A Procurement Compendium

Index

ACKNOWLEDGEMENTS

The originals of these articles – which I have in some cases edited, added to or otherwise adapted – appeared originally online, featured on various websites. Most were for various Spend Matters publications, including Spend Matters UK/Europe, Public Spend Matters Europe (which became Public Spend Forum Europe) and Spend Matters (US). A few featured in our Spend Matters UK/ Europe newsletter or on the late lamented Search4Procurement ‘jobs board’ we ran for a while with a notable lack of success.

My thanks go to Jason Busch, my business partner in the European venture and Spend Matters’ original founder, who first inspired me to try this whole ‘procurement blogging’ idea. His writing, insightful but laced with personality and even humour, showed there was a way of writing about procurement that wouldn’t automatically send its audience to sleep!

More thanks to Nancy Clinton, our Publishing Director, who edited some of these articles and has been a great colleague and friend over recent years, and to Raj Sharma, the visionary founder of Public Spend Forum and now Govshop. And our readers, particularly those who commented on our material, and made sure I kept going through days when I struggled to find that really fascinating topic to cover!

I’m also grateful to everyone I’ve met in the procurement world who has helped me learn and understand more about our business, including those whose books have been useful and / or inspiring such as Dick Russill, Andrew Cox, Jonathan O’Brien, Sigi Osagie and many more – and practitioners who have similarly contributed directly. I’m not going to name them all for reasons of space, but most will know who they are if they happen to read this – thanks!

Finally, thanks to my wife Jane who got used to me seeing a chance for a procurement article in everything we saw, did or talked about. The price of cabbage – an article about global warming and vegetable crops! Choice of university for a friend’s daughter – a debate about how ‘open’ the higher education market might be! A lovely skiing holiday – supply chain issues when your resort might be cut off by blizzards! You get the idea …

FOREWORD

I got into procurement by accident, like many of us in the industry. I still don’t know how. I was working for Mars when the Head of HR tapped me on the shoulder – literally – and suggested I really might like to apply for a Purchasing Manager role. I was working in sales, in the office, rather than out on the road, with the plan being I would move into Marketing within a few months. I hadn’t even thought about purchasing, but when HR suggested something at Mars, you tended to do it!

It turned out to be a great move, but I still don’t know if Mars was just desperate to get me out of sales or whether the legendary Neil Coutts, then number 2 in the Purchasing Division, wanted me in his team – he knew me as we were both in the semi-serious Mars tennis-playing circle. So, either sporting nepotism / networking or incompetence at designing promotional material for the sales force explains how I got into procurement!

Writing was also an interest from a relatively early age. I wrote some sketches for Footlights at university, and after that dabbled with scripts for sitcoms, song lyrics, stories for my young daughter, and then co-wrote a proper procurement book, published in 2010.

I wrote for Supply Management magazine regularly, when I was working as a procurement director and then consultant, and then (as mentioned in the ‘Acknowledgements’) Jason Busch inspired me to start blogging to support my consulting business. That turned into Spend Matters UK/Europe and the rest is… well, if not exactly history, several million words of attempted wisdom about all things procurement.

This book is a collection of articles from the first few years of Spend Matters UK/Europe and associated online publications and newsletters. I’ve arranged it broadly by topic and included some short links and new explanations where appropriate.

Obviously, I have not chosen articles that related to very specific events or issues that were quickly forgotten, but where they were significant like the London 2012 Olympics you will find some references. Topics such as the latest news about tech firms date very quickly, I realised, whereas thoughts about good practice or economic analysis are often still relevant.

Anyway, while there is content here that has some sort of ‘educational’ purpose, this is designed to be dipped into rather than consumed at a single sitting. You might even decide to keep it on the bathroom windowsill, if you see what I mean - but most importantly, I hope you enjoy it, wherever you choose to consume it!

Chapter 1

BEING A

PROCUREMENT LEADER

Let’s start this selection with some pieces relating to the whole business of being a senior procurement executive – what should you think about, who might inspire you, and so on.

I got to Procurement Director level relatively young, which was great in some ways, but looking back, I made many mistakes and perhaps lacked both experience and some external advice or guidance. So, whilst I would never presume to ‘tell’ people how to do their jobs, I like to think some of this material might be useful to people going through a similar experience to my own, perhaps coming to terms with a first senior role.

