Why work in professional procurement?

Contents

2 Contents

Page

Introduction 3-5Jonathan Dutton, Managing Director, CIPS Australasia

Career case studies 6-10Marissa BrownSubcontracts Officer – C4 Systems at BAE Systems Australia

Chris CrozierChief Procurement Officer at BHP Billiton

Marny FoadSourcing and Procurement Practice Lead, Accenture Australia. Accenture is a global management consulting, technology services and outsourcing company.

Billie Gorman MCIPSHead of Strategic Sourcing at Bank of Queensland

Vanessa Read MCIPSSourcing Specialist for Rio Tinto Procurement

Paul Rogers FCIPSPractice Manager at PMMS Consulting Group

Stephen Sherwood MCIPSExecutive Manager Sourcing within the Group Strategic Sourcing Division at Suncorp-Metway Limited

What is it about procurement that is so interesting and yet so hard? 11-17Belinda Adam – ACT and National Winner of CIPS Australia’s inaugural essay competitionin 2006.

The evolving role of the modern day chief procurement officer 18-20Peter L. O’Brien, Head – Asia Pacific Supply Chain Practice, Russell Reynolds Associates

Appendix I 21A chief purchasing officer’s (CPO) job description template

Appendix II 22Achieving full membership of The Chartered Institute of Purchasing and Supply (MCIPS)

Appendix III 23Salary surveys

Introduction

Why work in professional procurement?

No one lies awake in bed thinking, ‘I wish I worked in procurement.’ ‘Why would Iwant to work there?’, they ask. No sex, glamour or money! One former CEO Iworked with went further when he asked, “Isn’t procurement for people who findaccounting too exciting?"

The truth is that professional procurement is a smart place to be. It’s the fastestgrowing profession in business [Procurement Professional, Issue 17, August 2007],offering a broad-based business education at the heart of an organisation.Procurement professionals today are dealing hands-on with many of the biggestissues in business and they are often the first in their organisation to deal with majorchange.

By definition, procurement people spend large sums of money. Organisations tend to feel secure when that activity is close to the centre, so procurement teams areoften located close to the action. High spend has a high profile, so the bosses areoften watching key procurement projects. There are good opportunities to shine.

It’s more than just buying things

But procurement is about more than just spending money. It’s about delivering a range of commercial benefits to an organisation and its customers. It’s about managing a secure supply line that delivers pre-defined successes and better outcomes for all stakeholders. One key outcome increasingly expected by consumers, regulators and stakeholders is environmentally sound supply solutions, or socially responsible and sustainable procurement. Procurement people are at the heart of exactly how to buy on environmental merit, as well as on commercialcriteria.

Professional procurement, today, is also far more than just buying things. It is external resource management; managing the supply base as a key strategic resourcein the same way IT professionals manage an organisation’s investment in technology,property professionals manage its estates, finance professionals its assets and HR professionals its human assets.

Organisations worldwide are increasingly recognising the contribution that professional procurement can make strategically; not just to the bottom line. A.T. Kearney’s survey in 2004 revealed that 60% of the Forbes top 750 firms in theworld had a Chief Procurement Officer [CPO] on their senior management team, compared to only 40% four years earlier. The CIPS salary surveys in the UK revealthat, on average, CPO’s now earn more than marketing directors.

So what do procurement professionals actually do, if they are not always buyingstuff? Well, they are managing the procurement cycle right down their supply chain, not just with their immediate suppliers.

3Introduction

4 Introduction

Procurement professionals are also managing suppliers, sub-contractors, staff, budgets and their clients (the stakeholders who benefit from the utilisation of whatthey’re buying). They’re doing things that make a difference. For example, as a procurement manager in IT during the late eighties I personally bought very little.My team of twelve or so professional buyers did that. They spent hundreds of millions. My time was mostly spent resolving disputes. Of course none of the IT worked in those days, so we were in dispute with most of our major suppliers.And we were half way through projects from which we could not pullout.

I also had to ensure we were capturing the business benefits of our investment (we weren’t, obviously). One way of doing that was to help suppliers resolve their problems – almost like a business consultant. Negotiating with unions, sub-contractors, banks, administrators and others in several countries was all part of the job; working upstream and downstream of the supply lines to get the results our stakeholders needed.

It was an exciting time, and I learnt a great deal about how business actually worksthat stays with me today.

5Introduction

The fastest-growing profession in business

The profession was awarded a Royal Charter in 1992, in recognition of its contribution to society. Full membership of The Chartered Institute of Purchasing & Supply (MCIPS) is a degree-level qualification in strategic procurement and is recognised worldwide as the pre-eminent standard in procurement. It includes 15 topics as varied as contract law, marketing, finance, negotiation, strategic sourcingand leadership [see brochure: How to achieve MCIPS]. CIPS now has 50,000 members in 150 countries.

