AS1 Group Project

BBC: Digital Media Initiative (DMI) 2008-

2013 Project

Finance and Procurement Management [BSOM073]

Dr Luai Jraisat

18 Jan 2019

Submitted by:

FASALU RAHMAN CHERNGODAN (18407038)

SHAHID ALI (18407043)

RAFSHAD NALAKATH (18404877)

VIVEK VISWANATH KOMANKANDI (18407040)

1|Page
Executive Summary

As a consultancy group, we are entrusted to write a report to the Trustees of the BBC on the

success or failure of procurement of the Digital Media Initiative (DMI) introduced in 2008. The

initiative was abandoned in May 2013. In fact, this report is specifically aimed to discuss the

possible actions required to diagnose the procurement of Digital Media Initiative (DMI) project

by considering the issues and problems, which affected the procurement of Digital Media

Initiative (DMI) project. Procurement efficiency and procurement competence of an organisation

is significant for ensuring procurement performance. The major issues that leads to the failure of

the project are incompetency of strategically manage the procurement or purchase by the BBC.

As part of this report, we are aiming to provide a discussion about the most advanced and

appropriate procurement and purchasing models, concepts and ideas in order to diagnose the

procurement of Digital Media Initiative (DMI) project. It is recommend that there is an overhaul

in the purchase and procurement process in the firm especially in areas like assessment of the

suppliers competency and capability, alternative methods of procurement and plan purchase

activities.

2|Page
Table of Contents
BBC: Digital Media Initiative (DMI) 2008-2013 Project...........................................................1

Finance and Procurement Management [BSOM073]..................................................................1

Executive Summary........................................................................................................................2

Introduction....................................................................................................................................4

Purchasing and Procurement........................................................................................................4

Procurement and Procurement strategy........................................................................................5

Steps in the Process of Procurement..............................................................................................7

Purchasing and purchasing strategy.............................................................................................7

Processes involved in purchase......................................................................................................8

Problems in the DMI......................................................................................................................8

Best practices, Models, and Concepts of Procurement and Purchasing....................................10

Conclusion and recommendation................................................................................................11

References.....................................................................................................................................14

3|Page
Introduction

The main aim of the “Digital Media Initiative (DMI)” project was to modernise the BBC’s

production and archiving techniques by using associated media asset management and digital

production systems. Procurement management is one management process in which services and

products are procured from a supplier or group of suppliers (Van Weele, 2010). There are

different methods or models of procurement including global sourcing, local or domestic

souring, single supplier and multiple supplier etc. organisation or firm (Von Haartman and

Bengtsson, 2015). The importance of procurement is increased considerable with the

globalisation organisations can make use of suppliers from around the globe to procure materials,

goods and products for their operation (Arjan, 2010). DMI is a strategic investment in people,

infrastructure and production processes, which is a technology-enabled transformation

programme (National Audit Office, 2011). In the event that the acquisition plan is not received,

the venture may prompt disappointment. In the present report a definite comprehension in

regards to the achievement or disappointment of BBC's drive, Digital Media Initiative (DMI),

will be given in setting the purchasing processes used.

Purchasing and Procurement

Often the word purchasing is not utilized reciprocally with the word procurement; meanwhile

procurement normally incorporates supplier quality, expediting, and traffic and logistics (T&L)

notwithstanding purchasing Lyson (2006). Purchasing and Procurement are altogether different

administration and business forms or more all altogether different life cycles. The following table

will present the major differences of procurement and purchasing in the context of supply chain.

4|Page
Procurement and Procurement strategy

Procurement means the procedure of selecting vendors, strategic vetting, establishing payment

terms, contract negotiation, selection of products and actual purchasing of products (Myerson,

2018). Procurement is concerned with procuring all of the services and goods while dealing with

several other operations related with procurement to reduce time, waste, cost and improving

quality, performance and responsiveness of supplier groups and finally increasing focus on

activities, which add value to the customers of the organisation (Musau, 2015).

5|Page
The study into best practice of procurement and how it can be viably integrated into the

organisational strategy is in this manner profitable to the current leaders in business (Bob Engel,

2011). A powerful procurement strategy depends on a mutual comprehension of the job and

reason for the acquisition procedure. Procedures, frameworks, measures and empowering

structures that help delivery competence along the whole procurement process cycle (Mishra and

Agarwal, 2010) The strategic management of procurement encourages the organisation to get the

best basic leadership in buying. Procurement management is connected in store network the

executives. Since acquirement the board likewise do, the immediate buying likes supply (Musau,

2015). That causes organisation to decrease time to do the obtaining physically.

In this modern world the importance of E-procurement is crucial because the organisations like

BBC can use it effectively to acquire the services and products they requires to improve its

operations especially developing, creating, sharing and managing video and audio contents in a

cost effective way (Craig, Carter and Rogers, 2008). An e-procurement framework is a data

innovation based framework for procurement, which is at input end of the supply chain (SC)

network (Presutti, 2003). It has been acknowledge that data frameworks, for example, e-

acquisition frameworks turn out to be increasingly related with diverse foundations to start the

growth of organisations (Vaast and Walsham, 2009). In line with this thought, the utilization of

data innovation in e-procurement frameworks is viewed as an advanced strategy (Mishra and

Agarwal, 2010). The implementation of e-procurement structures can add value for endeavours

and clients through using IT empowered resources in SC network (Dong et al. 2009).

6|Page
Steps in the Process of Procurement

Adjusting the procurement procedure with organisational strategy is just piece of a definitive

objective of procurement policy. According to Mehra et al. (2004), services and products must

be acquired and the way toward buying these merchandise and enterprises is known as the

“Procure-To-Pay cycle”. This in turn can be defined in supplementary stages like supply,

identifying Supplier, supplier selection, determination of the demand, negotiation, approving the

purchase requisition, confirmation of order, delivery announcement, invoice entry, receiving of

goods and payment.

Purchasing and purchasing strategy

Lyson (2011) defines purchasing as the process which is integrated as part of supply chain and it

is accountable for acquiring or helping clients to secure products and services in the most

proficient way at the opportune time, quality and cost. The process of managing suppliers as part

of purchase strategy accordingly provides competitive advantage for the firm (Farrington, 2009).

The fundamental targets of obtaining are to procure the correct nature of materials at the perfect

time in the correct amount from the correct source at the ideal time (Baily, 2005). There are

firms that endeavour to set standards for purchase procedure and such procedures can differ

incredibly between firms.

7|Page
Processes involved in purchase

Purchasing is a subdivision of the process of Procurement, which as a rule alludes to the

purchase of services of products for a business. It as a rule incorporates getting and paying

(Lyson, 2011). The major steps involved in the overall purchase process cycle are order

confirmation, shipping notice in advance, inward products, invoice entry and payment.

Dissimilar to the total purchase-payment arrangement, the procedures unequivocally connected

with purchase as indicated by the size and extent of every business. As purchasing is a procedure

that is a piece of the more elevated amount acquirement process, buying and obtainment are

regularly utilized conversely (Farrington, 2009).

Problems in the DMI

BBC has provided the long-term strategic partner Siemens the contract to deliver DMI and they

did it without considering their own procurement procedures and financial guidelines. They did it

quickly and straightforward under Technology Framework Agreement they had formed in 2004,

without allowing other suppliers to attain the contract (NAO, 2011). There was no open tender

called by the BBC before providing the contract to Siemens. Thus, the BBC was less positive

about terms of value, quality and conveyance potential, as new and explicit challenge made it

conceivable (NAO, 2011).

Similarly, although the sourcing strategy (procurement) is suitable for the specific tender and fits

into the strategy of outsourcing by the management of BBC, it did not have a latest assessment of

Siemens capability and capacity to deliver the programme. Instead, they go with the agreement

based on the assessment made way back in 2004 as part of the Technology Framework

8|Page
Agreement. BBC is not building procurement judgments on sub-optimal basis, so there is no

possible outcome of their procurement method is possible to offer the best value for money.

Some other issues that lead to the termination of the DMI project as identified by the National

Audit Office (2011) are as follows:

The BBC also failed to conduct sufficient testing of DMI components. Similarly, there was a

lack of appropriate evaluation of the actual needs of the firm and its priorities. It is also evident

that there was no consistency or clarity of the policies of the firm regarding company’s top

priority and requirements. Lack of participation of the employees in the major decisions

regarding procurement was another issue as it prevents the decisions from covering the changes

occurred in the firm. In addition, the determination of the archive was agreed in August 2012,

but, other requirements of DMI remained unclear and production teams were uninterested in

using production tools. The task created by the IT group was not as indicated by necessities, it

essentially did not work, and terminated as the planned clients had prescribed halting further

advancement attributable to vague business course. The late delivery of the project is also a

major issue as the management mentioned while terminating the DMI that the original vision of

DMI was no longer valid due to changes happened in the firm and expiry of time.

