CPOstrategy – Winter Edition 2019 by B2e Media

5 WAYS OF ACHIEVING SUSTAINABILITY IN PROCUREMENT I s sue 8 • Winter Edition • www.cpostrateg y.com

E XC L U S IVE

Procurement excellence with Wael Safwat

Value in procurement transformation Martin Lee, CPO of KPMG, explains how a procurement transformation centred around spend control brings greater value

EXECUTIVE INSIGHTS

Welcome to the winter issue of CPOstrategy! Our exclusive cover story this month is Martin Lee, Chief Procurement Officer at KPMG, as he explores how a procurement transformation, centred around spend control, brings value for KPMG. Lee is currently overseeing a major procurement transformation with KPMG, in which one of the UK’s leading providers of professional services, including audit, tax and advisory specialisms - delivering integrated solutions to its clients’ issues – is transforming its procurement processes in order to bring visibility, control and influence across an increasing proportion of spend to drive informed decisionmaking for the business. “Historically, buying was quite simple. Now you’re trying to work people around, ‘what’s their business case?’ What are their change drivers?” he says. “It’s less about being a reactive service, but more proactive, working to understand what they’re actually trying to achieve and how you might bring the supply base and commercial models to that.” Also in this month’s issue, Paul Howard Assistant Chief Joint Defence Services (Commercial) at NZDF, discusses the procurement transformation of the New Zealand Defence Force, Wael Safwat, Director of Procurement of Black & MacDonald Ltd and Chair of CIPS Canada talks about how companies can both define and deliver procurement excellence and we also look at 5 ways in which businesses can enable greater sustainability within their supply chain and procurement ecosystems. I hope you enjoy the issue!

EDITOR IN CHIEF Andrew Woods

EDITOR Dale Benton

SOCIAL MEDIA MANAGER Callum Rivett

CONTRIBUTING EDITOR Kevin Davies

CREATIVE LEAD Mitchell Park

GRAPHIC DESIGNER Rebecca Side

VP GLOBAL FINTECH & INSURTECH Alex Page

VP TECHNOLOGY Andy Lloyd

VP PROCUREMENT Heykel Ouni Greg Churchill

PRESIDENT & CEO Kiron Chavda

PUBLISHED BY

Dale Benton, Editor content@b2e-media.com

CONTENTS

KPMG

NZDF

40 PROCUREMENT EXCELLENCE WITH WAEL SAF WAT

5 WAYS OF ACHIEVING SUSTAINABILIT Y IN PROCUREMENT

PART FOUR OF A SUPPLY CHAIN MASTERCL ASS WITH FR ANK VORR ATH, EXECUTIVE PARTNER OF SUPPLY CHAIN AT GARTNER

AECOM

80 EVENTS

May 13-14 2020 | Intercontinental London, The O2

DELIVERING ON C-SUITE PRIORITIES

800

attendees

150+

global 500 companies

FIND OUT MORE WORLDPROCUREMENTCONGRESS.COM

6tn

annual combined spending power

62%

‘Head of’ or above

MAKE CONNECTIONS THAT WILL DRIVE YOUR BUSINESS FORWARDS. WHO WILL YOU MEET? Visionaries

Leading the function, mapping long-term goals

Achievers

Tackling the pragmatics of implementation

Influencers

Creating the blueprint for strategic delivery

@procurementleaders #PLWPC

Value in procurement transformation WRITTEN BY D a l e B e n to n PRODUCED BY H ey ke l O u n i

LISTEN TO MARTIN LEE’S PODCAST ON THE DIGITAL INSIGHT’S OUTPUT CHANNELS BELOW

Martin Lee, CPO of KPMG, explores how a procurement transformation, centred around spend control, brings value for KPMG

istorically speaking, procure-

of procurement and invested heavily

ment has often been seen as

into transforming it. Procurement can

a mere cost centre and the

truly bring great value to an organisa-

part of the business where buying was

tion, if the organisation recognises that

done. In recent years however, procure-

procurement can be a trusted partner

ment has taken a dramatic shift as

to the business. This certainly forms

more and more businesses around the

the foundation procurement transfor-

world, from large scale global organi-

mation... in which one of the UKâ&#x20AC;&#x2122;s lead-

sations to smaller and younger compa-

ing providers of professional services,

nies, have redefined their understanding

including audit, tax and advisory

KPMG

specialisms - delivering integrated solu-

purchasing space and a key focus on

tions to its clients’ issues – is trans-

procure to pay (P2P) implementation,

forming its procurement processes in

Martin feels his experience and passion

order to bring visibility, control and influ-

for procurement has prepared him well

ence across an increasing proportion of

for this next evolution of procurement

spend to drive informed decision-mak-

at KPMG. “I definitely think it’s one of

ing for the business. Spearheading

the best jobs going, with an unparal-

this transformation journey is Chief

leled involvement in helping an organi-

Procurement Officer, Martin Lee.

sation to ensure trust and deliver value

With over 20 years in the sourcing and

and growth,” he explains. “You touch w w w.c postrate gy.com

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everything from marketing, to the

transformation strategy and so the

running of our buildings, through to the

CPO now has to communicate to each

services we deliver to our clients. It’s

and every part of the business a little

such an impactful role. Gone are the

differently than it did in the past. More

days of buying; it’s about how you work

so, the demands, expectations and skill

with the business to impact how they

sets – and ultimately the very role of

invest and leverage themselves in the

the CPO – has changed too and this is

marketplace to get the right solution, at

something that feeds into this transfor-

the right value and risk profile. With the

mation. “Historically, buying was quite

executive sponsorship and appetite,

simple. Now you’re trying to work people

the platform for procurement is set, like

around, ‘what’s their business case?’

never before, to be value creators.”

What are their change drivers?” he

The broader evolution of procurement has certainly played its part in KPMG’s

says. “It’s less about being a reactive service, but more proactive, working

w w w. cp o stra te g y. co m

to understand what they’re actually trying to achieve and how you might bring the supply base and commercial models to that.” As CPO, Martin is tasked with looking at how procurement, as a trusted partner, can bring information to the table, to help people understand the art of the possible from the marketplace. This, he feels, is something that has developed increasingly in recent years. “Data is key to everything now and you need to be able to provide that data in a way that people can use and understand,” he says. “There is now an expectation of the ease of use as a business, all the way through from the people on the ground delivering services through to the executive board who want to know how they can consume data in a way that gives them an actual insight.” In early 2019, KPMG set out a procurement strategy, one that would ultimately see procurement play a key role in seeing the company increase its UK business to £3bn by 2022. A key enabler of achieving this is through greater spend control, changing how KPMG buys goods and services across KPMG UK, and through a new procurement organisation and operating model, including the implementation of a new P2P tool. “As an 14

KPMG

“ Historically, buying was quite simple. Now you’re trying to work people around, ‘what’s their business case?’ What are their change drivers?” — MARTIN LEE CPO, K P M G

w w w.c postrate gy.com

organisation we really wanted to build upon an already successful strategic sourcing team,” explains Martin. “Over time we built a program to implement procurement technology, the opportunity to control, visibility and influence our spend across our supply chain. Technology is at the heart of the change. It’s about creating efficiencies for how we transact, creating the visibility of our spend and our third-party engagement, allowing strategic sourcing decisions with our business stakeholders to be more innovative while delivering greater value, at the same time enhancing the ownership of the solution through an effective controlled purchasing environment.“ A key part of the transformation saw KPMG work closely with IBM to extend its sourcing capabilities. This has seen the building of a hybrid across multiple locations, delivering strategic, tactical

did not have at that stage,” says Martin.

and a procurement operations model to

“And so, it has allowed us to grow our

enable KPMG to influence spend across

strategic sourcing together with their

the entire firm. “The relationship with

breadth and depth of market knowledge

IBM has allowed us to deliver a lever-

and commercial impact. That was a very

aged procurement model across multi-

positive thing from a strategic sourcing

ple locations of onshore, near shore and

point of view.”

offshore from an efficient cost model

The challenge then for KPMG and

and from a skill sets and capability

IBM became one of identifying a way of

perspective that procurement in KPMG

moving towards a more transactional

KPMG

way of operating, particularly when it came to deploying procurement feeds from 15,000 users across the business which in turn expanded procurementâ&#x20AC;&#x2122;s interaction with the business significantly. For Martin, IBM was integral in this regard and a reflection of how the

