Multinational oil and gas company, BP, headquartered in London, is one of the world’s ‘supermajors’ of the industry. With 73,000 employees around the world, across 78 countries, BP locates and produces oil and gas for energy consumption, manufactures and markets fuels and raw materials, invests in alternative energy and delivers energy products and services to facilitate the everyday lives of people all over the globe.
As part of its company strategy in an ever-evolving market, the firm focuses on five areas that are core to its commitment to advancing the energy industry, and one of those is digital transformation.
Paul Alexander, who is Regional Head of GBS Procurement for EMEA at BP, shares the firm’s dedication to digital transformation as a necessary driver of efficient, streamlined and effective modern business practices, and he applies this equally to the business of procurement.
“Our craft, alongside the industry, is undergoing rapid change,” he says. “Some good, some maybe not so good. So it’s a good time to stand back and take a hard look at what is happening and how we must adapt.”
The procurement function at BP always had a category management model in place, because, as Paul says: “that should be the default scenario for all organisations.” Like all business spend strategies, it has significantly morphed with time, but he still maintains that category management is simply “the way it should be done.”
“Category management,” he says, “is relevant to all organisations, but particularly to the larger, more complex firms where decisions of strategic import are being made, decisions that are hard or impossible to reverse, and where a significant amount of money is being spent with third parties.”
The procurement team are still travelling on their category management transformation journey, and thus are using a light-touch approach to processes. While it is growing in credibility, Paul has witnessed a number of challenges to the approach.
“Category Management is an ongoing process,” he says, “and you need to keep building on it, but there are some ‘must haves’ you need in place to make it happen.”
Rapport with stakeholders –
“Building a good understanding with buyers, decision makers and other stakeholders is paramount. We achieved that through ‘empathy.’ It takes skills in face-to-face engagement, collaboration and understanding what outcomes might be most relevant to BP and its functions. You have to learn the technique of talking to the business. That may sound obvious, but procurement is traditionally bad at communicating what it can do. Procurement needs to go out and engage with the business, understand them, ask about their business needs and then work backwards from that.
To avoid any tension between the two teams, we must align with their needs, the end result they want from their purchase and what drives those needs. Just for a moment procurement has to forget its functional base. And that means listening , coming from procurement that is often hard to do. But we need not just to listen, but to listen holistically. Understand the ultimate need for the item, its life expectancy, its reliability for the situation, and follow a CTQ process for everything; in that way you can demonstrate to the business that they can trust you to deliver to their needs.
And if you are really visionary, you will take those findings back to the supply chain. One of the best things you can do is go out and talk to the suppliers you don’t yet work with. I believe we are 50% of the way on that journey.”
Developed capabilities –
“We had a very traditional category management model; we did have skills in the buyer community but not necessarily the right ones for a good category buyer. So we recognised the need for a culture change in our training programme needs. We used training from Future Purchasing, and frankly, we realised we should have done this much sooner. It’s very important to invest in the right training.
We recognised the need for a culture change in our training programme needs. We used training from Future Purchasing, and frankly, we realised we should have done this much sooner. It’s very important to invest in the right training.
There are some fundamental skills that make a good category manager: a fundamental understanding of economics – how to analyse a market, at both micro and macro level, with an understanding of Kraljic and Five Forces, and a robust understanding of behavioural economics as well as business life in general, for example you need to know the difference between a cash statement and a balance sheet. Alongside this, you need the softer skills of ability to empathise, tell a good story, present an argument, and be persuasive. Focusing on how much price you can take out of a deal is not category management, in fact that is what corrupts it.
Category management is not about managing transactions, rather it’s about understanding the mass of forces on a supply market and how to influence them. It involves a lot or reading and a lot of research. And if you want to attract the right calibre of person into procurement, you need also to offer them some fun.”
Culture change and leadership –
“The business expects procurement to be order placers. We need them to realise that we are not just there to get the cheapest deal; they still don’t understand the tri-part between good, fast and cheap! We need them to know that we are there to understand their needs. The business doesn’t see procurement’s talent that way, and sadly, neither do most procurement people. So that’s another challenge.
We have to change the perception through leadership – and by that I mean good leadership. Selection of the right leadership is important. While a compliance-driven approach is essential, long Word documents that no-one reads and a dictatorial approach, accompanied by unbalanced metrics, will not work. You should be able to come away from talking with a leader feeling inspired. Procurement is a place of diplomacy, you need encouragement and you need support, or it can be a lonely place. So a good leader has a universal set of business skills.”
Other forces at play
“There are other things affecting your category management approach. New technology is oversold in my opinion, but it does allow you to be more efficient and less interventionist. It can save you from admin effort and complaints associated with the quality of transactions, like invoice clearance, or late payments. But the person who relies on tech to think for them, has a long way to go. The right technology, deployed in the right way, for the right purpose is immensely powerful. There is a lot of it around and selectivity aligned to effective application is essential.”
“Acceptance of change is another issue. We’ve seen huge pushback, not least from procurement. The business will often see change as a good idea, it improves the service they get. But for procurement, it is easy for them to simply default to being a buyer, when what we should be doing, is prioritising helping the business.”
Guest Author: Paul Alexander
Regional Head of GBS Procurement for EMEA at BP