Cushman & Wakefield's APAC supply chain transformation shows how procurement delivers corporate goal
The built environment is a great metaphor for globalisation. It's getting axiomatic to say that the great cities of the world are becoming more alike, and that if you were to be dumped at random in any one of them the buildings alone would not be a sufficient clue to where you were. Populations are migrating to these environments because this is where the industry, commerce and housing is all concentrated and as a result, cities are getting larger, sometimes exponentially as populations explode.
Global businesses have one thing in common – they need premises, offices, factories or shops. Another thing is that, totally dependent as they are on getting the working environment right, securing and maintaining and managing those premises is very unlikely to be their core business. They universally resort to the services of a specialist to source, negotiate and eventually manage their premises, whether these are rented, leased or owned.
It was in 1917 that J Clydesdale Cushman and Bernard Wakefield went into the real estate business together in New York. A measure of its success is the number of times it has been acquired by larger groups – most recently in 2015 merging with another long-established global real estate services provider DTZ, backed by the private-equity giant TPG to create a company in contention to become the world's largest company in its space. The strength of the Cushman & Wakefield brand is recognised in its adoption as the name of the new entity, which has an annual turnover of more than $6bn and some 45,000 employees. The year following the merger, 2016, saw the company transact over $191bn in deals and today it has a total of around 4.3bn sq ft of commercial property under management.
Cushman & Wakefield's clients include many if not most of the biggest global businesses, including the likes of Unilever, Nokia, Lego, Coca-Cola, Nomura, Zurich Insurance, Rolls-Royce or Shell Oil (for whom Cushman & Wakefield negotiated the largest office space lease in the world in 2011). It's also a truism to state that companies like this would not place a business-critical asset in the hands of a firm they did not trust implicitly.
The firm has a global policy, delivered through offices in 70 countries divided into major regions. Each of these offers nine core services in 21 sectors from airports to technology. Clearly the importance of each of these sectors will vary depending on the region, but all of them are well represented in the Asia/Pacific (APAC) business, which covers the burgeoning aspirations of India and Vietnam as well as the mature markets of Singapore and Australia and New Zealand (ANZ).
The merger with DTZ presented an attractive opportunity to Stuart Smith, a procurement professional with more than 15 years' experience in property supply chain leadership, when he was appointed to the job of Chief Procurement Officer (CPO) APAC, based at Cushman & Wakefield's Melbourne office. His role is to lead ANZ in procurement capability development as well as integrating APAC opportunities as part of the company's unified regional programme of procurement initiatives and maturing category strategies. It was a huge opportunity to overlook a very large regional spend. “I was also very interested in the ownership structure,” Smith says. “Being owned by a private equity firm meant that the whole organisation, not just procurement, was going through a transformation and a culture change. I could see that procurement would be a big part of that: I was keen to see how I could contribute to that journey.”
The company's brand reputation and relationships depend on the processes and partnerships it manages throughout its supply chain. “We see our vendors as strategic partners to our own success,” says Smith, as he introduces the transformation he is leading, with enthusiastic support from the APAC leadership and in line with global strategic goals. “This is about more than saving money. It is about trying to line up functionality with company strategy, as an integral part of our clients' success. If we don't manage our vendors well and help them understand what we are trying to achieve then the outcome is going to be detrimental to us. Seamlessness of expectations, transferred up and down the supply chain, is where I want procurement to go.” Leveraging people, processes and systems, aligned with Cushman & Wakefield corporate policy, is the way to achieve this, he says.
Digitising core processes
Technology is the backbone of efficiency in our times. While outputs and IP remain in the hands of the teams, technology is what drives the process. Cushman & Wakefield's global intranet is a powerful platform that carries all of the templates, vendor registration and compliance documents and other tools that help to automate processes that used to happen manually.
Smith obtained permission to replicate that portal, “Advantage” in the Australia network: “I wanted to find an effective means of communication to save our team being disrupted by phone calls and emails on a regular basis with the same question.
“The team is now able to focus on the delivery of new outputs and the development of new tools and products and commercial outcomes. I want them to be focused on developing vendor relationships on refining our panel agreements. To do that we need to give our category leads bandwidth. The account procurement teams can deliver client expectations in the field while our category strategy teams manage the whole client portfolio / vendor relationship. The technology advantage was key to the separation of roles, allowing our people to work more creatively.”
Spend cube analysis is another key enabling technology. This brings visibility to complex client requirements and expectations, allowing effective contract life cycle management and integration with the J D Edwards ERP platform. There's plenty of data available fed back from financial and operational communication in the field, but many systems still sit in isolation, Smith feels: analytics draw these together. He gives a simple example: “It's nearly impossible to compare, when asked, our rate per square metre against a benchmark figure without linking commercial with operational performance. No current system does that but without that link you can't benchmark reliably.” Benchmarking client commercial performance against varying scopes of works is an as yet uncracked nut but he has it in his sights.
When Smith came in to lead APAC in 2017, he found a procurement team with a strong desire to be at the centre of the change process but without a clear idea of the corporate goals. “My role was to bridge the gap by directing people towards the objective, articulating that objective to the business and the team, and then breaking that journey down into manageable phases.” Policies and procedure for APAC were, however, decided in conjunction with the global teams and the executive leaders of the business worldwide. Smith’s leadership role included making sure that his team had ownership of the journey, were clear about the objectives and that each of the three pillars, (People, Process, and Technology / Systems) advanced hand in hand, at the same pace.