CIPS Australasia (CIPSA) was established in early 2005 with only 88 members and now has almost 3,000. Members include professionals from 78 of the top 100 mostprofitable ASX companies [BRW listing, December 2005], illustrating there’s some correlation between professional buying and profitability. In 2008, CIPSA itself waslisted by BRW magazine as the 49th-fastest-growing business start-up in Australia, an indication of the growth of the profession itself.

Professional procurement today offers a rewarding and varied career where you canlearn a great deal; a great place for talent to find its wings. But it is also a stickyprofession. People who have fallen into the profession quickly learn to enjoy it.They realise what it offers and how worthwhile it is. Hopefully a few people are now lying awake at night wondering, ‘How can I get into professional procurement?’

Jonathan Dutton FCIPSManaging Director CIPS Australasia

Career case studies

6 Career case studies

Marissa Brown

Subcontracts Officer – C4 Systems at BAE Systems Australia

As a subcontracts officer for C4 Systems, I’m responsible for the subcontract activities for a wide range of projects. This includes providing project and engineering managers (and their teams) with subcontract management advice, direction and support to ensure we create and maintain a positive and professional relationship with all our suppliers.

In this role I’m also responsible for providing subcontract and supplier managementadvice and direction for all minor bid activities and ensuring that the bids comply withBAE Systems’ procurement policies, processes and procedures.

After finishing university I saw a subcontracts manager position at BAE Systems advertised,which called for someone with my qualifications. Although I wasn’t sure what the roleentailed, and I knew I didn’t have the necessary experience, I put in an application. BAESystems still called me in for an interview and they offered me a graduate procurementofficer role.

Shortly after I joined BAE Systems they rolled out a graduate program, in which I enrolled.The two-year programme involved four six-month placements; as a procurement officer,commercial officer, subcontracts officer and an estimating and pricing officer.

The programme also gave me the opportunity to participate in a stretch assignment,which is not necessarily directly related to your current placement. I became involved inthe restructure and development of BAE Systems’ Procurement Developing Youth trainingprogram, which we called Reach. It was awarded CIPSA Best People DevelopmentProgram in 2007 and the Foundation and Practitioner Levels have since been accredited to CIPSA Level 4. I’m still actively involved in the development of this programme.

Interaction with a wide range of stakeholders; both the internal project teams and our suppliers, is what I enjoy most about procurement. I find the profession offers a wide range of opportunities and, more importantly, offers an insight into how various companies operate within a range of industries. The skills and experience derived fromthis are invaluable.

Chris Crozier

Chief Procurement Officer at BHP Billiton

My role is accountable to the Board and our Group Executive for driving functional excellence across BHP Billiton’s supply teams at every level from site to global. I also provide single point accountability in:• setting the strategic direction of the function for ongoing management of the supply

of goods and services to the organisation• defining and overseeing the governance of supply systems, processes, policies,

procedures and standards globally to ensure optimal spend management • setting and measuring key performance indicators for the function to ensure

commitments to functional excellence are met

7Career case studies

Previously, I worked in operations and marketing, before moving into procurement viamanagement consulting. I find that procurement combines the pragmatic problem solvingof operations with the commercial aspects of my marketing heritage and the strategicinsight gained through management consulting.

Procurement is very dynamic. It provides exceptional oversight across a global organization as well as the opportunity to assess macro and micro impacts on our sector,and the subsequent impacts on the inbound supply chain. The role is highly transparentand the function delivers real value to shareholders.

Marny Foad

Sourcing and Procurement Practice Lead, Accenture Australia. Accenture is a global management consulting, technology services and outsourcing company.

In my role as a consultant I work across the full range of areas within procurement; strategy, sourcing, compliance, supplier management, requisition to pay, governance, and stakeholder management. We work with clients to understand how their processes compare to those of the most successful businesses in these areas. We help them identifywhy there is a gap between them and those with higher performance, and we then workwith them towards closing it.

It is my responsibility to make sure we (Accenture) have the skill set to match our procurement offer in the market; making sure we have the right people available to do the job. I have also contributed to developing our perspectives on procurement; beinginvolved in Accenture-led research to make sure we are on top of the changes going on in the profession.

At the beginning of my career I was on the supply side, as a key account manager withinthe New Zealand dairy industry. This gave me a full view of the global supply chain fromcollecting the milk, getting it to the factory and processing it, selling and delivering to theinternational market.

Moving to the UK, I was contracting and I fell into a couple of procurement roles thanksto my experience with price modelling and negotiation. Through this contract work Igained exposure to consulting and that’s when I made the transition into supply chain consulting with Accenture.

It was a really interesting time to step into procurement consulting because there was alot of change happening, much of it driven by technology (like e-procurement, auctionsand e-market places). I was working with global organisations helping them understandand use new technology to their advantage.

Organisations each have different types of challenges, especially in this current economic environment where many organisations are changing and aligning processes to savemoney. I enjoy applying myself to these challenges and working across the whole spectrum of procurement; sometimes all at once, and other times focusing on specificactivities. You work across the whole organisation too, because a fundamental aspect of procurement is how it interacts with the wider business to support its strategic

Case studies

8 Career case studies

objectives. As a result, you get to deal with a lot of different people and gain exposure to different points of view. You then have the challenge of trying to align these, and hopefully - ultimately - receive their support.