To start, an insight into my regrets relating to my time as a procurement director (for the Dun & Bradstreet Corporation, the Department of Social Security and the NatWest Group). I also commented about my successes, but I think the regrets are probably more interesting! I wrote a series of articles; here are a couple of those.

Things I Wish I’d Done When I Was a CPO

I wish I had fired more people

OK, let’s start with a controversial point! Thank Guy Allen in part for this. At his Real World Sourcing workshop last year on ‘the first 100 days of a new CPO’ he suggested that firing someone was a good thing for a new leader to do in order to establish authority and ‘pour encourager les autres’, as he said.

My thinking is not quite that. It is more that I suspect I was too tolerant of poor performance at times. I’ve never enjoyed those disciplinary aspects of line management (not many of us do, let’s be honest) but what I’ve realised is that you won’t be forgiven by your peers and boss if procurement’s performance is dragged down by poor performing staff. The image of your entire team can be very negatively affected by one or two people, and few of us have enough slack in the system that you can hide them away where they can’t do any damage.

So, I wish I’d grasped the nettle on a couple of occasions and been more decisive. Of course, it is easier in some organisations than others, and it is notoriously difficult to lose people in the public sector, however badly they perform. Indeed, I still think that is one of the few areas in which the private sector is demonstrably ‘better’ than the public – in its approach to performance management.

Or you can just hope people go of their own volition – it does happen sometimes, and I can remember one occasion when I really gave thanks to one of our competitors for poaching a particular procurement manager! But if you really want to move the procurement function forward, your team is key, and you just can’t afford to have people around who don’t contribute. Be fair, be objective, but ultimately, be decisive.

I wish … I’d been bolder in terms of investment

It’s never easy asking for money, and of course many of us in procurement are by nature fairly cautious with our money. One might even say a little parsimonious at times, miserly perhaps at the extreme? I don’t think I fall into that category, but I was certainly cautious, and saw that as an admirable trait. Which in most cases and for most of the time, it is. However, there are times when one needs to be bold, and that was never something that came easily to me.

It’s not impossible to drive change without spending money, but it is tough, it takes longer, and I suspect it is even harder to do it today than it was when I was a CPO. Investment, whether it is in tools and software, people through recruitment and training, or consulting and similar support, can definitely accelerate the change and increase the chances of success.

And what I’ve learnt is that generally the CPOs who drive the most visible change and the biggest success are prepared to put their hands up and say, ‘I can deliver these benefits, but I am going to need some investment to achieve them.’ I wasn’t very good at doing that, partly because of this innate caution about spending money.

It’s also worth noting that the best time to have the conversation is very early in your time with an organisation. Indeed, if you are really courageous, talk about it at final interview stage. If you don’t get good signals back, then you can decide if you are still interested in a role where investment may not be on the table (it might still be a decent job but at least you know where you stand). If you leave it until you’ve been in the role for two years, the danger is the organisation perceives everything is fine, they like you, results look good – so why spend a million on a transformation programme?

The other opportunity where you may have to make the case for investment is if there is a ‘burning platform’ – or you can create the perception that there is one. But that’s a topic for another day, I think.

Anyway, you have a choice. You don’t have to be bold, and many CPOs do just fine without putting their heads above the parapet. But you only get one chance in life and one chance as a CPO of a particular organisation, so I feel I should have been a bit more daring!

I wish… I’d been more sociable with my senior peers and colleagues

Looking back, I think I was reasonably effective in the formal stakeholder management situations – giving a presentation to the Board or the like. But I could have been better in terms of that senior stakeholder management if I’d cultivated my relationships with some key senior colleagues better. I’m particularly thinking about my time at NatWest and I’m talking about the CIO, the Group Property Director, CFOs and COOs for the major divisions of the bank – the people who were critical to the credibility, acceptance and indeed provenance of my procurement team.

What brought it home to me was when NatWest found itself in the takeover battle with RBS and the Bank of Scotland. In adversity, the senior managers got to see each other much more often, and I got far closer to people like the CIO than I had before, and actually ended up with a good relationship with him and most of the others. But why hadn’t I got to that point earlier? A little natural reticence, maybe the fact that most of the people were a bit older than me and I hadn’t been with the firm long … I don’t know.

But certainly, one thing I could and should have done was the ‘fancy a beer sometime?’ tactic. Or coffee, lunch, whatever. Of course, we would have talked work, even if we had gone to the local pub. But just to get into a less formal situation might have helped in having some of those potentially challenging discussions about working together, roles and responsibilities, and so on. To chat about the tensions between IT and procurement, or how we could do a better job to support the retail bank change programme would have been useful to all parties.

