Speeding Procurement

Speeding Procurement

You're also using IT to speed procurement.

This year we will do about $18 billion in e-auctions. Suppliers bid for our business over our Web-based application. It saves us incrementally over $1 billion a year. What we try to do in every way possible is to ensure there's competition in our supply base, just like our customers do with us.

We also do purchase orders digitally. Say somebody wants to buy a computer. They go into our database of prenegotiated contracts, select the computer available to them, and then a message gets sent to that person's approver, saying: "Do you approve of this person buying a PC?" If the answer is yes, then an EDI signal takes that order and puts it directly in the order-entry system of the supplier. This ensures that the people who do buy are buying off prenegotiated contracts. Before, you had a number of situations where a buyer would go and cut his or her own deal. For doing that, GE would pay a higher price, and there wouldn't be the same kind of controls over whether they could buy a particular item in the first place.

How is IT being used to boost sales?

Take, for example, one of our businesses in the financial services area. When a salesperson would cut a deal with a customer in the past, it would require approval from GE headquarters. Oftentimes, the customer would get upset because they'd get an agreement with the salesperson and then headquarters would sometimes reject the deal. So we put in place a Web-based wizard that allows the salesperson to put into the application the specifics of the deal and create a map in the red, yellow and green metrics format. Green in this case means the likelihood that the deal would be accepted. It's all based on artificial intelligence, where you put rules into the application, so the salesperson knows if the proposal they're considering is green, yellow or red—red means it will get rejected, yellow means "call—we have to discuss," and green means approved. The payoff? Approval times are faster, people are not working on bad deals anymore, and, you get much happier customers because they can get feedback right away. We've doubled the capacity of salespeople.

What's next?

Being able to make decisions even faster, and being able to have your processes operate even faster. Our management team has changed enormously in the last four years in terms of its comfort level with this stuff. The big change will be when wireless really works. Then you free up sales and service people to really do their jobs remotely. That's the next great leap. Linux is also going to be a big technology changer as well, because it's going to allow you to do a lot more on cheaper platforms. We are using a lot of Linux, and we are rolling out more and more of it.

How does the move to real time tie in with GE's famous Six Sigma quality push?

Six Sigma is a five-step process: Define the scope of the process you're focusing on, measure its current performance, measure how good it is and how defective it is. Then you analyze it, so as to understand why defects are occurring. Then you improve it and control it so it stays defect-free. Digitization is the improve-and-control phase of Six Sigma. It gives you the tools you need to keep improving.

This article was originally published on 11-02-2002
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