There’s a real focus on people with procurement, which is another attraction for me. Ifwe can’t influence people, we can’t get our job done, so relationships are really important.

Billie Gorman MCIPS

Head of Strategic Sourcing at Bank of Queensland

All of the bank’s strategic contracts fall within my area of responsibility. We have a small team – five people. Our primary role is strategic sourcing and contract negotiation,implementation and management for the 15 or so critical and high value contracts (80% -90% of our supplier spend).

Our largest contract makes up about 30% of our supplier spend and covers the majority of our IT and business process operations. It is fully managed by myself and a contractsmanager. Mostly though we work with the business to conduct the up-front sourcing strategy and execution through to contract award and then hand it over to the business,reviewing the performance on a regular basis.

A temping role in a procurement team unexpectedly kicked off my procurement career.I’d studied journalism and moved to London to become a journalist. The pay wasn’t goodenough so I began temping, which led to an IT Buyer position at London Underground.Since then I’ve worked in a number of procurement roles in Europe and Australia withOracle, BSkyB, Pine Rivers Shire Council and Parmalat. I’ve been in my current role at theBank of Queensland for 18 months.

The diversity of the procurement function is something I really enjoy. You’re not restrictedto being an analyst, a lawyer, an accountant or a relationship expert. It’s a blend of every-thing.

I also like corporate strategy and am results driven. Procurement allows you to play in the strategic space whilst seeing an immediate and direct contribution to the bottom line.

Vanessa Read MCIPS

Sourcing Specialist for Rio Tinto Procurement

My role is category manager for electrical, mechanical, and industrial supplies (mainlymaintenance, repair and operations (MRO) goods) for the East Coast of Australia, althoughmost of the contracts I manage have a national focus. This means that I have end to endaccountability for all suppliers that fall into this category, which is worth more thanA$500million per year.

This is an extremely varied role as I can plan the projects I work on. For example, I maychoose to work on price reductions, continuous improvement initiatives, low cost countrysourcing, reduction of transaction costs via automation, or to run a tender or sole source -

9Career case studies

the list goes on! Basically it is up to the category manager to determine where the value is and how it will be delivered to the business.

When I completed my business degree at university, I did not have a set profession inmind. I knew I wanted a job that offered variety and exposure to the commercial side ofbusiness and research uncovered the Queensland State Government graduate programmefor procurement professionals. At the time (four years ago), procurement and its role didn’t have a lot of visibility at university level. Once I found out more about the profession, I applied, got the job and – thankfully - found that it was exactly what I waslooking for.

It’s been 12 months since I joined Rio Tinto Procurement and I never have two days thesame. I enjoy the independence that comes with being accountable for my categories andthe strategies that I undertake. As long as I can prove the value to the business, I candetermine my own scope of work. I have the ability to have a direct positive impact onthe business because achieving efficiencies or cost reductions has a direct effect on thestrength of the company.

Meeting suppliers is something else I enjoy; learning about their businesses and buildingrelationships. The profession is packed with people of a variety of backgrounds (commerce, legal, business, IT and engineering, for example) - I learn something new everyday and I’m constantly challenged.

Paul Rogers FCIPS

Practice Manager at PMMS Consulting Group

As a consultant, I work with clients across a wide range of procurement-related issues. I participate in assignments either alone or as part of a team, mostly in Australia but PMMSConsulting Group is a multi-national organization so we have clients all over the world andI travel a lot.

Often I’m involved in designing organisational structure, writing policy and devising mechanisms to co-ordinate procurement. I’m also involved in initiatives to raise organisations’ procurement competence, like training and coaching.

In 1981 I started out as a Graduate Trainee in ‘Supplies’ - the UK National Health Service'sthen label for procurement. I actually studied geography at university. I was very interested in human geography and in how people relate to one another in interpersonalrelationships. There’s certainly a link there with negotiating, but I chose procurementbecause I wanted to work in a professional role and I didn’t fancy accountancy with itsfocus on numbers.

Work as a practitioner in a variety of roles followed, and I became a senior lecturer in procurement and then programme director for a degree in management. I became a consultant, selling the business school’s services, and then joined PMMS Consulting Groupin the UK in the 1990s.

What is it about procurement that is so interesting and yet so hard??

10 Career case studies

Procurement has really gained organisational prominence in the last decade.Organisations’ expectations of the procurement function have evolved and there havebeen many external market changes. Looking back at the new millennium and Y2K preparations, we were told the world could stop on 1 January 2000. It was the first timethat an external factor was globally seen as a real threat. Since then there have been others – tsunami and pandemics for example – which have all heightened organisations’awareness of their exposure to external factors. When the external world changes soquickly, you can’t apply a cookie-cutter approach. New ideas keep the profession evolvingso that we’re meeting next year’s challenges rather than last year’s. I’d describe myself as acreative person, and this is where creativity comes into procurement. I enjoy challengingand innovating; taking what’s there and continually improving it.

