Procurement Excellence

Winner: DHL

Highly Commended: Nokia

An increase in customer satisfaction by 25%, a trebling of regional savings potential and a 30% increase in managed spend are just three reasons why German logistics company DHL walked away with the fiercely contested Procurement Excellence award.

At the heart of the quite startling improvements was its BestFit Procurement Profile – a programme which in addition to all of the above benefits, also improved the career prospects of procurement staff working for the company.

Award Judge Corey Billington, the professor of procurement & operations management at IMD Business School, said the project was the result of an “outstanding strategy” and that “a focus on collaboration will lead to long term competitive advantage.”

The need for BestFit was driven by many issues. Procurement was traditionally very country-focused with little sharing of information or collaboration in sourcing; initiatives were very much procurement driven, rather than being driven by the customer and procurement had a low profile in many of the regions that DHL operated in.

Tracy Clark, head of procurement central & eastern Europe, who heads up the BestFit programme, described the results of the initiative as providing “really big, big leaps” and was delighted to win the award. But she is clearly not one to rest on her laurels; already setting her sights on new countries determined not to rest on her laurels, saying that there were more countries and more areas of spend still to go after.

The second phase was kicked off in autumn 2007. Initial feedback was very encouraging with the pipeline of opportunity more than 90% higher than the previous year and a tripling of the regional benefit potential. 

“BestFit has been a cornerstone in developing procurement excellence within Deutsche Post World Net,” said Dr. Hugo Eckseler, CPO of DeutschePostWorldNet. “It has enabled us to change ourselves from a country driven to a globally category driven procurement organization leveraging global supply markets while serving our customers on a personal local basis.”

Best cross-function project

Winner: North West Collaborative Procurement Hub

Highly Commended: Merck Sharp & Dohme

NHS procurement specialists in the UK walked away with the award for Best Cross-Function Project for their work in persuading 17 separate units spread across the country to collaborate on buying.

The project leaders successfully persuaded the different renal units to sign up to a new purchasing strategy – and in doing so, saved £1m of tax payers money. An added complication was that some NHS hospitals are run by independent trusts that are under no obligation to co-operate with each other in collaborative procurement deals. Each trust is used to running its own budget but they were happy to work together on the renal project, alongside procurement experts from the purchasing hub.

The project involved a huge range of stakeholders: clinicians, renal technicians, finance staff, renal  nursing staff and procurement.

A list of consumables used at the centres was drawn up by the project, a list which reached more than 500, provided by 14 suppliers and costs £4.5m a year. A full sourcing procedure – in accordance with EU regulations – was then followed, with all the specification documents being handled by the clinicians buyt the business lead being taken by procurement.

The result was that all the required products came in; but at a cost of just £3.3m – a saving of £1.2m. “This is a major breakthrough in an area where procurement is normally regarded as a threat to quality/professionalism,” said Awards judge Willem Van Appen, CPO of Royal KPN. “The involvement of clinical staff early on, ensuring that their requirements would be on procurement’s radar screen, was a smart way to gain buy in.”

People Development

Winner: HSBC

Highly Commended: Fujitsu-Services

Banking giant HSBC won the People Development award for its Group Purchasing International Resourcing Programme, a strategy which had the aim to develop professionally resourced purchasing teams across HSBC Group.

The programme comprised of three modules: international secondments, which would typically involve a minimum of two years in an overseas location; short-term assignments, up to 12 months in an overseas location and relationship manager, which are dependent on an individual’s or a territory need.

“International secondments in combination with short term assignments is a fantastic approach in a global operating company,” said Awards judge Willem Van Oppen, CPO of Royal KPN. “Cross-cultural cooperation and exposure is a main benefit. HSBC thus creates a procurement organisation which is able to tap best practices from around the globe.”

HSBC applied talent management techniques including; a purchasing capabilities framework, succession planning; and training and development plans, to identify strengths and development needs across all levels in all teams. Multinational training events for HSBC buyers were held in the UK, the Middle East, the Americas, Europe and Asia Pacific.

