"One on One: An Interview with Sarmento Silva" By Jill Schildhouse, Summer 2005, Vol. 41, No. 3, p. 2
Journal of Supply Chain Management Copyright © August 2005, by the Institute for Supply Management, Inc.
Interview by Jill Schildhouse, writer for Inside Supply Management®
Sarmento Silva, C.P.M., is a 27-year career purchasing professional, currently serving AstraZeneca Pharmaceuticals as director, purchasing system development and reengineering on assignment as leader for its current mySAP ERP and Ariba Buyer implementation project. Prior to coming to AstraZeneca, he was global manager of packing and printing for Rubbermaid Corporation. Silva has been an active member of the Institute for Supply Management™ since 1980, earned his Certified Purchasing Manager certification in 1984 and currently serves on the Editorial Review Board for Inside Supply Management® magazine. He holds a BA in communications and an MBA in marketing. In 1993, Silva was awarded the Distinguished Service Award from the Western New England Purchasing Management Association, Massachusetts House and Senate, and received a citation from the governor's office for statewide excellence. In 2004, he was awarded the "Dick Jackson" award for distinguished service to NAPM—Delaware, Inc.
The Journal of Supply Chain Management: What makes sourcing services different from sourcing traditional goods?
Sarmento Silva: While traditional goods don't need a lot of conceptual vision, sourcing services is typically a collaborative effort. Most people involved in services have an appreciation for their own subject-matter expertise. Many times, these services are not necessarily mapped out in advance, but come as a collaboration with the supplier. The supplier comes in and pitches ideas and from that there tends to be a development of what is needed.
I think from this perspective, people who use that service see themselves as subject-matter experts and have a hurdle to get over when purchasing people come in and say they can help. This situation makes sourcing services more difficult because you're having to deal with not only external forces (suppliers) but internal forces (subject-matter experts) as well.
The Journal: Please share some examples of specific services areas and what the key hurdles are within those areas.
Silva: First, let's look at advertising, which encompasses design, creative and production services (commercial print, television production, direct mail, etc.). Many people would say you really can't source the creative end of advertising. But, you can look at creative services based on rate cards. Are you using the partner or junior partner? Their rates should be different. Are you rolling in expenses and is that out-of-pocket expenses? And how are you dealing with those? Is this a fixed fee? Do you negotiate some way to quantify that?
Consulting and advertising are very similar. Consulting firms use various models. Some firms bring in one or two senior partners to run the project. Then they "pull the school bus up" and bring in a lot of brand-new people in their organization to act as the resource. Some firms work the opposite way.
In terms of benefits, we hired subject-matter experts to help us understand how medical and life benefits are parceled out. And we didn't end up picking the same company for all of our insurance needs. Once you bring in subject-matter expertise, be sure you can transfer their knowledge to yourself. Then the next time you source that service, you won't need to bring in a third party.
Temporary labor is similar to benefits. We brought in two or three firms and determined the types of labor they specialize in. In a pharmaceutical company, we use laboratory, clerical and office workers. We don't necessarily get all three types of temps from the same provider.
The Journal: What are some general items to keep in mind when sourcing services?
Silva: The importance of clearly defined deliverables, metrics against the deliverables and milestones. Many times, there are never penalties tied to these milestones. Deliverables can be shady because it's a collaboration with a supplier.
In looking at services, you really have to take some time up front to understand what your organization needs by interviewing internally. Never underestimate the quality of information that's inherent within your own organization.
In any strategic sourcing endeavor, supply managers need to have a solid internal cross-functional team and search out subject-matter experts. They need to understand their organization. The first couple of times purchasing deals with an area, they don't understand the process. As they get further along in the sourcing of services, they become the subject-matter expert.
The Journal: How can supply managers apply strategic sourcing principles to service purchases?
Silva: Strategic sourcing principles are very similar and can be applied to anything. You need to understand what it is that you're buying. We have a multiple-step methodology to follow, which includes defining the opportunity, conducting the industry analysis, finding a supplier base and then doing RFXs. You have to build a model that you can present to the potential suppliers to bid on. Once you understand which suppliers you want to work with, then you begin your negotiations. Then finally you build your service-level agreements and your metrics.
The Journal: Short of a mandate, how does the procurement department gain the credibility needed to be involved in the nontraditional sourcing process?
Silva: If procurement is not involved early in the process, you just become the person who writes the PO. By just walking around, learning who's who and setting up some meetings at the senior manager level, you can build a benefits case. It's critical to understand what turns people on.
Sometimes saving money is important. Sometimes it doesn't matter. You need to understand where your organization is and build your business case based on that. Do your homework and find out which of your current suppliers are not responsive or have gaps in customer service. Find the chink in the armor and use that to your advantage.
The Journal: Once you have developed this delicate relationship, how do you continue to build upon it?
Silva: Nothing breeds success like success. Learn what you do internally and what your suppliers do. I know it's difficult, but you've got to really educate yourself on the market. Put yourself in the position that shows that you are, in fact, a subject-matter expert. If you build a better mousetrap, the world will beat a path to your door.
The Journal: What benefits has your company gained from involving supply management in its services spend?
Silva: The benefit is our ability to get buy-in from the organization that it will allow purchasing to build crossfunctional strategic sourcing teams. And now, we are moving toward a category management platform, which I believe is the evolution of strategic sourcing.
We are setting up forward-looking, cross-functional internal teams that manage a category of spend. To some extent, this team owns and prioritizes that category of spend, draws the planning for that category and then designates strategic sourcing teams. So now we're going to the category team and asking, "What are the priorities? Where is the low-hanging fruit that we can go after?" And now they have a vested interest, so when you need a resource from their area to participate in the crossfunctional strategic sourcing team, they're there.
My organization has been doing this for six months and has the approval of executive-level management. We're looking to have 80 percent of our categories handled by a category management team before the end of the year.