CPO Strategy
Executive Insights

Vinnell Arabia: Procurement excellence – a business enabler

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We speak to Dr. Preston Butler, Jr., Director of Procurement and Subcontracts at Vinnell Arabia, a unique US/Saudi company of former military expat personnel who provide training and logistics to the Saudi National Guard…

Vinnell Arabia is under contract with the United States Army and has been around in various different formats since 1975. Its primary customer has been, and still is, the Ministry of National Guard in the Kingdom of Saudi Arabia. Vinnell Arabia primarily provides training to the forces guarding the Kingdom; everything from military tactics to sustainment. Today, the company is the leader in US military doctrine-based training, logistics, and support services inside the Kingdom of Saudi Arabia.  

“We’ve been doing that for 43 years now,” retired military officer and current Director of Procurement and Subcontracts, Dr. Preston Butler, Jr. explains. “The function we’ve grown into is providing additional purchasing support for the US Army’s Office of the Program Management. Vinnell Arabia’s Procurement & Subcontracts Division does some work on their behalf in terms of subcontracts and other procurement transactions. We’ve grown from a small organisation to a relatively large one with 2,200 employees here in the Kingdom.”

Procurement excellence

With a procurement staff of 40 comprised of Saudis and expats, Vinnell Arabia has established tens of thousands of formal contractual agreements with local suppliers and vendors. Dr Butler has a firm idea of what constitutes procurement and supply chain excellence and works hard to galvanise his team behind a vision that promotes excellence through the entire process. “I guess the words could even be reversed because procurement is one part of the supply chain, which is made up of different functions linked together starting with identifying the requirement, to getting the approvals and necessary funding to award the purchase order.”

“Since Vinnell Arabia is contracted by the United States government, we work within a very structured process in
a slightly a different way than many private companies who can pretty much broker whatever deals they want to on
a golf course, or over a cup of coffee.” Vinnell has a very robust procurement process in in order to be in compliance and withstand government and other third party audits. We have to make sure that when we think about procurement holistically. It’s not just procurement alone,” he says. “It’s the entire supply chain process that must be considered. And if we do it right, then we have what I would consider, an excellent process that has integrity built into it, so as requisitions flow from one link to the other, we can be transparent and avoid a conflict of interest. We must also ensure there does not appear to be opportunities for manipulation because things of that nature that could get us into trouble really fast.”

The procurement team at a company like Vinnell Arabia is inextricably linked to the operational success or failure of the company, when reliant on third-party outsourcing. “We have three types of suppliers: Critical, Key and Standard. About 9% are Critical suppliers who provide everything from aircraft repair parts and services that we just cannot live without. They are day-to-day services that are on site every day providing services such as janitorial and food services. We spend a large sum of money on service subcontracts and recently developed a formal supplier management program that includes a monthly evaluation of their performance. We work really hard to ensure the right suppliers are selected at reasonable prices using a “Best Value” methodology. This means we take price and other factors into consideration when making each purchase and awarding each subcontract. The way I see it is our job is to enable the operational or business units to succeed. To a large degree, we cannot succeed if our subcontractors fail.”

Transformation

Vinnell Arabia had a vast roster of suppliers prior transitioning to a new ERP system in 2018. Seven hundred fifty (750) suppliers were reduced to 350 during the transition. “We only moved forward with active ones,” Dr. Butler explains. “350 suppliers is still a large number. Anytime you’re over 100, that’s a lot of suppliers to monitor and maintain a healthy relationship with.” Vinnell has upgraded its procurement SOPs (standard operating procedures), three times “in the spirit of pursing excellence” since 2014. “We perpetuate the theme within the division called ‘From Good to Great’. We’re always thinking we did good this week, but how can we do better next week?” This type of thinking keeps you alert so you bring your “A-Game” to the office every day.”

Traditionally, the Middle East has been slow to change with technological trends, but all that is changing as focus shifts dramatically towards the digital age. Massive amounts of investment into new technology will enable many Middle East companies to match their western competitors, but there is still a long way to go for many local businesses. “The Kingdom as a whole may not be ready for e-commerce, but I spoke to a fairly large company last month, in terms of their contracting practices, and they have not moved to e-commerce because their opinion is that the suppliers in the Kingdom are still not ready for that type of technological shift.” Well, Vinnell is going to go ahead whether the market is ready or not, as part of its modernisation outlook. Dr. Butler stated, “we are using the McDonalds’ business method…If you build it, they will come. Whether it’s two months, three months or three years, our suppliers will eventually make the transition and we will all benefit, and move from good to great.” 

Vinnell made a change a few years back from cash payments and now avoids making them unless it’s absolutely necessary and justified. “You’re either on EFT (electronic funds transfer), which is the best-case scenario or we will write a cheque and even that’s a little old-fashioned. And then the third is to pay cash, which is the worst-case scenario. To protect ourselves from the perception of impropriety, we use the principle I call the Rule-of-Two. The objective is to ensure at least two people are involved in each procurement activity especially ones that involve cash transactions because the last thing you want is a scandal in your procurement organisation.

