CPOstrategy – Issue 13 by B2e Media

I s sue 13 â&#x20AC;¢ www.cpostrateg y.com

Understanding EQ and hiring for it in a postpandemic world

ABB: Taking procurement to the next level in times of change

At es eam that creates valu

HOW WIK GROUP POWERS ITS PROCUREMENT THROUGH SUPPLIER RELATIONSHIPS Daniel Chua, Head of Global Sourcing at WIK Group, discusses how supplier relationships are the cornerstone to success...

EXECUTIVE INSIGHTS

Danieli China: How procurement agility provides a competitive edge

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Welcome to issue 13 of CPOstrategy! FOR OUR COVER feature this month we speak with Daniel Chua, Head of Global Sourcing at WIK Group, as he tells CPOstrategy how supplier relationships are proving to be the cornerstone to success during the COVID19 pandemic and beyond. Elsewhere, Francois-David Martino, CEO of Danieli China, tells us how breaking down competitiveness can be achieved through a redefined procurement approach and how procurement people are always in the change, making it easier for the CPOs to explain the change and to make people adapt to it. As part of a new series, Iain Campbell McKenna looks to answer the question: What will the “new normal” be in the post-COVID-19 procurement world? Iain explores what procurement needs to do to effectively step into a new and in some cases, vastly different role - this month we explore Emotional Intelligence, or EQ, in a post-pandemic world.

EDITOR IN CHIEF Andrew Woods

EDITOR Dale Benton

SOCIAL MEDIA MANAGER Callum Rivett

CONTRIBUTING EDITOR Kevin Davies

Rounding out the magazine we have an exclusive interview with Tania Seary, one of the most globally influential members of the procurement and supply chain world, and founder of Procurious, James Meads looks at how removing unnecessary bureaucracy and non-value added processes can improve the agility of your organisation post COVID19, and David Swift Global Head of Corporate Services Procurement at Novartis, explores how in the search for a seat at the table, procurement continues to face an uphill battle.

Stay safe, and enjoy the issue!

CREATIVE LEAD Mitchell Park

VP GLOBAL FINTECH & INSURTECH Alex Page

VP TECHNOLOGY Andy Lloyd Craig Daniels

VP PROCUREMENT Heykel Ouni Greg Churchill

PRESIDENT & CEO Kiron Chavda

PUBLISHED BY

Dale Benton, Editor content@b2e-media.com

CONTENTS

WIK Group

6 24

Turning crisis into advantage: Driving improvements by removing red tape

Danieli China

Ahead of the curve in connecting procurement professionals

Functionality in dysfunctionality and the integrity of procurement

Understanding EQ and hiring for it in a postpandemic world

ABB

At es eam that creates valu

HOW WIK GROUP POWERS ITS PROCUREMENT THROUGH SUPPLIER RELATIONSHIPS Daniel Chua, Head of Global Sourcing at WIK Group, discusses how supplier relationships are the cornerstone to success... WRI T T EN BY PRODUCED BY 6

D al e Bent on Gr eg Chur c hi l l

hen we talk of a procurement

on both internal and external relation-

transformation, we often focus

ships and what’s key to any relationship?

on a shift in process or the

Communication. By having clear, open

implementation of new technologies and

and constant communication across the

platforms in order to embrace a much

entire organisation and across your entire

more agile and “leaner” operation. More

supply base, only then will you truly

recently, organisations have started to

begin to see the real value that’s hidden

realise that all the best laid plans require

throughout the supply chain and procure-

the right talent and the right skill sets

ment ecosystem.

throughout the organisation, not just the

“Relationship management, for me, is

procurement function, to be able to fully

key,” explains Daniel Chua, Head of Global

realise the savings potential or the inno-

Sourcing at WIK Group. “I think that is one

vation and true value that procurement

of the very important factors and by rela-

can bring. But take it back even further,

tionship management I mean not only to

procurement and supply chains of all

the suppliers but also to my internal stake-

sizes, scope and complexities, are built

holders.”It’s also about understanding

WIK GROUP

what we are going to be able to do to

responsible for creating and develop-

get support from suppliers, both finan-

ing hundreds of system solutions and

cially and non-financially. By non-financial

producing millions of products world-

support I mean in times of crisis, like right

wide. Perhaps most notably, WIK Group

now with Covid-19. If you have a good

has evolved into a global, full-service

relationship with suppliers, they actu-

development and manufacturing partner

ally allocate more resources to support

to many leading international brands. By

you. Procurement is all about relationship

its own admission, WIK Group believes

management that you build for a long

that “corporate challenges can only

time. You get returns when it is needed,

be managed by leveraging synergies

not simply on a daily basis.”

between capable people and financially

Founded in the early 50s, WIK Group

solid partners, driven by responsible

is a privately held German contract

sustainable change and innovation. We

designer and manufacturer (ODM/OEM/

focus our resources on personnel devel-

CM) for electrical appliances and devices.

opment and process excellence based on

Fast forward to 2020 and WIK Group is

a value-creating company culture.”

w w w . c p o s t r a t e g y. c o m

Building a sustainable enterprise for future generations Everything Industrial Co., Ltd. (ETI) was founded in 2001 in Shenzhen, China. With 20 years development, ETI now has manufacture plant in Suzhou, Shenzhen, Malaysia and service branch in Japan, North America, Europe for marketing, R&D, logistics and supply chain support. ETI dedicates in the die cut, precision metal components as well as the advanced surface treatment who serves to top players in consumer products, medical products and appliances.

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As part of this corporate belief, WIK

Vodafone and Phillips, Chua was brought

Group embarked on a procurement trans-

in to deliver real change. Perhaps most

formation journey that will realign the

importantly for Chua, upon entering the

procurement function to collaborate more

business back in 2019, he wanted to make

with wider business units in order to be

it clear that the change he sought was not

able to generate greater cost savings,

a change of personnel.

unlock better efficiencies and drive inno-

“I wanted people to know from the

vation all while continuing to deliver its

outset that I’m not here to fire anyone. I’m

products and services to the highest

here to try to work with all of you, to bring

possible standards. This is where Chua

in and collaborate on new ideas together

comes into the picture. With a career that

with my experience from the bigger, inter-

has seen him take on senior procure-

national companies,” he says. “Let’s try to

ment roles for some of the leading multi-

work together. I needed to instil that mind-

national companies in the world, such as

set into my new team, because there are

w w w . c p o s t r a t e g y. c o m

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W W W.GE N BY T E C H. C O M

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WIK GROUP

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E sales@ampron.com

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“PROCUREMENT IS ALL ABOUT RELATIONSHIP MANAGEMENT THAT YOU BUILD FOR A LONG TIME. YOU GET RETURNS WHEN IT IS NEEDED, NOT SIMPLY ON A DAILY BASIS” Daniel Chua, Head of Global Sourcing, WIK Group

going to be changes. At the same time,

going to be valuable for WIK,” says Chua.

there will be a lot of coaching required

“I want everyone to adopt a mindset of

towards a different way of thinking around

thinking outside the box and being far

procurement. Simply put, the only two

more vigilant and experimental in terms of

things that are normally discussed with

bringing different things to the table.”

suppliers are either cost or quality. End

To highlight his point further, Chua

of story. We need to explore the relation-

points to a more traditional approach to

ships further and so I want them to look at

the bill of materials (BOM). Previously,

it from a different angle and in much more

and much like many procurement func-

depth.”

