By Dan Berthiaume
As part of a systematic project to improve its North American operations, during the last three years Kraft Foods has used BPO to help eliminate issues including silos, a lack of spend visibility, non-PO (purchase order) “maverick” spending, and multiple systems from its indirect procurement spend process. In a recent webinar sponsored by Capgemini, Stephane Sacherer, global service delivery manager, indirect procurement and AP, Kraft Foods, explained how three years ago Kraft assessed the problems affecting its indirect procurement spending.
“Category managers couldn’t see what was being spent,” he said. “There was a high degree of maverick spending, with orders going directly to suppliers with no control. You couldn’t handle new vendors or new products from existing vendors with the PO tool. You could only send POs to approved suppliers, and there were policies for PO usage but no tools to enforce them. Users lacked the knowledge, training and time, so were doing non-PO processes or going direct to the supplier.”
In addition, an unwieldy indirect procurement IT environment included two main systems, one for capital spend and one for non-capital spend, with many best-of-breed solutions from different vendors.
Kraft Selects SaaS-based Indirect Procurement BPO
Kraft’s North American operation already used an SAP backbone, so the company decided to implement a new SAP platform-based indirect procurement tool. “It would be simple to use, allow you to create POs for all types of spend, and expand the use of POs to all sites in North America,” said Sacherer. “Some sites, such as the sales location, did not have the capability to use POs. They would call the supplier and sign an invoice with no PO tool.”
According to Sacherer, Kraft initially considered building its own in-house PO tool, but decided the associated effort and cost would be too great to justify. “We decided to find something outside with the same characteristics, but that would be quicker and cheaper to put in place.”
Kraft sent RFPs to different providers, including providers of outsourced SaaS (software-as-a-service)-based solutions that would charge a fee per transaction. Any solution selected would have to feature easy SAP integration. After reviewing a number of RFPs, Kraft decided to implement the outsourced IBX procurement platform from Capgemini.
IBX Enables ‘One-Stop’ Shopping
“IBX allowed us to implement our requirements without building the solution ourselves,” said Sacherer. “It offered one-stop shopping to the end user.”
Sacherer described this “one-stop shopping” environment as an “Amazon-like” front end where users could employ the IBX system like a search engine, browsing supplier and buyer catalogs and performing price checks. In addition, he said it offered quick implementation.
“We used the full IBX suite in the procurement area,” said Sacherer. “It was a 14-month project, which seems like a long time but there were parts that had to go online at the same time as other SAP tools. The ‘go-live’ took about six months, from June to December 2010.”
Sacherer cited benefits to Kraft’s indirect procurement operation from IBX including fast and easy PO creation, improvements of master data and content quality, an expanded number of procurement channels, and increased pressure on non-compliant users. In addition, he said the old problem of not being able to send POs to unauthorized suppliers has been solved.
“The user can create a new supplier and send a request (for authorization) to the category manager,” said Sacherer. “The process is in place so it can be done quickly for the end user. You can create a cart in seconds.”
Kraft Looks Ahead
Currently, Kraft has about 24,000 users of the IBX indirect procurement platform, including 9,000 active users. “There are also more than 5,000 suppliers activated,” said Sacherer. And as for future plans, “We are currently rolling out the system in Latin America,” Sacherer stated. “We also plan to migrate to SAP SRM 7 (supplier relationship management application) by the end of 2012 or early 2013.”