Finding the Cure

When a company quadruples its revenue within four years, some things can get out of hand. In the case of MasterBrand Cabinets, the second largest cabinet manufacturer in the United States, two things became clear: It lacked visibility into its materials spend, and whatever it was spending was too much. The company's incredible growth from $230 million in sales to $1 billion happened on two fronts. One was organic growth and the other was through an aggressive acquisition strategy. In turn, the company inherited information systems that were incompatible with its existing platform.

First Attempt
For MasterBrand to gain transparency across its information backbone, the company needed to implement common ERP systems at each of the acquired companies. But as the costs of that project proved to be less than fruitful, the company decided to take a different approach.

After analyzing its spending practices, the company soon concluded that it could shave 4 percent of its total procurement spend by renegotiating supplier contracts. Unfortunately, this idea also proved to be less than efficient as MasterBrands would find itself in the same position that it was in before -- with no process in place to help it capitalize on its 4 percent savings.

"We had no easy way to identify our corporate spend nor to act upon it," says Aaron Songer, sourcing analyst architect for MasterBrand. "We had no infrastructure by which to identify our supply base."

Other primary problems that MasterBrand was facing included:

• Lack of an accurate and timely view of spend data across multiple divisions using several different systems.

• Use of cumbersome spreadsheets and manual processes to gain partial view of spend.

• Data is difficult to merge, manage and aggregate.

• Unable to accurately measure and share supplier performance (delivery, quality, service).

• Lack of an environment to deliver critical business information within the sourcing department or with suppliers.

• Inability to quickly integrate acquisitions into its sourcing process.

The Doorway to Success
To help stem the aforementioned challenges, MasterBrand began to evaluate technology vendors that offer spend and analysis tools. The company eventually landed on Verticalnet Spend Analysis to deliver a centralized, enterprise-wide view of overall spend, cleanse the data into an easy-to-use, actionable format, improve purchasing efficiencies by targeting savings opportunities and supporting the means to achieve them, and monitoring the results.

The solution is designed to leverage existing enterprise transaction systems and provide non-invasive access to key spend data. MasterBrand also uses the software to quickly gain purchasing leverage after the acquisition of a former competitor.

"We wanted to aggregate all spend data from our disparate systems and divisions by commodity," says Brad Andler, director of strategic sourcing and chief procurement officer for MasterBrand. "This will give us visibility into what we are spending. We also wanted to automate our RFQ and RFP processes through EDI or the Internet. This will reduce the indirect costs associated with procurement by streamlining and adding speed to the entire process," Andler explains.
Centralizing communications with suppliers was also a major objective. "We wanted the supplier to go to one centralized location for all dealings involving sourcing," says Andler.

MasterBrand also recognized the need to implement Verticalnet Supplier Scorecards to measure supplier performance and securely share performance information with suppliers, in line with the goal of driving continuous improvement from its supply base.

Quick Implementation
Another requirement of MasterBrand was the potential for quick implementation."We didn't want to take two years to get off the ground," says Andler. "With Verticalnet we could get up and running in six months."

Adds Songer: "Verticalnet offered a much more robust product offering than any of the other vendors we analyzed. The solution includes better capabilities and speed in delivering information." MasterBrand is also taking advantage of Verticalnet software to manage its Supplier Corrective Action Request (SCAR). A SCAR is generated whenever a shipment of direct materials does not conform to the MasterBrand order. In the past, SCAR was a highly manual process that was managed individually as well as differently by each of MasterBrand's 14 divisions.

"Our divisions communicated on issues differently and there was a lack of consistency, a lack of follow up and therefore a lack of supplier accountability," explains Andler. "This tool standardizes and streamlines SCAR."

Some of key benefits that MasterBrand is currently experiencing include:

• Lower costs of purchased materials -- both direct and indirect -- targeting year over year savings of between 2 percent and 4 percent.

• Enterprise-wide spend visibility

• Leveraged volume across divisions

• Rationalization of supply base

• Better monitoring and improved service from suppliers

And the benefits don't end there. "Verticalnet has already enabled us to cut the analysis process by one third if not more," says Andler. "Before, we could never be sure that we had captured all of the relevant data. But as long as information is out there in a system, Verticalnet's technology allows us to go and get it."