Zalando – Brochure 2020

Building indirect procurement in a fast paced company from the ground up

PROJECT PARTNER

Building indirect procurement in a fast paced company from the ground up Djordje Stevanoic (Director Indirect Procurement) and Alejandro Basterrechea (Head of Procurement Operations) at Zalando tell us how an agile and robust indirect procurement function is key to the future of Zalando

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D al e Bent o n Hey kel Ou n i

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he role of Indirect Procurement has evolved into a strategic function.

Over the last decade, the transformation and evolution of procurement has enabled a wider understanding of what the true value of procurement can be to a business. An interesting evolution, and a growing trend, has seen many people shifting from direct into indirect procurement.

“The buyers from direct procurement often say that indirect are the ones who buy pencils or copy paper,” explains Alejandro Basterrechea, Head of Procurement Operations (Indirect Procurement) at Zalando. “Now, if I look at our team, we have people coming from the business functions or the direct procurement space. It's

Not only cost savings, but how to really

becoming more attractive because you

use the money in the best way and at a

have other levers and can influence

speed that allows us to become a strate-

specifications more than in the direct

gic partner to the business.”

space.” This is an observation shared

by Djordje Stevanovic, Director Indirect Procurement, who believes that the time

The evolution from transactional to strategic business partner

when indirect procurement was merely

Becoming more of a strategic part-

in charge of office supplies and company

ner is exactly the remit that Indirect

cars is firmly in the past. He says: “Once

Procurement at Zalando is working

the business and the world evolved and

towards, with Stevanovic being brought

everything became more global and

into the company to build up an indi-

competitive, the attention to cost grew.

rect procurement function and support

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the company in its ‘next level’ of growth

“On the one hand an indirect procure-

following a successful IPO in 2014.

ment organization and all its processes

Zalando was founded in 2008 and

and people and on the other, an ePro-

as Germany’s most successful start-up

curement tool. There was already a core

and one of the first unicorns, it experi-

group of people doing indirect procure-

enced hypergrowth in terms of revenue,

ment activities and reporting into the

customers and employees and therefore

CFO organization, but in my experience,

sought to control the increasing spend

usually in such an organizational transfor-

more professionally, by investing into an

mation, you either already have the tools

indirect procurement organization. “The

and need to restructure the teams or you

main challenge was that we needed to

already have an organization and need

build two things at the same time from

to run a digital transformation.”

the ground up,” explains Basterrechea.

“At Zalando, this was about doing 5

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One of its clients is Zalando SE, Europe’s leading online platform for fashion and lifestyle.

As part of the company’s vision to become the Starting Point for Fashion, Zalando is building a sustainable indirect procurement solution to support the ‘next level’ of growth. Zalando, in partnership with Genpact ERC, has established a risk based third party due diligence program for all its indirect business partners to comply with its code of conduct requirements.

“With focus on compliance, we deployed an experienced team with deep domain knowledge, empowered with smart technology to ensure near real-time reporting of true hits” says Anu Vij, Regulatory Compliance Leader at Genpact. “This ensures Zalando is working with ethical & sustainable business partners who acknowledge its code of conduct and adhere to various regulatory requirements.”

Zalando follows a risk based approach where all business partners undergo initial risk classification and are appropriately assigned to Genpact for conducting due diligence checks. “We screen their business partners across 40+ countries on risk areas like sanctions, anti-bribery anti-corruption, political exposure and adverse news (including labour rights, health & safety, etc.) and provide results to Zalando to develop their response strategy for high risk business partners” says Anu. While Zalando runs a mature program, Genpact’s prerogative would be to help them stay abreast with the ever increasing regulatory dynamics and at the same time maintain a sustainable third party risk program. This includes evolving towards continuous monitoring of business partners and better integration of sustainability

parameters to manage risk across the business partner life cycle.

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The procurement space continues to remain dynamic. As a result, agile third party programs are increasing, as stakeholders realize there’s a lot more to do ‘beyond database run’, widely apparent throughout the current pandemic. “What COVID’s taught people is that supply chain disruption is not going to disappear in a hurry. I think it is reminding procurement officers to closely monitor their supply chain risk, identify sole supplier dependency and understand their supplier network that impacts their end product offerings” says Subhashis.

