Procurement system upgrade highlights Rio Tinto's hesitance to change
Mining behemoth Rio Tinto has 45 operational sites spread across the world, resulting in the creation of around 2,500 contracts and 1,000 variations each year.
In its sourcing and contracts team alone, Rio Tinto employs 350 to 400 people globally.
Speaking at the recent SAP Ariba Live conference in Sydney, Rio Tinto's source process and improvement manager Rick Steele detailed the struggle he had with moving the procurement sector off paper and into a more efficient way of working, and highlighted the cultural hesitation the Australian-British multinational has against change.
Rio Tinto upgraded its procurement software to SAP Ariba in 2010, before the ERP giant acquired the vendor in 2012.
"It took me 12 months in Rio to get final approval, and if the Iron Ore CFO hadn't heard about it and jumped on the horse and helped me, I'm not sure I would have ever got legal, because legal just kept saying you don't understand the risks so we don't want to take the step," Steele explained.
While Steele implemented the Ariba platform across Rio's procurement segment, he said he wishes he had moved ahead with SAP end to end.
"We started the journey just on trying to improve our sourcing, trying to improve compliance, so we could have a system where all of our people were sourcing projects in the same manner. We're not worried about what forms or how -- we just wanted to have standard processes to follow and realistically have an electronic database to put all our contracts in," Steele said.
"We currently have about 13,000 contracts stored electronically in Ariba; prior to that, we had them all in safes somewhere in the world."
The main problem with that, Steele said, is these contracts could be in any of the 35 countries Rio Tinto has staff in.
"At least now we have electronic copies of it," he added.
Offering advice to those charged with upgrading a process in an established organisation like Rio Tinto, Steele warned others to be prepared to change internally to fit the system.
"I'd always prefer to change my model than change the system I'm working in," he said, labelling the organisation's change management training a "horror story".
Running late with its scheduled go-live date, Steele said the organisation decided to skip the training for all of the staff using it, and train only a handful who would then pass on their knowledge to others in their respective regions.
"I know now we've still got people there seven years later still struggling to use Ariba, simply because they were there for the first week and they're just never going to get over it," he said.
With pricing not going to be the driving force in contracts moving forward, Steele said he plans to expand the Ariba platform to work more closely with suppliers to ensure Rio Tinto harnesses all of the value out of the contract process it can.