I have the shortest attention span in the world, so I need constant stimulation and variety.Fortunately, procurement has offered me an amazing diet of activities; from negotiating to supplier visits, from market analysis to policy writing. I have undertaken procurementassignments from Melbourne to Miami, from Manchester to Manila; more than 20 countriesin all. I love the balance between the commercial and the interpersonal, and the fact thatevery project is unique and has its own challenges.

Stephen Sherwood MCIPS

Executive Manager Sourcing within the Group Strategic Sourcing Division at Suncorp-MetwayLimited

The Executive Manager Sourcing leads a team of specialists to deliver major sourcing projects across the Suncorp Group. These projects (typically lasting three months orlonger) require significantly more design, research, industry engagement, specificationdevelopment and contract negotiations than the less complex sourcing activities conducted by the Category Management teams.

After several years’ experience as a maintenance engineer in the Army, I was attracted tothe procurement profession. It was through my work on defence materiel procurementprojects - where I developed skills in setting specifications and criteria, conducting evaluations and contract negotiation - that I first become exposed to procurement.

From there I became a Contracts Manager for a major maintenance contract, and thenmanaged various outsourcing arrangements that included inventory and warehouse management. On leaving the Army, I tried a few other roles but decided that procurementwas where I wished to specialise. The great thing about procurement is that I have theopportunity to learn about how different industries and businesses work – by that, I meanboth my own as well as the suppliers’. I really enjoy engaging with a wide variety of people and assisting them by providing solutions to their problems.

To me, the procurement professional is like a consultant providing advice and solvingproblems to support our business colleagues. I always find the work challenging as it is different from day to day and covers a range of problems: from legal issues, service problems and risk management to learning about new products entering the market - allwithin the one role.

What is it about procurement that is so interesting and yet so hard?

11What is it about procurement that is so interesting and yet so hard?

1 I work in the Australian Capital Territory’s procurement branch, ACT Procurement Solutions. ACT ProcurementSolutions is a recently centralised organisation which is responsible for aiding departments and agencies (“ClientAgencies”) within the ACT Government to undertake procurement activities

Belinda Adam, ACT and National Winner of CIPS Australia’s inaugural essay competition in 2006.

Introduction

“That sounds rather boring, doesn’t it?” is the standard response to my pronouncement that I am a procurement officer. Unfortunately, I know from previous experience that any attempt to further explain the nuances of my job are generally met with that split-second pause where the other person attempts todetermine whether I am making a joke or whether I belong in a mental institution. I therefore generally seek refuge in the somewhat clichéd line, “It’s more interestingthan you’d imagine”, and hope that this is suitably enigmatic enough to plant theidea that being a procurement officer is not one of the most unexciting occupationson the face of the planet.

The truth is, I genuinely love my job in procurement. I find it both interesting andchallenging1. So in response to the question proposed above, I believe the elementsof procurement that make it so interesting are ultimately the challenges that existwithin this field.

The most interesting aspect of procurement is the incredible diversity and quantity of goods and services which its officers are involved in purchasing. These can rangefrom medical equipment, to information technology systems, to the construction of buildings. The scope of goods and services that can be procured is, in itself, ultimately a challenge for the procurement profession.

Diagram 1: Procurement – Interesting, but hard.

Increasingly interesting

procurement activities

Increasingly challenging procurement

activities

Increasing knowledgerequired of

specifications and markets

Increasing range of goods and

services availableto be procured

12 What is it about procurement that is so interesting and yet so hard?

2 State Procurement Board, Selling to Government at http://www.spb.sa.gov.au/sellingtogovernment.asp Last accessed 30 August 2006

3 IEEE Intelligent Systems, HCC Implications for the Procurement Process http://www.ihmc.us/research/CognitiveSystemsEngineering/The%20Procurement%20Woes.pdf#search=%22no%20single%20process%20for%20procurement%22 Last accessed 30 August 2006

To be an effective procurement officer, goods and services must be purchased in away that meets the requirements of the client agency, through effective engagementwith the marketplace2. However, as procurement becomes increasingly interestingdue to the vast range of goods and services available to be purchased, a feedbackmechanism is created, and it becomes harder for procurement officers in terms of:(1) understanding the different specifications for various goods and services; and(2) interacting effectively with the individual markets for each of these goods or

services.

Why is procurement so interesting?

As I noted above, the most interesting aspect of procurement is the range of goodsand services that are purchased. Even within general categories of goods and services, every product has its own individual characteristics that distinguish it fromothers. For example, while the construction of two buildings may involve similar elements, differences - like intended use - impact on the procurement process. Abuilding intended for general office use has significantly different requirements in terms of security and materials used compared to one being constructed as part of a prison complex.

