Creating a World Class Procurement Organization by Managing the Nuances of Retail Spend
Home Retail Group comprises of some of the UK’s most recognisable retail brands:
- Argos: UK’s number one retailer for toys / small electrical appliances.
- Homebase: UK’s second largest DIY retailer, and the leading provider of Home Enhancement products.
- Habitat: An iconic blend of household furnishings with a strong digital presence.
Starting Out With a Centralised Procurement Operating Model
In 2005, Home Retail Group was the first Iasta, a Determine Company, client in the UK to roll-out Iasta SmartSource, jumpstarting their journey to becoming a world-class procurement organisation.
Home Retail Group formed a centralised eSourcing team that delivered over 1000 projects to source goods/services of more than 80,000 merchandise products (GFR) to customers. The centralised team also managed events to source non-merchandise goods/services (GNFR), from pallets in the distribution centres, to gas and electricity supplied to all of their worksites.
While Home Retail Group grew in the diversity of their spend with three recognisable and distinct brands, having only one team to manage both merchandise (GFR) and non- merchandise (GNFR) products was challenging, as it called for a more flexible process to address the uniqueness of non-merchandise spend.
Shifting to a Hybrid of Centre-Led and Centralised Procurement Models
In 2011 Home Retail Group moved to change its Procurement Operating Model (POM) by creating two dedicated eSourcing units within their Group Procurement and Group Commercial Departments.
Moving away from the old structure of a merchandise team that occasionally ran GNFR projects, Home Retail Group divided the centralised team into two teams:
- GNFR using a Centre-led model
- GFR using a Centralised model
Within GNFR, the number of suppliers is nearly three times the size of the GFR supplier base, with a large number of low value contracts. The centre-led model complimented the uniqueness of GNFR spend and required the management of hundreds of sub- categories, often requiring deep market knowledge and flexibility of how the process could be applied accordingly.
Home Retail Group’s use of Iasta SmartSource has provided greater transparency within the procurement process. With the eSourcing team often being the only point of contact during the online phase of sourcing projects, Iasta SmartSource creates a fair and equal process, consistency of message, project policy flow, and ensures all suppliers have access to the same information.”
eSourcing Manager, Home Retail Group
Greater Transparency and Governance Within the Procurement Process
Technical expertise has created the opportunity for continual process improvement and ensures Iasta SmartSource is always used to the highest of its capability. Additionally, specific category alignment for Home Retail Group members within the eSourcing teams has enabled procurement to become champions of the process and software, fine-tuning projects to suit each spend category and tailoring projects even closer to stakeholder requirements. Separating GFR and GNFR ownership resulted in the following benefits:
Centralized approach used within GFR
Taking a centralised approach for the merchandise team ensures the final result of the sourcing event for direct spend delivers the total value proposition. Home Retail Group considers this approach as a step away from the traditional “price” auctions and towards a “value” auction model.
A centralised team dedicated to GFR has increased knowledge and focus on merchandise spend for managing the nuances of which supplier to partner with outside of price alone. Today, Home Retail Group uses Iasta SmartSource to factor in lead time, shipping time, RTM agreement, terms, rebate, product quality and sustainable supply.
Centre-led approach for GNFR
Given the large number of contracts and suppliers within GNFR spend, a broader, more flexible approach was needed for managing contracts. Today, 100% of Home Retail Group’s spend is mapped within the IS department enabling them to utilise real category management and track all upcoming exposure. Additionally, they have varying levels of contract coverage across different categories, but since contract management is only mandated in IS, procurement has between 50%-80% coverage across all other categories.
Today, all GNFR contracts are added to the database and triggers are set for one or three month reminders. In addition, each contract owner within the procurement team has the widget set up on their Iasta dashboard to quickly show upcoming expiring contracts within the next period.
Overall, a hybrid centralised / centre-led approach combined with the use of Iasta SmartSource Sourcing and Contract Management has provided greater transparency and governance within Home Retail Group’s procurement process.
The two approaches enable the teams to specialise within their respective areas, increasing opportunity to increase leverage and reduce costs. The teams regulary meet to consolidate learnings and process improvements, maximising the opportunity to increase leverage and reduce costs. In addition, this “centre of excellence” model has resulted in new opportunities, enabling the team to double spend throughput year-on- year since 2011.
Our eSourcing teams act as a final sign-off gateway before tenders are published. This creates a streamlined process and a clear governance of the information published to suppliers and maximises our results.”
eSourcing Manager, Home Retail Group