Supply Excellence — Live from LIVE: Lessons from Private Equity

Live from LIVE: Lessons from Private Equity

May 13th, 2008 · by Justin Fogarty · No Comments · AribaLIVE, best practices, supply management

Private Equity (PE) firms don’t usually come to mind when you hear the terms “strategic sourcing” or “procurement.” But Shant Mardirossian’s solo mainstage presentation and contributions to the Views from the C-Suite roundtable today showcased a very interesting use of spend management principals as a pivotal piece of how PE firms are extracting value from their holdings in tough economic times, which for PE’s means less leverage due to the credit crunch and squeezed returns due to high priced raw materials.

Shant is a Partner and the CFO of Kohlberg & Company LLC, a mid-market firm with holdings that include Bauer (hockey equipment), Singer (sewing machines) and Central Parking Corp. They specialize in buying “troubled” companies and turning them around. At Kohlberg, that process includes cost reductions through the use of services and technology AND combining purchasing power for indirect spend across multiple companies they manage. That doesn’t mean they handle purchasing and sourcing across their various holdings - they let the experts from each individual company handle that. But when working together will give them greater leverage with suppliers without interfering with the needs of their internal customers, why not save some time and money?

An interesting perspective that might have some lessons in it for larger companies with fairly autonomous business units. And if Shant was right about this eventually moving beyond indirect spend to actually include direct materials in the future, then that could be even more relevant beyond the world of PE firms.

Since his work brings him in contact with a relatively large sample size of companies, hearing him validate that the trends of in-sourcing and near-sourcing are becoming more and more common is another strong data point on the topic. According to Shant, wage inflation in China and rising costs of transportation are reversing the tide and bring supplies and manufacturing closer to home.

Justin Fogarty is Managing Editor of Supply Excellence and will be covering Ariba LIVE 2008 in Las Vegas this week. Questions and feedback on the event or blog can be sent to Justin at jfogarty[at]ariba[dot]com.

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