tions, WIK Group would have a team

In order to achieve this, Chua would

focused entirely on BOM. Chua wants

accompany his team on supplier meet-

these people to input the BOM numbers

ings and gain an understanding as to the

but also to be able to think about those

way in which these supplier relationships

numbers, to analyze them and to under-

are handled. Only then, he feels, can he

stand more about the materials and parts

leverage this supplier base for greater

themselves. “Then they can ask and ulti-

insights which will then translate directly

mately answer the question as to why we

into greater relationships and ultimately,

are buying these parts at this particular

greater savings. “I’m slowly coaching my

cost?” he says. “Once upon a time that

teams that you need to bring in ideas

was a question that would be passed onto

about what the suppliers are doing for

the sourcing teams and forgotten about

other customers and how this is also

until next time. Now, we have people w w w . c p o s t r a t e g y. c o m

asking more questions and understanding the business more.” Changing a mindset and a culture within a business is no small feat, particularly when that business has been extremely successful operating in a specific way for a long time. This is a challenge that Chua has faced and will continue to face throughout this journey. It’s easy to say on paper that you will come in and instil this innovative cultural mindset that will guarantee success and cost savings, but being able to achieve that is a different story. Chua is a firm believer in being able to walk the talk and being able to practise what he preaches. Every step of this journey, every decision he makes and process he changes, he does so with purpose in order for both his people and his management to be able to see real value and benefit from those changes. Any feedback he receives from above he shares with each and everyone of his team members. “It’s about reinforcing the notion that; all their efforts and hard work are being recognized by senior management. Not just by me,” he says. “This is important in building up a shared mindset so that we work as a team and move away from working independently in silos. We work as a team and have shared responsibilities because ultimately, those 14

WIK GROUP

responsibilities will impact the entire business, not just one particular function.” “We can’t operate to an out of date mindset of; once you’ve done your bit you move onto something else. If a mistake is made in your processing or it comes from the sourcing engineers, if you spot it and fix it you’re saving two people or even more. We’re working together and for one another. This is incredibly important for what I want WIK Group to achieve.” This is also key in establishing a sense of integrity for procurement. As with many organizations the world over, procurement has changed dramatically in the eyes of senior w w w . c p o s t r a t e g y. c o m

Established in 2002, the Shenzhen company manufactures high-quality spring, shrapnel and wire forming products in the automotive, medical, electronic and artificial intelligence industries for clients all over the world.

C L I C K TO D I S C OV E R M O R E

www.jltcn.com cty@jltcn.com

专致于流体控制 Specialized in fluid control

Specialized manufacturer of fluid control components

Environmental

Safe

Intelligent

Innovative

management and in the eyes of the busi-

complete the tasks but to complete them

ness. Chua and his team have witnessed

in a ‘better’ way than others.

this first-hand through this transformation

“The best way that we can see that the

journey. Where procurement was almost a

business now has complete confidence

business add-on, now Chua and his team

in our abilities is that we used to have key

see the other business units coming to

account managers being directly involved

them and wanting to become more like

in almost every part of our process,” says

them. The procurement responsibility of

Chua. “But now, after only six months,

WIK now takes on much more responsibil-

they don’t need to. They have confidence

ity. Historically, tasks would be transferred

in our abilities and they leave us to it as

away from procurement but now the tasks

much as possible.”

are coming into procurement because

As Chua has already noted, relationship

procurement now has the capabilities, the

management is key and as he continues

processes and the mindset to not only

to build competencies and drive change

w w w . c p o s t r a t e g y. c o m

“ I INTRODUCED MYSELF TO EVERY SINGLE ONE OF THEM AND I SAT DOWN AND SPOKE WITH THEM OVER DINNER. OUTLINING WHERE WE WANT WIK TO BE IN THE FUTURE AND THE ROLE THEY CAN PLAY IN THAT” Daniel Chua, Head of Global Sourcing, WIK Group

internally, he must also look further at the way in which the supplier relationships are

and the role they can play in that.” “Again, it’s about better understand-

handled from the supplier’s perspective.

ing the relationships so that we can grow

To best approach this, Chua kept things

these relationships together. Now, you’ll

simple. “After I looked at internal systems

see my team (where possible) travelling

and I looked at improving the way we at

around and meeting with suppliers and

WIK dealt with suppliers, I spent a month

sitting down with them and talking through

travelling outside the business to speak

our strategies and how we can better help

with all of our key suppliers,” he says. “I

each other. It’s all about rethinking what

introduced myself to every single one of

we think about our supplier relationships.”

them and I sat down, I spoke with them

At the time of writing, the world is

and I listened to them. It was about outlin-

currently gripped by the COVID-19

ing where we want WIK to be in the future

pandemic which has and will continue to

WIK GROUP

define and redefine business practices

with regards to that changed mindset and

indefinitely. Risk and crisis management

shared responsibilities,” he says. “How we

is nothing new to procurement, but when

progress relies entirely on everybody’s

discussed it is often theoretical risks and

discipline.”

theoretical worst-case scenarios. As we

This discipline is crucial in reporting a

are currently experiencing a worst-case

process of Resume Work Status that Chua

scenario, businesses are now having to

has implemented, a process in which

act. Chua believes that the COVID-10

WIK can identify and better understand

crisis is actually giving credence to the

how and when its suppliers can return to

changes he has made and will continue

limited or full operating capacity. Given

to make to WIK’s procurement practice.

governmental restrictions and a number

“This situation has actually put us into a

of external factors, each supplier’s

spotlight that shines on us as individuals

status will vary and so the responsibility w w w . c p o s t r a t e g y. c o m

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“THE BUSINESS AND INDEED OUR CUSTOMERS HAVE THE CONFIDENCE IN US TO BE ABLE TO DELIVER THAT INFORMATION TO THEM IN THE RIGHT WAY SO THAT THEY CAN BETTER UNDERSTAND WHAT’S GOING ON AND HOW WE ARE MANAGING THIS SITUATION IN A WAY THAT WORKS FOR EVERYONE” Daniel Chua, Head of Global Sourcing, WIK Group

rests with WIK’s procurement teams with regards to collecting the right qualitative

operate.” “It goes back to what I said about confi-

data on these suppliers so that they can

dence. The business and indeed our

report back to key stakeholders with the

customers have the confidence in us to be

right insights in order to make the right

able to deliver that information to them in

decisions for the business. “These key

the right way, so they can better under-

stakeholders are external,” explains Chua.

stand what’s going on and how we are

“On a weekly basis we report back to all

managing this situation in a way that works

our external customers about the status of

for everyone.”

the current situations and what is going to

On paper, it seems as though this trans-

impact them and the number of suppliers

formation journey and indeed the meas-

that are working for their products,”

ures that Chua has looked to instil have

“Right now as an example, we are moni-

been entirely pain free. He is keen to admit

toring around 400 suppliers and my team

that this is not the case and that it’s impor-

can tell you exactly how many of those

tant for anyone enabling change to stop

suppliers are relative to just one of our

and look at the pain points you experience

customers. They can also tell you how

along the way a little deeper. “We still have

many of those suppliers are located in

a journey to go,” he says. “But what we are

areas that have different levels of lock-

doing is fine-tuning each and every step

down restrictions and how many can still

of the way so that people can get up to w w w . c p o s t r a t e g y. c o m

WIK GROUP

speed.” The future of this journey is very bright for WIK Group and Chua breaks that future down into a number of key elements. Firstly, he wants his procurement teams to be producing qualitative data while also bringing more valuable information into the business such as terms of technologies and new forms of supply base back into WIK Group. Ultimately for Chua, it will always be about the people and the relationships. Over his entire career he has always valued the importance of having key relationships built by people with the right mindsets. “What has been and will always be crucial to any form of success that I and WIK experience as part of this journey is that my team trust me in what I’m trying to deliver,” he says. “My team trusts that I’m willing to showcase their achievements and their success to our key stakeholders. What’s also key for me is that I have been blessed with management and senior stakeholders that truly support ideas and initiatives. This will only continue to enable great success for WIK Group from a procurement standpoint now and well into the future.”

w w w . c p o s t r a t e g y. c o m

Turning crisis into advantage: Driving improvements by removing red tape How removing unnecessary bureaucracy and non-value added processes can improve the agility of your organisation post COVID19 WRI T T EN BY

J am e s Me ads

JAME S ME ADS INDEPENDENT PROCUREMENT CONSULTANT

e are on the cusp of a oncein-a-lifetime recession. Lockdown is the calm before

the eventual storm. It is unlikely that it will be as immediate and sudden a change like how the introduction of lockdown measures instantly changed our lives, but make no mistake, we’re in for a very nasty economic contraction. How well you survive it and come out at the other end is going to depend on how nimble and agile your organisation is. Larger companies have more

You can’t keep swimming with the

resources, usually pay the best salaries

current and accepting corporate red

and are able to attract the top talent. The

tape and inefficiency as an inevitabil-

problem is, these A-players working for

ity like death and taxes. Getting rid of

you often get suffocated by all the corpo-

unnecessary bureaucracy, and taking

rate bureaucracy and unnecessary red

non-value added processes away from

tape, which means they fall short of real-

Procurement Category Managers, must

ising their full potential.

become a top priority.

