Paul Joesbury, CPO at Chesapeake spoke at the CPO Event September 2013

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Transforming Procurement to
improve Purchasing and
Supply Chain Effectiveness -
The Project
Paul Joesbury
CPO – Chesapeake Packaging
Researcher – ASTON UNIVERSITY
Ast on Un iv e r sit y

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What is the PEPPS Project
• The PEPPS Project is a study into the key determinants of
success in the transformation and development of
Procurement organisations
• It is a collaboration between academia and industry, and forms
part of a DBA Programme undertaken by the lead researcher
• It aims to determine an approach that allows the effective
focussing of resources on specific activities that have a proven
correlation to results
• It will enable a root cause analysis and corrective actions to
failing procurement transformations
(Procurement Effectiveness in the Public and Private Sector)
Ast on Un iv e r sit y

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Why this is important…
• Procurement and supply chain effectiveness is critical to the long
term viability of any organisation
• Companies / Organisations often spend large amounts of money on
Procurement Initiatives – is it spent wisely?
• Public Sector organisations spend your taxes! – Spend inefficiency
results in less money being available for activity that improves
outcomes
• Procurement and Supply Chain are (only now) becoming recognised
for the potential contribution an effective programme can make –
Why do we feel that we need to constantly justify our existence!
• There are still too many programmes that don’t deliver to
expectations – resulting in questions over the professions role in the
organisation
• World class procurement can deliver savings of between 6 – 10% on
influencable spend
Ast on Un iv e r sit y

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Background Research Method
• Builds on activity and experience
in different industries
– Automotive (OEM + 1st tier)
– Aerospace
– Public Sector
• Phase 3 and 4 – Longitudinal
Study within Chesapeake
Packaging
• A “Mixed Methods” approach
• Builds on research into team
effectiveness:-
– Cranfield, Loughborough &
Aston Universities
– TRW, GKN and Arup Industry
Partners
Phase 4
INTERVENTION
Perform an
Intervention
Phase 5
ANALYSE /
CONCLUDE
Analyse and
Confirm findings
Phase 3
“AS-IS” ANALYSIS
Determine the base
level
Phase 2
CONFIRM /
DEVELOP THE
MODEL
Ensure correct
elements have been
included
Phase 1
DEFINING SUCCESS
Determine what
constitutes successful
procurement
Ast on Un iv e r sit y

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Chesapeake Packaging - Company Overview
• Global producer of specialty
packaging
• Sales ~ £500m
• ~40 facilities worldwide:
• European leader in paperboard
packaging
• 4,700 Employees
• Private Equity backed – The
Carlyle Group
• Strategic Sourcing transformation
programme Launched 2011
Ast on Un iv e r sit y

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The nature of Chesapeake's supply chain
• Multiple customers, Multiple
industry sectors, multiple
customer delivery points
(~4000)
• 1.8 billion items supplied each
year
• 3,400 CSK products used
every minute / every day
• >2000 potential board
combinations – (board is often
customer specified)
• ~9000 ink and varnish
combinations
Ast on Un iv e r sit y

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The Procurement Effectiveness Model
Ast on Un iv e r sit y

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Compelling case
Research Findings
• A compelling “need” to make
the change e.g.
– Significant Funding issue
– Threat of bankruptcy
– Significant cash issue
– A new way of working
• Chief Executive active support
– Active involvement and
interest
– A “must support” initiative
Chesapeake example
• Owners and new CEO had
identified the need to transition
from a “Traditional” to a
“Strategic” purchasing and
Supply-chain function
• CEO personally involved in
pushing the initiative forward
Establishment of an “Executive
Steering Committee” involving all
key senior management
Compelling Case
Competency
Effective Strategy
Communication and
Network
Governance
Ast on Un iv e r sit y

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Competency
(of the organisation and people involved)
Research Findings
• Company and Individual
• Key competencies identified :-
– Drive for Excellence
– Influence and Communication
– Leadership and team-working
– Concern for order and detail
– Commercial intuition
• Mental capability
– Psychometric testing
• Verbal reasoning / Numeric Reasoning
• OPQ / Personality profiling
Chesapeake example
• Team established, Initial
assessments performed
• Assessment centre process
adopted
• Some people identified did not
make the grade – fell out of the
process
• Changes made to category
management team structure
• Resultant team is relatively young
and inexperienced (although with
good potential)
Compelling Case
Competency
Effective Strategy
Communication and
Network
Governance

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Effective Strategy
Relationship Management
Peter Kraljic (1983)
Steele and Court (1996)
Customer View of Supplier
Supplier View of Customer
Compelling Case
Competency
Effective Strategy
Communication and
Network
Governance
LEVERAGE STRATEGIC
ROUTINE BOTTLENECK
BUSINESSIMPACT
SUPPLY MARKET CHALLENGE
GROWTH CORE
NUISANCE EXPLOIT
ACCOUNTATTR RELATIVE VALUE
Ast on Un iv e r sit y

