LESSONS LEARNED

Driving Change at Essroc

July 2007

Internal Interviews
Essroc

Internal Interviews

Process variation between locations.

Process / buying channels not optimized.
Dissatisfaction with SAP approvals.
Low MRP usage and user satisfaction.
Low level of corp. contracts
Pro-Card system limited (and varied) use and tracking
Too many vendors with low PO count (noise).
Too much time pushing things through the system
(work arounds, searching, fixing)
Targeted training / tips and tricks sharing needed

Procurement Cards
Used on a limited basis only for minor expenses.
Have a limit of $1000, but poor understanding in
general of how and when to use them within the
plants.
In Southern Indiana we had 5 different p-cards, and I
had to provide reconciliation on a spreadsheet and
define what GL account it had to go to! Each had a
$10K limit per month and we maxed out every one
every month!

Requisition Strategy
Poorly defined channels, and no workflow
established for requisition approval.
Approver level is unclear and long leadtimes are
frustrating to plant buyers and maintenance
engineers.
Corporate is sitting on the req and doesnt approve it
what is taking so long?

One Suggestion
Utilize a two-step approach a requisitioner and an
approver.
Designated requisitioner for jobs.
Approver would be a cost center maners (e.g. quarry
manager or plant manager) who is in charge of the
budget.
Has authority up to $250K for maintenance jobs.

Work more closely with plant comptrollers to give

them more authority.

Limited Use of Blanket Orders

Blanket orders are largely used only through word
of mouth
General set of rules that if you requisition this
material based on this assignment you can bypass approvals!
No standard ways of buying and poor
understanding of approval processes for large buys
of $100K or more.

Project Engineering Frustrated

Problems are understanding the real need of the project which

might start as a wish that the plant has. They have an idea of what
they want but the reasons why is because I say so! If you want
me to produce, I need this!
For the people making the decisions it is difficult for them to
swallow that. They need backup why does the plant need to
replace ESPs with baghouses? We fail at trying to get that through
and get the people who will approve it or request it.
Procurement doesnt want to be involved in feasibility and
identification of whether you need it. Once it becomes a project
then the role of procurement is to buy. But sometimes we have
already gone through the technology decisions wet process, dry
process, bag process, ESP, etc. We go through the technology with
the support of our technical groups guidelines in Italy. Once we do
that we are married to a technology and a vendor at times that is
what happens. And then we have to start all over again to justify it
to procurement. And they are upset because they werent involved
in developing the specifications!

Key Supply Management Priorities

Need to find a way to communicate better across the whole

supply chain, internally first! Plants are doing their own buying.
80% of the time we do not know about the purchase until
requisition received with first level plant approval. Need a way to
know the need and do an enterprise system but have to get it
jump started yesterday. Some manual systems may be required.
Have to find a way to become more efficient on the small stuff.
Plant purchasing manager position is being changed to supply
manager symbolic more than anything. I want to re-focus their
efforts on running a first class warehouse, managing inventory,
kitting maintenance, etc.
Redesigning the job of the maintenance planner, and the
purchasing manager to a plant supply manager. Effective plant
agreements for 80% of their routine less than $2500 spend. Not
spending time on 3 bids.
Re-make the job of the field supply manager. Starting to work
together.

Plant Buyers See the Problems

Everyone in our plant has NOT converted to using
the system. They dont know how to use it, and take
the shortcut. They will go outside the system and
write a requisition, because that is easy for them.
And I cant blame them I have experimented with
the req system for maintenance, and am not thrilled
with it.
Getting feedback from the plants is the first thing that
corporate has done right.they are always making
changes WITHOUT going to the plants

Requisition Approval Process is Muddied

Requisition approvals have slowed down this is the biggest

problem, without a doubt. Now that central procurement is involved,
it has drastically slowed it down to a month or more in some
cases.I am hoping it is just one of those learning curve things that
will improve.

There is a lack of clarity on when we need to get approval. One

time we do it, and they tell us that we should handle it internally, and
in other cases, they tell us to get the quotes.and we dont know
why they do it one way or another!

For major projects, it is a situation of who is doing what.and it is

fairly confusing.

