April 2, 2003
Spotlight on Services Spending
Shell shaves over $8 million from annual $100 million contingent workforce budget
by Demir Barlas, Line56
The lion's share of enterprise spending is on services, both permanent and contingent, and Shell is no exception. The oil giant spends $100 million a year on its contingent workforce, reveals contingent workforce project lead Kim Chapman.
While spending is high, visibility has been low. Chapman explains that, historically, Shell handled its contingent workforce needs on an ad hoc, paper basis. "You'd just reach for the Rolodex and get an accountant."
Unfortunately, as Texas Instruments discovered in 2001, there are two problems with manual, unregulated procurement: the cost of paper processes ("it's just not efficient," Chapman says) but, more importantly, the fact that such procurement leads to maverick spending and neglecting of preferred suppliers. In both cases the end result is inflated costs.
Can enterprise resource planning (ERP) save the day? Not, in this regard, for Shell. Chapman (like his counterpart at Texas Instruments) praises the value of the existing ERP system from SAP, but notes that it doesn't extend to contingent workforce procurement. "We're a SAP company, but we'd have had to spend a lot to get that functionality," Chapman reveals. "SAP is great for materials procurement, but when it came to services, it was quite a lot of money and SAP just didn't do it for us."
For that reason, Shell turned to e-business software -- encompassing electronic request-for-bids, matching and hiring, timekeeping, and management features -- from niche vendor IQNavigator. Shell started rolling out IQNavigator in December 2002, adding units in February in April of this year. Shell has tied IQNavigator to SAP, and the integration was headache-free, according to Chapman. "It cost $50,000."
The deliverables have been compelling. "We're going to preferred suppliers and getting the better rates we've negotiated," Chapman says, adding that internal visibility complements the view and regulation of suppliers. "We know how many people are where, doing what, for how much." The deliverable has been clear and compelling: "We've saved more than eight percent of our total continent workforce spending."
The executive sponsor of the contingent workforce project is Shell's CFO, and Chapman notes that there are dashboards and reports available to management.
