Vodafone has rebuilt its sourcing and procurement activities around innovative e-techniques and supplier performance management for which it won a 2006 European Supply Chain Excellence Award. Here, Detlef Schultz gives his views on this award winning approach.
In the competitive global world of telephonye-business is making a vital contribution to Vodafone’s competitive edge. e-sourcing has been adopted globally by the company allowing procurement efficiencies.
Rather than use e-auctions to source commodities, Vodafone uses them in complex areas. One recent success includes an auction of an entire network including services and traffic management. This success was achieved by conducting a reverse auction which was followed by a Dutch auction. The process began with a Vodafone-determined asking price which increased until a participant was willing to accept the auctioneer’s prices.
Suppliers hold detailed contract reviews to understand the requirements and specifications before participating in e-auctions.
The sophisticated use of e-techniques has gone handin- hand with the transformation of Vodafone’s global supply chain function. The company concentrated on achieving synergies, especially in the network area. Price comparison and joint negotiations with operating companies resulted in a number of quick wins.
Having made significant progress with suppliers and operating companies, it soon became apparent that further benefits could only be achieved through revolutionising the supply chain. Vodafone moved to aglobal material category driven approach where such functions as IT, networks and services are the focal point.
A detailed material category management system was developed and deployed, whereby accountability for categories are globally managed to serve operating companies’ requirements. As a result, the definition and execution is now standardised across all companies. Vodafone’s supply chain is now on its way to operating in a truly global way.
‘To make material categories work in a strategic and operational way it is essential to have accuracy and transparency of your global spending footprint,’ says Schultz.
‘Hence we installed a spend analysis tool as step one, which enabled us to define the right actions for the future. This first step towards a global ERP solution provided a total picture of all expenditure. Having “one version of the truth” was the foundation for esourcing.The introduction of the spend analysis was followed by the “value acceleration” in 2005/06 inwhich e-sourcing was the driver.
‘Despite their scale, e-auctions are not necessarily the answer to every situation. There will be categories that must be sourced through e-auctions and others where you do this for a while until you have a real foundation.
Each material category therefore has its own sourcing strategy. The major advantage of the category approach is that you have a specialist who knows the world market: who are the major players, size of the market,what position Vodafone has and so on. This intelligence is translated and processed into a sourcing strategy which is executed across the globe,’ he adds.
An example of exceptional category management coupled with the advanced e-sourcing skills was a real tender for data centre consolidation where Vodafone achieved exceptional pricing by using multiple vendors to offer interchangeable standards, driving costs down. Vodafone’s global supply chain evolution has been welcomed by operating companies.
Each of the operating companies is either number one or number two in their markets, each has been successful in managing their markets, materials, and contracts to help the business grow. The more mature a company is the more it becomes apparent that only a joint approach can bring further success. There are also considerable benefits for suppliers. A global approach makes Vodafone easier to do business with and the company’s target is to be the preferred customer.
‘Vodafone’s clear strategy and standardisation of requirements and global demand visibility are the foundations for the success of e-sourcing and eauctions,’ says Shultz.
In support of global material category strategy deployment, Vodafone’s supplier performance management (SPM) programme provides a way of measuring and driving continuous performance improvement with suppliers and operating companies.
‘Vodafone’s global supplier performance management programme has allowed Vodafone to deepen its relationships and capability when it comes to working with suppliers in global partnership,’ says Shultz.
Joined Vodafone in 2003
Detlef Schultz joined Vodafone in March 2003 to lead the Global Supply Chain team. His responsibilities include strategic and operational leadership of Vodafone’s Supply Chain Management in the areas of network infrastructure, IT and services.
Previous Position in th US
Prior to Vodafone, Schultz held various supply chain, planning and operations management responsibilities for the world’s largest semi conductor equipment manufacturer, Applied Materials in California. He spent more than six years with Applied Materials.
Member of the board
Before moving to the US Schultz was a member of the board of management for Babcock-BSH AG in Germany. He led the area of supply chain management and control. Prior to that, he worked 10 years for Siemens. He started his career with Siemens in 1985 and was active in the area of materials management in Germany, Korea and Singapore. His most recent position in Siemens was purchasing director in Bocholt and Kamp-Lintfort, Germany.
Masters Degree in Business
Detlef Schultz was born and raised in Germany and graduated from the University of Cologne with a master’s degree in business.