Procurement Planning Transformation at Acea
Achieving perfect synergy between HQ and subsidiaries
The Acea Group, an Italian leader of the integrated energy sector and a key player in the power distribution, energy, and environment sector, required a solution for improving its purchasing, planning, and control. The solution must be capable of aiding Acea Group’s HQ to interact with the various teams responsible for purchasing at each of the group's operating companies. Acea chose the Board Decision-Making Platform to design and implement a procurement strategy that would increase internal efficiency in processing purchasing requests, while also providing greater bargaining power and reputational advantage in supplier relations.
- Industry: Energy & Utilities
- Department: Supply chain
- Revenue: €3.379 billion
- Employees: 7,650
- Electricity distribution: 9.1 TWh
The Acea Group is an integrated multiutility company that manages and develops networks and services in the water, energy, environment, and energy infrastructure sectors. Acea is a public company – the public sector has a significant influence on its operations in industrial and commercial nature – operating in special sectors such as natural gas, thermal energy, electricity, water, transport, ports, airports, and postal services.
Acea Group is the top Italian operator in the water sector, with around nine million inhabitants served in central and southern Italy, and a vital player in Italy’s energy sector, with approximately 7.1 TWh of electricity sold to 1.4 million customers. Acea is also a leading Italian waste-processing operator.
Acea's business vision is built on sustainability. Sustainable development is a key structural element that steers the group's business decisions and operating management.
Acea has chosen to centralize the purchasing process at the parent company. This process is overseen by the purchasing function, responsible for sourcing suppliers (from a pool of around 1,600 active businesses) and leading negotiation phases that lead to contracts being drawn-up and finalized.
Clorinda Pavoncello, Head of Planning and Control in Acea's purchasing and logistics area explains:
Our purchasing center operates for both the parent company and all our subsidiaries, of which there are more than 20. The center is responsible for providing governance across the remaining investees. We operate based on demand from the companies based across Italian territories.Acea manages around 3,200 orders and framework contracts for works, services, and supplies with a value of approximately €1.1 billion. This comprises a catalogue of 158 product and service categories.
The purchasing process begins with a purchase request issued by the operating company that formally sets out the characteristics of the contract or order. The process is fully digitized and once the requests have passed through the approval process, they are delivered directly to the purchasing function in the relevant category area. This is done through an automatic routing system that looks at the classification of the request. The responsible buyer then begins the negotiation phase with suppliers or initiates tender procedures. They manage and monitor the process until a contract is entered into and signed by a fiduciary with a specific power of attorney.
The purchasing process only involves the Purchasing & Logistics (P&L) function during the operational phase; the phase of preparing documents and making appendages is handled entirely within the operating companies.“We gradually realized that there were some limitations keeping us from meeting our group's expectations efficiently,” comments Clorinda. She continues:
The buyer was only engaged when the purchase request had already been formalized and submitted to the P&L function. Requests were processed one at a time, so there was no big-picture perspective at the group level. Additionally, because we were often only engaged during the execution phase we were prevented from guiding the company to define the characteristics of the requested product or service. This somewhat limited our ability to take advantage of contingent market opportunities.
This limited visibility of the company’s needs meant it was not possible to formulate long-term plans and so Acea were not always in a position to apply the most advantageous purchasing strategy.
At certain points of the year, impacted by the inevitable dynamics of each season, there were recurring periods of peak demand that held up our processing queues and extended the time required to issue contracts. In addition, where documentation, sent over by the operating companies, needed to be added to or modified, processing times became even longer and the risk of falling behind planned schedules increased,
recalls Clorinda. She continues:
In short, we had an 'executed' approach, where we could only start working on a request when the buyer came to us. This meant not having any opportunity to interact with the company at all, during the process of preparing supporting documentation, and not being able to adapt the timing of requests to be more optimal and use available resources more efficiently.
We therefore started thinking of a proactive approach that would consist of planning phases over a well-defined period, one that aligns across all Acea’s operating companies. Before implementing Board at Acea, these opportunities for coordination were difficult to put into practice because stakeholders in the purchasing process were committed more to day-to-day operations. They were unable to dedicate extra time to analyzing, forecasting, and spreading knowledge throughout the organization between HQ and the companies. Combined, this translated into a lack of a common strategy.
Selecting the best software: Streamlined implementation and strong usability
To address the issues identified above, Acea initiated a software selection process. The first stage was to identify and set the evaluation criteria to identify the best solution on the market. These were divided into two general categories:
- An extendible platform (including the possibility of using plugins from various applications available on the market)
- Adherence to cloud compliance legislation
- Presence of an ‘update and release’ model for new releases of the software
- A business-oriented solution that ensures users are independent from the IT department and the vendor
- An adequate implementation timescale.
- Versioning integrated directly into management planning
- The possibility of establishing a procurement planning process, including authorization management workflow
- High score on the System Usability Scale
- Functionality for user profiling
- KPI led measuring.
Acea required a solution that would provide these characteristics on an integrated, shared, and easy-to-implement platform. Clorinda notes,
The Board platform was the program that obtained the highest score in our analyses, conducted by both the IT department and the Acea purchasing function - She adds - We then contracted design and implementation of the process through a tender. The process was efficient because we were able to modify the design of the application that we had in mind even while work was in progress, so to speak, until the launch of the full-fledged pilot project.
Planning and analysis through an intelligent, nine-step workflow
The purchasing planning and analysis solution built in Board consists of three integrated macro-areas that all use the same datasets. This ensures complete, reliable, and consistent information; a single version of the truth. The three areas include:
- Procurement planning
- Analytics to support day-to-day activities (which includes a document and inventory analysis function)
- Performance assessment and KPI setting/monitoring.