We need a process map of who is responsible for getting the

quotes, when, how long to get them out, and who does whatthat
would make life out here at the plants a LOT easier!

Lots of Transactional Work at Plant Level

I generally dont have time to go to vendor catalogs or spend any
time learning the system if I cant do something in 5-10 seconds,
I move on to something else. I am working 11-12 hours in a day
my purchasing activities include closing POs, looking at it to see if
it is correct, following up with workers to understand if they have
done the work, etc.

I have put in 8 hours today, and am only 1/3 of the way through
the work. Most of the problems are services need to ensure it is
complete, and if work postponed, etc.
Biggest areas for improvement are to help clarify the roles and
responsibilities of purchasing and production people. Production
is creating reqs for production-related items as it should be
abut are not doing it always as a rule.
Ideally, people using the items should be creating the
requirements, but not the PO this should be escalated over time

Workarounds

Because of slowness of release process, our 2007 projects are going south.
It used to be one or two weeks at most for the vendor to put it on the invoice.
So what we have done is if it is a $25K job which takes 2-3 weeks, we will
req it out on a weekly basis instead so it stays there.
The problem seems to be someone on the release strategy line who is
outside of the plant, on vacation, out of the plant, but on vacation, and it is
not being addressed. The requisition will sit for weeks!
As a result, one thing we try to do, which we shouldnt, is to convert that
$25,000 job into four $6377 line items so we can get it done. We shouldnt
have to do four line items for one but they know we need to fix it quick , and
it has got to get fixed to get it running again. It is tough to wait for 2-3 weeks
for the PO.
The BIGGEST issue is getting requisitions released! That is the biggest thing
that I have any problems with. It is not being local but I have to get on the
phone to release it. That is happening at corporate level and I think it
would help if they had our plant managers more leeway to release some of
the reqs. Purchasing at corporate is waiting for people to approve it!

Supplier Interviews
Essroc

Bravo is NOT User-Friendly

The majority of the time (70%) there is not enough money on the
PO. Someone wants the work done and puts in a guesstimate
and it is a big pain to go in and change the order, or so Im told.

A lot of times to get the information you need on scope,

working through the system a pain. If you hit the
wrong button with the mouse, you are back at square
one. I am a hands on guy but the fact is it is not easy
to use and is in fact a real nightmare, and complicates
everything. I understand that a big company has to
centralize purchasing but the system interface is a
problem and is way too complicated. WE are not a big
company, and dont have great computer skills, so we
spend a lot of time trying to figure it out.

Not Enough $ on POs

Getting the PO into the system is a real
pain. I know it will get blocked if it is over,
so I wont invoice over the PO amount, and
have to ask them for another PO for the
remainder which can take a long time.
That is what they ask me to do, and tell me
I will get paid quicker that way. It always
takes longer for the second one to get paid
no one is in a hurry to get it processed
once the work is done.

Lack of Response from Essroc

It might take two to four weeks to get a PO approved, and it
depends on the amount and everyones vacation schedules, who
is out of town. All my accounts payable go to Nazareth. I get my
POs from the plants but invoices sent to PA and have little or
no contact with those people. You can call and leave a message
and they will get back at some point, and it might take several
days.
I will call them I called them, wrote to them, mailed to them for
3 months for PO numbers and never got them so my invoices
would not get paid. I tried dealing with the plants, I tried with
corporate, I tried plant managers and no one wanted to step up
and get it done. That was last summer. Now we are getting POs
and send in an invoice and in 60 days we still dont get paid.
So they make you email (we arent allowed to talk to anyone)
and they come back and say they dont have the invoice. In
another 30 days we write again and the same person says they
dont have it even though we have documented proof. They
are just awful to deal with.

Emergency Orders are the Worst

The PO amount will always change because they want it done now
and they dont know how long it will take. Then they usually make us
wait until the invoice is done to create a PO to match. If they give me
a PO for $50K but there is $100K to get it done they dont add it to
the PO. I rarely see a PO.
On emergencies there is no time for a PO and they could do a better
job on turning those around. When time and materials runs over their
guesstimates they do a poor job on the estimates. No clear way to
define how to do it until you get inside. They dont know how bad it is
until they shut it down and cant say $100K every time or they
wont get approval from corporate to deal with the emergency!
Essrocs typical payment is 90 days only after we go after them
several times. They are a big customer we did $500K with them last
year. I know someone in their corporate group for 20 years and that
is how I got paid I called him up and he called up the plant manager!

