MISC—like other GLCs—had overly focused on the program’s governance directives for years. This hampered competitiveness with multilayered, committee-based decision-making processes for tenders that occurred outside procurement, turning it into an administrative function instead of a business partner offering strategic supply-market insights. It also affected the customer experience, which had deteriorated.
When MISC came to Kearney, leadership wanted to improve procurement efficiency while maintaining control and provide a service and a product that were much more user friendly, with fewer layers. Attaining this goal meant the company would have to transform how it procures supplies, focus on getting 10- to 15-year contracts with the best suppliers, and then train and educate those suppliers as valuable partners in the business.
Yet, the company’s procurement depended on a one-size-fits-all approach, where predetermined bidding occurred by default, and rigid technical scoring had the lowest bidders winning, though there may have been others with stronger skill sets. No-tender bid waivers and direct purchases abounded. Tender committees based on quorum governed and frequently made purchase decisions armed with incomplete or anonymous information. And suppliers were selected through open registration. Value and risk played little part in know-your-customer assessments and financial due diligence. Instead, the same requirements were placed on every vendor, so if one failed to meet criteria, there was no alternative.
Interestingly, sustainability was also on MISC’s radar. Among its objectives was to achieve net zero by 2050, but it lacked control of 80 percent of its supply chain emissions—not uncommon, for most of its competitors were in the same boat.
To lead MISC toward its aspirations, Kearney knew a regenerative approach would streamline governance and turn the enormous organizational ship toward procurement as a strategic value contributor and supporter of business imperatives. Regenerative procurement harnesses the power of the supply base and works with the business across all levels to ensure the top line is protected and grows, rather than focusing solely on bottom-line savings.
Kearney developed a transformation blueprint along these lines. We then introduced the company to Piskadlo, who has deep experience in complex global procurement initiatives, to lead the charge. Among his tasks as MISC’s new CPO was dismantling procurement structure, employing a value-focused procurement staff, and pushing responsibility down into the company.
MISC leadership agreed with the overarching concepts but still felt close to its governance hierarchy and control. Piskadlo realized that a standard transformation wasn’t going to work. So he pulled back on the value argument and sought to speak leadership's language instead, using the government’s Red Book on Procurement Guidelines and Best Practices and in-depth analysis to illustrate that their governance was actually high risk and in non-compliance. Huge amounts of spend—98 percent—were occurring outside the governance process in some parts of the business, which they thought needed streamlining only.
This got leadership’s attention. Piskadlo won their blessing to shift procurement governance to a category management model that would better analyze spend categories and drive value. His team abolished bid waivers and right-sized thresholds for spend requiring tender, which significantly reduced direct-appointed contracts. More contracts now flowed through procurement, which could positively influence awards and drive outcomes aligned with business needs. Financial ratios went from eight to a segmented approach of zero to four, and registration was adjusted from open-to-all to on-award. Regarding staff, Piskadlo secured approval to rapidly upskill employees with training on strategic sourcing and spend analysis, among others. Investment in procurement capabilities included structured approaches to problem-solving and negotiation.
When it came to suppliers in the past, MISC had evaluated them using a retrospective annual assessment via committee. Now, it began to use both category and supplier relationship management, along with continuous improvement, to create more touchpoints for discussing performance on an ongoing basis. The effect was to move from a more adversarial, master-supplier relationship to a collaborative one that could capture supply-base power to meet MISC’s goals.
Finally, the CPO and his team published newly established policies and guidelines in manuals for each procurement group and corporate entity, ensuring the new ways of working were promoted organization-wide.
Once Piskadlo and his team convinced MISC leadership that governance could be streamlined and procurement-centric, they were more open to new value-adding processes. But they wanted to see how procurement could be aligned to and achieve business metrics. The first they tasked Piskadlo with tackling was the most important: oil purchases, which had to be made during the COVID-19 pandemic unfolding at the time.
Shipping costs are the lifeblood measure of a global maritime company like MISC, which must keep its fleets on the water 24/7. Thousands of considerations roll up to this metric, so achieving value had to go beyond claimed savings to a much larger business goal. The ability to rotate the oil supply chain quickly and efficiently tied closely to revenue. Piskadlo had to convince leadership it made sense to focus on the business goal and a potentially counter-intuitive procurement approach, such as increasing—rather than consolidating—the oil supply base.
“We had to look at the end outcome,” he said. “For me, procurement is always about outcome. In this case, it was about keeping ships on the water.”
Management agreed to the decision, and using regenerative procurement methods, he was able to illustrate that securing fuel supply helped protect the company's revenue and uplift during an extremely volatile time.
Given the entrenched and deeply hierarchical nature that procurement governance tends to have in Malaysia’s GLC environment, MISC’s CPO found that introducing regenerative principles using a wave program demonstrated how well new processes would work. Piskadlo realized it was imperative to shift the company's procurement mindset to a value proposition based on revenue protection, the supply chain, environment over governance (in relation to ESG), and delivery of tangible, measurable value. These things were as important—if not more so—than savings.
At this point, MISC has a comprehensive procurement plan with an empowered procurement function at its center. Like any transformation, this one succeeded by celebrating achievements along the way to build confidence. Even so, audits to quantify results were essential. And the company now has a team in place that can support the new principles going forward.
“The transformation was a hearts-and-minds campaign, not an application of best practices,” Piskadlo pointed out.
It is, indeed, possible to jump from old ways of doing things over decades to best-in-class with one giant leap, but it takes patience, perseverance, and belief in the power of regenerative procurement.