Now, more than ever, if you’re going to beat more agile and leaner competi-

Eliminating “work for work’s sake”

tors who have lower overheads and can

Tim Ferriss’s classic 2007 book “The 4

make decisions faster than you can, slay-

Hour Work Week” is a bible for all aspir-

ing the bureaucratic dragon is no longer

ing digital nomads and entrepreneurs

something you can ignore.

who want to take control of their lives

T U R N I N G C R I S I S I N TO A DVA N TAG E : D R I V I N G I M P R OV E M E N T S BY R E M OV I N G R E D TA P E

and free themselves of the corporate grind. Maximising productivity, and the freedom to outsource non-essential work to third parties, is a major topic in his book. A cornerstone of this is the concept of eliminating what he calls “work for work’s sake”. Also known as “busy work,” this is typically low-level but necessary administrative work that takes up a lot of time but has little or no added value. In the procurement space, this is tactical buying, firefighting day-to-day operational issues or box-ticking exercises that are there to fulfil internal compliance requirements. Are your Category Managers who are on £65k a year having to submit ridic-

“ How well you survive it and come out at the other end is going to depend on how nimble and agile your organisation is”

ulous documents like travel requests, change of payment terms forms or catering requirements for meetings? Let’s take travel requests as a prime example of corporate waste. Your category managers aren’t your teenage kids going on Amazon with your credit card, so don’t treat them like it. Yes, you have a budget to manage. But should you really be degrading highly skilled knowledge workers by forcing them

James Meads, independent procurement consultant

to justify why they’re volunteering to give up their Sunday evening with their family to instead spend it on a red-eye w w w . c p o s t r a t e g y. c o m

intercontinental flight?

with “busy work” red tape issues is an

Likewise, you should also give them

hour they’re not spending on deliver-

the tools to manage simple commercial

ing their savings targets or working on

decisions like payment terms requests. If

innovations with their supply base and

a supplier is insisting on 30 days’ terms

stakeholders.

rather than the corporate standard of net

If you’re insisting on these policies,

60 or net 90, a mid-senior level manager

then you don’t run an efficient, highly

surely has the intelligence and judge-

productive team. It’s really that simple.

ment to make the right call. These should either be eliminated or

Hire someone more junior on half the salary if you want to exert this level of

completed by an admin assistant. Every

control. I use the word control, but what

hour you force a team member to deal

I really mean here is micromanagement

T U R N I N G C R I S I S I N TO A DVA N TAG E : D R I V I N G I M P R OV E M E N T S BY R E M OV I N G R E D TA P E

andI’m being polite. Alternatively, hire a

What you probably didn’t know is

couple of purchase admin team members

that most companies will also use this

to manage your internal bureaucracy.

same categorisation for their existing

Sales teams have admin assistants for

customers.

good reason.

If you’re a B or a C customer, or even if you’re an A customer, if you’re difficult to

Are you a preferred customer?

do business with, then you’re not going

Most sales and business development

to be a preferred customer.

executives will categorise sales leads as

When I talk about ease of doing busi-

A, B and C based on how warm the lead

ness, I’m not referring to how hard you

is and how attractive the customer or

are on your supply base when it comes

amount of business could be to them.

to nailing them on price and squeezing w w w . c p o s t r a t e g y. c o m

their margins.

have to show that they’re indispensable,

I’m talking more about how easy it

usually by citing some or other legislative

is for suppliers to deal with you, at all

requirement or budgetary constraint and

levels of the business. Do your Category

then coming up with a rather draconian

Managers never answer suppliers’

policy to vindicate it.

emails or requests for meetings because

Do your team members need to jump

their workload is too high? Does it take

through hoops to book a flight? Or to

weeks to change something simple

use VPN to access the company network

like a VAT number in a vendor master

from home? Do they need to justify why

record, or to get a contract or pricing

their mobile phone bill is £20 higher

agreement signed? Are you constantly

than last month? What if they have minor

paying late because you’ve outsourced

(non-legal) amendments to a contract

your accounts department or your P2P

approved? What do they need to do to

process is a mess.

obtain approval for not following compet-

The easiest way to establish this is to send them a simple survey to under-

itive bidding rules? If so, then something is wrong.

stand what they see as your strengths and weaknesses. You’ll be surprised how many are willing to give you constructive feedback, especially if it’s anonymous.

Do your internal controls really add value? Internal functions that are overheads rather than revenue contributors need to justify their existence. This is often in the form of unnecessary red tape which they force onto other departments’ workload. Let’s not beat around the bush here. I’m talking about the likes of IT, Legal, HR and Internal Audit. They rarely add to a company’s bottom line and as such 30

T U R N I N G C R I S I S I N TO A DVA N TAG E : D R I V I N G I M P R OV E M E N T S BY R E M OV I N G R E D TA P E

“Internal functions that are overheads rather than revenue contributors need to justify their existence” James Meads, independent procurement consultant

Do you need controls in place? Of course. Should the process be that bureaucratic that it requires a level of sign-off or documentation that means it takes up more than one hour, end-to-end? No. If it does, then the tail is wagging the dog. These processes need to be pushed back onto the departments who are enforcing this level of compliance. They’re impacting your ability to deliver results with the headcount you have in your team.

Workload-heavy admin tasks? automate or outsource them There will always be some tasks which can’t be eliminated and are still considered necessities. Even if they are long-winded or admin heavy, they need to be done. Some of this will still fall into the responsibilities of your core procurement team. Digital transformation is something of a buzzword at the moment. But before considering what areas of your processes can be digitised or automated, you need to first consider what activities your procurement team spend the most time on. Automating vendor payment enquiries doesn’t make w w w . c p o s t r a t e g y. c o m

T U R N I N G C R I S I S I N TO A DVA N TAG E : D R I V I N G I M P R OV E M E N T S BY R E M OV I N G R E D TA P E

sense if you have an efficient AP process and procurement isn’t frequently dragged into resolving AP issues. Likewise, having an expensive piece of risk management or contract administration software isn’t going to be a priority if most of your suppliers are local and your biggest transactional time suck is the time it takes to go out and get 3 quotes for one-time, non-repeatable project spend or capital investments. Does it even make sense to invest in software? Or is it instead a more cost-effective solution to outsource some of your day-to-day tactical buying and compliance box-ticking to a third-party BPO, or to set up a tactical buying office in a lower cost country that can functionally report to individual category managers and perform some Junior Buyer tasks at a fraction of the cost? The result in terms of positive impact on category managers’ administrative workload is still the same.

