How an enabled and empowered procurement team becomes a stronger enabler for business
Enable, Empower and Encourage: Procurement teams reach higher level of performance at Lufthansa Group Angela Qu, Senior Vice President, Chief Procurement Officer at Lufthansa Group tells us how procurement is becoming a true business enabler.
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any people have a classical perception about procurement. To them procurement is
an administrative function hidden away in the back office. Procurement is simply to get the right things for the right time in the right quantity. “This is just a starting point,” explains Angela Qu, Senior Vice President, Chief Procurement Officer at Lufthansa Group. “Procurement can provide more added value to the business, if we become much more strategic, and are able to bring valuable market information and alternative solutions to the decision table. Further, we should be able to facilitate collaboration with internal and external stakeholders, connecting the dots of the whole supply chain. Ultimately, procurement should drive supplier innovation and sustainability at the top of its agenda. Thus, we can support the company’s growth and become the key enabler of value chain
in mind as she started her tenure at
creations. However, there is a long way
Lufthansa Group: to create a better align-
to go from where we stand today, even
ment on long-term objectives across the
knowing where the final target is, as we
different procurement teams within the
head towards where we want to be in a
group, and to bring procurement to a
5-year horizon.”
much more strategic level. As part of this, she also looked at making the procure-
Procurement vision 2025
ment contribution much more visible from
Like many procurement profession-
a P&L context while also upscaling and
als, Angela Qu had a very clear mission
skilling people across the group.
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LUFTHANSA GROUP
This mission started in April 2019 and
Right after that first week, Qu organ-
she recounts that ‘day one’ proved to
ized a series of strategic workshops with
be one of the most significant. “I met my
her leadership team that consisted of the
whole procurement leadership team and
various heads of procurement from differ-
was asked by one of the colleagues:
ent airlines within the group. Collectively
‘What is your vision here? What do you
they defined their long-term goals of
want to achieve?’” Qu replied: “It’s not
the procurement function (i.e. where
about what I want to achieve, but rather
they wanted to be in five years). Thus,
what we want to achieve. Let us work it
a vision was born. Procurement Vision
out, together!”
2025 will see procurement become a key w w w . c p o s t r a t e g y. c o m
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Photo by Annie Huss Kearney, Chicago
Smaller. Smarter. Speedier. Disruptive Procurement is a radical new approach to creating value and innovation by challenging the status quo across the entire product and service line. It requires going far beyond conventional desk top procurement to under stand the value the company brings to its customers as well as the value that suppliers bring to the company.
This is the first procurement book with a special focus on the board level
de.kearney.com/disruptiveprocurement
For almost 100 years Kearney has firmly established itself as one of, if not THE true market leader, when some of the world’s foremost organisations are looking for trusted advisors to support them in delivering real strategic change. As a leading global management consulting firm with more than 3,600 people working in more than 40 countries, organisations undergoing significant procurement transformation journeys turning to Kearney is something of a no brainer. “With clients ranging from automotive, commercial and retail, right through to aerospace and defence, we at Kearney have a simple promise: to deliver the guidance our clients need to make real progress and impact” says Kai Engel, Partner and MD. “In this new world where we are seeing truly disruptive procurement and going in completely new directions in terms of challenging the product and service portfolio of companies to drive cost reduction, Kearney can call upon its incredible heritage and expansive partner ecosystem to deliver results,” says Michael Strohmer, Partner at Kearney. “But while we possess the leading edge know-how, we very much work in a very pragmatic way together with the client and so they feel inspired about what we bring to the table in terms of innovation but they know that we understand their specific issues and we always find ways to optimize a cost and value.” Strohmer identifies three main areas of change for procurement: 1) The standing of procurement has increased significantly over all industries meaning there is a necessity to have good procurement, that goes beyond simply being compliant with the process, but really drives value. 2) An increased focus on strategic topics in procurement and a decrease in operational workload. 3) Procurement has a seat at the table and, in some corporations, is much leading innovation and driving change in products.
So how does Kearney ensure that its services continue to serve this changing landscape? “This is a big challenge,” admits Strohmer. We have dedicated people identifying future trends and following what’s happening in the startup area. We are fortifying our ecosystems to have the leading edge solutions and know-how developed by ourselves and coming from the market and creating this ecosystem and we have plug and play situations, where we can really collaborate with one of our partners for the client.” At the real heart of Kearney is its people. The company is extremely proud of its people and the way they listen to clients and understand their challenges and develop creative, innovative solutions and ideas to succeed. These relationships are built by working hand in hand, having fun together, and sharing great success together. “It is something which is highly important for us,” he says. “to work with the client and also the different functions of the client and so we train the people, how to work with engineering, with finance, how to market people and so on, so that this becomes a kind of network of true collaboration.” No one has the keys to success, but there are steps that can be taken to ensure that however challenging the road ahead can be, it remains the right direction to grow and to succeed. For Kearney, this requires commitment from all sides of the business. “We need to be excited about what the clients are doing. With excitement comes commitment,” he says. “The people, the product, the journey, the challenges, we need to be excited together by all of it. For us, it’s incredibly important for the success of a project.”
