Dawn Tiura: Well folks I'm excited to introduce you to the next team and that's GEP Procurement Transfer Nation with a CPG client. They are an outsourcing finalist in the Future of Sourcing Awards and I'm real excited to welcome you guys to the podcast.
Rafiq Merchant: Thank you so much. Thank you so much for having us.
Connor Hill: Yes. Thank you, Dawn.
Dawn Tiura: It's an honor. I read your incredible submission. And obviously the judges thought it was fantastic, and you were made it into a finalist. But can you start by just stating what the problem was for our listeners? What were you trying to solve?
Rafiq Merchant: Sure, absolutely. So, we had an opportunity to work with a Fortune 500 client and fundamentally they were looking to change the way their procurement organization operated, right? So, what does that really mean: I mean, it broke down into sort of four or five major areas.
Rafiq Merchant: One was more around… they wanted to change, you know, historically, they operated in a very tactical fashion. And they wanted to sort of move away from that. Ultimately try to transform their organization where they're now driving significant value both from a financial perspective, but also value to their stakeholders and business sort of partners across the organization.
Rafiq Merchant: They were a very, sort of, decentralized organization. And then depending on the region that you are in, the responsibility is different. They wanted to move away from that to having a global structure, being very coordinated and really being able to leverage their buying power across the globe.
Rafiq Merchant: The third component was, sort of, lack of consistent and effective processes and policies. So again, depending on the region that you are in, those policies weren't really aligned to driving maximum value for the organization.
Rafiq Merchant: And the fourth sort of point was around the actual organizational structure, making sure they had the right people in place to be able to deliver on the results that they wanted. Making sure those organizations were right sized. So, there was, you know, appropriate sort of spend per FTE or spend per individual that they were able to target.
Rafiq Merchant: And then sort of finally, making sure that their goal aligned with the goal [inaudible] the overall [inaudible] be able to go out and deliver on savings or drive financial value. However, you know, from a business perspective their stakeholders that they work with, those goals aren't necessarily aligned. They might have different objectives of growth, for example, versus cost savings.
Rafiq Merchant: And so, working with them to find that middle ground and create sort of that consistent balance where, you know, the goals are aligned between the business, but also procurement as well.
Dawn Tiura: Now was that Connor or Rafiq talking, just now? Rafiq Merchant. So, I should've welcomed you in the beginning. So Rafiq Merchant and Connor Hill are with us today. So, Connor, can you tell me a little bit about what makes this innovation sustainable?
Connor Hill: Yeah, so I think there are a few different things that we really have there. One of the biggest things, I mean kind of jumping off of Rafiq's point, [was] that we really wanted to take this client from more of kind of a tactical look to more of a strategic look, right, is the fact that we really put a lot of time and really kind of focus on change management for this.
Connor Hill: And I think really what we see with a lot of clients especially when doing procurement transformation is the fact that you can really design a great model, but when it comes to actually making it sustainable you need to make sure that your stakeholders are going to accept it at the end of the day.
Connor Hill: So, when we were working of course really to implement our new design is the fact that we really wanted to get or really work closely with a lot of the folks in the client's procurement organization to really get their thoughts. To get them to go out and speak to their stakeholders and get their thoughts on the new model based on kind of a quick description of how roles and responsibilities, process and policies, and things like that would change going forward.
Connor Hill: And so, what we were really able to do is equip the client with a lot of these tools and judge how their folks, their stakeholders on a day to day basis would really feel about this change. And what we really saw over time through good communication, through constantly making folks available to answer questions is that stakeholders became more and more thought into this new model where procurement is going from being very ethical to being more strategic and is really seen as a partner at the table.
Connor Hill: And so through really effectively using this change management as a tool we were able to get buy-in from these other stakeholders. And that's really what's going to make this new model actually sustainable in the long run.
Dawn Tiura: Oh, it sure is. You never underestimate the importance of getting people to buy into it. So, what can other companies learn from this project? What's some good takeaways?
Rafiq Merchant: I think, overall, and I know that sort of Connor hit upon this, and we would really emphasize it, but change management is so critical, right? A lot of companies go through a process of, "Hey, let's complete a design phase. Let's identify what the issues are gonna be. Let's help the client devise [what] this new future state structure's going to look like."
Rafiq Merchant: But then when you deal with organizations that operate on a global scale with multiple business units across different functions and different [inaudible] it's so good to be sure that [inaudible] stakeholders that you're going to work for that change.
Rafiq Merchant: Do they understand the change that's coming down the pipe? What does it really mean for them? Are you able to conduct a readiness assessment, right? To be able to gauge blockers within your organization. Are some people going to fight the change? How do you bring them on board? And this all needs to happen before the change is rolled out, right?
