It’s easy to assume that when a company reduces its size, a reduced supply chain would follow. However, that was not exactly the case for McGraw Hill Financial. Last year, the company sold its education business and underwent a transformation and rebranding campaign. The company’s Senior Director of Global Sourcing Kevin Giblin says the shift has put a greater emphasis on what McGraw Hill Financial does as a services company and how the supply chain aids in this transformation.
The supply chain’s role at McGraw Hill Financial is a bit unique from the procurement offices you would find at say, an electronics manufacturer that purchases MRO supplies. McGraw Hill Financial certainly has to keep the paper stocked, but because it deals in the exchange of information as the leading provider of credit ratings, benchmarks and analytics in the global capital and commodity markets, the company’s supply chain needs are often intangible.
“We don’t really have a material product per se, it’s more of the resources and working capital behind the research and information we produce for our customers,” Giblin says. “To be able to do that more efficiently and at higher margins is what we’re focused on. Traditionally, higher-cost categories of spend, for example consulting – whether it’s financial or business management – all those areas are becoming much more important to focus on.”
The supply chain’s role at McGraw Hill Financial is to put a sourcing structure in place that makes it easy for other divisions to focus on their core functions. The strategy has taken several forms but each piece is integrated into a holistic supply chain.
Looking at the Long Term
One of the company’s most recent efforts was to implement what Giblin coined CRP or Collaborative Resource Partnership. It’s a thought process that the global sourcing team uses to look at suppliers’ long-term viability. It looks at three major components: financial condition, performance, and forward-looking projections, such as growth and investments.
“These types of scorecards are used to do two things: analyze suppliers but also to measure performance ongoing,” Giblin says. “I think it’s important to use the scorecard in a way that gives us a peek into the likely performance in the future. Otherwise, you run into challenges like the downturn in 2009 where suppliers seemed to be doing well but then suddenly went out of business.”
It’s a situation McGraw Hill Financial knows first-hand. In 2009, the company needed to develop contingency plans when two suppliers shut their doors with little notice. Giblin implemented the CRP later that year so the company’s supply chain could have greater and more accurate insight into its suppliers’ standings. It doesn’t necessarily mean relationships are severed, but it does put McGraw Hill Financial on notice to watch certain suppliers more carefully.
“We were reacting at the time, but now we have a more proactive program in place,” Giblin says.
In addition to reducing risk, the supply chain is also focused on reducing spend. For instance, the global sourcing team has assumed control over the travel program rather than having this sizeable spend managed through travel representatives. The supply chain team negotiated prices with a select but comprehensive range of airlines and hotels for the company’s business travel needs. This exercise alone has reduced its roster of preferred hotels from 1,200 to 200 with negotiated prices. Collaboration with business units helped make the consolidation efforts a partnership, leading to greater buy-in and higher savings.
Saving through Sustainability
Another strategy McGraw Hill Financial has taken to rationalize its spend is to reduce its environmental impact. In 2011, Giblin held a summit for key suppliers and made a bold declaration that he wanted the company to be in the top 20 on Newsweek’s Green 500 U.S. Companies list. After three years of intentional sustainability investments, as part of McGraw Hill’s broader environmental sustainability strategy, McGraw Hill Financial placed at 19.
“By working with our supply partners, we are able to help McGraw Hill earn this recognition,” Giblin explains.
One of those suppliers is Canon, which has helped McGraw Hill Financial save the equivalent of 2,000 trees and 700 billion bps of energy with its environmentally friendly practices, including using recycled paper and toner, energy-reducing equipment, and configuring devices to default print double-sided copies.
Staples is another supplier that has worked closely with McGraw Hill Financial to improve its sustainability standing and lower costs at the same time. It started with working together to change buying habits and creating a minimum order size. This meant less deliveries and less packaging material, which in turn translated into lower costs shared across the supply chain. The office supply retailer now provides McGraw Hill Financial with a complete line of environmentally friendly products, including binders made from recycled denim, pens that use vegetable oil for ink and notebooks made from sugar cane pulp .
During the past 12 months, the company purchased more than 41 percent of products using recycled content, lowering greenhouse gas emissions by the equivalent of more than 134,000 pounds. This remarkably translates into more than 617,000 gallons of water saved, 420,000-plus wood resources saved, and more than 1 billion total energy units saved. Staples also partnered with Sanford and Terra Cycle to introduce a program to recycle writing instruments. For each item recycled, a donation is made to a charitable organization of McGraw Hill Financial’s choosing.
Giblin explains that programs such as these not only reduce expenses and environmental impact but also send a clear message to the public.
“The value for us, in addition to being environmentally conscious and generating significant carbon footprint reductions, is that it creates more visibility into our sustainability,” Giblin says. “We moved up in our green ranking and that publicly adds to our shareholders’ value. When consumers look to invest in a company, these are the types of behaviors, philosophies and values they like to see. These are all important elements that govern the daily lives of the global sourcing team at McGraw Hill Financial.”