Precision railroading. Procurement maturity Project partners
Precision railroading. Procurement maturity Paul Harridine, VP of Procurement and Supply Management at CN, tells CPOstrategy how a transformation will bring procurement maturity and stability for the backbone of the economy...
Written by
Dale Benton
Produced by
Richard Deane
CN : Pre cision railroading. P rocurement mat u r i t y
3
T
he discussion around procure-
more internally, or if you’re operating
ment transformation is seemingly
with a very high margin, then there is less
on a neverending upward curve.
incentive to look at building your procure-
More and more businesses the world
ment competencies or to look at your
over are investing in procurement trans-
procurement costs” he adds. “In the end,
formation and while this is not an entirely
it comes to every business, even those
new concept, it has certainly become the
with an extreme competitive advantage
talking point for procurement profession-
in a market. At some point, competitors
als and most importantly CEOs and CFOs
catch up and you have to be effective and
right now.
procurement expertise is key to that.”
“The fact of the matter is, when it comes
With a team of around 24,000 railroad-
to a procurement transformation journey
ers which transport more than C$250
there’s a really good return on invest-
billion worth of goods annually for a wide
ment for it,” explains Paul Harridine, VP of
range of business sectors, across a rail
Procurement and Supply Management
network of approximately 20,000 route-
at CN. “For one reason or another, a lot of
miles spanning Canada and mid-Amer-
sectors have never thought about it thor-
ica, CN is undoubtedly a market leader.
oughly. However, for sectors like auto-
Throughout times of crisis, and 2020 in
motive it’s been a core competence for a
particular is a year beset by crisis, CN has
long time, as it goes without saying that
a responsibility to continue to operate
procurement is key if your whole busi-
and to deliver on its promises perhaps
ness model relies on a high proportion of
more so than most other businesses..
costs being with suppliers. If you weren’t
CN has always been an extremely
good at Procurement you wouldn’t
effective business from an operations
survive very long.”
point of view and has led the industry for
Harridine acknowledges that while the
a number of years. Like all businesses,
benefits are as plain as day for a sector
the level of improvement or the speed of
like automotive, for other sectors with
improvement over time starts to slacken
entirely different business models, it
off. From an operational point of view, the
takes longer for the procurement penny
business recognised the need to look
to drop. “If you are a nationalised industry,
at other areas where it could improve.
if your business has a fairly small propor-
Continuing to drive what CN calls “preci-
tion of its costs with suppliers and much
sion scheduled railroading” could only
CN : Pre cision railroading. P rocurement mat u r i t y
5
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“ The fact of the matter is, when it comes to a procurement transformation journey there’s a really good return on investment for it” — Pau l Ha rri d ine V P P ro cu rem ent a nd Supply Ma na gem e nt at C N
take the business so far, for so long,
transformation journey. It can even be the
having been the leader in this for around
most challenging, but Harridine speaks
20 years. With more than $6 billion of
of a business that hadn’t really tried to
external spend each year, this is why, in
professionalise its procurement supply
2017, a decision was made to embark on a
management function prior to 2016. This
procurement transformation journey
apparent gap in performance between
CN engaged PwC to look at how it
what’s happening now and what the
might drive its procurement performance.
potential could be was by his own admis-
This process began in 2016, and as part
sion ‘pretty large.’ During this period the
of this journey CN sought to recruit a VP
business strategy hasn’t changed,” he
of Procurement and Supply Management
adds. “We’ve always been about growth,
that had experience of transforming
based on a foundation of precision
procurement in different environments.
scheduled railroading.
This is where Harridine entered the fray.
“Occasionally, you do get into business
A common question is often why now?
cycles where you suffer a temporary blip,
Understanding why, is the first step in any
but again, the long-term trend is growth.