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Effective Strategy
Total acquisition cost
Compelling Case
Competency
Effective Strategy
Communication and
Network
Governance
Identification of Need /
Demand planning /
Spec Management
End to end
Supply-Chain
Solution
Make vs Buy
Internal + associated cost of doing business
Adapted From Lucas Aerospace Strategic Sourcing Programme
“Boundary-less Procurement”
Improve
Specification
Restructure
Relationships
Consolidate
Spend
Increase
Com
petition
Restructure
SupplyBase
Reduce
Consum
ption
Optimise Total
Supply Chain Costs
Reduce / Eliminate
Transactions
The Cost of Doing Business
Dem
andandSpecification
Management
SupplyBase
Managem
ent
Reduce Total Life cycle
/ Ownership Costs
Quality
Cost
Delivery
Cash
Innovation
Ast on Un iv e r sit y

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Effective Strategy
End to End Supply Chain Management
Compelling Case
Competency
Effective Strategy
Communication and
Network
Governance
CustomerCustomer
Supplier’sSupplier’s
SupplierSupplier
Goods
&
Services
Knowledge
Knowledge
Data
&
Information
DAYLIGHT
HolisticII
(H2)
Upstream
Category
Management
Downstream
Category
Management
SupplierSupplier
ReplenishmentReplenishment
Supply AvailabilitySupply Availability
Total Supply CostTotal Supply Cost
Risk ManagementRisk Management
InnovationInnovation
Lifecycle CostLifecycle Cost
Market DevelopmentMarket Development
Problem SolvingProblem Solving
Goods
&
Services
Data
&
Information
Ast on Un iv e r sit y

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Effective Strategy
Integrated Supply
Compelling Case
Competency
Effective Strategy
Communication and
Network
Governance
Ast on Un iv e r sit y
CUSTOMER
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier Supplier
Supplier
Supplier
Supplier
Supplier
Supplier Supplier
Supplier
Supplier
Supplier

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Effective Strategy
Integrated Supply
Compelling Case
Competency
Effective Strategy
Communication and
Network
Governance
Ast on Un iv e r sit y
Integrator Supplier
Supplier
Supplier Supplier Supplier
SupplierSupplier
Sub
Supplier
Sub
Supplier
Sub
Supplier
Sub
Supplier
Customer

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Communications and Network
Research Findings
• Clear objectives
• Agreed process for the
achievement of objectives
• Informal network is powerful in
terms of achievement of
objectives
• End to End supply - chain visibility
• Effective Marketing
– Although care on expectation
management
– Language in important
• Ongoing stakeholder comms
• Good Data is essential
Chesapeake example
• “Policy deployment plus” process
implemented
• Developed better links to customers
(Daylight)
• Implemented Sponsor / Mentor
approach between category
managers and senior exec team
members
• Quarterly Exec review of
programme
• Significant investment in Data
Infrastructure
Compelling Case
Competency
Effective Strategy
Communication and
Network
Governance
Ast on Un iv e r sit y

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Governance
Research Findings
• Programme requires a robust
method of calculating savings that
is independent of the procurement
department
– Improved credibility / reduced
cynicism
– Direct link to finance
Chesapeake example
• “White-Book” savings governance
process implemented
• More structured project
management systems in place
• Senior Finance manager
assigned as programme controller
• Monthly “White-book” reviews
• Finance sign off on savings
• Exec forum is a powerful support
mechanism
Compelling Case
Competency
Effective Strategy
Communication and
Network
Governance
Ast on Un iv e r sit y

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Summary
0
2
4
6
8
10
Compelling case
Competency
Effective Strategy
Communications
and Network
Governance
• Significant improvement to savings
delivered
• Significant improvement to the buy-
in around the organisation
• Significant improvements to Cash
and Working capital
• Significant improvement to
procurement staff morale
• Improved ability to meet customer
requirements
• More creative supply-chain
solutions / Value add services
• Better risk management
• More focused and coordinated
approach
Procurement and supply chain have moved from being
a business “bystander” to an integral part of the
decision making process
Ast on Un iv e r sit y

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Next Phase
• Living TAC…..Integration of Group Technical
and R+D functions within the activity
• Procurement function development into a profit
centre through the identification of additional
value added services to its customer base
– Purchase BPO for Packaging
– Integrator Supplier concept
– Category Management as a service
Ast on Un iv e r sit y

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visit our website at:
www.chesapeakecorp.com
Thank – you
If you want more details, or want to be part of
the PEPPS project research then please e-mail
me on :-
joesburp@aston.ac.uk
paul.joesbury@chesapeakecorp.com