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Case - Developing Procurement Expertise Through a Multi-Stage Training Program
Our client, a conglomerate of transportation service providers, perceived an opportunity to potentially leverage its combined purchases to realize lower unit costs. While working with them to achieve that leverage, a variety of other savings opportunities surfaced -- some large, some smaller.

Approach & Value Added
Rather than create lots of consulting work pursuing each of these as independent initiatives, we helped establish cross-company teams to research the major opportunities, and suggested the creation of a training program that would assist purchasing staff recognize and exploit these situations as they arose.

Phase I of the program covered:
  • Purchasing Vision
  • Best Practices
  • The Mentored Champion Process
  • Ethics
Phase I established a consistent baseline of practices and skills among staff members. The Mentored Champion Process, which we had developed as part of our Council work, was hugely successful. By involving suppliers and users earlier in the purchasing cycle, and establishing cross-functional commodity teams, significant improvements in cost and product utility were achieved. Over a period of several years, more than $100 million was realized in savings.

As the success of Phase I was realized, a Phase II was developed. This time, the accent was on negotiations, communications, and financial analysis. Again, the program was well received.

Logistics costs -- e.g., forecasting usage, placing orders, shipping from the vendor, inventorying the item, moving it to its point of use, and eventually moving it to be disposed of -- were a large but often underappreciated component of the total life cycle cost of materials the client companies purchased. Phase III brought in Drs. John Langley and Ray Mundy from the University of Tennessee to teach the "The Logistics Process."

This prepared the staff well for Phase IV -- which focused on advanced financial analysis techniques like total cost of ownership and cost decomposition, as well as on the then-evolving topics of supplier partnerships and supplier evaluations.

Phase V covered using the internet as a strategic purchasing tool, and provided additional opportunities for course attendees to work through detailed examples and practice their growing set of skills. One useful device introduced in Phase V was an "applicability worksheet" where participants were given the opportunity to describe in detail where and how they could apply some of the tools being reviewed.

In summary, the initial interest in building staff skills evolved into a comprehensive, tailored training process that spanned five years. The topics covered at any given stage were those that could next be applied, taught by those who were most cost-effective. Our relationship with the client purchasing professionals continues to evolve and we likely will consider what Phase VI might look like sometime in 2000.

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