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Application of sourcing skills to aspects of its human resources buy is yielding 8-10%

Boothroyd Dewhurst : 25 September, 2006  (Company News)
Application of sourcing skills to aspects of its human resources buy is yielding 8-10% annual savings for Intel Corp., which is a world leader in managing indirect spend. Development of a global medical insurance program saved 23% through an online bidding event. A five-lot Internet negotiations strategy for a life and health insurance program in China yielded savings of 38%.
“In 2002, Intel’s costs for its indirect spends were fast outpacing our revenue growth,” comments Sharon M. Drljaca, global benefits sourcing manager for Intel. “Purchasing’s management team made the decision to really focus on getting involved in the managing of indirect costs.” Up until that time, she said, purchasing’s role was “irrelevant.” Companies traditionally have used outside consultants and insurance brokers to negotiation terms and feeds of health and insurance contracts. That was the case at Intel, which also had a decentralized HR organization.

In 2002, Intel established a U.S. benefits sourcing team to support HR in procurement. “Many of our contracts with suppliers were outdated or were not in compliance with Intel’s contracts terms and policies,” says Drljaca. “A number of our suppliers had not been out to bid for a number of years and there was limited information as to the competitiveness of the supply base.”

Job One then became to clean up all of Intel’s benefits contracts. New contract templates were developed with the assistance of the Intel legal department. “This has made the contracting process much more efficient and provides the necessary protection to Intel that in the past was missing,” she commented. Other sourcing tools that were implemented: supplier selection scorecards, statements of work, RFP templates, charter documents, and supplier disposition documents.

Another critical step was the development of a document that outlined the responsibilities of each organization as it related to the sourcing, design and management of sourcing programs and suppliers.” Our level of engagement and involvement with HR continues to expand,” says Drljaca. “We are now included in project exploration, sought out for our knowledge and even recommend studies for them to consider as part of their design planning process.” The sourcing project is also expanding globally.

The 8-10% savings was not across the entire HR spend at Intel. It reflected the savings on specific projects during a particular year.

The new program also significantly expands Intel’s benefits spends with diverse suppliers. Diverse suppliers are included in 100% of bid opportunities when candidates are available. Intel also requires primary suppliers to participate in Intel’s second-tier diversity program. Intel boosted spending with Tier 2 diverse suppliers 10-fold.

Drljaca has served as New Business HR Manager and U.S. Benefits Program Manager in her seven years at Intel. She outlined her HR program at the 91st Annual International Supply Management Conference and Educational Exhibit in Minneapolis.
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