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Solectron outsources $1.2 billion worth of indirect spend to IBM

Solectron Corp., a provider of electronics manufacturing and integrated supply chain services, has signed a deal with IBM Corp. whereby Big Blue will manage the company’s indirect procurement services across 17 countries. Solectron is expected to realize significant savings throughout the life of the contract by leveraging IBM’s global economies of scale and by optimizing core procurement processes. The value of the contract is not being disclosed.

IBM will manage more than $1.2 billion per year of indirect spend in areas such as temporary contract services, office equipment, utilities, and telecommunications. Core to the project is the implementation of IBM’s complete Procure-To-Pay procurement solution that will be integrated with Solectron’s internal systems and controls. IBM’s solution will enable web-based requisitioning as well as procurement and supplier payment.

“The savings we expect from this contract with IBM will contribute to both operational and process innovation and simplification, which improves services to our customers and suppliers,” says Perry Mulligan, chief procurement officer, Solectron.

Solectron worked closely with IBM to customize the service offerings into a single, holistic procurement solution. This approach combines Solectron’s strategy with IBM’s procurement practices. Elements of the overall procurement solution include IBM commodity experts, a global contact center and an accounts payable processing center supporting Solectron suppliers and employees around the globe. Solectron will also have access to a full range of transformation and maintenance services from IBM.

IBM’s Business Transformation Outsourcing (BTO) services are designed to standardize, streamline and improve key business processes, such as supply chain, procurement, customer relationship management, finance and accounting, and human resources.

The hosted Procure-To-Pay environment and business operation will go live in the autumn of 2006 in North America and will then be fully deployed globally by early spring 2007.

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