When discussing procurement transformation or exploring the concept of a best-in-class procurement function, a consistent and widely accepted truth is there is no ‘one size fits all’ approach to defining and operating a procurement function or a procurement model.
Each organization has its own unique complexities within its procurement and supply chain functions which makes it all but impossible to simply lift a successful operating model and drop it into a different organization in an entirely different industry. But, while that may be true, the continued evolution of procurement and indeed the way it is being perceived (and invested in) has created an incredibly exciting time for the procurement function and for procurement professionals. Opportunity is well and truly knocking for procurement.
“As much as procurement has become far more strategic in nature, with some incredible strides being made in the function all over the world, I think if we were to ask: what is the perfect procurement operational model that can be translated from organization to organization, I just don’t think we have institutionalized a successful model,” says Renee Leong, Chief Procurement Officer, ENGIE North America. “There is scope there for a model that can be copied, leveraged and utilized across all the industry and companies. But I think we have a long way to go.”
The question then becomes one of change. More specifically, changing the way we measure procurement, especially for an organization like ENGIE North America, proudly part of the ENGIE company, a global leader in low carbon energy and services with €55 Bn revenue globally. The company provides capabilities and solutions in the United States and Canada to help customers decarbonize, decentralize and digitalize their operations and run their facilities more efficiently and optimize energy through clean power generation, energy storage, and retail energy supply. As such, the focus of procurement (and how it is measured) takes on a whole new dimension when compared to some other procurement functions.
Where once, procurement was simply a cost saving operation, it has transcended this somewhat narrow definition. While cost saving is and will always be a crucial part of procurement, the role it can, and is, playing in organizations like ENGIE are shining examples of the true power of procurement.
“We all understand the importance of driving cost savings for an organization. It is absolutely a critical part of our role,” says Leong. “But from an organizational perspective, I think we need to really think about a much better way to measure procurement’s contribution and value to the organization besides that hard saving metrics, right?”
“Let’s look at how successful we are in being able to help support development teams with competitive and creative proposals to win more energy bids, to get more business opportunities, and how well we actually help the business organization manage supply chain risks and execute projects on time and under budget,” shares Leong. “How do we measure how well we actually provide solutions to business to solve problems? We don’t have those metrics. It’s very important right now and, as an organization, we need to rethink the way we should measure our procurement efforts.”
A procurement leader with a wealth of leadership, category management and transformation experience under her belt, Leong was brought into ENGIE North America in 2018 to oversee Strategic Sourcing and Supply Organization and Digital Procurement Transformation to support ENGIE as a global energy leader. Where procurement fits into the equation, in Leong’s eyes, is right at the heart of the business. In her own words: procurement is the hub in the center of a wind turbine with three blades.
“Procurement is the connection with suppliers and our business. That’s really our function. The value that we extend to our suppliers and our business is done so through those three blades,” she says. “The first blade represents how we help ENGIE to make a difference. We want to serve ENGIE’s business transformation goal. We want to be more focused on the performance and help the company gain competitive advantage, and we really hold ourselves accountable to this mission.” As such, the procurement team has consistently exceeded performance saving targets each year over the past 3 years.
The second blade represents creating business value by working with the business and the suppliers. “Procurement sits in the perfect place to really have the opportunity to look into what the supplier can offer to us and understand what problem the business is facing and how we can connect and work together to try and to find the solution,” says Leong. “Simply put, we’re able to leverage technology and the supplier’s creative solutions to solve our business problem. We are an army of problem solvers.”
The third blade is perhaps the most important one as it speaks to a broader conversation around the shifting nature of procurement. For Leong, the third blade is all about the culture of the team. “How are we going to develop as a team?” she says. “Procurement is constantly shifting and evolving, so we want to make sure we are adapting our mindset and how we work with the business to build more sustainable value,” she says. “How are we going to develop new ways of working together? We should encourage diversity, cherish our supplier relationships and build trust with our internal key stakeholders. These are the essential ingredients for what we want to achieve.”
Procurement transformation is well trodden ground, but it remains very fertile and as businesses the world over continue to invest in and communicate their procurement transformations, it’s important to recognize what exactly is changing. As Leong says herself, if we are changing the way we measure procurement and its value, how are we actually going about it?
