’ve offered some valuable tips Supply Excellence readers can use to assess procurement performance and developing a plan for improvement. I look forward to Part Two of this interview when you showcase how you bootstrapped a procurement organization and the results you’ve achieved.

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