Michael O'Malley, a University of lllinois graduate, knows all about the winds of change from his days

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Michael O'Malley, a University of lllinois graduate, knows all about the winds of change from his days in his hometown of Chicago (aka the Windy City). When O'Malley was named vice president of Procurement & Supply Chain Management at CSX Transportation several months ago, he felt that changes were needed to get his sourcing team on a faster track. Since his appointment to the job, he has put the company's procurement and supply function on the “strategic and global” track to twenty-first -century excellence. CSX is one of four Class 1 Railroads in the United States.

In 2013 the company had sales of over $12 billion and net earnings of $1.86 billion ($1.83/share). With a barrel of crude oil fluctuating in the $70 to $125 range the past three years and fuel prices in the $2.50 to $3.00 a gallon range, railroads have become a favorite of many shippers interested in taking advantage of their superior fuel efficiency. The U.S railroads' low cost-per-ton-mile allows them to compete very favorably with other transportation modes. Railroads own both the land and the rails that support the movement of freight via locomotives and railcars.

Keeping a modern railroad running, however, requires that significant amounts of money be reinvested into infrastructure. The firm plans to spend approximately $5 billion during 2023, which requires a skilled procurement and supply chain group to manage that spending effectively.

Extract from: CSX Purchasing and Supply: Managing into the Winds of Change: Source L. Giunipero, interview with E. Michael O'Malley and CSX supply management personnel.

Using the above abstract and relevant literature, write a brief essay advising Mr. Michael O'Malley on the strategic sourcing steps which he will need to follow in order to form a skilled procurement and supply chain team to manage that spend of $5 billion effectively.