About the author: James Meads is an independent procurement consultant, helping SMEs to increase their bottom line by driving value through strategic sourcing and spend management. He also hosts The Procuretech Podcast, showcasing how digital technology is transforming the procurement profession.

w w w . c p o s t r a t e g y. c o m

Danieli China: How procurement agility provides a competitive edge Francois-David Martino, CEO of Danieli China, tells us how breaking down competitiveness can be achieved through a redefined procurement approach... WRI T T EN BY PRODUCED BY

D al e Bent o n Gr eg Chur c h ill

hen we think of the traditional

business forward. Over the last decade

career journey, getting to

or so, the path to the top has changed

the very top and becoming a

and so too have the expectations of

c-level executive takes years of cutting

the c-level executive. Despite its c-level

your teeth within different levels of a

status, more often than not, the executive

business in order to truly understand the

level of the CPO is mere window dress-

business and how, when the time comes,

ing. This however, has begun to change.

to make the right decisions for taking that 36

DANIELI CHINA

“It is true that procurement doesn’t fare

the P & L, particularly in the industrial

well in the top function careers that lead

business. I’ve always had a key idea that

you to more CEO positions,” explains

leadership by knowledge and by compe-

Francois-David Martino, CEO of Danieli

tence is extremely important.”

China. “But I spent most of my career

With a career spanning over 20 years,

in procurement and supply chain and I

working around the world for tech-

was always passionate about purchasing

nology providers such as Siemens,

because I knew that it could influence

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CONTENTS

Martino honed his craft in purchasing and procurement and established himself

procurement is key. Procurement has evolved and so too

as a leading procurement talent. He

has the perception of it. Everybody

reached a point in his career though,

knows what the sales, accounting and

where he felt he had hit a wall. “At some

finance teams do, but the traditional

point in time when you’re at the top of a

perception is that nobody really knows

function, nobody can really tell you how

what procurement does. This is changing

to do your job because you’re an expert

of course, but it varies from company to

in your company about that, something

company as it depends entirely on the

is missing and it’s this progression,” he

maturity of the organization. “Once upon

says. “I was told by my colleagues that,

a time procurement was a depreciation

thanks to my experience in procure-

function where all the people who were

ment, I had a true understanding of what

failing in other functions ended up,” says

the other functions are in how to run a

Martino. “If you look now at a procure-

business and that gave me a lot of confi-

ment function, these are the tough guys

dence that I could definitely be a CEO.

who are extremely powerful and have a

Look at it this way, a large portion of the

lot of responsibility within the company.

CEOs of OEMs in Automotive have been

What makes it key is the compliance

heads of procurement at some point in

and that they sign contracts and there-

their time. This is simply because of the

fore, they take risk or mitigate risk every

constant demands and the knowing that

day for the company. It’s not just about

cost is so valuable. These are key points

the price, it’s about what happens if the

in any CEO position.”

suppliers close and go bankrupt or what

Over the following years, Martino

happens if there’s a quality problem etc.

became a senior manager and a CEO at

The responsibilities you have towards

Siemens and Thyssenkrupp before he

the business are huge.”

became CEO at Danieli China. Equipped

As a technology provider within the

with vast international experience,

steel industry, Danieli Group provides

Francois was given the opportunity to

technologies to manufacturers to

take Danieli China forward with a new

produce steel. The company’s motto

and innovative operating model, and

is Innov-Action; to be a step ahead in

w w w . c p o s t r a t e g y. c o m

capex and opex and promises to achieve an even higher level of quality and standards in every aspect of its work from planning, designing and manufacturing to erection, commissioning and service. With specific technology assets equal to millions of dollars in value, a delay in production could see customers lose millions. Danieli Group has to be extremely reliable in its supply chain to be able to deliver and to be reliable. While Danieli may be recognised as a market leader, the metals market is incredibly saturated and so competitiveness is key. Competitiveness comes from that reliability in its supply chain. Martino believes that not everybody is talking about the same thing and very often competitiveness is reduced cost. To him, competitiveness can be distinguished by five aspects; the functionality and the technology you are bringing to the company, how you are materializing these functions in a simple, smart and cost-effective way, how good your suppliers, your costs and the conditions and business model you are offering to your customers are and the fixed spot and structure of who is hosting the service of the products you are selling. â&#x20AC;&#x153;In effect, the size of your company and your structure has to fit the market. The 40

DANIELI CHINA

w w w . c p o s t r a t e g y. c o m

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CONTENTS

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one aspect that decides what kind of size

have to adapt to the size of your compet-

you should be, is your competitor. If you

itor. Otherwise, you will not be relevant

are fighting with small competitors who

anymore.”

have half your fixed costs, you should

Danieli China has embarked on an

look smaller. Maybe, like Danieli China,

ambitious strategy to create a ‘new’

you could make a specialist separate

company entirely and drive the business

business to fight against these smaller

up to one billion Euros in the Chinese

companies.”

market, which means that its current busi-

This is a shift that Francois is seeing

ness revenue needs to be multiplied four

around the world, with large market

times over within six years. For Martino,

players like Siemens, GE and ABB tradi-

the only way to do that is to observe the

tionally relying on volume their leading

right governance and make changes in

status to be competitive now transform-

the right way. “I cannot multiply the quan-

ing their operating models because this

tity of the volume of the product that I am

is no longer the case “Most of them are

selling straight out of the bat because it

separating the business,” he says. “You

will need investment to become so good

w w w . c p o s t r a t e g y. c o m

in every product and I cannot reasonably

this was most certainly the case as he

build a competitive company doing that,”

was tasked with introducing this new

he says. “So I need to diversify and adapt

concept - spending a lot of time winning

my business model and be much more

the support from his team. The key for

flexible,”

him was clarity. “When you explain things

“Danieli had established itself as the

clearly, they can begin to understand and

leading company for certain products,

can start to see this is working. That’s

but we lost that market because our price

where they are able to support you,” he

was no longer competitive. We needed

says.

to change in order to beat the smaller

“Here in China, the support from head-

companies who have the design and the

quarters in Italy is non-existent, so one by

flexibility and who has reinvented how to

one I would speak with the top level to

do business.”

the lower level explaining the idea. I had

Incredibly, in just three months Danieli was able to reduce its intake by more than 20 million Euros. This level of success showed the adaptability of Danieli. Coming off the back of this success, Danieli China has a plan in place to build two or three more companies per year. “We will achieve over one billion,” beams Francois. “It has to be profitable and we have to adapt the business models one by one.”

The beginning of the journey: Communication and key supporters When looking to redefine a process or an operating model, or in this instance creating a ‘new’ company, a major challenge is trying to convince people that this is the right thing for the company. For Martino, 44

DANIELI CHINA

great support from our president on that, which made the process a lot easier.” Martino is keen to stress just how

“PROCUREMENT PEOPLE ARE ALWAYS IN THE CHANGE AND SO IT HELPS YOU EXPLAIN THE CHANGE AND TO MAKE PEOPLE ADAPT TO IT” — F R A N C O I S - DAV I D M A R T I N O , C E O O F DA N I E L I C H I N A

important it is to have key supporters. The task was simple, kickstart the idea into motion and within six months create the company, enter the market and begin selling and being successful. The speed of which Danieli China was able to achieve this was a surprise even to Martino, but he knew that the work was only just starting. “You never have to give up and what made the idea so fast implemented and successful is the fact I never doubted it, ‘’ he says. “When people were talking to me, they were seeing the passion and how clear I was about my idea and how convinced I was. Something which is key to me is clarity and communication, you need to be clear on what you want to do in order to succeed together.”

