The Challenge: Control Spending in a Distributed Organization

Kennametal Inc. is a leading global supplier of tooling, engineered components and advanced materials for use in production processes. Headquartered in Latrobe, Penn., the company improves customers′ competitiveness through the delivery of application knowledge and advanced technology. Companies producing everything from airframes to coal, medical implants to oil wells, and turbochargers to motorcycle parts, recognize Kennametal for its extraordinary contributions to their value chains.

With over 14,000 employees and 50 manufacturing plants worldwide, Kennametal is strategically organized along three global business units: Metalworking Solutions and Services Group, Advanced Materials Solutions Group and J&L Industrial Supply.

As a highly distributed organization, Kennametal faced several challenges, including:

• Buyers from different business units sourced non-material goods and services directly from local suppliers, which resulted in wide variability of prices.

• "Maverick," or off-contract, spending was between 20 to 25 percent.

• Compliance with a rationalized supplier base was below 50 percent.

• The procure-to-pay cycle was paper-intensive, error-prone and costly.

• Recent acquisitions of Conforma Clad and Extrude Hone created an even more geographically distributed organization.

Given those challenges, Kennametal recognized it could realize significant cost savings by centralizing its supplier and customer contracts; reducing maverick spending; and streamlining the source-to-pay process across the corporation.

The Solution: Ketera Procurement and Content Management

Kennametal went live with Ketera in 2002 after reviewing the offerings of many other vendors.

"After searching for 18 months, and reviewing over 40 e-procurement solutions, we selected Ketera because the solution provides the best overall value," said Jim Cebula, Director of Global Purchasing with Kennametal.

Since Ketera Procurement is an on-demand service, Kennametal never had to invest in expensive consulting services, hardware or software. By choosing an on-demand model, Kennametal has also significantly lowered its total cost of ownership (TCO). In fact, some companies report that the TCO of on-demand solutions can be less than one-third of the cost of owning, maintaining, and operating traditional client/server solutions.

As an integral part of the Ketera Spend Management suite, Ketera Procurement decentralizes Kennametal's corporate procurement purchasing practices while helping to maintain centralized control over preferred suppliers and negotiated prices. As a result, the corporate procurement solution helps to maximize savings and eliminate maverick spending.

Kennametal also uses Ketera Content Management, which offers an auditable and automated system for catalog publishing. This exception - driven system ensures that Kennametal can manage and update multiple catalogs with the most current information.

The Result: A Lean, Mean Operation

Today, over 500 internal users and 17 suppliers use the Ketera Procurement system, resulting in substantially lower transactional costs.

"Using Ketera, we′ve lowered our costs and improved our compliance with negotiated corporate contracts," said Cebula. "By buying on contract, we typically see a ten percent reduction in cost."

Additionally, Kennametal has seen other major benefits, including:

• Return on investment has been 150 percent in only three years′ time.

• Implementation required minimal internal resources, and took only 45 days from start to finish.

• Corporate compliance with the rationalized supplier base is up to 70 percent, with the ultimate goal of 85 percent well within sight.

• Automation of the pay-to-procure cycle and standardization of the corporate procurement process have streamlined operations.

• Ease of use has encouraged wide end-user adoption throughout the company.

• Going forward, Kennametal will continue to add new users and suppliers to the Ketera corporate procurement system, thereby saving more time and realizing additional cost savings.

Kennametal also intends to use a new purchasing card system in conjunction with Ketera to give its buyers the ability to do pre-negotiated contract buys, as well as "on-the-spot" buys via one easy-to-use desktop solution. "Buyers won′t have to waste valuable time by logging out of one system and into another," added Cebula.

Today, the company is also in the process of evaluating the Ketera Contract Management solution, which would enable it to manage its contracts more effectively.

"Currently, we have our contracts in diverse desks and folders, but not in a single, Internet-based application," said Cebula. "Having Ketera Contract Management would enable us to locate all our contracts at all times. We could keep track of contracts that are about to expire, and be better prepared for negotiations before the expiration date."