1. A LEAN PROCUREMENT STRUCTURE FIT FOR TODAY’S CHALLENGES
WELCOME TO
A LEAN PROCUREMENT STRUCTURE FIT FOR TODAY’S CHALLENGES
Colin Cram
Marc1 Ltd
Tel:
Mobile:

3. TESCO: 24 MARCH 2012 ANNOUNCEMENT
PROCUREMENT TO BE DEVOLVED TO LOCAL STORES
Local Managers have Better Understanding of Local Demand
Each Store Able to Choose Own Products and Ranges, but Retaining Core Ranges
More Responsive Customer Service
Release Initiative and Creativity
Greater Use of Local Suppliers
Each Store Able to Negotiate Best Prices/Deals – Big is not always Best!
Greater Variation in Store Designs
Each Store to have its own Procurement IT System (based on common overall approach)
BUT Centralised Purchasing of Tesco’s Own Brand Products to Remain

4. WHAT ARE THE LIKELY BENEFITS? WHAT ARE THE POTENTIAL DOWNSIDES?

5. JANUARY 2014
Internal Review Indicates Purchase Price Differentials of over 40% on Some Products
Tesco Blames Suppliers for 25% of Products Out of Stock at Some Stores
Many Tesco’s Stores Reduce Product Ranges by over 50%
Suppliers Claim Tesco’s Purchasing is Chaotic. Number of Contracts has increased 1000 fold. Costs Passed on to Tesco
Suppliers Claim Effective Scheduling of Deliveries has Ceased. Costs Passed on to Tesco. Lorry Congestion causing Delays near Tesco Stores

6. JANUARY 2014 continued
‘Which’ Survey Indicates that Tesco’s Product Quality is ‘All Over the Place’
Action Sustainability Report Claims Tesco’s policies on sustainability and working conditions of overseas suppliers have become meaningless
Local Suppliers Claim they get Less Business from Tesco than Before. Tesco Admits it does not have the Data to Refute this Claim
Managers Claim Too Many Staff have had to be diverted from Customer Service to Back Office and Procurement Functions

7. JANUARY 2014 continued Tesco Sued over 13 Outbreaks of Food Poisoning
New Store Collapses – 10 deaths and 56 injured – Tesco Blames Local Architects and ‘Cowboy’ Builders
Tesco’s sales Down by 27% - Combination of fewer customers who each spend less
Tesco’s Share price Down by 70%
CX Denies Tesco in Meltdown. ‘We are going through major change. Teething troubles are inevitable and will be overcome’

8. JANUARY 2015 Tesco Share Price Down by 90%
25% of Stores Earmarked for Closure
Tesco CX Resigns to Spend More Time with Family
Director of Procurement Replaced by Interim
Takeover Bid from Coop Denied
PWC to do Fundamental Review

9. JULY 2015 TESCO TAKEN OVER BY COOP After Review by Monopolies and Mergers Commission

10. MIRROR TO PUBLIC SECTOR PROCUREMENT What Does It Look Like
MIRROR TO PUBLIC SECTOR PROCUREMENT What Does It Look Like? How Well is it being Managed? Can iit be Done Better?

11. DOES PUBLIC SECTOR PROCUREMENT MATTER?
£230 Billion pa
£3,500 per Adult and Child pa
One Third of Total UK Public Spending
One Sixth of UK Gross Domestic Product (GDP)
0.75% of Global GDP
Size makes it Critical to Delivery of Public Services
Effective Management is Essential to Reduce Public Spending Deficit
Critical to Delivering Innovation , Sustainability and Economic Growth Policies
EDUCATION PROCUREMENT - £30+bn
Alone would put UK in top 30% of national GDPs

12. PUBLIC SECTOR PROCUREMENT
£Bn
Central Civil Government:
Ministry of Defence
Local Government
NHS
GP Prescriptions
Higher Education
Further Education
Schools

13. FEATURES OF PUBLIC SECTOR PROCUREMENT
70% Non-Central Government
50% Common Categories, Goods, Services
3000 Procurement Organisations?
£bn
Professional Services
Social Care
Construction
ICT
Facilities Management
Energy
Reprographics
Travel
Fleet
Food

