In conversation with Alfred Aloysius – Asian Procurement Part 2
Our latest initiative, CPO Diaries – ‘Conversations in Asian Procurement’ aims to publish a series of interviews conducted with well-known Procurement Practitioners from the region, who lay out the vision for their function while detailing out the best practices they have implemented along the way.
In this dual-post series we bring, Alfred Aloysius, Director – Strategic Sourcing, SMRT Corporation Ltd. to share his expertise and ideas.The previous post saw how SMRT is transitioning from a tactical to strategic organization and what are the top 3 goals and challenges the procurement team faces.
ZYCUS: What performance benchmarks have you set and are there specific metrics you track to measure performance?
ALFRED: Let me share a few targets with you: In terms of cost reduction or cost avoidance, we are trying to improve our current performance fourfold and an ambitious stretch target doubles that. We are also trying to improve our purchase order (PO) cycle time by about 30% from current performance. Finally, we are targeting 95% satisfaction levels in terms of service delivery for our internal customers. For suppliers, we are looking at their delivery times, which is a critical aspect for a company that is in the business of providing public transportation.
ZYCUS: How do you identify your key suppliers? How do you measure them? What kinds of initiatives do you take to improve your relationships with suppliers?
ALFRED: We categorize our suppliers depending on criticality as well as maturity stages. For example:
- We look at spend and divide our priorities according to spend totals.
- We also identify strategic suppliers based on the kinds of items they supply. Some of these vendors may be proprietary and demand very long-term relationships. For example: We buy buses that will be in service for some 20 years; trains will be in service for some 35 years.
ZYCUS: What tactics do you employ to make sure that costs don’t simply transfer from SMRT’s books to your suppliers’ books?
ALFRED: Our negotiations with suppliers depend on their strategic importance to us. We don’t necessarily push them on price. Sometimes, we push them to improve their processes in order to yield better delivery times; at times, we sign longer-term contracts with them. Our negotiations may also revolve around payment terms that directly affect cash flows.
In essence, the value is not necessarily always based on price. It can be a host of other measures that may directly or indirectly affect our savings targets.
ZYCUS: How does the senior management ensure that procurement managers, buyers and agents understand how their activities tie into the overall vision and business performance of the organization?
ALFRED: At SMRT, we do place an emphasis on developing a high-performance and people-oriented workforce, as this is vital to us for achieving our business objectives. We build upon and strengthen our service culture and capabilities whilst ensuring that every employee enjoys meaningful work in an enabling, professional environment. As an organization, we have developed KPIs that enable everyone to work towards our business objectives.
We also reinforce our vision and goals across the procurement team. Whether you are a CPO or a manager, none of our team members lose the focus from the big picture even as they continue to handle tactical and transactional activities. In fact, our managers need to keep an eye on tactics to ensure they are always aligned with and correctly interpreting SMRT’s strategic vision. This may be easier for us to accomplish as we are a flat organization. The two levels – strategic and tactical – interact often.
We also have a very strong feedback mechanism in place wherein each individual buyer knows how he or she is performing and, more importantly, how our senior personnel can contribute to further the professional growth and development of our buyers. We review KPIs together on a monthly basis and look at each buyer’s hits and misses. This review allows individuals to better their productivity and performance while achieving business objectives.
ZYCUS: Thanks Alfred for your valuable insights. We are sure the vision and the roadmap you have outlined in this interview will prove to be helpful to a number of other organizations from all over Asia.
Do share your comments below.