Often maligned as the less dynamic, less cool, more uptight cousin of marketing, it’s fair to say procurement gets a bit of a bad rap. Given the nature of the role, it’s perhaps not hard to see where this reputation (albeit a slightly unfair one) has come from. The process of acquiring supplies and services and negotiating contracts can at times seem in conflict with the creative, ideas-driven world of marketing — with many thinking of procurement as cost-cutting, bureaucratic box-tickers, just waiting to rain on their parade. But of course, procurement is a fundamental aspect of business — providing the foundation for all other departments, and the organisation as a whole, to be able to function effectively and smoothly. So how can procurement change it’s image as the killjoy?
The cultural shift towards agile creativity means all departments are re-thinking and adapting the way they work — including procurement. By having to meet the needs of a more demanding and dynamic creative sector, procurement are proving once and for all that they can be responsive and flexible — and most importantly that cost-cutting isn’t their only agenda.
One man who knows plenty about the pressures, pitfalls and misrepresentation of procurement is Romain Delpech, Central Sourcing Manager at British American Tobacco. We caught up with him to get the inside track on his role, how it’s changing and what the future of procurement looks like...
Rare Design: Thanks for agreeing to chat to us, Romain. Procurement gets a bit of a bad rep, certainly from creative departments, and marketers who often claim they stifle creativity. What are your thoughts around that? Is there any friction between the departments?
Romain Delpech: I think overall there is some friction between let’s say, marketing and procurement, but I have found BAT quite different in that regard. At the end of the day we’re here to help marketing get things delivered and get things done at the right price. I think the problem within the whole industry is that sometimes procurement is not necessarily on the same page as marketing. We look at pricing, we look at contracts and all those kind of things — which are the very basic things for procurement — and I think we have a reputation for being too focussed on money.
RD: So how does BAT ensure that creativity and innovation is allowed to flourish alongside procurement?
Romain: The priority for marketing tends to be more on the creative side, on quality, on turnaround. At BAT, the procurement team really tries to say ‘okay what are the priorities, what do you want exactly? Is money the concern or is it something else?’ Obviously we have some budgetary constraints but that’ll probably be the first thing we say when there are constraints with money.
I think we play more of a managerial role. For example, we help our stakeholders deal with agencies using the experience we have with more mature suppliers. We try to use our best practices with suppliers and try to replicate that with the marketing agencies because the creative world can be a bit messy. What I’ve been doing with Rare is just kind of setting up a way of working with the team. Our marketing team have a lot of pressure on them and very tight deadlines to meet so we need the right suppliers on board to deliver quickly without losing the creative aspect.
I don’t know if it’s just at BAT or the industry as a whole, but we’re trying to change the reputation of procurement — which tends to be that we’re the bad guys only concerned with cost reduction. So now, rather than talking about cost reduction, we talk about value for money. It’s difficult because from a marketing perspective, where the money should be spent is very subjective. Creative is very difficult to measure.
RD: So do you think procurement is maybe a little bit misunderstood by some?
Romain: Kind of, but I think it comes from both sides. I’d say we’ve helped to create that misunderstanding. In some companies I’ve worked for, the message has been ‘procurement is here to help you save money and work with your budget constraints’, whereas our function is much more than that. So now we’re trying to change that message and say no, that’s not the only thing we do — that’s actually a secondary thing technically because we are a supporting function, here to support other aspects of the business, like marketing. I think there is misunderstanding around everything we do.
RD: It sounds like procurement needs to get a marketing branding message for the department...
Romain: Yeah, we’re doing that at BAT to be honest. We have a team looking at procurement at the moment; the way we communicate across the business to send the right message and say we’re here for this and that and this... So yes, I think you’re right. I think how procurement is branded is important.
RD: You touched a little bit on speed of delivery... Agility is a big buzz word at the moment. From your point of view what is procurement doing, particularly at BAT, to keep up with the rate of change and the demand for speed?
Romain: At the moment we’re working with the NGP team - Next Generation Products - which includes all the vaping types of products. NGP is very new and young and fragmented so procurement helps the team and the supplier find the best way of working. We’re saying ‘ok you need to trust the supplier you work with and plan things together so they can gain insight’. That’s how we achieve agility.
All of our suppliers — like us — are agile and very responsive, but they can only be responsive and agile if we give them the right materials. So it’s a win:win relationship. We say to them: this is what we want to do. That way if they would approach something differently they can be proactive instead of reactive. We’ve changed external suppliers in the past precisely because they weren’t like that at all. They weren’t involved enough and there was no real plan, so there was no way it was going to work.
Now we have suppliers that get involved in the plans and the scope of work. We sit down with them regularly, and we try to set things up like this because in a team, you win together and you fail together. If you expect a supplier to do things because you ask them to do things it never works because in the end you’ll be kind of complaining or saying ‘this supplier is just being reactive instead of proactive’. We are also responsible for that outcome, so we’ve try to change the behaviour and structure things. At the end of the day marketing is marketing: it’s creative but it’s also not very organised.
RD: Two years ago, PepsiCo scrapped their marketing procurement department and gave all the purchasing responsibility to the brand teams to try and help them move quicker. Did you know about that?
Romain: No, I didn’t know. That’s actually very interesting, though, because we do get comments, not only from the wider business but also from inside the team, about the process sometimes being too long or not agile enough and perhaps too rigid.
We don’t want to be seen as the function that slows things down and needs to be removed from the equation. The message which we’re trying to send here is that we can be agile as well, and sometimes we’ll drop the process because it’s in the best interest of the company. We’re saying: ‘we will support you whatever the objectives and if we need to make compromises on the process, we will.’ It’s something we have to prove with action, though, not simply articulate.
