Managing Vendors In A Rapid Change Environment

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Managing Vendors In A Rapid Change
Environment Ken Horner Senior Vice
President Strategic Sourcing and Contracts
Administration June 14, 2001
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AGENDA Background on Washington Mutual Strategic
Sourcing Group Managing Vendors Through Mergers
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Background on Washington Mutual
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Recent Acquisitions

• 1996 - Western Bank
• American Savings
• 1997 - Great Western
• 1998 - Home Savings of America
• 1999 - Long Beach Financial
• 2001 - Bank United
• PNC Mortgage
• Fleet Mortgage

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Distribution Network

• 1996 1999
• States 5 40
• Financial Centers 309 1,106
• Loan Centers 48 430
• Households 737,000 5,350,000
• Assets 20 billion 186 billion
• 2001 loans serviced will exceed 2000 by 2-1/2
  times

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1995 Strategy

• Focus on core competency
• Access expertise
• Save time and money
• Capture market share
• Reduce risk

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1995/1996 Outsourced Functions

• Network and desktop management IBM
• Item Processing EDS
• Facilities Management CB Richard Ellis
• Loan Processing Alltel
• Credit Card Associates

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Strategic Sourcing Group
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Mission

• Create efficiencies through expense savings, cost
  avoidance and service level improvement while
  achieving superior customer satisfaction

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Objectives

• Proactive approach to maximizing benefits of size
  in dealing with vendors (cost savings / service
  levels)
• Coach/partner with company managers to negotiate
  more effective deals with vendors
• Act as an advocate for consistent company
  negotiating positions
• Act as a champion of Supplier Diversity

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Client Critical Success Factors

• Quality of Work
• Ability to Deliver
• Adherence to Schedule
• Vendor Costs
• Flexibility
• Change Management
• Compliance
• Exposure Minimization

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Common Misconceptions

• Strategic Sourcing Group should have the final
  decision on which vendor is selected to provide a
  given product or service
• Competitive bidding is always the best method for
  driving cost down
• A competitive bid process is flawed if it is not
  on a completely equal playing field
• Changing vendors will yield immediate benefits if
  the new vendor offers a better price, better
  service levels, etc.

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Negotiation Practices

• Cowboys make the worst deals
• Bureaucracy is your friend
• You really need the right Contract Negotiator
• End User Managers must defer to negotiator all
  the way through the process
• Negotiator must report high in organization -
  direct report to CIO or Shared Services Executive
• Negotiator to manage interfaces with Legal,
  Business Owners, Information Security - must be
  skilled in negotiating all contract terms and
  conditions
• Authority to negotiate ALL technology contracts -
  even ASP relationships driven by End User
  organizations

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Managing Vendors Through Mergers
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Existing Vendors

• Growth expectation clear (resources, savings)
• Hard deadline implementations
• Risk avoidance
• Internal skills required
• Tight TM project management process
• Adherence to project methodology
• Resist temptations to change existing systems and
  processes

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Acquired Vendors

• Establish accountability for each vendor
• talk to acquired employees - get the oral history
• read every contract
• send the right notices on time
• know how to recognize need for renegotiation
• Renegotiation Situations
• their vendor is also your vendor (anticipate this
  in your own contracts)
• no-exit contracts or 100 liquidated damages
• there will be vultures - find them early
• lotto mentality
• return of data

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Occasio Favorable Opportunity
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Rethinking Banking

• Occasio sets a new standard in retail banking by
  combining WaMus proven sales and service culture
  with a contemporary look and feel.
• Its innovative use of people, technology and
  design elements converge to provide something
  banks have never consistently delivered an
  inviting customer experience.

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Technology Elements

• Teller towers - you can see the screen
• Automatic cash dispensers
• Point of sale systems
• e-Teller wireless system
• Access to wamu.com
• Touch screen for product information

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Vendor Challenges

• Multiple critical paths and resource needs
• initially difficult for vendors to appreciate
  importance of this initiative - not in the
  routine
• expansion of need for top vendor project mgrs
• New this, new that, new everything
• hardware size and location
• wiring approach
• devices, interfaces and added security
  requirements
• Fast contract negotiation for new vendors
• Forming new vendor-to-vendor relationships