Leading global excellence in procurement and supply

David Smith CB FCIPS

PROCUREMENT SYSTEMS PERFORMANCEA UK GOVERNMENT CASE STUDY

David Smith CB FCIPS

Leading global excellence in procurement and supply

• Former Commercial DirectorUK Department for Work and Pensions

• Former Deputy CPO UK Government• CIPS Past President

David Smith CB FCIPS

Leading global excellence in procurement and supply

Why is Procurement so important to

Public and Private Sectors?

Leading global excellence in procurement and supply

Procurement is ‘Big Business’

Leading global excellence in procurement and supply

Procurement is ‘Big Business’

• UK Central Government spends over £66 billion per year on Goods and Services (non military)

• UK Public Sector spends over £250 billion per year on Goods and Services

“from paperclips to prisons”

Leading global excellence in procurement and supply

Government Policy touches its citizen’s lives and defines them

…..and can save them

Procurement is often at the forefront of delivery of key services

JUSTICE, HEALTHCARE AND HOSPITALS, SOCIAL CARE, CULTURE, TRANSPORT, EMERGENCY

SERVICES, WELFARE REFORM

Leading global excellence in procurement and supply

Old ThinkingOld Thinking

The commercial function in Governmentused to be seen as:

• A Barrier

• A Process

• All about requisitions

• Just Negotiation!

• Limited Added Value

Leading global excellence in procurement and supply

The General Election in the United Kingdom in 2010 brought

• The first coalition government since 1945• The worst financial position in generations• An agenda to tackle the financial deficit first and

foremost• An agenda to reduce expenditure• An agenda to address waste and inefficiency• An agenda that promoted procurement as a key

enabler to deliver efficiencies and savings yet improve public services

Leading global excellence in procurement and supply

Top suppliers asked to contribute to Government’s efficiency drive

Government to re-negotiate with its

suppliers

Quick Wins Needed

Procurement at the heart of Government’s efficiency

drive

Leading global excellence in procurement and supply

Delivery of best value for money

Quality Services

Cost ReductionEfficiencies

Propriety

How are we being measured?

Absolute reduction in Spend

Reduced staff numbers and overheadsSpeed of delivery

More sustainable outcomes

Leading global excellence in procurement and supply

Requisitions - Low Level Activity

Introduction of Professional Purchasing

Effectiveness

Collaboration

Efficiency

Procurement –an established profession

Making a business Contribution

Board Level Recognition/Presence

Policy through procurement

E-enabled solutions

Minister for Procurement

Pre 1980 1980s 1998-2014

Leading global excellence in procurement and supply

• Key Suppliers

• Controls and Approvals

• Capability

• Common Commodities

• Growth

• Organisation & Shared Service

• Demand Management

2010-14

The Key Features of Procurement Reform

Leading global excellence in procurement and supply

The role of procurement in ‘Growth’

•Small & Local Businesses

•Lean Process

•‘Licence to Operate’

•Early Engagement with Market

•Transparency,

•Reducing Expenditure and delivering vfm

Leading global excellence in procurement and supply

Issues!

• Implementing cultural and behavioural change quickly

• Transforming the ‘Centre’s capability ’ to give Departments the confidence to centralise

• Delivering more with less!!!!!

Leading global excellence in procurement and supply

WhatWhat’’s Gone Well?s Gone Well?

• Government/Ministerial commitment given procurement higher profile than ever.

• Crown management of key suppliers.• Level of efficiency savings.• Freezing discretionary spend, reducing demand.• Simpler, faster procurements.

Leading global excellence in procurement and supply

‘The Enablers to Change’

•Systems , Processes, Technology and Knowledge - Data

•Influence

•Suppliers

•People

•Systems , Processes, Technology and Knowledge - Data

•Influence

•Suppliers

•People

Leading global excellence in procurement and supply

‘The Enablers to Change’

•Systems , Processes, Technology and Knowledge - Data

•Influence

•Suppliers

•People

•Systems , Processes, Technology and Knowledge - Data

•Influence

•Suppliers

•People

Leading global excellence in procurement and supply

Basic Data

• How much do we spend?• Who do we spend it with (and why)?• What do get for our money?

• Then make informed choices!

Leading global excellence in procurement and supply

‘The Enablers to Change’

•Systems , Processes, Technology and Knowledge - Data

•Influence

•Suppliers

•People

•Systems , Processes, Technology and Knowledge - Data

•Influence

•Suppliers

•People

Leading global excellence in procurement and supply

Leading global excellence in procurement and supply

Measurement!

•Delivering!!

•Cost of Function (absolute and %)•Third Party Expenditure against total Headcount•Reduce cost of function and improve Rate on Investment

Leading global excellence in procurement and supply

‘The Enablers to Change’

•Systems , Processes, Technology and Knowledge - Data

•Influence

•Suppliers

•People

•Systems , Processes, Technology and Knowledge - Data

•Influence

•Suppliers

•People

Leading global excellence in procurement and supply

Working with our Suppliers

• Out of every £100 we have we spend £50 with our suppliers (65% of this is with our top ten) Our suppliers play a crucial role in delivering both front line as well as support services

• Our challenge is to ensure that our suppliers can stay long enough to contribute to delivering VFM and improving our efficiency

Leading global excellence in procurement and supply

Suppliers

• Government being seen a single customer

• Getting Better Value

• Competition and the role of Local & Small Businesses

• Supply Chain Management •Who is being managed?

Leading global excellence in procurement and supply

Supply Risk ManagementIs this the most important thing that we do?

• Understanding dynamics of key suppliers

• Understanding their Supply Chain• Contingency planning• Understanding the Risks • Risk Mitigation• Supplier Relationship Management

Leading global excellence in procurement and supply

Who are your key Suppliers?

•By Value?•By Criticality?•By Vulnerability?

Who are their key Suppliers?What are their risks?Who is a more important customer than you?

Leading global excellence in procurement and supply

‘The Enablers to Change’

•Systems , Processes, Technology and Knowledge - Data

•Influence

•Suppliers

•People

•Systems , Processes, Technology and Knowledge - Data

•Influence

•Suppliers

•People

Leading global excellence in procurement and supply

Our PeopleOur People!!

Leading global excellence in procurement and supply

What do we expect from the next generation of public sector procurers?

•Act with Propriety• Know what they want to buy and why•Market Aware• Commercially and financially aware •Act on behalf of the public sector

Leading global excellence in procurement and supply

What do we expect from the next generation of public sector procurers?

• Improve and drive value from existing contracts• Manage corporate demand,• Understand the future supply chain• Is not averse to risk in procurements but knows

decisions must be managed, commercially advantageous and legally sound

Leading global excellence in procurement and supply

Leading global excellence in procurement and supply

Ambition?

• ‘World Class’ Commercial Function

• Staff 100% ‘Commercially Aware’

• 100% decisions ‘Sustainable’

• An organisation that understands and wholly manages supply risk and delivering value

Leading global excellence in procurement and supply

Current Issues keeping Procurement at the ‘Top Table’

• MONEY!!!!!!• The Economy

Supplier Vulnerability Understanding dynamics of key suppliers Contingency planning Global Market

• Data Management• Delivery!

Leading global excellence in procurement and supply

Issues being addressed Issues being addressed personally by CPOspersonally by CPOs

• ETHICS & FRAUD

• SUPPLY CHAIN RISK

Leading global excellence in procurement and supply

Is it our time and our

opportunity to make a

difference!

Leading global excellence in procurement and supply

Thank you for listening

and enjoy…