Gap cuts procurement costs 10-20% with e-sourcing
With a web-based sourcing strategy tool, Gap Inc. has cut the cost of sourcing non-merchandise operational products and services by 10-20% while shortening the time to prepare sourcing projects, senior director of strategic sourcing Eric Germa tells Internet Retailer.
In the past, Gap had to work with a mixture of physical documents and spreadsheets and multiple forms of communications between its buyers and its suppliers, making it difficult to maintain consistent procurement practices across its more than 3,000 stores as well as its online operations. “It was difficult to do requests-for-proposals while going back and forth with different suppliers, and it was a challenge to have consistent procurement across all of our teams,” Germa says.
With its web-based strategic sourcing tool, Gap initially gathers information from multiple suppliers on several areas of procurement, including service levels, depth of product lines and pricing, then puts together a multi-step spend management process based on the best available terms from suppliers.
The universal accessibility of the web-based application makes it possible for people throughout Gap’s global operations with sourcing duties to contribute and view sourcing information, providing for increased speed and consistency in planning spending projects, Germa says.
Once it finalizes contracts with suppliers, Gap incorporates the approved spending arrangement into its separate web-enabled procurement application, where individual store managers and others with procurement responsibilities can purchase items through the approved contacts. “The system helps us improve compliance with corporate procurement policies,” Germa says.
In one example, he adds, Gap has been able to improve the procurement of shopping bags. Shopping bags can vary widely in the way they’re constructed with different types of materials, and Gap will use different types with special designs for particular shopping seasons, Germa says.
By allowing its sourcing managers and suppliers to drill down and collaborate on details such as the amount of resin needed in plastic bags—which impacts the weight and quality of the bags—Gap has improved on the delivery of the correct type and volume of bags for particular seasons, he adds.
Gap uses a mixture of in-house and outside sourcing technology, Germa says.
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