CDSA

HITS Spring: A Hollywood Case Study on Strategic Sourcing

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At the annual HITS Spring: The Hollywood Innovation & Technology Summit in Los Angeles on May 17, several entertainment execs will take a closer look at how strategic sourcing is impacting their decision-making.

Emma Chontos, former SVP of global sourcing, strategy and vendor partnerships for Paramount Pictures, will join Leon Pilosof, SVP and head of procurement for Lionsgate Entertainment, and Sebastien Slek, executive director of Time Warner global sourcing marketing, for the panel discussion “Strategic Sourcing for Business Innovation in Hollywood.”

Here, Devendra Mishra, executive director of HITS, interviews Chontos about the unprecedented role being played by executives responsible for strategic sourcing in this regard, and the transformation they are making from traditional procurement to strategic sourcing as a strategic competency and asset of the enterprise.

Mishra: In the entrepreneurial business of Hollywood, where the studios treat each movie as standalone business entity for legal and financial reasons, what was the business landscape you witnessed through your lens as the SVP of global sourcing, strategy and vendor partnerships?

Chontos: The business landscape has changed drastically over the last 10 years. With the decline of DVD sales, box office challenges and consumer demand for cable and streaming services anywhere, anytime, the studio was faced with finding the balance of meeting the demand of shareholder value, creating great content, and addressing the need to adapt to an industry in transition. Within the organization, the need to look at efficiencies and synergies across the entire ecosystem were more important than ever.

Mishra: How were you placed in the organization structure of the enterprise?

Chontos: I reported into the COO and was part of the studios senior leadership team which comprised of C-level and divisional presidents. Visibility to the company’s strategic goals and objectives along with understanding the overarching challenges, provided invaluable insight into sourcing’s approach and focus. In return, I was able to provide a unique perspective and understanding from supporting all divisions and vendor partnerships across the supply chain.

Mishra: What were the challenges of managing across all categories of commodities and services in a large and mature organization with a rich legacy?

Chontos: Creating an effective strategic sourcing group within a 100-plus year organization brought complexity and opportunity, both in equal measure. Managing across a large, matrixed and siloed organization required a thoughtful approach that was customized group-by-group and stakeholder-by-stakeholder.

Mishra: Our biggest challenge early on was the lack of visibility to detailed enterprise-wide vendor spend. Understanding the complete vendor landscape was critical in order to objectively support sourcing’s overarching strategy and approach.

Chontos: Equally challenging was the composition of vendors supporting the studio. Upon completing a portfolio analysis, we saw many vendors providing the same goods and services, inconsistent pricing and deal terms and legacy vendors had gone unchallenged. In order to leverage economies of scale and drive vendor efficiencies across the supply chain, we had to change the historical approach of tactical and siloed deal making to strategic and inclusive.

Mishra: How would you describe the major milestones of the journey to significantly improve the profitability of the enterprise?

Chontos: I have three mile posts of the journey:

Visibility to Detailed Companywide Spend
In partnership with finance, IT and stakeholders, a purchase-to-pay project was initiated to consolidate multiple financial systems and provided the opportunity to validate and normalize spend categories, cost centers, and vendor data. The spend analysis derived from this initiative determined the total negotiable spend opportunity and identified and prioritized projects by category, vendor and department.

Transition from Tactical to Proactive Strategic Sourcing
In our first year, 100% of projects executed were initiated by the business and were tactical in nature, low dollar, and covered basic categories. By year two, we had implemented centralized buying and preferred vendors to support commonly consumed categories with 70% of projects executed having been initiated by sourcing and sponsored by stake holders. Projects became strategic, they were often cross divisional and large in size, spend, and impact. This transition to proactive sourcing was a key differentiator from traditional sourcing and a turning point for the group.

Formalized Vendor Selection Process
Obtaining support to establish a companywide formal framework to select and award business to vendors was a cultural shift for the company, and a necessary one. What was key however, was the need to customize the approach dependent on need (i.e. not everything required an RFP, or sourcing to be the lead, etc.). Due to the historical approach this was one of the toughest transformations, however by starting with teams that were open and by delivering expected results, the momentum grew quickly within the company. It was through this framework that we realized the biggest impact to the bottom line.

Mishra: What were the resources you applied over what period of time?

Chontos: As sourcing’s support expanded across the departments and as new categories and spend were addressed, the resources and skillsets required continued to change and evolve each year. What is needed in the startup phase will look very different in the subsequent build out and steady state phases.

Hiring team leads with specific deep category expertise was crucial not only for building credibility and legitimacy, but also in cross training the sourcing generalists who supported the category verticals. This was done with a mix of skillsets comprised mainly of spend analysis, project management and sourcing lifecycle experience.

