Training - Contract Management
Let’s be frank – contract management isn’t the most exciting aspect of procurement. After all, who likes paperwork and minutia? Most people don’t. For those in the earlier stage of their career understanding legal jargon can be daunting and negotiating the contract with the supplier, harder still. More experienced professionals might not have even been taught this core skill properly and, with a desire to focus on more exciting activities, try to steer clear of contracts whenever possible.
Robust contracts are a key tool to manage your suppliers and minimise risk. So, like them or loathe them, you need to be good at them. Following some simple steps and with a bit of practice, I’ll show you that contract management isn’t nearly as arduous as you might think.
If you’re a Head of Procurement or Procurement Director you might have different needs. Perhaps you’re unhappy with the low level of spend under contract, the poor accessibility of contracts or that the full contract value isn’t derived. As a Procurement Director I’ve had this challenge myself and have some god ideas of how to help you.
Training - Contract Management
Let’s be frank – contract management isn’t the most exciting aspect of procurement. After all, who likes paperwork and minutia? Most people don’t. For those in the earlier stage of their career understanding legal jargon can be daunting and negotiating the contract with the supplier, harder still. More experienced professionals might not have even been taught this core skill properly and, with a desire to focus on more exciting activities, try to steer clear of contracts whenever possible.
Robust contracts are a key tool to manage your suppliers and minimise risk. So, like them or loathe them, you need to be good at them. Following some simple steps and with a bit of practice, I’ll show you that contract management isn’t nearly as arduous as you might think.
If you’re a Head of Procurement or Procurement Director you might have different needs. Perhaps you’re unhappy with the low level of spend under contract, the poor accessibility of contracts or that the full contract value isn’t derived. As a Procurement Director I’ve had this challenge myself and have some god ideas of how to help you.
Course Prospectus
Procurement Adventurer®
Dan Plimmer
Intro
I first met Dan in 2007 when he joined the Procurement Team at innocent drinks and when I moved to pastures new in 2011, I was delighted to hand the reigns over to someone as capable as him. Dan went on to hold senior buying roles at Sainsburys. Since 2019 he has been the Head of Procurement at Huel, one of the leaders in the plant-based revolution.
If there’s one person I like to discuss all things procurement with, it’s Dan. He is fascinated by understanding where his materials come from and why they cost what they do. Typically, we’d prefer to meet on our bikes, but with Covid-19 lockdown we had to settle for a virtual beer – an Estrella for Dan and a Corona for me.
How did you get into Procurement?
My career started at Tesco as a retail buyer in the meat, fish and poultry category. This gave me an excellent grounding in commercial acumen, but I realised I wanted to practice a different type of procurement with a connection right back to origin. If the price of tuna had gone up 20% from the week before, I wanted to understand why and how I could influence this. Innocent’s hunger to understand every aspect of the supply chain right back to banana plantation, strawberry field and mango orchard gave me this connection – it was a more sophisticated approach to procurement compared to my retail experience. Furthermore, innocent’s vision and purpose and emphasis on sustainability were so compelling to me personally. This exciting period sourcing fruit cemented my passion for procurement.
What have been the highlights of your procurement adventure?
Behind every product or material I’ve bought, I always find there’s a unique story of how the business began. There might have been a flash of genius although often it’s pure determination to overcome the many trials and tribulations of getting off the ground. Often it’s the people who make the biggest impression. I’ve met some great characters – Peter Dreher, a leader in apple juice production in Germany really stands out for his vision and commitment to make the best quality apply juice possible. Sometimes it’s the sheer scale, for example seeing the Brazilian orange industry up close – row upon row of orange trees – on the one hand impressive; on the other concerning to see pure monoculture. I’ve worked with some great people along the way. Rozanne Davis, Technical Director of innocent, is a great example. On one trip to Poland she took me to inspect strawberry production at 2am in the morning. She had a meticulous eye for quality and she taught me all about refusing to compromise on our standards. She was also a great fan of getting off the phone and into the field, rolling up ones sleeves to see it and judge it as it is.
To join a young SME like Huel has been inspiring. There is so much scope to make things happen with huge ambition to match.
"What runs deep is our ambition to change the way the world thinks about food ."
Huel is at the forefront of the plant based revolution - tell us about their exciting mission
We’re really clear about our mission at Huel: to make nutritionally complete, convenient, affordable food, with minimal impact on animals and the environment. This comes to life across our product range, from our original powders through to our ready to drink products. What runs deeper is our ambition to change the way the world thinks about food – there’s plenty of evidence that things need to change to make sure we can keep feeding a growing global population, and that it can’t come at the expense of poor nutritional, environmental or social outcomes. One of the big factors which attracted me to Huel in the first place was the opportunity to be part of a business that wants to succeed in the traditional sense, and to do this by contributing to solving some of the world’s most pressing problems in a meaningful way. We’re also very lucky to have some amazing materials to work with. For instance, milled flax has a great story behind it and being at the cutting edge of the plant-based revolution makes it all the more exciting.
How can Procurement help deliver a company's sustainability agenda?
Sustainability is a hot topic at Huel and we’re no different to lots of other businesses in that regard. I think Procurement has a pivotal role to play when it comes to 'walking the walk' though so many pledges or initiatives actually depend on the actions of suppliers and supply chain partners, so the business making the commitment is often not in direct control of the inputs required to actually deliver on that commitment. Procurement therefore can make a real difference, be that incorporating sustainability requirements into up-front supplier selection or award criteria (much like having enough stock available or being competitive on price), to influencing suppliers to tailor their own sustainability activities to suit the buyer by leveraging spend. The natural pitfall is prioritising cost and availability, the two cornerstones of procurement value creation, ahead of sustainability. So the sooner sustainability is built in as a baseline requirement the better.