This means there can never be a single procurement process that has the ability tomeet the requirements of every activity undertaken. The procurement process forpurchasing stationery supplies is very different to that for purchasing the services ofan architect. As a result, procurement officers have the unique opportunity to gain adegree of familiarisation with many of the different fields that products and servicescome from, such as medicine or information technology.

Procurement officers are then able to use the information gathered, together withtheir previous experience and intuition, to devise a process for undertaking the procurement activity in order to achieve the best possible outcome for the clientagency, and, ultimately, the public3.

There is little danger that the field of procurement will not remain interesting anddynamic. As new goods or services are being developed, procurement practices willcontinue to remain highly fluid in order to adapt and meet the requirements of theseever-changing activities. This is because those who develop new goods or servicesthat are able to be utilised within the public domain, generate demand within society.Government is subsequently obliged to provide these goods or services in

13What is it about procurement that is so interesting and yet so hard?

4 James Brian Quinn & James F Quinn, Forging Environmental Markets, at http://www.issues.org/16.3/quinn.htm Last Accessed 30 August 2006. Diagram 2: The perpetuation of a procurement as a fluid process

5 CIPS Australia, Why Do We Need Professional Procurement?, Appendix 3, at http://www.cipsa.com.au/BigPage.asp?CatID=285 Last accessed 30 August 2006

accordance with the public’s expectations, and thus a market is created4. In this way,the cycle is perpetuated: those who provide the goods and services are rewardedmonetarily, providing incentive for others to devise new and better goods and services. Consider, for example, the ACT Government website. Only fifty years ago,such a service would have been unheard of. Today, the website is considered to bea fundamental service by which information and contact points are provided.

If the ACT Government removed this website, it would be tantamount to retreating tothe stone age and chiseling information on cave walls with a piece of rock! However,for this relatively simple method of communication to exist, procurement processesneed to be put in place for procuring website design, the purchase or licensing ofsoftware, the technical support needed to maintain and update the website and themaintenance of the servers supporting it.

This constant evolution - and the associated fluidity - in the field of procurementmakes it a fascinating profession to work in, and provides virtually unparalleledopportunities for procurement officers in a diverse range of matters5. At the sametime, the wide and ever-changing range of items and services to be purchased ultimately gives rise to challenges for those in the procurement field, as discussedbelow.

Diagram 2: The perpetuation of procurement as a fluidprocess.

Increased public demand

for goods and services

Government providesgoods and services

for the public

Development of goods

and services

Development ofnew markets

14 What is it about procurement that is so interesting and yet so hard?

Why is procurement so challenging?

Procurement officers deal with a wide variety of procurement activities, and therebygain a degree of familiarity with the different requirements of these activities. This enables them to tailor the procurement process to the type of commodity orservice required. In the majority of circumstances they do not possess a specialisedknowledge of, or expertise in, the goods or services being procured. Consequently,procurement officers are, to a fairly large degree, reliant upon the client agency’sknowledge of the requirements and market for the relevant commodity or service6.

When the client agency is purchasing goods or services that are within their corebusiness function, they are able to provide the procurement officer with the benefitof their expertise in relation to the required specifications and the most appropriateway to interact with the market. This means the procurement process is relativelystraightforward, and the procurement officer is able to focus upon providing adviceon the most effective process for obtaining these goods or services.

However, although client agencies understand the complexities of procurement with-in their own areas of expertise, the magnitude of goods and services available meansthey do not typically have that same depth of understanding for other activities.Subsequently, the client agency may have a general idea of what the new product orservice should do, while the more technical requirements elude them. They are alsogenerally unfamiliar with the markets for these goods or services, as they do notaccess them on a frequent basis.

Consider, for example, the following two scenarios.

In scenario one, ACT Health wish to procure a life-support machine for the CanberraHospital. This procurement falls into one of ACT Health’s core areas of expertise, and the department has the benefit of a staggering amount of experience in procuring medical machines and equipment. ACT Health is therefore likely to be in a position to:(1) understand the terminology used to describe the function of the machine;(2) understand the way in which the machine would need to operate to meet their

requirements;(3) understand the Territory’s market power relative to potential suppliers and other

customers, and effectively use this in order to better the procurement outcome(through in-servicing, for example);

(4) have an intimate knowledge of the suppliers within the market who would mostlikely be able to provide the machine;

(5) utilise existing relationships within the market to better the procurement outcome;

6 Department of Defence, Defence Procurement Policy Manual, at http://www.defence.gov.au/dmo/gc/dppm5_6/LinkedFiles/003_Disclaimer.pdf paragraph 366. Last accessed 30 August 2006

15What is it about procurement that is so interesting and yet so hard?

(6) understand how the market operates, such as knowing periods where generaldemand may be less, resulting in greater cost savings; and

(7) be aware of technological breakthroughs and advancements in the field, therebyreducing the likelihood of the machine becoming obsolete.

