April 28, 2006, 12:00 AM

Sourcing Sense

(Page 2 of 2)

Shopping bags can vary widely in the way they’re constructed with different types of materials, and Gap will use different bags with special designs for particular shopping seasons, Germa says. Moreover, some bags may come from a single domestic supplier, while others come from multiple foreign-based suppliers. As a result, several managers within Gap-including managers in the areas of marketing, merchandising and global trade-need to contribute as well as analyze information through the universally accessible web-based system.

Easing the bigger headaches

But the system also needs to include suppliers’ input. A specific requirement in sourcing plastic shopping bags, for example, involves determining which ingredients to include in their construction. By allowing Gap’s managers and suppliers to drill down and collaborate on details such as the amount and cost of resin needed in the bags-which impacts their weight and quality level-Gap has improved on the delivery of the correct type and volume of bags for particular seasons, Germa says.

No longer faced with gathering and analyzing information on multiple paper and electronic documents from both within Gap and trading partners, the company and its suppliers can now access and analyze a single version of the truth through an online source, producing more accurate cost figures. “This lets us look at total delivered costs,” Germa says.

Providing even more of a headache for retail managers than acquiring items like plastic bags is the sourcing of complicated services arrangements, such as for HVAC systems. To build a profile of what it needed to spend, Gap had to first understand the drivers of HVAC system breakdowns, such as the age of equipment and the necessary level of preventive maintenance.

The people factor

By having retail managers and suppliers collaborate in the e-sourcing tool with information on the requirements of the HVAC systems and the servicing capabilities of suppliers, Gap has been able to both provide for more effective servicing contracts and shorten the lead time to finalize the contracts, Germa says.

The e-sourcing system also supports dealing with a larger number of contractors simultaneously. “Through our e-sourcing tool we qualified over 100 regional and national HVAC providers,” Germa says, adding that Gap then uses the tool to narrow the list to the ten best providers before negotiating contracts with each for 10 regions across North America.

As with many technology-based systems, however, he adds that e-sourcing doesn’t replace the kind of work that forces managers to roll up their sleeves and dig up information on what Gap needs to run its operations. Indeed, e-sourcing adds discipline to traditional chores of gathering and organizing information, because managers realize e-sourcing tools work only if they’re fed the correct information in the first place. “It forces us to do a lot of homework upfront, which makes implementation of sourcing projects easier,” Germa says.

“E-sourcing is a way for us to drive our teams to make better decisions and better engage our suppliers,” he adds. “At the end of the day, we want to have fewer but better relationships with the right suppliers.”


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