Jim Hemmington, Head of Procurement at BBC spoke at the CPO Event March 2014

1. Developing and Implementing a Strategic
Sourcing Strategy
Jim Hemmington
Head of Procurement
20 March 2014

2. SOME FACTS…
Our income is : £5.06 billion
Licence fee income is : £3.60 billion
Other income : £1.46 billion
Spend on goods/services is : £1.4 billion
Spend on outsourced services : £0.7 billion
(includes technology, HR, Finance, transmission)

3. SOME FACTS…
8 NETWORK
TV CHANNELS
10 NETWORK
Radio Stations
79% weekly reach
On average 7 hours per week
per viewer
46 local
Radio Stations
97% weekly reach
(average 19 hours viewing/listening)
Most listened to
Radio Station
£13.9m (per day)
Most watchedTV
programme
Olympics
opening 29.7 m
iPlayer - 3rd most favourite UK brand
Source yougov

4. WHAT’S BEEN OUTSOURCED?
Transmission - terrestrial and satellite
Technology
Playout and
Access Services
Studios in Salford
HR
Finance
Facilities Management
Audience Services
Collection of the licence fee
Total
£700 m

5. ANDTHE REST OFTHE SPEND?
Is category managed……..
Production
Resources
Post production, graphics & special effects, props,
make-up services, studios, outside broadcasts
Logistics
Technology &
Broadcast
Workplace
Marketing
Corporate Services
Air & rail, hotels, fleet, taxis, hire cars,
couriers and specialist carriers
Cameras, sound desks, system integrators,
technology consumables, microphones, etc
Consultancy, training, insurance,
Legal, subscriptions
Research,TV idents, trailers, promotional events,
merchandise
Rents, rates, energy, furniture and furnishings

6. OUTSOURCING

7. WHY DIDWE OUTSOURCE?
BUT – we had no overarching strategy
other than considering “make or buy”
MONEY SAVED
JOB DONE
We needed to REDUCE COSTS
We generated savings of circa £700 m over
ten years (around 10%)
We needed to fund the digital age,
with the first digital service launch
due in 1999

8. THE APPROACH BACKTHEN…
1. Fixed term contracts
2. Output based specifications and strong
contracts
3. Competition used to drive cost down
4. KPI’s to check performance
5. On-going governance refined
6. Supply chain issues left to supplier
7. Exit planning part of out-going negotiations

9. We needed to
focus onVALUE
not just cost
reduction
We couldn’t
reprioritise the
focus of services
without
significant
investment
Heavy risk
transfer
was working
against us 50% of our
supply spend
was residing in
inflexible long
term contracts
SO,WHEN DIDWE SET A CLEAR
STRATEGY? We found that…..

10. FIRST STEPS – looking inwards
In 2007 formed a group “STAR Board” -
contract managers tasked with managing
the outsourced portfolio as ONE
We created a Continuous Improvement
savings programme (with variable success)
We enshrined a consistent governance
model in the way we managed our
outsourced contracts
We reinforced operational consistency
through linking together contracts via an
Operations Board
IN 2010 WE SET OURSELVESATASKTO
REVIEWOUR SOURCING STRATEGY
EXTERNALLY AND BENCHMARK
PROGRESS

11. WHAT EMERGED FROM OURTASK
No further scope for substantial
outsourcing
We needed a clear strategy governing all of our outsourcing activity
Renewing contracts on a like-for-like basis wouldn’t work
Contracts were starting to overlap (e.g. technology and facilities
management)
We needed to plan early to make space for new outsourced
operating models

12. STRICTLY OUTSOURCING
Right
packaging
of services
Looking for
real
collaborative
relationships
Negotiating
agile
contracts
Focused
Contract
Management
MOVING FORWARD –THE PRIORITIES

13. WHEREWE’VE GOTTO
• Reducing cost: shifting licence payments to web and direct
debit, driving continuous improvement
• Securing income : greater use of targeting strategies to maintain
collection revenues
• Closer working and better planning:
reducing cost of signing and subtitling while
improving quality
• Complete cost transparency: manage a measured reduction to
global transmission services
• Dealing with audience contacts
more effectively: greater focus on
audience feedback

14. We better understand our suppliers’ operating model,
costs and cost drivers
We’ve changed our expectations - competition alone doesn’t get the best deal –
• cost models and full cost transparency
• cost of managing risk
• when change becomes a cost
• what if scenarios
• sustaining value for money (managing our changing business environment)
KPI’s are better linked to success factors, and driving the right behaviours
Governance is clearer on: CUSTOMER /AUDIENCE FEEDBACK
Have you really done something strategic?

15. CATEGORY
SOURCING

16. CATEGORY - WHATWE DID
• Established category management in 2008
• Consolidated our supply base from 100,000
suppliers to 16,000
• Drove on-contract compliance to 93%
• Saved 12%

17. BUTWE NEEDED A STRATEGIC REVIEW
Operating the category structure brought a number of
observations:
• Production services –could be influenced more
• Logistics - needed more sophisticated relationships
• Technology – needed riskier and more forward looking
relationships
• In some areas of spend we were adding little value
AND:
• Some category managers were needing to
become change agents;
• Others were continually driving competition
• Others were focusing fully on key relationships

18. OURTASK HERE LEADTO
A more business focused category
sourcing strategy, signed off by business
stakeholders annually
A full “spend analysis” of category spend, which identified opportunities for
further cost savings
More tailored services
Establishing procurement business partners, to work close to operational areas
More targeted interventions, especially on “tail” spend
Opportunities to manage demand and influence behaviour

19. AND FINALLY
We needed to pace ourselves to the
changes in the BBC
Our strategy was driven by
practical application – it started out
too theoretical
Implementation is hard and slow
To achieve success in the harder
areas requires gradual steps with
targets set to help progress rather
than hard objectives.

20. THANKYOU
AND
KEEPWATCHING/LISTENING