Portugal Telecom Part a Case

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Problem Statement: How does Portugal Telecom centralized their procurement in order to improve its process methods and achieve a more dynamic capability, in order to save potential costs, increase profits, and be more competitive in the industry?

Driving Issues:
* PT has no organized procurement operation either at group or business unit level. * All business units are at a different life cycle
* Not able to extract information from the system of what was bought from suppliers and who had bought it * From supplier, we know that the company misuse included electricity wastage and under utilization of unnecessary corrosion protection on some network materials * Every department was issuing RFPs and conducting individual negotiation with suppliers. * Existing Purchasing Department only possessed clerical and administrative skills * Major purchases were being made by IT outsourcers and by the Engineering Department and both lack negotiation skills. * Little or no information was shared between departments * No history of price benchmarking

* Little or no effort was made to develop new suppliers which gave current suppliers no incentive to improve

Analysis: The procurement department currently lacks negotiation skills because they only have the ability to do clerical and administrative work. The purchasing categories that deserve the most attention: * Software currently has a 10 year contract with a benefit of transparent auditing however there is no IT strategy or planning team within the PT which mean everything is left to PT SI. PT needs to approach this category and organize a strategy team * Switching costs are very high and involved a set of proprietary hardware and software. Need to evaluate the cost and benefits for the company in the long run. * Advertising & Media is only being handled by an agency. PT needs to question and evaluate the agency’s strategy and whether PT is really...
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