The CPO in the CEO The seamlessness of this transition for Danieli China owes a lot to the CPO experience that Martino possesses. He feels that his procurement background helps in winning that change in two key areas. Firstly, when procuring to a niche group and interacting with w w w . c p o s t r a t e g y. c o m

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CONTENTS

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has over the supplier.

all the functions, he understands what

“There is something a little wrong in

every function wants and what they don’t. Negotiation, often a cornerstone of

the automotive procurement relationship

procurement, means that he knows how

because you are adopting a very arro-

to sell the idea without making the wrong

gant position towards suppliers as they

compromises. Secondly, change. “You

completely depend on you,” he says.

also understand that you always need a

“Automotive suppliers plan for parts for

change,” says Martino. “In procurement

one model, if you stop the order then

you are regularly changing buyers and

that means hundreds of people fall

budgeting methods. Procurement people

behind. The power you have in your

are always in the change and so it helps

hands is extremely big and sometimes

you explain the change and to make

I feel, people are not really prepared to

people adapt to it.”

apply this power.” Recalling his experience with the rela-

Supplier relationships

tionship with suppliers, Martino found

When changing an operating model from

that he had completely changed his

a procurement perspective, one has to

mindset as he truly believes that suppli-

consider the impact this will have on the

ers are more than simply giving you

supply chain and the supplier network.

the costs you want. “The more I have

As a man who started out in automotive

this vision of equality with the supplier

procurement, Martino understands the

and see that it’s not about playing the

power that the procurement professional

big guy and imposing things, the more I

“SEEING THEM [SUPPLIERS] AS COMPANY CEOS AND MANAGERS AND TALKING AT THE SAME LEVEL, THEY SEE YOU AS SOMEONE WHO CAN BRING VALUE TO THEIR COMPANY AS WELL” — F R A N C O I S - DAV I D M A R T I N O , C E O O F DA N I E L I C H I N A

w w w . c p o s t r a t e g y. c o m

understand what kind of deal the suppliers would be interested in and then I can make the right proposal so that we create value together,â&#x20AC;? â&#x20AC;&#x153;Seeing them as company CEOs and managers and talking at the same level, they see you as someone who can bring value to their company as well.â&#x20AC;?

COVID-19 2020 has seen the world gripped by the COVID-19 pandemic, which has truly disrupted both life and the global economy. The world we have lived over the last five months has shown us that nothing is guaranteed and Martino feels that the global supply chain and how we understand it can no longer be safe and reliable. The sending and buying of products worldwide has become incredibly complicated through the virus and the closing of borders. For Danieli China, at the heart of the pandemic, and at the time where most of the people in the world needed masks and medical devices, Martino feels that the response of many global players has exposed a level of risk that has been neglected. He points out how he has discussed contracts with customers in China that had previously imported technology as a sign of good quality and now these same 48

DANIELI CHINA

F R A N C O I S - DAV I D M A R T I N O , C E O O F DA N I E L I C H I N A

w w w . c p o s t r a t e g y. c o m

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“WE ARE DISCUSSING WITH A LOT OF COMPANIES, CUSTOMERS, SUPPLIERS AND PARTNERS ON HOW TO COLLABORATE TOGETHER AND IDENTIFYING JUST HOW STRONG WE WILL BE TOGETHER THAN WE WOULD BE OPERATING ALONE” — F R A N C O I S - DAV I D M A R T I N O , C E O O F DA N I E L I C H I N A

customers have completely different

a very sound protocol to allow people

requests. Some of its Chinese custom-

working with masks and we had temper-

ers are requesting that everything is

ature measurement devices,” he says.

localized because they don’t want the

“We made the investment but we had

risk of imported equipment which can

the support from the government and

put the brakes on any contract. “This is

this helped us to reopen very fast and it’s

a big change in demand,” he says. “I can

something that we were very proud of.”

sense that it is going to be something we see all over the world in all industries

“It has been seen as a leading example of how a company reacted to the crisis.”

and markets.” When the Government in China decided

The road ahead

to close the country and the factories,

At the time of writing, Danieli China has

Martino admits that he didn’t know what

created two new companies in 2019 and

the future would hold for Danieli China.

intends to build 12 new companies in

A positive, he notes, is that the company

China over the next five years. 2020 will

understood that it needed to be proac-

see this year the building of three new

tive. “We started to collaborate with the

ones. Needless to say, the future is most

local government on how we could put

certainly bright for Danieli China. “We have

in place a procedure to help our people

adapted a completely new approach on

go back to the factory at the same time

China markets because we have an open

as being safe. Together we had created

mindset and are in a position of strength,” w w w . c p o s t r a t e g y. c o m

DANIELI CHINA

he says. “We are discussing with a lot of companies, customers, suppliers and partners on how to collaborate together and identifying just how stronger we will be together than what we would be by operating alone.” On a certain level, one could argue that the success of Danieli China would allow the company to take the foot off the gas a little. This isn’t an argument Martino believes in. “I believe that our work is to create opportunities but also to solve problems and in terms of solving problems, I always believe that if you can fix something, you can fix it. If you cannot fix it, you have to get rid of it,” he says. “If you want to build 12 companies that are going to reach one billion, you have to coordinate millions of actions that hundreds of people inside and outside the organization on a global scale work towards this strategy and keep remembering that. If you want to succeed in your professional life or personal life you have to make sure that those thousands of actions and decisions are one small step towards that goal.”

w w w . c p o s t r a t e g y. c o m

UNDERSTANDING EQ AND HIRING FOR IT IN A POSTPANDEMIC WORLD What will the â&#x20AC;&#x153;new normalâ&#x20AC;? be in the post-COVID-19 procurement world? What will it mean to you as a procurement professional? What new skill sets should you be looking for in your procurement team, and what old ones are no longer as pertinent? To help answer these and other questions regarding talent acquisition and development is Iain Campbell-Mckenna, MD at Sourcing Solved. As part of a new monthly series, Iain will provide his unique and experienced take on what procurement needs to do to effectively step into a new and in some cases, vastly different role - This month we explore Emotional Intelligence, or EQ, in a post-pandemic world

WRI T T EN BY

Iai n C am p b ell- M c Ke n n a

IAIN CAMPBELL-MCKENNA MANAGING DIRECTOR SOURCING SOLVED

“EQ is often undervalued in procurement....and in a post a COVID world, perhaps the most critical skill we can bring forward.” – Nancy N., VP Indirect Sourcing When we attend various conferences, we often hear how innovation and digitalisation play a pivotal part in procurement’s evolution. While no one will dispute their importance, our profession at its heart is about relationships, and more specifically having the Emotional Intelligence or EQ

rather than stimulating further discussion.

to manage them effectively. After all, as

However, and despite its universal

Nancy N said herself, EQ is perhaps “the

recognition as an attribute we all need

most critical skill” in our profession.

ourselves and want in others, organisa-

Now, there is no doubt that you are familiar with the concept of EQ. It is one

tions usually encounter two obstacles in their efforts to quantify EQ when they look

of those terms in which its ubiquitous use to hire their next great procurement leader. has, to a certain extent, made it some-

It’s important to note as well that, in refer-

what meaningless. When we say mean-

encing the word “leader,” we are not only

ingless, this is not to suggest that EQ

talking about a title or senior position. In

is unimportant, but it’s undeniable that

today’s world, all procurement people must

it is used so often that we do not give

assume a leadership role.

it the attention it is due. In other words,

Now that we have explored the notion of

if you ask someone if EQ is essential,

EQ and how all procurement people are

the conversation usually ends with ‘yes’

leaders in their own right, we pose two key

U N D E R S TA N D I N G E Q A N D H I R I N G F O R I T I N A P O S T- PA N D E M I C W O R L D

questions for the future:

how you respond to it that counts the

• How and why EQ will be different in a

most. The global COVID-19 pandemic

post-pandemic world

is undoubtedly something that has

• Why smart executives are now looking

happened to all of us on a massive scale.

beyond the resume to find EQ

Beyond efforts to flatten the curve, social distancing has forever changed

You are not alone

not only the perception of procurement’s importance, it is progressively redefining

“Attitude is a little thing that makes a big difference.” – Agata, SAP Deployment Lead – Business Transformation

our roles and ways of working. While remote working is nothing new, for most of us it was more of a concept along the lines of the four-day workweek and flex-hours, i.e., promising in nature

There is an old saying that goes; it is not

but not necessarily practical on a large

what happens to you that matters, but

scale. That has now changed. We are w w w . c p o s t r a t e g y. c o m

all, for now, and the foreseeable future

misinterpreted in the virtual realms than

“together on our own.”

they are in the physical world.

