Vodafone’s procurement chief has built a control centre that uncovers inefficiencies – and then uses robots to speed up the process. No wonder he looks relaxed.
Ninian Wilson is loving life in Luxembourg. The Scotsman who has previously run UK-based procurement departments for Royal Mail and Cable & Wireless, moved to the small landlocked country in Western Europe in 2009 to take up the post of technology procurement director at Vodafone.
In that position he was responsible for the business’s network and IT expenditure across all its operating companies around the world – of which there are now 24.
In 2016, he stepped up to become group procurement director and CEO of the Vodafone Procurement Company (VPC), heading up what he describes to those outside the profession as the company’s “global shopping department”. And there, he has brought to life one of the first digital transformations within procurement – with clear benefits.
The VPC covers the requirements of Vodafone’s two dozen operating companies and a combined reported group revenue of €43.6bn. Vodafone has around 92,000 staff, with those numbers set to grow following the purchase of four assets from telco Liberty Global in July – the acquisition of which the supply chain management (SCM) department has been involved with from the get-go.
Wilson, who is named on the CIPS Procurement Power List, is particularly proud of the digital control room his department now uses to oversee the company’s global spend. It’s an incredibly powerful system that affords them daily updates at a glance. And it’s a system that shows he is leading where many plan to follow – to embark on a digital transformation of their own procurement processes.
Wilson is also enjoying life in a multicultural country, working for an international business, and lives close enough to work to pop home at lunch to feed his dogs.
Crunching the numbers
As of the end of June, Vodafone Group had approximately 640 million mobile customers, 21 million fixed broadband customers and 14 million TV customers, including the customers in its joint ventures and associates. It also has more than 85 million mobile phone SIMs connected to its Internet of Things (IoT) platform, including its Enterprise customers and also its own Consumer IoT customers. That staggering roll call of numbers means the group isn’t far from being able to claim that one in every 10 people in the world is a customer.
Consequently, the procurement department covers a massive expenditure. The group spends around €25bn a year with key partners, just under €500m a week – and it’s the job of Wilson and his colleagues to ensure spend is optimised and maximised.
Expenditure is segmented: Technology, which covers, among other things, network infrastructure, fibre connectivity and media services; Commercial Services, which includes the brand itself, HR, fleet, travel and so on; and Products & Services, covering mobile phones, accessories, SIM cards and more. Additionally, the procurement company has some strategic partners outside of Vodafone for whom it provides procurement services.
Ten years ago, when the VPC was set up, it had just six people. Now the building houses 400 staff, most of whom are part of the 1,100-strong worldwide supply chain management (SCM) team. And the success of sophisticated digital initiatives driven by Wilson and his colleagues mean the vast majority of the group’s €25 billion annual budget is managed by and constantly being improved upon by the team at the VPC in Luxembourg.
“As of last year, about 83% of spend in Vodafone goes through our VPC, and savings performance through the function is at our highest level ever,” says Wilson.
Vodafone, like a number of companies, is now on its second iteration of its digital transformation, a journey about which Wilson issues weekly updates to the team. The aim is to create a sustainable competitive advantage for the company and be nothing short of the best digital supply chain management team in the world.
Let’s get digital
“When I took the CEO VPC role, I wrote to the management team and told them I wanted to end up with one version of the truth around all our key tools and metrics. I set the team the task of developing a full digital scorecard in four months. The day it went live, Nick Read, now group CEO, visited and we were able to walk him through it. We’ve since built on it with mapping and scoring.”
The advance analytics and predictive modelling produced by the control centre enables SCM professionals to identify bottlenecks or problem areas for extra attention, investment or training in order to further improve efficiency and compliance levels.
The system attracted the attention of the Wall Street Journal, which described it as “supercharging procurement with automation and AI”. And The Hackett Group, which VPC uses to benchmark its activities, has deemed its performance levels world class, and better in every single category of purchasing. The consultancy recognised the SCM control centre at its recent digital awards for its ability to act as an “x-ray big data machine which uncovers hidden inefficiencies in less than 10 seconds”.
To bring full transparency into how the procurement process is actually functioning and to boost efficiency and compliance, the control centre was built using technology from Celonis, an expert in process mining. Now VPC is successfully using AI and data visualisation to reduce time to market and cut procurement costs.
The group issues around 800,000 purchase orders a year and receives around five million invoices. Until fairly recently, a small team was collating data on approval rates and so on, but by the time that information was collected and reported it was already out of date.
Vodafone then undertook a project to build a new procurement system, utilising artificial intelligence, machine learning and robotic process automation to simplify routine tasks. The system crunches through masses of bytes of information and little red dots on a flow chart track precisely where POs have got stuck or delayed. Four data scientists based in India then flag bottlenecks to the team in Luxembourg, which leaves procurement staff to spend time on higher value tasks, such as a strategic sourcing and negotiating.
The result of this system means perfect purchase order rates have jumped from 73% to 96%, and cost per PO is down from €2.7 to €2.36, with a year-end target of €1.86. Catalogue ordering is high and the quick identification of any problems is reducing time to market by 20% and has cut procurement costs by 11%.
It is also achieving the ‘single version of the truth’ that Wilson wanted: all the group CFOs and supply chain colleagues can see the metrics.