YEAR FOUNDED

1987

REGION HQ

London, UK

relationship between the two companies far exceeds a simple project delivery relationship. â&#x20AC;&#x153;The relationship is an w w w.c postrate gy.com

“ The relationship is an opportunity to provide an agile operating model that we can adjust to how our business evolves” — MARTIN LEE CPO, K P M G

w w w.th e in te r fa ce . n e t

opportunity to provide an agile operating model that we can adjust to how our business evolves. It gives us a way of getting to skill sets that we didn’t have and thanks to the many clients that they work with in a similar capacity. It creates a useful network,” says Martin. “I can tap into the knowledge and insights from this network and their own procurement capabilities to know whether it validates what we are doing, or to help stretch and challenge my team through insights that create the credibility to be able to help my business.” The very idea of change, particularly in an organisation the size of KPMG, can understandably be very fearful in many respects and so it’s important that the drivers (in this case the procurement team) work to help the business understand what that change means. Martin stresses that one of the biggest early learnings and advantages for his team was utilising the capabilities that existed across KPMG, encompassing Change, Communications, Programme Management and Systems Implementation. The team built out a change journey, engaging with business stakeholders to determine their P2P understanding and readiness. Early understanding of P2P was relatively immature and the team had to help them understand the impact, and the opportunity it provided. “I think we’ve realised that throughout that period, we’ve had to put more direct effort into certain groups to help them understand what the opportunity is and understand how they can adapt to that change,” he says. “Our role as leaders is to help support people, understand and appreciate what the opportunity for them is and where they can learn new skills or adapt to roles, or in fact take on 20

KPMG

Martin Lee CPO, KPMG As CPO of KPMGâ&#x20AC;&#x2122;s UK Member firm, Martin leads a team responsible for over ÂŁ1/2bn of indirect spend. He has a passion for Procurement and transformation, having been in the industry over 20 years, with significant leadership, sourcing and P2P experience. Over the past year, Martin has led the Procurement transformation at KPMG, creating a new Procurement operating model, expanding the scope and influence of the team, and implementing the Coupa platform to over 15k users, helping to realise enhanced spend control and a step change in value delivery for the firm. w w w.c postrate gy.com

“ It’s about making sure that people understand what we are trying to achieve and communicate the vision, so they could understand, appreciate and get excited about that” — MARTIN LEE CPO, K P M G

new accountabilities in that process. It’s

The main procurement transformation

about making sure that people under-

began in early 2019 and so, as Martin

stand what we are trying to achieve and

admits, KPMG is still at the very begin-

communicate the vision, so they could

ning of this journey. The first 12 months

then understand, appreciate and get

will be seen as laying down the founda-

excited about it. Of course, through-

tions for future growth, with the imple-

out that process, you will find people

menting of the technology, and the new

that have to take time to learn about

operating model focused around creat-

what that change means for them and

ing a platform and new ways of work-

their function.”

ing. 2020, as Martin describes, is about

KPMG

heavily influence a transformation. The trick for an organisation is to be flexible and proactive enough to be able to evolve with the shifting landscapes, whatever they may be. “Throughout the journey we’ve had to make a few adjustments. Whether they were parts of our business that had changed how they operate, or in effect the relationships that we brought in, it was about learning what they were going to do differently to perhaps what we first thought,” says Martin. “One of the things you have to do is be very clear about what you’re trying to achieve. We had a governance model so that we could operate it with consistency with decisions and make sure that each of those changes was something that considered and made a formal decision against, rather than just meandering through a journey.” Ultimately, the key to successfully “leveraging that platform to grow our

navigating a journey is understanding

visibility over the supply base, under-

that changes will happen, whether they

standing how our business is going to

are foreseen or not. More important, is

work with us through those systems,

taking key learnings from these changes

and helping us unlock the opportunities

and using the knowledge or the data

the visibility creates”.

and insight and turning that into smarter

The challenge for any transforma-

and more informed decisions moving

tional journey revolves around external

forward. This is something that Martin,

factors. Business needs and demands,

despite being at the very start of this

as well as market dynamics, will all

journey, has already begun to do. “We’ve w w w.c postrate gy.com

built a team around us that are now owning our technology, our processes and our operations. It works on an agile basis, so that if we learn that our approvals aren’t quite right, or we learn that our data isn’t in exactly the right place, we can make quick and easy changes to it,” he says. “Working across our business, we’ve also put in place change agents that enable us to work with key individuals across the business on a more regular ongoing basis to talk about feedback, to talk about new ideas, to talk about change that we’re bringing through and get them to communicate to us about how we can improve and change things.” Looking at the first 12 months of this journey, Martin can already begin to look at key successes that have been achieved and start to plan out how to build on those for the coming years. KPMG has successfully rolled out the initial stage of the transformation on time and on budget. Both the hyper care team and the project team that worked with Martin throughout the journey have now completed their activities and moved on to their next project, leaving Martin in the wonderful position of knowing that his team has delivered the solutions and the operating model in place. “We’re now into the position 24

KPMG

David Braid, Procurement CoE Lead - SRM, Sustainable Procurement and Supply Chain Risk: What were the challenges you faced during the transformation? It often felt like a procurement-only programme, but actually, it was a business-wide programme. It was key to ensure that everybody within the business, came into support and sponsorship of that program and worked together. For many business functions the new technology will become their shop window of products and services to the internal business functions. The transformation teams were able to take away a lot of the pain from us as a procurement team, ensuring that the best practice communications and training was built and delivered. Quite simply, investment in skillful change management pays great dividends.

What will continue to be the key challenges? As you would expect, delivering to business expectations will continue to be our challenge. Perception of the solution delivered in August could inevitably be misconstrued as, ‘Well it’s done now, isn’t it? It’s fixed.’ Actually it’s not, we’ve just started this journey, we learn every day and the work that has to be done now is about ensuring we’re able to continue providing, and improving the service, through measuring the performance and taking action where required. There will be wobbles. The journey so far has been a bit like riding your bike with stabilisers. Now hypercare is finished we’ve taken the stabilisers off and all of a sudden

we’re on our own now. Through being on your own, you build that confidence up and in six months’ time we’ll for sure have forgotten that we even had the stabilisers on at all.

How has the transformation been received on a business level? People know what the big picture is, they know it’s about getting the costs under control, it’s about being able to get the transparency on a supply basis, about being able to take that information and gain increased value. If you’ve got transparency on data, all of a sudden you are a much better partner to the business. Doing the simple stuff really well drives credibility through our business and demonstrating this will deliver on the investments and create greater value going forward. The successful transition has created energy and engagement, so we take that momentum we now have across the business and focus on delivering our own procurement 2020 strategy and goals across five activity pillars of Spend Control, Customer Experience, Value Creation, Delivery Excellence – all underpinned by Enhanced Capabilities and Behaviours.

How will it impact KPMG from an external perspective? It allows us to demonstrate that we are operating a trusted and value generating function, raising the profile of KPMG as a forward-looking procurement activity, whilst also providing our business the trusted licence to operate in our client marketplace.

w w w.c postrate gy.com

KPMG

where we’re thinking proactively rather than reactively,” he says. “Examples where we’ve been able to take business cases to our board to shift policy. That’s been a real game changer for us, and it’s been positively received by them.” Over the course of the next year, KPMG will look to focus on its pipeline of procurement engagement and projects that will drive the business forward. KPMG will continue to make sure it has the right teams, with the right skill sets and experience in place to succeed. For Martin, this is ultimately the one true key to success both today, and in the future. “Program would have achieved nothing without putting people in who are committed and who understand and are excited about it,” he says. “Without that, we would never have gotten to where we are. In reality, we’re now shifting up a gear and those people are evolving, alongside us, providing new people to further expand our capability to get to where we want to go.”

