Centralised procurement will help the increase value via strategic sourcing ©Getty Images
Centralised procurement will help the increase value via strategic sourcing ©Getty Images

BT’s procureco hits the strategy hot spot

14 May 2021

The telecom company’s new centralised procurement business straddles the UK and Ireland to secure global connections

It is a quandary that will be familiar to many larger businesses – to centralise procurement spend, with the efficiencies that involves, or give departments flexibility to make their own decisions. BT has become the latest business to conclude that a standalone procurement company (or a procureco) will revolutionise its strategy, and for CPO Cyril Pourrat it marks the culmination of a personal mission.

Dublin-based BT Sourced made its debut this year, two years after Pourrat joined the UK’s largest telecoms business from US giant Sprint and hot on the heels of a new ‘digital procurement garage’ which will help the business ‘co-create’ with suppliers and partners.

This follows the example of rival Vodafone, which since 2008 has run procurement for all 24 of its operating companies from its Luxembourg-based Vodafone Procurement Company, managing over 83% of overall spend and dealing with more than 10,000 suppliers.

Efficient communications

The imperative for BT is “better value creation through strategic sourcing”. But the business is also at a financial crossroads – having spent £12bn upgrading its broadband network, BT wants to reduce its UK locations from 300 to just 30, and is facing the heat from unions, which expect job cuts to its 120,000-strong workforce.

It has struggled to keep up with nimble rivals in recent years and is on a drive to save £2bn across its operations by 2025. Pourrat, however, is optimistic. “We have made real progress over the course of the last year, particularly with the category boards, savings framework and digital ecosystem that I have put in place,” he told Supply Management. “This gives us a strong starting position for BT Sourced where I’m expecting to see strong results in our first year of operations.”

The fear with centralisation, of course, is that while it may achieve efficiencies, it removes the ability to make localised decisions when one size does not necessarily fit all. But Pourrat says BT Sourced will “modernise and simplify the way we do business”, arguing that having a procurement arm in a different country has been proven to increase effectiveness, with the procureco able to work closely with key suppliers. “We can share more information and work together to find new efficiencies,” as well as working on innovations, he adds.

Access to markets

Brexit and the global network Self-service tools will make procurement more agile and simpler to engage with, while the business says it is already deploying AI, robotics, blockchain, deep learning and machine learning to improve efficiency. “These new platforms are giving us the insights to make fast, data-driven decisions that benefit everyone throughout our supply chain,” says Pourrat, adding that it “gives us the perfect entrepreneurial environment for trialling the latest tools, and for collaborating with developers to bring new concepts to market in a quicker, more bespoke way.

“[AI] can drive insights from our spend, PO and contract data all the way through to using it to automatically map out the tiers in our supply chain and locate the various factory locations of the suppliers”. And, of course, locating BT Sourced in Ireland is a smart way to sidestep some of the potential problems Brexit might cause when it comes to talent availability, though Pourrat is too diplomatic to say so: “As we’re a global organisation, there is also the potential for talent in the rest of the EU and further afield to relocate and join us.” The direction of travel, then, is clear – and plenty of other FTSE 100 businesses will be watching to see whether it pays off. 

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