ABB: Taking procurement to the next level in times of change
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ABB: Taking procurement to the next level in times of change As part of a broader digitalization journey, ABB looks to transform indirect procurement... WRI T T EN BY PRODUCED BY
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D al e Bent o n Hey kel Ou n i
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he concept of procurement transformation seems almost old fashioned in the sense that
it’s something that all major businesses and organisations are currently going through. These transformations are often incredibly complex and full of any number of moving parts and so the challenge is breaking that complexity down into sizable and manageable actions that will allow the company to deliver major change. Technology and the concept of digitalization is a common driver of change within a procurement transformation journey. To put it simply, gone are the days of experience-based decision making. In its place? Data to create actionable insights. As a technology leader that drives the digital transformation of industries all over
Procurement at ABB and Martin Tomczak,
the world, ABB is certainly no stranger
Head of Strategy, Process Excellence &
to the concept. With a history of innova-
Digital within Global Business Services
tion spanning more than 130 years, ABB
(GBS) Procurement & Logistics function at
has four customer focused, globally lead-
ABB. Procurement & Logistics being one
ing businesses: Electrification, Industrial
of the services delivered by GBS, which is
Automation, Motion, and Robotics &
ABB’s shared services organization, deliv-
Discrete Automation, supported by the
ering operational and expert services in
ABB AbilityTM digital platform. ABB is
Finance, Human Resources, Information
the go-to partner for digital transforma-
Systems, Procurement & Logistics, Legal,
tion, but what happens when the digital
Global Travel Services and Real Estate.
transformation comes to indirect procure-
With more than 7,000 people based in five
ment at ABB? This is the challenge facing
main hubs and front offices, GBS provides
Daniel Stumm, Global Head of Indirect
business services to ABB teams across the
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globe.
in those business lines, plus their indi-
“The value of indirect procurement
vidual procurement and finance teams,
at ABB is based on the fact that we are
to deliver greater value to our evolving
an internal service provider that aims to
business in line with their business prior-
create a positive bottom line impact for
ities, and drive tangible impact to the
each single business line, while also keep-
profitability.”
ing our ROI as an organization above benchmark,” says Stumm. “With the decentralization of ABB
As procurement began to engage with the wider ABB businesses it became apparent that procurement spoke its own
launched in December 2018 we trans-
language; one that wasn’t immediately
formed from a headquarter-focused
understood by the business. “We needed
support model, to a service model that
to step back and put the emphasis more
benefits our businesses. Today we work
strongly on the business needs,” says
much more closely with the internal clients
Stumm. “We did this so that we could try 5
and realise their expectations in a way that would make them happy customers and add procurement as a true financial impact – creating an increased purpose as indirect procurement.” Tomczak, as Head of Strategy, Process Excellence and Digital, knows all too well about the role of data analytics in enabling this true impact. “The time of decisions based on mere experience is over. We must listen to what our company’s internal data tells us and we do that through data lakes,” he explains. “Very early on as part of this journey, ABB was quick to create better transparency by breaking down data silos. Only then can we begin to connect the dots and make the right decisions based on the right data in a quick and effective way.”
The ‘right’ data Having the right data and making the right decisions quickly is fundamental in order to adapt and survive in an ever-shifting market. It’s written within the DNA of ABB that the company understands and acknowledges customer satisfaction and in order to do so, ABB requires data. Stumm highlights that customer satisfaction is a key KPI for indirect procurement. Indirect procurement measures the satisfaction of its broad internal customer range using Net Promoter Scores (NPS) on an annual basis with a defined group of internal clients. Running in parallel to this, they also measure service quality on a transactional level with customers that use its services. Whenever a customer completes a purchase request through the procurement system or ServiceNow ticketing system, they can rate it between one and five. Stumm highlights that this is similar to how travel and restaurant customers 6
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use TripAdvisor to rate their service, and
business intelligence dashboards and
how organisations use that information to
detailed spend analytic tools to enable
listen to the customers and improve.
quick decision making. First and fore-
As procurement works closely with each
most however, this team is not made up of
ABB business, Stumm believes that each
purely procurement people; it is a combi-
business has a ‘different flavour’.
nation of people in IT and analysts that
“While we are all part of ABB, there are different objectives across our four businesses– even in terms of expected
have a good understanding of ABB’s business intelligence. This is particularly important and bene-
service quality from us,” he says. “The
ficial for ABB throughout the COVID-19
customer is our business and so we’ve
pandemic. “Indirect procurement needs to
implemented an internal ecosystem that
react fast in terms of cutting discretionary
enables constant dialogue with the busi-
spend, an example of which being market-
ness and therefore the customer. It’s about
ing events that have been canceled,”
making them a part of the decision-making
explains Stumm. “In order to resolve this,
process so that we are together from the
the team needs to be able to quickly
very beginning of a project. If we feel friction on something at the early stage, then we can address it together and overcome it. The only way we are going to succeed is by doing it, and failing in some regards, together.”
