|
It was in
early January, 1996, when 12 people from Owens Corning came
together to find ways to streamline its MRO acquisition and
use process across its plants in North America, and it was a
very good day. So good, in fact, that the group has already
aligned with an electrical supplier that, from the start,
has dramatically cut costs and streamlined acquisition to
save Owens Corning over $1 million annually. To date, the
group has plowed through reams of data and several
presentations to select a bearing supplier, and their sights
are set on pipe valve and fittings, safety equipment and
mills supplies before the end of the year.
“We look to save $6 million the very first year just in
reducing our transaction costs,” explains Rose Drolett,
global procurement team leader at Owens Corning.
Owens Corning, headquartered in Toledo, Ohio, is perhaps
best-known for its pink fiberglass insulation and its
trademark mascot, the Pink Panther. It’s also a world-wide
producer of composites that are used in applications ranging
from skis to golf clubs to bridge decking and power
transmission towers. Its composites are also used in
automobiles, computers, fiber-optic cables and
large-diameter pipe used to build the infrastructure of
developing nations. The company’s sales were $3.6 billion in
1995 and its goal is to reach $5 billion by 1999, aiming to
achieve earnings and cash flow at twice the rate of sales.
Those are
ambitious goals. Refining production processes and reviewing
every cost center is key to the company’s goal of increasing
earnings and cash flow.
“Before,MRO products were considered nickels and dimes in
the whole process,” says Drolett. But when you consider the
company’s 96 manufacturing and research facilities
throughout the world, the nickels and dimes add up: “We
spend over $42 million annually and process 250,000
transactions per year on MRO products. We conservatively
estimate our cost for processing a transaction at $52 (it’s
likely closer to $108), which adds another $12 million in
cost to MRO procurement. That’s more than $50 million we
spend annually for MRO products.”
Drolett estimates that Owens Corning uses over 1,000
distributors for MRO items, many carrying different brands
of products. Result: a mishmash of products used throughout
all plants, and no hope of leveraging the buying power of
the plants for lower pricing.
“We’re looking at this process in three steps. First, we
want to consolidate our distributor base; and second, we
want to negotiate in partnership with our distributors to
get lower unit prices from suppliers. The third step is to
standardize products across plants and processes.”
Tall Order for Big Savings
Accomplishing the task of streamlining a vendor base across
the world is a tall order, so Sourcing Effectiveness Teams
(SET) are concentrating their efforts on North American
plants and leveraging their findings globally when
practical.
The first step was assembling a cross-functional team that
represents all types of plants and disciplines. It includes
people from maintenance, production, purchasing and
corporate offices.
“Our first meeting was a complaint session,” Drolett admits.
It was like a retreat because we had so much to accomplish,
but as we started looking at the complaints, we turned them
around and made them into possibilities. It turned out to be
a very productive three-day meeting.” |