LISTEN TO MARTIN LEE’S PODCAST ON THE DIGITAL INSIGHT’S OUTPUT CHANNELS BELOW

w w w.c postrate gy.com

Procurement excellence with Wael Safwat

WRITTEN BY D a l e B e n to n WA E L SA F WAT, H E A D O F P R O C U R E M E N T AT B L AC K & M C D O N A L D A N D CHAIRMAN OF CIPS CANADA, TASKED W I T H A M I S S I O N TO E L E VAT E T H E ROLE OF PROCUREMENT ACROSS THE ORGANISATION TO DRIVE TRUE VALUE CREATION, DISCUSSES THE JOURNEY SO FAR INCLUDING THE CHALLENGES, THE IMPACT OF TECHNOLOGY, AND OF COURSE, THE SUCCESSESâ&#x20AC;¦

W A E L S A F W AT Head of procurement at Black & McDonald and Chairman of CIPS Canada

How does your role as Head of Procurement relate to the overall strategy of Black & McDonald? Our organisation, as a construction company, tends to operate across business verticals in terms of mechanical, electrical, utilities, wind farms and power generation. In my current role as Head of procurement, my mandate across the organisation is to enable our business growth, understanding the ability to leverage our strategic partnerships in supply and manufacturing across different markets. And also, in building a sustainable transformation roadmap to help the organisation to achieve its strategic goals. Procurement is morphing and

it would require a massive effort and

becoming much more of a strategic

in terms of understanding the busi-

part of the business â&#x20AC;&#x201C; with what

ness needs, in defining what it means

you're doing with Black & McDonald,

by value to the organisation, build-

is that something you agree with?

ing a strategic relationship with the

Over the last decade there's been a

internal stakeholders, understand-

massive understanding about what

ing the current markets you operate

value the procurement organisation

across, and having the right talent in

can bring to the business? Certainly,

place to deliver the model.

P R O C U R E M E N T E X C E L L E N C E W I T H W A E L S A F W AT

Talk to me about Black & McDonaldâ&#x20AC;&#x2122;s

mandate is about understanding those

procurement transformation journeyâ&#x20AC;Ś

expectations and those challenges and

My focus is to have a clear under-

to start building a procurement strat-

standing of what the business needs.

egy that can bring value, identify areas

Some of the ongoing challenges we

where we can have quick wins, at the

typically face are similar to other

same time, building a stronger rela-

organisations that operate within the

tionship with our key partners and key

same industry, and also as part of the

supply manufacturers, where they help

challenges of a global economy. My

us in our growth journey. w w w.c postrate gy.com

What is key to developing a greater

the stakeholdersâ&#x20AC;&#x2122; map, and under-

understanding of the organisation

standing the level of influence within

and the role of procurement?

the organisation. Maybe relinquish

There are a number of key ways in

some control they have across differ-

which we are looking to try and help

ent business clients and try to initiate

get a clean understanding of procure-

certain discussions with the stake-

ment and one of them is building an

holders to understand how procure-

in-house analytics platform, where

ment can bring value. The value can

we can start understanding the spend

be defined in different ways, it can be

profile, the key supplier and how

supporting business growth, can be

they've been dealing with our key

process optimisation, can be process

partners as well as the nature and

excellence in terms of execution,

behaviour of the spend across the

can be risk management in terms

organisations. This is will come hand

of the way to safeguard the organ-

in hand with the ability to develop

isation in terms of dealing with the

P R O C U R E M E N T E X C E L L E N C E W I T H W A E L S A F W AT

present ourselves as a business partner and trusted advisor. To a great extent, 60 to 70% of my time is spent building strategic relationships across the organisation through open communication channels, not only between myself and the key executives across the organisation, but also enabling other procurement members within my team to build those relationships and better understand their needs and having the ability to talk the business language. How do you ensure your teams are equipped with the right skills and capabilities to succeed? global market and the supply chain

Our goal is to bring the best talent

risk across different parts. And more

to the organisation, not only to be

importantly, building a performance

part of the procurement team, but

management platform that can really

also to give them the opportunity

share the outcome of procurement

to have further career progres-

and impact across the organisation.

sion across other business clients. We identified a need for talent that

As a procurement professional, you're

should reflect the organisational

very familiar with the language and

needs. That will tie back in terms

expectations, how much have you had

of our spend profile; we need to tap

to break it down and communicate it

into and support the business and

to those not as well versed as you?

the skills required in terms of plan-

Whenever we tend to approach the

ning analytics capability, technical

stakeholders, we try to refrain from

background, market knowledge and

procurement language; we try to

risk management. We tend to hire w w w.c postrate gy.com

“ B Y B E I N G E N G A G E D W I T H C I P S MYSELF AND WITH MY TEAM, IT HAS HELPED US TO BETTER UND E R S TA N D A N D C O M M U N I C AT E AC R O SS D I F F E R E N T M A R K E TS ” — W A E L S A F W AT Head of procurement at Black & McDonald and Chairman of CIPS Canada

within a very well diversified skill

and a great source of knowledge

set, focusing on the ability to build

for all the organisations across

the relationship, the knowledge and

all sectors, to define what sort of

the industry to grasp more under-

skills are required, what the differ-

standing about the business and

ent levels within the procurement

the flexibility and how to be agile in

team should be, from a junior level, all

terms of responding quickly to the

the way up to the head of procure-

business needs and changes.

ment. We really try to leverage CIPS’ global standards where relevant to

Is this where your relationship with

our organisations to try to increase

CIPS comes into play?

those global practices, but also in

Over the past year, CIPS has been

building a journey and motivating

able to come in with the procurement

our resources for continuous profes-

supply chain global competencies

sional development.

P R O C U R E M E N T E X C E L L E N C E W I T H W A E L S A F W AT

How has this helped obtain stake-

more credibility when we're discussing

holder buy in?

certain aspects with internal stake-

I think by having a CIPS practice as

holders, and we tend to be perceived

well as understanding that CIPS not

as bringing value on the table, and also

only offers the global standards of

tend to have more depth and knowl-

procurement supply chain, but also a

edge of different sectors and be famil-

massive knowledge transfer that could

iar with different trends.

help individuals and organisations to excel while they are performing within

Technology is key to this transforma-

their organisation. By being engaged

tional journey, how has technology

with CIPS myself and with my team,

informed your decision making?

it has helped us to better understand

We tend to believe that all new tech-

and communicate across different

nologies are key enablers to develop

markets and that also provides us with

and support the organisation. In w w w.c postrate gy.com

procurement, in particular, we are having an overall enterprise digital procurement transformation roadmap, with procurement being part of that along with other functions across the organisations. We tend to focus on bringing the right technology to the organisation, that not only supports the current state, but also drives us in terms of building and enabling our competitive edge and bringing more innovation to the business and growth. So, there has been a number of platforms that we look after internally within our organisation and also with the expectation that as the technology structure keeps evolving in the market, we have to keep up to date with those changes to bring the best to the organisation. How do you handle the ever-changing technology marketplace? It's a transformation journey. You have to be lean and agile to ensure that you are up to date with the change and also be trying to bring the best to the organisation. In my view, sometimes people tend to aim for the best practice with the latest technology, which may not really reflect the maturity of the organisation, or the level of needs that the organisation has. So, building 36

P R O C U R E M E N T E X C E L L E N C E W I T H W A E L S A F W AT

this balance between the innovation, the trends in the market, and how the technology continues with the business, and also understanding very carefully, the level of maturity within the organisation, and stakeholder engagement and appetite for driving those innovations. Technology is about change management, itâ&#x20AC;&#x2122;s not digitalisation, it's about a different way of thinking. A transformation is a journey, so where you are along this route, in terms of what you've achieved, what you're yet to achieve, and what you want to achieve in the near-term future? With our journey we keep changing every day. We clearly understand where we w w w.c postrate gy.com

need to go and we've got an understanding of how we can bridge the gap from the current state to future state. As we continue to be challenged every day with the new trends in the market, it's really very challenging and engaging. Every day there is something really different. That's what we are trying to focus on and sell when we bring talent to the procurement organisation. To tell them that it's very unique; every day, you've got a new challenge and every day you have to be on the top of the game. I believe that is going to be an ongoing journey as we continue evolving as an organisation and we continue our growth, not only for us, but also for our partners and our clients. What will remain key to achieving your goals, both personal and those of Black & McDonald? Continuous professional development. Knowledge is an asset. Stephen Hawking once said that the biggest challenge to knowledge is not ignorance, it's the illusion of knowledge. I think continuous professional development of both myself and my team will be the key to ensure that we're on the right track and this will be the key measure of success.