Rafiq Merchant: So, one thing we would really encourage other organizations, really emphasize, is dedicate enough and ample time within your overall sort of transformation goals and process to change management. That could be anywhere from six weeks to even six months depending on how large the organization is and ensuring that all your key stakeholders are ready for the change, understand the change, and then are accepting of it.
Connor Hill: I think-
Dawn Tiura: That's great. That's really good advice. I'm sorry. Go ahead.
Connor Hill: Sorry, Dawn. Just to jump off of that point as well. One of the other things I would say is that procurement transformation at the end of the day it's not the same as a light switch, right? To Rafiq's point, you really do need to put a lot of time into making sure that you have designed this final model where it comes to processes, policies, roles, and responsibility. Who's going to operate in what sense and what region? A lot of points like that.
Connor Hill: But even then, you can roll this whole new kind of org, this new process, new policies all out. But it's not going to happen overnight, right? Really procurement transformation, as with any other kind of change management exercise really takes months, and even in some other scenarios for very large organizations, more than just a year to even complete and really get successful buy-in.
Dawn Tiura: That's a really good point. You can't rush it. So, you've had the ability now to look back at the project. And yes, it was very successful. But is there anything you would've done differently, or approached differently?
Rafiq Merchant: I think, you know, thinking about that, you know, the natural inclination what ends up happening, Dawn, in these situations is that, you know, you work with sort of the region that has the significant sort of, you know, buying power or significant amount of individuals. Yet you're still trying to create this global change, right?
Rafiq Merchant: So I think one thing that we would do differently, right, and if the goal and the vision of the senior stakeholders or the procurement organization is to create a centralized global model is ensuring that on an ongoing basis you're sort of accepting and gathering regional input no matter how big or small those regions are 'cause at the end of the day you want buy-in from them, right? And this is first internally, within the organization. When I say that, I mean the procurement organization. So, making sure we really have an understanding of what these people are doing from a day to day perspective. How are these changes going to affect these individuals? And then making sure externally, when I say outside of the procurement organization, how sort of people are going to react to these changes.
Rafiq Merchant: Now, granted, if you take a look at the client that we worked with almost, you know, a significant—over 50%, 60% of their business—was centric to the U.S. Now, you know, the rest of it was divvied up across regions, but there were regions where there was only 10% or 15% of their sort of annual revenues were sort of driven from those regions. But that doesn't make them any less small in terms of the change that you're trying to get them to adopt, right?
Rafiq Merchant: And so, making sure that regional input is collected, is collected often, and is definitely taken into your thought process when designing sort of a goal solution.
Dawn Tiura: No, that makes perfectly good sense, and I think a lotta people sometimes forget to look outside each queue and look at the different regions and look at their differences. So that's really good.
Dawn Tiura: So, what are your chances of winning? How do you guys feel?
Rafiq Merchant: Connor, you can definitely chime in here as well. I think we feel—look, this was an extremely rewarding opportunity for us as an organization to take this journey, right? Some people like to call it even partnerships, but it's really a journey, right? We enjoyed taking this journey with this organization. It was really working in tandem to understand sort of where they wanted to go.
Connor Hill: When you say winning, Dawn, what exactly do you mean? In what sense?
Dawn Tiura: Well, you're a finalist and we're going to find out who actually has won this category at the awards program. So, I was just wondering: how optimistic are you, and how excited are you?
Connor Hill: What I would say is we're definitely excited to be nominated. It was really good to actually hear from a few of the folks including Imran and the rest of the team. I'm not one to really speak much on the future, but what I would say is that we definitely put [in] a lot of hard work, and really a lot of different folks worked on this project. And that's really what drove a lot of success. Though I mean, regardless of the outcome we'll definitely be looking forward to hearing back from you guys.
Dawn Tiura: Well, and I think I just wanna tell you this, congratulations. You've raced to the finalists. It didn't take the judges long to get you there at all. So, it must've been extremely impressible for them to do that as well. So good job.
Rafiq Merchant: Thank you.
Dawn Tiura: And folks, we're rapping up with GEP Procurement Transformation with a CPG client. And with me today was Rafiq Merchant and Connor Hill. Thank you, guys.
Rafiq Merchant: Thank you so much, Dawn.
Dawn Tiura: That was GEP Procurement Transformation with CPG client. Up next as our outsourcing team finalist is Denali, a WNS company with a savings initiative for specialty beverage company.