Because however brilliant our category strategies or engagement roadmaps, relationships do still matter, and nowhere more so than in how we interact with our critical internal stakeholders.

***

As we’re talking about leadership in this section, let’s have a look at four of the many interviews I conducted. One was with a giant of the procurement world (John Paterson), one with more of an unsung hero (Paul Barker of HMV, a firm that was going through challenging times when we interviewed him, and the challenges have continued of course), Ellen Davis, a late entry into the procurement profession, and Jon Hughes, who never led a function, but as a thinker, trainer and mentor has been very influential in the profession. We’ll start with him.

Jon Hughes

Jon Hughes announced his retirement as Chairman of Future Purchasing recently. After a career as one of the true thought leaders in procurement, including winning the CIPS Swinbank Medal a few years ago, I caught up with him for a very animated and fascinating phone call the other day.

So Jon, what are you most proud of in your 30 years plus in procurement?

Firstly, being involved in the 80s and 90s in defining rigorous processes for what we now see as the core of procurement – areas such as Category Management and SRM (supplier relationship management). That just hadn’t been considered and systemised in the way that a number of us did then, working with firms like Reckitt & Coleman and SmithKline Beecham. And I still see some of our material being presented as original work by consulting firms and others even now – I can recognise our typos!

Then, I like to think I’ve contributed generally to the IP of the profession over the years with my writing, speaking and advisory work. I’ve always tried to get away from simplistic thinking and options and help people get under the surface and into deeper ideas.

What about regrets?

I’ve spent a huge amount of time helping to develop functional procurement improvement and excellence. I wish I’d done more in the executive development area. Why hasn’t procurement been able to influence top management more strongly? When I have got into that level, it has usually been successful – even revelatory at times for the top team. But it doesn’t happen enough, we need to shape their thinking more.

And on a similar note, I regret not doing more to develop procurement at MBA level. We have some universities offering procurement-related MBAs, but not the top ones, we still don’t have LBS, Harvard, or INSEAD teaching procurement. The momentum seems to have gone on the business school side – we need to change the fundamental thinking of business leaders, help them get their minds around key business issues, understand how suppliers should align to the business. And the thinking in the public sector seems also to have regressed – where is the debate around integration of suppliers into programmes and achieving policy goals?

Which organisations have been the most stimulating to work with?

I’ve been lucky to work a lot in FMCG – Reckitt, Diageo, Nestlé – there’s a real energy there and its always interesting working with the marketing community. Then there is Pharma – the link between procurement processes, suppliers and the whole research process is fascinating, whether it’s been large firms like GSK and Novo Nordisk or smaller firms such as Lundbeck.

The third area is actually the public sector – the work I did with Professor Andrew Cox in health trusts was fascinating and innovative, we felt. The tensions in the sector between supply and demand, the complexity of the systems – there’s still a need I perceive there, some big work needs to be done in health.

Which individuals have had a major impact on your thinking?

I was incredibly lucky to work with Ken Bowers, who was probably the first procurement consultant operating in the UK at the end of the 1970s. He was very much my mentor, and I dedicated my book, Transform Your Supply Chain, to him.

I’ve also been fortunate to work with some great, forward-thinking CPOs – Mark Ralf, John Dixon, Robin Cammish and others. I also have huge respect for Professors Lamming and Cox, even if I didn’t always agree with everything they said! I’ve also met good people in the public sector – if I was continuing, I would want to put effort into that area. I think a few key individuals could still make a huge difference to public procurement.

***

Becoming a Procurement Person – Ellen Davis explains her move from HR

We’re halfway through David Smith’s year as CIPS President, amazingly, and we hope to get his perspective soon on how his Presidential theme is working out. You may remember he is promoting the idea of encouraging young – and not so young – people to join the procurement profession. That is both about explaining what a great career it offers, and also helping people get a foot on the ladder through apprenticeships and the like.

So, when a mutual friend told me about a lady who had made a very conscious mid-career choice to move into procurement – from Human Resources, no less – I thought it would be worth talking to her. What is her perspective on our profession, why did she take the decision, and how she was finding the brave new world of procurement?

Her name is Ellen Davis, and she leads the procurement function at the UK Hydrographic Office in Taunton, Somerset, in the South-West of England. The UKHO ‘provides nautical charts and navigational services of the world’s oceans and ports to support world shipping, including the Royal Navy’.

