The emergence of strategic sourcing in the 1990s is rapidly changing corporate purchasing and increasingly forcing change in fleet purchasing and the supplier selection process. Strategic sourcing initiatives re-examine the way a corporation conducts its business and are tasked to identify opportunities to consolidate purchasing volume to obtain reduced pricing from key supplier partners. The migration of large corporations to strategic sourcing is becoming a powerful change agent at large fleets.
One example is Bayer Corp., which in 2003 launched strategic sourcing initiatives on several fronts to reduce costs in a number of “spend” categories, including fleet management. One of the major purposes of Bayer’s strategic sourcing activities was to ensure that Bayer spoke with one voice when making major procurements. The strategic sourcing fleet team was charged with standardizing and streamlining vehicle acquisitions and leasing services within the NAFTA region. As a result, the team developed a new corporate policy that dramatically reduced vehicle types and leasing services by single sourcing with a single vehicle manufacturer and lessor.
Bayer is but one of many corporate fleets that have embarked on strategic sourcing initiatives. Today, strategic sourcing is the hottest trend in corporate procurement. In the case of Bayer, Fleet Manager Jean Morris was actively involved in the strategic sourcing process, and she represents a good role model for other fleet managers to emulate.
What is the Role of the Fleet Manager?
A strategic sourcing fleet group typically includes a cross-functional team, which brings the fleet manager together with representatives from other departments in the company. The benefit of a cross-functional team is a more thorough examination of the fleet purchasing and supplier selection process from a wider range of interests and perspectives. Although these cross-functional teams may bring a fresh perspective to fleet management, they also tend to lack real-world expertise of fleet requirements, sometimes leading to wrong, and perhaps very costly, decisions unless there is active participation on the part of the company fleet manager.
Another challenge with some strategic sourcing groups is that they are sometimes single-focused in their goal. Frequently, the single focus is cost cutting. The assembled sourcing group may be very good at buying, but the non-fleet members often do not understand the subtleties involved in the service relationships between the corporate fleet department and its partner fleet suppliers. In addition, procurement groups often work on several projects simultaneously, limiting the amount of time they can devote to understanding the complexities of fleet management. In this type of environment, the fleet manager needs to stand up and articulate the concerns and consequences of certain decisions.
However, at some companies, the fleet manager doesn’t have as powerful a voice as other members of the strategic sourcing committee, despite the fact that decisions are being made that will impact fleet operations. In these situations, the fleet manager must present the “fleet” perspective to strategic sourcing since he or she is probably the most qualified person in the organization to understand the consequences of decisions on a well-run fleet.
If you find yourself sitting on a strategic sourcing committee, you need to persuasively articulate your thoughts to others. You will require a broad perspective of how procurement and supplier selection decisions impact the corporation as a whole. If you advocate a contrarian position, not everyone on the sourcing committee will agree with you. You will need the courage to take a stand for your convictions. In a recent article on strategic procurement, Michael Beiger, category manager procurement for Hoffmann-La Roche, (and a former fleet manager himself), pointed out that the key problem between fleet and procurement is that they do not speak the same “language.” Generally, it is easier for a fleet manager to translate fleet needs into procurement’s language (cost) than to expect procurement to learn the intricacies of fleet. When dealing with intangibles such as service, quality, and innovation that a fleet supplier can provide, quantify these costs/savings and express them in cents per mile, dollars per month, or lifecycle expense. (See the November/December 2003 issue of Fleet Financials magazine.)
In the Final Analysis, It is Up to You
The growth of strategic sourcing in corporate America will influence the traits required of tomorrow’s successful fleet managers. Fleet managers need to rise above the level of simply managing the day-to-day work. Your understanding of the company’s business will have to transcend beyond fleet management. A competent fleet manager can easily save a company millions of dollars by implementing the right fleet policies and selecting the right fleet suppliers. However, this ability may be inhibited in the future unless fleet managers exert their expertise and influence within strategic sourcing groups and retain an important say in the RFP and supplier selection process.
In the final analysis, the only person who can make this happen is you.