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#plzurichforum Transformational Procurement Takes Off.

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The Procurement Leaders Forum took flight in Zurich this morning with a fascinating presentation on Heathrow Airport. Ian Ballentine, CPO, talked the meeting through the huge challenges of managing such a large business operation. “It’s like a city,” he stated. “It consumes as much energy as a small city. And it’s the fifth largest shopping centre in the UK.”

 

The numbers are indeed impressive. 76,000 staff travelling to work there every day. 200,000 passengers use Heathrow daily. There are two runways, which bother operate at 99% capacity. Every 40 seconds, a plane lands of takes off.

 

But Ballentine does not have his head in the clouds. Managing such a large business requires a grounded mindset. “The first thing for me is line of sight. Any function in any organisation needs to know what is critical to the business.”

 

The same is true of procurement. This function, just like any other, needs to know the priorities of the business and align its activities around these organisational goals.

 

Ballentine laid out four priorities:

  1. Beat the plan, EBITDA and return to sharefolkders
  2. Transform customer services, beyond savings value –add
  3. Win the support for expansion. This was a major target for the airport, and procurement had a sinigifcant role to play. Heathrow managed to get 400 supply chain organisations to write to the UK government and support the third runway at Heathrow.
  4. ‘Mojo’ – “For every person that works in Heathrow, direct employees and retail workings, they feel great and rewarded at work.”

It’s the last of these points which stands out. Heathrow spends significant efforts in managing its onsite suppliers to an impressive depth.

 

“Organisation’s need to own its supply chain, and ensure that suppliers’ employees are treated just as well as our own employees,” stated Ballentine. “It’s no longer acceptable to think, ‘once we have outsourced it, it’s no longer our problem’.” It is the mission for procurement that all the employees across the site feel satisfied and happy in their work.

 

It is important to note that transformational is not an immediate process, some ambitions in the have to be planed downed. Ballentine takes a view that procurement maturity has four steps: Traditional, supporting, collaborating, influencing. At the moment, he believes that the function is moving towards the third stage. As such, the buyers’ activities reflect these capabilities. Partnering agreements and supplier collaborations, for instance, are planned for the future, as the organisation doesn’t possess the skills to forge genuinely collaborative arrangements.

 

So far, the plan is taking flight. The passenger approval ratings have improved from 65% to 85%. This year, procurement has taken £30-£35m of the bottom line. Over the five years, procurement would have taken £260m out of operating expenditure.

 

This is in the light of significant steaff cost increases. Heathrow Airport committed to paying its staff the ‘London Living Wage’ – which is a salary level 30% over the national minimum wage.

Ultimately, if a transformational process is to succeed, it has to demonstrate the core credentials of business benefits. And in that respect, procurement at Heathrow certainly has wings.

 

You can follow the Zurich Forum at our liveblog throughout the day.

Jon Webb
Posted by Jon Webb