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June 28, 2011 at 7:30 AM
Procurement and supply management operations have long touted the benefits of ordering goods and services online from suppliers, among them lower costs and streamlined processes. Perhaps some of the biggest beneficiaries are companies with a multitude of locations and a center-led purchasing operation.
Such is the case for The ServiceMaster Company, a large commercial service network headquartered in Memphis, Tenn. Some of the company’s best-known brands are Terminix, TruGreen and Merry Maids.
ServiceMaster has 5,100 company-owned and franchise locations; because of the nature of some of the products it purchases (lots of heavy bulk items such as fertilizers and chemicals) each location orders goods and services from a supply base made up mainly of local and regional providers. The company also owns one of the largest fleets of vehicles in the country which means its locations also buy vehicles, parts and maintenance.
With all those locations and suppliers, ServiceMaster also has a number of financial platforms, and until 2004 when the company implemented an e-procurement system from Ketera Technologies (now a part of Rearden Commerce which acquired it in 2010), the procurement operation was challenged by a lack of line item detail on its spending.
“We didn’t have any visibility,” says Rob Brindle, director of competitive intelligence. “We could tell you what we spent with a supplier but we couldn’t tell you what we bought from them. It was embarrassing because we were asking suppliers for the information. So, we started a quest to get that line item detail.”
Brindle, who works within a group called enterprise procurement services (EPS), reports to the company’s chief procurement officer. EPS is responsible for market intelligence, spend analytics and e-procurement platforms for ServiceMaster.
“Our job is to look at our suppliers and their suppliers for potential disruptions in the supply chain, and try to head those off,” he says. EPS also watches for price changes and alerts colleagues in sourcing when it’s time to go to market in a particular category of spend.
One reason ServiceMaster selected the Ketera e-procurement platform was for its capability to create custom catalogs for its locations. “Now, we have several hundred views of the same catalog,” Brindle says. “Our contracted suppliers provide one master catalog. Ketera cuts that up for us and shows different pieces to different branches.”
The catalogs carry indirect materials such as office supplies, safety supplies, MRO (maintenance, repair and operations) items, print materials, and fleet vehicles as well as direct materials such as fertilizers, chemicals and pesticides. About 25% of the company’s addressable spend is purchased through the catalog, and Brindle is looking to increase that by 5% to 10% every year.
Use of the e-procurement platform helps free up time of EPS so that it can focus on its core responsibilities such as risk management activities. Line item detail on spending provided by the platform also helps the company with supplier negotiations.
“With the data, we can tell the supplier whether they are the lowest-cost provider,” Brindle. “If they’re not, we let them know we’re going to switch x amounts of dollars or x amounts of items to their competitor. Because we can show them that kind of detail, we are able to negotiate much better pricing to maintain that lowest-cost provider status.”
Brindle adds that users at the locations find the e-procurement platform easy to use which helps reduce maverick spending, another way ServiceMaster is able to better manage costs.
Lessons learned
The ServiceMaster Company’s Rob Brindle offers up this advice to purchasing operations new to e-procurement:
- “Document your processes before you start. This is the time for you to correct mistakes or processes before you electronically enable them. If you don’t, you will just take a bad process and make it really bad.
- “Change management is critical to success. It’s a huge change for companies to go from one way of doing things to another. We didn’t believe that one business unit was very technology savvy. But we found out users were placing online orders at home. Our hesitation was holding them back at work.”
Susan Avery
Susan has 25 years experience covering the purchasing function for Purchasing magazine and Purchasing.com. In that role, she led editorial coverage of supply management at manufacturing and services companies and managed coverage of indirect sourcing, developing expertise in industrial MRO, corporate travel, services and IT markets, as well as e-procurement, procurement cards and software