Rina Schneur

As the telecommunications industry underwent a massive downturn in the early 2000s, Motorola, Inc., needed to drastically reduce costs and increase productivity. In Motorola's procurement community, the priority was to reduce the cost of direct and indirect materials purchased. Realizing that a radically different approach was needed, Motorola turned to Operations Research (OR) for guidance. Combining OR-aided methods such as innovative bidding, online negotiations and scenario-based optimization analysis, Motorola launched a comprehensive system to support the company's sourcing process. Motorola's sourcing teams use the OR capabilities of optimization to identify the optimal award strategy under different scenarios while considering constraints such as parts qualification status, supplier count and capacity.
The results speak for themselves. Savings captured have exceeded $600 million thus far, including nearly $200 million (an extra 4-7%) attributed to the advanced collaboration, on-line negotiation, optimization and analysis system capabilities. Using the system not only changed the way negotiations are conducted, but has also served as a catalyst for moving Motorola from loosely coordinated efforts by individual sectors of the company to conducting truly global negotiations jointly across business units.