An essential element to Dr Butler’s notion of procurement excellence is procurement integrity, of which incorporates two aspects. “Number one, you have to have personal integrity, which is essential for every Buyer.  When I say personal integrity, I mean having a strong ethical attitude in your business dealings because we are held to a higher moral standard. After all, we are trusted officials spending government money, whether it’s Saudi money, or US money, it is public money; it belongs to the people. It belongs to the Kingdom. And we have a huge fiduciary responsibility. So, we (procurement officials) must have personal integrity.”

Dr. Butler’s second (classification of) integrity deals with the system, meaning the processes put in place and so these two work in tandem, rendering them auditable. “If you do
a gap analysis, you should be able to see if someone veers to the left or right, just like in SPC (statistical process control) charts. We don’t have those of course, so all of ours checks and balances are conducted via human intervention to see if what we’re doing is what we said we were going to do in accordance with our approved procedures. If not, the question(s) is what corrective action(s) do we take?”

The third element to procurement excellence at Vinnell revolves around training. “Not necessarily formal training, but training in terms of peer training and on-the-job by managers. When I was in college, I did an internship at a bank. One of the jokes back then was about banker hours. Since banks didn’t open until 9:00 a.m., most people thought the employees came to work at 9:00 a.m. So everyone desired a job where they could go to work at 9:00 a.m., like bankers. The truth is they came to work at 7:30 and spent 90 minutes counting money and preparing to receive customers. So I implemented the same concept in our organisation. From 7:00 a.m. to 9:00 a.m. we train, execute numerous administrative actions, and prepare for customers and suppliers. The purpose is to ensure we take time to train and prepare ourselves to perform at a high level.”

Another important tenet to Vinnell’s pillars of procurement excellence is external training, or better stated, education, so that customers understand how to work within the procurement system. “I always tell my guys to work as though the customers are wrong. I know we’re supposed to say the customer is always right, but if you do that, you will not question the requisitions, statements of work, item descriptions, etc. In other words, you will not do your due diligence, which will most likely lead to errors and poor decisions. The best way to review a requisition package is to assume something is incorrect. Then you will review it more meticulously, which could save time and money. Accuracy in contractual agreements is paramount and the responsibility of the procurement official, not the customer. After all, the procurement officer signs the contracts. He who signs – is responsible.  

Suppliers Conference

To foster those essential relationships with suppliers, Vinnell Arabia hosted Suppliers Conference in 2017. The four-hour event hosted 125 participants representing 65 companies and covered topics such as the procurement process, vendor expectations, best value procurement, blanket purchase agreements, subcontracts, and Value Added Tax (VAT). “We’ve only done one so far and based on the written feedback from participants, it was a huge success. Most requested we hold the event every year.  It was a great way to communicate to your major suppliers as well as prospective suppliers at one time. In addition, it gave us an opportunity to listen to them in order to see things from their perspective. 

So, what in Dr. Butler’s opinion constitutes a successful Chief Procurement Officer (CPO)? “I have something up on my wall that I try to live by. The title of it is “Leadership” and it consists of 14 different points. It serves as a daily reminder. The first point says, ‘Be competent and professional – know your job and do it.’ And that’s pretty much universal, whether you’re doing procurement or anything else, but especially procurement because there are a ton of factors to consider when making decisions such as  regulatory requirements, local laws, , compliance, policies, operational mission, just to mention a few.  There are so many factors you have to take into consideration when you’re making what appears to be a simple decision on the surface, but in reality is full of complications.  You really need to be competent in your job, first and foremost because so many people are depending on you. And then I would say, probably trumping all of that, you must have integrity. The first boss I ever had in contracting told me, ‘You can’t legislate integrity. You either have it or you don’t.’ If you’re working in this field and you have an integrity issue, it’s going to hurt you, and potentially the entire organisation. I think procurement officials have to understand their role and how it fits within the grand plan of the company and ensure their actions are in alignment with the company’s goals and strategies.”

“It is also important to enjoy what you do because it will keep you motivated. We don’t get many pats on the back and public appreciation for what we do. So procurement professionals can’t work for recognition and praise. The top performers simply enjoy their profession and make it look easy, but it is really challenging and taxing. Every decision we make has a financial implication. I’m sure I contribute to this misperception. When I’m asked what I do,
I tell people I buy things for my company, which sort of is an understatement.  There really is a lot more to it than that.”

Business Enabler

When asked how he envisions the procurement and subcontracts functions, Dr. Butler stated, “the number one responsibility for a procurement activity is to function as an “enabler” for the success of the company. Everything we procure or lease has a direct impact on the daily mission of the company or quality of life and will hinder or enable success. The procurement officials, both Buyers and Managers, affect the reputation of the company when we engage with external customers and suppliers. I believe we are business enablers because without office supplies, computers, printers, furniture, materials, vehicles, housing accommodations, leased office space, custodial services, etc., the company cannot function.”

Companies are always chasing and striving for excellence or best in class. “In my opinion, if a company seeks to achieve excellence it needs to focus on people and systems. Without both being excellent, you will always have a gap. If the supply chain is to achieve excellence, it must be an integral part of the company’s vision and properly aligned to enable operational success. I cannot over emphasise the importance of noncompromising integrity in both the individual and the processes. Finally, companies that normally achieve and sustain excellence have a strong continuous improvement philosophy that permeates throughout the organisation as the norm rather than the exception.

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