With more than 2,100 locations in the United States, eight Canadian provinces, the District of Columbia and Puerto Rico, Service Corporation International (SCI) says it is North America’s largest single provider of funeral, cremation and cemetery services. But before its five-year purchasing plan was implemented, it was not realizing as many economies of scale as it could have from the hundreds of thousands of purchases made by its multiple locations.
Begun in 2009 and completed successfully this past year, the five-year plan’s goal was to save the company $35 million over its five-year span. Instead, it saved in excess of $60 million, and with those purchasing changes now being standard procedures, those savings will continue into the future.
Now embarking on plans for a three-year roadmap, Rone Luczynski, SCI’s managing director of procurement and supply chain, expects to have the plan completed by summer’s end. SCI is formulating the new plan with KPMG, and several of its goals have already been determined.
“We’ll be working on getting more vendors enabled in our Procure 2 Pay (P2P) systems and processes, thereby enabling our associates to order products more efficiently with consistent item selection,” Luczynski says. “We are also working on advancing our associates’ knowledge and education in supply chain activities.”
Improvements will be made to strategic sourcing, electronic sourcing on the Internet, contract management and contract compliance. “This will provide us with one central repository to store and manage all our supply chain agreements,” Luczynski says.
In 2006 and 2007, SCI had a strategic assessment completed of its supply chain efforts. “We were very much a decentralized procurement company,” Luczynski states. At the time, only vehicle and casket purchases were somewhat centralized, and even that was inconsistent. “We have one of the largest fleets in North America,” Luczynski declares. “We had an agreement to purchase and lease cars in a centralized environment, but it wasn’t a 360-degree centralized fleet process at the time.”
When Luczynski joined the company in late 2008, he convinced Julian Davis, a principal at a consulting firm, to become director of business support services and help lead the supply chain transformation initiatives. Davis and the supply chain’s other directors – Kris Hallinan, Nancy Simon and Eric Vredenburg – realized much more of the company’s products and supplies needed to be obtained through a centralized or center-led supply chain. So they set about formulating and executing a supply chain transformation initiative.
Because of SCI’s many locations throughout North America and Puerto Rico, a retail, center-led model was chosen for the supply chain. Each location needs products quickly, so the company uses third-party shipping and delivery services, usually directly from vendors.
To streamline SCI’s fleet management practices, Davis created FleetSmart for the company’s 7,300 vehicles, which include funeral coaches that carry caskets in funerals, limousines, lead cars, vans, small trucks and sales and operational vehicles for managers. The FleetSmart initiative implemented new programs and processes to proactively manage fleet costs and maximize vehicle operational efficiencies.
When Luczynski and Davis joined the company, only 80 percent of casket purchases were centralized. Now, nearly 97 percent of caskets are obtained through one vendor. The company used Coupa’s cloud-based software to create its own online catalog of products and supplies from which its funeral homes and cemetery locations could easily order.
“When Julian and I got here, there was no item hierarchy,” Luczynski explains. “SCI was managing products by general ledger code from a financial system with no purchase order system, no item hierarchy and no item numbers per se.” So the first order of business was to create a list of all the products the funeral homes and cemeteries needed so they could be ordered online and total expenditures could be tracked in the software.
More than 300,000 vendors nationwide were reduced to 90,000, with allowances made for local and regional differences. “We had 187 casket vendors when we started,” Luczynski recalls. “We’re now down to 10, with 97 percent going through our strategic supplier. We’re still optimizing our spend and leveraging our scale. Our direct merchandise team led by Scott Sayes is currently working on a granite project with our operational partners. It’s the last category we haven’t centralized. We have over 416 granite vendors. We’ll get that down to 10 or 20 vendors by the time we’re done.”
For the future, Luczynski and his supply chain directors are excited about the possibilities provided by big data and business intelligence. “From a company perspective, our transformation of the supply chain really laid a foundation for us to better serve families and increase the return on our system and process investment,” Davis points out.
“We need to reduce costs and simplify processes, but we think that our locations are the best at providing excellent service to families at a most difficult time,” Luczynski states. “Supply chain management can help our operational partners and the company by optimizing the end-to-end procurement processes and leveraging our scale.”