As Tim pointed out the other day, Telefonica has some impressive numbers to show for their e-sourcing efforts. But I think the truly amazing thing is that they’ve had such success while managing €25.2 billion in spend for the 4th largest telecom company on the planet, which operates across 21 countries. And given that they’ve grown to that size by acquisitions - which require smooth, fast integration - they truly are a model of procurement efficiency.

So what makes their operation tick? If I told you it’s decision by consensus, would you believe me?

Well, it’s true. In his keynote address at Ariba LIVE in Brussels last week, Telefonica CPO Juan Carlos Montejano Dominguez described their procurement process; a 3 level matrix of corporate, country and specialized buyer levels.

Procurement decisions are typically made by local buyers and category experts. They strive for unanimity in their choices and if they fail to reach that threshold, the decision moves up one level of the matrix and begins again. That process is consistent across all of their companies and they have the stats to show it’s working. Hard to imagine when you consider how difficult it can be to find consensus on anything - from capital equipment purchases to where to eat lunch that day - in most organizations.

Telefonica also puts a heavy emphasis on knowledge sharing across departments, companies and borders. Their 900 person procurement department shares conditions of purchasing and methodology information about their e-sourcing events. And their Supplier Performance Management (SPM) program also allows gives those involved in purchasing decisions an up to date quality assessment of potential suppliers.

But a well designed, efficient process alone doesn’t always equal results. So Juan Carlos was kind enough to also share his Tips for Success:

1. Secure management buy-in
2. Begin with limited scope, then grow by function, company and commodity
3. Start with quick wins to build confidence, trust and success
4. Evangelize the use of e-tools
5. Monitor usage and openly reward top users
6. Select best of breed resources
7. Integrate with local financial systems
8. Invest in continuous training
9. Maintain momentum and build on success

Justin Fogarty is Managing Editor of Supply Excellence and is providing coverage of Ariba LIVE 2008 Europe in Brussels. Any feedback or questions about the event or blog can be directed to Justin at jfogarty[at]ariba.com.

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