P R O C U R E M E N T E X C E L L E N C E W I T H W A E L S A F W AT

“ Y O U ’ V E G O T A N E W CHALLENGE AND EVERY D AY Y O U H AV E T O B E O N THE TOP OF THE GAME. I B E L I E V E T H AT I S G O ING TO BE AN ONGOING JOURNEY AS WE CONT I N U E E V O LV I N G A S A N O R G A N I S AT I O N A N D W E CO N T I N U E O U R G R OW T H ” — W A E L S A F W AT Head of procurement at Black & McDonald and Chairman of CIPS Canada

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New Zealand Defence Force: On the procurement frontline WRITTEN BY A n d rew Wo o d s PRODUCED BY H ey ke l O u n i

CPOstrategy talks to Paul Howard Assistant Chief Joint Defence Services, (Commercial) at NZDF, regarding its procurement transformation…

elivering a successful procurement programme in any industry or enterprise is

challenging. Add to that the sensitivity and reliability demanded of a military organisation based in one of the world’s most remote locations, and the challenges become significant. The New Zealand Defence Force (NZDF) is the organisation which, in partnership with the Ministry of Defence, provides essential support

do everything: from Headquarters to the

to the delivery of the Government’s

camps and bases, to help them do their

national security interests. The person

procurement,” he explains. “The only

responsible for making sure that

thing we don’t buy are major platforms.

everything keeps flying, sailing and

We actually have a Ministry of Defence

rolling at the NZDF is Assistant Chief of

here, as well as the Defence Force, and

Joint Defence Services (Commercial),

they buy the ships, planes, military vehi-

Paul Howard. Howard looks after all

cles, etc., but it’s us who runs them,

Procurement activity across the NZDF,

including any long-term commercial

incorporating both its military and

relationships as well as the nuances of

corporate pillars, ranging from main-

those relationships and contracts.”

tenance, repair and overhaul (MROs)

Howard’s department is responsible

contracts for major platforms to consul-

for an annual spend of around $800m a

tancy support. “We literally get a call to

year, employing a team of procurement

NZDF

reconfiguration. “It was very process driven,” he explains. “They’d made an attempt at category management and professionals and includes the Accounts

had had a number of reviews. In the

Receivable and P2P function too.

previous seven years, prior to my arrival,

“This is good for us, because it means

I think they’d had five different reviews.”

that we have a bit of a nursery, and a

The reviews, conducted by various

career path, for up and coming buyers,”

consultancies, were also fairly consist-

Howard explains.

ent in their summations that the

Howard has a wealth of experience

procurement department was a largely

working for government departments

transactional function and in need of

back in the UK and moved to New

a more strategic approach. In terms

Zealand in early 2015 looking for a new

of the implementations suggested by

challenge in a different environment.

the reviews, Howard believes some

The procurement landscape at NZDF on

were only ‘half done’. “So, I had cate-

Howard’s arrival in late 2015 was largely

gory managers,” he says, “but when I

transactional and in need of major

studied what they were actually doing, w w w.c postrate gy.com

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“We're very much moving towards agile procurement in terms of making sure that we know exactly what it is that we want from the market” — PA U L H O W A R D ASSISTANT CHIEF, JOINT DEFENCE SERVICES (COMMERCIAL)

some were acting more like contract

ensure that NZDF was getting the best

managers. In some instances, they

deals. “What I was finding was that the

were producing category strategies

focus of the team was on quantity, not

and category plans, in splendid isolation

quality which meant that basic errors

from the business sponsor or business

occurred followed by significant re-work

owner, or had no buy-in from the busi-

leading to frustrated customers who

ness to implement those strategies. In

saw us a roadblock. In fact, it seemed

some cases, we would find the opera-

that the premise of procurement was

tional procurement teams helping the

like a factory in how it had been set up

customer put something together to

and demonstrated from an organisa-

meet their needs but then the category

tional point of view, that procurement

manager would intervene and question

was perceived as just a process, not a

whether what they were doing was the

strategic function.”

right thing or not, in terms of the cate-

Howard discovered that a great

gory strategy. In some extreme cases

deal of the critical buying decisions in

they would play this out in front of the

NZDF were being taken elsewhere in

customer, who was sitting there think-

the organisation, often without any

ing, ‘What the devil’s going on?’”

input whatsoever from his team until it

Meanwhile, the procurement function

arrived to go through the procurement

was largely process driven with teams

assurance process which his team is

slavishly following process to produce

responsible for. “For example, a business

contracts but not necessarily providing

owner, usually having made their mind

the necessary commercial acumen to

up about what they were buying and w w w. cp o stra te g y. co m

YEAR ESTABLISHED

1990

REGION HQ

Wellington, NZ

NZDF

from whom without coming to procure-

2016 marked something of a water-

ment first, would ask us to ‘assure’ their

shed for Howard and the NZDF, follow-

decision. This would lead to us looking

ing the release of the Defence White

at it and often rejecting it, which led to

Paper, which signalled a $21bn invest-

frustrated customers who were look-

ment in capability over the next 10 to 15

ing for us to tick a box for them, which

years, plus a regeneration of the Estate.

added to the perception that we were

The financial outlay included replac-

a roadblock, people that just got in the

ing two major aircraft platforms. “We

way of the Defence Force doing its busi-

have Hercules and P-3 Orion aircraft

ness. However, there was a recognition

for military movements and mari-

when I was recruited, that things proba-

time patrol, respectively. Following

bly needed to change.”

nearly 50 years of usage, we were

w w w.c postrate gy.com

going to buy brand new, latest generation aircraft. Just this year, the NZ

our act together.” As procurement was then part of

Government have announced that we

the logistics organisation, a military

will be replacing our existing Hercules

commander (Commander Logistics),

C-130H aircraft with the C-130J Super

was the designated Chief Procurement

Hercules, following on from the deci-

Officer for the organization and so,

sion to replace the P-3 Orions with the

Howard had a number of conversations

P-8A Poseidon, and we will also take

with both the Commander Logistics and

delivery of our new Maritime Tanker/

Commander’s boss, the Chief of Joint

Fleet replenishment Ship HMNZS

Defence Services. “I decided to have a

Aotearoa in early 2021. We are also

tough conversation to illustrate that I

buying a new offshore patrol vessel

couldn’t necessarily provide the level

and will be completing a frigate system

of strategic procurement support that

upgrade in the next few years.”

the NZDF was going to need. I said to

The programme represented a massive challenge to the procurement team and Howard made it very clear that this was a step change and that procurement in NZDF would need to significantly change in order to enable a successful outcome. “I said to my boss, at the time, ‘When these decisions were being considered, was any thought given to the level of commercial expertise required to ensure we got the best through life-support constructs for these modern complex platforms?’ And the answer was, ‘No, we didn’t but maybe we should have.’ It was a pivotal moment because we were going to have new aircraft and ships turning up in 4-5 years and in Defence terms, that wasn’t a lot of time to get 48

NZDF

them: ‘You’re going to call on us, and if

capability index was introduced which

we stay the same as we are now, we’re

assessed a number of elements that

not going to be able to do it, because at

assessed a Government Agency’s

the moment, we’re not fit for purpose.

procurement practice and capabilities. It

You’ll probably end up having to go out

was all about making sure you have the

to the market to get (a lot of) expensive

right people; the right commercial skills

contractors to do this work and your

and strategic positioning. This assess-

capability simply won’t rise.’”

