Gensin Case

To apply the seven stage process to the purchase of legal services at Gensin, the first stage is to rationalise the supplier base. However, for this to occur there is a clear need to understand the services offered in order to categorize those services In order to assess how they may be allocated to specific suppliers. As May and her department do not have the knowledge needed, it is important that there is the collection of relevant input data to allow for the categories to be developed. Cross functional teams can provide for a high level of input, as long as the team includes those who will have the knowledge needed, for example, those who work with the services, and those who have to deal with the inputs and the outputs (Grant, 2013). This indicates the members who should be present; these will include members from the firms' internal legal department, and other staff who deal directly with the legal services purchased. For example, this may include senior management from most major departments, as many of these will have to deal directly or indirectly with legal issues, from the regulatory requirements of marketing through to employment and health and safety law, as well as issues such as product liability for the research and development department (MacIntyre, 2014). As May will also be looking at the way services may be allocated with the aim of reducing the number of suppliers, the potential for single firms to provide for different needs may also be considered, which may also mean that as the task progresses external members of legal firms may be invited to participate as some meetings.

The team members are important as they are able to provide both the input data as well as the knowledge and skills to assess that data and create the desired output. The data that is needed will include, but not be limited to • Identification of the legal issues the firm has to deal with • Identification of how these issues may vary in different countries

• Break down of the current spending on legal services divided by issues and country

• List of the current legal services suppliers, and the spend with each supplier

• Information on the existing and potential legal suppliers, including which services they could offer if services were aggregated.

• Schedule of the fees charged for services for the legal firms, and information on the degree to which these may be negotiated or subject to discounts.

• Details of contacts at the short listed legal firms

• Details of how the firm currently deals with the legal supplier, including how the contracts are allocated, how they are operated including communication and the processes for used for making decision, for example whether or not to settle, and the communication processes used.

This data is all needed in order to assess what it needed and ensure that the suppliers who are selected can provide the services needed, with the expertise requited and the ability to deal with the firm in an efficient manner.

Obtaining this data will be a time consuming task. Details of the law firs used and amount spent with each may be obtained from the accoutring department, as they pay the bills, so can provide this data. However, data regarding the types of issues dealt with would need to be gathered from the firm's departments using the services, but may also be gathered from the law firms, although they may charge for collating that data. It is this element of the assessment process which will require members of different departments to be present, who may need to refer to their own departments/division to collect the relevant data.

With all the data collected, there will be several considerations regarding the way in which a supplier is selected. Firstly, the element of expertise needs to be examined; if a law firm has a high level of expertise are likely to create value by mitigating legal issues, and providing good advice. However, to obtain value, Gensin may also want to look at the variety of services that are offered; some law firms may have different areas of expertise which can be supplied, and the scope and scale of services that can be offered. This would help to create value by reducing the number of suppliers dealt with, and may facilitate a greater level of leveraged. Likewise, while expertise may be across different subject areas, there may also be the potential for international firms to be leveraged in order to deal with legal firms across different countries. Obviously, fees will also need to be considered. Importantly, long-term relationships, the current relationship between Gensin and the potential supplier, and the ability for this to be leveraged to create further value and develop trust may also be a consideration in terms of supply chain management (Trent, 2001). The most important criteria will be the level of expertise and the ability of the suppliers to deal with the scope and scale of issues faced by Gensin, as well as issues such as transparency of peas, followed by the fee level.

Monitoring and measuring the contracts once they are negotiated will be important. This will involve assessing not only the amount is paid, but also the cost of the outcomes, for example whether or not the new firms are defending against potential liability cases as effectively as past representation, and whether the advice is resulting in significant cost benefits. Transparency, compliance with scheduled fees, and satisfaction from internal stakeholders should also be considered.

Kraljics matrix can be used to help classify different commodities (Caniels & Gelderman, 2005). Looking at how these may be classified in terms of legal spend, the different elements of legal advice and services may be placed into the various segments. The matrix is based on two dimensions; financial risk and supply risk, each classified as either high or low.

Supply risk

Low

High

Financial risk

High

Leverage products

-Tort and personal liability issues brought against the company

-Consumer law

-Contract law

Strategic products

-Tort and liability issues brought by the company against others

-Intellectual property law, particularly patents for new drugs, particularly protection in the international markets including the developing countries where intellectual property rights are weakly and forced

Low

Routine products

-Marketing and advertising law

-Employment law

-Health and safety law

Bottlenecks products

-Patent searches

Many of legal issues will vary depending upon the circumstances. However, the above matrix indicates the way in which different issues may be perceived within this matrix. Based on this assessment above, the strategic products should be high on the list for services acquisitions as these are important in terms of financial risk and supply risk. Routine products, including employment law health and safety or lock in advertising law would be bottom of the list.

A plan for the meetings will need to assess the different elements required, focusing on the strategic products concerning tort liability issues and intellectual property, identify the way in which these may be categorised in terms of both topic area, and geographical divisions. Following the discussion the following plan may be used to guide the follow-up meeting.

1. Welcome and review of past meetings

2. Presentation of the proposed categories divided by product and geographical area

3. Discussion and amendment to the proposed categories

4. Presentation of the potential suppliers who can meet the services for these different categories

5. Discussion regarding the potential suppliers

6. Determination of a shortlist to be contacted for further negotiation

7. Other issues

Involving the purchasing department in the acquisition of legal services will provide a number of benefits. The purchasing department are used to undertaking the seven stages, including categorisation of products of the purchase, which will facilitate value creation through the aggregation of those services and the ability of the firm to average economies of scope and scale as well as buyer power (Nellis & Parker, 2006). Often, it can also be beneficial for an external person to review a purchasing process in order to provide a greater level of objectivity, especially if contracts have been running a long time, as personal relationships that develop over time have the potential to interfere, creating loyalty which may not necessarily lead to optimal financial efficiency (Ramanathan, 2014). These purchasing department is well placed to act as a centralised hub for the collection of information and the determination of optimal suppliers.