CN : Pre cision railroading. P rocurement mat u r i t y
So there wasn’t any Eureka moment. The
committee members to make sure they
business just recognised that procure-
were all fully aligned to what it was we
ment investment was the way forward.”
wanted to do,” he says. “I also had to
To begin with, PwC worked with CN
engage with the team, and that was prob-
on a maturity profile, which highlighted
ably one of the most important steps,
different process and system areas
because there was a certain amount of
where the company was, relative to so
insecurity, given that the existing ways
called ‘world-class’ procurement func-
of working had been around a long time
tions. This initial benchmarking and
and you’ve got consultants coming in and
foundational work saw the two compa-
talking about organisational changes, and
nies draw up a roadmap. With Harridine
a new boss arriving. The ownership of the
coming on board, he admits he needed
transformation by the team is probably
to hit the ground running pretty fast.
the biggest factor in terms of how effec-
“We were able to get the endorsement
tive it will be.”
from the board and I then subsequently took that around the various executive
Trust is something that doesn’t come overnight, and a common challenge for 9
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CN : Pre cision railroading. P rocurement mat u r i t y
Š2020 PricewaterhouseCoopers LLP, an Ontario limited liability partnership. All rights reserved.
many procurement professionals is build-
function leading these changes, the team
ing credibility. As Harridine admits, you
sees the success and is part of the solu-
start with a certain amount of credibility
tion and as success builds, it becomes
because you’ve been brought in by the
self-sustaining. In this regard, it moves
CEO and the CFO, but this only takes you
away from it being a top down initiative
so far. While this is crucial to success, it’s
towards a more bottom-up, collaborative
ultimately the responsibility of the people
approach with teams driving their own
in the function to make it happen. “That’s
targets and managing their own priorities
about building relationships. Trust doesn’t
toward the overall vision and objectives
exist in a vacuum and it tends to come
that are aligned to the corporate strategy,
following a period of delivering. It can
delivering value across the organisation.
take months, maybe even years in some
“From a stakeholder perspective, most
cases,” he says. The team and stakehold-
senior executives will always want to
ers need to buy into the process and so
engage in that discussion,” he says. “How
part of that building of trust is engaging
can I do better with what’s important to
them in the development of the solution.”
my function and my objectives? How can
Whether it’s a category management
I help the business do better overall?
strategy or a new process implementa-
When addressing areas for improvement
tion, Harridine had to make sure that all
it’s also important to not belittle what’s
key stakeholders were on the steering
happened in the past. Almost by defini-
committees and were a part of the work-
tion, people get a bit defensive of what’s
ing groups involved in implementing these
been done prior, so you’ve got to steer
new solutions. With the procurement
away from that as much as possible. The
“ Even through the most difficult of situations during 2020, as the backbone of the economy, we still have that inherent capability to still operate and deliver on behalf of suppliers and consumers and customers to keep the economy going” — Pa u l H arri d i ne V P P rocurem ent a nd Supply Ma na gem e nt at C N
11
key to this is engaging people in developing the solution and how it’s going to help them achieve their own objectives.” CN set out a timeline of three years for this procurement journey and, somewhat naturally, that meant that there were clear objectives that needed to be achieved within this time period. But as Harridine, and CPOs the world over know full well, this journey never stops. Harridine reflects on his previous experience in the automotive industry more than 20 years ago, where the function drove a 3% year-on-year improvement out of the cost base and muses that were he to speak to people there now; they’d still be driving that level of improvement each year. “You never move away from that mentality of how you’re going to drive
delivering on the promise of this trans-
another improvement in the following
formation but he is keen to acknowledge
year and you’re going to keep defining a
that the benefits and the achievements
strategy that allows you to do that,” he
go above and beyond these specific
says.
examples. “We stayed true to the course
“Yes, within the three-year timeframe,
and it’s paying dividends now. In our
we’d set some objectives in terms of
original goals, we were talking about a
redesigning processes, introducing new
100 million dollars of benefits and we
operating systems , expanding the team
have significantly exceeded that. We’ve
and implementing a new operating model.
created value in a multitude of different
As with every transformation, there is
areas that truthfully were not in that orig-
always a financial objective and an ROI
inal roadmap,” he says. “Going back to
associated with the programme .”
that alignment with stakeholders, there’s
Three years into this journey and Harridine can point to key successes,
a lot of different value creation opportunities in procurement that come from that
CN : Pre cision railroading. P rocurement mat u r i t y
alignment. Procurement is so much more than simply setting objectives around
“ I’ve never once thought about trying to do better than our peers in rail. We want to try and set the standard in rail by aspiring to be worldclass. By doing that, we become a true core competence for CN” — Pa ul H arri d i n e
traditional cost reduction .” No journey, no matter how successful in the end, is a seamless movement from point A to point B. That’s true of life and it is true of procurement. Harridine recognises this and is blessed to find himself within a company, and an industry space, that has a strong sense of stability that is intertwined with its very purpose as a business. “Even through the most difficult of situations during 2020, as the backbone of the economy, we still have that inherent capability to still operate and deliver on
V P P ro cu rem ent and Supply
behalf of suppliers and consumers and
Ma n a gem ent at CN
customers to keep the economy going,” 13
he says. And in that sense, there’s a kind
based on lean thinking. It is based on the
of certainty about the business that you
principle in a shop floor context, each
don’t always find in a lot of other business
morning the team gets together to talk
sectors.”
