17 February 2011 | Rebecca Ellinor

The procurement profession will hang on to Ian Russell only as long as he stays interested – and right now, he’s interested.

Russell has held senior positions in procurement, technology, operations and strategy roles. Since October 2010 he has been commercial director at South African Breweries (SAB), responsible for all the supply chains that support the SAB business – everything from hops and malt, to glass and marketing. He manages a 60-strong team covering an annual spend of more than US $1 billion.

He and his counterparts at parent company SAB Miller’s four hubs – in South Africa, Europe, North America and Latin America – are involved in a change to centralise strategic sourcing in Switzerland to free up their time to focus on adding value in other ways.

For Russell, this means leading his team to do things they haven’t been able to before. “It’s really exciting,” he says.

First stop is supply chain optimisation to look at value engineering and value analysis with its suppliers. In other words, his team will examine the processes – particularly those where buyer and supplier meet – to see how they can take cost out. They will examine for example, freight and logistics, scheduling errors, unique specifications and so on.

“There’s always a lot of cost for the buyers and suppliers in doing business with each other. If you get into that area and jointly tackle the waste, you’re both likely to benefit. This is what we need to focus on.”

And while the 80-strong team in Switzerland work out how to make the most of the group’s overall buying power on global deals, Russell and his department will concentrate on developing the local supply base – a move he describes as “crucial”.

“In 2008 there were some good economic models pulled together when the oil price was going silly. They all concluded we will get to a price point (for a barrel of oil) at which the economies of scale you get by centralising in one part of your country, or say China and export to other places, will be outweighed by the cost of freight and logistics.

“There’s a point (about $140-$160 a barrel) at which local manufacture with much shorter distribution chains just makes economic sense. We’re not there at the moment but we could be there again in three or four years. So all of us have to be thoughtful about how long and complex we want our chains to be.”

Other advantages of using local providers include better security of supply and stronger relationships because you’re closer to your providers, as well as boosting local employment.

“There’s a pendulum that’s swung massively towards highly centralised production, particularly in China. It will swing back in four or five years, and you have to be ready.”

This doesn’t mean you can’t do global deals with suppliers, it just means you’re going to force those suppliers to be close to you at the same time, he says.

“The big guys have picked up on this and are worrying about it, but there’s a lot of complacency and misplaced belief that oil is inexhaustible. It’s not tenable long-term.”

Another aspect he plans to examine is how SAB can improve the development of its supply base from a broad-based economic empowerment perspective. Russell joined SAB after 13 years in financial services, most significantly with Barclays and ABSA. Having established a procurement department from scratch at the latter, he is no stranger to expat life in South Africa.

Career ladder

His post at ABSA followed procurement and non-procurement roles at Barclays, which followed early years at Ford Motor Company. While at Barclays, Russell was part of the mergers and acquisitions team that looked at the due diligence of the ABSA purchase. His role was to examine whether the technology systems of the two banks could be integrated. This role involved commuting to South Africa.

Not long after he was back from this completed work he was asked to return to examine the company’s cost management. As with all such acquisitions, Barclays had guaranteed the market a return on investment and Russell was asked to make these promises a reality.

“We had some high-level numbers in mind and my job was to deliver them. I quickly realised the way to unlock those savings was to create a professional procurement function modelled on Barclays’ operating standards, re-using a lot of its processes and leveraging some of its global deals.”

Now based in South Africa, his job swiftly became about how to develop a world-class purchasing operation from nothing.

“There wasn’t one before I got there. It was run by what I call ‘Yellow Pages sourcing’. When somebody wanted something they picked up a copy, got something delivered and paid by cash or cheque.”

Rather than being daunted by the prospect, Russell considered it tremendous fun. “It’s not often you get asked to develop a procurement organisation totally from scratch in an organisation as large as ABSA.”

The bank has 11 million retail customers, about 45,000 employees and 1,100 branches.

The first thing he had to do was get some staff to assist. “South Africa was a bit behind the curve as it is in so many parts of its economy, and procurement hasn’t – until recently – been recognised as a professional discipline here.”

He called on the help of around six expats from Barclays in the UK and commissioned a local consultancy house to bring in a swat team. While they studied what was spent with whom and made some initial savings to boost liquidity and credibility among senior management, Russell turned his attention to getting in more help.

“While they were doing deals, I got involved in a huge and aggressive headhunting and market recruitment campaign. I discovered the local marketplace didn’t have all the skills we needed, so I had a manager 100 per cent focused on capability building to fast-track development.”

To bring these new recruits up to scratch, during his first two to three years at ABSA, Russell was running 20 days of training per head per year. “It was almost like running my own university.”

Once those in the marketplace heard about this – and that individuals were being given a large spend portfolio – Russell had people knocking on his door. “That was a wonderful position to be in. It makes recruitment a lot easier and means you don’t lose people so quickly because you’re seen as a leading light.”

Commercial flair

To get the right mix needed for a strong procurement department, Russell says, you need commodity experts, individuals with knowledge of the organisation, and people with commercial flair.

“If you put those kinds of skills together you get a powerful procurement team.”

The ABSA mix was biased towards people with the commercial acumen more than those who had had a procurement job before.

And Russell says the training and development of the team at ABSA made a difference to the profile of procurement in financial services in South Africa. “We set a new benchmark and that legacy means I can choose from a better skills base.”

His team delivered the three-year target in just two years. So does he intend to remain in Africa? “I’ve stayed because it’s a more rewarding environment – you see the impact of your efforts quickly and there’s more energy and excitement doing some of those things here.”