The power of analytics Analytics then, is crucial to this ecosystem and constant dialogue within ABB. This in turn redefines the very profile of procurement. ABB built a team of dedicated data analysts, called a ‘Performance Management Team.’ This team, situated in ABB’s Krakow and Bangalore GBS hubs, is focused on the fast development of 8
“We have to accept first of all that we are not there yet. We may be close to the Champions League in some areas and in the Champions League in places, but we still have to improve” — DA N I E L S T U M M , G LO B A L H E A D O F I N D I R E C T P R O C U R E M E N T AT A B B
access and check the cancellation fees of the contract and explore the options available.” In order to achieve this, a tracking system was needed. “Thanks to our Performance Management Team and their IT expertise, we now have digital dashboards implemented and operating within our Bangalore and Krakow offices,” explains Stumm. “They really stepped up big time. It’s not just us (the management team) who need the access, but our controllers, finance people and people from the business. We now all have an overview on the overall exposure to ABB so we can see, in real time, just how we are working to reduce the exposure to ABB. I think that’s a completely new field of play for the indirect procurement teams, thanks to digitalization.” Data storage and analytics continue to be of great significance to ABB moving forward. This has completely revolutionised a number of ways in which ABB indirect procurement monitors its operations. For example, with regards to travel, ABB now uses one global travel agency, connected via one global platform.
continues in pg 72 9
Accenture: a trusted partner to help solve procurement’s new value equation Accenture has worked closely with ABB to assess its procurement maturity and define the transformation journey. The challenges facing ABB’s indirect procurement team are not uncommon – enable procurement to reveal greater value to a broad set of stakeholders with different business priorities, become a trusted business partner and optimise digital investments to benefit from the power of digital. Markus Hoppe, Principal Director at Accenture Strategy
range of specialised, high-value apps to create a vastly
explains: “many procurement teams now realise they
improved experience across the value chain.
must revisit their propositions to make them better suited
Finally, with technologies like machine learning
to the digital age. In practice, that means more closely
and artificial intelligence maturing fast, procurement
aligning their services with business needs and adopt-
leaders are looking at how related applications can
ing new technology to increase operational quickness.
be used to boost the performance of their workforce
And as this is happening at a time when digital skills are
and even fundamentally reshape procurement roles.
in short supply, procurement teams are also having to
By deploying smaller, more focused teams armed with
invest in reskilling their team members.”
new skills and working alongside machines, procure-
In its work with procurement organisations from some
ment organisations can help address the skills gap.
of the world’s largest companies, Accenture has iden-
Moreover, the approach allows procurement teams to
tified a three-step process by which procurement can
tack away from transactional tasks towards a new role
release value in their enterprises.
within the business as architects of value.
First, procurement teams must look at how to best
These three parts of procurement’s new value equa-
turn data into value. Leading procurement teams are
tion underpin ABB’s own transformation and have in-
building data lakes on top of their ERP systems to
formed a roadmap that will allow procurement to make
consolidate data from across their enterprise. Ad-
a new role for itself. The plan was made before the
vanced analytics is then applied to the data, provid-
COVID-19 pandemic hit, yet despite the huge changes
ing procurement with unprecedented visibility and
that COVID-19 will bring in the years ahead the prior-
insight. This data reveals much more than just what’s
ities identified by Accenture remain valid. If anything,
being bought from which supplier and sheds light on
the COVID-19 crisis reiterates the need for responsive
the material’s provenance, the supplier’s service level
and flexible procurement practices that match exactly
agreements (SLAs), delivery and performance, and
to the needs of the business – precisely what ABB’s
even sustainability practices. This information allows
transformation is all about.