As a result, the attributes of EQ will be “tested” like never before.

Stress and stress management is another area of difference. For example, did you know that according to a

When we say attributes, we are talking

recent report from States of Play, a joint

about the ability to:

CNBC/Change Research survey that

• communicate better

people “working remotely” are 60 per

• reduce and better manage stress

cent more productive than they are in

• defuse conflicts

an office environment? Now, that may

• build new relationships while maintain-

sound like a good thing, and to a degree

ing or improving existing ones • empathise in isolation

it is. However, the same reports also indicate that many are feeling a higher

As you acknowledge the above checklist, you are probably giving an affirmative nod thinking; I already know this is all-important. Here is the thing, regardless of how proficient you or your team were previously, you now have to be able to demonstrate EQ in relative isolation. Take communication for example. When you are in front of another person, you can in all probability pick-up on their vibe or body language when speaking with them. You know, the old if their arms are “crossed” they are “closed” to what you are saying adage. Being able to make such determination – even during a Zoom call - is considerably different and challenging. Statements can be more easily misunderstood or 58

U N D E R S TA N D I N G E Q A N D H I R I N G F O R I T I N A P O S T- PA N D E M I C W O R L D

level of stress because outside of the

building or maintaining relationships, or

office it is far easier to lose track of time,

having an ability to empathise, remote

meaning that people are putting in long

working also demands better proficiency

hours without any breaks. As a result,

in these areas. Therefore, being able

most are operating at a level where there

to assess either a current employeeâ&#x20AC;&#x2122;s

is a higher likelihood of emotional and

or potential candidateâ&#x20AC;&#x2122;s attitudes and

physical burnout. In an ironic twist, the

EQ ability in a remote working world is

concerns with remote working previously

critical.

were that people would do less rather

Unfortunately, the existing tools and

than more. With poor time management

methods we use to assess someoneâ&#x20AC;&#x2122;s

EQ, the pendulum has swung way over to

EQ in a post-pandemic world is often

the other side of working too much.

limited, perhaps even outdated.

When it comes to resolving conflict,

w w w . c p o s t r a t e g y. c o m

Beyond the resume “Resumes play a small role, getting to know your candidates as a person matter more, and EQ/ Cultural Fit matters the most.” – Executive Search Company In an earlier article we talked about how platforms such as LinkedIn are convenient regarding the solicitation of CVs or resumes. Use these platforms and there is no doubt that you will get a healthy response when you post for a posi-

TAKE PART IN OUR SURVEY! Assessing the imapct of the Covid-19 pandemic on the procurement professional

Click here

tion you are looking to fill. That said, many professionals on both sides of the hiring table, are beginning to wonder if “candidate quantity” is taking precedence over “candidate quality?” Specifically, is being inundated with large numbers of CV’s making it more difficult to not only attract the best and brightest candidates but quantifying their “remote EQ?” For many in our profession, the answer is yes. In our next article, we will provide you with an overview of a proven framework for remote EQ hiring success in this brave, new world. In the meantime, we would invite you to take our two-minute survey regarding your remote-working experience. After we have closed the polling at the end of June, we will be publishing a paper on the results and what they mean.

U N D E R S TA N D I N G E Q A N D H I R I N G F O R I T I N A P O S T- PA N D E M I C W O R L D

w w w . c p o s t r a t e g y. c o m

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

D al e Bent o n Hey kel Ou n i

he concept of procurement transformation seems almost old fashioned in the sense that

itâ&#x20AC;&#x2122;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 &

ABBâ&#x20AC;&#x2122;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

ABB

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 w w w . c p o s t r a t e g y. c o m

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 66

ABB

w w w . c p o s t r a t e g y. c o m

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 68

ABB

“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 w w w . c p o s t r a t e g y. c o m

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

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

ABB

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

w w w . c p o s t r a t e g y. c o m

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 74

ABB

“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 w w w . c p o s t r a t e g y. c o m

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

ABB

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 w w w . c p o s t r a t e g y. c o m

“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

ABB

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.”

w w w . c p o s t r a t e g y. c o m

AHEAD OF THE CURVE IN CONNECTING PROCUREMENT PROFESSIONALS Tania Seary, one of the most globally influential members of the procurement and supply chain world, and founder of Procurious, discusses falling in love with procurement and how Procurious the worldâ&#x20AC;&#x2122;s first and leading online business network dedicated to procurement supply chain professionals was truly ahead of its time. WRI T T EN BY LIS T EN T O T HIS PODCAS T

D a le B e n t o n

s we’ve written on just about

Put simply, procurement knows procure-

every page of this magazine,

ment, so how much of this makeover is

procurement has changed.

understood and embraced by other busi-

Some of the leading procurement practi-

ness units? Take it one step further, how

tioners have sat down to tell me just how

do other organisations perceive procure-

procurement now has a seat at the table,

ment? We know it’s happening every-

is becoming more strategic and a real,

where, but how do we find out more and

key driver of growth for a business.

share best practices and knowledge?

One of the more interesting comments

As this procurement transformation

shared is that once upon a time, procure-

continues to this very day, it’s an ever

ment was a function that simply consisted

evolving journey into new and untested

of ‘the folks who cash the cheques’.

waters for many and so connecting and

One thing to note is that these are the

sharing with our peers is something of a

comments of procurement practitioners.

no-brainer.

AHEAD OF THE CURVE IN CONNECTING PROCUREMENT PROFESSIONALS

Enter Procurious, the world’s first and

like a company in its own right. And so

leading online business network dedi-

that’s what Procurious is about - bringing

cated to procurement and supply chain

together all the CPOs from all over the

professionals. With upwards of 40,000

world in an online environment.”

members from all over the globe in a

Just look at some of these major disrup-

whole host of industry sectors, Procurious

tive events, the floods in Thailand, the

is very much a leading platform in the

tsunamis, and now we’ve of course with

procurement world.

COVID-19, often you’re the only person in

But don’t just take our word for it.

your business who’s managing your cate-

“What I learnt when I worked in

gory. The Procurious platform gives you

large corporates is the value in bring-

the opportunity to connect with people

ing together all of the business unit

around the world who are managing your

CPOs,” explains Tania Seary, founder

category. And what I like to say is that the

of Procurious. “Every business unit is

more we use our community muscle, the

w w w . c p o s t r a t e g y. c o m

stronger it will get. It’s like any muscle. So,

then of course there’s the internal issues

the more the people reach out and seek

like dealing with finance and managing

help and ask questions, the stronger the

up to the CFO. So, I don’t think there’s

community will become.”

that many roles in the corporate world

Seary, who’s career has seen her work in marketing with major global corpo-

that give you that scale and scope.” As a marketing professional and

rations such as Walt Disney Company,

procurement practitioner, Tania under-

Alcoa and The Faculty Management

stands the commercial side of procure-

Consultants, founded Procurious because

ment and approaches it with a different

she believes in marketing the procure-

perspective than a traditional career

ment profession, a profession she is so

procurement professional. She believes

passionate about. Fast forward to today

that a major part of this transforma-

and Tania is now recognised as one of

tion of procurement centres around

the most global, influential members of

this commercial component. In her own

the procurement & supply chain profes-

words, and another reason why she loves

sion and tells me what it was around the

procurement so much, procurement

early 2000s that made her fall in love

professionals should aspire to be the

with procurement.

best commercial leaders in their respec-

“I just absolutely fell in love with procurement,” she beams. “It’s just the

tive businesses. “What we are seeing at the moment is

scale and scope of it. I don’t think there

so much opportunity for us to be work-

are many professions or functions that

ing with external stakeholders to deliver

allow you to operate across the full

so much value,” she says. “There’s a lot

breadth of the business. So you need to

of creativity in procurement, where you

understand the customer, you need to

can really say: ‘Look, what’s the business

understand the manufacturing and opera-

problem we’re trying to solve here and

tions process.”

