MERGERS & ACQUISITIONS
Appetite for acquisition
Nick Martindale
The recession has had a devastating effect on global merger, acquisition and takeover activity but there are signs that it could be about to pick up again.
On the acquiree side, the key is to get involved as early as possible in the due diligence process and to reassure core people in the business that they have a future.
CPOs will come under pressure to deliver synergy savings and one way to do this is to approach suppliers and ask how they can contribute to a more cost-effective organisation. But it’s important that they don’t sign up to unrealistic targets.
For those who work for an organisation being acquired, however, the result is likely to lead to redundancy or relocation. One CPO decided early on he did not want to be part of the new organisation and took the decision to move on.
On a professional level, CPOs must give as full an overview as possible of the procurement department and its capabilities and give the existing team as much exposure to the new management.
Going through such an experience can also be good for CPOs. “There is only a certain number of CPOs who can say they’ve gone through this process and done either pre or post-deal activity,” says Richard Nixon, a partner at KPMG procurement advisory.
Coping with redundancy
Nick Martindale
The global recession has seen many CPOs being made redundant as companies scale back operations and look to reduce headcount. CPO Agenda spoke to four senior procurement professionals who have found themselves in this situation.
One trend that emerged was how long it took to finalise a redundancy package with the employer.
Many have found the jobs market challenging and experienced a range of emotions along the way.
“You have good days when you have lots of calls and get some good feedback and other days when there just doesn’t seem to be anything out there,” says Ian Evans, former head of commercial at UK hotel chain Travelodge and now head of procurement and logistics at Royal Berkshire NHS Foundation Trust.
To give themselves the best chance of finding new work, CPOs have to ensure their professional network is as up to date as possible and register with specialist procurement recruitment agencies.
They must also be willing to relocate and to move into a new industry or from the private to the public sector.
However, some clients are now being more choosy owing to the number of candidates available and are looking for people with experience of working in their own industry.
CAREERS
So you want to be the CEO… or do you?
Sarah Lim
Many CPOs have ambitions to move into executive or CEO roles. But what should their career strategy look like and what leadership qualities will they need to succeed?
Sarah Lim, a member of the retail and consumer goods practice at executive search company Spencer Stuart, warns anyone considering this route to understand the pressures that come with the top jobs and be prepared to step out of their comfort zone and take risks.
The most important element is to gain exposure to other parts of the business, particularly on projects that are of strategic importance to the CEO. CPOs are more likely to get an opportunity to move outside procurement in fast-moving industries or organisations that are undergoing structural change.
If a CPO lands the top job, building an excellent team is crucial, especially for areas where they may not be comfortable, such as sales or R&D.
Being motivated by building profits, a genuine interest in the wider business and an ability to take tough decisions are also vital. Often these decisions are based on judgment, rather than the fact-based analysis typical in procurement.
New CEOs must also adjust to former colleagues becoming reports and may use a personal coach to come to terms with the new relationship.
INTERVIEW: HUGO ECKSELER
Delivering the post
Nick Martindale
The current economic climate has led Deutsche Post to adopt a tighter focus on cost-reduction. In an exclusive interview with CPO Agenda, CPO Hugo Eckseler talks about how the procurement function is helping the mail and logistics company through negotiations with suppliers and improving working capital.
“Our argument is that those suppliers who are willing to co-operate with us in these difficult days will have preferred status in the future,” he says, while on the working capital side it is piloting a supply chain finance programme to achieve longer payment terms without jeopardising suppliers.
Although the function is having to do more with fewer resources, the downturn has had positive repercussions too. “By working together with business management, co-signing letters to suppliers and involving business units in activities, people now better understand the role that procurement can play,” he says.
“It has also provided opportunities for us to do things that you cannot do in very good times – the standardisation of products, for instance.”
In the future, he predicts a stronger trend towards business process outsourcing, which requires a different set of skills in the procurement team.
