HSBC overhauls purchasing

24 August 2009

25 August 2009 | Jake Kanter

HSBC is revamping its procurement department to help steer it through the economic crisis.

In December, the banking giant's purchasing team for the UK began a project to tackle rising supply chain risks and become more aligned to business objectives. The ongoing work includes putting 40 buyers through intensive training this summer.

Changes have been made in response to the financial crisis, which last year saw HSBC's pre-tax profits drop by 62 per cent compared with 2007, to $9.3 billion (£5.6 billion).

HSBC UK has an annual spend of £2.2 billion, with IT and bank operations among its largest categories. The procurement department will deliver up to £80 million of HSBC UK's total savings target for this year of £125 million. Concerns over vendors' potential financial problems mean mitigating supply chain threats has become a high priority. Risk management strategies include examining contracts and the markets in which its 10,000 vendors operate, and monitoring supplier's financial reports.

David Allcock, senior manager, supply management strategy, told SM: "We want to build a level of trust with suppliers so we can have conversations with them about the challenges they face. We also want them to consider HSBC first when they have innovations and new products and services."

HSBC has introduced a "2-1-2" work routine, where buyers spend two days with the customer, one day in the office and two days with suppliers. This is designed to help stakeholders understand new procurement processes and enable purchasing to take the "commercial lead".

Alison Parker, head of supply management for the UK, Europe and Middle East, said: "It's making sure they're not sat behind a desk five days a week. The idea is to get out so they are not just a name on an email."

The 16 modules of buyer training included sessions on relationship building with internal stakeholders and negotiations. The team will spend the rest of the year "embedding" the changes, with the aim of becoming one of the top procurement functions in the world. The project will also be rolled out in Europe and the Middle East.

Allcock added: "Are we delivering to world class now? No, because we've only just started our delivery journey. But we firmly believe that once we've developed our staff and had an impact on the supply chain we will be recognised as world class."

SMaug2009

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