Aided by new technology, and supported at boardroom level for its deep insights into every strata of a company’s operations, procurement is now seen as a vital strategic aid. Across the globe, traversing every industry, the CPO is fast becoming a visionary with a 360-degree holistic insight that can truly help businesses to strategize and accelerate growth.
Traditionally, the Middle East has taken a little longer than most to adapt to the evolution of procurement, but change is occurring thanks in part to the work of bodies such as CIPS (Chartered Institute of Purchasing and Supply), which has spent ten years highlighting the strategic value of procurement in the region. Now, certain companies and CPOs are leading the way in bringing procurement into a new dawn.
Technology has increasingly become a major focus for the Middle East, with many nations vying to make the area a global center of technological excellence and digital transformation as seen in projects such as the upcoming Expo 2021, Dubai. The Telecommunications Regulatory Authority (TRA) of the United Arab Emirates (UAE) was established in 2003 to regulate the burgeoning telecommunications sector in the UAE and enable government entities in the field of smart transformation. The UAE is ranked first in the Arab region and seventh globally in the Telecommunication Infrastructure Index (TII), according to the UN E-Government Survey 2020 – surpassing many developed countries in the sector and reflecting the level of development of ICT in the UAE.
The UAE has also remained first, globally, in the mobile broadband subscriptions index and advanced from second to first, globally, in the Mobile Broadband Internet Subscription Index. In terms of Internet users, the UAE moved up to 5th from 13th globally, while rising to 29th from 68th in the world, in the Fixed Broadband Subscription Index. TRA is working hard to achieve a number one ranking in this index in order to achieve the goals of the National Agenda: to be the first in the world in TII by 2021. In short, the role of TRA is to “encourage, promote and develop the ICT industry in the UAE”. And to facilitate an endeavor of this scale, you need a smart and agile procurement function.
The procurement function at TRA is headed up by Sulaiman Abdulla, Manager Procurement & Contracts, who joined in 2016 with a wealth of experience having worked for different government and private sectors. TRA is dedicated to developing and modernizing the telecommunications system in the UAE through training, enabling and establishing related educational institutions, and obtaining the latest ICT devices, equipment, and facilities.
Upon his appointment, Abdulla initiated a massive procurement transformation at TRA by establishing a roadmap that would see procurement becoming much more than a merely transactional aid at the regulatory authority. “I wanted us to start developing people, governance and partnerships,” he explains.
Abdulla initiated an extensive round of market research to gain feedback and insights from TRA’s internal and external stakeholders. “I really wanted to understand their requirements with an increased focus on supplier engagement,” he says, adding, “After all, they understand the market better than anyone else.” There has been a real shift in the sharing of information and insights within the regulator, and externally with partners, since Abdulla took over. Focused on collaboration with bodies such as CIPS, TRA wants to increase awareness and knowledge of the strategic value of procurement and now places a massive value on supplier engagement and collaboration to create a longer-term perspective of operations outside the standard quarterly timeframes that many departments adhere to. “I am interested in looking at partnerships over 20, 30, 40 years,” he explains. “Sometimes, people don’t really understand the CPO, procurement and negotiation. It’s not a transactional role anymore. It’s more about quality, new ideas and flexibility.”
Transformation of procurement function is a process, not merely a project you start and finish. “We started this journey four years back by focusing on technology enhancement, process re-engineering and people development in skill set capabilities. You always start small till you reach big. Procurement professionals and leaders have to understand that success is a journey. You can’t simply just jump from a manual working environment to artificial intelligence. Transformation starts with automating your manual processes, then shifting to digitalization and the analysis of the information and data to reach to AI.”
The mindset of CPO, according to Abdula, should change from “competition to completion” in order to achieve greater value and sustain the growth of the organization. “This means, we as procurement professionals, should work more collaboratively with our internal stakeholders and suppliers,” he explains. “We complete each other in the process of supply chain in order to achieve a win-win strategy.”
Abdulla has placed an increased importance on supplier engagement and collaboration at TRA, but why is supplier collaboration so important to TRA’s activities with regards to strategic procurement? According to Abdulla, it has become essential for companies to extract the best possible performance of the supply chain involving all parties (internal and external) and includes a commitment to add value to supply chain management. “Most procurement professionals are focusing more on the internal stakeholders by having an internal engagement plan with stakeholders and an effective communication plan to understand their needs and requirements. On the other hand, we often see that the level of collaboration and engagement with the suppliers is low. Chief procurement Officers need to realize the value and the importance of supplier collaboration.”
Abdulla details a number of benefits from this form of engagement. Project timelines can be accelerated and project outcomes improved; for example, boosting business expectation and requirements while minimizing risk. There can be a massive development of staff by closing existing skill gaps which also boosts operations with regards to staff retention which, according to Abdulla, will relieve dependency on contractors and suppliers. Plus, value addition and cost optimization by reducing inventory levels will significantly improve the customer journey, allowing better visibility into customer demand, supplier performance and faster decision-making. “Effective collaboration with partners is all about sharing valuable information and transparency to achieve a common goal or target,” he says. “It also means that both parties are extending their efforts to achieve the value that both parties wish to reach. A ‘win to win’ strategy.”