Learn More
www.kearney.com
contributor to the overall growth of the company and the associated value creation.
The Vision is built on three pillars: Strategic Foster next level strategic sourcing, supported by automated and digitalized processes and tools to procure products and services with best-in-class quality and cost
Professional Enhance competence and entrepreneurship amongst procurement staff; ensure a high-performance driven organization and create a professional image to internal and external stakeholders and suppliers
Sustainable Build partnerships with internal partners as well as suppliers; retain knowledge and talent while providing sustainable solutions to business units and include sustainability aspects into decision-making process With these three key pillars in place, the team has identified their strengths and weaknesses in terms of current organization, structure, process, tools etc. Qu could then begin to launch short-term and long-term actions.
Enable and Empower the procurement teams to reach higher ambition of performance In procurement, particularly in times of transformation, results speak louder than anything else. Qu recognizes this and she can point to some considerable successes 8
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“ Facing the current challenges across aviation industry, procurement teams at Lufthansa Group are focusing on three topics: ensure smooth operations; maintain competitive cost base; and generate profits for each flights” — ANGELA QU, SENIOR VICE P R E S I D E N T, C H I E F P R O C U R E M E N T O F F I C E R AT L U F T H A N S A G R O U P
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that she has overseen in her time
Along with rolling out NLSS across
with the company. In 2019, Qu’s team
different categories, Qu also focused
achieved a significant growth in savings,
on strategic empowerment of group
representing almost a 50% increase on
category managers. Qu notes that: “We
2018; a testament to the work that Qu
empower our group category managers
and her procurement team achieved
by letting them understand what they’re
in a short time. The key success factor
responsible for and what their mandates
was the launch of “Next Level Strategic
are. Empowerment means that they are
Sourcing - NLSS”, which is the founda-
truly aligned to the procurement vision
tion of Vision 2025’s strategic pillar. The
and understand how they can play a key
aim of NLSS is to enhance the plan-to-
role in the transformation. In the end,
strategy process, with a standardized
the team has to deliver the requested
procurement methodology (using the
results.”
“Kearney Purchasing Chessboard”) in a continuous improvement approach to generate sustainable value for all stakeholders.
It is a simple five-step approach: 1) Spend transparency: understand spend through data and market analysis 2) Benchmark: set benchmark, define gaps, analyze root causes and aim for innovation 3) Develop: define category strategy and action plans with product owners/ process owners/ demand organizations 4) Implement: execute strategy and improvement plan 5) Sustain: review, reflect, and prepare for continuous improvement 10
LUFTHANSA GROUP
“ I truly believe engaged and empowered employees can deliver higher level of performance” — ANGELA QU, SENIOR VICE P R E S I D E N T, C H I E F P R O C U R E M E N T O F F I C E R AT L U F T H A N S A G R O U P
On top of that, Qu looked at those “enablers”, including advanced tools, data analysis capabilities, functional trainings, cross-industry best practice sharing programs and working collaboratively with other partner functions to find the best solutions for the business. At the same time, Qu spent significant time building the large talent base “Spotlight on Talent for Procurement”, which is a group wide program, identifying talents and giving them insight regarding procurement as a function. She ran numerous dialogues and one-on-one talks with potential talents from other functions, explaining why procurement is a great place to be. Through those active communications, she was able to attract talents into her organization with new ideas and new ways of doing things. “I am very proud to see that, through this journey, our own organization has transformed from a disparate procurement community to a more aligned and performance-driven procurement team! Together we became stronger as a function, as we can build upon our competences and knowledge from each other. Through our Next Level Strategic Sourcing processes, we have w w w . c p o s t r a t e g y. c o m
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become a valued business partner rather
to drive innovation and sustainability.
than simply waiting there until we receive
Alas, 2020 saw the world gripped by the
a request to negotiate,” says Qu.
COVID-19 pandemic and companies have been forced to act fast in order to miti-
COVID19 and crisis management With key successes under her belt, the
gate the impact as best as possible. “It was a unique situation for me and my
future looked bright for Angela Qu and
team,” affirms Qu. “Without much warning
procurement at Lufthansa at the begin-
in advance, in early March the Group’s
ning of 2020, with Qu and her team
cash inflow suddenly dropped by 90%.
well on their way to another 30% saving
This was a challenging time for my team
increase compared to 2019. Qu was
and me. First of all, we were worried
about to launch a supplier innovation
about the health and safety for ourselves
campaign that would see Lufthansa work
and our loved ones. We also had to keep
closely with its suppliers to redefine and
a functioning supply chain for on-go-
reinvigorate the relationship model and
ing operations, such as Lufthansa Cargo
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LUFTHANSA GROUP
who flew masks and medical equipment
when to protect and support the most
around the clock, and also the many
fragile parts of the supply chain in these
rescue flights which the Lufthansa Group
turbulent times. Whatever we do has to
performed for our home countries. The
be within the legal framework and based
most challenging part has been the 3rd
on mutual agreement with our service
pillar: sustain cash within our company in
providers and suppliers.� Lufthansa Group
order to weather the storm.�
has taken corporate responsibility espe-
Looking back to the last few months,
cially seriously during this challenging
Qu speaks of the importance of acting
time. A special approval process was
fast, calmly, and professionally, particu-
established for small and mid-size enter-
larly when dealing with supplier relation-
prises, or private owned companies in
ships. As Qu says, “The value of procure-
urgent need, so that they received their
ment has been particularly effective in
payments on time.
