The planning process is integral to the success of any strategy. Indeed, one could argue it is the most essential task if the function is to deliver what is required of it. But the process of formulating these plans, whether it be on a quarterly, annual or five-year basis, has changed out of all recognition over the past decade.
Previously, the only plan a CPO had to worry about was how much money the business had to save. “Any plan, generally, would have been purely savings driven – the numbers were key,” says Simon Soothill, former head of marketing and travel sourcing at UK financial services firm Lloyds Bank.
“If you were lucky, you would sit down with a few stakeholders and say: ‘This is what we want to achieve and this is how we intend to do it.’ But it was purely a finance task – it was about delivering or hitting a number. Now it’s more about delivering value beyond savings. Savings will always be an important element of procurement’s work, but now I’m working with suppliers and looking at things such as how to improve pace and agility and how to de-risk the supply base.
“It is rare these days for me to start a conversation with: ‘How much do you want to save?’ It’s much more likely to begin with me saying: ‘Tell me about your brand and your marketing objectives.’”
That encapsulates just how much the planning process has moved on. Procurement Leaders contacted one organisation for this article and was told the procurement function had gone away for a week to devise a strategy for the next three years.
That’s not only an indication of how strategic the planning process has become but also the trust placed in procurement chiefs to devise a plan that delivers for both the function and the business at large.
This alignment – rather than the savings-first approach of the past – now dominates the thinking of procurement teams when it comes to planning.
“It’s very much a cooperative process,” says Mike Mirrlees, a former procurement chief at Diageo and EMI Music, who is currently working with online retailer Asos on an interim basis. “I’ve been exposed to it in a number of ways and in a variety of industries. The secret to success is to be so close to your stakeholders that you’re effectively joined at the hip.”
Finding out as much as possible about stakeholders’ requirements, aims and ambitions is one of the most important tasks during the planning process.
“You have to understand their [stakeholder] needs almost more than you need to understand your own,” Mirrlees says. “That’s the only way to develop solutions that match your needs, their needs and those of the business.”
By demonstrating an ability to understand and appreciate stakeholder needs, a procurement function will not only be able to build a plan that delivers for the business as a whole, it will also be able to evolve that plan as situations and priorities change.
One US-based CPO identifies four considerations for procurement teams involved in planning.
“Stakeholder engagement, needs-analysis, opportunity identification and solution development – they are the four key pillars of any successful planning process...If you can get all four of those right, you have a good chance of being successful.”
Ninian Wilson, global supply chain director and CEO of the Vodafone Procurement Company, says his planning process involves some of the company’s most senior executives, highlighting just how much planning has changed from a procurement perspective.
He tells Procurement Leaders the chief technology officer, the chief commercial officer and the CFO – the individual to whom he reports – alongside the company’s CEO, are all involved.
Keeping all sides happy and ensuring buy-in from these crucial, yet divergent, stakeholders is never easy. But procurement is so integrated with the company that the biggest challenge for Wilson is not necessarily securing their buy-in – it is analysing the data the company produces and applying that to the process.
“The planning process is very well designed within Vodafone with a significant focus on the revenue side of the
“Our biggest challenge is the sheer volume of information we have to work with across the 25 operating companies/countries in the Vodafone family, but new technology will help us further in this challenge.”
Just how far companies can realistically look forward at a time of global unrest and economic uncertainty – particularly in the eurozone – is another factor at play today.
“It is essential that procurement not only aligns with the corporate strategy but also understands the competitive strategy for the sectors it operates in,” says Richard Wilding, professor of supply chain strategy at Cranfield University.
“If you’re looking at a five-year horizon, you have to break it down and say that in that first year we’re going to need this kind of capability from our supply chain partners. In year two, we’re going to need this, and so on. Those needs are going to change over that five-year period and procurement needs to be well placed to come up with a strategy that takes this into account.”
Identifying issues that may hit the company years down the line is a sixth sense procurement has had to develop. This has been particularly true when it comes to ensuring the supply of raw materials.
Take the automotive sector, for instance. At the end of May, Bloomberg reported there was a “burgeoning risk of a supply crunch in cobalt”, a core material used in electric car batteries. “If capacity does not grow as planned, cobalt prices could continue to spike and there could be a major cobalt shortage,” said Bloomberg New Energy Finance analysts. “This would have serious implications on the electric vehicle market.”
All of which brings planning into even sharper focus. “If in year five, a procurement organisation has identified that it’s going to need capacity for x million widgets and at the moment you’re looking at an environment when you can get a few hundred thousand, you clearly have a
problem,” says Wilding.
“If you haven’t got that, you’re going to be constrained in terms of supply. You need to work with your supply base to come up with a solution. It’s about moving away from a transactional type of procurement to being more integrated and forward-looking.”
But planning is a process that has to go beyond supply and stakeholder needs. It also has to include considerations around investments in technology. Bob Amareld, senior manager of strategic operations and analytics at Biogen, is an important figure in the strategic direction taken by the biotech giant. He tells PLQ it is essential for any plan to balance the direction in which the market is moving with the company’s medium- and long-term ambitions.
“I make recommendations to the business when it comes to investing in technology and I work alongside our category management teams to ensure we’re making the right investments in process and technology to support what they’re doing,” Amareld says.
“If you don’t keep an eye on the market – particularly in an area such as IT, where things can move so quickly – you’re going to fall behind. You need flexibility because our directives can change a lot.
“It’s also essential to ensure there’s executive buy-in for our technology initiatives. I can bring in the newest artificial intelligence or robotic process automation tools, but if there’s no leadership from the top directing people to use it, then we don’t get great adoption – no matter what the plan is.”
Any plan, of course, will find itself buffeted by external events, which is why it is essential plans consider risks that could affect the business.
Shockwaves, such as the UK’s decision to leave the European Union, need to be consistently analysed and plans amended.
Although that requires both bravery and confidence, failing to act is often far more costly than taking immediate action.
“With Brexit, there is so much uncertainty and speculation about it that no one really knows what it’s going to do for any industry that has significant holdings in the UK,” says Mirrlees at Asos.
“Is March  really a deadline that’s going to have an immediate impact? As authentic business partners, procurement professionals need to be able to call out and say that for any supplier relationship that is up for review or has any sort of potential for disruption, they need to be factoring in the impact of Brexit on any strategy.”
No doubt, procurement plans are being shifted and adapted in the UK and Europe as that date approaches: it is just the latest challenge for those in charge of mapping out the future. Planning has always been an imprecise process, but it is procurement’s job to manage that uncertainty – as much as possible – by working closely with stakeholders.
The article originally appeared in PLQ Volume II, Issue III. To find out more about PLQ click here
This article is a piece of independent journalism, written by an experienced journalist and commissioned exclusively by Procurement Leaders.