Dawn Tiura: Well folks, I'm excited right now. We are going to be talking to an outsourcing team finalist. This is Denali, a WNS company represented by Wei Shen along with Starbucks represented by Jonathan Gartner. So, their shortlisted finalist program was a saving initiative for specialty beverage company.
Dawn Tiura: So, Wei and Jonathan, welcome to the podcast. Thank you.
Jonathan Gartner: Thank you.
Dawn Tiura: I'm glad to have you here. Now so tell the audience right now what was the problem you were originally trying to solve? What launched all this?
Jonathan Gartner: So, hi. This is Jonathan. The problem we were trying to solve is—at the core of it, Starbucks needed to find ways to improve its margin and sourcing obviously holds the keys to one of the more common ways of doing that. And the issue we had to deal with from a sourcing team perspective is that Starbucks is such an innovative company that our people were typically getting pulled into a dozen different directions. And only a small percentage of our time or too small of a percentage of our time, maybe 25% or 30%, was being directed towards cost savings.
Jonathan Gartner: So, we needed some help from people that knew what they were doing; some real experts in the discipline of procurement to help us accelerate to go farther and do it in a way that was sustainable.
Dawn Tiura: That's great. Well it sounds like you found a great partner with Denali WNS. So, what makes this innovation sustainable? Is this a flash in the pan or can you sustain this over time?
Jonathan Gartner: It's sustainable from a couple of different perspectives. One, I have to give you a little bit more context about Starbucks. Our culture is very sticky. It's very relationship based. That's different than process based and that's different than a highly results oriented. So, in a relationship-based company, it's relationships between function. So, say, sourcing and category or sourcing and R&D. It's those relations tend to drive things.
Jonathan Gartner: And we are entrepreneurial at our core, which means oftentimes people are accustomed to going fast and discovering things on their own. And you rely on your relationships as a sourcing team to catch up.
Jonathan Gartner: And when we've tried different types of, let's say, outsourcing solutions or gotten outside help before, we weren't able to find the right, I would say, recipe or combination of ingredients that was respectful to the culture. What Denali has done incredibly well is we have an extensive team from Denali here on site. Denali was careful to work with us to pick people with the right types of personalities that could dig in with us and form strong relationships across the building.
Jonathan Gartner: And so, Denali was very good at adapting to our way of doing business as opposed to driving the Denali way. And so, they were very, very respectful. So, the cultural sensitivity is one. I'd say a second piece that I'll mention is that we were able to together have a very clear scope of work, and stayed focused on that scope of work, with clear reporting around it that we review in KBRs.
Wei Shen: I can maybe add one more I think is in addition to what Jonathan mentioned. One thing that kind of triggered me was the way how I think we can become sustainable with our system more is this co-creation of the engagement model. I think when we first started, you know, we didn't really have a pre-defined way of engagement. And we started say, "Hey, let's have a team." You know we started with more like a centralized queue model of engagement. And as we worked together with Starbucks teams we realize, you know, it's more effective to be using a category dedicated resource engagement model. So, we changed as we get into the second year.
Wei Shen: So, I think this co-creation is key to making sure that we are adapting to the way that will still work for Starbucks. So, I think that's also helped us to be more sustainable.
Dawn Tiura: Well also—and that's not normal, Wei. Most companies don't... They wanna force their own view on the other company. So that's impressive.
Jonathan Gartner: And that is one of the reasons we've been so pleased with Denali is their flexibility and our ways of working formally. We've been in a relationship-oriented company like Starbucks. Those relationships, that's a person to person, project to project dynamic that has to be worked through and initially overcome, and eventually established. And we've gotten through that.
Jonathan Gartner: I'll say it also helps in order to, I'd say what also helps is that Denali's able to leave behind excellent work product and artifacts. And so, as an example, we did one of the first really massive wins that primarily Denali, but I'd say the collaboration delivered was related to fluid dairy or milk.
Jonathan Gartner: The Denali team left behind a very impressive set of analytical artifacts... So spreadsheets as it were, but they were really big complicated ones, that are easy to use. And so, our team received not only great results in the moment for that particular RFP and North American continent-wide selection process, but now we have a tool that we can use to manage the business on an ongoing basis. And that type of tool you can use and leave behind, you don't always get in an outsourcing deal. Sometimes it's just the one-shot deal and you're done.
Jonathan Gartner: And so, it's that care to establish a relationship and leave behind an artifact that's usable, I guess is how I'd like to close on that question unless you have some follow-up.
Dawn Tiura: No, and I love the fact that you talk about recipes and formulas and now artifacts. You've got a great vocabulary in regard to this.
Jonathan Gartner: Well thank you. So, beverage company after all.
