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"The Fisher Scientific
web site is one of best we have seen. It is exceedingly
user friendly and the wealth of information and tools is
very impressive"
Johnson Matthey is a speciality chemicals
company focussed on its core skills in catalysts and precious
metals. It is organised into four operating divisions: Catalysts
& Chemicals, Pharmaceutical Materials, Precious Metals
and Colours & Coatings.
The group's principal activities are the
manufacture of autocatalysts and pollution control systems,
catalysts and components for fuel cells, pharmaceutical
compounds, process catalysts and speciality chemicals; the
refining, fabrication and marketing of precious metals;
and the manufacture of colours and coatings for the ceramic,
glass, paint and plastics industries.
Johnson Matthey has continued to develop
its technology for almost 200 years, demonstrating the company's
ability to maintain world leadership by adapting constantly
to rapidly changing customer needs. Rigorous in its own
environmental policies, many of Johnson Matthey's products
have a major beneficial impact on the environment and enhance
the quality of life for millions around the world.
The company has operations in 34 countries
and employs around 6,500 people. Its products are sold across
the world to a wide range of advanced technology industries.
The main Johnson Matthey site in the UK
is in Royston, Hertfordshire. Further sites are a refinery
at Enfield in North London, a research centre at Sonning
Common near Reading, several facilities manufacturing products
for the Colours and Coatings division in the Stoke-on-Trent
area and the recently acquired pharmaceuticals manufacturing
operation, MacFarlan Smith in Edinburgh. It was from the
Royston site that the initial drive towards e-procurement
came. The directors and management recognised the need to
understand e-procurement and the opportunities that it could
present.
In September 2000, a project was
started to determine if there was a business case for e-procurement
at the Royston and Enfield sites. E-Procurement project
manager, Garry Tobiss takes up the story. "At that
time we had no way of accurately tracking what we were spending
on indirect materials; there was just no visibility of spend.
The six week study revealed that whilst our direct orders
were very well managed, orders for our indirect materials
were left far behind. We found that different divisions
were using different suppliers for the same commodity, or
even worse using the same supplier but paying different
prices."
The business case developed for e-procurement
focused solely on supplier rationalisation. Whilst it was
recognised that 'soft savings' could be made in terms of
administration and cycle time reduction, it was important
to Johnson Matthey that a ROI could be demonstrated as a
result of better supplier deals. Existing suppliers were
asked to provide data detailing Johnson Matthey's purchases
and volumes. From this the company was able to put together
a list of requirements from which they could then invite
suppliers to tender.
A paper putting forward the business case
for e-procurement was put to the board in December 2000,
and received approval. "Although we were confident
of making the savings that were indicated in the business
case," comment Garry Tobiss, " the decision to
move forward was still, in part, a leap of faith. It was
important, however, to remember that the actual business
risk involved was relatively small, in relation to the returns
that could potentially be made."
The first stage of the process was the
software selection. Johnson Matthey was adamant that suppliers
should not have to pay in order to be part of the e-procurement
software solution. "If suppliers had to pay to have
their catalogues on our chosen software the cost would somewhere
along the line be passed to us, the customer, which is a
situation from which everyone loses" comments Garry.
By the end of January 2001, the selection process was complete,
and Ariba was appointed as their e-procurement software
provider.
From here, progress was fast and furious.
Technical implementation of the Ariba system started in
February. Integration took place with Johnson Matthey's
ERP system, JD Edwards using adapters built by Johnson Matthey.
On the 2nd April 2001 the system went live with 450 users
across two UK sites, using eight supplier catalogues, one
of which, Fisher Scientific, using their proven punchout
technology. The speed of this implementation was important
to Johnson Matthey. Comments Garry "We wanted to prove
that it could be done, and in order for the return to be
demonstrated we needed to get as many suppliers as possible
on the system from day one. A slower approach, just running
a small pilot would not have seen such a return, and would
have been more difficult to convince people of and realise
the potential of, the system."
