In Part 1, I spoke with Dave Wilson, one of the Lead Procurement Consultants at Touchstone Spend Management. We spoke about Dave’s career to date and how the CIPS (Chartered Institute of Procurement & Supply) qualification has helped him in his role.
In Part 2, Dave gives some specific examples of how his study of CIPS and his application of that knowledge has benefited his clients.
Client – Leading Estate Agent Group
Relevant CIPS module: Managing Contracts and Relationships in Procurement and Supply (Level 4, Module 5)
The reason we were brought into help here was they had no knowledge of contracts from an organisational level. They had lots of paper-based contracts and some on spreadsheets. These contracts were held in many disparate locations. There was very little visibility of who contracts were with, no knowledge of what the level of on-contract spend was and there was no semblance of actual contract spend vs budgeted spend.
The obvious, and in my opinion correct answer is that they needed a contract management system. The real question was: how do we set the contract management system up so most value is derived?
When you first talk to the people you are going to be working with, you’re looking to find out what contracts they have, the structure of those contracts and the approach to managing contracts at both a departmental level, and an organisational level.
To do this, to really get to the root of the problem you need to be able to quickly understand what the person you are talking to requires. You need to know the theoretical best practice, you need to know the shorthand. At this particular company this was a considerable challenge as they had so many different types of contract, a devolved procurement approach, and very different processes at a departmental level.
Studying CIPS, and in this particular case the ‘Managing contracts and relationships in procurement and supply’ module (Level 4, Module 5) meant I was able to understand, far quicker than I would otherwise have been able to, their requirements. CIPS gave me the knowledge to discuss and understand all the different types of contract they had across all the devolved contract silos. It enabled me to set up the contract repository to suit all departments including: IT, facilities and procurement. A big driver for this project was also the requirement of the legal team. This meant I needed to be able to understand the legal side of contracts. CIPS gave me the knowledge to understand the terminology actually held within a contract, and enabled me to set the solution up so they could do contract approvals with it.
The situation now is one where they have full visibility of organisational contracts, when they expire and the key contract milestones. They have many different types of contract, but they have the correct template, aligned to the correct type of contract and they are able to define information based on that type.
As you progress in CIPS you do find out more about the different levels of an organisation from a procurement perspective, and how the objectives of a business flow between strategic and tactical. Here, their lack of contract visibility was causing them to have tactical problems like paying more than they should for commodities, but it was also exposing the business to the risk of working with suppliers they really shouldn’t be working with.
This has all now been mitigated due to the application of CIPS best practice and the Proactis Contract Management System.
Client – A Higher Education Centre
Relevant CIPS Module – Sourcing in Procurement and Supply (Level 4, Module 3); Improving the competitiveness of supply chains (Level 5, Module 3)
The problem here was a simple one; they weren’t running enough sourcing events. They knew this needed to change so set up a Greenfield procurement function and brought in a new Procurement Director to head the department up (Initially a team of one). He identified the current sourcing process as being overly complex and long-winded, and told the business he couldn’t do this all by himself, they either needed more people to manage the process or a software system to sort it out. The decision was made to implement a software system and they contacted us to help.
As it was just me and him with any background in procurement, we were often working with user groups who had no real experience of working within a formal procurement framework, and they were naturally sceptical of some of the processes we were trying to implement. If you are not able to clearly explain to someone the reason why they should change their current way of doing things, they won’t change.
I couldn’t just tell them what the software did, I needed to be able to properly explain the theory behind the practice and how it’s going to benefit them. This is where my knowledge of CIPS, in this case the ‘Sourcing in Procurement and Supply’ module proved to be invaluable.
There are so many different ways to run a sourcing event and so many different types of eAuction. I needed to be able to explain the theory behind each, why I thought a certain type of auction or sourcing event would be appropriate for a certain type of transaction, and why the Procurement Director and I planned to set the system up the way we eventually would.
Can you describe some of the different types of sourcing event you set up?
Quickquotes is a good example. Rather than having a full multi-stage tendering process (where you send out your RFI as the first stage, then get your score and shortlist together before sending out RFQ 2nd Stage etc.) you can streamline the process. In this case we decided a quick quote process would be appropriate for any orders under £50k. The quickquotes functionality gives their users the freedom to define their requirements and specifications, then ask (X) number (usually 3) of preapproved suppliers to quote on it, all within the system. The supplier who comes back with lowest price wins the bid. You have to be careful with this one as to what categories you set it up for, but if you get it right, you make big savings. I discussed what categories this functionality would be appropriate for with the Procurement Director. Based on these discussions and what I learnt from the CIPS module, I built a solution which has seen the organisation realise some big savings, particularly on those tail-spend items.
Client – A Membership Organisation
Relevant CIPS Module – Category Management in Procurement and Supply (Level 5, Module 4)
The main problem here was they weren’t able to categorise spend. They didn’t have a P2P system outside of a rudimentary module bolted onto their finance system. They didn’t have spend categorised and no template structure of what they were purchasing. They were just ending up with an invoice to pay, and were potentially buying from suppliers they hadn’t used before.
From a theoretical perspective, CIPS gave me an understanding of the many different ways spend can be categorised. You can have different levels, different hierarchies, you can be as specific or as high level as you like.
Let’s talk about the hierarchy of IT spend at this organisation, how we broke it down and came up with some savings targets. At the top level they have overall IT spend. The next level we broke it down into hardware and software. After that hardware was broken down into laptops, servers etc. Software was broken down into different types of licenses; Microsoft, Adobe etc. IT at the top level had the target of saving £1m. But we broke it down into £600k on hardware, £400k on software. Going further we said we wanted to save £50k on servers and continued to break it down in that manner to a pretty detailed level.
Clearly, I needed to understand all of that conceptually, I needed to understand how to categorise spend and the different theories behind it; that’s what CIPS gave me. It’s important to realise there is not one hard and fast rule; you need to adapt the theory and what you’ve learnt to the real world.
More generally, you need to understand the organisation you are working at, what levels they look at budgets, what level the forecast is at, and how they wish to present data to management.
Clearly, implementing a proper P2P system helps. But you can ensure your client makes the most of that system by using your theoretical CIPS knowledge to recommend how items should be structured, should it be a direct PO or a requisition, is that process right for that category etc. and build the system based on strong theory.
Moving back to this membership organisation, because I had that advanced level of understanding of procurement and supply, I was able to explain to them how best to solve their problems around category management. They knew they had a problem, they just didn’t know how to solve it. The fact they didn’t have any procurement people meant I was required to act as the pseudo Head of Procurement for the duration of the project. Without CIPS, I simply would not have been able to fulfil that role.
The situation now: They know exactly the breakdown of spend in each category. Although they don’t have a Procurement Manager, they are able to analyse this information using the best practice and knowledge I have passed onto them. They understand how the process works, they have that control of buying and I must say, I’m very proud of this project.
Thanks Dave, some good examples of how CIPS has helped you and your clients.
No problem mate, always happy to share some knowledge!
If you wish to find out more about more about how Touchstone Spend Management can help improve your spend management processes, please feel free to get in touch.
Who knows, you might even end up working with Dave!