Comparison to other Customers

They are not our favorite plant to work for. If two people call me on
the same day and one is Essroc I will take the guy who will pay me
in 30 days and not give me a hard time about Purchase Orders.
Essroc is the worst of the bunch. Everybody realizes we are a
critical supplier but they still jerk us around. Others make sure our
problems are solved and they are more flexible upfront realizing
that the work cant be estimated upfront.
Most companies we work with have emailed invoices and pay us
electronically. I dont have any trouble. I am pretty sure we just get
a check from Essroc never seen an electronic payment. I get an
email and voicemail when I call them, and no one ever calls back.
They are the worst customer I have.

Recommendation 1: Complete PO after

maintenance work complete

I dont know if they can fill the PO in afterwards (e.g. give him a
number they can invoice on, total up the bill, fill in the blank,) but
for some reason they cant do that. Or so they tell me. Jobs
that we do a firm lump sum we get a PO for those. There is
NO problem getting paid on those. If they could do something
to improve time and materials and the unknown costs, that
would help us out quite a bit.

They should internally be more flexible to adjust POs. If they

give me a PO and they change it later that should be their
problem, not mine. Have to give me POs faster we do $100K
of work without a PO on the basis of faith. Every other
customer I work with gives me a PO upfront, a bogus amount,
and matches it later. When they get my invoices, mark them,
log them and pay them on time.

Recommendation 2: Blanket POs

If they could do one thing it would be create blanket POs. We

are in the plants every day, so they could issue blanket orders to
cover miscellaneous orders and clean them out every month.
All of my billing is accompanied by a signed timesheet, with the
exact hours and what we did and is signed by the end of the
shift. There is never a question about the hours that always
goes with the invoice. If they had managers that wouldnt worry
about $2000 orders every day it would save a bunch of time
on their end and mine.

Buying Channels

22

External Best Practices

Benchmarked Companies

Suncor Energy (Doug Kent)

BASF (David Rice)
Sciquest (Susan Miglotti)*
Boston Scientific (Ken Hartman)*
MeadWestvaco (Paul Thimmons, Chris Ossen)*
Rockwell Collins (Phil Krotz)
AT&T (Mary Everett)
IBM (Frank Couch)
Kiawet (Brian Berry)
RSC (Gordon MacDonald)*

Common Themes
Every organization I spoke with is struggling to use SAP in
services
None of them had implemented MySAP, though many were
using Enterprise Buyer (SRM)
Varying levels of Pcard implementation
Integration with maintenance organization identified as a
common critical success factor
Need for good master data integrity is also a fundamental
building block for success
Each company had developed their own unique approach to
working with the complexities of SAP in a services
procurement environment

The SAP Story: Self-Service Procurement Search Catalog

To retrieve a desired object, users can search catalogs across

company boundaries optionally from
Internally hosted catalogs, where purchasing controls the
content, but the suppliers deliver the content.
Internal catalogs, where purchases are booked against your
own stock.
External supplier catalogs, accessed over the Internet
Catalogs hosted by marketplaces or other external brokers,
maintained and hosted by external broker.

Dave Rice - BASF Use pcard on

Punchout-Roundtrip

Use 12-14 catalogs in a roundtrip method for office supplies,

industrial supplies, safety, lab, flowers, packaging, software,
specialty echemicals, electrical supplies, magazines, business
cards, stationary, electronics, recognition gifts

Start behind the firewall in SAP SRM, identify the commodity, click
on link, punch out to supplier site, fill up shopping cart, add credit
card and shipping locations, and hit order.

