How procurement boosts customer experience at John Lewis Group
Paul Bestford, CPO for GNFR procurement at John Lewis and Waitrose, tells us how procurement contributes to the retailer’s world-famous customer service.
Exceptional customer experience has been synonymous with the John Lewis Partnership (JLP) for decades. The John Lewis and Waitrose brands are frequently ranked among the top UK retailers for customer experience.
John Lewis’ own Financial Reports to 2017 reveal a Net Promoter Score — which measures customer satisfaction and loyalty — of +62 for 2017, up from +59 the previous year.
However, a professional procurement function is relatively new within JLP.
Retail buyers making product choices and generating profit have been around for a long time, but procurement for goods not for resale (GNFR) didn’t exist in the business until seven or eight years ago.
“Up until that point, Waitrose and John Lewis had treated GNFR with an emphasis on goods, rather than services,” says Paul Bestford, JLP’s chief procurement officer (CPO), responsible for GNFR procurement at John Lewis and Waitrose.
“They had people buying consumable items and bits and pieces, but more of the procurement just happened within the business, usually undertaken by budget-holders.”
In the three-and-a-half years since Bestford joined and restructured the function, procurement has played a major role in contributing to JLP’s world-famous exceptional customer service despite – or perhaps because of – procurement’s agenda of delivering value for the business.
“I’m not even sure that it is the role of procurement to create a balance between value and customer experience,” says Bestford. “Procurement is here to maximise the value that we add to the products we sell.”
Adding value to products
Each year JLP spends £7bn on products that it wants to sell, including groceries, furniture and clothes. It then invests several billions of pounds worth of resources to ‘add value’ to these.
This might be through product selection, moving products around, presentation, marketing and providing customer services in branches. This investment is split 50:50 between the company’s employees (partners) and suppliers.
“Half of that resource investment goes into wages and the other half goes to suppliers,” Bestford says. “That’s a fundamentally important thing for the organization to understand because it contextualizes the scale of our wage bill and the scale of our supplier bill, which are equivalent.
“The purpose of that resource investment is exactly the same. The reason we spend those billions of pounds is to maximize the difference between the price we pay for the products we buy and what we then sell at the checkout.”
For goods not for resale, JLP spends £1.5bn a year. About 60% of that is spent on services — people, not products — IT consultants, drivers, warehouse workers and so on.
The peaks and troughs of retail — not to mention JLP’s Christmas TV ad — mean the company depends heavily on contract labor.
“We’re trying to maximize the added value to those goods for resale,” Bestford says. “The same way that our partners in branches have a role to play in maximizing the customer experience, many of our suppliers have a very similar role.
“There might be suppliers giving marketing advice, in call centres, in logistics. Many of these services directly touch our customers, and are critical to providing a total value service proposition that justifies our customers coming to us rather than Tesco or Amazon.”
The reason we spend those billions of pounds is to maximize the difference between the price we pay for the products we buy and what we then sell at the checkout.
Changing the perception of procurement as a function
However, there remains an assumption within JLP about procurement’s role — that it’s “primarily interested in the price of goods and services, and that the best thing for partners to do is to work out what they need. Then, if they really have to engage procurement, wait until after they have worked out where they are going to get it from before sorting out details with the procurement function”.
“Effectively, it’s a little bit like measuring your HR function on whether they have managed to pay everyone less this year than they did last year,” says Bestford. “You wouldn’t ever dream of using that as a primary metric for an HR director. The reality in JLP is that it is something we’re interested in but it’s not our reason for being.”
One of the ways JLP is getting past this assumption is by changing stakeholders’ perceptions of what procurement is for.
“Partly it’s about the dialogue that I have at a senior level within the organization, but it’s also about finding the really good examples,” says Bestford.
Adding value throughout the business
One example is the procurement function’s decision to put suppliers in the middle of the process of designing and refurbishing stores.
JLP uses third parties to design the customer experience (the design and feel of shops, as well as marketing and the website). The customer proposition is dependent on the suppliers’ ability to deliver great design, great products and a great experience — both directly and indirectly.
The input of the supply base, facilitated by the procurement function, throughout the design process is crucial.
“We have a large number of beautiful department stores that are a substantial asset. We need to keep them fresh and new, ensuring that the customer experience in those stores is as good as it can be,” Bestford says. “This is expensive in an environment where people are increasingly shopping online.”
Traditionally, a store design team will work up a design for a store. They turn this over to the property team, who work out the details, the design and how it can be constructed before handing it over to procurement.
“By putting suppliers and procurement professionals with the right kind of expertise alongside design and property teams, we’ve brought suppliers up to the front of that process, including discussion about the delivery of the store,” explains Bestford. “This has enabled us to come up with some really fantastic propositions for our customers.”
It sums up what procurement at JLP is all about.
“It’s not just about taking the specifications of all the products and getting the cheapest price,” says Bestford. “It’s about working with the supplier resource pool and stakeholders in the business to really think about the business’ needs, and delivering even greater customer experience and greater value.”
Efficio’s recent work with the John Lewis Partnership delivered savings of more than 20% for the Consumables category.
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Innovative supplier relationship management
Understanding JLP’s strategy is a key part of the procurement function’s approach to boosting customer experience.
With growth and maximizing brand power goals in place, the procurement function needs to innovate and find innovative suppliers that can really make a difference to the business.
This has meant focusing on supplier churn. “When we signed up with a supplier, we stuck with them for about 50 years on average. That doesn’t sit well if your goal is to think about how suppliers can contribute to innovation and competitive advantage,” says Bestford.
He adds: “We value our supplier relationships, but a key part of this is about making a conscious choice not to go down the route of rationalizing the supply base. Instead, take a moment to think about whether we have got the right suppliers and how we increase our appetite for risk and innovation.”
Increasing innovation means finding the right balance – supplier relationship management has a focus on supplier development rather than on cost savings.
It’s about working with the supplier resource pool and stakeholders in the business to really think about the business’ needs, and delivering even greater customer experience and greater value.
Restructuring the procurement function
When Bestford joined JLP, the procurement function had one system of looking at everything – a seven-step process.
He explains: “It didn’t matter whether it was an urgent tactical need to buy something, or a strategic program of change – we used the same process.”
A restructure of the procurement function meant splitting up reactive needs, whereby procurement would source whatever was needed, from procurement related to a strategic program of change, for which a more structured methodology would be used.
“This has taken us through some of the more difficult supplier and customer relationships,” says Bestford.
“What they are seeing now is a more responsive service and a distinction between what happens when something is needed urgently versus conversations at a more strategic level about some of the more complex programs of change.”
He adds: “They don’t see that as the same thing anymore – and that has enabled us to have more constructive and open conversations with our stakeholders.”
It’s not procurement’s role to cut budgets, but to maximize the outcome of investments.
Procurement as a strategic function
Changing the self-perception of the procurement team has also been critical to strategically positioning the function at JLP to enhance customer experience, another outcome of the restructure.
The team understands that they don’t take ownership of which suppliers are chosen, rather they support the business in its strategic goals.
“It’s not procurement’s role to cut budgets, but to maximize the outcome of investments,” Bestford says.
“I don’t see a particular conflict with providing an exceptional customer experience, as procurement isn’t positioning itself as simply being an engine of cost reduction.”