ment, which is carried out annually,

Around the same time, the New

also contributes to the NZ Treasury’s

Zealand government had been revising

Investor Confidence Rating (ICR)

their approach to procurement capabil-

which is used to rate NZ government

ity: ‘You can’t make good investments

Agencies abilities (A-E) to be able to

unless you’ve got good procurement

make substantial investments. “If you’re

people and systems.’ So, a procurement

getting an A or a B rating, then you’re

w w w.c postrate gy.com

NZDF

“…we’re talking about a vision towards World Class and making sure that we are professional in our dealings” — PA U L H O W A R D ASSISTANT CHIEF, JOINT DEFENCE SERVICES (COMMERCIAL)

doing really well, which means that you are trusted to spend significant amounts of taxpayers’ money, without necessarily having to go cap in hand to the Treasury every time,” Howard explains. This presented something of a ‘perfect storm’ for change so Howard persuaded the Chief that his team should come out of the logistics organisation, to create a more strategically focused function that understood, and was capable of, developing and delivering a pipeline of strategic procurement projects. In mid-2017, Howard started to report directly into the Chief of Joint Defence Services who is a member of the NZDF Board. Since then, Howard and his team have made great strides as procurement has pushed itself into a more recognised and strategic position at NZDF. Its PCI (Procurement Capability Index rating) was 2.7 (out of 4) in September 2017. “I think that was reflective of the fact that we didn’t have anything majorly going wrong because we’d fixed quite a few things that were not quite right but in reality, we’d only done some tinkering around the edges. However, I said to my boss, ‘Being “OK”, when you’re just about to spend $21-22bn is probably not where you want to be or w w w.c postrate gy.com

should be’ and he agreed.” The PCI at

and Communications and Information

NZDF has since moved up to 3.1 within

Systems branch. They work with those

12 months and has just been reassessed

business units very closely and spend

at 3.35. “That’s actually gone past the

a lot of time onsite with them, some-

target we were set for this year,” he

times attending their management team

enthuses.

meetings, as their Business Partner. I

As part of this overhaul, Howard

think we’ve done that so successfully

proposed a commercial improvement

that recently one of the portfolios had

program and went on a recruitment

their awards night and one of my people

drive. “I reorganised several of the

got nominated for one of their awards.

teams and ceased category manage-

It was a big effort to reconnect with

ment as a concept. I placed our focus

the business, to genuinely help them

back onto the business owners and

get what they need, when they need it

what they needed and how we were going to give it to them. I didn’t want to continue to allow them to go off and do commercial activity on their own, as they didn’t have the right level of expertise to do that, so we created the concept of Procurement Business Partners whose roles were to be multi-faceted. We needed to reconnect Procurement with the customer base, so that they understood that we were there to proactively support them; in certain cases, being fairly well embedded into some of their governance and structures. We called them Commercial Portfolio Managers and recruited senior commercial professionals covering Logistics Command, Capability Branch, Estates and Infrastructure 52

NZDF

Paul Howard Assistant Chief Joint Defence Services (commercial) Paul joined the UK Civil Service in 1982, moving into procurement in 1995. Paul has led many multi-million dollar procurements, programmes and projects including delivering the award winning UK Schools Recruitment Service, The Mobile Infrastructure Project as part of the UK National Broadband strategy, the first WW1 Commemoration event management contract in Belgium (broadcasted live by the BBC) and a TFM contract for NZ Immigrationâ&#x20AC;&#x2122;s new refugee resettlement centre in Auckland. Paulâ&#x20AC;&#x2122;s career has seen him work in several UK Government Departments finishing as Commercial & Procurement Director for the Department for Culture Media and Sport before moving to New Zealand in early 2015. Paul is a CIPS Fellow with Chartered status, a member of the CIPS Wellington committee and the NZ Procurement Excellence Forum. Paul joined the New Zealand Defence Force in 2015, leading a large team providing strategic and and operational procurement, commercial and P2P services.

w w w.c postrate gy.com

and get public value; the other spin off

of creating their own procurement team

was to help stop them (even if they were

with the assistance of a consulting firm,”

unaware) from doing things that were

Howard explains. “I felt that was a false

risky for the business such as breaking

economy, to pay a consultant to develop

the NZ Government procurement rules

a separate team for them, when the

which are based on the trade agreements

money would be better spent on making

we have from around the world.”

sure that the existing procurement func-

The first department Howard and his

tion developed a commercial business

team connected with was ICT, which

partner approach and a delivery structure

was busy completely transforming the

that allowed us to get on with the right

organisation through a move to cloud-

level of advice.”

as-a-service. “They wanted to do a big transformation project and were thinking

From ICT, the business partner approach was rolled out to Capability,

“The PCI at NZDF has since moved up to 3.1 within 12 months and has just been reassessed at 3.35” — PA U L H O W A R D ASSISTANT CHIEF, JOINT DEFENCE SERVICES (COMMERCIAL)

NZDF

Logistics and then Estates and

at the very beginning of procurement

Infrastructure. “On a holistic level, we’re

projects to maximize value. We’re very

still in the throes of doing that improve-

much moving towards ‘agile or lean

ment program. We are very much looking

procurement’ too, in terms of making

towards World Class, because I believe

sure that we know exactly what it is that

it’s very difficult to achieve World Class,

we want from the market and that the

especially for a public service organisa-

market is very well appraised of before we

tion because of the lack of a bottom line

actually pull the trigger on the procure-

and the inevitable political shifts that

ment process. We’re not quite there yet,

affect the organisation. So, we’re talk-

but we’re making great progress.”

ing about a vision towards World Class, making sure that we are professional in our dealings, and that we’re involved

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Part four of Frank Vorrathâ&#x20AC;&#x2122;s supply chain masterclass, Executive Partner of Supply Chain at Gartner Part four of a six part supply chain masterclass with Frank Vorrath, Executive partner of supply chain at Gartner. Frank explores the concept of organisational structures and talent development in order to support the next era of business growth

WRITTEN BY D a l e B e n to n

LISTEN TO FRANK VORRATHS PODCAST ON THE DIGITAL INSIGHTâ&#x20AC;&#x2122;S OUTPUT CHANNELS BELOW

F R A N K V O R R AT H E X E C U T I V E PA R T N E R O F S U P P LY C H A I N AT G A R T N E R

expand current business capabilities to create sustainable performance and results; they have to continuously innovate, transform, and create a new business capabilities to support these new

alk us through the concept of organisational structures and talent development

business models. What customers expect from organisations going forward is convenience,

designed to support the next era of

but also for business to respond to any

company business growth?

kind of demands, at any given point of

If you think about what companies

time, which means you have to organise

are intending to do, in terms of driving

your organisation in different ways, than

performance and profitability to impact

you did in the past.

shareholder value, and to attract new

The whole purpose of an organisation

investors - they need to focus on a few things, and one of those things is making the best decisions for investments in working capital and fixed assets, to generate the highest potential earnings to create shareholder value, while moving through uncertainty and managing on-going business disruption. Companies have been coming to the marketplace, and based on their foundational business capabilities, in order to compete, that wonâ&#x20AC;&#x2122;t be enough in the future. Around 63% of all companies over the next couple of years will go through business model changes, redesigning business models and looking into the future basis of competition, and that means they have to not only 58

S U P P LY C H A I N M A S T E R C L A S S W I T H F R A N K V O R R A T H

is to make decisions. The decision-mak-

be your people. They are, sometimes

ing and the execution are not in isolation

the same, but sometimes with differ-

from one another. You have to organise

ent expectations. Hereâ&#x20AC;&#x2122;s where the

and design an organisation to be able

challenge comes. An organisation is

to generate value for you as a busi-

always under pressure to perform on

ness as well as to respond to customer

the highest level. That means in terms

demands.

of providing the highest potential earnings, providing the highest potential on

Is there a challenge in trying to remain

return on capital employed to satisfy the

profitable and successful during

shareholders in the business because

disruption and transformation?

shareholders are so important.

The challenge is to be able to respond

Think about the sustainability effect

to the lead stakeholders in a business.

on business continuity to perform under

That could be your customer or it could

these new business models; there is a

w w w.c postrate gy.com

transformation needed, which means

How important is it for businesses

you looking for investments. The invest-

undergoing to invest and to spend

ments could be in your people in the

time enabling employee engagement

talent and so you need to have a new

and talent management to bring

organisation because talent is a crit-

everybody into the decisions to

ical enabler for an organisation to be

create wider collaboration?

successful in future, not only currently,

Talent and people are the key enablers

but also taking into account the chang-

for companies to compete. There is

ing of roles through digitalization and

so much talk about technology in the

that require investments. Conversely,

future, but at the end of the day, it’s the

you could be looking into emerging

people we’re most interested in. We all

technologies as an enabler to acceler-

know about a shortage of people when

ate and create the next best practices

it comes to certain functions within

frontier, which is linked again to creating

the supply chain and the companies

the value for your customer, and which

who really understand and develop the

is then fundamentally important for you as an organisation for your basis of competition. When you invest in building high capa-

“ W hen you invest in

bilities you’re actually taking cash from

building high capa-

your existing operations or generated

bilities you’re actually

by your existing operations, to invest in building new capabilities in order to

taking cash from your

perform on a different level than you

existing operations or

perform today, in order to give something back to the shareholders. So that’s why it is challenging because organisations sometimes are not in a position to reinvest in the business and they need to fix the house first.

generated by your existing operations” — F R A N K V O R R AT H EXECUTIVE PARTNER OF SUPPLY CHAIN AT GARTNER

S U P P LY C H A I N M A S T E R C L A S S W I T H F R A N K V O R R A T H

talent they have, while also looking in

more purpose driven structures and

from the outside to consistently bring in

networks and connected people within

new talent into the organisation, are the

those networks and the roles they play

winners in tomorrowâ&#x20AC;&#x2122;s marketplaces.

and how they empower people.

