Telkom takes 'collegiate' approach with top suppliers to save 'as much as possible'

Will Green is news editor of Supply Management
19 August 2014

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19 August 2014 | Will Green

The head buyer at Telkom has said he will be working with core suppliers in a “collegiate” way to cut costs by “as much as possible”.

Ian Russell, who has been CPO at the South African telecoms firm for six months, said in the past the company had “tactical and transactional” relationships with suppliers but he wants to treat them “more thoughtfully and carefully”.

In the last financial year Telkom spent R17 billion (£961 million) with around 2,400 suppliers, but 80 per cent of that spend was with 23 suppliers. Total revenues in the period were R32.5 billion (£1.84 billion).

Russell said he had conducted workshops with the top 20 suppliers. “I genuinely believe that with my top 20 suppliers the right approach is a very collegiate approach,” he said.

“We invited them in and said, if you were me what would you do and what are the things we are not buying from you that we should be to reduce our total cost of ownership? What are the things Telkom is doing that is pushing in cost? Do we schedule and plan well? Are we specifying well? Do we have too many competing technologies in our environment?

“We will create a project plan with each of those suppliers that says, we have got those ideas, now how do we turn them into reality?”

Russell said a strategic review of the company was completed last year, which concluded that Telkom “needed to place much greater emphasis on managing its non-employee cost base”. His mandate is all non-employee cost including property, supply chain and procurement. “It’s a pretty wide portfolio and deliberately designed to focus on the organisation end to end,” he said.

Russell, who has set out a three-year roadmap, said it was not possible at this stage to quantify how much would be saved. “I believe there is significant opportunity but to quantify it at the moment would be misleading. It is as much as possible and I think that ‘as much as possible’ will be a lot,” he said.

“I think a significant part of the value will come from actually treating suppliers more thoughtfully and carefully from a relationship perspective and working with them to deliver much better value propositions. A technology company desperately needs the oxygen that comes from research and development and collaborative working with suppliers. Because of Telkom’s previous approach it probably hasn’t accessed that. I’m talking about developing longer term, more structured relationships with the big suppliers so we get quicker access to the right innovation and some of the lower cost ways of doing business.”

Russell has also introduced category management, with the categories of technology, network and infrastructure, professional services and marketing and advertising, and demand management. “We need to be more thoughtful about what’s needed, rather than what was wanted in the past,” he said.

He manages 400 people across purchasing, property and supply chain with 100 working in procurement. “I have inherited a fairly mature procurement function but it has been very transactionally focused,” he said. “We need to change the emphasis to category management and strategic sourcing.”

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