Procurement GPS

The Challenge

This organisation is a global manufacturer of technical products and services predominantly to the public, government and private sectors.

Advances in science and technology over the last twenty years have resulted in increasingly complex solutions becoming available to, and being demanded by, the customer base. This complexity has resulted in uneconomical manufacturing situations in high-cost regions around the world.

The consequence of these changing market dynamics has been ever increasing pressure to adapt the business model so that it reflects the changing market conditions impacting the organisation.

The Solution

An acknowledgement by the business executive that the current business model was no longer fit for purpose led to a general review to understand what should be the strategic capabilities of the organisation, thereby defining what was no longer core. This gave procurement the information it needed to initialise an analysis of external supply market opportunities for outsourcing non-core capabilities.

To support the new strategy, people were recruited from the best business schools with the only constraint being a no compromise policy. Money was spent on the recruitment process, but if no-one met the required mark, then no-one was recruited.

The prime intent of this strategy was to bring people into procurement who could source and build sustainable relationships with business partners. This meant not only changing the way procurement people did their work, but also removing the mindset legacy of 'traditional' transactional procurement.

The Results

With the better targeting of the organisation’s resources on its core activities, this resulted in tighter control of the function's activities and a better understanding by the organisation of its value proposition.

Building business partnerships resulted in greater access to new technology and routes to market, which had the impact of providing greater flexibility in the longer-term business strategies adopted by different parts of the organisation.

During the transition period, two-thirds of the incumbent procurement staff were replaced with higher-calibre business staff. The net effect was a reduction in overall staff levels, of 30%. Using GPS meant that the new recruits became effective much more quickly than had previously been experienced.

The bottom line was a sustained improvement in performance that exceeded investor expectations.

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