Global Logistics and Supply Chain Strategies - October 2008 - (Page 14)

PPG Analyzes, Then Brings Serious Focus to Managing Procurement Editorial Director Jean V. Murphy A conversation with Jim Polak, director of general purchasing at PPG Industries, Pittsburgh. PPG Industries is a leading diversified manufacturer that supplies paints, coatings, chemicals, optical products, specialty materials, glass and fiberglass around the world. PPG operates in more than 60 countries and has more than 150 manufacturing facilities and equity affiliates. Last year the company generated sales of $11.2bn and spent more than $7bn on direct and indirect materials to support its operations. To help the company control and leverage its indirect spend, Jim Polak developed and led a corporate spend analysis project. Using tools from Ariba, the resulting sourcing strategy is having a significant impact on PPG’s bottom line. take a look at this and I talked to a lot of people about it. It became clear that if we were going to do this the right way, we needed to start with spend analysis. We were never going to be able to automate transactions until we knew where the money was going and what all of our associates were buying. So we started with spend analysis and we realized some pretty good savings—in the millions of dollars. Then in 2003 we decided we needed a world-class interface in spend analysis, and we opted to go with Ariba. Taking a best-in-class approach, we also decided at that time to go with Freemarkets as our e-sourcing vendor and with a small company in California called Softface for data enrichment. Within six months, though, Ariba acquired both those companies. Basically, what we wanted to do was to improve our ability to automatically categorize data and to generally step up our game in the e-sourcing arena. Q: How did you come to head up this spend management project at PPG? Polak: I’ve been with PPG for more than 34 years now. During that time I have worked all over the company—as an engineer, in management science, in market research, in customer service, as a plant manager, as a sales manager, as director of marketing and as director of production. So I had all that experience before I became a director in our purchasing department. When I first came to this job in 2000, the things that amazed me were how many processes we had that were still manual and how we had people in all these different pockets across North America acting as independent groups with very little visibility into our spend. This was true globally as well. As a result, we were not leveraging our spend. We would optimize it for businesses or regions, but we were not optimizing it across North America or across the enterprise. Q: In this context, what does it mean to categorize data? Polak: Well, we have a PPG version of the United Nations Standard Products and Services Code (UNSPSC) that we use to classify both products and services that we purchase. For example, take a commodity like electrical MRO [maintenance, repair and operations]. Instead of having one big categorization with that title, we give different buckets under that category an identifying PPG UNSPSC. This allows us to create a hierarchy of classifications within a big category. Within electrical MRO, for example, you have things like lead ballast, motors, motor repair, switches, wiring, cable and a lot of other things. Some vendors might be able to offer really good pricing in one area but not another. So we identify unique buckets of spend that we can aggregate, optimize and leverage. Typically, as time goes on you get smarter so you can create more finite and more uniquely identified categories of spend. Then you have more opportunities to leverage each one. Q: How did you approach the problem? Polak: The vice president I reported to at the time really gave me a free swing at deciding what we should be doing in terms of automation. That was the height of the internet boom and “e-procurement” was the biggest buzzword in purchasing. Every company wanted to do “e” something. I had the luxury of having several months to really 14 OCTOBER 2008

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Global Logistics and Supply Chain Strategies - October 2008 Contents Editorial GL&SCS Exclusive Fastforward Up Front The Top Story In the Driver's Seat Think Inside the Box Recipe for Success NITL Preview Opinion Industry Voices

Global Logistics and Supply Chain Strategies - October 2008

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