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both at speed and at the same time in

and how indirect can be structured,

a high speed environment all the while

including the organizational design and

being customer obsessed and starting

implementation of user-centric solutions

to deliver value,” remembers Alejandro

to suit Zalando’s needs. The second

Basterrechea. “This was a new challenge

phase looked at what Basterrechea

that required a mindset change for any

describes as “ramping up”.

experienced procurement professional,

“Now, you have to look at how you

but it was worth it. We see the results

ramp it up from an organizational side;

now”.

looking at staffing, defining skill sets, job

In 2015, Zalando outlined a very clear

profiles and acquiring the right people at

roadmap as to how it wanted to build

the right time,” he says. “On the tooling

this indirect procurement function. The

side it's about user centricity and how we

journey can be defined by four phases.

implement tools people love to use and

Phase one focused entirely on defining

how we can get the most out of them.”

the why and value of the organization

Phase three explores

“ Now, if I look in our team, we have people coming from the business functions or direct procurement space. It's becoming more attractive because you have other levers, and can influence specifications more than in the direct space.”

— ALEJANDRO BASTERRECHEA, HEAD OF PROCUREMENT OPERATIONS (INDIRECT PROCUREMENT)

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professionalisation. More specifically,

he says. “You have the right people and

Zalando Indirect Procurement is at a

the right sizing, but now you need to

stage where it has reached a critical

bring value. We have a good backbone

mass in terms of the right organizational

and now need to deliver based on the

structure, level of expertise and ePro-

value we bring.”

curement usage. “So, the question is

It was at this point in the journey

how to take advantage of an established

that Stevanovic joined the Indirect

organization and bring it to the next level

Procurement team at Zalando. “I was

to reach the status of strategic business

impressed by the speed, the entrepre-

partner that delivers value to its stake-

neurial culture and customer obsession

holders and gets the seat at the deci-

mindset of the company. This was also

sion-making table,” says Stevanovic.

reflected in procurement, which in four

Phase four is all about creating the

years achieved what it would have taken

procurement of the future. “You have the

a decade in other organizations.” For

technology, the processes and the data,”

Stevanovic, whose career saw him move

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from direct to indirect procurement, this journey for Zalando is one that can be defined by “stakeholder management”, meaning managing the ‘right’ stakeholders in the ‘right’ way. In other words, identifying the right internal customers, understanding their needs and addressing those needs proactively by leveraging the tools and talent it has implemented so far.

“You need to explain what you would like to do with your internal customer, what kind of value you can bring, and you need to execute and bring that value,” he says. “You accept the fact that you need to gain the respect and take on the responsibility of things that are

actively be a part of the daily life of your

outside the normal responsibility of a

customer. They are the stakeholder, so

procurement organization.” Stevanovic

stakeholder management is essential.”

believes that this speaks to that broader perception of indirect procurement and how most people think of a buyer as just

Enabling growth and the impact of technology

a negotiator. Stevanovic is keen to high-

The indirect procurement journey for

light that negotiating is but one part of

Zalando is about enabling objectives like

the ‘entire set’ of services that indirect

growth, financial impact and customer

can run. “We understand and comple-

satisfaction, while providing the right level

ment the internal customer and we can

of spend and cost management as well

offset and neutralize the things that aren't

as enabling the user's business to make

working for them,” he says. “This is how

informed decisions. This requires a level

you can save money. You can also save

of agility combined with the right process

time and resources. The real goal of the

and technology in place to minimize work

indirect procurement organization is to

for the business so they can focus their

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effort on growth; generating revenue, while onboarding and generating more

all the strategic value that comes from it.”

Transparency, compliance, and in turn

customers. Spend management is a blan-

data, allows the conversation between

ket term that we hear in all procurement

indirect procurement and the internal

organizations, but for Basterrechea it's

customers to change. In short, it allows

about how indirect can simplify processes

indirect to assert its position from a

with enough transparency and compli-

support or control function to a strate-

ance so that people can manage their

gic business partner. Data is the key to

budgets properly and efficiently. “In doing

this. “If you have the data, the conver-

this, you will collect so much informa-

sation becomes fact based,” explains

tion from internal and external customers

Stevanovic. “Data-driven conversations

that you can continuously provide the

are more effective. This can help areas of

right level of transparency for smart deci-

the organization be faster in achieving the

sions,” he says. “It enables better deci-

target of being on the same page.”

sion making, which translates into indirect procurement because they can profit from

There's also agility and the system. If the entire team is associated with a tool that 11

is difficult and doesn't work well and is

Data driven Procurement

somewhat clumsy to use, the internal

So it’s clear that data and stakeholder

customer will not see indirect procure-

management go hand in hand. For two

ment as a ‘giant’ in the business. “We

men whose careers have been defined

have to be a giant because we are

by procurement, communicating its value

one of the few organizations that have

and navigating the complexity is second

access to all areas of the business,”

nature. Doing this sounds simple on

says Stevanovic. “This is an incredible

paper and data certainly helps, but ulti-

advantage. We are creating a bridge

mately there remains a lack of informa-

and connecting the separate areas that

tion as to what indirect procurement can

are not as close as they should be. We

actually do for business.