Organisations are realising that

They are also looking into contribu-

the old structures of high hierarchy

tion and rewarding the contribution

donâ&#x20AC;&#x2122;t work anymore and they real-

related to the purpose they have.

ised that structures need to change to

Organisations are shifting more to

increase empowerment and collabora-

talent development programmes.

tion and innovation in an organisation.

The reason for that is that organ-

Where you have typically a hierarchy

isation really realising that they

around control and chain of command

need to empower their people

about titles about task, accounta-

more because thereâ&#x20AC;&#x2122;s so much

bility for cost, bureaucratic, now you

brain power in an organisation lost

will see organisations looking into

because of old structures.

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S U P P LY C H A I N M A S T E R C L A S S W I T H F R A N K V O R R A T H

How does the concept of a shadow board better enable a business to perform and transform seamlessly into this new era of business? You have companies being set up from a governance point of view with a board of directors and they have a responsibility towards shareholders. Now, the whole idea and concept of a shadow board is that you give young, emerging talents in an organisation the opportunity to present their ideas or even observations to senior leadership and ask: what would they do to run the organisation differently? What have they observed? We know that over the next 10 years, the financial performance of 25% of enterprises will be weakened because of competition that does not exist today. This is where senior leaders in an organisation and the Board of Directors can use the opportunity to use millennials through a shadow board. They can turn to these younger generations for their brain power in in terms of raising the bar for competitiveness or repositioning their organisations in the marketplace. So instead of having the traditional boards running an organisation, there are companies out there with shadow boards, running in parallel. They are trying to integrate that w w w.c postrate gy.com

concept more, but the decision-making

people with the young generations

is still with the main board. Insights are

of people in your organisation, then

delivered to the business, senior leader-

you capture innovation, which some-

ship, as well as Board of Directors from

times comes from younger generations,

shadow boards.

because they are used to new technologies. You also capture experience and

How will the idea of a shadow board

expertise at the same time. Now, when

play into enabling the workforces of

you can connect that to a purpose, an

tomorrow?

organisation can become even better.

The next wave of retiring profession-

It is often informal, but there is a better

als is just around the corner and so you

way of doing this formally, which means

want to capture that expertise, experi-

that can be a part of a former Talent

ence and knowledge before it actually

Development Programme, where you

walks out the door of your business.

have mentors coaching talents and your

If you can connect more experienced

organisation from an experience and

S U P P LY C H A I N M A S T E R C L A S S W I T H F R A N K V O R R A T H

expertise point of view, in combination

what the true strategy and the purpose

with the innovation. It’s a transfer of

of that organisation is. Having a better

knowledge, which can happen on both

understanding of the overall strategy,

sides; it’s not one sided. Because you

goals, objectives, will really contribute to

capture the innovation as well as expe-

creating that attractive workplace.

rience and expertise. You transfer that

People want to be empowered. They

knowledge to the next generation of

want to take more ownership, and

leaders in your organisation.

responsibility and accountability. So you need to create a structure which

How do you make a workplace more

allows the freedom of people to take

attractive so that you can retain

that ownership, they also want to have

this future workforce and hire new

an understanding of long term commit-

talent?

ments, and long term commitments of

I believe what makes a workplace really

the business not only from the sustain-

attractive is if people can understand

able business performance and results; it’s also from their commitment to sustainability.

“ T here is so much talk about technology in

What also makes an attractive workplace is removing barriers and having the ability to make faster decisions,

the future, but it’s the

creating an environment of innovation,

people we’re most

freedom. Freedom is about the concept

interested in” — F R A N K V O R R AT H EXECUTIVE PARTNER OF SUPPLY CHAIN AT GARTNER

but also, creating an environment of of work life balance. In the workplace of the future, it won’t matter if you work from an office or from somewhere else, it’s all related to the business outcome you’re trying to accomplish. One important factor for creating an attractive workplace is through social contracting, which means the social networks in organisations are very, very powerful. w w w.c postrate gy.com

Which means people are connected 24 hours, they can exchange information inside the organisation and outside the organisation, using social media, platforms, etc. If you could offer one piece of advice to an organisation embarking on a transformation of structure, what would it be? My advice would be when they make decisions; they need to make decisions for their investments and their main stakeholders of their business. How is that impacting my customers? How’s that impacting my people? And how is it impacting my shareholders or potential new investors in the business? So, make the best-informed decisions around all your stakeholders in your business, and don’t show preferences.

LISTEN TO FRANK VORRATHS PODCAST ON THE DIGITAL INSIGHT’S OUTPUT CHANNELS BELOW

S U P P LY C H A I N M A S T E R C L A S S W I T H F R A N K V O R R A T H

w w w.c postrate gy.com

5 WAYS OF ACHIEVING SUSTAINABILITY IN PROCUREMENT WRITTEN BY D a l e B e n to n T H E S U P P LY C H A I N A N D P R O C U R E M E N T F U N C T I O N I S R E S P O N SIBLE FOR MORE THAN 80% OF A CONSUMER BUSINESSâ&#x20AC;&#x2122; GREENH O U S E G A S E M I S S I O N S . N AT U R A L LY, B U S I N E S S E S S E E K W AY S T O E N A B L E G R E AT E R S U S TA I N A B I L I T Y W I T H I N T H E I R S U P P LY C H A I N A N D P R O C U R E M E N T E C O S Y S T E M S . H E R E , W E L O O K AT F I V E W AY S O F A C H I E V I N G S U S TA I N A B I L I T Y I N P R O C U R E M E N T:

5 SHIFTS IN PROCUREMENT FOR 2020 AND BEYOND

INCREASED REGULATION AND COMPLIANCE WITH SUPPLIERS Regulation and compliance have

in this environment will mean

long been hot topics for supply

developing a well-defined

chain and procurement organi-

supplier compliance manage-

sations, but due to the increased

ment strategy and programme

spotlight on supplier risk, and

with a focus on continuous

non-compliance, the conver-

supplier performance moni-

sation continues to heat up. A

toring, regular supplier audits

recent study from CIPS revealed

and assessments, collaborative

that half of global firms have

corrective actions and timely

faced supplier non-compli-

compliance reporting. Companies

ance challenges, with the rising

that embrace such a strategy

complexity and fragmenta-

will not only be well prepared for

tions of supply chains causing

new regulatory enforcement, but

management systems and docu-

will also be known as strong and

mentation issues. Succeeding

ethical brandsâ&#x20AC;?.

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OPEN COMMUNICATION WITH THE CONSUMER Transparency. It is a keyword

companies must be ready to

often spoken, but never truly

embrace a level of transpar-

understood. What does it

ency that is dictated by their

mean? Openly communicat-

consumers and not by their

ing the intricacies of all your

stakeholders. A recent study

business operations? And

conducted by MIT Sloan School

who decides what needs to be

of Management, revealed that

communicated? The answer?

75% of respondents consid-

The consumer. In the age of

ered transparency helpful in

information, the consumer

strengthening trust between

decides with their feet and

businesses and consumers.

their wallets and these deci-

“At a time when customers

sions are made easier through

are becoming savvier – and

access to information around

more sceptical – about social

business practice like never

responsibility, our findings

before. The current and

show that the investment can

future generations will have

be worthwhile as it always

far more focus on sustain-

engenders consumer trust,”

able best practice, and so

the research said.

