'Board level integration vital to control purchasing processes'

Will Green is news editor of Supply Management
24 September 2014

Integrating procurement into the business is vital if you want to control purchasing processes, a conference was told.

Nick Ralphs, interim head of purchasing strategy and performance at RBS, said this had been a key achievement in his previous role at insurer Direct Line Group during the period it began to be divested from RBS, and where procurement had been "operating one or two levels below executive on the whole".

Speaking at eWorld Purchasing and Supply, Ralphs said at Direct Line, where there was supplier spend of £1.8 billion, 70 per cent of contract decisions were taken at board level. This happened at weekly sign-off meetings, but it could take six months before a project got signed off. "The executive oversight was too late," he said. "We were quite inefficient.

"Although we had that meeting every week on a Tuesday, every week someone would phone up on Wednesday or Thursday saying, I need to get sign-off."

Ralphs changed the system and set up four category committees, covering technology, claims, business services and marketing, each chaired by a member of the executive and meeting on a monthly basis. "Straight away we had a body of people chaired by someone who could approve," he said.

A two-stage process was also adopted where first a need was identified and a financial forecast completed before it was signed off by the committee, or sent to the CEO or finance director if necessary. The second stage involved doing the sourcing work.

"It became a lot less painful, the whole process, and it integrated procurement with the business at an executive level," said Ralphs.

"If you want to control purchasing processes you need purchasing to be integrated into the business."

In his current role Ralphs said he was part of work to divest a number of RBS branches that will be branded Williams & Glyn, a consequence of the bailout the bank received from the UK government following the 2009 financial crisis.

He said he had taken a different approach to risk with the new bank compared to RBS, which has set procedures that must be completed whatever the tier of the supply chain.

Doing away with a "generic approach", he has replaced the terminology of tiers by grouping suppliers into five categories - material outsourcing, customer critical, information security, associated parties and offshore - with differing requirements for each.

Ralphs said there were fewer "mandatory things" for contract managers but more individual responsibility. "You have to start using your judgement," he said. "We're upping the ante for people on contract management."

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