Procurement – A Lesson in How To Make Your Company Profitable.

At the end of July, the Financial Times reported on Mexico’s state-owned oil company Pemex posting positive profits for a second straight quarter.  The article goes on to say that prior to this, Pemex had a history (5 years worth) of posting losses.

In the article, this second quarter of rare profits from the oil giant are being credited to increases in revenue and a stronger Mexican peso, but as I was reading this, I recalled an article from January published in Reuters reporting how Pemex under the leadership of a new CPO (Miguel Angel Servin) were moving away from historically high no-bid awards and towards a managed spend model.

The Reuters article tells us that in less than 1 year, Pemex migrated from an environment where 80% (62 Billion pesos) of it’s spend was awarded under no-bid contracts to one where only 30% of spend was not bid.

To me, the correlation between the Company’s move towards managed spend and it’s new-found profits seems obvious.  In fact, I’m a little insulted that procurement was not even mentioned by FT’s article.

I would even go further!

The Mexican peso has moved very little in the period that spans these two articles.

When measured against the US Dollar the Mexican Peso was 20.78 in December 2016 and is 17.8 in August 2017 (1.5% change).  So to claim that the strength of the currency has anything to do with the organization’s profitability is laughable.

No!!!  I’m crediting the procurement department and Mr. Servin for moving an organization rife with corruption, cronyism, and waste to a well-managed organization with a healthy procurement system.

Congratulations to Mr. Servin for a job well-done.

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