Drawing on your knowledge as a meat and fish buyer, how do you see consumer eating habits changing over the coming years?
My last grocery retail job was in dairy, looking after cheese, desserts and chilled beverages. The category was at the sharp end of the plant-based revolution and we were already seeing tremendous growth in plant-based dairy alternatives. For instance, plant milks have been going through a real boom in terms of innovation and consumer demand – not so long ago the choices were limited to ambient soya or rice milks tucked in a dark corner of the store. Now the choice is almost endless - they’re right in the thick of the dairy aisle, and there are lots of interesting new brands with great stories and amazing innovation. When it comes to consumer habits it’s clear that people are finding ways to eat less meat and dairy products. Sometimes this is an active choice but it’s increasingly passive as people just seek out new and exciting foods to eat. Consumer knowledge of the impact of meat production is higher now than ever, and we also now have a huge variety of great tasting and exciting plant-based products available to us. Choosing reduced-meat or reduced-dairy meals isn’t a compromise any more, so I can only see the participation of plant-based products increasing in consumers’ baskets. Clearly food waste is another big driver of consumer habits, and that includes both the amount of food which goes in as well as the packaging which follows it. Increasingly we’re seeing retailers and brands respond to consumer sentiment by eliminating or light-weighting packaging, and by allowing people to buy just what they need. For all the above Huel is obviously really well placed.
Recently, I came across this book about mankind's love of meat and how consumer behaviour is changing. It's fascinating and well written
What are the aspects of procurement you find most rewarding?
I love learning about new supply chains and materials – the simple process of asking a dozen open ended questions to unearth what’s really going on and where the best value lies. Recently, I've spent time sourcing merchandise for Huel. It's totally new to me, technically challenging and having spent most of my career in food they are the first non-food items I’ve had to source at scale. At first glance the change in category was quite daunting, but I quickly realised that many of the core procurement principles still applied – having a really tight specification and creating a robust cost model proved to be key. And yes, I love doing a really good deal! It’s not a competitive thing for me resulting in, ‘I win; you lose’. It’s about coming out of a negotiation where I’ve created value for the business and I’ve justified my salary many times over, and I know that the deal works for the other party and they won’t back out or let us down when it comes to execution.
What has been the best procurement lesson you have learnt?
It comes back to the point I made about asking great open-ended questions and to never stop being curious – this is a simple technique but remains the most valuable there is. If you’re up front and give people visibility of why you’re asking the question, you’d be amazed at how much they open up. The odd time one finds the recipient of one’s questions has been economical with the truth. More often than not, they just haven’t thought the information is relevant, or maybe they’ve been concerned about how you might respond or use the information. I’ve learnt to build strong relationships with people, but in a balanced way in so far as maintaining a healthy cynicism about what I’m being told. Never feel you can’t ask the last question!
Sometimes Procurement can be looked down on by revenue generating functions like Sales. How can we position Procurement to play a pivotal role in a business?
On the one hand, one has to accept Procurement is not seen as the strategic driver of a company and we often need to justify our seat at the table. However, I would argue that Procurement has a pound-for-pound value creation which gives other teams a good run for their money! The beauty of Procurement is that for every pound we save on a material we put a pound onto the bottom line. I’m happy to acknowledge that marketing is crucial to growing and maintaining demand, but it isn’t always easy to demonstrate the ROI.
What’s more, a great procurement team can deliver value far beyond simple cost savings. With such a broad visibility across the business we can activate many value levers:
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Harnessing suppliers’ innovation and partnering with Product Development to deliver NPD
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Dialling down risk with the Technical Team
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Offering the Sales Team an improved specification for the same cost
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Avoiding cost at times of market inflation
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Flexing supply to ensure stable stock
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And as good project managers we can play a pivotal role at times of crisis
The last two points have been particularly relevant recently as we’ve faced into Covid-19!
"Procurement has pound-for-pound value creation which gives other teams a good run for their money!"
Talking about Covid, what lessons can procurement take that can help us prepare for Brexit?
I would see responding to Covid and Brexit as maintaining business continuity in the face of ambiguity and supply chain disruption. Procurement has to recognise that it requires rolling up ones sleeves and getting into the detail – there’s no substitute for understanding your risks when it comes to how you mitigate or eliminate them. On the face of it this might seem like a lot of effort for a one-off event, but you’d be surprised what other insights come out of an exercise which is notionally just to stress test supply chains - you might discover an extra step in a chain that could be removed to reduce cost or new insights about your suppliers’ capabilities. As with any risk management, the judgement is in deciding how much to address versus what to manage later in the event of an issue. It didn’t help last year that there was very little certainty about what type of Brexit we would actually have; to a large extent that uncertainty still exists.
How can we get more excellent professionals to join procurement?
Great question, and I’m often surprised at how often great people aren’t even aware of procurement let alone consider it as a possible career path. I think this might be down to the out-dated view that purchasing is just a service function, one to be kept away from the really strategically important stuff and often gummed up with process and bureaucracy. More recently it might be to do with the emergence of entrepreneurship and portfolio careers as preferred options for people entering the working population. I guess the answer to your question though has to come from raising the profile of procurement as a discipline, and making sure that it’s not seen as a one-way track but rather an area which can provide people with a great deal of transferable experience, perhaps more of a stepping stone and rite of passage to broader business leadership roles if that’s what they aspire to hold. I can’t think of many job types which offer the same breadth of commercial exposure, project management, influencing, long and short-term planning...the list goes on. As a general basis for understanding how businesses really work I think it stands alone, so making this clear to potential job seekers is really important.
Rapid fire
'Resource-Investigator' or 'Completer-Finisher'
Resource investigator
City Break or Epic Bike Ride?
Epic bike ride
Vanilla or Chocolate?
Chocolate
Book or movie?
Movie
Late night or early morning?
Late night