In scenario two, ACT Health wish to purchase an online learning refresher programfor their nurses, which is not within their general area of expertise. So although ACT Health may understand the immediate requirements of the programme - such as the ability for content to be updated as required, or for the names of those whocomplete it to be recorded - it is unlikely that the more technical aspects of the procurement will be properly considered or understood. These aspects could include:

(1) the inter-operability of the program with the existing system;(2) the ability for multiple users to be logged on at any given moment;(3) the stability and security of the program;(4) the technical terminology used to describe the capabilities of the program; and(5) any technical advances that have been made in this area.

Furthermore, ACT Health is unlikely to have had any significant interaction with thismarket, and will therefore be unfamiliar with market issues such as:(1) the number and identity of suppliers likely to be able to supply this product;(2) the relative power of the department within the market.(3) any technical advances that have been made in this area; and(4) the ability of the market to provide ongoing support for the programme.

In scenario one, the procurement process is relatively simple, as the procurementofficer is able to rely upon the expertise and experience of ACT Health and focusupon any specific procurement issues that may arise during the process.

By comparison, scenario two demonstrates the point at which procurement becomesinfinitely more challenging, as the procurement officer is required to take on a far more intensive and proactive role to ensure the best possible outcome of the procurement process. Ultimately, the procurement officer is required to alter theirrole from that of an advisor for the procurement process itself, to a role where he or she almost morphs into the person with the greatest expertise regarding the goodsor services to be purchased, and their respective markets.

It should be noted that before this process begins, the first challenge for the procurement officer lies in determining the extent of the client agency’s experiencein dealing with the proposed activity. This is not necessarily easy to do as there are many shades of grey. Often, client agencies have managed to gain some understanding of areas which are not immediately central to their core business,through acquiring staff with different backgrounds or from the frequency of procuring particular goods (like stationery) over the years. While some client agencies are remarkably upfront about their lack of expertise, others are more reluctant to admit that the situation is not one they are comfortable with. In dealingwith these agencies, a degree of relationship management is often required. This is

16 What is it about procurement that is so interesting and yet so hard?

essential in ensuring the agency feels they retain ownership of the procurement, andhave not been excluded from the process7. It is therefore vital for the procurementofficer to determine the extent to which the client agency understands the requirements and markets, and the subsequent level of assistance needed.

Upon determining that the client agency does not possess sufficient expertise to basethe procurement activity on, a procurement officer is required to take on additionalresponsibility for the majority of the procurement process, compensating for theclient agency’s inexperience. The greatest challenge for a procurement officer in this situation is in becoming familiar enough with the goods or services to understandany potential issues likely to arise. By correctly identifying these issues, the procurement officer is able to better focus the client agency on their requirements for the product or service, and how it will to relate to any existing systems or procedures.

The next challenge for the procurement officer is to ensure that the client agency’srequirements are able to be understood by the market. Failure to address criticalissues of concern may ultimately result in a failure of the process, due to the marketnot responding, or the client agency being offered services which do not meet theirrequirements.

To use a simple example, a client agency wishes to purchase an environmentallyfriendly car in line with policies on protecting the environment8. If the specificationsreleased to the market say nothing more than “it must be an environmentally friendlycar”, the market response could return with cars which are environmentally friendlybut unacceptable due to cost, performance, durability, reliability, size, length of warranties or resale value.

The procurement officer also faces the challenge of attempting to determine the type of market that exists for a particular product or service. This can have a significant impact on the procurement process when the market does not possess the capabilities requested by the client agency, or when the client agency does nothave sufficient market power to influence the market.

To continue with the environmentally friendly car example, the market may not beable to provide a car which meets the cost, performance and durability requirements of the client agency; rendering the entire procurement process useless. Due to thevast number of goods and services that are procurable, it becomes inevitable thatclient agencies are not able to acquire the appropriate expertise in all areas of procurement, which in turn creates a challenge for procurement officers: to effectively identify these shortcomings, add to the substance of the procurementrequirements, an effectively engage with the market.

7 Purple Vision, Enlightened Procurement http://www.purple-vision.com/downloads/enlightened_procurement.pdf Last accessed 30 August 2006

8 Australian Capital Territory- Government Procurement Board, Environmentally Sustainable Procurement Circular2004/07at http://www.basis.act.gov.au Last accessed 30 August 2006

17What is it about procurement that is so interesting and yet so hard?

Conclusion

From the above, it can be seen that the field of procurement is both interesting andchallenging. The vast array of ever-changing procurable goods and services meansthat procurement processes are in a constant state of flux, and need to be carefullyadapted in order to achieve desirable outcomes for client agencies. This also givesrise to the challenge of understanding the requirements of a procuring agency for different goods and services, and the type of market interaction to be undertaken,when the procurement falls outside the client agency’s area of expertise. However,by better understanding these challenges and their underlying causes, procurementprocesses are likely to be more successful and achieve better procurement outcomes.

N.B. All Bibliographies and references for this essay are available in the PDF version published on www.cipsa.com.au on the Professional Resources page.

