19 June 2008
Telecoms firm O2 is to reorganise its procurement function to boost its position in the Telefonica group, drive efficiency and improve collective benefits.
The changes mean numbers in the procurement team will double, there will be more control over spend, and responsibility for some indirect categories will be handed over to a third party.
"I am trying to get the benefits of the Telefonica spend and O2 supplier relationship management to get the best of both worlds," said Simon Lee-Smith, CPO at O2. "The goal is to align the procurement function across the group and drive synergies."
The firm will double the number of procurement staff it employs from its current 36. It will be looking to fill a variety of positions, including senior buyers and category heads in both UK and group procurement roles.
He described current UK resources as "somewhat lean" partly because of the team's strategic approach, and said the recruitment was an investment in procurement people to drive economies of scale.
He added he does not want to dilute the added value each buyer brings to the company - estimated at £3.5 million per person in cost savings, cost avoidance and additional revenue. "It means we can go deeper and wider into our spend base. We are now taking the wider view with specialists in procurement taking more responsibility for purchasing as a whole."
Buyers will also gain control of all the spend in a particular category, rather than just working on specific projects.
Lee-Smith said catalysts for the change included a desire to boost global scale, "get under the skin of global relationships with suppliers", and fit in with O2's company-wide plan to improve customer satisfaction.
He added that support from the UK CEO and group COO had been critical to implementing the changes.
The team is also looking to hire a third party to take control of a "substantial figure" of indirect spend. According to Lee-Smith the deal, currently out to tender, will deliver a whole set of benefits. These include greater flexibility, as the company will be able to bring in buyers with specific category knowledge when needed, quick wins, greater market knowledge, and an ability to access economies of scale with other clients O2 would not previously have had access to.
But he insisted the third party provider would have to "live and breathe" the values of the O2 team.