LIVE Dispatch: Keynote Highlights – Alcoa and BHP Billiton

I sat in on Tuesday morning's initial keynote sessions at LIVE and came away with a number of useful tidbits on how Alcoa and BHP Billiton overcame internal resistance and market challenges to use Spend Management to drop hundreds of millions of dollars to the bottom line. But before the respective CPOs of Alcoa and BHP took the stage, Kevin Costello, Ariba's (Nasdaq: ARBA) Chief Commercial Officer, and Bob Calderoni, shared a few facts about the state of Ariba's business. To wit, there are currently 130 Ariba spend visibility customers and "roughly" the same number using Ariba's Buyer / Procure-to-Pay applications. At the same time, there are 140,000 suppliers offering more than 750 million catalog items on the Ariba Supplier Network (ASN), and currently $90 billion is transacted over the ASN on a yearly basis (which might sound impressive, but by Ariba's own estimates, over $20 trillion is spent worldwide each your on indirect goods and services, leaving a huge market opportunity for Ariba to go after).

Following this introduction, Christy Breeves, Alcoa's CPO, took the stage. Responsible for $14 billion in annual spend on strategic, indirect, and capital markets and services, Christy told the audience about how Alcoa transformed its procurement function, saving hundreds of millions of dollars, despite rising commodity prices which caused price inflation as high as 300% for key metals categories which the aluminum giant purchases. I took copious notes during Christy's presentation and will post a longer blog with more detail about Alcoa's procurement transformation later in the week.

After Christy's presentation, Mark Cotter, VP of Global Sourcing and Category Management for BHP Billiton, a worldwide basic industry giant with a $130 billion market cap, took the stage to discuss the role of governance in leading a successful center-led procurement charge. At BHP Billiton, Mark oversees $16 billion in annual spend. Mark described his "3 C's" staged transformation approach to Spend Management at BHP. This model has led to over $500 million in booked savings in recent years (and a 100% increase in spend under management). Starting initially with a "command and control" approach that focused on strategic sourcing and identifying initial post-merger synergies, BHP quickly moved to a "collaborative" Spend Management approach that created a centralized approach to managing spend (following a "defiantly decentralized" model, as he called it). Last, Mark talked about how BHP is now in its "capitalize" phase, which is allowing it to realize savings quickly and effectively. For example, when BHP recently acquired a $7+ billion company, it was able to harmonize all prices with the acquired company in 90 days, while also identifying procurement savings that were 50% higher than what they expected at the time of acquisition.

Stay tuned later today and this week as we dig into additional Spend Management success stories from LIVE, as well as provide more details about Alcoa's and BHP Billiton's procurement transformation journeys.

Jason Busch

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