One year on, the Ariba system is now live
in seven sites across the UK, one in Belgium and four in
the USA. In the UK there are 80 supplier catalogues, four
of which are using punchout technology. The range of commodities
covered is vast, from maintenance, repairs and operational
supplies, laboratory supplies, fire equipment and hand tools
to instrumentation, desktop computers and stationery.
One of the criteria for the selection
of the software provider was their ability to utilise punchout
technology. This allows users to access a supplier's website
from within Ariba, compile their order and then take it
back into Ariba to send to the supplier. The advantage of
this for a supplier such as Fisher Scientific, is that it
allows end users access to a wealth of information available
on their web site, such as real time stock availability,
order tracking, images of products and technical information.
This would not be available using a 'hosted catalogue' whereby
suppliers provide the customer with a list of items which
then has to be managed by the customer. "The Fisher
Scientific web site is one of best we have seen," comments
Garry. "It is exceedingly user friendly and the wealth
of information and tools is very impressive. Because of
the element of choice we need to give our scientists, a
hosted catalogue would have been totally inappropriate,
even without the challenge of having to try and manage 80,000
products. This way, Fisher Scientific does it for us!"
Prakash Lathia, team member of the Noble
Metals Laboratory, echoes these thoughts. "Using the
Fisher Scientific site via Ariba is very easy and a huge
improvement on our previous paper based system. Placing
an order now means that it will go directly into the Fisher
Scientific system, before we had to hand write a requisition
form which then had to go for authorisation, then on to
the purchasing department where the order would eventually
be placed. As there was no visibility in the system, it
could be anything up to ten days before the order would
be placed, and it would be very difficult to find out how
far in the system it had got. It was not unusual for things
to get lost internally, or to sit on people's desks awaiting
attention while they were on holiday. Now we know exactly
when the order has been placed, and using tools on the Fisher
Scientific site such as the real time stock availability
and order tracking we know when to expect delivery. As some
of our orders are for repeat items, facilities such as multiple
hotlists are really useful."
An improvement in working processes since
implementing Ariba has not only been seen by the end users,
but has also had a significant impact on the purchasing
department. Previously, the purchasing department spent
approximately 50% of their time on manual tasks, such as
faxing orders to suppliers. These highly qualified people,
who are all members of the Chartered Institute of Purchasing
and Supply, were being totally under utilised. Since implementing
Ariba, purchasers are now spending more of their time working
closely with suppliers, fostering better relationships.
The wealth of data now available on spend, also means purchasers
have the visibility of spend profiles they need to be smarter
managers of suppliers.
This reduction in manual tasks is also
of benefit to the suppliers. Comments David Taylor, Service
Development Manager at Fisher Scientific; "When our
customers place their orders electronically, either directly
from our website or using punchout with e-procurement providers
such as Ariba, the amount of time consuming, manual tasks
performed by our customer services representatives is greatly
reduced. They are spending less time re-keying orders, issuing
credit notes for incorrectly ordered items and organising
returns, and have more time to provide real customer service,
such as chasing suppliers for out of stock items, sourcing
items for customers and taking part in much higher value-adding
activity."
Amongst all this success, and all these
benefits achieved, with hindsight is there anything Johnson
Matthey would have done differently? "The technical
implementation of a project such as this is not difficult,"
comments Garry. "We demonstrated this by moving one
supplier who was not previously enabled to being live on
Ariba within three days. The part that should not be underestimated,
however, is the cultural element of introducing e-procurement.
In some ways we may not have done enough change management,
particularly with regards to training. We have seen that
frequent users of the system love it because they understand
it, are confident using it and can see the benefits it brings
to their roles. The only complaints we have about the system
are from infrequent users who, due to gaps in their knowledge,
can get unnecessarily frustrated with the system. We are
continuing training programmes that look to address these
issues."
And of the future? Johnson Matthey
firmly believes that e-procurement is here to stay. Garry
comments; "We are currently tackling some of the 'tougher'
commodity groups such as freight, and whilst a suitable
solution is not out there yet, we are confident it is only
a matter of time. We also want to apply what we have learnt
in e-procurement to purchasing of our direct materials,
whilst looking at new elements such as electronic invoicing."
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by
enabling supplier base rationalisation