Jamie Ogilvie-Smals is the Vice President of Consulting for GEP, the leading global provider of procurement consulting services to Fortune 500 and Global 2000 enterprises worldwide. Mark Pollack, COO of Sourcing Industry Group, got together with Jamie recently to get his thoughts on organizational transformation, innovation in the procurement industry and much more…
Mark Pollack (MP): Jamie, tell our readers about yourself and your role within the organization.
Jamie Ogilvie-Smals (JOS): GEP is the largest provider of unified procurement solutions in the world, combining strategic consulting, managed procurement services and cloud-based procurement software. We have a rapidly-expanding, blue-chip client base of Fortune 500 and Global 2000 companies in Europe, Asia and the Americas.
I’m a vice president in GEP’s consulting practice and I am based in London. My primary responsibility is client delivery, mostly large enterprises in Western Europe, which means that I spend a lot of time in the UK and on the continent.
In the more than 15 years that I’ve focused on procurement consulting and outsourcing, I have covered most categories and capabilities within them. These days I spend a lot of time helping senior procurement, supply chain and operations chiefs think through and develop procurement and supply chain strategies.
MP: Based on your work and travels, what are some of the trends and challenges you're seeing confronting enterprise procurement organizations and their teams right now and how is it impacting their transformation?
JOS: It varies by sector, by region and even by individual company, but procurement organizations on the whole continue to seek cost savings. Seems obvious, but with many more things on the chief procurement officer’s agenda, it sometimes gets downplayed.
One thing that I’ve seen quite a bit in recent years is that some industries that have been historically less sensitive to cost are facing margin pressure now and struggling with what to do about it – for example, financial services and pharmaceutical companies.
They need to address cost in more focused and comprehensive ways. Procurement is an important lever but one that requires a completely different mindset and attitude. There are important lessons from other sectors, such consumer goods and services and manufacturing, which have been dealing with cost challenges for many years.
I'd say also that an increase in regulation and focus on risk management across procurement is driving quite a lot more work in supplier relationship management (SRM). It is driving more rigor in processes. To illustrate this, the UK has particular and very strict regulations for financial services institutions relating to major outsourcing deals. Procurement plays a key role here, and it’s a good example of how procurement has evolved in terms of creating value within the enterprise.
The last challenge I would mention concerns technology. Procurement has not traditionally been an early adopter of new technologies beyond the obvious Procure-to-Pay (P2P). But that’s now changing; GEP is seeing a major shift in which our clients are not just embracing technology more energetically—they’re looking at the world through a digital lens. They’re seeing the impact of technologies including artificial intelligence and robotic process automation (RPA) on work processes, and they’re asking us to help plan and execute transformation strategies that fully leverage the capabilities of emerging technologies.
MP: Why do you think that so many organizations are struggling with these transformations?
JOS: Well, any transformation is difficult. When we talk about procurement transformation, we tend to talk about changing your processes, changing your people, changing your tools, which is basically changing everything. So it is never quick and easy.
But at the same time, there’s always a concern with how fast transformation can occur. Some companies just want to say, “I've worked out that what I've got now is not right, and I know where I want to go. Let's just get there straightaway.” You can go fast, but you can lose a lot of knowledge as well as other business relationships along the way. Procurement doesn’t stand alone. It supports many other business functions and partners with others including finance, risk and information security.
On the flip side, sometimes the pace is too slow and the expectations of senior management won't be met because you need to deliver results. Speed and sponsorship are both crucially important. Procurement is not typically one of the top and major functions in an organization. It needs to get buy-in and support from people like the CFO and CEO, to make sure that a transformation can actually be accomplished.
When you transform something, the reality is often that you take something that was working, although maybe not that well, and throw it all out the window and start again. Without question, there is a lot of noise during that change period. If you haven't gotten senior sponsorship to provide funding and an understanding of what that change will mean, you can fail. It does take time and money to do transformation correctly. The benefits of procurement transformation can be huge, but it's an investment and you've got to see it that way.
MP: I would love to know the characteristics of successful companies who've gone through this transition. What have you seen in your experience?
JOS: Change is frequently experienced as pain. To successfully transform, the organization needs to understand why things are changing and what the ultimate benefits are. That understanding helps motivate people to push past discomfort, learn new things and share in the success.
Wide business engagement is crucial. I mentioned before how other functions are crucial to procurement success. We don’t operate in a silo – our purpose is to help other people in the company. If those people and stakeholders aren’t engaged in our transformation efforts, we are not going to be successful. Procurement needs to build grassroots support in the teams it serves.
In addition, successful transformation requires a clear vision of where you're trying to go. If you don’t have a clear, coherent objective in mind, you're going to run into a lot of problems. Planning and vision is crucial.
One more point – it is all about the team. You need a team that is going to work together with shared goals. There needs to be a collective mindset of collaboration. Again, procurement needs support from the rest of the business. If you're not collaborative, if you're not actively seeking support and working closely with others, you will fail.
MP: Do you see any particular skills that organizations possess that make them more successful than others?
JOS: Historically, procurement has tended to recruit and promote people with strong analytical, project management and negotiation skills. But today, people skills are just as important. Yes, you must work the numbers. But effective communications, team building, engagement and change management skills are what make the difference between success and failure. It’s a lesson GEP has learned and seen reinforced through scores of major transformations.
MP: The final question, Jamie: Can you share the benefits that can be realized with the unified approach to procurement?
JOS: Ultimately, procurement must be unified in terms of Source-to-Contract (S2C) and P2P. If not, you're missing a huge value lever, because the benefits go in both directions.
From a sourcing perspective, why would you care about what's happening with P2P? Well, when you're out there negotiating deals, you need to know what actually happens as a result of those deals. Who are we working with? What are we spending with them? Who's doing the spending? What are they buying?
Then you actually have to make sure that people are buying from the contracted suppliers. The supplier you’ve engaged might be giving you volume discounts, for example. But if your people aren’t complying with those contracts and buying from preferred suppliers, then you're not going to get those discounts.
The unified approach to procurement is designed to bridge the gaps in the process that result in those kinds of disconnects between S2C and P2P. Procurement is a function where in many cases, organizational design gets hampered by legacy roles and processes. You’ve had people on the sourcing side, identifying the suppliers and executing the contracts; and you’ve had people on the purchasing side, raising POs, doing the buying and handling payments. And as we’ve seen, furnishing each group with its own software system has not enabled them to overcome the problem of their disconnection.
But as procurement becomes more strategic, with new expectations for bringing value to the enterprise, demands have grown for greater visibility and control over the whole end-to-end process. The unification of S2C and P2P into a complete source-to-pay model provides the pathway for procurement to fulfill the mandate to support the full sourcing and buying lifecycle. And this is why you now see much more interest in full technology platforms, like our SMART by GEP, that enable procurement to meet these expectations—not just duct-taping S2C and P2P together, but creating a singular workflow that truly transforms the function and elevates its status in the business in unprecedented ways.