CVRD Inco sells suppliers on Quadrem
Hundreds of mining suppliers heard senior CVRD Inco executives extol the virtues of e-procurement at a Town Hall meeting for suppliers in Sudbury March 29th.
The company began transacting business through Quadrem, the mining industry’s global e-procurement marketplace, with seven suppliers in 2002.
“It was very much a voluntary process,” said Wayne Smith, CVRD manager of
global procurement and logistics. “We encouraged suppliers to get on board, but over time it became evident to many of them that, not only was this the way Inco was going, but it was also the direction
in which the world was going.”
Today, the company does business with approximately 175 suppliers through Quadrem. It’s not a lot, he acknowledges, considering it still does business with 2,000 or 3,000 more suppliers, “but it’s the old 80:20 rule – we do about 80 per cent of our business with about 150 suppliers.”
Skeptics who see e-procurement as a way for the company to drive down prices have it all wrong, said Katherine Kirkpatrick, Quadrem’s vice president of marketing.
“The whole premise behind e-procurement is efficiency. It’s about using automation to improve the way business is conducted.”
Quadrem enables CVRD Inco and many
other large mining companies, including Rio Tinto, Barrick, Codelco, De Beers and CVRD itself to do away with the clutter of paper. Electronic document deli-very, said Smith, expedites business processes. It’s instantaneous, results in fewer errors and does away with faxes and mailed documents going astray.
Quadrem was established in 2000 by 19 of the world’s largest mining companies. Today, there are 34 active buyers at more than 700 sites and approximately 50,000 suppliers. Together, they transact more than US $17 billion worth of business annually. One of the most successful global e-procurement marketplaces in the world, it’s now also reaching out to the oil and gas sector and packaged goods manufacturers.
Transacting business through Quadrem is neither difficult, nor expensive, said Michael Busuttil, regional vice president for North America. Flat fee programs range from $200 per year to a few thousand dollars. There is also a pay as you go option, allowing suppliers to receive requests for quotation for free and pay a $45 fee only if they choose to quote.
“If they do enough bidding, they very quickly say ‘Hey, I may as well be a Quadrem member and pay an annual fee,’” said Smith.
Another simple invoice and order processing option using email has been designed for suppliers with fewer than 25 transactions per year and costs between $50 and $200.
Suppliers transact business through Quadrem by integrating it with their Enterprise Resource Planning (ERP) software or through a web-based application. The latter requires no software and no programming, just a computer with an Internet connection and a standard Web browser. The supplier logs on to the system to review RFQs, submit quotes, acknowledge orders and invoice the customer. Every conceivable document associated with the procurement process, from change orders and service entry sheets to advance shipping notices, is available electronically and help is just a phone call away at Quadrem’s regional office for North America in the Toronto area.
There are two main tools: Quest, a robust sourcing application ideal for large and complex bids, and QuickQuote, described as more of a pricing confirmation tool.
Quest, in particular, has dramatically improved efficiency, both for CVRD Inco and its suppliers. This year, said Smith, the Ontario division will process more than 1,000 tenders electronically.
“When we were dealing with paper, it was difficult for the contract administrator to deal with more than three or four suppliers because of the massive amounts of paper coming in. Now we can reach out to six or seven suppliers because the process is more efficient. This means that the supplier base in Sudbury is getting to bid on more work than they did in the past. They can look at the opportunity and there’s no cost. If they decide to bid, they have to pay a fee.”
The data provided by suppliers through Quest can be transferred to spreadsheets to facilitate comparisons. Using templates, it’s also easy for the procurement team to duplicate tenders from one year to the next. “A lot of work is repetitive, whether it’s a hoist repair or a furnace rebuild,” said Smith. Once a template is created, the contract administrator can very easily update it the following year and fire it back out to the supplier community for bidding.”
CVRD Inco is currently testing QuickPay, a new tool offered through Quadrem. With QuickPay, suppliers no longer have to pick up the phone to find out when they can expect payment. Instead, they go online to confirm receipt of their invoice, whether it has been approved and when they can expect payment.
“It relieves a lot of pressure on the payables department because they’re no longer having to field all these calls,” said Smith.
The tool also allows suppliers to opt for earlier settlement in exchange for a discount. CVRD Inco is already set up to get discounts for early payment, so “the real value is the visibility. They know when their payment is coming and can plan around it.”
Quadrem also facilitates auctions for large volume supplies such as explosives and tires. Most suppliers get knots in their stomach just thinking about it, but according to Smith, CVRD Inco rarely awards its business to the low bidder.
Product quality and service are equally important. “At the end of the day, we’re looking for quality products over time, not just widgets today at a very low price.”
The company continues to use gentle persuasion to move suppliers to the Quadrem system, “but there will come a day when this is how we do business with everyone,” said Smith
CVRD in Brazil chose a different approach. “They wanted to move away from fax and paper, so they mandated their suppliers to use Quadrem.”
According to Smith, CVRD issues 430,000 purchase orders, processes 1.5 million documents and has 7,000 suppliers transacting business electronically, for a total Quadrem-channeled spend of $4.9 billion per year.
Suppliers joining Quadrem still have to promote and market their products and services to generate new business and penetrate new markets. However, once a relationship is established, they can use the system do business globally with the largest mining companies in the world. n
Tagged Barrick Gold, Brazil, Canadian mining industry, CVRD, CVRD Inco, De Beers, efficiency, Greater Sudbury, Inco, Katherine Kirkpatrick, Northern Ontario, Northern Ontario Business, Ontario, Quadrem, QuickPay, Rio Tinto, Sudbury, Sudbury Basin, Wayne Smith