“Powerpoint has gone for monthly performance reviews. Data is accurate to the day, so we can look at the tool and see which countries are ahead, which are on target and which we need to take remedial action with.”
The individual countries collaborate to demonstrate how they’re using the system to best effect and a healthy level of competition has been created between the various markets, which all want to be number one.
“It’s super clear, there’s no debate left on numbers and no excuses,” he says. And that goes for him too – it is numbers in the control room that his boss, group CFO Margherita Della Valle, uses to judge performance.
The system also now tracks the contracting process, using electronic signatures to cut sign-off from five weeks to two or three days. And, more recently, Wilson tasked the team with putting all the inventory online, a project that so far has proved successful.
But not everything in the digital transformation journey has gone smoothly. The team was disappointed with some early attempts at machine learning, so promptly closed that project down and moved on. Work to put category management processes online so they could be jointly developed were perhaps premature, and a switch to electronic business cards was abandoned after a failure of adoption.
Learn and move on
“It’s key to have a culture where we can try things and it’s okay to fail so long as we learn from it and it’s contained. I don’t want everything to fail every week, I’d like to succeed at six or seven out of 10 projects. Procurement is traditionally a conservative department, but we’re on the step of this massive digitisation of everything we do, so it’s time for us to step forward and take some more risks in a managed way.”
AI and contract drafting
The plan is to run more proof of concepts for digitisation of the contract drafting process, using AI to scan for which clauses are negotiated over most and which most frequently deviate from standard terms. The company is also starting to use AI to lift KPIs from contracts to create performance dashboards that can assist with the managing of deals. And it plans to have the end-to-end sourcing process integrated in the tools so it can have full oversight of it – how quickly suppliers and new catalogues are set up, for example.
But beyond the ongoing digital transformation of SCM, which is part of a company-wide journey, Wilson and the VPC are considering other projects they would like to get stuck into.
“There is a whole theme around ‘procurement with purpose’. We’ve done a lot of great work on health and safety here, but what else should the procurement functions be looking at over the next one to three years? There’s a huge amount we might want to think more about around plastics, energy, recycling, the environment – we want to get into this in the next 12 months. We align very strongly with the company’s values, and the company has strong values around purpose.”
But to get to that other work you’ve got to do the basics fantastically well. I always say to the team if you want to do innovation and all those other great things, you must be operationally fantastic, hence the control tower. You must deliver your procurement benefits every year and you can’t argue about it and you’ve got to keep delivering ever year. As soon as you don’t deliver what you say you’re going to do, you lose all the right to look at all those other areas.
“When I do my objectives with my boss Margherita, she just expects the procurement savings. She expects me to come up with three or four transformational objectives that help the company be successful. Procurement savings now are a given, operational excellence now is a given. It’s about what else you’re doing to support the company.”
He keeps the team grounded with his persistently conservative estimate of VPC’s performance. “If anybody ever asks me, I rate us about six out of 10, even if we have a score that’s higher – as soon as you say eight or nine out of 10 you start to become complacent. On a good year we’re 6.5, on a bad year we’re 5.5. The leadership team we have here at the VPC is wonderful, it’s a really good mix of people from different cultures and perspectives and we have the ‘let’s try to be excellent mindset’.”
Wilson sees his job as relationship management with key vendors and partners. “Some people want to be the ‘super tough procurement person’, but you have to consider whether that gets you more or less value in the long term.” Despite living abroad, he retains his Scottish identity. “I do have some fun with some [of his team] and say ‘if we don’t get this done, I am going to get a ‘little bit Scottish’ and then I usually send them a picture from Braveheart to explain what I mean.”
And he’s incredibly passionate about Vodafone. “I love it. You see the impact it can have on people’s lives. Whether that’s educating women in refugee camps [a target to educate five million women through the Vodafone Foundation has now expanded to improve the lives of a billion people by 2025] or things like bringing the IoT to life, we’re one of the leaders if not the leader in the world. And all of those technologies combined with consumers plus businesses, means it’s a great sector to work in. And the brand’s not a bad one!”
Strength in difference
The company already benefits from a multicultural workforce, but it’s working to boost the number of women in senior positions, create an inclusive environment for LGBT+ staff and suppliers, and support start-ups. Almost half of Luxembourg’s population is made up of foreigners (48%), from 170 nationalities. Wilson values the cosmopolitan environment and the chance to work with so many Vodafone teams across the world.
“By our nature we’re quite a diverse company and we’re working hard to be more inclusive. Now we’re looking at LGBT+ and I’m fortunate enough to be the group executive sponsor. My job is to bring together the whole agenda so that our company values cascade through the different tiers of our organisation.”
Wilson was asked to take on the sponsorship role so he could also consider how to facilitate those values through its supply chain. “The top 10 companies we work with, for example, have a combined total of around 2.3 million employees, so if we help our supply chain to become more diverse and inclusive it will help make a difference.”
The company is actively supporting late-stage start-ups through Tomorrow Street, an innovation accelerator created in partnership with Luxembourg’s national incubator Technoport. “If you want to become a telco that’s more digitally focused, you’ve got to try different things. That cultural shift for SCM is important and means adapting how you work with people, how you coach and give instant feedback. For a lot of traditional companies that’s quite a hard thing to change.”