How can we creatively solve and create a

“You need to understand the community and understand the supply base that you’re buying from. You also have

commercial solution that will deliver exponential value?’ “The world is our oyster. Let’s not

the opportunity to do a lot of community

waste the crisis. All the cards are in the

good through social procurement. And

air. So, think outside the box and think

AHEAD OF THE CURVE IN CONNECTING PROCUREMENT PROFESSIONALS

“It’s just the scale and scope of it. I don’t think there are many professions or functions that allow you to operate across the full breadth of the business” — TA N I A S E A R Y, F O U N D E R O F P R O C U R I O U S

w w w . c p o s t r a t e g y. c o m

about what solutions we can deliver to

supply chain professionals can look to

the C-Level that previously may not have

one another to truly inspire that thinking

been able to obtain oxygen. Now that

outside of the box mentality. Traditionally

people are looking for solutions, they

speaking, procurement is a very face to

may consider something quite creative.”

face engagement function. But that’s not

Procurious in a way is a true reflec-

always possible, particularly in a time of

tion of Tania’s belief and passion for

crisis. Procurious then adopts the role of

procurement. Through the platform,

social media, or as Tania eloquently puts

she has created an environment where

it, it becomes a form of speed dating.

the 40,000+ global procurement and

She calls it speed dating because it truly

AHEAD OF THE CURVE IN CONNECTING PROCUREMENT PROFESSIONALS

speeds up the process of getting to know

what’s important to her is the people that

who you actually should meet face to

do engage with and through Procurious.

face with and fully understanding who are

“It doesn’t really matter because we’re

the people in your network that can really

serving the 40,000 people who are

help you advance your career.

interested. The key thing is the sheer

The mere mention of social media

amount of people who are coming back

may raise a few eyebrows and leave

every month to read the content and be

you asking, do we need another social

active on the platform from all around the

media platform? Tania recognises that for

globe,” she says. “ That’s an important

some, that will always be the reaction, but

audience and you could argue that these w w w . c p o s t r a t e g y. c o m

people are the thought leaders or the

comes along, we know what it looks like,

more proactive members of the profes-

we can advise people on what’s the inter-

sion. They’re actually the ones who do

esting story here? Where’s the learning?

want to learn and want to value connect-

What’s something people haven’t heard

ing with others. That’s the key thing; the

before? And that’s really what we’re

people click and really demonstrate their

focused on. If you look at a lot of content

interest.”

out there, there’s a lot of repetition. So we

Since the very beginning back in 2013, Tania has always believed that Procurious

really want to excite the profession.” “I feel fortunate that we’ve got a very

was a platform well and truly ahead of its

committed community and we’ll keep

time. Fast forward to 2020, with the world

pushing ahead.”

gripped by the COVID19 pandemic and

A key challenge in creating a space

the significant disruption it has caused

for networking and community engage-

to procurement and supply chain func-

ment is that it can soon, often very easily,

tions the world, a platform like Procurious

evolve into something of an echo cham-

is well and truly a must-have thing right

ber.Yes, as human beings we share our

now. Procurement has changed a lot in the last 6 years, how has Procurious changed with it? Not much, it would seem, because it doesn’t have to. “We have the same functionality as we had when we started and people aren’t using all of it yet anyway. So, I think we’re now going to see a lot of the professional associations really head in the direction that Procurious has,” says Seary. “We’ve always been ahead of the curve in our ability to look at procurement and supply chain with a very fresh set of eyes. That sounds funny for someone who’s been in the profession for 20 years, but the benefit is that when something interesting 88

AHEAD OF THE CURVE IN CONNECTING PROCUREMENT PROFESSIONALS

“I think those that are prepared and want to be at the C-Level should acknowledge, have a good dose of humility and knowledge of the fact that they don’t have all the answers,” — TA N I A S E A R Y, F O U N D E R O F P R O C U R I O U S

successes and we seek out the success stories, but what do we learn from them? Many procurement professionals, Tania included, actually glean greater value in the failures and the hurdles people experience along the way. As such, Procurious actively seeks out and encourages people to share their failures through campaigns such as its recent Major Tech Fails campaign. Working together with RiseNow, the campaign looks to help people in the procurement technology space because Seary recognises that a lot of money is spent, and lost, in technology. “We really want to help people, but that’s not a headline that you would see anywhere else. It takes a bit of courage to come out with that. That’s what our community wants to hear. They want to hear the mistakes people have made and how they can avoid them and learn from them,” she says. “As the saying goes; people don’t make the same mistake twice. They make them over and over again.” Seary believes that there is a sad truth in the procurement space, one that sees professionals avoiding going w w w . c p o s t r a t e g y. c o m

out into the business community and therefore not understanding how to be competitive. How can you compete if you don’t know what you’re up against? This is another way in which Procurious brings out a different mindset in people. “We’re trying to attract people to the Procurious platform who are keen to learn. They’re not territorial about their networks and what they know,” she says. “They’re humbled by how much they don’t know and I think that defines different types of leaders across our profession. I think those that are prepared and want to be at the C-Level should acknowledge, have a good dose of humility and knowledge of the fact that they don’t have all the answers, but they’ve got a fabulous thing and a fabulous network that will help them find those answers.” While the value of Procurious is clear for all to see, it’s important to recognise that Procurious isn’t the only platform out there for professionals to connect. Seary is a firm believer that competition is healthy, but in this instance, her approach to the concept of competition is very different. In fact, she welcomes it with open arms. “I think it’s fantastic because it benefits the profession,” she beams. “Competition is healthy. We’re trying to raise the level 90

AHEAD OF THE CURVE IN CONNECTING PROCUREMENT PROFESSIONALS

of professionalism in our profession. So, the more competition for providing services and educating people, the profession can only benefit. That’s always been my personal and objective and I’ve stuck to that,” “Let’s face it. There’s probably around 15million procurement professionals in the world. So, there’s a lot of people to serve.” The COVID-19 pandemic has and will continue to provide extreme learning opportunities for us all. A platform like Procurious will allow us all to connect the dots a lot faster and keep our minds open. “A lot of the theories that we hold true and dear for the supply chain are going to be challenged,” says Tania. “It’s going to be a reset, but this will be an experience that nobody in procurement and supply chain, or in business will ever forget.” COVID-19 has made the world understand what supply chain is and its importance. Seary feels it’s going to be easier for professionals moving forward to explain the need for transparency of supply base, risk management procedures, and the need for analytics, inventory and visibility. “It’s going to be a lot easier to sell our needs and our strategies moving forward because I think w w w . c p o s t r a t e g y. c o m

“If you show you have a lot to add, a bit of energy and some ideas you’ll find that you’ve got more than a seat at the table - you might be running the place” — TA N I A S E A R Y, F O U N D E R O F P R O C U R I O U S

AHEAD OF THE CURVE IN CONNECTING PROCUREMENT PROFESSIONALS

there’ll be a lot more respect for what people do,” she says. and people who’ve really helped save our community. There’s a new found and There’something of a well-deserved appreciation for some of these procurement roles now.” With a community stretching all over the world, sharing advice, success stories and failures, one would be forgiven for thinking Seary has all the answers in order to succeed. She’s quick to note that’s not true, but for her it’s simple; keep presenting ideas because that’s what the C-Level wants. “They do not want people sitting there nodding, she says. “Sure, it’s nice to have a compliant employee but they want people with ideas and energy and they want solutions.” “In times like this, nobody has the right answer - but we need people with ideas to put forward and to have the courage to lean into conversations and deliver because there’s nobody in the business that has the breadth and the scope of the information that you do in your role.” As the procurement professional, that breadth and scope of information will open many a great door both professionally, and for the business. “You’ve got invaluable information that can really help decision making. If you show you have a lot to add, a bit of energy and some ideas you’ll find that you’ve got more than a seat at the table - you might be running the place.”

