South Jersey Industries
South Jersey Industries develops an in-house procurement organization to drive efficiency and cost savings throughout the corporation with best practices.
By Janice Hoppe-Spiers, Knighthouse Media
South Jersey Industries (SJI) Director of Procurement Will Smith has spent the past year-and-a-half building an in-house procurement organization after the corporation doubled in size. By developing the tone and direction of the department, he has established a set of best practices that emphasize efficiency and cost savings, which are now used company-wide.
SJI is one of the largest independent gas distributing companies in the United States comprised of three divisions: SJI Utilities, South Jersey Energy Solutions and SJI Midstream. SJI Utilities, its regulated natural gas business, delivers safe, reliable, affordable natural gas to approximately 690,000 South Jersey Gas, Elizabethtown Gas and Elkton Gas customers in New Jersey and Maryland.
“South Jersey Gas, Elizabethtown Gas and Elkton Gas were recent acquisitions for us in July 2018,” Smith says. “That doubled the size of the corporation and was the impetus of bringing me on to merge in those acquisitions and formalize the procurement practice.”
Smith came aboard SJI the week of the acquisitions in July 2018 and became directly involved in the merger and acquisition (M&A) activity. Although he had been involved in some M&A activity while at Lockheed Martin, Smith said joining SJI gave him the opportunity to get in at the ground level and drive that across the organization.
The second major aspect that attracted Smith to the position at SJI was from a system implementation perspective, implementing new technology solutions for the newly acquired businesses and the business overall. To date, SJI has moved half the corporation to the Workday system, a cloud-based ERP system for finance, human resources and planning.
The third opportunity for Smith was to truly build a procurement organization from scratch. “In a lot of scenarios, you are given a previous organization and trying to recreate or reinvigorate it,” he explains. “SJI gave me the ability to come in on the ground level. That has its challenges because you are building foundations and starting from square one, but it allows you to set the tone and direction.”
Policies and Procedures
Prior to July 2018, SJI had decentralized the duties of a procurement organization. Smith was tasked with establishing the overarching procurement practice, which includes everything from the creation of a standard procurement policy and procedures to how the business is to interact with the procurement organization.
“Because of the previous non-existence of that organization, once I had worked with leadership to create procurement policies and procedures, I did roadshows to the various departments and business functions to educate them on the function of the procurement team,” Smith remembers.
SJI implemented the Workday system to design those policies and procedures, as well as streamline the procurement process. Elizabethtown and Elkton had been on the Workday system since August when SJI took over those procurement responsibilities from the prior corporation. “That was a big milestone for us to take on all that procurement, as well as the system implementation associated with that,” Smith notes.
The procurement team has been tasked with driving organizational efficiency and savings. In 2019, the organization is on target to realize about $1.9 million in savings, which has been primarily driven by traditional supplier consolidation and RFP negotiation activity.
SJI developed a formalized supplier diversity strategy, ensuring where it spends its dollars represents the communities in which it resides. “This is the first year, year-over-year, where dollars in the supplier diversity space has risen to about $1 million that space,” Smith notes.
Today, an RFP is done for anything procured over a certain dollar threshold. SJI can reach out to its partners, such as the Eastern Minority Supplier Development Council or The African American Chamber of Commerce, New Jersey, to alert them to the RFP and find out if any member companies can meet the need for SJI. “That has been one of the key areas and elements for us in trying to partner and ensure that qualified, diverse vendors are part of our sourcing process,” Smith explains.
SJI implemented the Workday platform to increase visibility through the supply chain and track every dollar as it moves through the corporation. The software platform also offers a supplier portal that SJI has taken advantage of to streamline its interactions with suppliers, which includes the onboarding process and invoicing.
The company will begin to build out the RFP capabilities within Workday so everything will be digital. Smith is also looking at integrating the procure-to-pay process for more timely processing.
As a Lean Six Sigma Black Belt, Smith has focused on digitizing processes and created a value stream map to pull out unnecessary processes and steps. To do so, he has built an internal procurement website within SharePoint, a cloud-base service hosted by Microsoft, to educate individuals about the procurement process. Smith has also implemented process flows with associated ticket documentation to better interact with the end-users.
SJI conducted a corporate-wide internal satisfaction survey to get feedback from the various functions. Smith asked his team five questions to get an internal baseline from the group.
“The five questions I asked were: ‘What can I do for you? What should I do differently? What can we do better? What is holding us back? What’s working well?” Smith says. “It was very powerful and has been phenomenal, quite honestly.”
By asking those questions, Smith discovered a lot of the functions in the teams were acting in siloed means and did not have a fundamental understanding of what they did and how some activities they were doing could negatively impact other functions or cause bottlenecks.
“What we created is the procurement bootcamp activity where the team will educate each other on the various functions they do and they will also participate in cross-training and documentation of our standard operating procedures,” Smith explains. “I describe my leadership style as empowered accountability. So, what we have focused on in the past year-and-a-half is empowering the team and making them feel comfortable to make decisions and to evoke change.”
Smith believes the most important thing for leadership to do is understand their management style. “You have to put words to it, be able to describe it and have the appropriate framework for it,” he says. “Whether people express it or not, they can feel or tell when you aren’t being genuine. Your leadership style needs to be flexible and adaptable enough for particular situations and scenarios. That requires bringing your genuine self forward because otherwise, people will see through it.”
Always on the Journey
As SJI continues to transition into the Workday system, Smith says his focus will be on ensuring everyone understands it to be successful. “It is a true cloud-based application, so if you think about traditional software there is a version of it and you get updates every now and then, but it is what it is,” he explains. “In the cloud, it’s truly an evolving, ever-changing system. Just because you knew how to do something before doesn’t mean you do today or there’s not a better way.”
Smith says the new software requires a change in the team’s mindset. “Previously, you might have arrived at a destination, but now there’s no such thing; you are always on a journey of learning and understanding the system,” he explains.
Moving forward, SJI’s procurement team will begin to focus on becoming a more strategic, analytics-driven organization with the goal of being a trusted business partner.