Supplier is send SCDL purchase transmission and just pay the bill
from Amex

$50M / year on pcard, and $10M on punchout roundtrip with pcard

Dave Rice - BASF Auditing users of

pcards on roundtrips

Report each month to site coordinator of users who are NOT using
approved suppliers

Audit 10% of cardholders annually to ensure they are following best

practices

Supply manager verifies prices by randomly selecting items on supplier

catalog

30% of transactions on EDI (5% of suppliers) focusing on high volume (raw

materials, chemical marketplaces)

Plan on utilizing more suppliers on e-catalogs (currently at about 100)

SAP is complex and you have to be a frequent user to be good at it

Doug Kent Suncor Work with

Maintenance Organization!
Our IT guys like to wrap a prophylactic around the organization and
have banned SAP from making any contact with all but a few IT
people.
The vast majority of this is the realization that if you dont plan and
arent integral to the planning process it wont deliver results for you.
Unless you are willing to change your own behaviors, it wont work.
We have 24 people in plan schedule and coordinate working closely
with maintenance.
Our biggest problem is in doing a word search for a master data item
sometimes it works and sometimes it doesnt. You may call it duct
tape, and we call it adhesive tape duct, and you may find it, and you
may not.
There is a huge volume of churn in our logistics and procurement
people to find items to put into fields, and a lot of master data fields
are not filled in, and not linked to contracts, and all the benefits do not
come to fruition. You need to actually manage your master data.

Doug Kent Suncor Manage Your Master

Data!

Managing master data means setting it up on a cost and

classification basis not a word search basis.
The master data has traditionally been treated as a lump of fields,
and you do word searches. To manage it, you need to establish
classes and categories for each piece of material and put in
attributes just like a real data piece.
A relational database rather than a flat file. It is difficult to move a flat
file into a relational database. We have done this in major projects
on bulk.
You can then give suppliers specific fields category color (white)
category size (two inch), category trim (stainless steel) and then
you have a basis upon which you can talk and search. (e.g. Search
for all valves that are two inch white with stainless trim.)
If you do it as a conglomerate of text may not get it. Need to use
natural language not computers.

Doug Kent Pcard requires process change

Use of pcards as an effective supply channel is a function of maturity
in the organization.

Buying sundry materials is a natural course of business. Issue is not

saving pennies but to make it as efficient as possible.

Every time maintenance uses a pcard we pay them 30 minutes to

drive into town, 10 minutes to buy the part, and 30 minutes to get
back assuming they dont stop for coffee and doughnuts!
Windshield time is huge and you pay them $50 an hour to go get
a $20 part.
Better to have a supply chain person to call the parts runner (e.g.
automotive NAPA runners) you are paying at minimum wage to run
parts to all the engineers. That is a more sensible way of having
mechanics use pcards.

Doug Kent Need Reliable Supplier

Catalogs if Used Externally

We are using our internal catalog and are at the beginning of the project to make
master data UNSCSP standards and linked to suppliers who have done similar
work.
Punchout depends on whether the vendor has done good work with their master
data. If we punch out and they havent done a good job, it is a nightmare.
If you call it a widget, and they call it a widget that is red and a centimeter off in
size it is not the one that fits. Suppliers are constantly shuffling their catalog to
discover how they can extract value from that catalog. They are sticking parts
together in a package, and telling you that the only way to buy it is to spend
more. If they dont have a group that is managing it well, and you dont have a
group that managing it well, it is a problem.
Managing it well means robust master data, and a way of linking that it links to
your SAP numbers. If you punch out your master data and it points to this part
and if they make it obsolete and stick it into a grouping or assembly what
happens is that your master data points to it, their systems tells it that it is
obsolete, and your system kicks itout to a procurement person.
Now your error handling system on handshaking is written by IT people who
cant speak normal English and the procurement will NEVER figure out what
exactly happened.

BSC - Ken Hartman Schools of Thought

on Content Management (CM)
Control content in-house (old school) including pricing what people see,
and entire process. Some companies partnered with Requisite
Technologies to provide the content management engine.
Open Catalog Interchange. Get out of CM business and push CM out to
suppliers. Challenges re who is going to ensure that the right content is
seen, and prices are correct on Punchout Roundtrip.
Punchout Roundtrip with Pcard Best Practice.
1. Have a ghost card available with suppliers, and cost center number
passed through on pcard statement OR
2. Get people their own pcard on the site and bypass AP.

