Procurement’s secret weapons to survive automation
The BBC’s head buyer is optimistic the procurement function won’t be replaced by robots if it adapts to become a strategic part of the business.
“Don’t be that function that’s the old oil tanker, taking months to change its processes. Be the speedboat, weaving in and out, responding to economic and environmental storms,” said Jim Hemmington, director of procurement at the BBC.
Speaking at the eWorld conference in London on Wednesday, Hemmington outlined four steps that procurement should take to avoid automation. He said procurement needed to create excitement in the business, become a business partner, nurture its talent and be agile and proactive.
“If you’re waiting for the business to instruct you on what to do, if you’re just focusing on savings or you’re seen as a service, if you’re following the market and being reactive, then there’s a good chance that your procurement function will become completely automated in the coming years,” be said.
Hemmington, whose department manages £1.5bn annual spend – about 20% of the license fee – said he has a number of “straplines” to get stakeholders excited about procurement. “The one that we’ve had for some time now is that the procurement function is about generating more money for programmes, that’s what we’re here to do,” he said. He also promotes procurement’s role in protecting the reputation of the BBC, and to engage “those sceptical people” Hemmington lets them know for every £1 spent on his department, it saves £13.
“Last year my team saved £76m, and that actually would fund a channel like BBC4. It’s strategic impact that’s important, but don’t assume people working with your function know that,” he said.
When creating a business partner framework, the first thing to do is develop a strategy, said Hemmington of his second step. Procurement at the BBC is working closely with directors and senior management in the technology, workplace and marketing departments to understand their strategies and “procurement has now a five-year plan to support the delivery of their strategies from a supplier perspective”.
Being a good business partner also means analysing the available data and proactively approaching departments with ways to make savings. “We can do things like invest more in video conferencing to cut down the huge travel spend between our centres in London and Manchester,” said Hemmington. “Using analysis to get an understanding of how we can change some behaviour, investing in more technology has driven those costs down and provided more money for programme-making.”
Concerning step three, procurement leaders need to think about what makes people effective in the context of their organisation’s nature, said Hemmington. “In the BBC we’re bringing in people from our production and marketing areas to be good procurers, rather than sending procurement people into the areas of marketing,” he said. Having a clear reward and development programme is also important. “People are the lifeblood of your organisation. Make sure you reward them and develop them.”
And for the fourth step Hemmington said: “Don’t be that oil tanker that carries on regardless of where the business is going.” Procurement’s contribution to the business can change within six months or less “with some of this technology”, so it needs to keep looking for new ways to add value and lead, not follow, the market.
The rise of automation became a focus for Hemmington when he switched the BBC’s finance outsourcing services last year, he said. The new contractor, IBM, has taken out huge costs by using machines instead of people, “so about 100 heads coming out of the provision of that service and being replaced by machines”.
“It’s great for me because I get to save lots and lots of money, but for people involved in some of those industries, it can be a bit frightening.”
Procurement could potentially be one of those industries. In the future, said Hemmington, machines will be able to benchmark prices daily, automatically switch suppliers, and even identify who the critical suppliers are and monitor their stability.
But procurement had two secret weapons for surviving automation: its people and its overview of the business, said Hemmington. Good procurement people have “advanced personal skills, rounded market knowledge and thinking about the way ahead. Machines will always be quite limited in that space”.
On procurement’s view of the business, Hemming said it was “about understanding the business environment, learning from the good and bad things that work for your business, and more importantly – because machines will never do this – understanding the organisation’s culture, what it’s there to do and what works well”.