Warren Buffett buys Heinz, procurement innovators

Warren Buffett’s announcement that he rather liked tomato ketchup and baked beans and was therefore going to buy the company (Heinz) sent shockwaves – positive shockwaves in general – through the business world last week. Buffett, the world's third richest man and most successful investor has turned his attention to Heinz in a deal worth $28bn (£18bn).

It reinforced a view that huge global brands , or rather the companies that make them, may have become undervalued in terms of their stock market prices. Whilst the developed world may be struggling economically, the opportunities for consumer products with strong brands in the developing economies, with their growing middle classes, seem considerable. (I bought a few Unilever shares for my SIPP personal pension  a few weeks back, so that sounds good to me. Blue chips – that’s my new investment strategy. No more Southern Cross or Rok for me)!

But there was less comment on one point – that Heinz have become global leaders in procurement thinking and particularly use of technology over the last few years.

I first met Rob Hemsley, who was then their procurement technology lead, through a mutual friend in 2003 I think, and found him a stimulating guy with a real enthusiasm for procurement thinking, development and ideas. I then had the pleasure of giving him a bit of advice on their entry for the 2004 CIPS SM Awards, and had the even greater pleasure of sitting with them at the event when they won the “best use of technology” and “overall” awards in 2004. Much celebration, I vaguely remember...

Actually, they didn’t really need my help, which was simply around giving an independent view on whether their entry read well.  Which it did, being full of strong content, and based on one of the first public case studies relating to the use of what we now call Market Informed Sourcing technology (optimisation, expressive bidding etc).  I’m not sure I fully understood the significance of what they were doing at the time, but I could see it was different and interesting. Asking suppliers how they could best meet Heinz’ needs, rather than stipulating a precise requirement, was pretty revolutionary at the time, and the award judges were far sighted enough to see that.

Heinz have continued to be technology leaders, and they have also become a great proving ground for leaders across the profession. John Dickson, ex Diageo, is now the CPO, but Hemsley went on to lead Heinz procurement Europe, then moved to BP to be CPO of the lubricants division, where he has continued to do great things. Phillip Duncan, who was his boss at Heinz at one stage, is now global CPO for Novartis.  Other procurement technology stars from the firm have moved across to the technology supply side and now help others get the benefits Heinz achieved.

So two points to conclude this reminiscence. Firstly, let’s hope Mr Buffett appreciates the contribution that procurement made to the business, and continues to support the function. He’s a long-term investor, so we shouldn’t see any short term beat-up-the-supplier initiatives which we have seen at times following other private equity type buy-outs.

And secondly, if you haven’t looked at Market Informed Sourcing yet, and you have complex sourcing tasks to execute, then do consider this now.  Trade Extensions, CombineNet, BravoSolution, Emptoris, and Iasta are probably the best firms in the market for this technology – have a chat or two and see if it looks as interesting for you as it did for Heinz. Or there are a couple of Papers (here and here) we wrote on the subject if you want to find out more.

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