Nike, the sports apparel company, has revealed how segmenting its supplier base has helped it to identify and develop strategic vendor partnerships that help the business achieve its goals.
At Nike, this initiative has been led by Maureen McKinney, the company's director of strategic partner management, working with Nike's CIO Roland Paanakker. McKinney is an example of the type of leader that analyst Forrester believes sourcing and vendor management professionals should, and will, become.
McKinney told Forrester's Sourcing and Vendor Management Forum in London that she and Paanakker first got together to work out if the company was getting the most from its suppliers 14 months ago. It had already spent the last four years driving down costs as much as possible, through strategies such vendor consolidation and outsourcing.
To begin managing its IT supplier base, Nike first of all created an operational dashboard, to highlight where unmanaged spend was happening in the company, and to identify the people responsible for it.
Recognising that all vendors are different, and require different treatment, Nike then segmented them into groups.
"Nike manages each group differently, aligning them to Nike's end-to-end goals for quality, efficiency and innovation," McKinney said.
The company placed vendors into one of four different categories: strategic planning, partner, core and divesture.
Divesture vendors are the ones that Nike are moving out, while core suppliers include those that sell commodities. The most important ones for the company, however, are those in strategic planning and partner, with the latter responsible for 'co-creating and innovating' with Nike.
After segmenting the vendors, to help them align their goals with those of Nike and encourage some healthy competition, the company then showed the vendors – which include Wipro, Cognizant and Infosys – how they performed against each other.
"It shows them what mark they want to go for," said McKinney. But then the company went a step further, by showing - to a certain extent - how big their role is in the company's whole portfolio.
This transparency is taken even further if Nike wants to engage its vendors in strategic planning.
"Now things are getting riskier. You have to disclose more," McKinney said, adding that she will only embark on strategic planning with a strategic vendor or partner, not with anyone below this level.
"They have to be a vendor of choice because the risk to me is too great if I don't," she said.
In order to engage with vendors for strategic planning, Nike firstly shared its corporate strategies. It then broke the strategies down and asked for specific requirements.
"You have to be able to say specifically, [for example], in the ERP upgrade, this is what you're going to do, what we need to do, and this is what we're willing to pay," McKinney said.
Nike also then shares its technology roadmap with the strategic vendor or partner.
McKinney acknowledged that sharing so much information with vendors was risky, but believes that taking the risks has paid off.
"Innovation is our advantage – and now we have to share it? Is it risky? Yes. Are there rewards there? Yes. Is business booming? Yes. I know we're doing things right," McKinney said.
Over the next year, Nike hopes to take all its vendors to a level where they have integrated strategic plans with the business, and weed out any that cannot achieve this. By 2013, it aims to have partners engaged from start to finish of an innovation – from the idea to the realisation.
"This year we want to be with integrated planning, so that we become the customer of choice. By being the customer of choice we're going to get the best and brightest, and achieve what we want to achieve," McKinney said.