Since the project was already derailed, the introduction of Siemens had no impact unless they

adopted the agile project management technique. However, the management of BBC failed to

adopt such technique for DMI. Instead, the team disagreed with agile method and followed with

minor changes and it brought some short-term success and was able to integrate new technology

into their system. The business necessities of the BBC have changed continually, which in the

9|Page
extra work for the aftereffect of the advancement group. These progressions caused conveyance

delays.

Finally, "insufficient control over the program" as identified by the National Audit Office (2011)

has been a major issue for the failure of the project. It likewise noticed the inaccessibility of a

capable organization's proprietor (SRO) and clarified that the administration of the BBC with

respect to the DMI was "all the more stressing on the mechanical side of the program than on an

adjustment in the size of the BBC ".

Best practices, Models, and Concepts of Procurement and Purchasing

It is evident from the investigation of the BBC's Digital Media Initiative (DMI) that they failed

desperately because of numerous elements. The most important among them is failure to identify

and adopt he best-fit procurement model. From the analysis, it is proved that the management of

BBC used the equity-partnership model for the DMI initiative and it is regarded as the most

intricate model. Mutual collaboration between the company and suppliers with a legal contract

ifs the feature of this model of procurement. In this model through shared equity agreed to

develop joint venture, subsidiary or acquisition. This model reinforces the bond between the

associations included, which concludes it as the most helpful model for all gatherings included.

Siemens and BBC had a sound linking and there was a long haul contract declared between

them, which have known as "Innovation Framework Contract". As per the agreement, BBC and

Siemens had chosen to collaborate on technological developments of which the Digital Media

Initiative was a piece (Sangani, 2014).

The best practice of procurement is about getting the required services and products from fitting

suppliers to empower the organisation to meet its vital goals in a productive, financial and viable

10 | P a g e
way. According to Turner (2011) the adoption of best practice of procurement is move far from

ordinary practice of procurement and should subsequently be drawn closer from a ‘value

opportunity’ outlook instead of a procedure point of view. There is a shift from the basic

procurement process, for instance, asking for an available number of proposals and picking the

most economical one, which as Turner (2011) suggests, passes on risks, which joins botched

opportunities for most added value.

The best practices procurement equivalent is in this way constant and fast development just as

benchmarking, where a firm estimates itself against other 'best-in-class' firms (Guth, 2010).

Some of the key characteristics of best practice procurement include commitment to just in time,

commitment to total quality management, long range strategic plans, commitment to total cycle

time reduction, strategic cost management, supplier relationships, service excellence, training

and professional development, learning, corporate social responsibility, management and

leadership (Arawati, 2011). There is obligation for associations to go past the inside or official

investigation of their acquirement structures and forms and into selection of best practices

through such methodologies as benchmarking (Turner, 2011). In addition, there is a need to

maintaining close relationship between the organisation and its suppliers. An efficient supplier-

manufacture partnership can be a basic part of a main ingredient of supply chain (Fynes, Voss,

and Búrca, 2005).

Conclusion and recommendation

The main aim of DMI is supporting BBC staff and partners in realising BBC’s creative vision in cludes

developing, creating, sharing and managing video and audio contents in a cost effective way by

programming on their desktops. In order to transform the way the BBC makes content for its

11 | P a g e
audiences it is essential for develop a fully integrated digital production and archiving system. It

will produce a digital content production scheme that permits easy desktop editing, effective

sharing across locations, manipulation of content and access to the archive. The BBC’s

projection of financial benefits for the DMI had weakened over time. Therefore, it can conclude

that in spite of the fact that the BBC had begun to actualize the framework, there was yet an

impressive approach to build up an in fact complex framework. It required incorporating a few

interdependent components with no time contingency.

From analysing the findings of the National Audit Office report (2011), it is identified that there

were several issues that contributed to the failure of the DMI project in BBC. The major issues

are decision to provide the contract for delivering DMI to its long-term strategic technology

partner Siemens without considering or taken full account of the its own procurement procedures

and financial guidelines. They did this because of their Technology Framework Agreement the

firm had with Siemens way back in 2004. The management of BBC failed to call open tender or

considering other options available for the firm or without allowing other suppliers more capable

of providing the project goal to attain the contract.

It can conclude that the BBC failed to evaluate appropriately the actual needs of the firm and its

priorities. Lack of participation of the employees in the major decisions regarding procurement

was another issue. Management of BBC failed to adopt advanced techniques like agile project

management of Pricne2 method for DMI. It is also evident that the BBC failed to consider the

changes occurred in the firm and develop an efficient control over the over the programme.

