Andrew Cubitt interview – Category management is a top procurement priority for wider spend efficiency at HS2

As Andrew Cubitt is Procurement & Supply Chain Director at HS2 Ltd, the company responsible for developing and delivering a second high-speed rail network across the UK.

HS2 is a mammoth engineering and infrastructure project that will provide fast and frequent connections for over 100 cities and towns, opening up local and regional markets, attracting investment and improving job opportunities for thousands of people. Accordingly, the anticipated spend is sizeable, in the region of £100 billion.

Cubitt, with 20 years of experience in the transport and consultancy sectors, oversees a team of about 315 people from procurement and commercial (not counting the many subcontractor teams) who are involved in making sure this spend is efficiently deployed. To do this he takes a total cost of ownership approach to the purchasing decisions over the lifetime of this project, and to support this he endorses category management as one of his top-three procurement priorities.

Why category management is a top 3 priority

While category management as a term is not widely adopted in infrastructure programmes, being borne out of the automotive and fmcg industries, it does apply as a sourcing strategy to key commodities, like steel and concrete.

“We use basic category management principles to ensure we are buying efficiently, sustainably and at the right price and right quantity at the right time,” he explains. “To this end, category management can be applied to any industry, and for us, even though we do not source directly, it is one of our top three priorities because we need to know how what we buy, directly or indirectly, affects both the economy and wellbeing of the planet. So as a strategy for the supply chain team, it is on a par with risk management, because at HS2 we are always considering our wider political, commercial and environmental impact on the market. Category management therefore is a facilitator to make sure risks are managed effectively and messages supported.”

How well is this understood and adopted by other stakeholders?

“It’s important to remember that as with all major infrastructure programmes, you tend to be working with large tier-one contractors. So it’s more of a consolidation contract. But underneath that tier one, it’s vital to us that the sub-contractors also take a category management-centred approach seriously. For this reason we are interested in getting the right partners for all of our contracts. Fortunately in the supply chain we are seeing a lot more focus placed on ‘buying better’ and ‘buying right.’ So what we do have control over is influencing our supply chain to make sure they get the best value from the materials they are buying while not impacting the ready supply in the market.

“It’s therefore imperative we take a good look at how the construction firms in our supply chain undertake category management. In recent years we’ve started to place greater emphasis on getting involved in that, and the next phase of the programme will see that focus increase with our T2 and T3 suppliers as we encourage them to give feedback and follow that route for project success.

“Having world-class category management strategies is not something suppliers deeper in the supply chain are known for, so this is a way to influence practices directly to help them raise their game. And as I am responsible for overseeing supply chain partnerships, it’s my team’s duty to make sure that the lots we are buying are bought in the best way that delivers most value. It’s seriously important today to act responsibly and not starve the world market of its commodities, be that steel, concrete or labour.”

Co-creation of strategies for outcomes

Findings from the global category management survey show that involving stakeholders and co-crating strategies leads to better value and outcomes. And at HS2 this is also recognised.

“Value is always a lever for us,” says Cubitt. “It is at the core of our role in procurement to bring tax-payer value, so we are always looking for opportunities to improve it. And that’s where a good strategic sourcing approach comes into play. To achieve that we have created a collaboration hub across our T1, T2 and T3 suppliers where value is the primary driver. They share knowledge about various categories, and, for example, this resulted in leveraging electricity and other utility bills to drive direct savings for our suppliers. Of course there are other advantages too to a joint catman approach, like understanding the economic effect of buying in bulk.”

So co-creation of category strategies with other stakeholders, both internal and external, is important and shows how value can be derived when strategies are aligned.

Category management is also a strategy for sustainability

Category management deployment can support other important business performance levers, a topical and vital one of which is the firm’s sustainability agenda.

“It’s important that the procurement team secure the full range of value from a category management strategy, including risk reduction, supplier innovation, speed to market and not solely cost reduction,” he says. “But it’s interesting how it can help towards sustainability goals. At HS2 we are pushing hard for procurement and the supply chain to be the leading force on driving carbon net zero. As an organisation we want to achieve this by 2025, which is a big ask on a construction programme, because clearly there’s a lot of carbon that goes into a project like this. The way we see this happening is through design and having sensible conversations with the supply chain.

For example, that might include altering the way you construct to reduce how much steel is used, and this is where category approaches come into play and have a big impact.” Cubitt endorses that category management is not just about deriving financial value, the true value lies in understanding all the different dynamics of suppliers, risk avoidance and sourcing socially and how you bring them all together.