The 'bite-sized' approach proved effective, for example when considering procedures: “We took our large procedures document and broke it down into a user-friendly form both for ourselves and for our stakeholders.” Getting the technology in place to support these changes is a work in progress, though advances have been made. A whole new system whereby vendors manage their improvement and compliance via Rapid Global, an Adelaide-based partner, is in place. Compliance monitoring had been a big issue, with some vendors, particularity those used less frequently, not keeping the necessary registrations and licences up to date. “We are looking at new tools to take up the next evolution of Rapid Global and have reinvigorated our internal compliance committee,” Smith says.
The results so far have seen compliance performance improve by 35% over the last six months alone. Another positive outcome was reducing the entire ANZ vendor base by 25% by removing those suppliers whose compliance levels had been identified as wanting, and whose services could be met by our strategic panel partners.
The creation of panels made up of vendors with whom Cushman & Wakefield has a strategic relationship in each of its 21 major categories has driven further value. Cleaning, for example, is one of the largest categories. “We have around 230 cleaning organisations: our strategic category panel for cleaning now has no more than 15. Our panel agreements are more than just commercial contracts – they focus more on driving value, for us as well as for the clients.” Standardised service level agreements (SLAs) and KPIs, not focused purely on operations but the breadth of service delivery attributes, (saftety, finance, risk…..), and ensure we have available agreed standardised scopes of work. All C&W staff have access through the Advantage portal to all the templates and standards they need, together with the guidelines and procedures on how to use these resources effectively. This helps ensure that no service parameters are missed, and as a consequence the clients are secure in the knowledge that Cushman & Wakefield has their interests at heart.
This drives competitiveness. “Many of our competitors don't have that fully integrated supply chain procurement model,” explains Smith. “They are expediting the requirements of the client to the vendor and back again with no real sophistication in defining the scope of works, and missing the opportunity identification levering off the expertise at each layer in the Supply Chain, including our expert teams and integrated vendors.” Vendors are empowered to suggest improvements, and clients are able to manage their own expectations, he adds. “Some of our clients are large enough to have dedicated procurement resources, and at larger clients we have embedded Cushman & Wakefield procurement specialists and managers. But we have an obligation to ensure that our strategy and category value offering works for largest through to the smallest clients. As the client accounts get smaller the need for an individual dedicated resource reduces, so we have a floating team who handle multiple accounts to ensure they have available direct access to our panel vendors for their own procured services.”
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Local sourcing to large clients
'Think global and act local' is nowhere more important a mantra than in APAC. It's a critical part of Cushman & Wakefield strategy to support indigenous businesses. At the end of 2017 the company launched its Reconciliation Action Plan (RAP). This pledged to provide employment and training opportunities, build community awareness, and facilitate collaboration with Aboriginal and Torres Strait Islander Australians. Since 2015, Cushman & Wakefield, in partnership with its clients, has spent approximately $25mn with indigenous businesses across its supply chain, and now Smith is determined to go deeper. In 2017 he made a presentation at the annual conference of Supply Nation, Australia's leading diversity organisation, exploring how indigenous businesses might evolve and what they should consider in their tendering processes. “Our indigenous procurement policy is a supply chain promise to indigenous communities nationwide,” he says.
At least four of the 15 organisations we mentioned earlier in Cushman & Wakefield's cleaning category panel are certified by Supply Nation as bona fide indigenous-owned enterprises. Companies such as ARA Property Services, founded in 1994, sit alongside equally well-established cleaning firms as GJK Facilities on this panel. His aim is to achieve an equivalent level of representation on each of the category panels.
Firms that are too small to make the panels on their own still participate through structured relationships with major indigenous business’s and facilitators like Supply Nation. “We have separate indigenous panels,” Smith says. “They are not category specific, but where a client wants to use an indigenous organisation across multiple services or on a consolidated site model, for which we can't quite see a place in a procurement category panel, we then engage with Supply Nation and those larger industry representative bodies to turn-key solutions in this alignment.”
Smith started by dropping some big names. Cushman & Wakefield has just signed up a major regional mining corporation to it’s client portfolio, but what is different about that is the regional operating model of this client, which before the merger might have been difficult to accommodate. “We have a procurement manager in Australia who is liaising our APAC sister companies in development of the Client programme of procurement initiatives to achieve contracting model they want,” Smith explains.
“The challenge is to deliver commercial benefit and consistent performance, not just across Australia but across the Asia Pacific region. Having an integrated APAC model is a fundamental benefit of our transformation journey. We are no longer talking of countries as silos, but engaging with a large client to leverage our categories and operating model.” The deal is setting a benchmark, he adds. From this year on, more clients will be coming on board to take advantage of Cushman & Wakefield's APAC operating model, delivering consistent services, tools, vendor strategies and category strategies.
In this encouraging environment Smith is confident that his teams will be able to achieve further savings in the supply chain over and above the 67% year-on-year increase they managed last year. Indigenous engagement will double. The vendor tail will be reduced by a further 30% by increasing the strength of strategic relationships. Adoption and engagement of our 220 panel vendors is due to grow by 65%, and Smith believes this will be exceeded. “These are the key targets for ANZ and more broadly. We have a very good team in ANZ and an excellent relationship with the country procurement leads. I want to start building stronger relationships between the senior leadership teams across the region and drive consistent integrated operating model, standards in scopes of work, consistent SLAs and KPIs.”