George Booth, Chief Procurement Officer at Lloyds Banking Group explores risk assurance and whether it’s become a top priority for the CPO of today.
How has the perception of sourcing and procurement changed, and how the role itself has changed and become more strategic to a business?
There is no doubt in my mind that procurement has firmly established itself at the board table in most organisations as they better understand organisations compete through their supply chains. Procurement drives competitive actions for organisations in gaining first mover advantage to access supplier’s technology innovation, risk assure extended supply chains, secure value and build in sustainability. In addition, the profession has had to become very international in your outlook, understanding different cultures, working across multiple time zones where relationships skills have evolved from being able to do business face to face every day, to having supply chains and factories and clients that are global, often communicating through technology. You have to be able to adapt and evolve in that world as it’s much higher paced. Procurement leaders have to understand global macro-economic and geopolitical factors and the impact they have to the supply of your goods and services. Being a business professional, ultimately delivering through sourcing or procurement, the core skills are commercial business acumen, supply risk assessment, your ability to build and forge strong, deep relationships, your ability to manage multiple tasks, operating in a 24/7 environment.
The sourcing skills have also evolved from looking at one or two local suppliers where you had long term arrangements, to a much more agile world where you’ve got consortium buying and many new players coming into various technology markets. All of the big established suppliers are changing, disrupted, and even going out of business, alongside many new entrants coming in. It remains a very exciting, challenging, ever evolving career path.
With constant disruption and evolution in the industry how do you stay in touch with what’s going on?
I always remain plugged into our business clients, colleagues and suppliers to understand their business drivers and what innovation is landing. I also meet new entrants in the market and I regularly go to industry forums. I’m part of the World Procurement 50, so that’s a peer group of CPOs from all different industries, all geographies, all cultures and backgrounds around the world on a range of subjects from talent, ERP technology, supply market innovation etc.
In addition,I keep tuned in, I look at Ted talks, I’m regularly on YouTube. I read a lot of industry articles, and I talk to my team. I’ve got 340 practitioners in my function, and every day there are various conferences with all the well known brands. They’re talking to my business clients, but ultimately solving customer problems. So it’s just constantly tuning in with what’s evolving, what’s changing, and understanding things like blockchain, AI, big data. What are these things and how do they impact my function? What are the tools and activities that drive us versus how they are transforming our ultimate customer’s lives? Within that, the supply chains between us, how do we shape them, evolve them? So it’s just keeping plugged in and being rooted in the reality that the very basics of what we do remain consistent.
How do you communicate to the wider business the value and importance, and the strategic nature of procurement?
I spend half my life probably talking internally to business clients and executives, selling what we do, talking to them to understand the business problems they’re trying to solve, and giving them a sense of the value we bring. Five years ago we changed the title of our function from procurement to sourcing, because procurement had evolved out of purchasing and it was very functional and we felt sourcing better reflected that at the core of what we do, it’s all about understanding the business problems and matching them to supply side solutions vs. the businesses bringing us the answers to put a contract in place for!
Being able to speak the language of your business in the context of the customer issues they’re trying to solve, and how we go and source in a very complex supply chain environment is crucial. A lot of the procurement/purchasing practitioners were very functional in their language and approach. They would talk about a process where, “once you’ve decided what it is you want to buy, you can come and speak to us, and we’ll help you find the right supplier, put a contract in place, get you the right commercials, and we’ll help you manage that through its life cycle in terms of supply chain or supply and relationship management”.
What we wanted to do was move the dial to say, “We understand the market you’re in, and the evolving customer challenges that are out there. We believe there are solutions that are rooted in the supply chain that we can help you access and source in a much more collaborative way.”
It was all about becoming more proactive as opposed to being seen as red tape or a transactional functional role, and that’s been a massive breakthrough. We are rebranding sourcing, having much more proactive deep and meaningful, richer conversations with the business. That’s upped the game in terms of capability in the team as we need professional business people who have particular sourcing, procurement, purchasing skills, but very much as a secondary consideration as opposed to the primary of business acumen, relationship building and innovation curiosity. If they don’t understand the supply markets alongside the business markets, then they’re not going to source the best outcome.
