In our last article, we introduced you to “friend of the site,” Luca Guzzabocca, the Director of Procurement, Logistics, HSE, Security Management (or “Chief Procurement Officer”) at Banca Monte Dei Paschi Di Siena (“Banca MPS”) and traced his path to his current CPO role. In this article we will focus on the procurement operations within Banca MPS.
Acquisti
Banca MPS (homepage link Italian) hired Luca as its CPO in July of 2008 to take over the management of procurement operations. Banca MPS also saw that Luca’s broad background and experience in procurement had exposed him to many other operational areas and asked Luca to oversee all logistics, HSE (health, safety, and environmental), and security operations for the bank. Luca believes that there is a huge opportunity for current and aspiring CPOs to take on the management of other operations, particularly given the broad exposure procurement can have with other functions (Sidebar: We agree! Earlier this year, we predicted that more CPOs will take on broader responsibilities in this decade). Luca’s team of 25 purchasing managers and 150 total staff is now responsible for all non-inventory and services categories which total more than €1.3 Billion and which he has segmented into three large groups – IT, Real Estate and Facilities, and General. Among the top priorities for Luca and his team are the management of logistics, security (systems and physical), cash management and transport services, and real estate and facilities. Luca’s team also invests time and energy ensuring compliance to all HSE policies and managing ISO14001 and OHSAS18001 certifications. They have also worked to develop a CSR (“Corporate Social Responsibility”) policy and program and successfully embedded it into their sourcing process.
Banca MPS, was founded in 1472, as a charitable or non-profit institution that lent money to support the community’s growth and avoid the usurious interest rates from other lenders at the time. Almost 540 years later, the Bank’s focus has not wavered. From the very beginning, Luca saw that operations at the bank would be unlike any of his earlier experiences and said, “Our Bank’s mission is to support the community; so, one of the biggest peculiarities about our company is that our suppliers can also be our customers. We have to make sure that this consideration is part of our supplier evaluations. This also means that my team must make a territorial commitment in support of operations, so staff is localized.” One interesting aspect or benefit of being a bank is that Banca MPS doesn’t write checks to pay its invoices. Says Luca, “We require all of our suppliers to open a bank account with us; we then transfer our payments into their accounts needed.”
Another aspect that was different for Luca was the bank’s low level of process automation and overall procurement maturity – the bank only had a reverse auction tool provided by a third-party service provider and no solutions to support any strategic sourcing processes. “After I joined Banca MPS, we quickly started a cost management initiative and as part of this program made the business case for an investment in a strategic sourcing suite,” adds Luca. The case was approved by the Bank’s General Manager and earlier this year, Luca’s team began deploying a suite of solutions – Spend Analysis, eSourcing, Contracts, and Supplier Performance Management – from Ariba. This technology project and the processes that they support will remain among Luca’s top priorities for the next 18 months.
Luca joined Banca MPS at an interesting time in the evolution of the procurement within all of Italy. Certainly the role has been recognized for many years but it has only been in the past four or five years that the function has established itself as more strategic. Part of this country-wide lag is due to company size (Italian companies are smaller, on average, than other Western countries) which means smaller budgets. According to Luca, “Until a few years ago, there was little pressure to improve procurement; companies did not invest in people or technology. That is starting to change.” Now, organizations like Business International and Procurement Executive Circle are hosting events that are geared to bring procurement executives together to network and share best practices and the solutions are becoming more prevalent and accessible. As these trends continue to emerge, more Italian companies will be able to follow Luca’s lead and begin to automate their processes.
It is clear that Luca is making an impact within Banca MPS and within the procurement industry in Italy in general; his work is garnering notice – particularly in the area of Sustainability. This year, Luca’s team was nominated for two Italian awards for excellence in Corporate Social Responsibility (Sodalitas Social Award and Green Globe Banking Award) and was a finalist for the same CSR category in two international programs – Procurement Leaders Awards (June) and CIPS Supply Management Award (September).
The third and final installment of this series will look at the intersection of Luca’s two passions – procurement and sustainability – as well as the not-for-profit association that he co-founded, Acquisti & Sostenibilita (Sustainable Procurement), an organization focused on the awareness and growth of sustainable principles across the procurement and supply chain community in Italy.
Brilliant article.
Given the specificity of banking business, especially those that are involved in community development, procurement is key. Savings made in strategic sourcing (spending) may total to considerable amounts compared to those banks’ earnings.
And look, segmenting into three large groups – IT, Real Estate and Facilities, and General tells a lot about the nature of procurement operations of that bank. So this is indeed a “hub” for this business.
Good job, good practice to learn from.
Hi Andrew – great post. Having spoken to Luca, I’d have to say he’s an interesting individual in a slightly unusual role. Which I think gives him a lot of useful views.
I’m curious to hear how he finds and encourages the right talent for his practice, given the various focuses he’s talked about and how his function compares to others in a similar industry.
Levon & Steve –
Thanks for the comments. I agree that Luca’s doing some very interesting and impressive things – like the topic of our next article: sustainability – and we hope to have him back soon to discuss other strategies and initiatives.
Re. Steve’s questions:
1 – Talents/people involvement: as you know there is not a “magic wand;” people have to be involved at the early stage of any big change/innovation project for it to work. What I have done and continue to do is to create a mini “think tank” managed by a small team of people reporting directly to me. This Team takes my key ideas and vision and then builds upon them to produce a proposal, project plan or a business case. If approved, the team is involved in developing the deployment plan for my organization.
“Communicate, communicate, communicate”
is another very significant part of the success in having the best people who are talented, dedicated, and motivated. Regular meetings are planned at different levels across my organization, including a quarterly plenary meeting. Major KPIs and achievements are also displayed on a public wallboard following the “visual factory” model.
2 Benchmarking: Across the Italian banking sector, my role and responsibilities (procurement, but also logistics, HSE, security, etc.) are unique which makes benchmarking a challenge since it depends on the story, the organisational model, and the size of the comparable enterprises for benchmarking to be effective.
Ciao Luca,
I appreciate this article. As you know we agree on the necessity to improve sourcing, procurement and cost management maturity in the italian banking industry.
Coming from another industry you can have a crucial role in fertilizing your company but also the whole professional community. Through events, initiatives, mutual benchmarking and also this type of interventions I hope we will be able to achieve a structural improvement. Let me say, sustainable too !
Finally I believe it is very much a matter of talents; we need to attract, motivate and grow a larger number of talents in the sourcing/procurement environment. It has not been an exciting world in the past but it has rapidly evolved into a strategic arena: it must be our goal to translate this to young professionals and future managers.
Best !