Service Corporation International (SCI)
When going on a trip, everybody needs a roadmap, or nowadays, a GPS system that provides directions. Service Corporation International (SCI) has completed a successful five-year supply chain improvement plan, and to continue its efforts, it has embarked on a new three-year plan. That plan is designed to streamline purchasing for SCI’s group of 1,540 funeral homes and 469 cemeteries in 45 states, eight Canadian provinces, the District of Columbia and Puerto Rico.
The first year of the three-year “roadmap” is expected to provide further improvements to SCI’s end-to-end supply chain and drive additional savings, enhance processes, data and reporting, and improve the company’s overall supply chain management capabilities.
In the first year of the roadmap, SCI will work on its strategic sourcing, talent development and procure-to-pay initiatives. SCI will be aided by KPMG supply chain practice in its efforts. The supply chain department has conservatively identified $22 million of new savings SCI can capture over the next four years with KPMG’s assistance.
As part of its five-year plan completed in 2013, SCI reduced costs and expenses and saved more than $70 million. During 2014, SCI’s supply chain department helped assimilate 400 locations of Stewart Enterprises, which was acquired in December 2013. “We absorbed their procurement department and all the spend that came with the acquisition,” SCI’s Managing Director of Procurement and Supply Chain Rone Luczynski says. “The acquisition increased our spend by approximately 18 to 20 percent depending on the category.”
Improvements made as part of the five-year supply chain plan included centralizing procurement. For example, nearly 97 percent of caskets are obtained through one vendor now compared with only 80 percent being centralized in the past. The department has whittled the company’s formerly 187 casket vendors down to 10. The Vendor Master has been reduced from more than 300,000 suppliers of a variety of products and services nationwide to 90,000 today, with allowances made for local and regional differences.
SCI’s supply chain department created FleetSmart to proactively manage fleet costs and maximize the operational efficiencies of SCI’s 7,300 vehicles. The department also enrolled more vendors in its SCI SpendSmart or Procure 2 Pay (P2P) systems and processes with its partners in the Transactional Accounting department. As part of the three-year roadmap, improvements will be made to strategic sourcing, electronic sourcing, contract management and compliance.
Several work streams have been identified for streamlining SCI’s supply chain. The first is strategic sourcing and optimization. The second is using the SCI SpendSmart system to purchase even more economically and smartly. The third is developing SCI’s employee skills. “We are going to invest quite a bit of money in our teams and our people over the next couple of years to ensure they have the appropriate skillsets and knowledge base they need to compete and continue to drive value to the organization,” Luczynski says.
Project management and analytical and financial skills will be among the proficiencies taught. To determine in which area an employee needs additional training, the supply chain department is partnering with KPMG and SCI’s human resources department.
“The first thing KPMG does is a skills assessment for every individual on the team,” Luczynski says. “Based on what the results of that skills assessment are, we target the training directly at the individual.” That may include instruction in negotiation, finance, relationship management, diversity, vendor or system management, software skills or project management.
Recruit the Supply Chain
An important part of the skills assessment process is hiring employees with the right skills to begin with. Of the supply chain’s 57 employees, 43 work in SCI’s Houston headquarters and 14 in Hyderabad, India. “Talent development is one of the more difficult challenges, and is one of the top three issues for CPOs around the world,” Luczynski concedes. “It is difficult for multiple reasons.”
Being near the oil industry presents hiring challenges for SCI’s Houston headquarters. “We are in the oil business arena, and they pay significantly well for a lot of different positions, but their jobs are a little bit different, and they may have more scope than sometimes what our jobs have,” Director of Merchandising Scott Sayes says. “One of the challenges we run into is pay differential. We try to offset that through lifestyle amenities such as flexible work arrangements.”
When recruiting for the supply chain department, managers try to hire from similar industries. “One of the things that has been identified through deep dives in analysis in the direct procurement business is that we very much mirror a retail organization,” Sayes continues. “My background is in retail, so one of the things we try to do is recruit through those retailers who are here in Houston. We also recruit from people in the oil business with similar backgrounds, but we also look at manufacturing. We build a very diverse supply chain organization on the direct side so we can have a lot of different visions of how we can go, and those differences make us much stronger.”
Director of Indirect Procurement Kris Hallinan seeks additional qualities for her department. “We run a lot of large, diverse projects in supply chain, and so the scope that we normally look for is procurement as well as some good analytical skills,” Hallinan explains. “If they have some project management behind them, that really helps them have a whole skillset that is needed in this department to be successful.”
As part of the SCI SpendSmart P2P optimization project, SCI partnered with Coupa, a supplier of cloud-based spend management software, on strategic sourcing, procurement and invoicing software. This new software simplifies purchasing decisions and increases SCI’s ability to leverage its spend across all its locations. “We’ve also added other systems to improve our P2P processes, such as oversight for our purchasing card (Pcard) program, which identifies potential fraud and misuse,” Luczynski says.
SCI’s hundreds of locations use the purchasing cards for company purchases of items such as supplies. “What the system does is it flags potential misuse for tens of thousands of transactions,” Luczynski says. “It’s got artificial intelligence built in that flags people who are using the card inappropriately or for potential fraud. The audit department manages fraud, and we manage the misuse part of that program.”
Company-wide, SCI is converting to Oracle Fusion software to replace an old Lawson financial system. “The project is a cross-functional team led by finance and accounting, but supply chain is involved in this as well,” Luczynski says. “It is not our project, but it has significant overlap with several areas including supply chain.”
Luczynski attributes the supply chain’s success to its employees and his directors: Sayes, Hallinan and Director of Business Support Services Julian Davis. “I have a great team,” Luczynski emphasizes. “We have a vision, and we have a multiple-year strategy under our Supply Chain Transformation Initiative.
“We have a long-term plan to centralize and optimize the SCI supply chain,” he adds. “It’s basic fundamental reengineering of people, processes and technology. Our teams have brought to bear a tremendous amount of execution against our plan and stuck to the vision. We’re very good about tracking all the metrics and savings related to those initiatives. We also have gotten a tremendous amount of support from our executive leadership, both in funding and resources and our operational partners in the field.”
For the future, Luczynski foresees organic growth and continued acquisitions. “We still have opportunities to acquire additional businesses in North America,” he says.
He estimates that SCI has a 16 percent share of the funeral and cemetery services industry, and that 54 percent of it is still independently owned by smaller companies. “They’re not too small to acquire,” Luczynski insists. “We acquire one or two locations all the time and also continue to build new locations. The future looks bright for SCI, and our job is to ensure that we support the company’s vision and strategy and assist our operational locations to have the best service, costs and value.”