Recent studies highlight that organizations engaged with suppliers are 38% more likely to achieve their expectations and goals towards cost optimization and value driven procurement. According to Abdulla, levels of engagement or collaboration can often start with the transactional level where both parties share transactional data including purchase orders, invoices payments, work orders, sales orders, inventory and contract terms to help the partners automate business processes and transactions and help in making best decisions. The level of engagement can also increase to a ‘strategic level’ where both parties are taking part in joint planning, redesigning of business and products by sharing high levels of value information. In this level, both parties share levels of risks and reward that can lead to better forecasting and planning that can reduce risk and enhance quality and better pricing plans, while boosting sales and operational planning and resolving critical issues and events.
Collaboration is dominating many conversations in every conceivable industry and procurement is starting to truly benefit from the sharing of information. Abdulla is a true devotee to the collaborative way of working and believes that a network of shared information can unlock true potential from procurement and the supply chain while driving innovation through the discussion of ideas and suggestions. Staff capabilities can also be improved greatly through sharing thoughts and ideas. “Knowledge is power,” Abdulla explains. “And it is very important for the organization to map its strategic planning towards a strategic level of engagement and collaboration with suppliers to achieve greater value and outcome from the supply chain.”
Supplier relationship management or as Abdulla terms it, supplier value management, requires an organization to shift from the traditional method of cost saving and negotiation to focus more on a ‘win–win’ approach which will empower the procurement team to be a business partner rather than a mere facilitator. In order to increase the collaboration level, organizations are required to get a holistic view across all suppliers before segmenting them in different approaches to identify the key suppliers who are adding value to the supply chain. “Segmentation of suppliers should not be focused on spend only,” he states “If you are going to increase the level of engagement and collaboration, then you need to consider different aspects while segmenting your suppliers. Some examples to consider are nature of projects, industry, spend, risk, innovation, performance and value. You also need to identify the supplier touch points in the supply chain processes. There are different areas where you can expand the supplier collaboration and engagement efforts to drive continuous improvement to the process. Apply an 80/20 methodology; focus on the 20% of your suppliers who generate 80% value to the organization.”
Supply chain or procurement processes are always centered around long-term business, and not short-term relationships, according to Abdulla. “This how the CPO differs from the CFO. There are always challenges faced in any collaboration, especially for procurement professionals who are responsible for managing internal stakeholder, and supplier, collaboration while maintaining the different mindset of spending and saving the budget. As a public organization, I believe there are great stories of success we have achieved through early engagement of our strategic suppliers on a national level.”
TRA practices different types of early engagement, based on the way it categorizes and segments its vendors. “Early engagement with vendors for new technologies, allows them to communicate the desired responses and narrow down on a specification to advise us as to the nature of the subsequent procurement. Another type of early engagement is when we need advice on a new market, product, or service from not just one supplier, but many suppliers or consultants.”
Early engagement with suppliers offers benefits to both TRA and its suppliers and enables the government to better plan for, and mitigate, risk. Complex, innovative or high-risk programs can be adapted to better utilize ICT industry capacities, providing government the opportunity to realistically measure and analyze the capacity of the ICT industry to contribute to strategic programs and engage early problem recognition. Suppliers might also know more about what is possible or not when facing technological uncertainty. Early involvement provides maximum opportunity for enhanced outcomes in terms of cost, quality, delivery and design. Early engagement with suppliers also allows the procurement team to leverage on supplier capabilities and achieve advantageous positions in the innovation and development processes.
“Early supplier involvement not only enhances outcomes, but also enables suppliers to bring new innovations to the table. If technology is complex, we bring suppliers in and discuss design ideas issues and challenges. Early supplier involvement assists in both the quality and cost of the initial finished good, but also in the ability to keep the product in service after the sale,” he says. According to Abdulla, it is important to engage early and widely with the supply side, to give a supplier an opportunity to shape the requirement. Suppliers who are involved earlier can have a better understanding of the requirement, reduce time to market, create better business forecasting and better resources planning that can lead to a long-term business relationship.”
Operating under TRA’s ‘newborn’ strategy, one of TRA’s strategic level projects was achieved within 100 days by getting the strategic suppliers engaged earlier in the prototype phases. “There was a daily collaboration with the different strategic suppliers who were on our premises to achieve the target,” Abdulla explains. “Clarity is very important while engaging the supplier. In this project, the goal was clearly transferred to all suppliers and changing the deadline was non-negotiable.”
Abdulla believes that developing internal capabilities is a key factor to success. “We have started engaging our strategic partners to develop the staff by closing the skills gap and providing a self-learning environment that leads to bringing different values to the organization; from knowledge adoption to applying best practices and utilizing the tools and toolkits. Regarding new tools and techniques, Abdulla can see a time in the not-too-distant future when artificial ‘emotional’ intelligence could be fully harnessed by the procurement function.
As with any new business practices, there will be challenges during implementation. Change management is often number one in the most common challenges facing new processes and operations. A new way of working and a shift in the workplace culture is seen by many as disruptive, but necessary. Among the challenges Abdulla has faced, he cites a lack of vendor’s cooperation, intellectual property conflicts with vendors and the overestimation of the development skills of the supplier. Political issues arise too, such as, the reward structure for suppliers and a degree of fairness to those not involved as early as other vendors. “Understanding is so important,” he says. “There needs to be understanding on all sides.”
With a procurement transformation fully under way at TRA, Abdulla and his team have 36 KPIs to monitor its success. However, how does Abdulla encapsulate procurement excellence? “Data is important. After all, without data you can’t improve anything. I place a high value on people, too. After all, you can have the best technology in the world, but if you don’t have the people and the brains, it’s useless. Procurement excellence is a continuous evolution and it’s all about driving value to the organization,” Abdulla explains. “Right now, people need to truly understand the procurement process to allow it to work at its full potential.”