The music industry operates in a very creative environment. Historically driven by growing revenues, Universal Music Group International (UMGI) could no longer rely on an upwards revenue trajectory in the new digital age.
A greater focus was placed on the bottom line and reducing the cost base without limiting creativity, cutting services, or reducing head count. The challenge was how to move procurement closer to the core of the business, becoming a strategic, change-focused function, which could deliver the multi-million pounds of benefit that UMGI believed lay within the organisation.
Working with procurement outsourcer buyingTeam, UMGI started by redefining how procurement should align with finance and the wider business.
Throughout this process, maintaining the integrity of the business culture and attitudes often meant saying “no” to suppliers who did not fit or add value to our operating model (moving away from just getting the best price). At the end of this redefining and re-engineering process, finance signed off these results:
• UMGI now views procurement as a strategic function, which drives business change.
• Large savings have been delivered, but the focus has been on delivering value from the supply chain.
• Changed attitudes towards cost management across the organisation.
• A sustainable solution.
• A simplified, de-cluttered supply chain.
• Greater transparency over local spend.
• Reduced transactional costs.
• All suppliers and new procurement culture aligned with UMGI’s systems.
• Aligned suppliers to UMGI’s new procurement culture.
• Successful implementation of change-focused projects.
My experience of working with procurement has highlighted how much value it can deliver. Its ability to drive business change has delivered exceptional financial results and given UMGI greater visibility across the entire spend base, plus improved overall spend control.
Tips for working with finance
1. ‘Fit in’ with the business culture: procurement has been viewed as a cost centre, adding little value apart from year-on-year savings. As these diminish, procurement teams are forced to critically understand the wider business.
2. It’s not all about price: increased performance, service levels and implications of risk are just as important. Creativity (with contracts and negotiation) is another key facet. Procurement teams need to review processes, design and implement new ways of working and get stakeholders to think differently.
3. Be seen as useful: procurement teams need to ingrain themselves into stakeholder communities, acting as advisers and internal consultants, and generating income ideas.
4. Impact on the bottom line: present the numbers in a user-friendly way – highlight savings and changes, together with an audit trail that shows savings are implemented and recognised on the bottom line.
☛ David Manning is group financial director at Universal Music