can bring opportunities that are not

Basterrechea notes: “At Zalando I've

being considered or that the business is

been closer to other departments more

unaware of.”

than in other companies. Having good

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technology and strong processes helps

tool and explaining to the business that

bring everybody together because you

if you follow the process and allow us

bring the same language within the same

to help you - everything you’re buying

system and process and you generate

externally will be processed in a much

all this important data for these teams.

smoother way because you’ll have a

Procurement becomes the spider in the

greater understanding and control of

web. You’re pulling different people and

your budget,” he says.

different information to the table to help

“It's just a fact that you need to put the

the stakeholder make a decision based

pieces of the puzzle together to look at

on the data you have from other areas.”

what you do as part of the business from

Stevanovic is keen to acknowledge

the right perspective. Sometimes, you

that it is still a step-by-step process,

may not have that perspective because

regardless of how seamless they are

it's not your first priority. But if you allow

making it. “It’s about providing the right

the procurement to help you in this you

“ Procurement becomes the spider in the web. You’re pulling different people and different information to the table to help the stakeholder make a decision based on the data you have from other areas” — ALEJANDRO BASTERRECHEA, HEAD OF PROCUREMENT OPERATIONS (INDIRECT PROCUREMENT)

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will have even more money than you did previously to follow up on your priorities even more.”

As part of phase one and two of this

is prepared and ultimately shared.

Trust is crucial to indirect procurement and having this P2P tool and process, as well as being data oriented, goes a

journey, indirect procurement now has

long way in building that trust and influ-

a P2P process that enables the organ-

encing change for the better. “Figures

ization to collect this information. They

don't lie,” says Stevanovic. “Once the

have also implemented additional tools

source of your data is proven and is

to process the information and provide

visible to everybody then you have a

visibility. The team will then analyze

fact-based discussion.

the data and get conclusions out of it

But the real target is to be part of

together with the business because they

the team because the people have to

‘read part of the story, but we don’t know

see another perspective. We look to

everything’. It's about how the information

have one of our people taking part in

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leading discussions.”

Basterrechea concurs with this sentiment: “If you're able to present the high level numbers and also provide

a role and this ability, to go up and down in the details at a high level when required, is essential.”

Indirect procurement then, for Zalando,

answers on the details, that helps the

is becoming a data driven organiza-

business because one number doesn't

tion and so it requires its people to be

tell you everything.”

data-driven professionals. For some

“Then there’s high level agility. If

this is a simple task, as they will have

somebody asks you for something,

cut their teeth in a world driven by

but it takes you three weeks to collect,

data, for others this will require train-

analyze and come up with an answer

ing and coaching. Both Stevanovic and

from the data, you're too late. Especially

Basterrechea agree though, that this has

in an organization like Zalando where

to come from the very top.

three weeks is a long time. Speed plays

“Djordje is already a data driven 15

person, so the discussions are based on facts and this becomes part of the team's culture,” says Basterrechea.

“It becomes part of the culture. But how do you enable the culture? What we're trying to build is a lot of self-service data solutions where our buyers are able to pull out data and information by themselves with ease. This is achieved through simple dashboards and reportings.”

Simplicity is the key and Djordje knows more than anyone that simplicity will allow the organization to be more effective and efficient while also building ‘momentum’. “Everybody has to have access to the data. This doesn't have to be a complicated process,” he says.

“If you have access to the data then the expectation is that you can pass this information to the team with ease.

Don’t come to me with a feeling, come to me with something that is really proven in the figures because then we can create the momentum and build on this.”The secret to this is coaching and explaining why something is making sense to do it in this way.”

Basterrechea is a firm believer that leadership has to lead by example by asking the right questions and allowing the indirect to provide the right information and data as he feels this is what will enable this to become the norm, embedded within the culture. “My team is one of the service units providing the data,” he says. “It's the customer's first mindset, so they need to understand what the buyer needs. They need to understand the role, what they want to achieve, and then work backwards to build the reports, the tools and the queries that they need to make them easier for them.Again, we don't make decisions with gut feeling, it's not part of our culture. People like to be convinced with facts.”