For ENGIE, the procurement transformation can be broken down into three parts: 1. strategy and process, 2. technology and 3. sustainability. At the time of her appointment, ENGIE had completed the divestiture of its coal fired assets and acquired new businesses focusing on low carbon energy and services as part of the business transformation. What this brought with it (alongside growth) was multiple business models, different systems and different processes and naturally, this created a challenge and thus, the transformation was born.
“It was actually the first opportunity for me to say, “Hey, this is a great opportunity for us to really try to standardize and optimize and, most importantly, simplify the source to pay process,” she says.
“The way that we need to do it is through technology. Procurement technology is key in streamlining the operational efficiency and gives us greater control and enables a more consistent and transparent process.”
To this end, Leong started a digital transformation journey to standardize source to contract to pay business process by using one single procurement platform across all businesses. She introduced a whole new suite of source to contract to pay procurement solutions in collaboration with Coupa as platform provider and Accenture as implementation partner. Over a 21- month period, this procurement suite was implemented in 11 business units and enabled significant efficiencies throughout all procurement activity. Leong is extremely proud of the results: 90% of all purchase orders can now be raised automatically and PO backed invoice rate 94%. “We also mapped over 90% of spend with category classification and 80% spend under contract – all through the new system,” she adds.
Leong is also keen to highlight that over 80% of supply onboarding is now achieved electronically with suppliers in a ‘self-service’ model. “The self-service model basically allows suppliers to come onto our system, provide all the information and set them up as our active suppliers,” she says. “This allows for real time collaboration with the suppliers, which in procurement is crucial. This in turn allows us to capture the majority of spend across all the business. Capturing accurate category spend data and insight is not only critical for procurement to identify saving levers and manage effective supplier relationships. It is also important for the business to understand our commitment with the suppliers and our supply market exposure. This real-time data means real transparency, which benefits everyone in the ecosystem.”
While the technology is not the defining feature of this transformation, it does play a key role in building the foundation for the future of procurement at ENGIE, which in turn reflects the future of ENGIE as a business. As the company divested away from oil and gas, and moved more towards renewable energy, procurement had to evolve with it. The technology to automate the procurement process acts as a true enabler for procurement to be able to support that evolution. Leong recognized that in order to do this, category management was needed and in particular; new expertise was required. As a successful business working in one particular market for over a decade, pivoting to a new arena will bring about new challenges and so, as part of procurement’s rising credibility to the cause, Leong seized the opportunity.
“We need to speak the language of the business and really become the experts in all areas,” says Leong. “It goes back to the question about what our value is. We won’t just be category managers who know this market. We also capitalize on the disruptive technology in our industry. We are managers that are truly helping the business to leverage the disruptive technology in our industry by providing guidance and looking at what the supplier’s latest offering in products and technology are. We also look at what our business needs are so we can work with strategic suppliers to pilot the new technology with promise of higher power generation output or test more flexible systems to enable us to generate a more reliable supply of power while lowering our operational cost.”
“This way, our value becomes so much more to the business. Our proposition is: we not only understand the market, but we also want to make sure that we bring the suppliers and provide the solutions to enable our business to compete.”
Over the last two years, Leong had the unique opportunity to lead procurement due diligence and manage post acquisition integration with the acquired entities. Taking advantage of economies of scale across businesses in North America and leveraging existing ENGIE framework agreements, the procurement team has been able to deliver cost benefits to these entities while introducing major suppliers such as Sonepar and United Rental to provide better services and support for them.
As procurement continues to be more digitally driven, organizations and their people need to be capable and comfortable with the technology at their disposal. With ENGIE’s transformation, Leong has given her teams an opportunity to experience, learn and utilize some of the best technologies there are in the market and how they drive true best-in-class procurement. This, she feels, is key in ensuring her teams are upskilled, engaged and truly excited to be a part of this journey. But it’s not only technology that excites the modern-day procurement professional.