procurement to answer a wider variety of questions and gain valuable insights for better decisioning. Second, procurement teams increasingly see the value of creating a seamless and throughout experience across procurement, suppliers and internal business
Markus Hoppe Principal Director Accenture Strategy markus.hoppe@accenture.com
customers. This move requires a much more flexible technology stack that focuses on functionality, ease of use and driving desired outcomes. As a result, many procurement teams are ‘hacking the stack’ by augmenting their new cloud-based ERP solutions with a wide
Karin Larsson Senior Manager Accenture Strategy karin.larsson@accenture.com
w w w. cp o stra te g y. co m
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Through this dashboard, controllers and
stepped up, consolidated down to one
decision makers within ABB can see where
travel agency, and made that enhanced
people travel, understand the negative and
life.”
positive outliers in that travel and they can
Another area of significant change is
even see whether a booking was made
temporary labor. ABB is working to imple-
on time - all in line with GDPR. “We really
ment an analytics system that will provide
have a new level of transparency with this
complete visibility on its total external work-
approach,” explains Stumm. “That wouldn’t
force. This has redefined the approach
have been possible if procurement hadn’t
entirely, particularly in ABB’s Switzerland
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operations. “We’re no longer just negotiat-
alternative, we can now ask the question as
ing markups for temporary agencies, where
to whether these roles could be filled with
we take a little bit at total cost. We have the
apprentices too.”
ability, thanks to all the data, to analyse the temporary labor workforce individually.” “We can then look at things like; are they
Stumm believes these conversations, thanks to analytics, represent the huge power of procurement and indi-
working longer than the usual 18 months
rect procurement. Indirect procurement
within the company? Rather than wonder
can look even further at how it influences
whether they can be in-sourced as an
not just spend decisions and investment
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decisions, but also other areas, like sustain-
Hoppe, Principal Director of Accenture
ability, travel and labor.
Strategy, has worked closely with Daniel and Martin as part of this assessment and
Benchmarking
will continue to do so throughout the trans-
All of this talk of data and customer satis-
formation journey. The remit was simple,
faction speaks to the broader concept of
define the plan for the future within this
benchmarking. Capturing and analysing
decentralised model. “Procurement in
the data is one thing, but you need to be
leading companies is beginning to look
able to benchmark against the market
starkly different from what it used to. This
and against others doing the same. “In
requires that you look beyond simply;
soccer terms, my ambition is to play in
this is where we are today and where we
the Champions League,” muses Stumm.
could be tomorrow,” he says. “It requires
“We have to accept first of all that we are
you to think about how you can reinvent
not there yet. We may be close to the
yourself and work out what is the art of the
Champions League in some areas and in
possible, fueled by pockets of excellence
it in others, but we still have to improve.”
that we see in the market?”
“It’s about putting the facts on the table and going back to the business, involving them in our development while also working with the outside world and benchmarking ourselves. So not locking ourselves in our small castle, that’s key to improving.” To that end, ABB called upon the services of Accenture to develop a strategic roadmap. This began with an exercise in assessment and an in-depth analysis of how ABB’s indirect procurement operates by speaking with its customers, its internal teams and with leadership. Markus Schebitz Managing Director at Accenture Strategy, along with Karin Larsson, Senior Manager and Markus 14
“We have to move away from searching for the right problem for a particular solution. Therefore, a proper demand collection process is key to drive digital transformation. It allows us to focus on the best possible solution approach for each identified opportunity and its underlying business case” — M A R T I N T O M C Z A K , H E A D O F S T R AT E G Y, P R O C E S S E X C E L L E N C E , D I G I TA L , G B S P R O C U R E M E N T & LO G I S T I C S , A B B
Accenture took the ABB leadership team on a ‘Procurement Digital Safari’ to deep dive into the platform and niche solutions in the market and how those solutions could benefit ABB in its journey. 30 key focus areas were identified and together the two companies explored and identified gaps and current capabilities and how to improve them. Through this, a roadmap was born. One that was accessible and developed with a top-down approach. “You need to ensure that you bring leadership on the journey and the solutions actually help them solve the problems that they have on the ground,” says Schebitz. “You need to realise you can’t become the leader in everything. It’s just impossible. You need everyone from the top down involved.” Schebitz compliments the way in which ABB have collaborated with Accenture in allowing them to understand what ABB wants to be. Schebitz feels this was important in finding the right priorities for this journey. “We spent a lot of time with the leadership team to enable them all to be able to articulate this,” he says. “That for me 15
has been the key input to ensuring that
so. Tomczak reflects on the role in which
the roadmap that they’re putting in place,
Accenture has played in this.
is actually in line with where they need to improve.”