With a number of financial crises in recent years, how has that shaped and influenced the role of the CPO?
I think there’s always that absolute truth or truism within sourcing, that you have to deliver on your numbers, you have to deliver value and you have to deliver savings. If you do that you get to play with the business. That’s being replaced with managing supply chain risk, and knowing who you’re forth/fifth tier suppliers are, driving sustainability in everything we do. For us in financial services we’ve outsourced many banking functions over the years. That includes credit and debit cards processing, ATM maintenance, the cash that we print and issue out, right through to all sorts of very intimate customer services that we rely on others to perform. We are also increasingly leveraging SAAS solutions that are out of the box and hosted in public cloud so we are able to access the very latest technologies.
We are also more thinking about who’s got our customer data our corporate data, who ultimately services our customers? There’s the potential for customer detriment or conduct risks. We think about who’s got a permanent or intermittent connection to the group. If somebody is going to pipe into the group or connect with us through a VPN, we need to know about it to assess the cyber threat and we need to know who services our ability to constantly provide 24/7 online digital banking.
My number one priority as a CPO is ensuring that we manage that supply chain risk. We help educate our business colleagues who work with us to choose suppliers and then manage these suppliers on a day to day basis. We still deliver savings value, we still look to achieve optimal outcomes with our suppliers and we look at sustainability, we look at innovation. But of all the things we do, which is deliver value, innovation and manage a sustainable and resilient supply chain, risk is definitely the one that tops the pole right now. You just have to look at the global nature, and the depth and breadth, the complexity in interdependent supply chains to you understand the reasons behind that.
What do technologies such as big data and artificial intelligence mean to you in sourcing?
What it ultimately means to me is that it gives us the chance to go beyond human limitations in terms of compute power, knowledge and an aggregate awareness. As an example, let’s say I’m looking to solve an issue to ensure ongoing supply for our data centres. Our data centres run computation and data storage for, in the case of Lloyds Banking Group, 30 plus million UK customers. If that supply chain is in any way threatened in terms of assurance of supply or compromise, I need to be able to know who supplies the first tier suppliers we deal with. Who supplies the second, third, fourth, fifth tier?
Whenever there is an issue that arises globally, by accessing the big data available through a number of tools monitoring global supply chains 24/7, it’s possible to take effective and pro-active action to avert disaster. It can be impossible for a humans to analyse at the scale and pace we need in order to convert data into insight at the scale and pace required.
The challenge for the industry is to find the optimal blend and mix of human awareness and monitoring, coupled with the technology and what it gives us. There are huge strides being made but there are still issues in integrating it all and giving you the risk vectors down to supplier brand in the scale of what we want. There’s a lot promised, but I’d say we’re probably 50-60% of the way toward optimised solutions, but we have to keep pushing it.
It is here to stay, we’re going to become more and more reliant on it. I’m a big fan, I just wish we could get to some of the nuances being wrinkled out of it, otherwise we’re not far away.
How much do you invest in bringing your team along this transformational journey of sourcing and procurement?
I run monthly colleague engagement calls and site visits and I always bring the latest technology thinking. We invite our teams to tell the story of the technology insight they’ve gained and/or the technology breakthrough they’ve made. It doesn’t always happen within the IT teams. It’s happening more and more across the different sourcing teams. Right across my entire team we’re uplifting their awareness of the digital transformation that’s around them, because everybody is doing digital today. The key is that everyone has to develop and learn and evolve their skills so they can speak the language of the business and their supply chains and they ultimately become an even better sourcing professional.
What would you say is the key to achieving success in a disruptive marketplace?
Ensure that you remain relevant in the conversation by experiencing disruption yourself – it will be there in your supply chains, you just have to look for it.. As a procurement or sourcing professional by nature, you’re going to buy different things, some are human capital in nature, some are more physical, parts and products that you can touch, other things are more virtual like software. My advice is to understand the common language of digital technology and the digital age that we’re in, and its potential to dis-aggregate the supply chains. Think about what customers, your peers and competitors use it for, what you could use it for? What are the risks and issues with it? Ultimately, always remain agile and nimble in your approach and be prepared to rip up what worked in the past and build a new approach for the future.