Logistics News

Telstra, IBM relationship promises $700m in savings

Telstra’s partnership with IBM, part of a mammoth procurement and supply chain overhaul of the telco, has embedded new systems

Telstra’s partnership with IBM, part of a mammoth procurement and supply chain overhaul of the telco, has embedded new systems and work functions across Telstra’s vast network to cut costs, consolidate and stengthen supplier relationships and, ultimately, improve the end customer experience.

That’s according to Ian Wheatley, the Executive Director of Telstra Procurement, who has given SupplyChain Review a rare and uncensored insight into the transformation strategy of one of Australia’s biggest companies.

The project to overhaul the entire department, part of the company’s five-year transformation strategy instigated by Telstra CEO Sol Trujillo, was an end-to-end examination, according to Wheatley.

Telstra wanted to reduce cycle times while improving responsiveness, reduce costs, and leverage relationships to improve visibility in transactions. The transformation was guided by a ‘one factory’ ethos — one way to procure, one way to connect, one company-wide view of vendor activity.

“It’s driven by actually improving the end customer experience,” Wheatley tells SupplyChain Review.

Wheatley describes a fragmented logistics strategy employed by Telstra before the transformation. Procurement was engaged in multiple ways with no single company-wide view of vendor activity and no consistent process for sourcing and monitoring employee policy compliance.

Of Telstra’s total sourceable spend, only half was through the purchase order process.

“The rest of our spend was dominated by paper-based processes that were inefficient and did not always take advantage of the existing vendor relationships we had in place,” he says.

“We needed better control of our sourcing and payment and increased speed of payment through streamlining our processes and increasing automation through removing paper-based processes. We also needed better connectivity to our finance systems to provide better reporting.”

The company also made no secret of the fact it was looking at consolidating its vendor base. Wheatley wanted fewer vendors, with better capabilities.

“We are trying to leverage off vendors that have the global expertise to be able to deliver the outcomes in the timeframes we’ve got,” he says.

Wheatley says those vendors are asked to share the “risks and the rewards” of implemeting procurement strategy.

Telstra aims to make savings of $700 million from the IBM partnership.

More from Ian Wheatley and Telstra’s supply chain overhaul in the March/April edition of SupplyChain Review magazine, out this week.

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