Accenture: Procurement Takes the Stage - Tom Van Wesemael and Jeremy Robinson
A tough economic climate means that procurement must deliver short-term cost savings quickly. Tom Van Wesemael and Jeremy Robinson, Accenture, explain to FDE how clients can achieve these savings and emerge from the recession with strong competitive advantages.
In a recent survey of top chief procurement officers worldwide, Accenture found that procurement departments were being asked ‘to do more with less’. Half the CPOs surveyed said budgets were being cut and that they had been asked to reduce costs within 12 months. Two thirds of CPOs said one in five savings targets had been increased by 15%.
Meanwhile, 50% of suppliers are trying to raise prices while the supply base risk has increased with companies in danger of failing or having to merge.
‘We also found that the procurement department is being asked to deliver savings in as little as six months – and this job has to be done without new hirings,’ says Jeremy Robinson, Accenture’s UK sourcing and procurement lead. ‘Therefore, as the procurement function moves centre stage, its professionals need fresh skills to run new sourcing strategies to challenge demand while working cross-functionally to deliver value and release capital for reinvestment or the bottom line.’
Of note, the survey also revealed that 64% of CPOs said they were now going beyond their normal boundaries and becoming involved in cross-functional teams.
‘We tell our clients there are good costs and bad costs,’ says Tom Van Wesemael, senior manager of sourcing and procurement for Accenture. ‘Some costs are essential to ensure that the business is aligned for the economic upturn when it happens. For example, by using a Smart Policy to better manage travel costs, clients can work to reduce classes/meetings or have the organisers of these events pay for the travel.’
Video-conferencing has been found to be an effective alternative to travel. Cutting travel also increases desk time and productivity. Invoice audits often throw up errors, particularly from telephone conference calls, while prices from single suppliers can be standardised across business units and further savings can come from reverse auctions.
Mission control
Accenture has developed an approach and is working with its clients through a Control Tower organisation, which manages immediate costs while controlling and stacking those that can be dealt with later. The client and Accenture work together in a fact-based and data-driven way where Accenture has organised all the required information about corporate spend on suppliers, consumption from different regions and the contract database, as well as what is happening in the markets regarding price changes and trends.
‘With prices declining,’ says Van Wesemael, ‘we need to know what the impact will be on materials and services being bought so that we can reach out in a proactive way to suppliers and start negotiating price reductions with immediate impact in a fact-based way.’
The Control Tower reports to a procurement committee, which includes the CFO, CEO and CPO, and because of the urgency and criticality of its work it meets weekly. The Control Tower includes a Negotiation Management Board containing procurement leaders from different business units and geographies, which meets daily. ‘It is reactive to suppliers’ requests, especially at year end when contracts expire or proactive there where commodity prices are falling and we are renegotiating these contracts,’ says Van Wesemael.
Ready for action
Just as the finance function was transformed 20 years ago, so the procurement function is now undergoing radical change.
‘It is no longer viewed as transaction “pencil-pushing” to send orders and make sure the invoices are paid,’ says Robinson. ‘It is about rapid and sustainable cost management. The rapid component is being able to respond to the current environment and the opportunities it brings. The sustainable component is about putting clear blue water between a company and its competitors for when the recession ends.’
