How Keller’s Procurement Function Provides Strategic Advantages
Keller provides geotechnical solutions including ground improvement, deep foundations and earth retention, mainly for general contractors.
About five years ago, Keller’s new CEO recognized that “it wasn’t leveraging its spend,” recalls Peter Weisberg, Keller’s procurement vice president. “We were spending over $800 million per year and much of that was ‘addressable’ — meaning, with the right buying strategy, we should be able to reduce it by a significant percentage.” It was time to add a procurement function.
Although its project managers had good intentions, “We were still leaving money on the table and not always taking advantage of the purchasing power we had with our suppliers,” he continues. “We spend $300 to $400 million alone just on steel and aggregate/cement products but that’s usually split over 3,000 or so projects a year which means our true project purchasing power is about $100,000 per project or per supplier transaction. So, the challenge becomes, is there a way to consolidate that spend to get a better deal?”
Weisberg joined Keller after serving in procurement roles at Fortune 500 companies, including Intel and Honeywell. “Coming from such world-class companies was great; although, it can be a bit stifling,” he admits.
At Keller, Weisberg has the ability to try a few different procurement approaches and see what works. “I draw on a lot of those big company experiences but then I filter out what I know won’t work at Keller,” he explains.
Early on, Weisberg was able to convince many Keller project managers to forward-buy some of the $15 million or so micropile casings it purchases every year to get better pricing. “Working with Procurement, we have identified opportunities to consolidate project spend and drive down pricing. Before, we were inclined to just do typical spot-buying as the project demanded,” reports David Mazzei, a project manager for Keller’s Northeast region.
By working with its equipment rental suppliers and its internal operations team, Keller also has helped move market share to the suppliers providing the best service and total cost. “We used to have dozens of equipment rental suppliers and our spend with them was highly disaggregated,” Weisberg comments.
Keller, whose North American headquarters is in Hanover, Md., now does annual negotiations with its preferred suppliers. “They provide better value to us as a result, and we have steadily improved their market share and sales,” states Sarfaraz Khan, procurement category manager for Keller equipment rentals.
Service and availability with its preferred rental houses has also gone up. “It used to be, for example, that when we needed to rent a large and often unavailable Caterpillar® 349 excavator, we were at the mercy of the regional Cat dealership to find one,” reports Khan. “Now we can use our collective national leverage and relationship with Cat to move up on the priority list and Cat has responded generally well to this.”
Another lesson Weisberg has taken from his past is the notion that procurement should be considered a subset of the supply chain. “The real value of having a procurement department is to give them visibility to the total end-to-end purchasing and delivery process,” he states.
Weisberg has found in many cases that is not about just negotiating a better piece price but instead “understanding why we’re buying what we’re buying and how we’re doing it,” he says.
Keller recently used Amazon Business to take a look at its spending on shop and MRO (maintenance, repair and operations) supplies. “Of course, they came back and showed us where Amazon was providing better pricing,” Weisberg recalls. “But equally important, they also showed us that our superintendents and foremen were spending a lot of time going to retail stores to make purchases.”
Eventually, Keller wants to setup punch-out e-catalogs on its employees’ phones which will allow its operations team to be more efficient in buying. “We should be able to reduce the amount of time needed at the store,” Weisberg says. Keller also recognizes that less time on the road helps keep its employees safe.
Weisberg also admits that part of procurement’s role is providing guidance, especially when working with suppliers in the construction industry. “Salespeople are professionally trained in getting you to buy,” he says. “You need to counteract that with having a team in place that can help you buy.”
Additionally, Weisberg is a big proponent of data-based purchasing decisions. “Buzz words like ‘we want to offer you a national contract’ or a ‘parts discount’ don’t really mean anything until you can really back the deal up with clear savings data,” he declares. “We had one supplier charging us three different prices for the same item with three different ‘national contracts.’”
Weisberg still thinks he is in the early stages of the transformation he and his team can make. “We’re not a big command and control-type company — not many mandates — so we have to win over the project managers almost one at a time,” he says.
Weisberg states that he prefers more of the consultative or collaborative approach. “When we show them the data and the fact that we’re saving them time, we usually can win them over with just that,” he asserts.
Increasingly, Keller is hearing from clients that they want to make sure that procurement has an opportunity to review costs. “We all want to take waste out of the system,” Weisberg says, noting that this is a concept he learned from lean management at Honeywell.
Keller sees more opportunities ahead to be more efficient. Earlier this year, the company re-organized and joined together its North America geo-technical companies to better serve their clients. Before the joining together, different Keller companies offered different solutions in different markets. Now, Keller is one unified geotechnical specialty contractor and clients have a single point of contact for the best, most competitive solution.
Weisberg enjoys the freedom he is given to explore. “We process 160,000 invoices a year — many of them still by manually opening envelopes and hand entering them into A/P system,” he says. “We should be able to digitize much of this process.
“We can then save time for both Keller and our supply base,” he states. “That’s how I like to do it — a win-win for everyone.”