w w w . c p o s t r a t e g y. c o m

Functionality in dysfunctionality and the integrity of procurement David Swift, Global Head of Corporate Services Procurement at Novartis, explores how in the search for a seat at the table, procurement continues to face an uphill battle WRI T T EN BY

D av i d S w i f t

uring my time as a consultant

with one of the Big 5 professional services firms, I worked

with different companies in different industries on a wide variety of projects. I concluded that all organizations have a degree of dysfunctionality; the successful ones are simply less dysfunctional than the rest. Since then I have gone on to have a career in procurement, working in both direct and indirect categories, in different industries across different geographies. I think procurement is a fantastic place to work for a number of reasons. We are a commercial function with eyes on the supply market, but equally so, on the hopes, aspirations and challenges of the businesses we work with. We are uniquely placed to help businesses be successful by bringing the best the market has to

seen as more than savings getters, being

offer into an organization and by keep-

business partners, trusted advisors, dare I

ing the risks at bay. When done well it is

say it strategic.

incredibly fulfilling. Having said that, like any other func-

Reality though is not always what we would like it to be and no amount of wish-

tion or organization, procurement is not

ful thinking is going to change that. For

immune to dysfunctionality. Some of it is

most organizations outside of the automo-

imposed upon us from the outside, but in

tive and technology industries, procure-

some instances, we really do not help our

ment is not perceived as a strategic

own cause. For as long as I can remem-

function.

ber, procurement leaders have talked

Procurement initiatives sometimes

about getting a seat at the table, being

do attract C-suite attention. A CEO may

F U N C T I O N A L I T Y I N DY S F U N C T I O N A L I T Y A N D T H E I N T E G R I T Y O F P R O C U R E M E N T

â&#x20AC;&#x153; Believe it or not, many procurement groups are still struggling with this most basic challengeâ&#x20AC;? David Swift, Global Head of Corporate Services Procurement at Novartis

launch a major cost out initiative to appease hungry shareholders but these generally are for a few quarters or maybe a year or two and more often than not do not retain the attention of the board on a permanent basis. While it would be nice - for our collective egos - to be considered strategic, I am not sure that this should be our primary concern. Rather procurement needs to be seen as being effective at generating value for organizations, which w w w . c p o s t r a t e g y. c o m

in turn should lead to the function being

a young fleet category manager, I ended

seen as an integral part of the enterprise

up having to source and implement a

strategy and not the other way around.

fleet management system to provide the

Let us have a look at a few of the chal-

insights I needed. In packaging, I had to

lenges faced by procurement organiza-

hire a programmer to create a specifica-

tions today. In no particular order.

tions database that allowed me to see where different divisions were buying

Spend visibility

similar or identical products from differ-

Believe it or not, many procurement

ent suppliers at widely varying prices. In

groups are still struggling with this most

contingent labour I implemented a VMS

basic challenge. Procurementâ&#x20AC;&#x2122;s first job

(vendor management system) for third

is to know how much is being spent, on

party temporary labour. In global mobility

what, and with which suppliers. If you

a tool that provided insights into the costs

cannot see it, you cannot manage it. As

of moving household goods around the

F U N C T I O N A L I T Y I N DY S F U N C T I O N A L I T Y A N D T H E I N T E G R I T Y O F P R O C U R E M E N T

world, that we used to keep our suppliers

see the sales of every SKU by size and

honest. All of these tools were category

colour in every one of our 300 European

specific but each of them was aimed at

stores. I knew how much inventory I had

providing insights to allow better decision

in each store, in the warehouse or in tran-

making.

sit to our stores. I was able to manage

According to Kearney consultants,

the inventory mix for each store based

“procurement technology is an abject fail-

on the velocity of sales for each item and

ure, totally not fit for purpose. Everyone

each size. I was able to model the size

hates it.” Bad user experiences, incom-

curve of next season’s buy, using sales

plete functionality, and a lack of advanced

history from whichever set of SKUs I

features were just a few of the many

deemed the best fit and as a result helped

issues they reported.

maximise sales and inventory turns while

Back in the 90s, when working for the sports retailer Footlocker, I was able to

minimising markdowns. This was done using homegrown software, running on

w w w . c p o s t r a t e g y. c o m

AS400 technology with dumb terminals

of losing the money next year. You see

and code based transaction codes. We

this in the hockey stick effect in the last

did not have PC’s or the internet back

quarter of the year. How many training

then, let alone artificial intelligence, RPA,

sessions must be booked in December

or block chain. Ironically, at a time when

or laboratory equipment delivered

you cannot read an article on any subject

that then sits in a cupboard for months

without hearing about digital, procure-

unopened. Another reason for this discon-

ment is still struggling with some of the

nect between finance and procurement

basics. It can be done and today there

is that they do not share the same source

is an ever-growing list of digital procure-

of truth. Finance uses general ledger

ment tools that promise to revolutionise

accounts while procurement uses its

our world. Procurement leaders need to

category classification. Further complexity

choose wisely and ensure that the tech-

occurs when legal entities are constantly

nology they roll out is effective at solving

changing due to mergers and acquisi-

real world problems and is not technology

tions, asset disposals or organizational

for technology’s sake.

transformation. Procurement systems

The S word – SAVINGS CFOs often complain that they do not see the big savings numbers reported by procurement in the bottom line. Some are downright skeptical as to the veracity of the numbers, although that does not seem to stop them asking for more with each passing year! According to Oliver Wyman, fewer than one in five CFO’s are happy with the way procurement performance is measured. There are multiple reasons for this disconnect. Firstly, if organizations do not cut budgets, the savings will never reach the bottom line. Budget holders feel obliged to spend their budget for fear 100

F U N C T I O N A L I T Y I N DY S F U N C T I O N A L I T Y A N D T H E I N T E G R I T Y O F P R O C U R E M E N T

“Another reason for this disconnect between finance and procurement is that they do not share the same source of truth” David Swift, Global Head of Corporate Services Procurement at Novartis

sometimes struggle to keep up with the rapidly changing organizational structure, making reporting difficult. One solution is to measure bottom line impact in close collaboration with finance while simultaneously measuring the broader procurement value contribution through a balanced scorecard.

The user experience Procurement’s stakeholders often see the function as slow and cumbersome and some would even call us road blockers. A function that “knows the price of everything but the value of nothing”. That is because Procurement sometimes acts as a policing function, with the idea that if buying is difficult, then spend will be kept in check. However, this is a wrong-headed approach. Good procurement should be able to help functions control their budgets while simultaneously meeting the needs of the business. If someone needs to buy something, the process should be as easy as possible and one where the requisitioner is not walking away in frustration. With the rapid spread of e-commerce, people have become used to getting what they want with minimal w w w . c p o s t r a t e g y. c o m

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effort. In addition, if you do not know what you want, online retailers are very happy to make some helpful suggestions! Therefore, this has to be one of the goals of procurement, to try to replicate the B2C experience in a B2B environment. So bringing it all together. If Procurement is to break free from the issues of the past and truly be considered as a value creating partner for the businesses it works with, it has to focus on getting the basics right. Whether that be, spend visibility, the credibility of the savings being reported or the user experience, much work has to be done to change perceptions for the better. Technology offers us hope but only if designed to be intuitive and user friendly. The best technology feels so easy to use, it could have been designed by a twelve year old. However, making something simple is actually quite hard to do and it is not a gift given to everyone. Which brings me to my last point. Great procurement, like great anything, depends on one key ingredient: people, good people. It is not about having a sprinkling of rock stars in the team but making sure the whole is greater than the sum of the parts. Organizations that take short cuts on their people have little chance of achieving greatness.

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