The outstanding entries in the Sourcing & Procurement category this year were those from Vodafone Global Supply Chain Management. (The judges chose to take the two submissions as a single entry). Vodafone is embarked on a radical programme to use its supply chain, and its sourcing and procurement in particular, to create value for the group, and although there is a long journey still ahead, the company has shown impressive results and thinking. In its own fourphase ‘roadmap’ Vodafone places its current activities in phase two (value acceleration) or in some cases phase three (industry leadership).
Paul Cowley, head of services at Vodafone Global Supply Chain, explains that one of Vodafone’s key strategic goals is to leverage scale and scope, and supply chain management is seen as central to realising this element of the corporate strategy. The current work, he says, is about ‘putting in the infrastructure’ and ‘building the global SCM community to maximise performance’. Vodafone’s two entries highlighted aspects of supply chain infrastructure; firstly, their advanced e-sourcing and e-auction activity, and secondly the application of Game Theory principles to Supplier Performance Management. Cowley says ‘We were able to quantify and give examples of where this had been applied globally and the value this had added to Vodafone. In terms of “building the community to maximise performance” we are well down the track on structuring an integrated SCM organisation and are to implement a balanced scorecard reflecting not just savings but the total value add to Vodafone of the SCM function’.
In terms of supply chain infrastructure, Vodafone’s ‘foundation phase’ saw common processes and data established with a groupwide e-sourcing platform, and establishing commonality in spend analysis, data standards and contracts, with the creation of a single contracts depository. Phase two implemented group-wide visibility through common processes for eRFX, e-auctions, contract and supplier performance management, group-wide knowledge-sharing through the intranet and data warehousing, and development of processes such as forecast aggregation, VMI, e-catalogues and einvoicing, and the creation of a single requisitioning ‘front end’. The firm is claiming a degree of industry leadership in developing strategic supplier relationships, sourcing optimisation (through the application of game theory to e-sourcing) and common b2b e-procurement for all inter-company business processes regardless of standard (eg RosettaNet, EDI, Web UI). Still being worked on are collaborative product life cycle management, and a market intelligence portal.
In parallel, Vodafone has been ‘building the supply chain community’ on the foundation of a robust mandate and governance structure from the boardroom down, on which is being established a comprehensive benefits tracking system supported by commitment to education and training.
The results from Vodafone’s comprehensive approach to e-sourcing are truly impressive both in volumes and in savings – cumulatively, in the fiscal years 2003-06, Vodafone has spent some £2,885m at eauction, with estimated cumulative price savings of £1,284m, this over some 2,500 auction events which have been concentrated on the 3G roll-out programmes for successive territories. As such, e-auctions have successfully been employed for pretty well every requirement. The game theory work (in conjunction with Cranfield School of Management) is in its way even more fascinating, so much so that it is not for publication just at the moment!
The judges commented that ‘In particular we were impressed by the very high level of senior management commitment, and the real pride shown by the teams in what they have achieved.
‘The winner operates in a field that you might expect to be dominated by crude sales targets, but we were truly impressed by the way in which the supply side had researched e-sourcing, e-bidding and so on using external experts in areas such as game theory, and have used this knowledge to become one of the UK’s largest and most successful users of esourcing.
The way this correlated with the equally strong entry on supplier management, where the company has made a major leap forward in the maturity of its supplier relationships, was equally impressive, and there was little hesitation in voting Vodafone the winner in this category’.