As a $4.5 billion manufacturer of paints and coatings, Valspar should be able to wield serious clout with suppliers when negotiating on prices for the raw materials it uses to make its products.
After all, its annual bill for solvents, titanium dioxide, epoxy and other goods runs to tens of millions of dollars and is the company’s single largest expense category.
But until recently, procurement processes at the company were seriously hampered by a lack of visibility into how much it was spending, on what and with which vendors.
The data that would have given the company that insight was squirreled away on a sprawling network of three discrete ERP systems and 19 other legacy systems, says Steve Jenkins, the company’s global IT director. Data was often missing - or entirely wrong. As a result, he says:
Our buying power was limited by the age and quality of available vendor and raw-materials data. That meant that our raw materials portfolio was proliferating, as was our vendor portfolio.
So when a chemist was starting work on a the formulation for a new product, for example, he wouldn’t necessarily choose the black pigment that we already use on a regular basis, from a trusted vendor. He might instead on-board a new black pigment and, in many cases, on-board a new supplier too. In this way, we were missing opportunities to increase our buying power, leverage global contracts and get the best volume discounts.
Not only that, but without better visibility into global raw-material spend, procurement staff at Valspar weren’t easily able to anticipate fluctuations in availability and price of raw materials that might negatively impact financial results.
Something needed to be done. A particular pain-point for procurement, Jenkins quickly discovered, lay in issuing requests for proposal (RFPs) and requests for quotation (RFQs) to suppliers - or, for the sake of simplicity, RFXs:
The data collection processes around issuing an RFX were very manual, very complex and extremely inefficient. So if Vendor A increased its prices, and we wanted to go off and see what Vendor B or Vendor C could offer Valspar, it would take many, many months assembling the data, checking its accuracy and inputing it into the RFX.
In fact, he adds, it often took as much as 10 months to bring together all the information for a single RFX and, by the time that goal was achieved, some of the data would inevitably be out of date.
Out of the pain
This rather painful situation, however, gave Jenkins the ammunition he needed to build a business case for Valspar investing in master data management (MDM) software that could bring some much-needed order to this chaos:
In talking to colleagues in procurement and finance, the RFX process was the issue that really stood out and by offering to solve it, we got strong support from the chief procurement officer and from our chief technology officer, who oversees product development on our range of paints and coatings.
While we were able to identify around six issues in total that MDM might help procurement and finance to address, the business-value calculations made it clear that we only needed to realise one out of the six to justify the implementation: the RFX issue.
Following evaluations of four MDM vendors’ products, Valspar chose Informatica, on the basis that it came top in sixteen out of the company’s seventeen evaluation criteria. But the selection, Jenkins stresses, was driven by the business, not IT:
In IT, we had our own preference, based on technology fit and how we wanted to architect the solution. As it happens, that was Informatica, but we held back from sharing that with the business. It was important that selection was based on features and functions by the people who would benefit from an MDM deployment, mostly procurement and finance, but also sales and marketing.
The implementation of Informatica got underway in July 2014 and the first phase - the bringing together of all data relating to raw materials and suppliers from 22 different systems - was completed in March 2015. The time it takes for Valspar to issue an RFX is now being rapidly whittled away to between one and two months. In time, the process will measured in days, says Jenkins.
In a second and third phase, Valspar will look at data relating to two other aspects of its supply chain its customers (these include DIY retailers such as Lowes in the US and B&Q in the UK, as well as industrial machinery companies such as Caterpillar); and the finished goods that they buy. Says Jenkins:
We’ll get the customer portion of the work done by the end of 2015 or early 2016 and then we envisage that finished goods will probably take another nine months - so by the end of 2016, all that data will be under control and management, helping us to build smarter sourcing strategies and better manage supply chain risk.