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Customer centricity

are the ones that are very customer

As indirect procurement, having that

oriented. Look at the success of Zalando,

customer first approach is what makes it

it is based on customer obsession,

a true strategic partner to the business.

convenience, and offering solutions.We

After all, indirect procurement is listen-

help them to help us, and once you have

ing, engaging and ultimately supporting

a customer obsession culture, which I

the business in its decision making and

believe we have in Zalando; it forces

strategic growth. “Remember, indirect

you to think simpler and to be more effi-

procurement doesn't own a budget,”

cient.This forces you to rethink how you

says Stevanovic. “Everything that you do,

approach them. Be it through process,

you do for someone else. This has to be

tools or the data and how you provide it.

part of the DNA of a buyer.”Basterrechea

Customer obsession is the key.”

continues: “Very successful companies

“ Everything that you do, you do for someone else.

This has to be part of the DNA of a buyer” — DJORDJE STEVANOVIC, INDIRECT PROCUREMENT DIRECTOR, ZALANDO

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Procurement in times of risk and uncertainty

Zalando is doing all it can to keep its

At the time of writing, the COVID19

well as, and looking to keep the business

pandemic has truly gripped the world,

running by looking at how it can maintain

causing major disruption to both life and

the partnerships that it has.

business operations. Understandably,

employees safe and to protect them as

The company has been working

this has taken its toll on Zalando and

closely with its brand partners to look at

indeed this procurement journey.

how it can help them through this crisis.

Zalando, along with many businesses

Zalando is an online ecommerce busi-

around the world, has had to adapt its

ness and so it has used this perspective

operations in order to survive, thrive and

to identify and offer support for those

help others as a good corporate citizen.

partners and onboard them as online

As part of a broader corporate drive,

retailers in a process called Connect

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Retail. Through this, Zalando has expedited the onboarding of brick and mortar stores and the partners can sell over its platform without any commission fee for a disclosed amount of time. This has been introduced and trialled in Germany, with the intention being to expand it to other markets, as well.

From a pure indirect procurement perspective, Zalando has invested into the procurement of protective equipment. “We were very fast because we were able to deliver a very important number of masks and different typologies of masks, to our people in the warehouses,” says Stevanovic. “We also worked to create the right environment to come back to the offices, if and when that happens, by providing our employees with the right protective equipment.”

This procurement approach was a mixture of tactical and strategic buying and was extremely successful for Zalando, thanks to its agility and the effective implementation of the P2P system. Through this, indirect procurement could select a supplier, check their conformity to the European standard for protective equipment and materials and pay for them all within the same day, whether it be Europe or Asia.

Protecting the business, alongside 20

protecting lives, is also a leading priority amidst this pandemic and Basterrechea champions the manner in which Zalando was quick to move in this regard.

“Once a decision was made, and we moved towards cost containment and protecting the business, we were able very quickly to lower approval thresholds, so that executives were more involved in the cost control, cost containment, and cost of business,” says Basterrechea.“What that has done is allowed us to leapfrog the implementation of digital solutions such as electronic invoices and e-signatures.We expedited a process that would have taken months into a few days.

It’s really a testament to how we turned a challenge into an opportunity.”

The pandemic has shone a light on the solid foundations that Basterrechea and Stevanovic have built as part of this procurement journey. While it has been a time of great duress, it's also been an opportunity to reflect on what has been key to succeeding, even in a time of crisis. “I think acquiring the Zalando culture within procurement, that shows its ability to act agile when the business needs and its ability to reduce costs when the business needs,” says Basterrechea. “But we also have the ability to adapt back again, when the business requires you to support growth and not cost cutting. That’s key.”

Building Procurement of the Future For Stevanovic, it goes back to people and stakeholder management. “Whether it's stakeholders learning about the culture and the environment and stakeholder management, this is a job where you need to work with 21

others,” he says. “You cannot work in isolation. You need to be present in the day-to-day of your internal customer in a way that supports them.”

People are key in building procurement of the future.

Attracting and hiring the right talent is the most important factor to have success as an organization. This includes not only the skillset but also the mindset.

“We have a very broad and diverse group of excellent professionals in our team. A truly international team that includes people from the most diverse procurement background. Some of them came from the business functions, some of them have jumped into other areas like data analytics or solutions management within the team and some of them have changed from direct to indirect,” says Stevanovic.

Zalando’s Indirect Procurement vision is to become the trusted value creator partner to the business by providing the most user centric procurement solutions, taking all the advantages of digitalization, becoming a data-driven organization, supporting the internal customers in implementing their business strategy addressing their needs through the most efficient and solid supply base and, by definition, ensuring the highest level of motivation and engagement in the team.

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www.zalando.co.uk