It’s an organisation going through huge change, as its core business for the last 200 years, providing very high-quality navigational charts of the seas, is moving from a predominantly paper series of charts and products to a digital one, with changing production methods and new competitive challenges rapidly arising.

Davis was originally an HR manager in the MOD and moved to the UKHO 13 years ago. She worked on career development issues, and she says that she felt ‘I should think about my own career in the same way that I was advising others to do!’

Then, in around 2008, she saw a piece written by Amyas Morse – he now heads up the National Audit Office but was then Commercial Director for the MOD. He explained that procurement in the MOD needed more ‘managers not technicians’ and outlined what a great career and profession one might have in MOD commercial. He must have been very persuasive, because Davis decided to make that move. She signed up for the MCIPS programme in 2009, paying for the first year of education herself, and before she actually had a job in the function – very brave!

Move on three years, and not only has she passed all her exams first time on her path to MCIPS, but she is also now Head of Procurement in UKHO. She now heads a transformed procurement team and has recently also taken ownership of delivering an on-demand digital print capability for her business.

‘We’re becoming less transactional – we’ve introduced category management, nearly all of the team are now CIPS-qualified, and we want to be seen as leaders in the public sector,’ she explains. ‘But I have found the public sector procurement constraints frustrating at times,’ Davis says. ‘We can’t just do deals even where we see real opportunities; we have to stick with the processes.’ (Welcome to the world of public procurement, Ellen!)

Moving from HR to Procurement seems a pretty unusual step?

‘I do actually believe there are a lot of similarities between the functions. Take negotiation skills – they’re certainly important in most HR roles. Supplier relationship management comes fairly naturally to me, I feel – like much of HR, it’s about getting the best out of people, and communicating effectively.’

The whole area of managing internal stakeholders effectively is another where she feels there is a clear read-across between the roles.

‘Persuading stakeholders of a particular course of action – one they might not initially feel comfortable with – is again something that both HR and procurement often need to do. I’d had some experience of the theory around persuasion techniques, but this was an area where the CIPS education was useful – we covered Yukl’s 11 influencing tactics, and as well as the academic side of things, the opportunity to test the approaches in real-life situations has also been highly educational!’

(As an aside – it’s good to hear praise for CIPS education, particularly in a behavioural rather than a technical area, which was historically perhaps the stronger suit for CIPS.)

Are there any areas where she feels her background is still a weakness or an issue?

‘I’ve got very strong technical specialists in the team who understand the nuts and bolts of the MOD procurement process. I needed that, because obviously I haven’t ‘been there and done it’ myself. I do regret that at times – I’d like to be able to get into the detail of the processes sometimes so I could contribute more to change and improvement. But I’m still hopeful I’ll get there over time.’

Does she have any advice to others who may be thinking about coming into the procurement profession from other areas?

‘Think about what you can bring to the function and the role. Work out what skills you have that will be relevant and can help to make procurement performance better. And play to those strengths.’

The links or similarities she sees between HR and procurement are very thought-provoking. Given the tension we sometimes see between the functions (often in turf wars over who leads on the procurement of HR spend categories), perhaps we could promote what we have in common as a means of establishing better relationships between the two professions? Anyway, many thanks to Davis, and we wish her and the Hydrographic Office continuing success.

***

John Paterson, IBM CPO, Talks Transformation

In this world where we tend to assume people move jobs and firms with some regularity, it is rare to find someone who has worked for one firm for over 40 years. John Paterson has done just that with IBM, including as their CPO since 2000 – an amazing achievement in these days of the two- to three-year tenure of many procurement leaders. So, it is not surprising that the Scotsman (albeit one who has lived and worked all over the world) is a bit of a legend in the procurement world.

And as well as presiding over IBM’s internal procurement, with a third-party spend of some $50bn a year, he is responsible for the delivery of the procurement outsourcing activities that IBM carries out for dozens of clients globally.

We started by discussing the recent IBM CPO Survey. One of the interesting findings there is that firms rated as ‘top performers’ in procurement terms make on average significantly higher profit margins than the average firm in the sample. So, I asked him whether he believes there is a real causality there – does better procurement really lead to better profits?

‘I think it is a causal link – I don’t have any problem believing that. If you are spending millions of dollars with your supply base, how well you do this must have a positive or negative