“The top talents really want to work for a company that promotes sustainability, diversity and inclusiveness,” she says. “We’ve done a lot within ENGIE in terms of bringing sustainability and inclusive procurement into the supply chain. This is key to attracting and retaining procurement talent. Our teams feel really good about how we are not only providing the traditional contribution to the organization through savings, we’re also taking center stage and leading the initiative and playing a really critical role in terms of helping to improve the environment. Once again, it’s about how we can define our value as a function.”
Any procurement professional will understand and recognize that the function possesses a very unique position with regards to supply diversity. Given the divestment of its assets, ENGIE has focused on decreasing its carbon footprint and providing sustainable product solutions to its customers all over the world. But this is just one example and there’s much more it can and is doing as procurement through its vast supply chain.
“We have the power to actually influence how the product is being made and how the services are being offered to us so we can really help drive positive change to society,” says Leong. “ENGIE is very aggressive in this area, so procurement actually has a goal from 2020 through 2030 in that 70% preferred and major suppliers must have Corporate Social Responsibility (CSR) rating above the controlled CSR risk level by 2025, measured by EcoVadis as well as 100% of our preferred and major suppliers will be able to meet CSR requirements by 2030.”
ENGIE utilizes EcoVadis as its strategic partner to assess all of its major and preferred suppliers on their CSR. “We really want to focus on those who are meeting our CSR requirements,” adds Leong. “These are the suppliers we want to do business with. But for those who are not meeting the requirement, what we try to do is to focus on working with them to make sure they are taking action and we provide support to help them get there. I’m really excited about the action we will be taking this year, in partnering with our suppliers to make sure that we’re taking steps to not only assess, but also act on it.”
When trying to address sustainability, it requires an upfront commitment and in most cases an investment in order to make it work. Leong firmly believes however that the investment is nothing when compared to the long-term value it will bring both to the business and to the world around us. She notes it’s going to help ENGIE as well as the suppliers in the long run to be more operationally efficient, to be able to reduce overall costs and most importantly, make a real difference on the environment.
“It’s going to be a win for them and for us,” she says. “We are setting a good example to showcase and inspire the procurement leaders and our peers to say, hey, we can do this and there is a way for us to work together and help our environment. Look within your own company at what you can do and be very open minded. Welcome the ideas from your suppliers on how to improve sustainability and the opportunities for real change will be endless.”
While success has indeed come the way of Leong as part of this transformation journey, the road ahead is perhaps equally as significant (if not more so) than the previous years. Having achieved key milestones around standardized procurement processes, digital solutions to enable greater efficiencies, bringing in supplier innovative solutions for business, and working with teams and suppliers around sustainability, diversity and inclusivity in the supply chain, the next 12 months look to be ones of doubling down on all of this great work. “We want to do even more in terms of digital procurement technology and build even smarter AI-enabled contract systems to help our procurement further,” muses Leong. “In the future, I think procurement needs to be leaner and more agile so we need to do more, for example, by utilizing robotic process automation (RPA) to take away many tactical activities that consume a lot of our team’s time and free us to focus more on strategic activities such as category management and supplier management to support the business.”
“I’m extremely passionate about supplier diversity and this is a focus for ENGIE North America. We are identifying the areas where we can expand our inclusiveness and supply diversity to better support ENGIE’s strategy.
Supply diversity is important because it enables flexibility and agility. These are the small businesses that, whether it’s women-owned, minority-owned, or whether it’s veteran-owned or disabled, these are the variety of the supply that becomes part of our supplier ecosystem. It helps us to drive competitiveness because it allows us to have more qualified suppliers to compete and provide us services and it also helps stimulate economies because we engage with local suppliers.”
Procurement transformation is a conversation driven by real change. Add sustainability into the equation and that change becomes increasingly difficult for some. But despite this, Leong is a firm believer that in order to make change, whether it is large scale business changes or changes globally, you need to be bold. “Look for new and different ideas and opportunities to help to improve your business, or to help solve a problem, overcome whatever barrier that we need to overcome and improve our society,” she says.
“Then you can challenge the status quo. If you find there’s opportunity, seize it. It’s the only way that can actually help to continue to drive the improvement. As long as you take the calculated risk in order to drive the success, being bold and taking that risk is always worth it.”