Joseph Lee, Vice President of Procurement and Subcontracts, explores how AECOM Management Services optimises its procurement to become a strategic sourcing organisation…
Whether it’s building iconic skyscrapers, mobilising defense programs, solving complex environmental challenges, delivering clean water and energy, providing infrastructure to secure the future of nations or protecting people and property from natural and manmade threats, AECOM Management Services provides projects and programs to improve people’s lives in more than 150 countries worldwide. Naturally, given the scope of its portfolio, AECOM requires a procurement and supply chain function that goes above and beyond the traditional procurement role – one that is often passive and reactive. This is where Joseph Lee, Vice President of Procurement and Subcontracts, comes into the fold. Lee leads all procurement and subcontracting for AECOM’s Management Services Group — an organisation with more than US$4 billion in annual revenue and operations in more than 25 countries. Joining the business in early 2017, Lee was tasked with creating a plan to transform the procurement organisation and to assess it in its existing format. Here, he found that procurement was still viewed as something of a cost centre.
“They received requirements and executed them. That was it,” he explains. “There was little value-add; no metric, performance or accountability to the team. After assessing, I recommended we stand up a strategic organization; one more forward-leaning that could negotiate long-term agreements in order to create efficiencies in our transactions. The idea was to create a strategic sourcing organization that manages multiple categories and, from there, a procurement organization drawing from strategic agreements in place.”
Once this plan was approved, Lee turned his attention to other efficiencies, bringing in Lean Six Sigma Black Belts to look at the company’s processes and develop improvements. This would include building greater cycle times from requisitioning to ordering – a process that would normally take around 10 days. Lee looked at reducing that to one or two days and pushing it even further to around 30 minutes. “With only a single, transactional tool in place, we also looked at technology to manage our end-to-end supply chain,” says Lee. “By partnering with Amazon Business, we have more tools and visibility, allowing greater sourcing and competitive capabilities and the ability to categorize and source with limited suppliers.”
Following the implementation of Amazon Business, AECOM Management Services was able to better control its tail spend, allowing Lee to look at generating even more efficiencies in the company’s purchasing. Lee increased the dollar threshold for micro-purchases from $3,500 to $10,000, providing AECOM’s internal customers greater capability from an operational perspective to buy through the company’s contracted suppliers. On paper, these transformative steps sound simple, but they allowed AECOM Management Services to see clear successes as part of its journey. However, Lee is quick to highlight that there is always challenge in transformation, particularly when it comes to procurement.
Lee approached the challenges in three key areas: people, processes, and tools. Given the new tools that Lee had implemented, he needed to ensure he had the right people with the right capabilities to deliver on the promise of these new processes. “There are two parts to what we are doing with our people,” explains Lee. “We’re actually making the investment. We’re training them, and we’re helping them understand what customer service is. We’re helping them improve on their visibility, transparency to our customer, and we’re providing them with the tools to be more successful. Likewise, we’re bringing in more seasoned strategic sourcing folks to run and execute our strategic sourcing plan.”
Lee is a firm believer in developing people. He highlights that in three areas — people, processes, and tools. No single area should fail, but he places people at the very top of the list with regards to importance. “When you’re making an investment into viewing your process, automating your process, and putting in the tools, you also need to invest in your people. You need to go back, look at their capabilities, and identify the gaps,” he says. “You just don’t hire someone because they have the background, the education, the skills, and everything to be able to execute then put them to work and that’s it for the next maybe five or 10 years. You continue to develop them, just like you’re continuing to enhance your process.”
The goal for AECOM Management Services was to become a forward-leaning, strategic sourcing organization. But what does strategic sourcing mean to AECOM? Lee admits that it can mean many things to procurement professionals and organizations around the world, but for him, it’s simple: “It’s about aggregating your spend to optimize your buy,” he says. “What this means is that you can look at your spend category and go back to your business customer. Then, start understanding the forecasts to be able to leverage your spend and then go back to the suppliers. You are optimizing your buy because you understand the volume better to be able to drive your cost down.”
Procurement is built in equal parts by its internal operations and its external robust supplier network. As AECOM transforms its procurement process, this has an impact on the supplier relationships that are in place. As Lee notes, strategic sourcing doesn’t stop at the internal level. “It’s a 360-degree cycle,” he says. “We have supplier meetings every quarter to understand the spend and understand the forecasts. Only then can you adjust your forecast.”
“Your supplier is working with you as part of your relationship. They understand your requirements, and we encourage them to be more of an innovative contributor to our business. What I mean by that is, we have a strategic long-term agreement with the suppliers, and they see our requirements and our patterns over time. I want them to be able to come to me and identify ways in which we could do something cheaper or more efficiently. They have a license to do that, and that’s what I call supplier engagement.”
The journey of transformation is one of continuous evolution and following the successful implementation of Amazon Business and Lean Six Sigma, Lee is already working on the next form of evolution. AECOM is currently testing Robotic Process Automation (RPA) and risk mitigation technology. Here, the company is working closely with UiPath and global enterprise application company, respectively.
AECOM is working with IFS to implement a full-suite ERP system that is robust and modular and allows for sourcing and contract management while also providing greater control over risk mitigation, property management and logistics. With IFS Applications, AECOM will be able to automate and streamline numerous front and back office processes, enabling the company to tighten the procurement cycle, regardless of whether inventory is received at an AECOM warehouse, a customer location or a construction site. The technology will allow AECOM to be more agile, flexible, and responsive to the dynamic mission priorities of our federal and commercial customers.
“They also have a ‘lobby’ platform that is a dashboard in which we can access everything,” says Lee. “With IFS, we realized that with what we need today, and what we need in the future, they are the ideal partner to help us get there on both fronts. We work side by side with IFS.”
With UiPath, AECOM has proven out the use of Robotic Process Automation (RPA) where software “robots” act as digital workers to automate common and repetitive tasks. Any process that is manual, time consuming, fairly structured and data collection are all candidates for Robotic Process Automation (RPA). AECOM is testing the implementation of bots into their repetitive processes, again covering the areas of risk mitigation with their supplier’s source selection and due diligence. “The source selection and due diligence process entail accessing and collecting data from a variety of sources in order to determine suppliers financial, corporate integrity, and operational capabilities and capacities to meet AECOM’s business objectives and minimize risks in our supply chain,” explains Lee.
In a few short years, AECOM has already come a long way on this transformation journey, but Lee is quick to recognize that no transformation ever really ends. In fact, he believes it is his responsibility to continue to improve and optimize the organization every day. Where will the company be in a year’s time? “Probably with more tools that I have implemented and will be implementing as part of the process improvement and optimization,” he says. “It never ends. Whether that’s from a people, process or tools perspective. You don’t stop. Continue to develop and optimize your organization in order to keep you on top of your game.”