Spend Management Can Help Bridge the IT and Business Gap

With the strategic importance of procurement and other sourcing functions increasing rapidly, IT leaders need to get more involved with these critical business activities.

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John Hill, Chief Information Officer and Senior Vice President of Business Planning at Carhartt, has 20 years of experience in IT management, including expertise in strategic sourcing and strategic planning. Established in 1889, Carhartt is a family-owned workwear brand based in Dearborn, Michigan. With more than 5,600 associates worldwide, Carhartt continues to build upon its 131-year-old legacy of delivering purpose-built products to hardworking people.

Running Carhartt’s 125-130-person IT department is just one of the hats that John Hill wears. Unlike many of his IT peers, the CIO and Senior VP also oversees all aspects of the company’s planning operations, including demand, channel, assortment, and supply chain planning.

“I spend more than half of my time on business matters, not on IT,” Hill says.

Hill’s planning roles are far from trivial. Over the past 15 years, Carhartt has produced more than 80 million garments and accessories in its U.S. plants, using materials sourced from both domestic and international suppliers.

No surprise then that, for Carhartt, procurement and supply chain management have always been a key focus of IT.  Growing numbers of Hill’s CIO peers are also finding they must devote more attention and support to these once-peripheral areas as their strategic importance grows and their IT demands increase.

An embrace of the cloud

As is true for most of Carhartt’s IT operations, the company will look to leverage a cloud-based solution for its procurement and sourcing needs. “Over the next couple of years, we’ll get rid of our data center,” Hill says.

While expense reduction is a common catalyst for cloud migrations, cost isn’t the main driver behind Carhartt’s cloud adoption. Hill cites three main reasons for moving to the cloud: faster time to market; reducing risk (“A big cloud provider can spend far more on security than I can,” he notes.); and leaving it to the cloud provider to manage the infrastructure upgrade path.

One major element of Carhartt’s cloud migration involves a broad transformation program to replace the company’s ERP system. That project, which will entail an end-to-end overhaul of all of the company’s business processes, will include the deployment of an SAP ERP suite in Microsoft’s Azure cloud infrastructure.

Despite Carhartt’s selection of the multifunction SAP suite as its core ERP platform, Hill’s team has not decided on a procurement and sourcing platform. Hill, who started his career in procurement and ran a $3 billion sourcing operation, knows that Carhartt’s complex and global supply chain operations require a best-of-breed solution in this area.

Even so, Hill isn’t rushing to make a selection. “We’re getting our sourcing processes and best practices in place before we even start thinking about a sourcing system,” he says.

Spend management is key

Once Carhartt is ready to move forward on this front, “The number one issue in selecting a sourcing platform will be spend management,” Hill says. “You need to understand where your money is going and how it’s driving your business objectives.”

More specifically, a key attribute for any sourcing and spend management solution is the ability to help a company determine how its spending compares to other firms, Hill says. Such consumer-like community data and insights “can help a business get an understanding of absolute competitiveness,” he says. “That’s where you see the benefits of the networking effect.”

The spend management platform should also integrate easily with contract management solutions and help a company properly structure negotiations with vendors and other partners.

“A lot of companies are a little too freewheeling when it comes to their approach to negotiations,” Hill cautions. “They don’t understand all of the deal terms and tradeoffs.

“Every term and condition needs to be transformed into a cost,” he adds. “The ability to monetize that as part of the negotiation strategy would be a differentiator for any sourcing product.”

Business Spend Management leader Coupa gives companies the visibility, control, and insights they need to better manage their spend, and in so doing, facilitates IT and business unit partnership. For further information about Coupa’s solution, go to https://www.coupa.com/.

Click here to read this ongoing series of interviews about how the role of the CIO is evolving as digital transformation initiatives mature.

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