“Working with Accenture, we’ve been able to identify smaller initiatives complementary to the ones we had on our
A focused approach to technology
agenda already ensuring alignment with
Digital transformation can become awash
the bigger transformation picture,” he
with buzzwords and inundated with tech-
says. “Managing this complexity can be
nologies that may or may not provide
very difficult especially for decentralized
value. Schebitz admits that it can be easy
companies with a strong global presence.”
to fall victim to this and invest because
Through this roadmap, ABB can look
of market trends. The approach to digital
closer at the procurement tools at its
transformation is something that Tomczak
disposal and how best to streamline
in particular is keen to rethink. “We have
processes. This includes the use of
to move away from the traditional thinking
Amazon Business Services as a market-
of digital transformation where we feel it’s
place for tail end spend, something which
all about this one big project that solves
Stumm highlights was inspired from the
our problems but in reality, will never
B2C experience. “We also still push e-auc-
get implemented,” he explains. “We also
tions which is nothing new, but it’s some-
have to go away from searching for the
thing that’s still not used sufficiently in the
right problem for a particular solution. A
area of indirect procurement from our
proper demand collection process is key
point of view,” he says. “Using e-auctions
to driving digital transformation. It allows
is an important basic step to truly digitalize
us to focus on the best possible solution
sourcing, laying the groundwork for sourc-
approach for each identified opportunity
ing automation.”
and its underlying business case.” In building a demand collection process,
ABB also collaborates with big as well as smaller tech companies to utilize the latest
ABB will avoid focusing on solutions such
technologies. The outcome of such collab-
as Robotics Process Automation (RPA),
orations are projects and studies around
chatbots or machine learning in the first
the usage of Robotic Process Automation
instance but rather on the opportunity to
(RPA), chatbots and text mining as well as
transform the perceived value by doing
an agnostic user interface to drive usability
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and offer internal employees one go-to
journey. “The average age of our team
service point for their requests. Usually the
members is quite young. So technology is
biggest value derives out of projects that
really close to their heart as they’ve grown
take the strengths of different technolo-
up in a digital world,” he says. “In order for
gies and combine them into one solution
us to leverage the capabilities of the new
design.
technology and the digitalization of our department, it’s also a question of mind-
Empowering people
set and having those people that are in
Around 60% of ABB’s Indirect
tune with the technology driving it. There
Procurement Team are located in Global
are those who aren’t as tech savvy, but
Business Services main hubs situated
we see that the rest find it easy to follow
in five countries, including India, Poland,
because with the footprint that we have, it
Estonia, Mexico and China. Stumm is
comes naturally.”
keen to highlight the importance of bringing procurement practitioners along this
Stumm notes that, where necessary, ABB will invest in upscaling its staff because 17
“It requires you to think about how you can reinvent yourself and work out what is the art of the possible, fueled by pockets of excellence that exist in the market” — M A R K U S S C H E B I T Z , M A N AG I N G D I R E C T O R AT AC C E N T U R E S T R AT E G Y
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they will be closer to the customer - the key stakeholder. These customers need to be brought along the journey. As Stumm highlights, customers in the digital age may favour self-service but that does not mean removing face to face human interaction. “ABB has done a tremendous job in the past with digital workspaces and new ways of working to enable efficiency independent from locations, time zones and age. In addition, it allows us to engage with our stakeholders around the world” says Tomczak. With a roadmap in place and eyes set firmly on making the right decisions now in order to enable a better tomorrow, Stumm is committed to his belief that ABB’s Indirect Procurement needs to be playing in the Champions League. He also recognises that, even when the company gets there, the job isn’t done and the journey doesn’t really end. “We’ve benchmarked and outlined where we want to go with the help of Accenture. But that’s just part of the journey,” he says. “We still have a lot we need to do. What’s important is that we never stop and that we never stop listening to our internal clients. We must continue to benchmark ourselves against the market and therefore provide true value to ABB.” “It goes back to what I said earlier, we need to involve as many people as we can and not lock ourselves in our small castle within procurement. Only then can we continue to provide better service quality.”
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