© Copyright Belinda Adam

The evolving role of the modern day chief procurement officer

18 The evolving role of the modern day chief procurement officer

Peter L. O’Brien, Head – Asia Pacific Supply Chain Practice at Russell Reynolds Associates.

At a time when financial markets globally are facing unprecedented challenges, we are witnessing extreme measures taking place in countries like the United States(US) and the United Kingdom, with established banks and institutions, desperate for survival, having to be saved by their governments. We are also hearing a great dealabout the slowdown in China, and the concern that it this is being predominantlydriven by the dramatic slowdown in demand from the US for China-manufacturedgoods. The reasons for what is happening - and the blame game - are never-ending.The reality is that, as distinct from the 1930’s Great Depression, markets across theworld today are significantly more reliant on each other, either through trade orthrough other forms of commercial and political enterprise. Over the last 25 yearswe have moved at such a significant pace, creating a ‘virtual commercial market’ within which we operate. Here, boundaries for trade and business relations havebeen broken down, allowing organisations to both source and supply goods andservices virtually anywhere.

How does this have an impact on the role of what we know as the modern day ChiefProcurement Officer (CPO)? Well, it has a huge impact. In only the past fewmonths, as a key advisor to a number of leading companies across the globe inrespect to the appointment of supply chain and procurement leaders, RussellReynolds Associates (RRA) has seen a clear shift in the requirements and demands of the role. Whether it be consumer and retail, or mining and resources, every singlesector is being effected. For organisations, it is becoming absolutely critical that their CPO has the following key competencies, and that any they don’t have arequickly developed:■ Understand all aspects of the end-to-end supply chain; not only the procurement

component but all other levels of complexity throughout the chain.■ Have experience working internationally, across different markets and business

cultures, ideally direct emerging market experience (e.g. South America, EasternEurope and/or Asia).

■ Be a very strong commercial executive who is able to not only understand risk but be capable of mitigating exposure to the organisation.

■ Highly numerate with strong understanding of the P&L, especially both cost andrevenue drivers.

Understand the ‘end-to-end’ supply chain

Most organisations today are operating across numerous markets, whether it be by way of sourcing materials from markets such as China or Vietnam, or supplying products to markets such as Europe or North America. In specific cases, organisations source materials from multiple markets, manufacture in two or threekey locations and supply products into more than 10 key markets, which in turndrives their revenues and growth. This is the recipe for a highly complex supplychain where the interdependencies within an organisation and the management ofoutsourced partners are huge.

19The evolving role of the modern day chief procurement officer

In today’s challenging environment, the CPO is being looked to by his or her organisation to not only understand the full end-to-end supply chain, but also to be a key leader in facilitating its effective operation. The important factor here is thatthose who aspire to be leaders in this field need to develop the competencies butalso the ability to work with peers and influence areas outside their direct control.

International experience

In today’s commercial environment, the role of the CPO includes being able tounderstand and work across different business cultures and environments. The CPOis seen as being able to cross international borders and link people from differentbackgrounds. They need to understand what works in one country and what doesnot work in another in order to be effective. To do this, RRA is seeing a requirementfor CPO’s and other supply chain leaders to have worked and lived in a few differentcountries and ideally to have spent time in an emerging market such as Asia, SouthAmerica or Eastern Europe.

Commercially astute to mitigate risk

One of the biggest concerns for corporations is that they become exposed in theirday-to-day business dealings to activities that could negatively effect their reputationand integrity, or the safety of their people.

CPO’s are viewed as being in many ways the protector of reputation, where he or she understands potential risks and puts in place practices that protect the organisation. For example, with the challenging financial environment we operate intoday there is huge pressure on corporations to reduce costs. One way to do this isto seek lower cost suppliers. Large reputably branded companies being connected to the use of, for example, manufacturers that utilize child labour in Eastern Europeto supply specific materials could be disastrous. The importance of ensuring that a corporation’s supply chain is ethical is crucial, regardless of the financial pressures.

Financially savvy

In light of the high level of complexity associated with the way corporations’ supplychains operate today, and the impact of factors like currency, hedging, total cost ofownership etc, it is necessary that the CPO can make decisions in the best interests of the wider business, and not only in respect to the procurement of products. This has more recently driven the requirement for CPO’s to be able tounderstand the corporations’ P&L, and other key financial tools, to measure and drive overall performance.

20 The evolving role of the modern day chief procurement officer

Conclusion

It is clear that the role of the CPO, and that of Procurement Managers worldwide, isbecoming more and more demanding. This is a significant step forward, as we arenow witnessing a change where leaders in supply chain are starting to be seen at the executive board table at a faster pace than ever before. This in turn is drivingorganisations to look more broadly at talent across an organisation, which they candevelop for senior supply chain and procurement roles.

Russell Reynolds Associates, in assisting corporations in the appointment of theirleaders, have seen a significant increase in demand for Chief Supply Chain Officers(CSCO). This brings an ‘end-to-end’ supply chain focus to dealing with the highlycomplex global business environment we find ourselves operating in today. This supports the demand for today’s CPO to move quickly to become tomorrow’s CSCO.