5 SHIFTS IN PROCUREMENT FOR 2020 AND BEYOND

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5 SHIFTS IN PROCUREMENT FOR 2020 AND BEYOND

AVOID THE HURDLES OF RESOURCE-HEAVY INVESTMENTS IN SUSTAINABILITY While companies are making

by 38% of companies as one of

valiant efforts to improve their

the biggest barriers for supply

supply chain sustainability, it

chain sustainability. So, what

is coming at a cost. Whether

is the solution? Adopting a

itâ&#x20AC;&#x2122;s large or small businesses,

smart approach to it. Making

each business has a complex

the right decisions based on a

and robust network of suppli-

big picture view combined with

ers and monitoring each and

a granular understanding of

every supplier is a resource-

the end-to-end supply chain.

heavy process. Businesses,

Advancement in technology,

almost forgivably, will look to

particularly in the realm of digi-

allocate their resources else-

tal twins, will play a key role in

where if this continues to be

supply chain sustainability in

the case. Cost was identified

the coming years.

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STICKING WITH TECH Technology has undoubtedly,

procurement best practice

opened the door to a new

in the years to come. A key

future for every business and

example of this comes from

every business function. We

Unilever and how it rolled out

are indeed living in the age of

an online monitoring tool for all

information and technology

of its Chinese suppliers. This

has enabled the CPO to under-

tool enabled its suppliers to

stand his or her supply chain

reduce its energy consumption

and procurement ecosystem

by close to 10%. This tool is part

like never before. It goes with-

of a broader ambition that will

out saying that technology

see the company procure 100%

will play a key role in enabling

of its agricultural content from

sustainable supply chain and

sustainable sources by 2020.

5 SHIFTS IN PROCUREMENT FOR 2020 AND BEYOND

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5 SHIFTS IN PROCUREMENT FOR 2020 AND BEYOND

POWER TO THE PEOPLE For all the talk of supply chain

historical misconceptions as to

and procurement sustainabil-

the value of procurement as a

ity, the conversation tends to

profession. Organisations such

focus on the bottom lines and

as CIPS work extensively to

the technology. One would be

address these perceptions and

forgiven for forgetting one of

provide a greater understand-

the biggest things within the

ing as to the professional and

ecosystem – the people. As the

intellectual development that it

old expression goes, a fool with

can enable, with technology and

a tool is still a fool and busi-

innovation, ethical and respon-

nesses must look to invest in

sible sourcing, and sustainable

their people as well as their tech

and environmental procurement

in order for them to be able to

just a few of the key drivers

drive true value from the latest

of the procurement conver-

innovation. In 2015, a survey

sation. Procurement after all,

revealed that people were iden-

is a function built on relation-

tified as one of the biggest chal-

ships. How can an organisation

lenges facing supply chain strat-

unlock greater sustainable best

egy in the next 10 years. This

practice from its supplier rela-

is in part due to the impend-

tionships, if it doesn’t invest

ing ‘skills shortage’ that looms

in the people to foster those

over the industry as a result of

relationships?

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AECOM MANAGEMENT SERVICES: DEVELOPING AND OPTIMISING PROCUREMENT WRITTEN BY D a l e B e n to n PRODUCED BY H ey ke l O u n i 80

JOSEPH LEE, VICE PRESIDENT OF PROCUREMENT AND SUBCONTRACTS, EXPLORES HOW AECOM OPTIMISES ITS PROCUREMENT TO BECOME A STRATEGIC SOURCING ORGANISATION

found that procurement was still viewed as something of a cost centre. “They received requirements and executed them. That was it,” he explains. “There was little value-add; no metric, performance or accountability to the team. After assessing, I recommended we stand up a strategic

hether it’s building iconic

organisation; one more forward-lean-

skyscrapers, planning new

ing that could negotiate long-term

cities, delivering clean water

agreements in order to create efficien-

and energy, securing nations or building economic infrastructure, AECOM is a company that delivers projects and programs to improve people’s lives in more than 120 countries worldwide. Naturally, given the scope of its portfolio, AECOM requires a procurement and supply chain function that goes above and beyond the traditional procurement role - one that is often passive and reactive. This is where Joseph Lee, Vice President of Procurement and Subcontracts for AECOM’s Management Services Group, comes into the fold. The Management Services Group is responsible for providing services for federal governments around the globe. Joining the business in early 2017, Lee was tasked with creating a plan to transform the procurement organisation and to assess it in its existing format. Here, he 82

AECOM

cies in our transactions. The idea was

to create a strategic sourcing organ-

from PR requisitioning to the buying:

isation that manages multiple cate-

a process that would normally take

gories and, from there, a procurement

around 10 days. Lee looked at reduc-

organisation drawing from strategic

ing that to one or two days and pushing

agreements in place.”

it even further to around 30 minutes.

Once this plan was approved, Lee

“Another element we looked at is tech-

turned his attention to other efficien-

nology as a tool to manage our end-to-

cies, and he brought in Lean Six Sigma

end supply chain, because we only had

Black Belt to look at the company’s

a single, transactional tool in place,”

processes and develop ways in which

says Lee. “What we have done is reach

they could be improved. This would

out to Amazon Business, which gives

include building greater cycle times

you more tools and visibility, allowing

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FOR MODERN SUPPLY CHAIN AND PROCUREMENT IT,

AECOM CHOSE IFS

AECOMâ&#x20AC;&#x2122;s Management Services Group is transforming their supply chain and procurement processes with IFS Applications, helping them become more agile, flexible and responsive to the dynamic mission priorities of their federal and commercial customers. #forthechallengers

you to have more sourcing capabilities

an operational perspective to buy

and be able to bucket and source with

through the company’s contracted

limited suppliers.”

suppliers. On paper, these transform-

Following the implementation of

ative steps sound simple, but they

Amazon Business, AECOM can better

allowed AECOM Management Services

control its tail spend allowing Lee to

to see clear successes as part of this

look at generating even more effi-

journey. However, Lee is quick to high-

ciency in the company’s purchas-

light that there is always challenge in

ing. Lee increased the dollar thresh-

transformation, particularly when it

old for micro-purchases from $3,500

comes to procurement.

to $10,000 allowed by the Federal

Lee approached the challenges in

Acquisition Regulation (FAR). What

three key areas: people, processes,

this did was give the ability back

and tools. Given the new tools that Lee

to AECOM’s internal customers,

had implemented, he needed to ensure

giving them what they need from

that he had the right people with the w w w. cp o stra te g y. co m

right capabilities in order to deliver on the promise of these new processes. “There’s two parts of what we are planning to do with our people,” explains Lee. We’re actually making the investment. We’re training them, and we’re helping them understand what customer service is. We’re helping them improve on their visibility, transparency to our customer, and we’re providing them with the tools to be more successful. Likewise, we’re bringing in more seasoned strategic sourcing folks to run and execute our strategic sourcing plan.” Lee is a firm believer in developing people. He highlights that in the three areas - people, processes, and tools, no single area should fail, but he places people at the very top of the list with regards to importance. “When you’re making investment into viewing your process, into automating your process, and putting in the tools, you also need to make that investment to your people. You need to go back and look at their capabilities and identify the gaps,” he says. “You just don’t hire someone because they have the background, the education, and the skills, to be able to execute then put them to work and that’s it for the next maybe five or 10 years. You continue to develop them, 86

AECOM

just like you’re continuing to enhance your process.” The goal for AECOM Management Services was to become a forward leaning, strategic sourcing organisation. But what does strategic sourcing mean to AECOM? Lee admits that it can mean many things to procurement professionals and organisations around the world, but for him, it’s simple: “It’s about aggregating your spend to optimise your buy,” he says. “What this means is that you can look at your spend category and go back to your business customer, then start understanding the

“ WHEN YOU’RE MAKING INVESTMENT INTO VIEWING YOUR PROCESS, INTO AUTOMATING YOUR PROCESS, AND PUTTING IN THE TOOLS YOU ALSO NEED TO MAKE THAT INVESTMENT TO YOUR PEOPLE. YOU NEED TO GO BACK AND LOOK AT THEIR CAPABILITIES AND IDENTIFY THE GAPS” — JOE LEE VICE PRESIDENT, PROCUREMENT AND SUBCONTRACTS AECOM

forecasts to be able to leverage your spend and then go back to the suppliers. You are optimising your buy because you understand the volume better to be able to drive your cost down.” Procurement is built in equal parts by its internal operations and its external robust supplier network. As AECOM transforms its procurement process for its government clients, this has an impact on the supplier relationships that are in place. As Lee notes, strategic sourcing doesn’t stop at the internal level. “It’s a 360-degree cycle,” he says. “We have supplier meetings on a quarterly basis to understand the spends and understand the forecasts. Only then w w w.c postrate gy.com