Procurement’s value proposition is enhanced

What category management also helps to drive is procurement’s own value proposition, to be more than the cost reducer.

“I want my team of procurement people to be more than traditional procurement people!” he says. “Category management does that for them because as individuals they get to be experts in their own field. For example, take our people buying rail. They are the true specialists in that category, so for them it not only helps with their personal development but because the business comes to them for specialist advice in their area, they in turn become strategic advisors —not just gate keepers and box tickers. They apply their knowledge to help put partnerships and strategies in place, and this is very important for the whole project.”

Given the priority Cubitt gives this in his own organisation, the question is, is this structure something he can mirror in his T1 subcontractors?

“This is something that we perceive as a key focus,” he says. “And it’s something we are starting to invest more effort into. Clearly we don’t buy everything ourselves, unless it’s railway crossings and switches, it’s a partnership of many teams. So real value comes from supply chain discussions and matching category expertise across them.”

Gaining visibility

The big difference for a project like this, is that many subcontractors are coming together with a single goal. It’s not one procurement team, it’s a “team of teams,” as Cubitt calls it. So a challenge for the category manager is to secure visibility when they are not buying directly.

“It’s an evolution for them,” he says. “The collaboration hub is a good way to achieve this, but the value comes from influencing where we need to apply pressure in the market and where we need to understand the wider effects of what we’re doing. So we all have a responsibility at HS2 to really think about how we are spending and make sure our partners do the same — that’s the key to success going forward.”

Clearly, instilling this thinking to achieve the full range of value is challenging because it’s such a mammoth project. Cubitt recognises that procurement people in his T1s and T2s have their own relationships with their supply chain and are doing things in their own way. His answer is to encourage them to think about the wider picture, and not to focus just on their part in the project or their own jobs. He emphasises that it’s one project and everyone is part of it.

“There’s a whole range, even thousands, of suppliers, often buying the same materials,” he explains, “and it’s a powerful concept to leverage that full capability. So it’s my job to bring it up to a level where we all understand the full picture, work together and empower them with the knowledge to do so.”

“In our team of teams we clearly have other heads of procurement, and it’s natural that not everyone will agree. So employing a more category-centric thought process to the things that are strategically important to HS2, like ‘building back together’ is the way to bring engineering and delivery together. We are focusing on the category and getting the right people involved.”

The right people …

Of course, on a big project like this, it’s important to keep capabilities up to speed. “To be good at category management you need to be good at understanding and manipulating data,” says Cubitt. “So a key area I’m trying to get our procurement and supply chain people up to speed with is data crunching, because I think data literacy is a key area for our profession that will make us more rounded.”

“I’ve come to the conclusion over my years at TfL and PwC that you have people that are really good at doing procurement and running a process — and we need them. But it’s not always the same people who can run your category strategies. These are the people who really understand category spend and can push our agenda in the supply chain where the categories really matter.

“At HS2 we have a golden opportunity to change the way procurement and the supply chain is perceived, because we’re a big team with big responsibilities, and it’s politically charged. So it has all the potential to be a perfect storm of things that could go wrong — so we need the best procurement and category managers to make sure they don’t. Success for me will be when all the T1 contracts are in place and recognised by the industry as having really good structures to engage the supply chain and to understand how we are affecting economics and markets in niche categories.”

… and speaking of structure

At a time when we are seeing a splitting of roles, that is category creation versus the go-to-market phase, we wondered whether the capability structure is a mixture of people doing both, or whether some are focusing on strategy while others focus on sourcing.

“At HS2 it works slightly differently. If you set the strategy with one part of the team and the delivery with the sourcing team, the sourcing team might not agree with the way the strategy has been written. So that’s a challenge when roles are split.

“What we do try to do is co-create strategies with the T1 providers. We’ve already pulled together some high-level strategies and we’ve started to share them with the supply chain, but this can get very involved. As an approach this is definitely leading edge, because mapping the whole spend under control versus the spend that goes on elsewhere, means you can see where leveraging can best take place. If you don’t get your arms around the whole of the spend then you can only influence part of it.

Getting organisations to embrace category management

“In my experience, from the organisations I’ve worked in with no repeatable spend, category management as a concept is quite difficult for executives and engineering to understand, which is a barrier. So to break that barrier down you have to make the value real and tangible against levels of spend for private sector companies. So the way to make category management work for the public sector is to devote focus on the value creation in private sector contracts and suppliers — and that’s what HS2 is going to do.”