Resolutions, E-Sourcing and You: How AGCO Stuck to its Transformation Goals

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A few months into any new year, many people’s New Year’s resolutions start to unravel. Psychologists can offer numerous reasons why you have (yet again) failed to maintain that new diet, but when it comes down to it, there’s really one explanation: accountability. Whether you’re trying to cut carbs or make it to the gym, your chances of sticking to a new habit increase greatly if you don’t take on the challenge alone.

In the business world, if you’re trying to get adoption of new approaches and tools, you may become dismayed when end users don’t adopt a new tool that you know will create value. In procurement, take the example of strategic sourcing. Many large organizations buy a new e-sourcing solution but don’t get adoption. The reason? A shared tool doesn’t imply a shared commitment to continuous improvement.

Get the Full Story: Pierre Mitchell discusses AGCO’s supply chain transformation live with the people who led it.

This is where a top-down business goal can be very powerful to enable a bottoms-up commitment to use new methods and tools. So, just as you might commit to a semi-weekly ride with your cycling buddies to shed pounds and improve your health, the commitment to improving your supply chain and shedding excess spending is the same idea. Having someone with you along the way ensures someone is checking in on your progress, encouraging you when you stumble and holding you accountable when you begin to sabotage yourself.

This focus on shared commitment and accountability to a broader goal was the case with AGCO, the Duluth, Georgia-based agricultural equipment manufacturer. Back in 2012, the company realized that to remain competitive in its industry it needed to become more global to better leverage synergies across brands and regions. This transformation required a more standardized set of product platforms, which meant AGCO needed to develop a more streamlined supply chain — including the supply base and the strategic procurement processes to manage it. This was also a perfect opportunity to kick-start a strategic sourcing transformation.

With that goal in mind, AGCO established its global procurement organization, composed of more than 250 employees responsible for more than $5 billion in spend. However, since AGCO knew moving from a regional to a center-led procurement model would be a formidable task, the firm wanted to give stakeholders the best resources possible in strategic sourcing. This meant that the stakeholders themselves needed a strong voice in selecting a solution provider, and ensuring that the partner could not only offer strong functionality but also serve as an extension of the team to adapt to their diverse needs across a broad global spectrum of spend categories. This approach helped ensure that an e-sourcing system didn’t meet the same fate as a binder sitting on a shelf — the equivalent of a dormant exercise machine.

To initiate the procurement transformation, AGCO identified four main objectives:

  1. Bring procurement to a new level of maturity
  2. Digitize manual processes to increase efficiency
  3. Create transparency across all areas in the company
  4. Drive change management to procurement into a globally-led and category-driven organization

Knowing that it wanted to move away from transactional buying and focus increasingly on strategic procurement, AGCO decided to first tackle sourcing by selecting an e-sourcing suite provider. Procurement decided to go with a best-of-breed solution, for several reasons. The organization wanted strong procurement products, capabilities that stretched beyond a one-size-fits-all approach, and a provider that could grow with AGCO’s changing needs. Such a provider would bring a collaborative approach, process discipline, decision support and efficiency to the firm’s already rigorous sourcing process.

Beyond strategic considerations, AGCO also needed specific considerations to be met. It needed a technology leader in supplier management, category management and contract management. It also needed a provider that could offer both strong support for the global organizations footprint in North America, as well as the European Union, Asia Pacific and South America. Finally, procurement emphasized that usability was as or even more important than functionality. A stable but state-of-the art user interface would be essential to convincing stakeholders to actually use the solution.

Ultimately, AGCO decided to work with a provider named SynerTrade. To learn more about AGCO’s decision process and the benefits the company realized during and after partnering with SynerTrade, check out Part 2 of this series.

Want to dig into the full case study? Watch our recent webinar on-demand with Jan Theissen, strategy and methods director at AGCO, where he explains how procurement used e-sourcing as the tip of the spear in its supply chain transformation.

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