Ken Piddington, CIO of Global Partners LP, an $8 billion energy company in the Northeast, recently implemented an innovative vendor partnership program that he hopes will improve the product and services the company gets from suppliers while helping those suppliers more efficiently serve the company and benefit from the relationship. He recently outlined the plan.
What spurred the need to create your Strategic Partner Program?
When I took over as CIO and reviewed the budget, I saw about 30% of it was dedicated to hardware and software and consultants and maintenance agreements, all that sort of stuff, a large chunk of money that I needed to get a better handle on. But I also saw that the only relationship we had with vendors was when they were trying to sell me something or when there was a problem. I thought, there's got to be a better way.
We also had to improve service levels. Global has a lot of vendors that have been with us for many, many years. But we're a different company today than we were three years ago, five years ago, 10 years ago, and we had many contracts that didn't fit our current business. So we needed to increase service levels, lower costs and get these guys to be more innovative and help Global find better solutions.
So, I put the plan together, went to Gartner and read through all their research on vendor management, had a couple analysts calls, went to the CIO Executive Council and asked for some peer reviews, and basically got validation behind what I was doing.
Did you receive some good feedback?
The best thing that came out of Gartner was a model for assessing vendors, and we tweaked it to fit our needs. And the CIO Executive Council gave me two CIOs that had similar initiatives. A gentlemen from Family Dollar Store was the best. He has been doing something similar for three years and he gave me the pros and cons, the problems he has had and how he has corrected those and where he has seen progress.
I also told a couple of our vendors I was toying with the idea, ones I already had pretty good relationships with, and they were very excited about it.
Excited about being better managed?
That's the amazing piece about how this has worked out. It ends up being a win-win for both sides.
Were they a little nervous up front?
Oh, absolutely. Some are still nervous.
So you devised the plan and got buyoff internally?
It was a part of my overall IT strategy I presented to the CFO and CEO: These are the things you asked me to attack, this is our road map for attacking those and this is one component of it.
Lay out the plan for us.
One thing we did up front is categorize our vendors based on how they play, because what we do with an Oracle, for example, versus what we do with a little guy who provides us laptops is very different. I need them to both fit into the program, but they each fit in differently. So we came up with a matrix with five categories across the top and all the vendors listed down the side.
The Strategic Level 1 category is for vendors that are critical to our day-to-day operations. Without them, we would have serious business impact. Our fuel terminals, for example, are our life blood, and the vendors that support the automation systems at those terminals are strategic. A Verizon in many worlds might be a commodity, but we have gotten heavily involved with them in support of these terminals, so we categorized them there. And Oracle Financials is another Strategic 1.
The Strategic Level 2 category is for companies we do a lot of business with, that are important to our day-to-day, but if they went away tomorrow we would still be in business, we'd just have a few more manual processes to deal with.
The Emerging category is for vendors that are starting to do some new cool stuff with us and, as our business is changing, they have the potential to emerge into strategic partners.
Legacy is much as it sounds. These are the guys that have been around for a long time. A lot of our mainframe pieces fit into that bucket.
And then we have Tactical, which is where a majority of the vendors sit. These are providers of commodity products or services I can get from multiple suppliers. It's about the relationship, the quality of service, and the price you are going to get.
I also wanted a dedicated account manager for each vendor, a single point of contact, even for vendors that have multiple product lines. It will be this account manager's responsibility to bring in the right people at the right time so we would stop getting bombarded from six different people all trying to sell us a different slice of their pie. CA and Oracle are perfect examples of that. We now have them working under a single point of contact. The cold calls haven't stopped, but they have been reduced dramatically.
Next: Vendor performance reviews
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