14. PROCUREMENT IS DISORGANISED
2000 Procurement Organisations? Many Procurement Consortia
Government Procurement Service
Pro 5
ESPO
YPO
CBC
West Mercia
NEPO
IESE
West Midlands
London (increasing collaboration, but not a consortium)
AGMA
Lancashire
Lincolnshire
Welland
Kent CC and Laser
Dukefield

15. OTHER PURCHASING GROUPS
Higher Education
NWCE
LUPC
SUPC (Southern)
North East Purchasing Consortium
Further Education and Academies
Crescent Purchasing Consortium
NHS
Supply Chain
SPS
HTE
London Procurement Programme

16. PUBLIC SECTOR ORGANISATIONS CREATE UNNECESSARY COSTS - For themselves and Suppliers
Indiscipline
Different Procedures/Contract Ts and Cs
Complexity – e.g. Tender Procedures
Multiplicity of Tenders
Multiplicity of ‘Duplicate’ Contracts and Contract Managers
Varied Specifications/Reinventing the Wheel
Very Varied Capability
Duplication
Inconsistency of Expertise, Processes and Procedures
AND cannot use industry best practice supply management

17. PUBLIC SECTOR ORGANISATIONS CREATE UNNECESSARY COSTS – for Themselves and Suppliers
Specifications:
Tarmac IT
Finance Systems
Outsourcings
Street Lighting
Construction
Waste Disposal
Research Equipment
Commodities Goods and Services
Who has the Best Specifications?

18. HOW ELSE TO TAKE OUT COST? TACKLE THE SUPPLY CHAIN

19. HOW CAN ONE SAVE MONEY THROUGH PROCUREMENT?
Increased Leverage
Better Quality Contracts
Expertise Available to All
Commodity Market Knowledge Available to All
Better/More Consistent Policy Implementation
Consistent Specifications
Opportunities to Use More Advanced Purchasing Techniques
- Relationship Management
- Supply Chain Management
- Value Analysis

20. UNDERPINNED BY Right Procurement Structures Information
Common Information/IT Systems
Discipline
Specialist Expertise Available to All
Market
Product
Procurement

21. SO WHAT HAS BEEN THE COST OF POOR PRACTICE /MISSED OPPORTUNITY?
Furniture %
FM/Outsourcing/Major Contracts Up to 35%
Laboratory Consumables Up to 90%
IT – 80%
Construction – 25%
Excellent Construction Management 5 – 15%
Social Care %
Legal Services %
Good Contracts Management – 35%
© C M Cram

22. EXAMPLES OF OBJECTIVES
1. Savings through Leverage etc
2. Innovation
3. Social Objectives including Sustainability
4. Supporting Economic Growth
5. Common Processes, Procedures and Interpretation of Procurement Law
6. Consistent Specifications and Quality
7. Application of Category Expertise for All
8. Expert Procurement and Contracting Expertise for All
9. Service
10. Targets and Performance Measurement
© C M Cram

23. How Should an Organisation Proceed?
MODEL EVALUATION
How Should an Organisation Proceed?
Collaborative Model/ Objectives
Indep
Collab
CLAN
Joint
Region
Sector
National
Cash Savings
Innovation
Social Objectives/Sust
Supporting Economic Growth
Common Processes etc
Consistent Specs
Specialist Category Expertise
Specialist Procurement and
Contracting Expertise
Service
Targets/Measurement
TOTAL
© C M Cram

24. PUBLIC SECTOR PROCUREMENT IN 10 YEARS TIME?
Central/ Major Departments/
Buying Solutions
Industry Specific
Regional P S Hubs/
Medium Depts
Local/Med/
Small
Departments
Major National Contracts/Suppliers *
Common Categories
Relationship Management
Market Management
PPIs/Major Project Support
Regional/Large Local Contracts/Suppliers
Small Local Contracts
Discipline/Implementation/
Compliance
© C M Cram

25. PUBLIC SECTOR PROCUREMENT: THE FUTURE?
INTEGRATION
COLLABORATION
INDEPENDENCE
© C M Cram

26. THANK YOU. https://www. iod
THANK YOU! or ‘Google’ ‘Colin Cram Towards Tesco’
Colin M Cram
Marc1 Ltd
Tel:
Mob: