Procurement Summitt Supplier Diversity Case Study

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Supplier Diversity Case StudyPG Alexandria
Plant Expansion2004

• D.M. (Daryl) Hodnett
• Director-Supplier Diversity and Small Business
  Development
• University of Missouri System
• November 17, 2014.

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Who is Daryl Hodnett?

• 30 years as an Executive at The Procter Gamble
  Company
• 10 Years as Media Manager-U.S. Advertising and
  Marketing
• 15 years-Group Manager, Corporate Purchases,
  Supplier DiversityNA Product Supply
• 7 years as Managing Partner of Damiho, LLC
• Supplier Diversity Consulting and Marketing
• Time-Warner, JJ, Shell, KLEW. Co, Sphinx
  Enterprises
• Lead Trainer for Diversity Information Resources
  (DIR)
• Current Director, Supplier Diversity and Small
  Business Dev - University of Missouri System
• Lead the process for four campuses
• Enrollment-77,000
• Incorporated in 1839-175 years

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Why Am I In COMO???

• University of Missouri is one of the U.S. Largest
  State Systems
• 77,000 Students, 2BN state economic engine
• Mizzou in Columbia is Flagship36,000 Students
• Major Urban Campuses -UMSL and UMKCDiversity
• Missouri STThe Georgia Tech of the North
• World class faculty in all 4 schools
• Supplier Diversity Program in Place ready to
  Expand
• ScaleScaleScalemeeting one of my long-term
  goals to teach
• Supplier Diversity Legacy Track!!!!!!!!!!!

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Part of Daryl Hodnett s SD Business Building At
PG
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Review Why Supplier Diversity

• U.S. Big 3 AutomakersBuilding Consumer Loyalty
• Were losing ground to imports
• Detroit How do we help rebuild the city?
• Future and current demographics nationally
• Toyota, Honda have adopted this effort (Based on
  having U.S. Mfg. plants)
• All 5 companies spend more than 1BN annually-BDR

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Review Why Supplier Diversity

• Consumer ProductsReaching the New America
• 204050 America is minority (California/Texas
  already there)
• Hispanic and AA population boom with birth rates
  1-2x whites (immigration as well)
• PG is CPG leaderOver 2BN in SD spend, Pepsi
  and JJ 1BN. McD-5BN reported by Fortune
  Magazine

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Review Why Supplier Diversity

• Advocacy GroupsNot why you should do it!
• Companies that have had significant history
  with discriminatory practices
• Have had federal government intervention
• Understood it is bad for business
• Public PolicyWill Drive Private Behavior

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Review Why Supplier Diversity

• Business-to-Business Pleasing your customer!
• Major customers ask suppliers to create supplier
  diversity efforts
• Automakers started the 2nd Tier initiative from
  corporate side
• Johnson Controls JVs Strategic Advantage
• Many suppliers (office products, foodservice,
  etc.) have efforts to report spending to
  uscompetitive advantage

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Review Why Supplier Diversity

• Colleges and Universitys Must develop compelling
  reasons for Supplier Diversity Its about BUTTS
  in SEATS for our future!

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Case StudyDevelopment to Meet Business Need
IPC/Georgia Pacific Story in Alexandria, LA.

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Case StudyDevelopment to meet Business Need
IPC/Georgia Pacific Story in Alexandria, LA.

• Background
• PG expanding its HDL Laundry Plant in
  Pineville/Alex, LA for March 2005 open
• Cant make liquid detergent fast enough at Lima,
  Ohio
• Will need suppliers for bottle making and
  corrugated box making in the region
• Fabric and Home Care Business decides on
  Plastipak for Bottles
• New-to-the-World Corrugated Box business
  Est.20-30MM annually
• No cannibalization of other corrugated business

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Case StudyDevelopment to meet Business Need
IPC/Georgia Pacific Story in Alexandria, LA.

• Global Packaging Leader decides on MBE as key
  sourcing criteria
• 
  January, 2004
• Insure the business (FHC Pres./GM/Purchases VP)
  aligned with MBE strategy
• Driven by PG 1.5 BN Goal by 20051BN Minority,
  500MM Women
• Get Corrugated Team enrolled
• Assign owners to deliver the results
• HodnettSD
• Rodriguez-Corrugated Mgr.
• MBE needs to be in Alexandria (50 Black
  pop)..PG Plant is in Pineville (64 White)
• Defined the strategy to win with an MBE
• NO DISTRIBUTORS
• Must be a scalable MBE supplier
• Work as part of the team (Plastipak and PG)
  seamlessly

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Case Study Development to meet Business Need
IPC/Georgia Pacific Story in Alexandria, LA.

• Process
• Majority-Owned Companies Selected to bid (6)
• Meeting focuses on the new business to be awarded
• 2nd key point is an MBE JV /idea is needed
• Help is provided if needed
• Major review meeting at existing HDL Plant in
  Lima to come
• All PG Incumbents except Pratt (Australian)
• IPC is only MBE Selected that could perform by
  itself
• Other MBEs PG Identified and referred
• PG refers to majority companies
• PG provides majority company info to MBEs
• Walk through and review of JV partners at Lima,
  Ohio April 2004
• New plant would mirror Lima
• Wanted all parties to see each other/MBE is
  biggest discussion point

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Case StudyDevelopment to meet Business Need
IPC/Georgia Pacific Story in Alexandria, LA.

• Bids Arrive at PG August, 2004
• IPC does joint bid with Georgia Pacific
• Georgia Pacific bids on its own/IPC does not bid
  on its own
• Pratt Industries bids a JV with Signature
  Packaging (Dennis Vinson)
• Smurfit Stone, IP, Inland and Southern Container
• do not bid any MBE JVVarious Responses to our
  ask
• Both of MBE bids were at an initial 12 premium
  versus the
• majority suppliers

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Case StudyDevelopment to meet Business Need
IPC/Georgia Pacific Story in Alexandria, LA.

• Process to Decision
• Close review of all bids
• Comparison of the two MBE bids
• Decide which of the majority suppliers can
  execute
• the bid best
• Fiber Leader reviews data with the Fabric Care
  GM/ Purchases VP
• Review of Fabric Cares MBE Goals Company Goal
  Progress
• Alexandria, LA community issues
• How much savings is business willing to leave on
  table

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Case StudyDevelopment to meet Business Need
IPC/Georgia Pacific Story in Alexandria, LA.

• Path Forward
• Management Approved Corrugated Team (with Mr.
  Hodnett) to pursue and work the IPC/GP
• Mr. Hodnett convenes Sr. Leaders of all parties
  (PG Purchases VP, GP- Sales EVP, owners of IPC)
  at October 2004 Chicago NMSDC Conference to
  review path forward/discuss bid submissions
• Fiber Leader and PG Purchasing Directors review
  all current GP/IPC business and advise them to
  submit a broader bid based on some give-backs on
  other business and some extended contracts
  (potential)

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Case StudyDevelopment to meet Business
NeedIPC/Georgia Pacific Story in Alexandria,
LA.

• Summary
• IPC and GP sign agreement for Alexandria Plant
  Development
• GP takes a small equity stake in IPC-Alex
• IPC/GP make concessions in several rounds of
  contract review
• PG extends existing GP business for 4 additional
  years with significant savings (11MM) over
  contract life
• GP provides PG significant one-time rebate
  (5MM)
• Helps Fabric Care meet profit commitment FY
  2004/05
• PG Awards 5 year 150MM contract to IPC
• Final numbers with all rebates and extension
  provides PG cost saving

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Case StudyDevelopment to meet Business
NeedIPC/Georgia Pacific Story in Alexandria, LA

• IPC leases facility in Alexandria versus
  Pineville
• Still provides the JIT need for PG and Plastipak
• IPC hires 50 people, 80 Black, mostly from
  Alexandria
• Helps PGs commitment to diversity at the PG
  site (via the supplier) and with AA Leaders in
  Alexandria area
• With GP as part of deal, start-up not at risk
• GP is PGs largest current corrugated supplier
• Already experienced at PGs Lima Plant
• IPC gets great training during start-up

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Case Study Development to meet Business
NeedIPC/Georgia Pacific Story in Alexandria, LA

• Summary
• IPC converts ALL of Alexandria Boxes in their own
  facility
• GP continues to produce their own boxes for other
  sites/provides paperboard to the venture
• IPC grows scale and has a SE presence
• IPC wins added 5MM business in 2006 from PG
  NOLA Coffee Plant
• Award of initial 10MM business to Signature
  Packaging (Pratt JV) on Diaper business in
  Missouri
• Huge Win for PGs 2005 1.5BN SD Corporate
  Goal

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The Road Forward For Corporate Supplier
Diversity

• Capacity Building Big Hit Strategies.
  Why?
• Supplier Diversity becomes Supplier Development
  to be successful
• A way to combat preferred/strategic/global
  suppliers
• Brings Supplier Diversity into main-stream of
  corporations supply base
• Focus and work strategically on a few large
  Supplier Diversity projects
• Easy to track and measure

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Questions You May Have(But, did not want to
ask!)

• Should we pay a Premium?
• Do we have a quota program?
• Why cant we just use our current suppliers?
• What if I cannot find an M/WBE?

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What are we doing at MIZZOU?

• 4 key focus areasWhere well Play!
• Increase direct spend of Supplier Diversity at UM
• Implement a formal 2nd Tier program with goals
  and timetables
• Expand Missouris educational focus of M/WBEs
• Leverage SD to increase UMs image and reputation
  for overall diversity
• Help lead the conversation in Missouri (state
  institutions and private sector) on SD

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What are we doing at MIZZOU?

• 4 key focus areasHow well Win!
• 15 of total annual spend by FY 2018
• Design/Construction and ProcurementStrategic and
  choiceful!
• 5 year goal of cumulative 500MM in total spend
• 6MM annual 2nd Tier spend by 2018 (Less than
  1MM today)
• Expand/Improve UMs educational focus of M/WBEs
  in MO.
• If we succeed, market and sell our work in
  Supplier Diversity
• Can help with minority recruiting of students and
  parents
• UM looks/feels diversity friendly
• Can/should be part of the Go-to-Market strategy
  to win with ethnic students in the future

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Supplier Diversity VideoA Business Case for
America (www.youtube.com/rdnick)
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Thanks/Questions!

• Daryl Hodnett
• Hodnettd_at_umsystem.edu