Mattel’s Indirect Procurement Organization: Lessons Learned Through Experience!
At a recent presentation in Los Angeles sponsored by Zycus Spend Management systems, Carol Danoff, VP of Global Procurement shared a personal story about her introduction to the world of indirect procurement.
“While I was working at Motorola in direct procurement, I received a phone call on May 28th, 1998, from the Corporate director of Strategy regarding a new career opportunity. I went to see him and he told me: “We are going to ask you to transition from direct procurement into indirect. Up to that time, I had been managing PCB’s, semiconductors, and connectors. We had put in commodity managers around each of these categories. He told me: “We want to take those same disciplines and apply them to indirect.” My first reaction was “What did I do wrong? We are welcomed in direct, so why would I want to move to indirect and buy office supplies?”
Since that time, many doors have opened for Carol in her career in procurement. Since that time, she has worked with Colgate Palmolive and is now with Mattel, and has learned many important lessons during her career. Carol summarized the most important three lessons:
- 1. Data is king.
- 2. People are powerful.
- 3. Do what you say you are going to do!
Lesson 1: Data is King.
Poor spend data can cause frustration for your team and destroy credibility with business partners, and a loss of leverage and savings with your suppliers. Many systems do not effectively roll up spend in indirect categories – and if the data is incorrect, there are multiple consequences. First, stakeholders will discount the information. For example, a marketing director will pick out an incorrect number, and if it isn’t accurate, will tell you that you are not worth spending time with. Second, poor data means that spending is categorized incorrectly. When speaking with suppliers, they may tell you what youa re actually spending versus their spend, which can cause problems.
But good data can solve a lot of problems. It provides spend visibility by location and category and enables an opportunity analysis. It is the basis for strategy development savings tracking, supplier optimization, compliance, and diversity spend tracking. Currently at Mattel, the team is in the process of developing a repeatable, easy to access, accurate data to set expectations with business partners. Business partners are being told that the data isn’t perfect, but it is directionally correct. Carol notes that “We are telling stakeholders that we need to work with you to help us with the categorization, and we need your support to help us. We do not expect end users to categorize the data on their own.
Lesson 2: People are powerful!
Carol emphasized the importance of having the right talent to drive the right relationships with stakeholders. But buyers aren’t buyers! Direct buying is very different from indirect buying. Mattel looks for indirect buyers with fundamental procurement skills, project management, negotiation, analytical skills, e-commerce, technology, and legal. The most important skill however, is relationship management and team work in indirect. She noted that “In indirect procurement, you are entering into areas of spend where people do NOT want help. So you need to help influence them and convince them that you are there to help, not tell them what to do. People are very protective of their space – and many view it as their day to day job! At Mattel, we partner with our people – and at first they may think they don’t need our help with contracts. But once we take them through the strategic sourcing process and we show them the opportunity to consolidate the supply base and address discrepancies, they buy into it.. Today, people do not enter into agreements with law firms or other agencies without going through our team.
Danoff noted that recruiting the top talent and get the right people into a procurement role has been a challenge. “Mattel wants people who can interact with all levels of the organization. Indirect is often viewed as an area that isn’t as important as other areas, so you are always fighting to elevate the stature of procurement and making it attractive for people in marketing and IT to move into a procurement role. I never envisioned that I would be engaging with all of the top leaders in the company to drive functional strategies. We are making it an exciting area for graduates coming out of school. We need to utilize transitional leadership skills and ensure the people we bring on board can interact with our senior leaders in a meaningful way.
Lesson 3 – Be able to say what we do and do what we say.
When you implement a new system, need to be able to have the right skill sets to do that. Mattel has a unique culture, in that the company started in a garage and today is the most innovative toy company in the world. Mattel has $5.4B in sales, and 27,000 employees worldwide. Its brands are highly visible, and include Barbie, American Girl, Fisher Price, Hot Wheels, and others. Major customers include Walmart, Toys R Us, Target, and others. Carol emphasized that “Mattel’s values drive what we do and so we need to speak to the culture and values of our organization, and we are philanthropic and drive everything with integrity. Mattel’s valuesare “Play with Passion, Play Together, Play Fair, and Play to Grow.
To ensure alignment with these values, indirect procurement strategies are based on data and facts to drive decisions. Procurement uses robust career development tools, and has a strong MBA recruitment program. The team uses scenario and contingency planning as part of our strategy to ensure they have good sourcing plans in place.
Our four values govern everything that is done in indirect procurement. A good example has been indirect procurement interactions with the marketing arm of Mattel. Mattel procurement has a dedicated market sourcing manager person who was recruited from the marketing area, and understands their lingo and requirements. This individual is able to truly partner with marketing and manage the relationship. Carol emphasizes that “Although functional owners often think they own supplier relationship. We need to manage supplier relationships jointly with them, using data, facts, as the tool to drive decisions.”
