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Procurement Operating Models: Independent Procurement Company

Procurement Operating Models

Many have dreamt of creating an independent and centralized procurement company


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Excerpts from Detlef Schultz & Thorsten Martin Schiefer:

Creating a single procurement center requires both time and a solid framework

DETLEF SCHULTZ: In 2003, we started to call our department global supply chain management. This department had the responsibility to coordinate, and the important part here is coordination, the activities in procurement across Vodafone.  We focused firstly on creating an operating engine, a frame around our activities.  We installed a spend analysis too because we didn’t even know where we spent the money, or how much money we spent on who. 

We implemented a supply performance management system.  We installed an e-sourcing platform across entire network deployment programs, and over time, we moved into global framework agreements on behalf of our operators across the globe.  In 2008, we said, would it not be great if we were not just one organization, but if we also had one procurement center which acts on behalf of the operating companies, and that is how the procurement company was born.

Inclusiveness with stakeholders enables confidence and security

The small operating companies were all in favor of doing this because they got additional leverage.  The larger operating companies had to be convinced where the value for them is.  To enable us to get everybody on board, we were extremely inclusive, so we had what we called accelerated solution design workshops into which we invited all members of the community, the heads of the procurement companies across the globe, there we defined and designed the scope and also the processes of the new organization, including the procurement company.

Governance structure is key to ensuring support from the operating companies

When it comes to the question, what is the procurement company doing, and what stays in the local operating companies, we have a solid governance model in place by which our supply chain leadership team discusses business cases for migrating volumes into the procurement company, and the members of the leadership team are the hub heads, as we call them, of our procurement departments.  If they sign off, migration goes, and it’s supported by the operating companies.

Support and trust is needed to manage scope and objectives

So I have to admit that you cannot do this on your own. You cannot create an operating company like ours, the procurement company out of an ivory tower, so you logically need executive support in setting up the procurement company within a larger company. Changes to the culture requires a lot of support from your stakeholders across the company, whether it is in technology, or whether it is in the operating companies, or whether it is in HR, because after all, you move an entire organization to another location, etc.  Second lesson learned, in the beginning, we did a lot of service level agreements with our operating companies to ensure that they are satisfied with what they get as service.  We have abandoned this after one year because we had built a level of trust which made it unnecessary to fill out service level agreements, so if I were doing it again, I think I would not go into the area of service level agreements within one company, but create a level of trust which allows you to manage across the company and agree with each other on what the goals and objectives are.

Success has enabled growth opportunities to become nearly unlimited

The Vodafone procurement company keeps growing, and the Vodafone procurement company keeps innovating processes which distinguish us from our competition.  I’m convinced that, in three further years, we’re at €15 billion, and then we keep going, and as I said earlier, there is such a large opportunity pool across our partner markets that the growth rate across the company, for the procurement company, is unlimited nearly.

Strong foundational structure and an entrepreneurial spirit has allowed Vodafone to achieve what others only dream of


I think if you are looking at the Vodafone procurement company, I think it is a really good example of making things real. At KPMG, we are working for a lot of procurement companies, and for a lot of CPOs, and I think there are a lot of guys who are dreaming of having their own procurement company, but at the end of the day, I think here we have got a very good example of making a dream real.  On the one hand, I think the guys had very good support by the top management.  On the other hand, there was a very clear structure, a very good strategic plan, and today we are here.  This is a real company working in nearly 10 billions of scope, and I think they are working globally with a very experienced team.  I think they made a dream come true, and I think the main reason for it is entrepreneurial spirit.

About Detlef Schultz, Vodafone

Detlef joined Vodafone in March 2003 to lead the Global Supply Chain team. His responsibilities include strategic and operational leadership of Vodafone’s Supply Chain Management across the globe in the areas of Technology and commercial Services. Detlef also leads the Luxembourg-based Vodafone Procurement Company, which is the strategic purchasing centre for the Group and now serves third parties.

Prior to Vodafone, Detlef spent more than 6 years in California with the world’s largest semi-conductor equipment manufacturer, Applied Materials where he held various Supply Chain, Planning and Operations Management responsibilities. Before moving to the US, Detlef was a Member of the Board of Management for Babcock-BSH AG in Germany where he led the area of Supply Chain Management and financial controlling. Detlef also worked for Siemens for ten years, more latterly as Purchasing Director based in Bocholt and Kamp-Lintfort, Germany.

He started his Supply Chain career with Siemens in 1985 in the area of Materials Management in Germany, Korea and Singapore.

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