Strategic sourcing

Worthington Steel in Columbus Ohio, one of the largest US steel manufacturers/processors, sought assistance with leveraging the processes and organizational behavior associated with their corporate purchasing. They were experiencing costs increasing at a rate not commensurate with their growth and discovering redundant inventory, processes and personnel throughout the organization. Since their procurement function was global and decentralized, they had minimal controls in place to initiate true leveraging of their spending or analysis of where product was purchased or located.

We began the project with a review of the individuals who “believed” they were in the purchasing function/discipline within the framework of the organization, with remarkable results. One third of those interviewed were actually in product development requiring some purchasing to support their programs, but buying the same items as other divisions, with no consolidation of requirements or purchase orders. Additionally, the vendors utilized were not consistent across divisions for acquiring the same items. Finally, performance metrics were either inconsistent or non existent in their departments.

With the support of senior management, we initiated a series of leadership meetings to share possible behavior change and introduce leading practices in organizational structure and continuous improvement. Discussion of setting tactical and strategic goals on a functional versus a departmental level yielded some very rewarding improvement opportunities.

We implemented a supplier scorecard relative to cost, time and quality aimed at similar products. We were able to reduce the overall number of suppliers for the client by 50%. Once this was accomplished, we concentrated on “maverick” buying throughout the organization to support the need for centralized measurement of processes and purchasing. We implemented a formal Sales and Operations Planning (S&OP) process for the client and recommended the leadership for this reside in Corporate Purchasing. This led to the appointment of a VP Purchasing for the company and a central led, not centralized, sourcing division with uniform standards, consistent performance measurements, personnel active in procurement in support of other departments who had been buying on their own, and significant reduction in scattered, redundant inventory.

The reduction of the supplier base, elimination of redundant inventory and consolidation of processes and personnel led to sustainable annualized savings of over $100 million.One of the most rewarding engagements our team experienced was the peripheral behavior changes and the spirit of the division becoming more dynamic. The continued increases in productivity, cost savings, consistent management performance and sales have been realized annually.

The client was in danger of an unwelcome takeover and avoided it through strong, unified management leadership. This project contributed significantly to that result.