about what the production level needs to
Every crisis and every challenge is an
be that day, what quality issues there may
opportunity to reflect on and look at the
be and communications that need to be
resilience and the effectiveness of the
cascaded? So by having that daily pulse
work you are doing. For Harridine and CN,
on the business, everybody stays very
the current COVID19 pandemic crisis has
close and agile, and if things are happen-
certainly put the procurement function to
ing, everybody knows pretty quickly
the test.
what’s going on and you can reallocate
“Things come along from time to time that obviously test you and the key to
and reprioritise very fast.” Harridine is a firm believer that it’s not
addressing these challenges is having an
simply a case of having a process like this
operating model which is agile enough
in place. Once people are used to it and
to respond. In procurement we have a
use it in the right way, teams work remark-
process called ‘Perform’ which is broadly
ably effectively and become self-starting.
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CN : Pre cision railroading. P rocurement mat u r i t y
“ ... when I look at my function and the people in my team, I’d be amazed if anybody could show a team of people that have responded more effectively to a crisis than at our Procurement and Supply Management function at CN” — Pa u l Ha rri d i n e V P P rocurem ent and Supply Ma na geme nt at C N
“When challenges come, the determin-
function as a whole. Harridine agrees,
ing factor for success is how tight is your
noting that the biggest endorsement of
team?” If your model is effective then
CN’s processes and systems is that it ‘did
the team becomes tighter, he says. “You
not miss a beat operationally’. When one
see people go above and beyond and
considers the number of products and
when I look at my function and the people
services CN purchases, the number of
in my team, I’d be amazed if anybody
suppliers it has, the fact that operationally
could show a team of people that have
the business never stopped as a result of
responded more effectively to a crisis
the supply issue, highlights the robust-
than at our Procurement and Supply
ness of the procurement function.
Management function at CN.” The COVID19 pandemic for many
“People went above and beyond because they’re proud to work in CN and I
procurement professionals has been an
hope they’re proud to be part of the func-
opportunity to reflect on the work that
tion we’re in as well. We all believe in the
the function has been doing. More so, it
direction we’re going in,” he says. “That’s
enabled a sense of endorsement for the
probably the biggest endorsement for 15
us when we look back on 2020. In terms
“We go back to that maturity profile on
of pressure testing our operating model,
a periodic basis because it’s important
I think that the team has come through
to get a sense of progress and reset the
with flying colours.”
direction regularly” says Harridine. “ We’ll
When building or transforming a
do another maturity profile early in the
procurement function, one that aims to be
new year to see where we are and impor-
best in class, it’s important for businesses
tantly, figure out how we move that little
to benchmark against the best of the
bit further up the scale.”
best. The maturity profile looked closely
“I’ve never once thought about trying to
at the quality of CN’s strategic sourcing,
do better than our peers in rail. We want
procurement systems, governance and
to try and set the standard in rail by aspir-
supply performance management. It then
ing to be world-class. By doing that, we
examined it against procurement func-
become a true core competence for CN.”
tions all over the world, across industry and sector.
Outside of continuing to improve processes and efficiencies, sustainability
CN : Pre cision railroading. P rocurement mat u r i t y
is a key goal for CN and for procure-
Elsewhere, procurement at CN is
ment. We have key objectives relating to
exploring how to use technology more
Safety, Diversity and De-carbonisation.
effectively such as artificial intelligence,
As one of the only organisations accred-
robotic process automation and devel-
ited on the Dow Jones Sustainability
oping better data analytics. “If we get
global index, CN is already a strong player
all of those right, combining them with
in this regard but Harridine knows that
the supplier partnerships and supplier
more can be done on this front. “The key
innovation, then even more value will be
to improving our sustainability initiatives
generated,” says Harridine. “And if we
starts by setting targets in these areas
keep building those processes and capa-
and then investing in our people, both of
bilities behind the scenes the benefits will
which I am proud to say we have done.
look after themselves.”
We will only progress if we keep developing our people, our teams and their effectiveness.”
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