If you have the brand marketing team dealing with the contracts and that side of things, it can be a risk for the business. Speed is one aspect but often you need an intermediary person between legal and brand in terms of reviewing contracts and other legal areas. We do all of that and then we show them to check they’re happy or if they would like to add anything. I think we add value. Maybe they felt the team at PepsiCo didn’t add any value — or maybe that added value was too expensive. I find that move quite risky.
RD: I think the idea was something like: marketing decisions are made in real time, so it’s more efficient to put that responsibility on the brand teams who are nearer to the consumer. Like you say, it’s a risky strategy.
Romain: I think the balance is not to get involved in everything single thing. You need to give marketing some freedom, which means picking your battles. At BAT, procurement only get involved in the very big projects — the ones which are either very strategical or very high value. We don’t tend to get involved with the smaller stuff because we don’t want to be overbearing and make it seem like they need to ask us every time they want to do something.
RD: Let’s talk about external suppliers, do you work from a pre-approved supplier list and how proactive are you in finding the right partners? Who are the right partners for BAT?
Romain: We work with a number of big suppliers but they’re not pre-approved. It really depends on the size of the project. If it’s a big one then we tend to do a lot of market research and market analysis because there are a lot of new providers with interesting ideas and innovations. Obviously we like to use global providers because we are a global company and we need our suppliers to have a global footprint as well. It really depends on the objective.
Sometimes it’s better to go for a local very agile small supplier for certain things — because you’re limited in terms of budget or timing — and you know that company will deliver much faster than a global one. Although I would say the global ones are key for a global company, like I say, we do sometimes go local. We’re kind of well balanced about that. But when we start a new project we tend to start with our historical suppliers, then we look at different processes and do some market research to see whether a new supplier would be more suitable.
We also consult our global network working in different markets around the world to see if they can recommend any good suppliers they’ve been working with. So we don’t necessarily stick with the same suppliers. We’re very open to exploring what’s out there.
RD: Let’s talk zero-based budgeting. Is that still in fashion? Is that part of how BAT works?
Romain: It really depends. Sometimes in the creative world you want to do things but then you realise you don’t have the money to do it. The marketing team will come up with a great idea, build a strategy around it and then want to source suppliers. And we say ‘ok, what is your budget?’ But they don’t have one because it’s a new idea that wasn’t part of the annual plan, so now we need to find the money from somewhere. So, because it’s more an innovation kind of thing, we have to look for a supplier that can help us with it. If we want to do things and we don’t have much budget — or we’ve got nothing at all — we still need to react to the market and competitors. Plans change all the time.
So I think zero-based budgeting is still there and will always be there. If you want to build a smooth and trustworthy relationship with your suppliers you need to plan with the budget you have and say ‘ok, this is what I have, this is your advert and then let’s work something out’. Which we try to do obviously but there are always unexpected things that crop up, and that’s where zero-based budgeting comes in.
RD: Can you explain why procurement is such an important part of the business?
Romain: I think procurement is really important because we look at things from a very different angle than the rest of business. Firstly, there are no emotions involved in what we do — we tend to look at things in a very cold way, as tasks. We make statements based on data, we help the business gain visibility on things they don’t necessarily think of. Things like: which suppliers do I use? Why do I need them? How do I use them? How can I rationalise the relationship with my money? How can I make the money that I spend more efficient?
Sometimes people don’t even realise that they’re spending money with one supplier to do one project and actually there’s another one that they’ve been using for similar projects - so why do they need two? You know, that kind of rationalisation. So we give them visibility on their wallet. This is how you spend your money. This is the supplier you used. This is when you use them, how you use them, which projects you use them for etc. So that’s one area.
We also help with planning and keeping within budgetary constraints — which is sometimes a challenge. Overall, procurement can protect the company a lot when it comes to contracts because there tends to be a legal aspect. Legal help the business a lot of course, but we are positioned somewhere in between the supplier, the business and legal. What we try to do is get the best value out of the supplier so that it’s win:win.
We try to help suppliers improve the way they work and potentially help them save money by suggesting changes and ideas. That only comes when there’s transparency and a very strong relationship. It benefits all parties, especially the business. If you have a relationship where you can help the suppliers be more innovative, the business ends up getting more from the supplier for the same money. So I think we’re important because we try to think about all of the additional things on top of marketing and deliverables.
RD: Going back to the relationship between marketing and procurement… You guys understand marketing and the creative process — so it’s not just looking at numbers is it?
Romain: No, we try to go beyond just the numbers. Obviously this notion about ‘the numbers’ sticks because, as I said, we make statements on facts and of course data is a big thing in procurement. But I think we also understand the importance of the creative side of marketing. I’d say here at BAT, the relationship between procurement and marketing is actually quite good. But it’s also a very unstable kind of relationship.
As long as you deliver what they expect and they’re happy, it’s fine and they trust you. It’s a bit like a couple in a relationship — if one day something goes wrong or you make a decision that’s in the interest of procurement rather than marketing, the relationship is threatened and the perception can flip back to a negative one.
RD: Taking all of that into account, what are the biggest challenges in procurement at the moment?
I think that relationship is the challenge: how do we strike a balance between procurement objectives and marketing objectives, and how can we support each other in the best way. I think one of the bigger challenges at BAT is what I said at the beginning about reputation. We need to own that change of reputation and send out the right message.
I think the big challenge is sending the message across all the functions that procurement is not here just to focus on savings, savings, savings, because that’s not how I do things and that’s not how procurement do things. And it’s a frustration for us to be honest. We get frustrated when we hear ‘oh you guys are just focused on saving money’. We want people to realise that’s not what we do — that’s just a small part of what we do and it’s not the most painful part. The most painful part is contract, relationship management and all that kind of stuff. So we have to try to challenge and change that perception.
Thanks to Romain Delpech for taking the time to talk to us...