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can you adjust your forecast.” “Your supplier is not only working with

of continuous evolution and following the successful implementation of

you as part of your relationship. They

Amazon Business and Lean Six Sigma,

understand your requirements and we

Lee is already working on the next form

encourage them to be more of an inno-

of evolution. AECOM is currently testing

vative contributor to our business. What

Robotic Process Automation (RPA) and

I mean by that is, we have a strategic

improving supply chain technology and

long-term agreement with the suppli-

execution. Here, the company is working

ers, and they see our requirements and

closely with global software company

our patterns over time. I want them

UiPath and global enterprise applica-

to be able to come to me and identify

tions company IFS, respectively.

ways in which we could do something

AECOM is working with IFS to imple-

cheaper, or more efficiently. They have

ment a full-suite ERP system that

a licence to do that and that’s what I call

is robust and modular and allows for

supplier engagement.”

sourcing and contract management

The journey of transformation is one

while also providing greater control over w w w. cp o stra te g y. co m

“ Y OU JUST DON’T HIRE SOMEONE BECAUSE THEY HAVE THE BACKGROUND, THE EDUCATION, THE SKILLS, TO BE ABLE TO EXECUTE, AND PUT THEM TO WORK, AND THAT’S IT FOR THE NEXT MAYBE FIVE OR 10 YEARS. YOU CONTINUE TO DEVELOP THEM, JUST LIKE YOU’RE CONTINUING TO ENHANCE YOUR PROCESS” — JOE LEE VICE PRESIDENT, PROCUREMENT AND SUBCONTRACTS AECOM

risk mitigation, property management and logistics. With IFS Applications, AECOM will be able to automate and streamline numerous front and back office processes, enabling the company to tighten the procurement cycle, regardless of whether inventory is received at an AECOM warehouse, a customer location or a construction site. The technology will allow AECOM to be more agile, flexible and responsive to the dynamic mission priorities of their federal and commercial customers. “They also have a ‘lobby platform’ that is a dashboard in which we can access everything,” says Lee. “With IFS, we realised that with what we need today, and what we need in the future, they are the ideal partner to help us get there on both fronts. We work side by side with IFS.” With UiPath, AECOM has proven out the use of Robotic Process Automation (RPA) where software “robots” act as digital workers to automate common and repetitive tasks. Any process that is manual, time consuming, fairly structured and data collection are all candidates for Robotic Process Automation (RPA). AECOM is testing the implementation of bots into their repetitive processes, again covering 92

AECOM

“ YOUR SUPPLIER IS NOT ONLY WORKING WITH YOU AS PART OF YOUR RELATIONSHIP, THEY UNDERSTAND YOUR REQUIREMENTS AND WE ENCOURAGE THEM TO BE MORE OF AN INNOVATIVE CONTRIBUTOR TO OUR BUSINESS” — JOE LEE VICE PRESIDENT, PROCUREMENT AND SUBCONTRACTS AECOM

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Joe Lee Vice President, Procurement and Subcontracts AECOM Joe Lee is the Vice President of Procurement and Subcontracts for AECOM Management Services. Joe joined Management Services in 2017, leading a geographical and diverse group of procurement and subcontracts professionals. His organization is responsible for overseeing the acquisition, planning and execution, performance management, and risk mitigation of Management Services suppliers across all programs both domestic and international. Prior to AECOM Management Services, Joe worked at Raytheon as Director of Supply Chain leading the Subcontracts group responsible for the acquisition of various raw materials, products and services for a successful end-to-end supply chain for all manufacturing requirements. Before Raytheon, Joe worked at Deloitte and TouchĂŠ where he has held various leadership positions. He served as Practice Leader in Subcontracts and Procurement leading his team in support of the Federal System and Grant Management. Under his leadership, the team transformed from a passive to a strategic organization contributing in Deloitteâ&#x20AC;&#x2122;s business growth in the MENA region. He also held a position in Risk Management and Corporate Compliance Joe earned his undergraduate degree in Business Administration from the University of the East, and completed his Masters Certificate in Government Contracts at George Washington University

the areas of risk mitigation with their

to recognise that no transformation ever

supplier’s source selection and due

really ends. In fact, he believes it is his

diligence. “The source selection and

responsibility to continue to improve and

due diligence process entail accessing

optimise the organisation every day.

and collecting data from a variety of

Where will the company be in a year’s

sources in order to determine suppli-

time? “Probably with more tools that

ers financial, corporate integrity, and

I have implemented and will be imple-

operational capabilities and capacities

menting as part of the process improve-

to meet AECOM’s business objectives

ment and optimisation,” he says. “It

and minimise risks in our supply chain,”

never ends. Whether that’s from a

explains Lee.

people, process or tools perspective.

In a few short years, AECOM has

You don’t stop. Continue to develop and

already come a long way along this

optimise your organisation in order to

transformation journey, but Lee is quick

keep you on top of your game.”

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EVENTS OF 2020 W R I T T E N BY

Kev i n D av i e s

THE TECHNOLOGY INDUSTRY CAN EASILY BE DESCRIBED AS THE MOST MERCURIAL AND TRANSFORMATIVE. NEW IDEAS AND INNOVATIONS ARE FUNDAMENTALLY SHIFTING THE BENCHMARKS OF BUSINESS PERFORMANCE, SKILLS DEVELOPMENT AND EMPLOYMENT. THESE TECHNOLOGY CONFERENCES PROVIDE E XPERTS AND INDUSTRY PROFESSIONALS WITH A MUCHNEEDED BIRD’S E YE VIE W OF WHAT ’S HAPPENING NOW AND WHAT THEY CAN EXPECT TOMORROW…

03.03.20 EWORLD PROCUREMENT & SUPPLY Since 2001, eWorld Procurement & Supply has provided a unique insight into the latest innovations and technologies for senior procurement, supply chain and finance executives. eWorld provides a highly time-effective platform to keep up-to-date with the latest developments, market trends and hot topics.

EVENTS

31.03.20 PROCURECON INDIRECT 2020 â&#x20AC;&#x153;We launched ProcureCon in 1999 and have been dedicated to supporting the growth of Procurement ever since. What started off as 100 people in a room discussing where this sector is headed, has led to over 5000 senior-level procurement executives being inspired whilst learning and developing their company as well as their careers over the past 17 years.â&#x20AC;? Onsite you will receive a memorable learning and networking experience. With over 45 interactive case studies, drill down roundtables, workshops and networking functions ProcureCon Indirect will provide you with insight, intelligence and contacts that will benefit you and your organisation for years to come.

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EVENTS

13.05.20 PROCURECON INDIRECT 2020 800 procurement thought leaders came together across three days in London (2019) for the inaugural World Procurement Week, and at the heart of this was World Procurement Congress. Co-chaired by Jet Antonio and Joe Agresta, who encouraged delegates to Be bold in your vision. â&#x20AC;&#x153;Be fearless in all you do, the event broke down barriers and channelled high velocity procurement across highly immersive and thought-provoking sessions.â&#x20AC;?

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March 19-20, 2020 | Eden Roc, Miami USA

DRIVING THE PACE OF BUSINESS IMPACT 300

130

Senior Procurement Attendees

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Expert Speakers & Facilitators

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AN AGENDA BUILT TO HELP YOU DELIVER

Increasing the rate of business change Continuous innovation for continuous result Reconfiguring the whole value chain

@procurementLeaders #PLAPC

17.05.20 PROCUREMENT SUMMIT Procurement Summit is the new event for procurement in Germany. We have set ourselves the goal of adding to the landscape of procurement events in Germany with a modern, entertaining event featuring leading minds on the subject. Procurement Summit has been held annually in Hamburg since 2018 and brings together top experts from the fields of purchasing, procurement, logistics, supply chain management and sourcing to discuss current trends. The target group ranges from medium-sized companies to global corporations and professionally from users to consultants and other service providers, as well as technology suppliers for purchasing.

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EVENTS

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