Ken Hartman Auditing Prices

How do you know you are getting contract pricing you will have
that issue with or without pcard.

You have to audit the companys price list. Most companies will
send you an Excel file with the part number and the price paid.

The other way to do it is to negotiate a discount off price list so

every transaction involves a 25% discount and your end price is X.
And then you have to audit the list prices and negotiate price
increases as appropriate.
E-invoicing works well in SAP, but a lot of care and feeding is
required for SRM, using standards for invoice documents

Ken Hartman Services Purchasing in SAP

The challenge with purchasing services using SAP is that the module is
very labor intensive to set up and maintain the internal services module.
The standard services catalog is difficult to use because most dont have
one like a materials master file. Services are more amorphous than the
hard part you are buying and finding the specifications is very difficult.
The biggest issue is with the entry of the services in what SAP calls the
service entry sheet. It is difficult to automate that. So most look at a third
party software package with timesheet capabilities and interface that
software into SAP with that goods receipts.
SAP has CATS and I implemented it at one client. The issue is that the
user interface is very difficult. You need to be physically on-site to enter
the CATS information and then setting up a workflow approval for that
time sheet is fairly labor intensive. It is NOT a slick solution.
Some third parties do a better job of allowing remote entry into timesheets
into an internet based applications that routes an image of the worksheet
to the hiring manager for approval and dumps the service entry sheet into
SAP.

Ken Hartman Negotiate Pcard rates

The yearly rebates you get on pcards vary from bank to bank.
You should spend some time negotiating it it is a good
revenue stream.
We are up over 1% of our total spend on pcard. We are getting
the very best rates and we are at $50M of pcard spend that
is considered very high.
Certainly there are bigger companies, but if you look at the cost
of money, someone spending $50M versus $100M not much
difference in the banks ability to borrow money, and at some
point you hit the Feds prime rate.
I could see it getting pcard usage to 1.5%, maybe 1.75% in a
best case scenario

MeadWestvaco - Paul Thimmons- Master

Data Project

MeadWestvaco uses an internal SAP catalog and an SAP

material master. We decided to exploit this functionality
internally. All material is linked in that catalog and associated
with a Purchasing Information Record.

The PIR includes information on who we buy it from, the cost,

etc. We spent a lot of money and time to ensure that all that
information was input correctly. Every material maintained in
that catalog is managed and updated by our internal people.

We initially contracted with a group to implement and getting our

business units onto the system. This was a lot of money to
enter that data into the system, and we found that the master
data was still very poor.

Paul Thimmons Master Data

So we sent people out to the field for EVERY SINGLE
material, and cleaned up all the data. This was an
intensive effort.
We now have 400,000 items in the catalog.
The PIR contains pricing and special information such as
process safety data, and instructions to the supplier that
they cannot substitute other materials for this material, etc.
This is in addition to the 40 character text limit.
The PIR is linked to a material number in SAP used to
maintain inventory. 100% of our direct materials have
material numbers, with detailed bills of material associated
with these built out in the field through interviews with our
field people.

Ken Hartman Maintenance Integration

The key to the process in my mind for MRO is integration with the
maintenance process. We needed to link the material number to the
maintenance process so that the maintenance engineer can create a
reservation for the item in the stock room. For non-stock items, the
engineer can create a requisition for buyers, which will automatically create
a PO (Lights Out Purchasing) or send it to a buyer.
The extent to which this occurs depends on a plants evolution. Some
plants are only 50% automated. Others have better information at the end
use level and for each piece of equipment, they can process it more
efficiently.
The BOM is the responsibility of the maintenance official at the plant. The
BOM can be created based on the past 3 previous orders and missing
items can simply be added over time, and as that history builds, it becomes
more accurate.
This results in proactive evaluation and experiential development of the bill
of materials and engineers need to LEARN what is used over time. This
is CENTRAL to an efficient process of procurement. If I have to discover
what I want to use every time, it is not efficient. We place a lot of effort in
development the information impacts.