Dawn Tiura: At the heart of every conversation. So, you guys have embarked upon this journey, it sounds like, over a year ago. If other people listening to this, what could they learn? So, if you could go back. You've seen the progress you've made, which has been substantial. But is there anything you would've done differently? What can other companies learn from you about this project?
Jonathan Gartner: I'll offer perspective from not just Denali, but other engagements. One, you have to understand the culture in which you're operating and the maturity of not just the sourcing team, but how sourcing or supplier selection is done at that company.
Jonathan Gartner: And finally, you have to have a clear sense of how quickly you can do certain things. And in a process or results oriented company like my first... I've been at three big companies in my career, and one was in the auto industry; one was in computer hardware. And those were process and results-oriented respectively.
Jonathan Gartner: In a relationship-oriented culture you have to be very sensitive to the company culture, and what you can push and how quickly. And so in, I would say, previous experiments with this sort of relationship it was the ‘consultant's way’ and we encountered within sourcing, and also within other stakeholder teams, a lot of resistance.
Jonathan Gartner: Whereas with the way that we approach this with Denali, the Denali partners, or excuse me, the Denali employees became members of our team. And they took our advice to let's go slowly the first couple of months, which will then enable us to go more quickly later. And so, to zoom back out and summarize the answer to your question is—you've gotta know your environment and what to push.
Jonathan Gartner: There's a great Kenny Rogers song called “The Gambler.” And you gotta know when to hold 'em, fold 'em, walk away, and run. So, apply that to this sort of relationship and I think therein lies the answer.
Dawn Tiura: This is great, you guys. This has been very enjoyable, and I wish you the best of luck. Thank you for your time together on this podcast and I look forward to seeing you guys in October.
Jonathan Gartner: Can I offer one more reason to give the award to Denali?
Dawn Tiura: Absolutely.
Jonathan Gartner: Real short. 20:1. That's our return so far on investment with Denali.
Dawn Tiura: Nice. That's a great ROI. So that ends a very good story. So, thank you, Jonathan for that. And Wei, I hope you're paying him on the side for his talking so well about you and your team. Congratulations to you. It sounds like an incredible nomination and I wish you the best of luck.
Wei Shen: Thank you. Thank you very much.
Jonathan Gartner: Thank you.
Dawn Tiura: Thank you.
Dawn Tiura: That was Denali, a WNS company with a savings initiative for specialty beverage company. And up next our outsourcing team finalist is Russell Investments with procurement best practices.
Dawn Tiura: So, folks, with me today is Viet Ho, and he is representing Russell Investments procurement best practices project. And they are a team finalist. So, Viet, I wanna welcome you to the podcast series.
Viet Ho: Thank you, Dawn. Thank you for the opportunity to kind of tell our story here as well.
Dawn Tiura: Well, you earned it because you made it to the finalist category. So, can you tell me the story about your nomination, and just about the project itself that you got nominated for?
Viet Ho: Yes, Dawn. Just for the audience, within the asset management industry, procurement typically plays a very emerging role because the majority of the companies in our industry don't really have a centralized procurement function. Some of the larger asset management company have a small kind of transactional procurement function. But only a few of them kind of have a more mature centralized procurement.
Viet Ho: We know this because about two years ago we did a self-benchmarking study with about fifteen asset management companies. And so that's was kind of the lay of the land there. And so, for us—it's really—at Russell, under my leadership, our global and social procurement has been centralized and professionalized over the last four years. So when I came into Russell, they were very much kind of build and centralize the function.
Viet Ho: And then as we went through and negotiate the contracts and did all the RFP, it come down to the second round, you know, year four, year five. The question is then what did we do next. And so, we start doing a lot more kind of transformation procurement, you know, demand management, supply discipline and requirement re-engineering. But even that kind of we get less opportunity.
Viet Ho: So, for this project it's really the last frontier for us, GSP here. It's typically, it's a direct area. So, at Russell, direct expense excluding kind of associate salary for this space make up about 40% of my supplier spend. So, we have about $1 billion spend. So, this make up 40% of that. And this has been concentrated in the investment advisory area.
Viet Ho: So, to use an analogy, if you look at an airline manufacturing company like Boeing here in Seattle, it's like they’re using companies to help them design airplane engines and the kind of the fuselage. And so, it's very critical to the operation of Russell. In the past this has been managed and negotiate and contracted with the portfolio manager. And the portfolio manager would select the supplier, negotiate the price, and execute the contract. So, the full kind of end-to-end process.
