The delivery man

30 October 2003
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30 October 2003

Incoming CIPS president David Rich-Jones combines strategic thinking with an uncompromising approach to delivery. He talks to Geraint John about his outlook for the profession and key challenges facing the institute

Persuading a group of engineers to use a cheaper logic analyser might not sound like a career-defining moment, but David Rich-Jones still looks back at the achievement with a sense of pride. As a young purchasing executive learning the ropes at GEC Marconi in the mid-1980s, he recognised that while the alternative product was half the price, cost was not the engineers' main driver. So, against the odds, he turned up one day at their lab with a test device and challenged them to try it out.

The experience taught him an important lesson - namely, that with a bit of insight and perseverance you can change people's attitudes, however entrenched they may seem. "Their view changed from 'No, absolutely not!' to 'I've got to have this one and nothing else!'," says Rich-Jones, who takes over the CIPS presidency from Peter Smith later this week.

That mindset is handy in his current role as chief executive of Xchanging Procurement Services, where his job is to convince purchasing directors to do the one thing most have traditionally resisted - accept they can't manage all of their spend effectively and outsource some of it instead.

The idea of outsourcing all or part of a procurement function is controversial. But Rich-Jones says he has seen signs attitudes are softening over the past 12 months. Arriving at a company and being confronted by a roomful of defensive category managers spoiling for a fight is not a comfortable experience, he admits. However, a growing number of procurement leaders are starting to see outsourcing as "part of the armoury of modern purchasing rather than as a universal threat.

"They are saying 'I have to deliver value for my organisation and I'm going to do it in a number of ways. I'll have a high-quality team at the centre. I'll do it by training and devolving authority to business units for certain types of spend. And I'm going to back another horse, too, which is outsourcing'," he explains.

In October 2001, Xchanging, a start-up firm founded by former Accenture senior partner David Andrews, won a 10-year contract with BAE Systems for human resources procurement services such as recruitment, training and fleet management. The deal, which is operated as a joint venture, has subsequently been expanded to include other areas of indirect spend, including travel, and is now worth £1 billion.

Xchanging has since announced further procure-ment outsourcing deals with building products firms Novar (formerly Caradon) - Rich-Jones's previous employer - and Heywood Williams valued at more than £250 million.

Leaving the top purchasing job at a PLC to become employee number eight at Xchanging was a gamble. But for Rich-Jones, it was a calculated one. "I've always been quite entrepreneurial and I wanted to make a business out of purchasing," he says. "I also bought into its view of outsourcing. So it was a fantastic opportunity."

He now heads up a team of 65 people charged with delivering savings of 20 per cent for its clients by 2005, through a mixture of better purchasing, aggregation of spend and slicker processes. Just as well then that he cites "delivery" as the single biggest driver in his career. "If everyone thinks something can't be achieved, it motivates me even more to get it done," he says.

His management style can be "very direct" at times, he admits. He isn't known for ranting and raving, but he does like to cut to the chase quickly and is intolerant of what he regards as "flannel" and excuses. Professionalism, honesty, teamwork and giving of one's best are the qualities he looks for when hiring new staff, and he believes investing a significant amount of time in the recruitment process pays off.

Valuable activity "Over 50 per cent of your success depends on how good your people are," he says. "Yet I'm surprised generally at the lack of attention that some people in this profession pay to recruitment. It's very easy to look busy in purchasing, but you have to ask what value people are actually delivering."

Rich-Jones is a strong advocate of the function's strategic role, and he enjoys devising strategy as well as seeing it through. Purchasing directors need to ensure their strategy is fully aligned with that of the business and that they are absolutely clear what their organisation expects from them and what purchasing can deliver, he says.

"You need to be able to identify the agenda that's important to your business. What's strategic to some will not be strategic to others. Each year you need to challenge whether your strategy is in tune with the organisation's." In his view, accepting that this isn't the case and being prepared to change direction takes a certain amount of courage.

But Rich-Jones is also a realist. Even where strategies are complementary, some companies will still refuse to see purchasing in a strategic light, he says. In such cases, it's important "to recognise when you don't have a winning hand" and move on if necessary. He cites SmithKline Beecham (now GlaxoSmithKline), where he worked for four and a half years in the 1990s, as an example.

"It was a very wealthy company. However much money you saved - and we did save a lot - strategically I don't think it was important to them in the way that bringing a new drug to market earlier was."

Tighter margins That experience prompted his move to Caradon, where profit margins were much tighter and he saw a bigger opportunity to add shareholder value. The company's chief executive, Jürgen Hintz, was very clear about what he wanted purchasing to deliver and was an enthusiastic sponsor of the function.

By sourcing raw materials such as steel and PVC and finished products such as showers from as far afield as Asia, eastern Europe and South America, Rich-Jones and his team were able to cut costs by up to 45 per cent in some categories and contribute tens of millions of pounds to the company's bottom line.

This is another area where he thinks purchasing professionals can easily lose their focus, as they seek to improve processes and implement IT systems. "I've always felt there has to be a financial value to what we deliver. You shouldn't ignore service and other elements, and you don't have to be aggressive about it, but you can't forget about the bottom line. As a profession, we do so at our peril."

Rich-Jones's fusion of strategic thinking and practical delivery continue to be an asset for CIPS, through his role in its board of management and council. In his vice-presidential year, one of his main contributions has been chairing the judging panel for the CIPS Supply Management Awards, which climaxes tonight at a presentation dinner in London to be attended by over 700 people.

As president, his key task will be helping to draw up the institute's next three-year corporate plan, which will run from 2004-07. Rich-Jones identifies three issues at the top of the agenda: continuing the process of modernising the institute's educational syllabus; clarifying its international strategy; and extending its representation within the profession, particularly among purchasing directors.

"CIPS has come a long way in recent years in all three of these areas," he says. "But we need to be challenging ourselves further now."

The international dimension is one that particularly interests him. CIPS has members in over 100 countries and provides services such as training in places as far afield as the Middle East and Hong Kong. The rapid economic growth of China is one major factor to consider; another is expansion within the European Union, where he believes more could be done to develop a purchasing agenda.

"I don't think we have a choice not to operate in the international arena, but it's the extent to which we do it and the kind of institute we want to be in the future," he says. "If we get it wrong, we could end up being very marginalised."

Career file David Rich-Jones Chief executive, Xchanging Procurement Services, aged 42

1980 City of London Polytechnic Business School, BA (Hons) in business studies, specialising in marketing 1984 Marconi Radar Systems, senior project buyer, promoted to principal buyer 1987 Cossor Electronics (Raytheon), purchasing section manager, promoted to head of procurement 1990 National Westminster Bank, group purchasing manager, information technology 1992 SmithKline Beecham, director and vice-president, strategic purchasing, and then the same role for European purchasing 1997 Caradon, group director of purchasing 2000 Xchanging, director of sourcing business development, then chief executive, Xchanging Procurement Services

SMoct2003

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