Individuals involved with the programme have benefited hugely from their experiences with a significant number receiving promotion upon completion of their secondment, retention is also high.  In addition, the local purchasing teams benefited from the sharing of knowledge and experience from the secondees.

Award for Innovation

Winner: Southern Water

Highly Commended: Royal Mail Group

The Procurement Leaders Award for Innovation was lifted by Southern Water for a radical decision to outsource the entire capital works supply chain.

The combined value of the 250 different capital schemes which were outsourced reached £750m, and ranged from the traditionally outsourced areas of construction activities and project management to areas never before outsourced in the water industry, such as full programme management. Because this approach cut new ground in a traditional industry, it carried significant financial risks. Fortunately, the strategy paid dividends in 2007, with all targets met.

The transition from doing the work in-house, based on engineering skills, to an outsourced arrangement, based on supply chain management skills, has been a far-reaching change. This required strong leadership and commercial advice from the company’s procurement professionals and meant a total change of procurement management within Southern Water.

“The procurement organisation transformed itself from a classic buying group to a commercial, supply chain organisation,” said Dr Corey Billington, professor of procurement and operations management at the IMD Business School and on the Award’s judges. “The project focused on collaboration and join benefit and had well documented results: zero defects; 10% savings; improved CSR KPIs with projects linked to key business indicators.”

Award for CSR

Winner: Marks & Spencer

Highly Commended: E.On

Marks & Spencer won the CSR Award for its wrapping materials product group. The group will have reduced food vest bags by 33% by 2010; will make its remaining carrier bags out of recycled polythene by 2008/09; and has worked with several organisations to reduce the overall environmental impact of carrier bags by at least 25% by end 2008.

Willem van Oppen, chief procurement officer of Royal KPN, and an Awards judge, said the project was a “very well run, well organised and complete program”. “Clearly, this is not a one off, reactive program and will deliver on-going long term value,” he said. “It has led to impressive, well documented results.”

In terms of climate change activity, M&S has benchmarked and e-auctioned the majority of products, resulting in reductions of price or improvement in specifications for the same price. During this exercise, however, it also considered the carbon footprint at all stages by comparing freight by road from Europe versus sea/road freight from Far East.

A simple change in the way that bags were transported from the Far East, from boxes to Comvac packs, allowed an extra 20% to fit in containers. Also shifting from road to rail freight in Europe has also allowed the group to significantly reduce its carbon footprint.

“Having customers charged for bags and using the proceeds for environmental projects is wonderful,” said Billington, “CSR within M&S is surely a big issue that is not only on the agenda but is in the DNA.”

Future Leader

Winner: Mark Edwards

BP’s Mark Edwards walked away with the Future Leader Award, recognition of his leadership of both people and initiatives across the oil company’s refining and marketing business.

Edwards is already part of refining and marketing procurement’s emerging leader programme, having been a graduate of BP’s Capability Accelerator Programme, a development programme for high potential procurement staff.

“Mark is an invaluable member of the lubricants procurement leadership Team,” said Dave Laycock, global procurement director, Lubricants, BP Refining & Marketing. “He is a great team player and is driven to succeed. He is strategic, always striving to achieve a bigger and better future, and is creative and innovative in defining options and solutions.”

Since 2004 Edwards has served a dual role as a commodity manager for Fuel Additives, leading his own team with a spend of some $150M and as lubricants strategy & planning manager, across a spend totalling $3bn. Within the Lubricants business Mark serves on the procurement management team, providing leadership for strategy development across a range of commodities and the assurance around financial and value reporting back to BP’s Refining & Marketing Procurement Function.

Jim Robinson, procurement director at BAE Systems and one the Awards judges, said Edwards was “clearly a consummate professional that can operate at all levels and across the whole spectrum of tasks required of a modern leader” and was also “regarded as such by his peers”.