How Turkcell’s root-and-branch procurement transformation is helping it redefine the telecom sector
Until recently, procurement was seen as a necessary, but rarely celebrated, aspect of daily business.
But times have changed. Nowadays, procurement sits squarely at the heart of almost every five-year plan and business strategy in a way the sector could never have imagined.
Embarking on an ambitious root-and-branch transformation of its procurement function, Turkcell has seen considerable success in recent years, reporting record revenues of $4.3bn in its last fiscal year.
Ali Türk, the firm’s Executive Vice President of Supply Chain Management, says that by championing resourceful buying practices and close-knit supplier relationships, procurement is elevating the company to new heights.
“If you want to stay strong and competitive in the market, you have to establish a powerful procurement function,” he explains. “While the role of procurement used to have a supportive and reactive function, it now has a strategic and central role in the organisation.
“We have a responsibility to contribute to the company’s strong financial structure, leadership in corporate business, and superior customer experience.”
A digital operator
Procurement isn’t the only thing that’s changing at Turkcell. A few years ago, the Turkish firm was better known for its mobile infrastructure, but today it has earned its stripes as a fully-fledged digital operator.
Growing its value-added services – its digital communication platform ‘BiP’, music platform ‘fizy’, TV platform ‘TV+’, digital publishing platform ‘Dergilik’, search engine ‘Yaani’, cloud platform ‘lifebox’ as well as its legacy communication services – Türk says that the company no longer sees itself as a mobile operator, but as “the only digital operator in the world today.”
“Turkcell has transformed its role from being an infrastructure focused service provider into an experience focused digital operator,” he adds.
“Our digital services are giving us the opportunity to share every moment with our customers, 1,440 minutes in a day. It gives us a competitive edge over our rivals in the market right now.
“We closed our last fiscal year with a 23.4% increase in revenue, thanks to our 4.5G investments and successful digitalisation model,” he adds.
With a footprint across Turkey, Ukraine, Belarus, Northern Cyprus, Germany, Azerbaijan, Kazakhstan, Georgia, and Moldova, Turkcell has evolved to become an international technology-driven and customer-centric company.
Procurement has played a pivotal role in this shift and, as a result, the chief of procurement has gained a well-deserved place at the company’s executive board level.
In his role, Türk is responsible for 23% of the company’s total revenue as operational and non-operational investments. With 300 people in the supply chain management team, Türk says that procurement is contributing to the company’s finances and enhancing its sales activities.
“Buying decisions have a direct effect on company’s’ earnings before interest, taxes, depreciation, and amortisation (EBITDA),” explains Türk. “This is one of the most important reasons why we are in close cooperation with our finance people.
“It’s helping us streamline processes, better serve our internal customers’ needs and identify better sources of supply,” he continues. “In essence, supply chain management plays a critical role in reducing the bottom line spending and increasing the top line revenue growth.”
The Chartered Institute of Procurement & Supply, better known as CIPS, represents one of the highest procurement standards in the world today. By overhauling its procurement function, Turkcell emerged as one of the first companies in the country to achieve this certification.
Along this journey, Turkcell has seen an ‘external transformation’ whereby it has grown its relationships with its suppliers; an ‘in-company transformation’ which it changed how it communicated with internal stakeholders and management; as well as a ‘structural transformation’ where its internal procurement function underwent organisational changes.
Sustaining strong supplier relationships is a critical aspect of supply chain management and, when working with almost 1,800 suppliers, it’s something Turkcell doesn’t take lightly.
As a result of a workshop with its top 20 strategic vendors, Turkcell has started to work towards increasing the transparency of its supply chain, using digital tools like online supplier portals and e-auctions.
Vendors can apply for active tenders through Turkcell’s online supplier portal, with 95% of tenders being published publicly.
Additionally, with 90% of Turkcell’s sourcing carried out through e-tendering, suppliers can also bid online through Turkcell’s e-auctions.
“Online tendering tools are very efficient and transparent,” notes Türk, “so this means suppliers can no longer claim that they have the lowest offer or that their offers are not being assessed.
“The procurement team has also benefited from our supplier’s positive change in perception, the reduction in negotiations, and the data we can collect from submitted offers,” he adds. “We are trying to stop evaluating our suppliers from a price-driven approach and trying to build long-term value-adding partnerships.”
On top of this, the Turkish company has promoted an open-door policy with suppliers. This means that if a supplier wants to get in touch with Türk’s team they can have a face-to-face meeting in less than two weeks.
“Although it can be tough and time-consuming, these practices have increased the level of confidence our suppliers have in us and it has supported the transparency of the organisation,” he says.
Yet, Turkcell has not only transformed how it works with its suppliers – it also works more closely with internal stakeholders and management to reimagine its procurement function from the inside-out.
With a seat at the top level of the organisation, the procurement team has weekly meetings with internal management every week which has helped to increase its visibility.
“With the new C-level presence, the power of distance between top management and the procurement team has vanished,” Türk observes. “The new structure has increased the confidence of the procurement team and support from top management has helped to enhance the teams’ awareness and capabilities.”
Cooperating closely with Turkcell’s finance division, procurement is also helping to manage the company’s strong financials by providing cash flow reports, opex optimisation programmes and capex per revenue analysis, for instance, to see visible financial results.
Increasing the visibility of the procurement function, Turkcell has also formed a strategic buying committee which Türk says has been a roaring success.
“The strategic buying committee was also a great opportunity to impress top management and show how procurement can bring additional value to the business,” he notes.
Perhaps one of the biggest transformations, however, is how Turkcell’s internal procurement function has evolved.
With over 30 companies under the Turkcell umbrella, the digital operator consolidated its group spending into one centralised procurement team.
“Consolidating group spending and bringing the different procurement units under one umbrella was one of the toughest challenges we faced,” notes Türk candidly.
“However, the company has not only profited from the increased budget, our smaller group companies were also benefited by the unified processes and contracts which helped to deliver savings.”
In the midst of Industry 4.0, digitisation has also had a ripple effect on the company’s procurement function.
The Turkish-based company has created a digital cockpit which monitors the company’s supply chain management, sales, network operations, marketing and HR in real time. With the help of this digital cockpit, Turkcell has made dashboards which combine different reporting tools, on the same platform, using different data sources. By developing and customising its current infrastructure, this digital cockpit makes access to information possible in real time monitoring.
On top of this, procurement has also developed a supplier integration project with Huawei for real-time order monitoring.
“Today if your strategies, resource planning, and business models are not in line with digitisation, it is impossible to be successful,” Türk says. “Therefore, we have digitised our processes, services and more to make real monitoring possible throughout the organisation.”
All of these initiatives and policies have accumulated to form an immense transformation, one which demonstrates the firm’s innovative thinking, strong business practices, and collaborative approach.
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Turkcell’s transformation has been a mammoth task but it hasn’t gone unnoticed by the international supply chain community, apparent as Turkcell scooped up accolades at both the Supply Chain Excellence Awards and the inaugural Procurecon Europe in association with CIPS SM Awards.
Procurement is a discipline that is defined by the need to meet aggressive cost targets, and thanks to its award-winning procurement strategies Turkcell is meeting this challenge head-on.
Working with around 1,800 suppliers, the company deftly tackles supplier relationship management with its suppliers’ performance management tool and its supplier management system.
These tools allow Turkcell to track its procurement processes from end-to-end and also allow it to measure suppliers’ performances using key performance indicators. In turn, this is helping to promote supplier-enabled innovation and cost-effective procurement.
On top of this, the company also manages its strategic business partners using a Key Account Management (KAM) model. Using this model, the firm promotes a dedicated, standardized, disciplined and heightened focus that ensures tasks are fully completed to a high-standard in an efficient way.
Türk also credits the firm’s innovative bundling negotiation technique for some of its success.
“We have changed the rules of bundle negotiations and transformed it into a more planned, structured, systematic and collaborative structure,” he adds.
Understanding the collaboration is key to success, Turkcell has also organised a Supplier Summit whereby the company can explain its strategies and expectations, make new business connections, strengthen existing relationships, and discuss new market trends.
In a similar vein, Turkcell’s procurement team is collaborating closely with its finance division.
By working together, the pair approach the firm’s budget in a very disciplined manner, meeting challenging capex and revenue targets.
With enviable financial health and some of the industry’s leading procurement practices, it seems Turkcell is set to continue on its upward trajectory. But what are the next steps for the digital operator?
As a Turkish company, one of the company’s main focuses is supporting local production and local firms that will contribute to the country.
What’s more, the digital company has also revealed that it is participating in a joint venture to create the country’s first national car and it is also helping to develop smart cities using its 4.5G technology.
Forecasting a surge in demand for data, Türk also says that the company will continue to tap into the growing demand for data, leveraging its search engine ‘Yaani’ and developing new tier III data centres.
“We expect that demand for data will keep rising as we see more and more 5G technologies,” he says. “Everybody needs to understand that a country which does not own its data is a country that is going to disappear in the future.”
In order to keep Turkish data in Turkey, the company notably has several data centres in the country.
“All of these data centers have been built to Tier III certification in order to provide security and management services for our customers at the highest international level,” Türk adds.
Keen to show leadership in corporate business, Turkcell is also looking for new opportunities as a health technology provider.
For example, the company has embarked on a series of city hospital projects in partnership with Rönesans health investment to help usher in a new era of digital hospitals.
“We have digitised city hospitals from end to end by installing and managing the latest technological infrastructure and IT management systems,” Türk explains.
On top of this, the firm is also exploring opportunities as an educational technology provider, most notably through Project Fatih.
This scheme aims to promote educational transformation by bringing state-of-the-art computer technology into Turkey’s primary schools, secondary schools and high schools.
All in all, it seems Turkcell has truly evolved from the company it was when it was first founded in 1994. It has undergone an extraordinary shift, putting procurement at the heart of its strategy. As such, whilst other telecom companies have struggled, Turkcell has blazed its own path in the sector.