Purchasing Value Creation

Beyond the Mandate ?

Group Purchasing Team

John Champion, FCIPSDirector Indirect Procurement Services, BAE Systems

Contents for debate

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• Selling is the new procurement skill ?

• How to influence stakeholders to unlock cost savings and add value

• How to differentiate your offering and build strong relationships

• Drive increased value to the business.

• How to sell your value proposition to internal stakeholders

• Understanding your customers – their drivers, and their goals

• How to deploy a group deal across the business and make it stick

Lies, Dam lies and Statistics

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Many Procurement departments are seeking to be involved early in the decision process.

However, they face three challenges:

1. 79% of business partners do not want to have Procurement involved at the earliest stages of a buy.

2. Organizational complexity and fast changing business needs make it almost impossible to predict buys.

3. Over half of Procurement departments feel under-resourced to meet current needs, so it is impossible to handle the increased workload that early involvement would bring.

Cost reduced in our service and your

products

Innovation by listening

& responding

Aggregation of volumes

and knowledge

Role of Group Purchasing Team - Aggregating Demand, Knowledge & Capabilities

We operate from a unique vantage point to identify opportunities, maximise

UK/Global leverage and share best practise to the benefit of the Company X businesses

Benchmark: Spend circa £750m pa with 85 + % under contract by Group Purchasing Team cost of Team circa £7m (1%) Savings target £20m incremental per anum

INDIRECT PROCUREMENT

IS OUR CORE BUSINESS

SupportingService delivery to Saudi Arabia

All wholly owned UK Company 60 + locations

JV’s where appropriate

BAE staff on MOD bases in UK

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4 Key Delivery Streams of Group Purchasing TeamAnnual Spend c. £750m p.a.

• Accountancy• Airlines• Child Care

Vouchers• Consultancy• Contract Labour• Company Cars• Healthcare• Hire Cars• Hotels• Insurable Risk• L&D

• Legal• Marketing• Outplacement• Overseas

Deployment• Pensions• Purchasing

Cards • Recruitment• Stationery• Travel Agency• Travel security

• Buildings Plant Ground Maintenance

• Catering• Cleaning• Construction• Disposals• Electricity• Energy

Management• Gas

• Health & Wellbeing

• Office Furniture • Plant &

Equipment • Security• Water • Waste

Management

• Couriers & Freight

• Cutting Tools• Local Sourcing• Logistics:

o on siteo external

haulage o manual

handling • Industrial Gases

• MRO consumables

• Personal Protection Equipment

• Test Equipment • Welding

consumables

1Employee & Professional

Services

2Infrastructure Services

3Production, Logistics &

Bespoke Sourcing Services

4Functional Excellence and Capability Development

Customer Engagement, Supplier Management, Commercial, Governance, Financial Tracking, Process Improvement

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Key Group Purchasing Team Sound bites

INDIRECT PROCUREMENT IS OUR CORE BUSINESSWe aggregate demand, knowledge and capabilities

• 20m savings target for 2015

• £20m savings delivered in year on year aggregated discounts

• ROI 6-1

• One of the largest Corporate Purchasing Account programmes in Europe

• With £400m spend Transacted via automated processing

• Over £600m of spend aggregated with top 30 Suppliers

• 40 category strategies underpinning the indirect procurement approach

• 60 strategic relationships with the supply base

• 300 suppliers with an agreements in place

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Annual spend c. £ 45 M p.a.

Customer Engagement, Commercial Governance, Financial Tracking, Process Improvement

Scope of Service for business unit X – Alignment

• Pensions• Purchasing

Cards • Recruitment• Stationery• Travel Agency• Travel security

• Accountancy• Airlines• Child Care Vouch’• Consultancy• Contract Labour• Company Cars• Healthcare• Hire Cars• Hotels• Insurable Risk• L&D• Legal• Marketing• Outplacement• Overseas Deployment

• Buildings Plant Ground Maintenance

• Catering• Cleaning• Construction• Disposals• Electricity• Energy Management• Gas• Health & Wellbeing• Office Furniture • Plant & Equipment • Security• Water • Waste Management

• Couriers & Freight• Cutting Tools• Local Sourcing• Logistics : on site• Logistics : external

haulage • Logistics : manual

handling • Industrial Gases• MRO Consumables• Personal Protection Equip’• Test Equipment • Welding consumables

Employee & Professional Services

Infrastructure Services

Production, Logistics & Bespoke Sourcing

Services

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2014 CSAT - Executive Summary

Overall an good set of results with the general trend of improvement. Key areas:

• 64 surveys carried out, collecting 379 ratings out of a possible 384.

• 95% of all ratings fell into the good or excellent category threshold.

• The average score across the 64 responses is 7.85 out of 10

• The average score across the 17 key stakeholders is 7.95 out of 10 (2013 = 7.4)

• The new ‘would you recommend us’ question showed that 95% would recommend us (good or excellent threshold)

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CSAT – Key Stakeholder Summary

Location: Across Company X UK Date: Mid Oct to Dec 14

1. Resource

2. Roles and Responsibilities

3. Processes

4. Demand / consumption management

5. Engagement – proactive/responsiveness

6. Communications

1. Positive mind-set / can do attitude /

approach to problems

2. Competency & professionalism

3. Knowing the business

4. Engagement / Working together

5. Communications

6. Delivering value

What we could improve:What we do well:

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As procurement becomes a more strategic function, professionals in the procurement function are also required to take up enhanced roles and have various skills over and above the traditional procurement skills

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Basic Skills• Vendor identification and shortlisting• Negotiation• Contract management

Future Skill SetsIncludes basic skills and the following:• Project management: Initiation, planning, execution, monitoring and control, and project completion• Financial management: Supplier performance analysis, ROI analysis, etc.• Business consulting: Market analysis, procurement best practice analysis, insight-based decision-

making, etc.• Analytical skills: Spend analysis• Technical skills: Leveraging technology/applications

Future Skill Sets ?

• Supplier risk management• Procurement

In addition to the technical and management skills, behavioural skills are also important as they not only help in more effective communication with stakeholders but also help build brand image

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• Individuals should be able to think about the effect of their words, gestures, appearance and behaviour on others

• Behavioural skills are important during supplier negotiations and for supplier relationship management

• Following are the behavioural skills of the procurement staff that are evaluated by some leading organizations:

• Change management• Cross cultural awareness and effectiveness• Stakeholder analysis and influencing• Strategic thinking and analysis• Conflict management

Behavioural Skills

Future Skill Sets ?