SUPPLIER INNOVATION
Refracted glory
Jon Henke
Manufacturers and service organisations are increasingly looking to suppliers for innovation but such activities can also lead to behaviour that can get in the way of genuine collaboration.
Drawing on years of evaluating supplier working relations, John Henke, president of US consultancy Planning Perspectives, identifies three customer competitive activities that create particular stress: conflicting objectives within the buying organisation’s functions, last-minute engineering/specification changes and adversarial pressure for price reductions.
To increase supplier innovation, organisations must maximise collaboration by involving suppliers in product development, sharing information in a timely manner and working with them to improve cost and quality competitiveness.
Customers must also minimise competitive activities by adopting a more trusting approach to supplier relations, particularly when it comes to price reduction pressures. But conflicting functional pressures and excessive/late specification changes are harder to control in the short term and the best approach is to compensate for these by strengthening the collaborative actions.
EXECUTIVE DEBATE
Balancing quick wins with sustainability, Stockholm
Stephen Finch, Ashley Hubka and Grégory Kochersperger
A panel of senior procurement figures from the Nordic region discussed how to balance quick wins with longer-term supplier relationships.
Bob Kickham, senior vice-president of sourcing at copper producer Luvata, warned that a focus on sustainability can mean you don’t get any quick wins, while the panel agreed that procurement has to pick its fights carefully so as not to get bogged down in discussions over pens or taxis.
In this climate, it’s equally important to ensure that weaker suppliers can keep trading, said Jonathan Watt, former CPO and senior vice-president at wind turbine company Vestas. One of the best ways of identifying those who are risk is to call its CEO or CFO directly yourself.
A debate followed about what the executives would do if they were CEO for a day, which examined issues such as procurement outsourcing, better teamwork between business units and aligning targets across procurement and manufacturing. There was agreement that procurement could do better at communicating the need to get spend under management internally.
The debate concluded with a look at whether indirect purchasing could be a source of quick wins and the role of technology in delivering short-term gains.
SUPPLIER RELATIONSHIP MANAGEMENT
Building the case for SRM
Mark Webb and Jonathan Hughes
Supplier relationship management has become a major focus in procurement, but a many organisations struggle to get the most value out of SRM.
In a study of 22 European and US companies, Mark Webb, managing director of Future Purchasing, and Jonathan Hughes, partner and leader in the sourcing practice at Vantage Partners, identified the firms’ high-level objectives in an SRM programme.
They go on to identify six key tools for unlocking supplier value, five ways to measure SRM’s benefits and six relationship dividends.
SECTOR FOCUS: LEISURE
The lessons in leisure
David Read
The leisure sector’s supply chains are often characterised as immature and unsophisticated, but other industries can learn from the way it meets the requirements of informed, demanding customers from a fragmented supply base.
David Read, chief executive of consultancy Prestige Purchasing, identifies five key lessons that other sectors can take from leisure: collaboration works, the customer is king, distribution is the key to success, internal stakeholders are critical, and ranging and specification drive value.
SUPPLIER PAYMENT
The high cost of extended payment
Matthew Harrowing
The trend for companies to maintain capital by paying suppliers later is “myopic and unhelpful”, argues Matthew Harrowing, co-founder of spend information firm Etesius.
He argues that delaying payment sends suppliers in search of other sources of capital, which are likely to be more expensive. And it will cost customers in the end, whether it’s a slower internet connection, a longer wait at the help desk, or even needing to find a new supplier: the UK’s Federation of Small Businesses said late payment caused 4,000 business failures last year.
TRAVEL MANAGEMENT
Set a new course in business travel
Amon Cohen
Experienced travel professionals saying they have never seen such a buyer’s market in business travel, but sector expert Amon Cohen explains how the long-term story is different. The emphasis in business travel is shifting away from prices to ensuring travel is only booked where a trip cannot be replaced by, for example, videoconferencing, and the CPO is vital to making this culture shift.
One criteria is the return on investment from business travel, which Airbus and Siemens are trying to measure.