After designing the purchasing planning model to embrace the each area, Acea Group broke the model down into three phases, which involved various stakeholders across the business. Chiara La Marca, Acea Purchasing Planning Manager for Acea, explains:
During the first phase, when purchasing needs are expressed and validated, the main actors included the group's requesting companies, Acea executives from HQ, and the main procurement teams. All purchasing needs are reported by the operating companies to Acea's purchasing function who then collaborate to drive the subsequent formalization of the procurement plan. Board allows the actors involved in this phase to apply filters and systems to support analysis, accessing historical data and receiving the needs proposal and key dates as an automatic output – drawing on the historic database
In the second phase, after the needs have been analyzed and consolidated, selection procedures are defined and the purchasing plan, including verification of feasibility, is formulated. At this point of the process, the stakeholders shift to planners and category managers of the purchasing function. They remain, however, in close collaboration with the operating companies who can modify or confirm the procurement plan proposal.
During this phase - comments Chiara - a fully-fledged purchasing strategy is finalized that works in conjunction with the various procedures and available labor force. Pro-active steps are taken to modulate work peaks in collaboration with the operating companies.
In the final, third phase, Board provides the operating companies with a schedule of purchasing requests to be submitted, setting deadlines to prepare the technical documentation by and finalize the requests.
The purchasing planning process has been formulated according to a workflow that is divided amongst the various owners of the various phases (the group's operating companies, the procurement planners, and the category managers). As Board users, they all have access to the Decision-Making Platform and can review, via an intuitive graphical interface, whatever they need. This transparency gives everyone the ability to check or view the status of each item to be processed, from start to finish, and makes it easier to collaborate with colleagues or share information with management across all teams.
Chiara goes into more detail,
The workflow we have set up in Board consists of nine preliminary steps. In the first step (purchasing planning), we start the process by setting parameters that apply on a cross-company level, shared by all operating companies. The operating companies come into play in the second to fifth steps to establish local parameters which are attributable to each company. This may include things such as the settings relating to the group-product-object in the procurement plan. In this way, we can normalize the data.
Board then prepares any requirements specific to each company. Within Board, ACEA’s subsidiaries can manage purchasing requests in terms of scheduling when the relevant technical documents need to be presented to the Purchasing Area.
The sixth and seventh steps of the procurement planning workflow return to the responsibility of the purchasing officer and the penultimate step (eight) involves the category managers who consolidate the purchasing plan:
During this phase Board again proves truly valuable as, thanks to the overview of all purchase requests in their purview, category managers are able to implement a far-sighted purchasing strategy, analyzing the workload and any foreseen or foreseeable peaks and resource availability, with a comparison to historical data - explains Chiara.
As a result, Acea can efficiently distribute the fulfilment of purchasing requests over the full year, noting each company's needs and, "Drive significant collaboration between the various teams to enable them to pool their experience as buyers," as Chiara adds. She continues,
This way, they can design optimal strategies for concluding certain contracts or scheduling activities, without having to interfere excessively with other transactions. Now, with Board, we can view and analyze volumes together, even when they originate from requests at different times. We benefit from significant competitive advantages in tender procedures and can present higher volumes of work.
Each category manager formulates their purchasing plan and proceeds to the final, ninth phase where Acea HQ checks the process has been executed properly and validates it.
With Board, Acea also has a section dedicated to analytics, perfectly integrated with procurement planning. Chiara comments:
The analytics constructed in Board support day-to-day-operations. We use a document sub-section for outstanding contracts, framework contracts for adjustments, ongoing purchase orders, and so on. Analysis is visualized across a series of screens, highlighting all relevant data from Acea's transaction systems. For example, in the ongoing contracts screen users can monitor the fulfilment state of active framework contracts (such as those expiring or nearing financial completion, and so forth), visualizing key information with a specific color scale for user ease.
Procurement planning and analytics are also linked in an area dedicated to KPI-based performance assessments. This environment utilizes the same datasets used for purchasing planning and analysis.
Once a planning system is set up, Acea put measures in place to ensure that planning follows the processes set by the organization. This means having an evaluation function that can accurately determine the degree that the operating companies are following the procurement plan. In doing so, each company has accountability for their operations, can be informed about their performances, and can view transparent data that will highlight any divergences from the plan and the consequences in doing so.
Harnessing Board's revolutionary potential
Given the strong benefits Acea have seen using Board in terms of success, effectiveness and transparent information, the group has decided to soon employ other Board features. These include:
- simulation and predictive analysis
- Business Intelligence (BI)
- reporting capabilities inherent to the platform
- integrated planning and analytics.
We are already pursuing four approaches to further expanding Board at Acea,” - comments Chiara -. Through Board we want to emphasize an agile approach already tried in working methods, between the HQ's centralized purchasing function and our ‘local' operating companies. We also want to move towards constant improvement of our procurement planning process – a goal that is now easier to achieve thanks to the flexibility of the platform of Board. By leveraging the platform’s modelling and simulation functionalities, we intend to use the program to generate increasingly detailed predictions, integrating them with the goals of the investment plan. Finally, we are harnessing Board's BI spirit. By extending operating reporting via Board, we are allowing users access to a broader set of data that is aligned and functional to the activities specific to each person's role.
Clorinda concludes - The Board platform obtained the highest score in our assessment, conducted by both the IT department and the Acea purchasing function. Implementation was efficient, as we were able to change the application's design even once it was up and running – all the way to our go-live.