knowing when to aggressively conserve
In mid-July Lufthansa group received
cash to meet internal liquidity goals, and
state-aid support. The procurement team
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ABOUT US The Lufthansa Group is the leading aviation group with operations worldwide, with a revenue of €36.4bn Euro in the financial year 2019. The group is composed of three segments: Network Airlines, Eurowings and Aviation Services. The Network Airlines segment comprises of Lufthansa German Airlines, SWISS and Austrian Airlines, which offers its passengers a premium, high-quality product and service and a comprehensive route network combined with the highest level of travel flexibility. Aviation Services comprises the segments Logistics (Lufthansa Cargo), MRO (Lufthansa Technics), Catering (LSG Group) and Additional Businesses and Group Functions. The latter also include Lufthansa AirPlus, Lufthansa Aviation Training and the IT companies. All segments occupy a leading position in their respective markets. A considerable amount of the Lufthansa Group's costs come from external suppliers. The procurement team led by Angela Qu, has responsibilities for several tasks… - Group procurement guidelines, process and procedures - Group wide category management, definition and implementation of sourcing strategies, and managing supplier relationships - Supply chain sustainability and risk management - Performance management and procurement tools development
- Functional competence and people development
has played a key role to mitigate insol-
open and transparent way. “I am grateful
vency risk. “It was essential to have a
for those corporation partners and suppli-
high degree of transparency,” she says.
ers who have supported us with special
“It was important to look at all purchas-
contributions and prolonged payment
ing requisites and identify what is in the
terms during the past months. Those
pipeline, and cancel purchase orders on
who demonstrated great willingness to
time. We also lowered down the thresh-
support and collaborate with us in the
old of approval so that every external
difficult times will remain our strategic
spend request went through a special
partners for the future,” says Qu.
controlling approval process. We worked extremely hard to ensure that our buyers
Going Forward
were equipped to communicate the
Procurement has transformed significantly
complexity of what was happening and
at Lufthansa, and the crisis has meant
to communicate with our suppliers in an
further transformation is afoot. As the
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LUFTHANSA GROUP
topics: ensuring smooth operations; maintaining competitive cost base; and generating profits for each flight. Throughout the crisis time, Qu notes that she and her teams are changing their role from the traditional cost-cutting role into a true enabler of business. “We have to enable smooth operations, in a fast-changing environment, The flight plan is not stable, and we need to have a high degree of flexibility in our supply chain planning and commercial agreements. We have to ensure our cost base becomes even more competitive. We are looking at how we leave out complexity and how we as procurement can be true enablers to our internal partners. We need to help our requesting departments, which have very limited pandemic continued, so did the impact on
budgets to get the services and products
business continuity and Lufthansa had to
they need.”
look at its plans for the future - both long-
Qu reflects that the COVID-19 crisis has
term and short. Initial successes were
not been a distraction from those initial
crucial, but it was time for Qu and her
goals set in 2019, but instead has been
teams to differentiate what crisis mode
a catalyzer and an accelerator. Whereas
was and what the next phase was going to
‘Procurement as an Enabler’ was a key
be. “We are okay, we managed our crisis
focus prior to 2020, it now becomes THE
well, but now we have to move into the
focus moving forward. “It will go hand in
next stage, which is the ReNew phase,”
hand with our strategic business partner-
says Qu.
ing,” she adds. “This will be our key focus
Facing the current challenges across the
in the near future and I believe we can truly
aviation industry, procurement teams in
enable the organization to grow again as
the Lufthansa Group are focusing on three
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“ I am very proud to see that, through this journey, our own organization has transformed from a disparate procurement community to a more aligned and performance-driven procurement team!” — ANGELA QU, SENIOR VICE P R E S I D E N T, C H I E F P R O C U R E M E N T O F F I C E R AT L U F T H A N S A G R O U P
What makes a successful procurement organization? Prior to COVID and indeed throughout, Qu and her team have achieved an incredible amount of success. Is there a secret to this success, a silver bullet that could guarantee success both now and in the future? Unfortunately, there is not, but Qu is keen to highlight there are things we can all do to ensure that whatever path we take, the road ahead remains a step in the right direction. “Procurement managers need to understand the company’s overall strategies and top priorities; we must align procurement strategy accordingly to support the business. Going forward, we must remain flexible, fast and responsive towards market changes, including better analytics skills, stronger forecasting visibilities on cash management and informed decision making which are the keys to achieving success. Ultimately, it all starts with proper communication towards our own team, our internal stakeholders and our supplier base. That will forever be crucial to being a true enabler and delivering true value to the business.”
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