This story is based in early 2000 and it’s about John Stegner a procurement executive in a company called John Deere the company that makes farm equipment construction and forestry equipment, etc. John Stegner was pretty convinced that the decentralized procurement sorting of division or system in the company was highly inefficient and he knew that if he could get a centralized system, he could get great cost savings. In fact his projections were that they could save up to a billion dollars over a five year period. He knew it’s not going to be as easy as walking in and making a rational database presentation because after all decentralization would mean loss of turf and loss of Independence for the divisional presidents. So he decided to use a different approach. He got an intern to work with him and chose one commodity – rubberized gloves that were used across the company in various manufacturing processes like welding, assembly, etc. He got the intern to visit all their 14 factories and collect samples of every kind of rubber gloves that are used in all these different processes and along with the rubber gloves also collected the name of the vendor, the price, etc. When the intern came back and put together all the data, the results of the data were amazing. The company was buying 424 gloves across the 14 factories and 12 odd manufacturing processes. The same supplier was supplying the same gloves to two different factories at two different prices. In fact not with just a little difference but there was huge variation of $4 to $17. John got the intern to actually tag every glove with the name of the vendor the price and the factory where it came from and then on a boardroom table he put all the 424 gloves sorted by manufacturing process. He then called in the divisional presidents and asked them to come to the boardroom. A usually vociferous group were silenced as their jaws dropped when they saw what they saw and it was apparent to them the problem of the decentralized operation. John made then a presentation of how a centralized operation could bring in efficiency and how much each division could save there was immediate consensus and John was given the mandate to centralize the procurement operation over the next six months. He managed to bring down the number of vendors from six to one, the number of different gloves from 424 to just 24 and all this resulted in a cost saving of over 50% on that one item alone. There is also an interesting end to that story. The intern Than John hired was offered a job in the procurement team and she went on to lead the commodity purchase for all safety supplies. What a wonderful story! Business Points ( Tags ) #Powerofmakingthingsreal #Powerofvisuals #Powerofdemonstration #Powerofshow #tell