Rockwell Collins Phil Krotz Data Integrity

We started in the late 1990s to get comfortable with taking sourcing out of SAP
and non-SAP sites and integrating into a sourcing analysis methodology and tool.
We have done a good job of leveraging that through our sourcing activities a lot
of it is Access databases but it is a good system one of the few companies that
hasnt had any major problems.
98% of spend is in SAP have released some ability around our indirect and
subcontract spend most of the effort has been on direct and getting visibility to
the invoice and payables level for indirect.
We have implemented various automation strategies and tools within SAP and
utilize the sourcing agreements.
80% of our spend is on sourcing agreement and of that 75% is going through
automated elements eRFQ, ePurchase order.
Sourcing groups get as much as they can on LT agreements which facilitates
SAP.
We look out six weeks for requirements look for source lists, pull drawings out,
attach to quote, send out to suppliers on source list based on critieria and have
a 2 week LT to respond.
Gets quotes back based on cost adjustment and awards to supplier automatically.
Get about 100,000 per year.

Phil Crotz Supplier Portal

Supply Collins website has a supplier portal. This the front end
dashboard for SAP.
All transactional information goes on SAP. Get forecasts for LT
agreement parts, or the source for the part. Updated POs if they
pull it in, they can split the orders, push it out based on their
capability. Supply Collins APO also through can pull drawings,
push drawings to them and get CAD files to them. PM pushes a
pdf file to them get POs, print barcodes, and manage APs on the
portal. Plumtree was the original product.
Have customized it to work on top of SAP and looking at how to
migrate to enterprise portal on SAP. A lot of data in from suppliers
from the portal, lots of info churned from SAP, lots of D&B data
pulling in, small business indicators (government contractor) Dennis
is turning that into information. We are sending that data out and
need to set it up with 4000 suppliers who send back information on a
quarterly basis. As we go forward how to become more predictive

Core Process, Enablers and Technology

Core P2P
Business
Processes

Buying
Channel
Selection

Zone Store
Request

Requisition
Information

Forecasting
/Planning

PO auto
Fax

Invoice
Payment

Policy
Deployment

Enabling
Processes

Maintain
BOMs

Technology/
System
Features

P-Card

SAP Response
Time

EDI/ XML

Contract
Mgmt

Maintain
Master
Records

Contracting
T&C
Supplier
Selection
P-Card
Use

Performance
Measurement
Material
Outline
Numbers
Agreements
SRM
Plant
Maintenance

Supplier
Development

Web enabled
procurement
Workflow

MRP
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Outcomes of Interactions
Commitment

Compliance

Resistance
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Inc.

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Proactive Management and the Exercise of Power

Relationship Capital
Insight

Leadership
Commitment
Management
Compliance

Knowledge
Power

Procedure

Enforcement
Resistance
Controlling

Copyright 2005 Baios,

Inc.

Enabling

Role
Power
45

Measures
CORE INFLUENCE SKILLS: Proactive influence skills most likely to gain commitment.
Consulting: Deepening your understanding of others' views by asking engaging questions
and responding in ways that encourage dialogue.
Aligning: Aligning features of your idea or approach to individual and institutional values or
ideals.
Reasoning: Offering evidence of how your idea or approach will provide institutional and
personal benefits.
LAST RESORT INFLUENCE SKILLS: Influence skills that may result in compliance without
commitment.
Pressuring: Using demands or persistent reminders to convince others to do what you want
them to do.
Legitimating: Establishing that you have the authority or right to make a request, or
verifying that the request is consistent with organizational policies, practices, or traditions.
Copyright 2005 Baios,
Inc.

46

Collaborative Engagement
Model
Actions

Outcomes

Inputs
Relationship Capital
Role Power
Knowledge Power

Copyright 2005 Baios,

Inc.

47

Collaborative Engagement
Model
Actions
Align

Outcomes

Inputs
Reason

Consult

Copyright 2005 Baios,

Inc.

48

Collaborative Engagement
Model
Actions
Align

Outcomes

Inputs
Reason

Consult

Copyright 2005 Baios,

Inc.

49

Commitment
Compliance
Resistance
Power and
Relationship
Capital
Increase
Decrease
Level

Final Thought
If you insist on beginning only with
certainties
you shall end in doubts;
but if you will be content to begin with
doubts
you shall end in certainties.
(Francis Bacon)

Copyright 2005 Baios,

Inc.

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