Supply Chain Risk

Webinar Notes: How to Eat An Elephant: Supply and Risk Management at ABB

Webinar Notes: How to Eat An Elephant: Supply and Risk Management at ABB

This week’s featured webinar was hosted by Emptoris and Procurement Leaders, with a supplier lifecycle management (SLM) case study from The ABB Group. You can view an on demand version of the event by clicking here. ABB is a global leader in power and automation technologies that enable utility and industry customers to improve their performance while lowering environmental impact. In 2010 they had $32B in revenue. As a 120 year old organization, they were decentralized with five divisions.

 

 

This decentralization created many of the challenges of most concern to the CPO. There is a steering committee made up of representatives from the five division heads and eight countries. Most of the spend managed at the country level is indirect. Any country with over $1B in annual spend is considered ‘major’ and gets a representative on the steering committee. ABB has five divisions, thirty global business units, 120 source systems, 500 local product groups, and 300 local reporting units.

There is an expectation that all systems put in place will work with no face to face training. There is no executive mandate, so transparency is the best way to win people over with facts and figures.

ABB started their SLM implementation about two years ago. At the time, they were having difficulty finding new sources of supply. Their size and decentralized structure made it hard for buyers to get visibility into suppliers being used elsewhere in the organization. 80% of ‘new’ suppliers were already known to another individual or group at ABB, but the number of source systems in place blocked the availability and flow of information.

The CPO wanted to combine qualitative and quantitative data in one system to support many different kinds of queries. The information comes from suppliers, ABB source systems, third party enrichment databases, etc. The vision for SLM at ABB included supplier profiles, supplier documentation, contracts, eSourcing, supplier qualification and onboarding.

So how did ABB ‘eat the elephant’ or tackle the enormous challenge of consolidating and leveraging all of this information? They picked a starting point, broke the effort into pieces, and prioritized them. Although this approach was necessary to make the effort manageable, it was critical to keep the end goal in sight.

SLM Use Cases at ABB

360 degree view: ABB wanted to start exploring the spend and activities associated with each supplier. The idea was to allow someone searching to start with general information and then move on to any document or captured information related to that supplier. From there, they should be able to move on to see what other suppliers are contracted in that category elsewhere in the organization, allowing the buyers to learn from each other. Data is not just available for drill down but as a ‘web’ throughout the entire organization.

Risk management: This effort takes four phases at ABB: identification, evaluation, mitigation and control. ABB struggles most with control – the management and monitoring of risk. When a supplier is flagged as an increased risk, they can identify where the impact to the ABB organization will be in case of a failure. Not all countries or categories will be affected by a specific risk type or source. Categories, organizations, and geographies are all set up in hierarchies to facilitate tracng the total impact of any risk. 

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