Finally, the failure to identify and adopt he best-fit procurement model was proved to be an

important problem that leads to the failure of the project.

12 | P a g e
Some of the key recommendations are provided in the following section

 The first recommendation is regarding a comprehensive analysis of the business situation

of the firm before developing a project to bring change like developing, creating, sharing

and managing video and audio contents in a cost effective way by programming on their

desktops.

 Assessment of the capacity and capability of the supplier is another major

recommendation of this report, as it will help to identify the actual competency of the

supplier to ensure timely and quality delivery of the products or service as per the

procurement contracts.

 To consider the standard options regarding how to find a supplier for a specific service or

product like open quotation. This would help the management to find more reliable and

cost efficient supplier or supplier groups for their project.

 It is recommended that the BBC require setting a clear standards that will give the official

a reasonable and exact investigate advancement and potential risks. The BBC official

should direct a more tightly and quicker review of key tasks to restrict potential

misfortunes to potential licensors.

 Finally, it is important to consider the most appropriate and best-fit model of procurement

for ensuring timely and delivery of the products or services with the required quality and

quantity.

13 | P a g e
References

Arjan, J. (2010). Purchasing & Supply Chain Management: Analysis, Strategy, Planning and

Practice. 1st ed. Hampshire: Cengage.

Arawati, A. (2011). Supply chain management, product quality and business performance.

International Conference on Sociality and Economic Development 10 (1), 98-102.

Baily, V and Jacobs, W, (2005). Manufacturing, Planning and Control for Supply Chain

Management. 5th ed. New York: McGraw Hill, London

Craig, R., Carter, D. and Rogers, S. (2008). A framework of sustainable supply chain

management: moving toward new theory. International Journal of Physical Distribution &

Logistics Management 38 (5), pp.360-387,

Dong, S., Xu, S.X. and Zhu, K.X. (2009). Information technology in supply chains: the value of

IT-enabled resources under competition. Information Systems Research 20(1), pp. 18-32

Farrington, B. (2009). Purchasing and Supply Chain Management. 8th ed. London Pearson

Education Limited

Fynes, B., Voss, A. C. and Búrca, S. (2005). The Impact Of Supply chain relationship dynamics

on manufacturing performance. International Journal of Operations & Production Management

25(1), p.6-19.

Guth, S.R. (2010). Implementing Best Practice; The Procurement Maturity Model. 95th ISM

Annual International Supply Management Conference, April 2010(pp.1-4) International Supply

Management.

14 | P a g e
Lysons, S. K. (2011). Purchasing and Supply Chain Management. 9th ed. Pearson Education

Limited London

Myerson, P. (2018). Lean Demand-Driven Procurement: How to Apply Lean Thinking to Your

Supply Management Processes. 4th ed. New York: CRC Press.

Mehra, S., et al. (2004). Purchasing Management and Business Competitiveness in the Coming

Decade. Production Planning and Control 15 (7), pp. 710–718.

Mishra, A.N. and Agarwal, R. (2010). Technological frames, organizational capabilities, and IT

use: an empirical investigation of electronic procurement. Information Systems Research (21) 2,

pp. 249-70.

Musau, E.G. (2015). Determinants of Procurement Function and Its Role in Organizational

Effectiveness. IOSR Journal of Business and Management 17 (2), pp. 12-24.

National Audit Office (2014). Digital Media Initiative. British Broadcasting [Online]. Available

from: https://www.nao.org.uk/wp-content/uploads/2015/01/BBC-Digital-Media-Initiative.pdf

[Retrieved on 12 Mar 2020].

Presutti, W.D. (2003). Supply management and e-procurement: creating value added in the

supply chain. Industrial Marketing Management 33(2), pp. 219-26.

Sangani, K. (2014). Wisdown of Crowds. Engineering & Technology. 9(3), pp. 82-83.

Turner, R.W. (2011). Supply Management and Procurement: From the Basics to Bestin-class. 2nd

ed. Fort Lauderdale: J. Ross Publishing.

15 | P a g e
Vaast, E. and Walsham, G. (2009). Trans-situated learning: supporting a network of practice

with an information infrastructure. Information Systems Research 20 (4), pp. 547-64

Van Weele, A. J. (2010). Purchasing & Supply Chain Management. 5th ed. Andover: Cengage

Learning.

Von Haartman, R. and Bengtsson, L. (2015). The impact of global purchasing and supplier
integration on product innovation. International Journal of Operations \& Production
Management 12 (2), pp. 301–312.

16 | P a g e