Webinar Notes: The CPO of Con-way Talks Innovation, Collaboration and How to Drive Lasting Value

This week’s featured event was presented by Sourcing Interests Group and Emptoris (an IBM Company). The main speaker, Mitch Plaat, is Con-way’s VP of Procurement and CPO and has been with the company for 22 years. He has overseen quite a transformation, starting six years ago with the decision to engage Emptoris for help in the form of solutions and services.

Company Background

Con-way Inc. (NYSE:CNW) is a $5.3 billion freight transportation and logistics services company headquartered in Ann Arbor, Mich. Con-way is an industry leader in the transportation and logistics industry and delivers industry-leading services through its primary operating companies of Con-way Freight, Con-way Truckload, and Menlo Worldwide Logistics. These operating units provide high-performance, day-definite less-than-truckload (LTL), full truckload and intermodal freight transportation; logistics, warehousing and supply chain management services; and trailer manufacturing. Con-way Inc. and its subsidiaries operate from more than 500 operating locations across North America and in 20 countries across five continents.

Procurement Transformation

When Con-way started on this journey six years ago, IT spend, direct spend and indirect spend were all handled separately. There was no formal strategic sourcing process or team. Con-way’s early goals included getting executive level visibility and actionable data. Later needs included a supplier relationship management mechanism (for the benefit of Con-way and their suppliers) and automating transaction processing and rolling accounts payable into procurement. Although this combination of functions is common now, it was new when Con-way did it.

Success by the Numbers

• Con-way achieved a return on their investment in 12 months (the return covered both solutions and resource investments).
• 1,000 suppliers have been rationalized out of the supply base.
• 20% reduction in project time (the average project takes 7-8 weeks)
• Over 80% of spend is now under management (compared to less than 50% six years ago)

The procurement team is measured by savings (contract savings – both realized and ‘soft’), spend under management, and average project lead time. Focusing on and improving lead-time in particular has allows the group to dispel the perception of them as a bureaucratic function. For the first couple of years, finance worked with procurement to validate reported savings figured, but as they built up trust, the practice was discontinued.

Spend Analysis Solution Implementation

Spend data was pulled from accounts payable, purchasing cards, travel, and eProcurement. The dimensions built into their spend analysis solution included GL code, location, business unit, time, UNSPSC code, and a custom in-house taxonomy, all of which were used in the initial assessment of opportunities that would fill the sourcing pipeline.

Mitch and his team have been able to use their spend analysis solution to open doors for them internally, proving the value of procurement by providing visibility to spend categories that has not been clearly seen before. It has also allowed them to assist Con-way’s sales function, particularly since they began to designate and track diversity spend.

Supplier Relationship Management

Although this was part of the plan from the beginning, Con-way found that this function needed to be elevated, particularly as traditional strategic sourcing brought diminishing returns. They started by segmenting the supply base and working with a select group of suppliers on a partnership basis, working hard to become a customer of choice.

The process takes time, and requires open two-way communication. To help achieve this, Con-way recently ran a self-assessment as well as supplier surveys to measure their perception of their own performance against how their key suppliers rated them. Going forward, they will focus their efforts in the areas where the two assessments differed the most. Benefits have come from joint cost reduction, process re-engineering (including company-wide lean training), and innovation. Measuring the benefits of a supplier’s innovation have been challenging, but Con-way asks that each supplier bring three new ideas to each quarterly business review.

Lessons Learned

• Pick the skill sets that you need to have internally that meet your current and projected future needs. That way as the function matures, the team is able to expand their reach without significant changes in personnel.
• Don’t stop selling the value proposition, regardless of the successes you have. Continuing to have the conversation not only keeps people engaged, but it allows you to respond to changes in business objectives and leadership.

Vision and Next Steps

Mitch’s vision is for procurement to serve as a differentiator, and to provide a strategic advantage for the company as a whole. The freight services industry operates on low margins, and any savings realized as a result of procurement’s efforts go straight to the bottom line. Because Con-way does not have a ‘mandate’ driven corporate culture, procurement had to work hard, selling the value proposition internally.

The next phase of growth for Con-way’s procurement team includes:

• Learning to respond to a changing pricing environment that affects contract renegotiation efforts. As the economy rebounds and suppliers look to recoup some of their losses, savings targets become harder to achieve.
• Consciously aligning procurement’s priorities with those set by the business, for example: margins, technology, process efficiency, or top line growth
• Balancing traditional sourcing activities with enhanced, more strategic initiatives by making sure that resource time is appropriately allocated – eliminating non value added work.