Indirect Savings Tips from UTC

Ever since I consulted to UTC when at FreeMarkets, I've had tremendous respect for the Connecticut organization (Hartford is another story – don't get me started on that one). Regardless of where its corporate headquarters is located, we can all learn quite a bit from what UTC has accomplished throughout its supply management operations over the past decade. Consider some of the indirect learning's from this recent article in Purchasing. The article notes that UTC has deployed an SRM process around its indirect spend using "such tools as supplier score cards, quarterly performance reviews and risk management plans" to improve savings and results.

The numbers are impressive. According to the story, UTC's goal for an original savings initiative was $500 million. But "the teams surpassed that goal, reducing costs by $800 million. At the end of 2004, this figure was up to $1.1 billion. In 2005, the teams added another $300 million to the tally." What are the key takeaways from UTC's experience? Purchasing summarizes UTC's success by suggesting that "teams use process, policy and sourcing strategies to meet [savings] goals [for indirect goods and services]". In addition, "don’t be afraid to outsource non core competencies such as the req-to-check process" and "use online auction tools when they make sense." Now that's sage advice from a company that practically wrote the book on using Spend Management to transform its EPS numbers.

- Jason Busch

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