19 July 2007 | Paul Snell
US bank Citigroup is to overhaul its buying operations in an attempt to increase its profile and influence.
Speaking exclusively to SM Michael Valentini, global head of procurement, described how the transformation will introduce standard, group-wide sourcing procedures creating greater efficiencies. And, to consolidate spend, he is considering investment in tools to increase demand, volumes and transaction data.
The plan follows an announcement in April that the group aims to save $4.6 billion (£2.26 billion) by 2009. It is expecting to cut around $2.1 billion (£1.03 billion) by the end of 2007.
Centralisation will play a large role in the savings and the firm has already brought together 65 per cent of its spend. It aims to centralise 100 per cent by 2009, achieving 80 per cent by the end of the year, a target Valentini said the group is "well on the way" to reaching.
Despite the restructure, regional procurement heads will remain in place. Valentini confirmed procurement leaders in EMEA and Asia will stay put. "The regional heads will remain as part of an integrated procurement model, working in collaboration through central processes," he said.
There will also be no change to the "global category lead" system, where particular regions have global responsibility for certain spend areas. Citigroup carries out procurement in more than 100 countries.
The structural changes form part of a group-wide cost savings plan. And procurement has backing from the top. "The senior management support and the expense initiative have accelerated procurement's work to grow its managed spend and influence."
Procurement is also taking more control over new categories such as consultancy, marketing and print.
But Valentini acknowledged buyers face a challenge to win over peers. While procurement cannot mandate a strategy to internal clients, it takes a collaborative approach, bringing its sourcing processes and expertise to other departments. "Alignment with the stakeholders and partners is absolutely critical," he said. "And having processes linked to metrics is the key in achieving this."
He would not be drawn on how the 17,000 job cuts the group is making worldwide would affect procurement. But he said the group's increased use of shared services for back office functions would not necessarily mean co-located buyers and buying areas.