Appendix I

21Appendix I

A Chief Purchasing Officer’s (CPO) job description template

■ Ensure the purchasing and supply management perspective directly relates to business needs

■ Select and implement the appropriate strategies to support the organisation’s goals

■ Advise on, and help to implement, strategic changes such as mergers and acquisitions, making sure synergies are exploited and the maximum commercialleverage obtained

■ Arrange appropriate outsourcing of corporate services – with the objective of delivering significant quality improvements and reductions in costs

■ Set continuous targets for improvement, providing training for colleagues and those with significant purchasing responsibilities

■ Use a range of tools, methodologies and approaches that can add significant value to the organisation with year-on-year improvements

■ Keep up with developments in purchasing and supply management through networking

■ Keep abreast of new techniques■ Employ good, professional people in appropriate roles and support their

continuing development■ Implement efficient information systems so you know what you spend, with

whom and on what, to maximise performance■ Ensure you have clear authority levels, policies and processes so procurement

is transparent and well-managed■ Secure ‘buy-in’ from colleagues and senior decision-makers

Appendix II

22 Appendix II

Achieving full membership of the Chartered Institute of Purchasing and Supply(MCIPS)

What is MCIPS?

MCIPS stands for Member of the Chartered Institute of Purchasing and Supply. Itrefers specifically to a fully qualified (full) member. Full members are recognisedinternationally for their professional accomplishment. Full membership confers thepost-nominals, ‘MCIPS’, and represents the professionalism associated with achievingthe highest recognised global standard of excellence in procurement. Members canachieve MCIPS through a range of study options, most notably through the CIPSProfessional Diploma in Purchasing and Supply, or working towards MCIPS throughthe Personal Development Plan (PDP), which recognises relevant experience andaddresses any specific development needs.

The CIPS qualification ladder

MCIPS is awarded to members upon successful completion of Level 6 qualifications (CIPS Professional Diploma) or any other CIPS-accredited certification to MCIPS level.There is further information about CIPS’ membership grades and how to achieveMCIPS at www.cipsa.com.au. Click on ‘Membership’ in the vertical left-hand menu.

Plus a choice of 2 units from 5 options• Legal aspects in Purchasing and Supply • Advanced Project Management • Finance for Purchasers • Strategic Public Sector Programme Management • Public Sector Stakeholders and Governance

Plus a choice of 2 units from 5 options• Marketing for Purchasers • Storage and Distribution • Operations Management in the Supply Chain • The Machinery of Government • Contracting in the Public Sector

Leading and Influencing in Purchasing

Strategic Supply Chain Management

Supply Chain Management in Practice*

Effectivenegotiation

in Purchasingand Supply

Developing contracts

in Purchasingand Supply

Measuring Purchasing

Performance

Managing Purchasing and Supply

relationships

Purchasing Contexts*

Understanding the

Purchasingenvironment

Purchasing Operations

Client and Supplier

relationships

Securing Supply

Purchasing in action*

The role and scope

of Purchasing

Systems andprocedures in

Purchasing

Working with Suppliers

The importance of Purchasing Contracts

Management in the Purchasing function

Risk Management and Supply Chain vulnerability

Improving Supply Chain performance*

6CIPS Professional

Diploma# in Purchasingand Supply

5CIPS Advanced Diploma

in Purchasing and Supply Management

4CIPS Foundation

Diploma in Purchasingand Supply

3 CIPS Certificate in Purchasing and Supply

2CIPS Introductory

Certificate in Purchasingand Supply

CIPS Qualifications Framework

# Also known in the UK as the CIPS Graduate Diploma *Integrative unit

Appendix II

23

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Salary surveys

The procurement profession has undergone a major transformation over the last fewyears and now provides an exciting opportunity for people who want a broad basedbusiness education, and to have a real impact on business.

Salaries obviously reflect experience, qualifications and ability, so those entering theprofession need to prove themselves by showing a willingness to learn, independentthinking and determination.

Salaries have risen rapidly over the last decade, outstripping growth in other comparable professions such as IT, finance, HR or sales and marketing.

There are a number of salary surveys available from recruitment companies inAustralia and New Zealand. You can find some of these on the websites listed below.

UK data is available at www.cips.org

Procurement and supply chain salary surveys covering the Australia and New Zealand markets are online at:www.hays.com.au www.hudson.comwww.jigsawsearch.com www.michaelpage.com.au www.mycareer.com.au www.robertwalters.co.nz www.seek.com.au

These are just some of the salary surveys available. There are others around, including some that are not presented online. There are several other excellentrecruitment firms specialising in procurement that do not publish their salary surveys.

Appendix III

Level 10, 520 Collins Street, Melbourne, Victoria 3000, AustraliaTel: 1300 765 142 • Fax: 1300 765 143

International Tel: +61 3 9629 6000 • Fax: +61 3 9620 5488Email: info@cipsa.com.au • Web: www.cipsa.com.au