From a process and tools perspective, within 24 months we had established a centralized spend management system, rolled out bidding tools, supplier catalogs and implemented purchasing and vendor selection policies.

Mishra: What were the outcomes of your endeavor?

Chontos: Within two years we had transformed the sourcing team from a traditional sourcing group to a strategic sourcing partner, averaging approximately a 7 times ROI on hard savings achieved.

We brought teams together for the first time by identifying synergies across the supply chain resulting in multi divisional strategic deals and partnerships. Through the results of addressing categories that were core across the business, we built credibility within the company to address some of the most politically charged categories such as marketing, publicity and production.

Above and beyond sourcing, we were considered an internal consulting resource and contributed to projects that included; revenue generation strategies, partner sponsorship opportunities and led a company initiative to gain insight and visibility to the studios content supply chain through process mapping, gap analysis and TCO studies.

Mishra: What were your efforts to promote professional development and improve organizational capabilities in your function?

Chontos: We continually assessed the resource strategy based on demand, bandwidth and growth opportunities. Providing team members the opportunity to work on projects across categories and exposing them to different sourcing leads and business groups proved invaluable, not only in professional development but it also kept it interesting.

The development of the teams communication skills was also an area of focus and a conscious effort was made to remove layers of communication and provide opportunities for all team members to interact directly with business owners and stakeholders, to include participating in status meetings with the COO.

Most importantly was time spent ensuring the team philosophy was understood and practiced. Unlike other sourcing functions, we by design were not mandated, which meant we had to earn the right to work with the business groups. We also went into deals with the objective goal of achieving a “win-win” outcome and understanding that it was our job was to ensure the success of both business and vendor partnerships. How we measured the team also contributed to professional development. By measuring the team as a whole (not by individual) it required individuals to continually look at the big picture and maintain collaboration, trust, and transparency within the group.

Mishra: Disruptive technologies have produced numerous solutions, some from boutique companies and others from large, traditional companies. How do you scout, screen and vet technology enablers for your internal business clients?

Chontos: I believe technology should be an enabler and an improvement from status quo. In order to leverage emerging technologies, Sourcing was entrenched in the M&E ecosystem through business operations, trade shows/industry events, CES, NAB, and IBC, identifying potential partners and ensuring technology aligned with evolving needs.

Our team generally maintained a customized approach, category by category. Vendors were tested by partnering with the stakeholder to determine suitability into our ecosystem. We saw demos and asked vendors to carve out a particular part of their solution, creating a new service/product because it solved a problem.

This included categories such as travel, where sourcing incorporated corporate/event booking tools. For media, we tested programmatic buying and for indirect categories such as IT and G&A, we explored appropriate tools and system solutions.

I took a holistic approach to technology to better understand where it would sit within the enterprise, solving the current need and ideally several years ahead. I also took into account additional business units who may benefit from the same solutions. Ultimately it was a simple selection process; if the technology proved to be faster at, cost effective and better than what existed, then it was incorporated.

Mishra: What have been your learnings from your unprecedented effort to achieve the strategic objective of eliminating wasteful spending across the corporation?

Chontos: I have been involved with a number of different approaches to address spend management and cost savings. What I found to be the most significant and sustainable results have not come from sourcing’s role as the purchasing police with a heavily mandated and governance function, but where business and stake holders look at sourcing as a valuable resource and innovative strategic partner.

There are areas where centralized procurement plays a role such as commonly consumed categories (i.e. temp labor and office supplies) however I have seen the biggest impact come from breaking down the silos and driving strategic deals across the organization. By increasing buying power through leveraging economies of scale, we achieved not only substantial savings and reinvestment dollars, but also efficiencies and increased supplier performance.

Mishra: Finally, after successfully completing your journey, has the transformation yielded a competitive competency of sourcing?

Chontos: Within Paramount, sourcing was looked at as an objective strategic partner who aligned with the business and was actively involved in the company’s decision making process. Through building effective relationships, establishing legitimacy, and delivering proven and sustainable results, sourcing changed how vendor and deal management was perceived and approached. This was further validated with the decision made by the parent company’s COO to scale the program across the entire Viacom enterprise.

HITS Spring is produced by the Media & Entertainment Services Alliance (MESA) and the Hollywood IT Society (HITS), in association with Women in Technology: Hollywood (WiTH); the Content Delivery & Security Association (CDSA) and the Smart Content Council. The event is being presented by Entertainment Partners, with sponsorship by Expert System, LiveTiles, Microsoft Azure, Ooyala, Veritone, Amazon Web Services, Avanade, MarkLogic, Aspera, Light Point Security, MicroStrategy, Scaeva Technologies, Zaszou IT Consulting and Bob Gold & Associates.

For more information visit HollywoodITSummit.com, and to become a sponsor and participate in the event, contact Christian Calson at [email protected], 310-945-6284.