Viet Ho: So then at Russell over the last I'd say over the last few years, we really develop a strong reputation. And so, with that I was able to approach the CIO, the Chief Investment Officer, with a proposal where my team can try to bring some of the lessons learned that we have on managing the supplier into this space to manage the investment advisor. And to knowing this is a very sensitive area, we kind of came in with a very soft approach doing a diagnostic project to bring kind of tip and tricks into the investment team. And so that was accepted by the CIO. He assigned one of his direct reports to sponsor this. And so we've spent about six months doing a lot of interviews and analysis. Talk both with investment advise themselves as well as the portfolio manager and so on.
Viet Ho: This is a sensitive area because two years prior to this a major investment advisor actually fired us because when we tried to negotiate with them we didn't do a good job and we kind of got them upset and so they actually told us to take our money and move to somewhere else.
Dawn Tiura: Wow.
Viet Ho: So, yep. And so, this is a ghost that I took it on myself to kind of exercise before we could move on with this. So very much as we launch into the diagnostic [it] became very clear that this is an area that hasn't been managed; there's no clear process. Different portfolio manager attack differently. In some cases, investment advisors are not being managed. There were also a lot of negative feedback from the investment advisor about the difficulty working with us.
Viet Ho: And so, all this information helped me to build a very strong business case for us to come in and help them develop a better solution, longer term. There's still a lot of risk here because even when the investment division agreed to do RFP, they was very worried about the term RFP. And so, we end up using a term called bake-off at the beginning just to kind of soften the impact. So just give your audience kind of a sense of the challenge we face here.
Dawn Tiura: Yeah.
Viet Ho: Yep. And so, yeah. So that's how we got involved. So, at the end of the diagnostic we had got an agreement to design a process where GSP played a stronger role in design and lead the negotiation and the contracting with the portfolio manager going forward.
Dawn Tiura: So, it sounds like portfolio managers are touchy about you getting involved in their spend. So that was probably a lot to overcome, wasn't it?
Viet Ho: Yes. And very sensitive, because for them the investment advisor really is their peer, right? Because they need the interaction property for an investment advisor for them to build a portfolio. So, it's very much a peer relationship. So, having us without any investment experience involved, it's kind of difficult for them to accept.
Viet Ho: So, for the first few project we really have to work really hard to accommodate, and create a very high touch process so that they can feel more comfortable and we build up that credibility as we move along. And so-
Dawn Tiura: So—you also had savings. You exceeded your original savings target by 8,000%. Is that correct?
Viet Ho: That's correct. So initially, we sort of, for the year one, which is 2016, we had a target of $2 million. And then we exceeded that. We came in about $16 million on year one.
Dawn Tiura: Wow.
Viet Ho: And then we again doubled that for year two as well. So, exceed expectation there across the board.
Dawn Tiura: Wow. And employees are dealing with the change? I mean you said you came in soft with your approach. But now they've bought into the transition, have they?
Viet Ho: Yes, they have, because we have a very clear vision on how to kind of do this right from the beginning. But it's kind of—we spoon fed them one spoon at a time. So, we designed the process where we help them to create a pipeline of [inaudible] of visibility so that the PM have a clear idea when their group's gonna do RFP. And then we also have clear role responsibility where different PM have different roles. And that's clear, defined.
Viet Ho: And then also, we have a very simplified RFP document. I mean, with two-page document. And so, the PM feel comfortable that it's not that much work for the investment advisor. And then myself and some of my team member did a road show. We went across, around the globe to sell the process and train the PMs on the new process. And so, we did a session here in Seattle, in New York, in London, and in Sydney as well.
Viet Ho: And so now we are into year three of the process now. And the PMs are completely on board. They’re coming back to us they are jogging to get on the pipeline so they can get their RFP done quicker.
Dawn Tiura: Wow. That's amazing. So, no wonder you were nominated, and no wonder you're a finalist for this team category, procurement best practices project. So congratulations, Viet.
Viet Ho: Thank you very much, Dawn.
Dawn Tiura: And I do have to say Russell Investments has had a really good showing in the Future of Sourcing Awards. I interviewed a woman that works for you a couple days ago who is a rising star, and I have another interview tomorrow.
Dawn Tiura: So, Russell has really made a good showing in this awards program. You've done some amazing things. And I do have to say the folks that work for you have the utmost respect for you and your leadership.
Viet Ho: Well, thank you, Dawn. I mean we try to develop a lot of highly talent people for our industry.
Dawn Tiura: Yeah. You've done a great job and they speak so highly of you. So, I wish you the best of luck in this category.
Viet Ho: Thank you, Dawn.
Dawn Tiura: Thank you. And folks, that was Viet Ho. They're the team finalist from Russell Investments in procurement best practices project. So, thank you, and I hope you listen on to the rest of our podcast series.