Just over a year ago, network equipment vendor Juniper Networks began rolling out a new procurement system to its 9000 employees worldwide. The aim was to get a better grip on annual spend of $1 billion. Putting procurement in the hands of every single employee was a key part of that, explained David Hearn, senior director of indirect procurement, speaking in a session at Coupa’s Inspire 2015 conference in May:
We have 9,000 buyers. Part of the core vision is you want to influence all 9,000. They’re all going to buy things, you want to influence them.
Over two thirds of the spend at Juniper is on one-off purchases, mostly consulting projects or custom software, which by their nature cannot be included in a pre-approved catalog of items. For example, $15 million might go on a consulting agreement, $40 million on CAD software. The new system allows the procurement team to focus on providing better support on buying these items.
In the past, most of the team’s time has been spent on managing smaller contracts because of a focus on purchase order administration, even though sixty percent were for less than $10k in value. Only nine percent of purchase orders were for more than $100k, but this minority represented three quarters of the overall spend. So a key part of the new strategy is to refocus on larger contracts, explained Hearn:
We want to put eighty percent of my team’s time on contracts greater than $100k. Why? The opportunity for supplier leverage on smaller contracts is low. If it’s under $100k you pick a supplier we already have in the database. I even cut out my buyers from looking at it.
You have to not manage the transactions, you have to manage the dollars.
This meant reassigning and retraining around a third of the 14-strong team from traditional buying roles to contract management:
I did not want to reduce my headcount cost but we did change where they were focused.
The second part of the strategy is what Hearn calls “non-intrusive guided buying.” There are various tools that help automate the process and which aim to head off ad-hoc contracting. For example, if someone searches for consultants in the catalog they see a helpful tips guide, a link to HR forms, the name of the relevant procurement adviser and finally a list of preferred consultants. Speeding up the process helps encourage employees to use the tools.
We don’t even measure cycle time any more. Once you get to hours, it doesn’t matter.
Strong take-up is essential to the success of the strategy: “Early involvement produces better sourcing,” said Hearn. There is a cost implication of giving all employees access to the new Coupa system but Hearn believes the procurement savings justify the extra cost of doing so. Coupa is used by many more staff than the former Oracle e-procurement system and the team is looking at other ways of enouraging even more engagement.
The more stuff we stick in Coupa — if people are going there, you’re more likely to guide them to your preferred suppliers.
War room but no war
The deployment followed a ‘big bang’ model of going live overnight in each country or region. After eight months, the system was live in 37 countries, with just 7 countries in south-east Asia still to go. People took to the new tool without problems, although that was largely due to solid preparation beforehand.
We had a war room, there was no war.
Employees were shown the new system six months before the roll-out began and invited to give feedback. Rather than pointing people to Coupa’s own 30-minute training webinars, Juniper made its own 2-minute YouTube videos with screengrabs to show how to use the tool. Spending time on the people issues was worth it, said Hearn.
It went well because nobody was surprised when they saw it. Even though Coupa’s a great tool, people are people. Change, you have to be prepared for it.
You don’t just get there. You have to put together the linkage to the group. If you change your systems, spend the most time on getting people to be comfortable with it.
A good example of how new software allows an enterprise to re-examine its existing processes and refocus on the outcomes that matter.
Disclosure: Coupa is a diginomica partner and paid the author’s travel to attend its Inspire 2015 event.
Image credit: Magnifying glass with dollar bills © sirikorn_t – Fotolia.com.