How Magna International is Bringing Order to Procurement Chaos with Its New CIO
brought to you by WBR Insights
A Decentralized IT procurement network can pose headaches for any Chief Information Officer (CIO). However, global automotive supplier Magna International thinks it's hired the right man for the job.
Magna International was founded in 1957 by Frank Stronach, under the name Multimatic Investments Ltd. The company merged with Magna Electronics in 1969 and the combined company was renamed Magna International four years later. By 2014 , Magna had become the largest automobile parts manufacturer in North America, and one of the largest companies in Canada. Its operating groups include Magna Steyr, Magna Powertrain, Magna Exteriors, Magna Seating, Magna Closures, Magna Mirrors, Magna Electronics and Cosma International.
Today, Magna International has revenues of $36,445 million and employs over 150,000 staff, placing it at #290 on the Fortune Global 500 .
A Supply Chain Business
As a manufacturer of vehicle parts, Magna International is right in the center of the procurement industry. Not only does it need to procure the items it requires to create its products, it also needs to deliver the completed parts onwards to the vehicle manufacturers.
(Image source: glassdoor.co.uk )
However, Magna International is a highly decentralized company, with manufacturing plants spread all over the globe. While this business model does carry with it certain advantages - such as the ability to enter new markets and expand aggressively - it also poses serious challenges for Chief Information Officers looking for standardized IT procurement systems. However, in its new CIO Paul Bellack , Magna International believes it has found the answer.
"We are a $35 billion company, but we operate more like 300 $100 million companies," said Bellack . "Up until a few years ago, those hundreds of plants ran completely independent of each other, with IT resources in every one. As general manager of a plant, you had almost complete operational autonomy as long as you were making money and meeting certain controls. The unintended consequence of this highly successful decentralized model, has been an absence of IT standards and enterprise systems."
A decentralized IT network can pose problems when it comes to costs, security, and data analysis. Because systems are not able to be licensed in bulk, costs can spiral out of control. One-size-fits-all security protocols also become impossible, and with no centralized and standardized data hub, analysis becomes a serious challenge to say the least.
However, with decentralization being a core principle of Magna International's corporate culture, Bellack was going to have to come up with a truly innovative strategy to address these issues.
A Two-Pronged Approach
The first challenge was to build a platform which could handle the IT services being provided, and to demonstrate to decision-makers the benefits of the system--without compromising the company's decentralized business model.
"Email is a perfect example," said Bellack. "When I became CIO of Magna, we had half of the company on Lotus Notes and the other half on three different versions of Exchange. Email is classic commodity where we can upgrade everyone to Office 365, lower our costs, enjoy better functionality, and not disrupt the decentralized operating model. SAP is another example. Right now, we have over 40 different templates for SAP. We won't ever get that number down to one, but we can have fewer than we do now, with attendant-cost and speed-to-market benefits."
Once this platform was in place, the next goal was to add value-based capabilities which could then be applied to the way Magna International handles procurement. With so many locations around the globe, and so many employees handling procurement, the issues of decentralized IT become compounded and prevent the company from leveraging global procurement economies.
Once the new platform was in place, transaction data was able to be collected from the individual (and still decentralized) divisions, and collated into a database. The completed dataset could then be normalized and standardized before being disseminated back to the procurement staff from where it originated. This way, all procurement agents around the globe could attain a complete picture of who was buying from whom, and leverage the power of big data analytics for the first time - all without losing the advantages of decentralization.
Final Thoughts
Managing decentralized IT is a huge job for any procurement based industry. However, with the right people and plans in place, companies such as Magna International can enjoy the best of both worlds.
The final word goes to Mr. Bellack.
"Find a simple way to help people to see the way forward. The house may be on fire, but take a look at this better house; here is how we are going to build it and move you in."