MetLife Moves to Frictionless Procurement

To manage every purchase in an organization the size of MetLife ($286 billion in assets), one would think that the carrier's vice president of procurement, Roy Anderson, commanded a small army.

However, Anderson maintains, no matter how large a staff he has, managing the purchases of everything from pencils to consulting contracts to IT hardware could not be accomplished at New York-based MetLife without a highly automated procurement system.

Centralizing Buying

When Anderson started in his current role in 2001, "there was a requirement to put the company through a good, efficient procurement process for all spending," he says. "The only way to get a procurement department to handle all of the orders without exploding is to automate much of the procurement process."

And that is just what MetLife did. In November of last year, MetLife brought in technology from Frictionless Commerce (Cambridge, MA), a provider of enterprise purchasing software for large purchasing organizations, to analyze contracts, audit contracts and ongoing projects, manage the RFP function and manage more than 1,300 suppliers. Frictionless' technology complements enterprise-resource planning (ERP) software from PeopleSoft (Pleasanton, CA) that links to MetLife's general ledger and human resources systems.

The end result will be a collaborative environment where suppliers can see what MetLife needs and submit proposals, according to Anderson.

The benefit to MetLife is that the core group of vendors has already agreed to certain legal terms that MetLife applies to all contracts-removing a commonly sticky legal negotiation between the legal department and the vendor's lawyers. "We don't want to be a big company that slams its suppliers," Anderson says. "For many contracts the legal terms are causing the biggest problems. Now our contracts are taking place for business decisions, not legal reasons.

Also, MetLife can monitor its core group of vendors' track record, including, price, reliability and deliverables. "And vendors won't promise what they can't deliver, because they run the risk of losing future contracts," he adds. "The better suppliers come to the surface."

For the vendors, according to Anderson, MetLife's procurement process simplifies some of the hardest parts of buyer-vendor relationship. "One of the largest costs a supplier has is sales," he says. "We have created an environment where we present all of the projects to them so they don't have to go around selling all of the time."

Basically, vendors control their own destiny in MetLife's procurement system. "The suppliers are notified electronically" about projects, according to Anderson. "If they know that no bids go to the fifth supplier or lower, we see them adjust their terms and pricing structure to be in the top four."

To get the procurement system up and running, Anderson says the hardest part was not the technology. "Building the templates and working with the legal department took months," he says. "We had come up with a definitive template structure that takes into account all of the little snags that usually complicate contracts so we can speed the process. If you spend all of your time crossing T's or dotting I's on a contract, you will never get the project done."

Currently, approximately 200 MetLife users are procuring products and services through the system. "There is a lot of learning that has to happen before people can use the system," he says. "We are getting more people involved everyday."

In the future, besides driving more buying through the system, Anderson aims to provide more data to the suppliers. "We will make it easier for suppliers to get more dynamic data about projects" so they can better tailor their offerings to meet MetLife's needs.

In the end, both MetLife and the suppliers will benefit, Anderson adds. "We want to have the best suppliers and we want the best suppliers to get a good amount of our business.

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COMPANY:

MetLife, New York,

$286 billion in assets.

LINES OF BUSINESS:

Life, property & casualty, investments, financial planning, banking.

VENDOR/TECHNOLOGY:

Frictionless Commerce (Cambridge, MA)

Enterprise Sourcing software, PeopleSoft

(Pleasanton, CA) ERP software.

CHALLENGE:

Streamline enterprisewide procurement process.

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio