CPOstrategy – Issue 14 by B2e Media

I s sue 14 â&#x20AC;˘ www.cpostrateg y.com

Building an agile and robust procurement organisation

Sustainability, resilience and innovation through procurement Dan Bartel, CPO of Schneider Electric, explores how procurement is key to driving new value to the company

Sourcing solved: Recruiting from within: increasing engagement and retention to drive profitability

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Welcome to issue 14 of CPOstrategy! WE’RE MORE THAN halfway through what has been an incredibly challenging 2020 for us all, but the future looks bright as the world continues to recover and move forward together! Gracing the cover this month is Dan Bartel, CPO of Schneider Electric. We sat down with Dan to discuss how the company is undergoing a procurement journey that’s designed to drive new value and position procurement as the key enabler for sustainability, resilience and innovation. “We weren’t focused simply on what we could do differently to get better results, but how we can better partner together to create value?” explains Bartel. Elsewhere, Djordje Stevanoic (Director Indirect Procurement) and Alejandro Basterrechea (Head of Procurement Operations) at Zalando tell us how an agile and robust indirect procurement function is key to the future of Zalando, particularly when they are building it from the ground up! We also hear from Lance Younger, managing director of INVERTO and Jonathan Sing, product manager at INVERTO as they discuss how the spotlight is well and truly shining on procurement, as COVID-19 represents a defining moment in its history while also playing a key role in deciding its future. Mike Cadieux returns with the Foundry Findings, as he tells us all to keep the pitchforks at bay while he expresses his surprise that cost avoidance measurement is still a thing in 2020. Iain Campbell McKenna, and how we can increase employee engagement and retention to drive profitability by hiring from within. Rounding out this issue is a look at five leading supply chains, according to The Gartner Supply Chain Top 25. Stay safe, and enjoy the issue!

EDITOR IN CHIEF Andrew Woods

EDITOR Dale Benton

SOCIAL MEDIA MANAGER Callum Rivett

CONTRIBUTING EDITOR Kevin Davies

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

Schneider Electric

Foundry Findings: How do you factor cost avoidance into your savings model?

Zalando

Q&A: Procurement transformation and sustainability with INVERTO

Five leading supply chains

Rehiring from within: How to increase employee engagement and retention to drive profitability

Schneider Electric: Sustainability, resilience and innovation through procurement Dan Bartel, CPO of Schneider Electric, walks us through a significant transformation journey designed to drive new value to the company through procurement

WRI T T EN BY PRODUCED BY

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

n the procurement conversation, the discourse is often dictated and dominated by

the latest technologies that continue to digitise the procurement process, or in the current landscape how procurement has responded to the COVID19 pandemic. Sustainability is very rarely the topic that the limelight shines upon. For a company like Schneider Electric, leading providers of energy and automation digital solutions for efficiency and sustainability, it’s very much cemented into the core foundation of the company. Sustainability is the conversation at Schneider Electric and procurement is but one of the key ways in which it champions and commits to its sustainability goals. This is particularly uncom-

the company to be successful with its

mon when discussing the concept of the

strategy.”

transformation of procurement and for

This procurement transformation

Dan Bartel, CPO of Schneider Electric,

of Schneider falls under three pillars.

sustainability is a key driving force for its

The first pillar looks at enabling growth

current procurement journey.

through those high quality and innovative

“What we’re trying to do is orient

products in order to bring in technolo-

ourselves [procurement] toward where

gies to improve Schneider’s market offer-

the business wants to go,” he says. “So

ing. The second pillar falls in line with

our vision for procurement is to bring

the traditional perspective as to what

top quality and innovative suppliers with

procurement does for a business; driv-

competitive solutions into Schneider, with

ing bottom line results. “It’s absolutely at

the best procurement team in our indus-

the core of what we do in procurement

try. We think that’s required in order for

in Schneider,” says Bartel. “And to be

SCHNEIDER ELECTRIC

honest, I think it needs to be, given the

also the offer itself which adds tons

strategy of our company.”

of complexity and a lot of noise to the

The third pillar is sustainability and helping Schneider advance their sustain-

system.” Bartel, whose career has been heav-

ability agenda by being leaders in the

ily industry focused as opposed to the

industry with suppliers, with respect to

more common CPO journey that jumps

corporate social responsibility as well as

across multiple industries, has had a

product and material compliance prof-

number of CPO roles throughout his

its. “Supporting that is, of course, all the

career. Having joined Schneider from

talent and competency development

ABB in 2019, Bartel reflects on how the

actions that need to be taken,” he adds.

procurement conversation has changed

“There’s a massive effort on complex-

so dramatically over the course of his

ity reduction throughout Schneider and

career. “I find myself very fortunate,” he

that’s on the organisation design, but

notes. “I came into procurement when it w w w . c p o s t r a t e g y. c o m

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For over 20 years, Drozak Consulting has successfully provided innovative solutions in order to realise substantial and sustainable cost reductions and efficiencies for global organisations, their supply chain and procurement functions. As the procurement conversation has continued to be defined by transformation, both strategically and operational, Drozak has stood out as a crucial consulting partner and has played a key role in enabling these organisations to successfully navigate the increasingly complex nature of procurement transformation. Through a combination of expert knowledge, international presence and years of experience, Drozak achieves fast and measurable results and increases profitability and efficiency for customers. Simply put, Drozak is committed to results. It is this commitment to results, and the innovative approach to delivering them, that saw Schneider Electric seek to partner with Drozak as part of a procurement transformation in which Schneider looks to redefine its global supplier negotiation model. In order to achieve this, there was a significant amount of training and upskilling and the development of an organisational capability that would see the company unlock greater value from its supplier relationships. This is where Drozak’s role, led by Dr Kai Michael Dresch, Associate Partner, is critical. In early 2019, Drozak was called upon by Schneider Electric to support a series of material productivity days (MPDs) for negotiations with some of the company’s biggest global suppliers. “In the beginning there was the usual skepticism about what an external Consultancy like Drozak could achieve or contribute to success. Schneider, a hugely successful company, had some bad experience with consulting firms in the past” he explains.. “Our approach is about knowledge sharing. From minute one, we look at how we can help you based on our approach and deep expertise in negotiations.” To allay this initial resentiment , Dresch speaks to a broader conversation surrounding procurement transformation, particularly one that revolves around supplier negotiation. Results and Trust. “This is important because you can only convince people of change when you are delivering outstanding results,” he explains. “In some businesses, the CPO is not as powerful as he or she wishes to be, but at Schneider, Dan (Bartel - CPO) has been pushing very strongly from the beginning, involved us early and has been fully backed by the board in order to foster change and deliver results. That may have made it a little bit easier for us to finally get through to everybody.” “Schneider is incredibly diverse and truly global, but still like one big family. We are now a part of that family. So when there are hurdles or roadblocks, we can pick up

the phone and speak directly to Dan or other executives in the business and overcome them together. It really is a trustful relationship.” That trust becomes extremely important when developing and executing on a transformation roadmap. Given the complexity of procurement and the volatility of the marketplace, the road ahead is never going to be pain free and the pressure to deliver will always be high “In the beginning of the Covid-19 pandemic situation we switched from face-to-face negotiations to 100% virtual and hybrid negotiations. In this case we could bring in our deep knowledge of virtual negotiations. We were one of the first companies offering this completely virtual negotiation package at the market. Our unique selling proposition is also based on the collaboration with 2 companies - institutes in the fields of (body) language, voice and surrounding elements. A virtual negotiation is definitely different, but by considering all the important aspects you can be as successful as in a face-to-face negotiation. Virtual will be the new normal in the field of negotiations. Definitely an outcome of a transformation process” Dresch said. Continuously challenging and pushing Schneider is exactly what Drozak has been asked to do. Dresch recalls Bartel’s demand that Drozak should never stop “shaking” his organization, bringing in new and particular unconventional ideas. “We can bring in our expertise, speed and insatiability for savings of our experienced consultants and when you see the improvements on the client side – this is outstanding and our philosophy of a trustful partnership. Drozak has already delivered incredible results for and with Schneider Electric and it will continue to do so in the future. These were projects focusing on classic methods for material cost reductions, Health Checks of regional procurement units and reorganization, as well as Innovation & Engineering driven concepts “The trick is”, Dresch emphasizes, “to implement all these concepts in a sustainable way and to ensure the knowledge transfer needed. The only thing a client needs is honest willingness to embrace change. We never stop until we reach best in class solutions in every single topic.” This willingness, and indeed trust, is built from Drozak’s expertise and previous successes as well as it’s collaborative approach with Schneider. “It has to be fact-based on the one hand, which is where the data and the results come in, but social factors matter as well,” he says. “Be open, be communicative, hold your hands up and say you were wrong, and praise when you achieve success. This is not 80 - 20%, this is 50 - 50% from the very first moment you enter into a partnership.”

w w w. cp o stra te g y. co m

was less strategic and have seen a trans-

the world over ‘woke up’ to procure-

formation over the last 25 years where, if

ment, has Schneider always been ahead

a company like Schneider is not thinking

of the curve? “In Schneider, the external

about this function as being strategically

spend that we manage is equal to half of

important or relevant, then they’re miss-

the revenue. A previous mentor of mine

ing the boat completely. I think nowadays

would take the targeted cost reduction

it’s a function that’s viewed by companies

and divide it by the operating margin of

as not only relevant, but critical to the

the company and say, ‘That’s the equal

success of the organisation.”

value of procurement in our company in

Procurement is absolutely key to

terms of sales,’” says Bartel. “That was

Schneider’s success and future growth.

really powerful and it helped people

That much is clear. But as organisations

understand the relevance of the function.

SCHNEIDER ELECTRIC

I think it’s come a long way but we’re not

backwards towards the main actions that

done. There’s still more we can do.”

have to be taken this year, next year, the

This procurement transformation is

year after, in order to get there,” he says.

very much the answer to that belief that

“There is a process in place where once

there is more to be done, and over the

a year, we refresh this thing and we roll

course of the next three years, Bartel

it forward a year. The process has to be

and procurement will roll out a number

dynamic and any time there’s a need

of changes and smaller projects that

to change something we should step in

form a broader alignment with the global

and evaluate that need and decide if we

supply chain strategy of Scheider. “We’ve

change or not, and if we do, what that

defined where we want to be three

change is.”

years from now and worked our way

Given Schneider’s large global

“ It enables us to get the investment allocations that we need to really reach our full potential, but of course we still have to deliver a believable business case and we have to have the trust of the organisation to go deploy that” — DAN BARTEL, CPO, SCHNEIDER ELECTRIC

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

footprint, Bartel is keen to stress that he and his procurement function form part of a broader procurement organisation that enables him to achieve things at speed as opposed to a traditional and rigid decentralised supply chain approach of many other companies in similar positions. Normally as part of a transformation story, we hear of the CPO coming in and having to gain operational buy in from leadership. This is often challenge number one. For Bartel, he admits to being “incredibly blessed” to be a part of a company in which procurement is recognized for the true strategic arm of the business that it is and how he has not had to invest time and effort in convincing them of the road ahead. That being said, he understands that results still speak volumes. “It’s really liberating and is attractive, not just to me but to everyone in my organisation, he says. “It enables us to get the investment allocations that we need to really reach our full potential, but of course we still have to deliver a believable business case and we have to have the trust of the organisation to go deploy that. The door’s open and they expect us to come with those proposals. It’s just more fun to spend time doing things that we enjoy doing rather than fighting for our survival or working to justify the organisation’s incentive.” So just how will this transformation improve on Schneider’s current market proposition? Bartel has outlined the means in which procurement will look to bring in more competitive solutions through a realigned approach to supplier relationships, but what will be the real tangible benefit from that? “That’s a good question,” he muses. “We’re looking to improve the external 14

SCHNEIDER ELECTRIC

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

“ We weren’t focused simply on what we could do differently to get better results, but how we could better partner together to create value?” — DAN BARTEL, CPO, SCHNEIDER ELECTRIC

perception of quality in the marketplace

and his team have been delivering

thanks to how we work with our suppli-

against this strategy and fine tuning it

ers. We should have a more attractive

where possible. One such part of this is

product, service and software offering in

improving the way in which Schneider

the marketplace because we worked on

looks at the market and how it influences

innovation. We should absolutely have

the business offering. “You don’t want

tangible, very easy to see improved

to build a functional strategy just based

financial performance as a result of the

on what the trends are and what every-

work that we do and we should have

body else is doing. It needs to come from

achieved our sustainability targets.”

within and needs to be really closely

When Bartel entered the business, the

linked with what the business is trying to

strategy for procurement had already

achieve,” he says. “But you really need

been laid out and defined. This is what

to understand a lot about what competi-

he described as a ‘luxurious’ thing for

tors are doing and what’s going on in the

any new CPO. Over the past year, Bartel

industry and so we have amped up quite

SCHNEIDER ELECTRIC

a bit our efforts to exchange externally

procurement function and Schneider has

with other companies like Procurement

looked extremely closely at how it can

Leaders and the Hackett Group that have

improve its supplier relationships. As

very good information on how the others

part of this, the company held a global

are doing so we can compare and get

strategic supplier day in which it invited

insights from that.”

100 strategic suppliers from all over

Another key change that Bartel has

the world. “We spent a day and a half

focused on has been a multi-sourcing

together with all of these suppliers. Half

strategy which wasn’t part of the over-

of our executive committee was partic-

all functional strategy previously. Where

ipating directly, including our CEO, our

once there were spot assessments,

CFO and our chief supply chain officer

Schneider now looks more closely at

engaging together with our suppliers,”

how it can increase the resiliency of its

says Bartel.

supplier network. The supplier relationship model is a crucial element for any

“We weren’t focused simply on what we could do differently to get better w w w . c p o s t r a t e g y. c o m

results, but how we can better partner together to create value?” For Bartel, this supplier event was all about broadening the mindset of the category managers and senior leaders to think outside their own business mindsets to foster innovative ideas and overall greater relationships with those suppliers. “It’s about really taking those partnerships forward in a meaningful way and how this is also key for Schneider as a business going forward,” he says. “We intend to become less transactional and to invest more in the relationships of suppliers, to create something together. It’s a real one-plus-one-equals-three principle that our competitors aren’t doing. We want to create an advantage and the advantage can come from growth or financial performance or sustainabil-

been very successful for a long time and

ity. Those are the three things that we

asking people to change can often be a

have our eyes on with these strategic

little difficult, so how does Bartel over-

suppliers.”

come this? “On one hand, expectations

Procurement, and in turn the supplier

need to be well understood and mutu-

relationships, are defined by people.

ally aligned from the very beginning. This

All the best tools and processes are

creates pressure, should you not meet

no good without the right people at

those expectations at times,” he says.

the very heart of it all. This transforma-

“It’s about making sure that the people

tion is focused very much on changing

have the support around them to do the

that relationship and enriching it, so it

job beyond the support provided directly

starts with the people. Schneider has

by me. I take a lot of pride and put a lot

SCHNEIDER ELECTRIC

of energy into making sure our people

They bring very good training and good

are successful and so we have a matrix

advice and coaching and mentoring

manager in some places who provides a

of the teams to better prepare them to

similar type of support in the onboarding

engage in discussions with suppliers,”

of our people into the procurement role,

he says. “In parts of our business, we

who clarifies the expectations and really

did need to shake things up. The rela-

enables our people to be successful.”

tionships were just getting stale and the

Training and upskilling is also key to

way that we were approaching those

this and Schneider works closely with

negotiations was very unorganized.

Drozak Consulting on this front. Bartel

Drozak brought a process, a standard-

asked Drozak to come in and shake up

ized way of working as well as train-

his organisation, but recognises it goes

ing and key support. They’ve done an

well beyond that. “They bring a process.

exemplary job in helping us get enabling w w w . c p o s t r a t e g y. c o m

and empowering our people to really

this, and Bartel admits that the company

drive more value from those supplier

has seen both setbacks as well as oppor-

relationships.”

tunities to grow.

Practicing what he preaches, Bartel

There have been things we had to

describes how Drozak and Schneider

accelerate and some things we had to

have to continue to innovate in their

slow down and in the long term, the strat-

own relationship in order to continue to

egy remains but with a couple of addi-

succeed and drive innovation together.

tional elements,” he says. “It has really

“If a partner wants to stick around, they

shined a bright light on the single source

have got to innovate because if you’re

situations that we have in the business

a one trick pony it doesn’t make much

and it’s given us an opportunity to take

sense to continue the relationship for the

action and make the investments that we

long term,” he says. “Drozak has inno-

need to make in order to build a more

vated with us tremendously. Looking at

resilient supply chain for the future.”

COVID, we can’t do site visits anymore

The financial strain caused by the

so Drozak has assisted us with some

pandemic has also forced a rethink for

very creative ways to make that process

many of where their priorities lie with

entirely virtual and it works.

regards to digital, as Bartel note: “We’re

“The longer you work together with

making big investments in digital and

a company like Drozak who innovates

some of those were slowed down a little

along with you, the better you get to

bit but there’s other aspects of digital,

know each other’s strengths and weak-

like how we interact with our suppliers.

nesses,” says Bartel. “It then becomes so

As an example, we have procure-to-pay

much easier to find things that you can

on source to contract that we acceler-

continue to do, that you should continue

ated substantially because it helped

to do together.”

us through the crisis. As it is right now,

At the time of writing the world has

we’re at the moment where we’re getting

been gripped by the COVID19 pandemic,

back to what our CEO calls ‘business

which has seen major disruption to a

as unusual’, which is back on track to

number of global businesses, along-

execute our strategy but still handling the

side the significant toll on human life.

impact of the crisis.”

Schneider has not been invulnerable to 20

SCHNEIDER ELECTRIC

Despite this sudden and difficult

“ ...it’s given us an opportunity to take action and make the investments that we need to make in order to build a more resilient supply chain for the future” — DAN BARTEL, CPO, SCHNEIDER ELECTRIC

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

SCHNEIDER ELECTRIC

obstacle in the road, the future is bright for procurement at Schneider. Thanks to a well defined commitment to redefining procurement, supported by a truly collaborative culture and a drive for innovation and sustainability in line with the broader business strategy, Schneider is well placed to succeed on this journey of procurement transformation. Bartel can reflect on what has made this journey successful so far and how that will continue to pave the way for that future success. It’s about developing relationships with the people, with your colleagues, your peers and your superiors and really understanding the challenges faced and assessing them and working with the team to come up with something new that you’re going to accomplish,” he says. “You need to make bold proclamations of what we’re going to change. wake people up and make those changes. Create a more balanced, simplified, energized, rejuvenated team that is more effective. We have been truly rejuvenating the organisation and it sends a strong message that we’re serious about shaking things up. That we’re going to be doing things different now and you can expect, if you’re in procurement, you can expect great career opportunities and if you’re one of our clients, you can expect better results.”

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

Foundry Findings How do you factor cost avoidance into your savings model? WRI T T EN BY

M ic h a el C a d ie u x

As part of Foundry Findings, our new and regular column from Mike Cadieux, Founder of Procurement Foundry, takes a look at cost avoidance measurement in the year 2020

" Donâ&#x20AC;&#x2122;t insult yourself, or your CFO, by reporting on cost avoidanceâ&#x20AC;? - TA N I A S E A RY, F O U N D E R O F P R O C U R I O U S *

Tania Seary said this in a 2016 article indicating that Tom Derry, CEO of ISM, shared the same opinion when it comes to the measurement of cost avoidance. As I write this today I am surprised that cost avoidance measurement is still *Check out our interview with Tania in Issue 13 of CPO strategy

a thing. Now before you bring out the pitchfork and torches, hear me out on this one.

H O W D O YO U FAC TO R C O S T AV O I DA N C E I N TO YO U R S AV I N G S M O D E L?

The David Copperfield Effect As one of the most famous magicians of all time, David Copperfield is a master of illusion. Witnessing his “now you see it, now you don’t” mastery of taking something and making it disappear into thin air is nothing short of amazing. Do you know what else is amazing? The way that cost avoidance takes something and turns it into nothing. However, if you miss the first part of the trick and only come in at the end when Copperfield goes ta-dah, it's disappeared; you would likely say “ta-dah what?” The reason for your lack of recognition is that you never saw “the before” – the thing he made disappear. With cost avoidance, it is the same thing. While we in procurement have the benefit of seeing the trick materialize from start to finish, i.e., we negotiate a supplier down from a 20 percent price increase to 10 percent, no one else in the organization is there to witness that accomplishment. Like trying to explain the Copperfield magic to someone who isn’t there to see it first-hand, it loses something in the translation. Think of a tree falling in a forest and no one being there to hear it.

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

So, we are at a crossroads regarding this cost avoidance thing. Let’s face it, if the CEO of the oldest purchasing association in the world tells everyone that promoting cost avoidance as a viable metric is a waste of time, then why are we even talking about it?

“ If the CEO of the oldest purchasing association in the world tells everyone that promoting cost avoidance as a viable metric is a waste of time, then why are we even talking about it?” Please continue to hold off with the pitch-

broaden the scope by which we measure

fork and torches.

procurement’s impact.

The point I am making is this; engaging

For example, do you realize that in the

in a chicken or the egg debate – by the

digital age in which procurement is

way, the egg came first, is a waste of time

taking place beyond the cloud on “the

because there are other, newer metrics

edge,” that the supply chain will deliver

that have an even greater impact on the

70 percent of all digital advancements

enterprise towards which we should turn

within the global enterprise?

our attention. In other words, we should 28

H O W D O YO U FAC TO R C O S T AV O I DA N C E I N TO YO U R S AV I N G S M O D E L?

â&#x20AC;&#x153; What are the metrics for measuring success in this newly expanded arena?â&#x20AC;? What are the metrics for measuring success in this newly expanded arena? If you do not have a ready answer, you risk missing a great opportunity to showcase how valuable procurement is beyond cost avoidance.

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

H O W D O YO U FAC TO R C O S T AV O I DA N C E I N TO YO U R S AV I N G S M O D E L?

In the context of risk, the cost avoidance debate is not entirely a lost cause. Companies like IBM have plugged their supply chain into the Weather Networkâ&#x20AC;&#x2122;s systems to use AI to track weather patterns to determine the likelihood of a supply chain interruption. Avoiding problems before they arise by circumventing bad weather or other conditions that could negatively impact a companyâ&#x20AC;&#x2122;s supply chain makes good sense. The only question I have is how you measure the return on avoiding a supply chain interruption due to weather? Okay, time to put away the pitchforks and torches. Why not check out my previous article for the Foundry Findings, where I discussed how to make your choice between MBA and Industry certifications. Or listen to my appearance on The Digital Insight where I discuss making procurement cool and how important a platform like the Procurement Foundry is right now! Be sure to subscribe to CPOstrategy for more great procurement insight!

MICHAEL CADIEUX FOUNDER, PROCUREMENT FOUNDRY

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

WRI T T EN BY PRODUCED BY

D al e Bent o n Hey kel Ou n i

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

Over the last decade, the transformation and evolution of procurement has enabled a wider understanding of what the true value of procurement can be to a business. An interesting evolution, and a growing trend, has seen many people shifting from direct into indirect procurement. “The buyers from direct procurement often say that indirect are the ones who buy pencils or copy paper,” explains Alejandro Basterrechea, Head of Procurement Operations (Indirect Procurement) at Zalando. “Now, if I look at our team, we have people coming from the business functions or the direct procurement space. It's

Not only cost savings, but how to really

becoming more attractive because you

use the money in the best way and at a

have other levers and can influence

speed that allows us to become a strate-

specifications more than in the direct

gic partner to the business.”

space.” This is an observation shared by Djordje Stevanovic, Director Indirect Procurement, who believes that the time

The evolution from transactional to strategic business partner

when indirect procurement was merely

Becoming more of a strategic part-

in charge of office supplies and company

ner is exactly the remit that Indirect

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

Procurement at Zalando is working

the business and the world evolved and

towards, with Stevanovic being brought

everything became more global and

into the company to build up an indi-

competitive, the attention to cost grew.

rect procurement function and support

ZALANDO

the company in its ‘next level’ of growth

“On the one hand an indirect procure-

following a successful IPO in 2014.

ment organization and all its processes

Zalando was founded in 2008 and

and people and on the other, an ePro-

as Germany’s most successful start-up

curement tool. There was already a core

and one of the first unicorns, it experi-

group of people doing indirect procure-

enced hypergrowth in terms of revenue,

ment activities and reporting into the

customers and employees and therefore

CFO organization, but in my experience,

sought to control the increasing spend

usually in such an organizational transfor-

more professionally, by investing into an

mation, you either already have the tools

indirect procurement organization. “The

and need to restructure the teams or you

main challenge was that we needed to

already have an organization and need

build two things at the same time from

to run a digital transformation.”

the ground up,” explains Basterrechea.

“At Zalando, this was about doing w w w . c p o s t r a t e g y. c o m

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For additional information visit: www.genpact.com/risk-compliance

Genpact Enterprise Risk and Consulting (ERC), a Genpact company, offers governance and risk consulting services to clients across the globe. Few key solutions under its suite of offerings include Third Party Risk Management, Anti-Bribery Anti-Corruption, Internal Audit, SOX Advisory and IT Risk Management. One of its clients is Zalando SE, Europe’s leading online platform for fashion and lifestyle. As part of the company’s vision to become the Starting Point for Fashion, Zalando is building a sustainable indirect procurement solution to support the ‘next level’ of growth. Zalando, in partnership with Genpact ERC, has established a risk based third party due diligence program for all its indirect business partners to comply with its code of conduct requirements. “With focus on compliance, we deployed an experienced team with deep domain knowledge, empowered with smart technology to ensure near real-time reporting of true hits” says Anu Vij, Regulatory Compliance Leader at Genpact. “This ensures Zalando is working with ethical & sustainable business partners who acknowledge its code of conduct and adhere to various regulatory requirements.” Zalando follows a risk based approach where all business partners undergo initial risk classification and are appropriately assigned to Genpact for conducting due diligence checks. “We screen their business partners across 40+ countries on risk areas like sanctions, anti-bribery anti-corruption, political exposure and adverse news (including labour rights, health & safety, etc.) and provide results to Zalando to develop their response strategy for high risk business partners” says Anu. While Zalando runs a mature program, Genpact’s prerogative would be to help them stay abreast with the ever increasing regulatory dynamics and at the same time maintain a sustainable third party risk program. This includes evolving towards continuous monitoring of business partners and better integration of sustainability

parameters to manage risk across the business partner life cycle. With supply chain disruption risks and increasing global regulations in third party space, businesses are now more than ever enhancing their third party compliance program. This has resulted in significant customer traction for Genpact ERC in the last 24-30 months. “Customers now realise that our ability to provide agile, modular and fit-for-purpose solutions has enabled them to de-risk themselves by restricting their engagement with high risk third parties” says Subhashis Nath, Head of Enterprise Risk & Compliance, Genpact. “Genpact has implemented a GENIE program which, allows senior compliance and procurement leaders of various industries to bring thought leadership and external breathing to all our regulatory solutions.” The procurement space continues to remain dynamic. As a result, agile third party programs are increasing, as stakeholders realize there’s a lot more to do ‘beyond database run’, widely apparent throughout the current pandemic. “What COVID’s taught people is that supply chain disruption is not going to disappear in a hurry. I think it is reminding procurement officers to closely monitor their supply chain risk, identify sole supplier dependency and understand their supplier network that impacts their end product offerings” says Subhashis. Genpact looks to stride ahead with their in–house TPRM program, enhanced with strategic partnerships and backed by deep domain experience with a central team servicing the globe. Customers in procurement, sourcing and compliance world, leverage Genpact for framework design, third party on-boarding management, supplier code program management, due diligence reviews, financial risk assessments and action plans remediation. Their flexible solutions are built on trust, experience, digital transformation and holding customers as key.

both at speed and at the same time in

and how indirect can be structured,

a high speed environment all the while

including the organizational design and

being customer obsessed and starting

implementation of user-centric solutions

to deliver value,” remembers Alejandro

to suit Zalando’s needs. The second

Basterrechea. “This was a new challenge

phase looked at what Basterrechea

that required a mindset change for any

describes as “ramping up”.

experienced procurement professional,

“Now, you have to look at how you

but it was worth it. We see the results

ramp it up from an organizational side;

now”.

looking at staffing, defining skill sets, job

In 2015, Zalando outlined a very clear

profiles and acquiring the right people at

roadmap as to how it wanted to build

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

this indirect procurement function. The

side it's about user centricity and how we

journey can be defined by four phases.

implement tools people love to use and

Phase one focused entirely on defining

how we can get the most out of them.”

the why and value of the organization

Phase three explores

“ Now, if I look in our team, we have people coming from the business functions or direct procurement space. It's becoming more attractive because you have other levers, and can influence specifications more than in the direct space.” — ALEJANDRO BASTERRECHEA, HEAD OF PROCUREMENT OPERATIONS (INDIRECT PROCUREMENT)

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professionalisation. More specifically,

he says. “You have the right people and

Zalando Indirect Procurement is at a

the right sizing, but now you need to

stage where it has reached a critical

bring value. We have a good backbone

mass in terms of the right organizational

and now need to deliver based on the

structure, level of expertise and ePro-

value we bring.”

curement usage. “So, the question is

It was at this point in the journey

how to take advantage of an established

that Stevanovic joined the Indirect

organization and bring it to the next level

Procurement team at Zalando. “I was

to reach the status of strategic business

impressed by the speed, the entrepre-

partner that delivers value to its stake-

neurial culture and customer obsession

holders and gets the seat at the deci-

mindset of the company. This was also

sion-making table,” says Stevanovic.

reflected in procurement, which in four

Phase four is all about creating the

years achieved what it would have taken

procurement of the future. “You have the

a decade in other organizations.” For

technology, the processes and the data,”

Stevanovic, whose career saw him move

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

from direct to indirect procurement, this journey for Zalando is one that can be defined by “stakeholder management”, meaning managing the ‘right’ stakeholders in the ‘right’ way. In other words, identifying the right internal customers, understanding their needs and addressing those needs proactively by leveraging the tools and talent it has implemented so far. “You need to explain what you would like to do with your internal customer, what kind of value you can bring, and you need to execute and bring that value,” he says. “You accept the fact that you need to gain the respect and take on the responsibility of things that are

actively be a part of the daily life of your

outside the normal responsibility of a

customer. They are the stakeholder, so

procurement organization.” Stevanovic

stakeholder management is essential.”

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

Enabling growth and the impact of technology

a negotiator. Stevanovic is keen to high-

The indirect procurement journey for

light that negotiating is but one part of

Zalando is about enabling objectives like

the ‘entire set’ of services that indirect

growth, financial impact and customer

can run. “We understand and comple-

satisfaction, while providing the right level

ment the internal customer and we can

of spend and cost management as well

offset and neutralize the things that aren't

as enabling the user's business to make

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

informed decisions. This requires a level

you can save money. You can also save

of agility combined with the right process

time and resources. The real goal of the

and technology in place to minimize work

indirect procurement organization is to

for the business so they can focus their

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

all the strategic value that comes from it.” Transparency, compliance, and in turn

customers. Spend management is a blan-

data, allows the conversation between

ket term that we hear in all procurement

indirect procurement and the internal

organizations, but for Basterrechea it's

customers to change. In short, it allows

about how indirect can simplify processes

indirect to assert its position from a

with enough transparency and compli-

support or control function to a strate-

ance so that people can manage their

gic business partner. Data is the key to

budgets properly and efficiently. “In doing

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

this, you will collect so much informa-

sation becomes fact based,” explains

tion from internal and external customers

Stevanovic. “Data-driven conversations

that you can continuously provide the

are more effective. This can help areas of

right level of transparency for smart deci-

the organization be faster in achieving the

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

target of being on the same page.”

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

There's also agility and the system. If the entire team is associated with a tool that w w w . c p o s t r a t e g y. c o m

is difficult and doesn't work well and is

Data driven Procurement

somewhat clumsy to use, the internal

So it’s clear that data and stakeholder

customer will not see indirect procure-

management go hand in hand. For two

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

men whose careers have been defined

have to be a giant because we are

by procurement, communicating its value

one of the few organizations that have

and navigating the complexity is second

access to all areas of the business,”

nature. Doing this sounds simple on

says Stevanovic. “This is an incredible

paper and data certainly helps, but ulti-

advantage. We are creating a bridge

mately there remains a lack of informa-

and connecting the separate areas that

tion as to what indirect procurement can

are not as close as they should be. We

actually do for business.

can bring opportunities that are not

Basterrechea notes: “At Zalando I've

being considered or that the business is

been closer to other departments more

unaware of.”

than in other companies. Having good

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technology and strong processes helps

tool and explaining to the business that

bring everybody together because you

if you follow the process and allow us

bring the same language within the same

to help you - everything you’re buying

system and process and you generate

externally will be processed in a much

all this important data for these teams.

smoother way because you’ll have a

Procurement becomes the spider in the

greater understanding and control of

web. You’re pulling different people and

your budget,” he says.

different information to the table to help

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

the stakeholder make a decision based

pieces of the puzzle together to look at

on the data you have from other areas.”

what you do as part of the business from

Stevanovic is keen to acknowledge

the right perspective. Sometimes, you

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

may not have that perspective because

regardless of how seamless they are

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

making it. “It’s about providing the right

the procurement to help you in this you

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

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

will have even more money than you did previously to follow up on your priorities even more.” As part of phase one and two of this

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

journey, indirect procurement now has

long way in building that trust and influ-

a P2P process that enables the organ-

encing change for the better. “Figures

ization to collect this information. They

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

have also implemented additional tools

source of your data is proven and is

to process the information and provide

visible to everybody then you have a

visibility. The team will then analyze

fact-based discussion.

the data and get conclusions out of it

But the real target is to be part of

together with the business because they

the team because the people have to

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

see another perspective. We look to

everything’. It's about how the information

have one of our people taking part in

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

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

answers on the details, that helps the

is becoming a data driven organiza-

business because one number doesn't

tion and so it requires its people to be

tell you everything.”

data-driven professionals. For some

“Then there’s high level agility. If

this is a simple task, as they will have

somebody asks you for something,

cut their teeth in a world driven by

but it takes you three weeks to collect,

data, for others this will require train-

analyze and come up with an answer

ing and coaching. Both Stevanovic and

from the data, you're too late. Especially

Basterrechea agree though, that this has

in an organization like Zalando where

to come from the very top.

three weeks is a long time. Speed plays

“Djordje is already a data driven w w w . c p o s t r a t e g y. c o m

person, so the discussions are based on facts and this becomes part of the team's culture,” says Basterrechea. “It becomes part of the culture. But how do you enable the culture? What we're trying to build is a lot of self-service data solutions where our buyers are able to pull out data and information by themselves with ease. This is achieved through simple dashboards and reportings.” Simplicity is the key and Djordje knows more than anyone that simplicity will allow the organization to be more effective and efficient while also building ‘momentum’. “Everybody has to have access to the data. This doesn't have to be a complicated process,” he says. “If you have access to the data then the expectation is that you can pass this information to the team with ease. Don’t come to me with a feeling, come to me with something that is really proven in the figures because then we can create the momentum and build on this.”The secret to this is coaching and explaining why something is making sense to do it in this way.” Basterrechea is a firm believer that leadership has to lead by example by asking the right questions and allowing the indirect to provide the right information and data as he feels this is what will enable this to become the norm, embedded within the culture. “My team is one of the service units providing the data,” he says. “It's the customer's first mindset, so they need to understand what the buyer needs. They need to understand the role, what they want to achieve, and then work backwards to build the reports, the tools and the queries that they need to make them easier for them.Again, we don't make decisions with gut feeling, it's not part of our culture. People like to be convinced with facts.” 46

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

Customer centricity

are the ones that are very customer

As indirect procurement, having that

oriented. Look at the success of Zalando,

customer first approach is what makes it

it is based on customer obsession,

a true strategic partner to the business.

convenience, and offering solutions.We

After all, indirect procurement is listen-

help them to help us, and once you have

ing, engaging and ultimately supporting

a customer obsession culture, which I

the business in its decision making and

believe we have in Zalando; it forces

strategic growth. “Remember, indirect

you to think simpler and to be more effi-

procurement doesn't own a budget,”

cient.This forces you to rethink how you

says Stevanovic. “Everything that you do,

approach them. Be it through process,

you do for someone else. This has to be

tools or the data and how you provide it.

part of the DNA of a buyer.”Basterrechea

Customer obsession is the key.”

continues: “Very successful companies

“ Everything that you do, you do for someone else. This has to be part of the DNA of a buyer” — DJORDJE STEVANOVIC, INDIRECT PROCUREMENT DIRECTOR, ZALANDO

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Procurement in times of risk and uncertainty

Zalando is doing all it can to keep its

At the time of writing, the COVID19

well as, and looking to keep the business

pandemic has truly gripped the world,

running by looking at how it can maintain

causing major disruption to both life and

the partnerships that it has.

business operations. Understandably,

employees safe and to protect them as

The company has been working

this has taken its toll on Zalando and

closely with its brand partners to look at

indeed this procurement journey.

how it can help them through this crisis.

Zalando, along with many businesses

Zalando is an online ecommerce busi-

around the world, has had to adapt its

ness and so it has used this perspective

operations in order to survive, thrive and

to identify and offer support for those

help others as a good corporate citizen.

partners and onboard them as online

As part of a broader corporate drive,

retailers in a process called Connect

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

Retail. Through this, Zalando has expedited the onboarding of brick and mortar stores and the partners can sell over its platform without any commission fee for a disclosed amount of time. This has been introduced and trialled in Germany, with the intention being to expand it to other markets, as well. From a pure indirect procurement perspective, Zalando has invested into the procurement of protective equipment. “We were very fast because we were able to deliver a very important number of masks and different typologies of masks, to our people in the warehouses,” says Stevanovic. “We also worked to create the right environment to come back to the offices, if and when that happens, by providing our employees with the right protective equipment.” This procurement approach was a mixture of tactical and strategic buying and was extremely successful for Zalando, thanks to its agility and the effective implementation of the P2P system. Through this, indirect procurement could select a supplier, check their conformity to the European standard for protective equipment and materials and pay for them all within the same day, whether it be Europe or Asia. Protecting the business, alongside 50

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protecting lives, is also a leading priority amidst this pandemic and Basterrechea champions the manner in which Zalando was quick to move in this regard. “Once a decision was made, and we moved towards cost containment and protecting the business, we were able very quickly to lower approval thresholds, so that executives were more involved in the cost control, cost containment, and cost of business,” says Basterrechea.“What that has done is allowed us to leapfrog the implementation of digital solutions such as electronic invoices and e-signatures.We expedited a process that would have taken months into a few days. It’s really a testament to how we turned a challenge into an opportunity.” The pandemic has shone a light on the solid foundations that Basterrechea and Stevanovic have built as part of this procurement journey. While it has been a time of great duress, it's also been an opportunity to reflect on what has been key to succeeding, even in a time of crisis. “I think acquiring the Zalando culture within procurement, that shows its ability to act agile when the business needs and its ability to reduce costs when the business needs,” says Basterrechea. “But we also have the ability to adapt back again, when the business requires you to support growth and not cost cutting. That’s key.”

Building Procurement of the Future For Stevanovic, it goes back to people and stakeholder management. “Whether it's stakeholders learning about the culture and the environment and stakeholder management, this is a job where you need to work with w w w . c p o s t r a t e g y. c o m

others,” he says. “You cannot work in isolation. You need to be present in the day-to-day of your internal customer in a way that supports them.” People are key in building procurement of the future. Attracting and hiring the right talent is the most important factor to have success as an organization. This includes not only the skillset but also the mindset. “We have a very broad and diverse group of excellent professionals in our team. A truly international team that includes people from the most diverse procurement background. Some of them came from the business functions, some of them have jumped into other areas like data analytics or solutions management within the team and some of them have changed from direct to indirect,” says Stevanovic. Zalando’s Indirect Procurement vision is to become the trusted value creator partner to the business by providing the most user centric procurement solutions, taking all the advantages of digitalization, becoming a data-driven organization, supporting the internal customers in implementing their business strategy addressing their needs through the most efficient and solid supply base and, by definition, ensuring the highest level of motivation and engagement in the team.

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

Q&A: Procurement transformation and sustainability with INVERTO Lance Younger, managing director of INVERTO and Jonathan Sing, product manager at INVERTO discuss how the spotlight is well and truly shining on procurement, as COVID-19 will represent a defining moment in its history while also playing a key role in deciding its future.

WRI T T EN BY

D al e Bent o n

LANCE YOUNGER MANAGING DIRECTOR OF INVERTO

JONATHAN SING PRODUCT MANAGER AT INVERTO

When we talk about procurement transformation, how do we break it down and define it for people?

want the next new product and design, and therefore the procurement function needs to have its capabilities aligned behind achieving that.

Lance Younger:

Organizations that are achieving

It's a very topical thing because ulti-

that alignment are outperforming their

mately, you only have so much time

peers. Transformation is a broad word,

and so much resources to be able to

but ultimately you need to define it

align behind your own personal trans-

within your organization and ultimately

formation. We have completed a bit of

within procurement so that you know

research recently on the link between

what you're not doing as much as you

procurement purpose and performance

know what you're doing as well.

because what we saw and what we work with clients on, is this alignment of saying, "If my business focus is one of cost optimization, lean processes because I'm in a manufacturing environment," then everything within the procurement organization needs to flow and be aligned behind that. Then you need to build. You need to have roles that are defined as commercial engineer, cost engineer that target cost analyst. You have analytics that supports cost and deep cost appraisal. You then need individual capability and technology that supports that and metrics that are aligned in and around cost as opposed to an organization that's leading towards product innovation and development like Nike. Thatâ&#x20AC;&#x2122;s what the ultimate customer wants. They 56

Q & A : P R O C U R E M E N T T R A N S F O R M AT I O N A N D S U S TA I N A B I L I T Y W I T H I N V E R T O

Is there a balancing act between saving costs and focusing on bottom line versus driving innovation?

to start focusing on other things. There's some organizations that embrace that and it'll be part of the CFO's mandate to look at risk as well. It becomes an open

Lance Younger:

door for procurement to push beyond

The core role of procurement is cost. It's

cost and into risk.

commercial. It's being entrepreneurial.

In many organizations it relies upon

It's looking at the price element of what

procurement to push and to champion

organizations deliver. So first and fore-

the innovation or risk agenda. There's

most, procurement functions need to get

a big decision for individuals to take

that right. Depending on the organiza-

because you'll join an organization and

tion, you are able to push beyond that

you'll not only want to deliver on cost

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

but also deliver on innovation. Youâ&#x20AC;&#x2122;ve then got to commit to that and in some

Tell me what youâ&#x20AC;&#x2122;ve seen in terms of procurement and COVID19?

instances, the organization is either not going to be ready, not have the appetite,

Lance Younger:

or they're not going to have the ambi-

There are a few things I've been really

tion for you and your team to be doing

impressed with. One is the speed by

more than just cost. Therein comes a big

which teams were able to mobilize their

decision as to whether or not you decide

plans, actions and core teams, to get up

to push it further, or you decide to do it

and running. Thereâ&#x20AC;&#x2122;s a good proportion

somewhere else.

of lessons learned from previous crises

Q & A : P R O C U R E M E N T T R A N S F O R M AT I O N A N D S U S TA I N A B I L I T Y W I T H I N V E R T O

about the resilience that actually exists within procurement functions. The other thing that impressed me

for individuals as well. Weâ&#x20AC;&#x2122;ve also seen a very rapid look at risk and supply risk, and in the short term

is how we've been able to collaborate

since January and February, we saw a

cross-company and cross-sector as well.

lot of people addressing some of their

Youâ&#x20AC;&#x2122;ve seen quite a few of these collab-

initial supply risks very quickly. What

orations being put into effect, dropping

we're seeing now is almost a second

aside any competition that exists to

wave. We're in lockdown and some coun-

solve problems that exist with individual

tries are coming out of lockdown, and

companies or simply providing protection

organizations are starting to struggle a w w w . c p o s t r a t e g y. c o m

little bit with what next. We're going into

at the very basic level, the number of

what we're calling a bit of a dance where,

different tools that people are using,

as restrictions on COVID are relaxed,

from teams through to Skype through

people are looking to understand what

to Zoom, we've been able to scale and

that means in terms of future demands,

operate a new way of working which

future course profiles and the like.

is synonymous with being digital and synonymous with being agile. Itâ&#x20AC;&#x2122;s how we

How important is it to look at successes and not just failures or challenges through COVID?

look to continue to look to embody that digital stuff into what we're doing that will be one of the key enablers and a key positive for us as we come out of COVID.

Lance Younger: I think it's an imperative. 14% of companies will effectively thrive. They'll come

Will the supplier relationship ever be the same again?

out of this better than they went in. Their growth curves will be more significant.

Jonathan Sing:

For many organizations you will need to

With every crisis, there is always some-

be concentrating on how you become

thing that changes and that remains, and

one of those companies that thrives and

maybe in this case, communication is

doesn't just survive? The other thing

one of them with the supplier. Now you

we've statistically shown is that those

have to make time to communicate every

organizations that at first tend to outper-

single day, and it is much more frequent

form their peers as well.

and it's both formalized and informal

With those two things in mind, it means that procurement in particular needs to

because everyone's working remotely. You can always have that drumbeat

look and understand what it should be

with your suppliers, and maybe this

focusing on to come out of the COVID

is something that's going to remain in

better, stronger. A relatively easy one for

terms of the relationship itself. I think the

organizations to focus on is digitalization

focus is going to be changing moving

and what we look to do to improve our

forward because I think a lot of the trans-

organizations across the board. Since

actions depending on the categories

COVID acted as such a catalyst for that

obviously and the suppliers can be quite

Q & A : P R O C U R E M E N T T R A N S F O R M AT I O N A N D S U S TA I N A B I L I T Y W I T H I N V E R T O

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

transactional. I think immediate term

work slightly differently moving forward

the focus will change from having those

post-crisis because the issues that

potentially hard discussions on price but

COVID is teaching or showing everyone

focus more on the availability at first and

is really an eye opener now. The relation-

then medium term it will be a case of

ship with the supplier will have to change

using that experience to drive value out

to make sure it future-proofs itself in

of it.

many ways.

They might look at driving further efficiencies, driving different operating models and looking at alternative supply

Will businesses look to focus more on surviving rather than thriving?

of the supplier just to make sure that risk does not happen again. So this is also

Jonathan Sing:

an opportunity for procurement profes-

Weâ&#x20AC;&#x2122;ve conducted a recent survey and

sionals to learn with their suppliers to

found that 70% of participants don't

Q & A : P R O C U R E M E N T T R A N S F O R M AT I O N A N D S U S TA I N A B I L I T Y W I T H I N V E R T O

necessarily plan to spoil the supply

a plan in place, scenario planning, and

chain, which could be at first a negative

then executing on that plan. Probably the

outlook. But actually what it says at the

most important thing is then being very

same time is that businesses are trying to

deliberate about how they can use that

build a response to crises and will modify

as a platform to rebound, to grow and

their supply chain. Just under half of the

to be strategic because procurement

participants plan to change their supply

is well positioned to focus on the cost

chain or have crisis response procedures

and risk. If they just focus on those two

in place.

things, then they'll come out of COVID in exactly the same position that they

Lance Younger:

went into COVID and may take a step

Thereâ&#x20AC;&#x2122;s an inflection point where people

back especially when they're looking to

go from doing the base things; reacting

move forward. If they use that as a base

to COVID, putting in a crisis team, putting

to move forward and accelerate digital

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

or deeper relationships with suppliers on innovation, then that is going to be where they're going to drive the biggest amount of opportunity.

How has procurementâ&#x20AC;&#x2122;s conversation around sustainability and other areas that are not often spoken of? Lance Younger: If COVID hadn't happened, then there are so many things happening with regards to the environment regarding social issues that mean that sustainability and procurement is going to be imperative. We saw it last year with budgets changing but also the procurement title changing as well. When risk was emerging as something for procurement, you didn't see procurement's title change to chief third-party risk manager. Whereas last year we saw four or five CPOâ&#x20AC;&#x2122;s changing their titles to being chief procurement and sustainability officer, and they're in big organizations. That change was coming. Once we get through COVID, it will become prevalent again, and the scope and scale of it will be trimmed depending upon which type of organization you're in. If you've got a supply chain that's heavily labor impacted, you've got a doubleedged sword here. COVID has accentuated those industries that have got a huge amount of people in their supply chain. It accentuates the people element from a sustainable procurement perspective, whether it be working conditions through to payments and wage levels. So there are reasons to be spending more time and focusing more on sustainable procurement. 64

Q & A : P R O C U R E M E N T T R A N S F O R M AT I O N A N D S U S TA I N A B I L I T Y W I T H I N V E R T O

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Will this redefine our preconceived notions of procurement?

What is one change that you hope remains permanent?

Lance Younger:

Jonathan Sing:

It's something that magnifies the reason

The agility, resilience and the ability to

why procurement exists, whether that be

respond fast to decisions. It's important

the intensity of focus around cost and the

to have processes but have the right

commercial role of being able to drive

processes that allow you to really make

and understand what makes up cost.

the right decisions to be more competitive

How can you understand detail down to

in a more and more dynamic environment.

the relationships that you need to have in place to be able to deliver both internally

Lance Younger:

while capturing and building on exter-

Leadership. The success or failure of

nally those ideas. Right now is a catalyst

a team, a company and a procurement

for procurement and for people in the

department is defined by leadership.

procurement industry.

Leaders can unlock gridlock. They're

We've seen how procurement has

able to communicate and be strategic

gone from looking at commercial to risk

and at the same time as being collabora-

to innovation, sustainability. In 10 years'

tive to basically move beyond inertia and

time, there'll be something else we'll be

engender imagination are all going to

looking at, but procurement, we'll still be

be critical things. So leadership at times

looking at it. We'll still be working with

of crisis and beyond is going to be an

suppliers to ensure that whatever the

imperative for me.

topic is, we're able to bring it to bear within our organizations.

Q & A : P R O C U R E M E N T T R A N S F O R M AT I O N A N D S U S TA I N A B I L I T Y W I T H I N V E R T O

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Five leading supply chains Created to shine a spotlight on the trends, capabilities and best practices of leading corporate supply chains worldwide, the Gartner Supply Chain Top 25 is an opportunity for procurement professionals to recognise and apply best practices to their own operations. Here, CPOstrategy takes a look at five of Gartnerâ&#x20AC;&#x2122;s Supply Chain Top 25

WRI T T EN BY

D al e Bent on

Schneider Electric (Gartner Supply Chain Rank #4) IN RECENT YEARS, the global specialists in energy management and automation has significantly digitised its supply chain processes in order to gain greater insight into the real-time location, status and ETA of all itâ&#x20AC;&#x2122;s outbound deliveries to improve customer experience and efficiency. Schneider also provides Smart Supply Chain solutions for its end customers, such as Product Information Management (PIM) tools and Supply Chain Optimisation tools to improve end-user efficiency and profitability. Find out more about Schneider Electricâ&#x20AC;&#x2122;s commitment to both its own supply chain and that of its end users here.

WWW.SE.COM

F I V E L E A D I N G S U P P LY C H A I N S

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F I V E L E A D I N G S U P P LY C H A I N S

H&M (Gartner Supply Chain Rank #20) FROM ITS EARLIEST days, H&M has sought to use its influence to support positive transformation in the fashion industry, driving innovation, collaborating with others, pushing for greater transparency and rewarding sustainable actions. Key to this, is its efforts to build strong, long-term relations with our suppliers, based on mutual trust and transparency. The company has signed the Transparency Pledge to disclose the names, locations as well as other additional information of factories without major concerns about the ongoing competition on the best available production capacity in our industry.

WWW.HMGROUP.COM

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Diageo (Gartner Supply Chain Rank #14) F R O M T H E FA R M I N G and production of ingredients to the manufacture and distribution of marketing materials or merchandising, each stage of every supply chain has an impact on Diageoâ&#x20AC;&#x2122;s employees, local communities, the environment and other stakeholders. The company seeks to integrate social and environmental standards into these chains and a clear commercial interest in ensuring that all itâ&#x20AC;&#x2122;s supply chains are sustainable. Through Ensuring expected standards, building capability and supporting and creating value with local businesses, Diageo uses its position as a large commercial and responsible buyer to test and prove models that governments and peer organisations can use to accelerate growth within the agricultural sector in Africa.

WWW.DIAGEO.COM

F I V E L E A D I N G S U P P LY C H A I N S

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F I V E L E A D I N G S U P P LY C H A I N S

Intel (Gartner Supply Chain Rank #8) INTEL PROUDLY AFFIRMS that it is leading the industry standard for managing risk end-to-end in the supply chain with Intel Transparent Supply Chain. These set of policies and procedures implemented at Intelâ&#x20AC;&#x2122;s factories that allow its end users to validate where, and when, every component of a server was manufactured. This caters to a growing concern about how counterfeit electronic parts might cause safety hazards or failure of business critical applications. Current supply chain practices start with trusting the source, but processes are limited for screening out counterfeit components, particularly for products containing many subsystems. In fact, companies often purchase IT equipment without knowing counterfeit IT equipment is infiltrating their data centers. Read more about the Intel Transparent Supply Chain here.

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Cisco Systems (Gartner Supply Chain Rank #1) AS ‘THE COMPANY that brought you the internet’ and a manufacturer and developer of technologies designed to create a world of potential, CISCO takes its supply chain responsibility incredibly seriously. The company ensures that it’s suppliers adhere to the very same high standards that it practices itself around ethics, labour practices, health and safety, and the environment. In November 2019, Cisco detailed how it had been successfully collaborating with its partners to design a blockchain solution to trace minerals in its supply chain. You can read more about this “Seeing the Source: Using blockchain as a traceability tool in the minerals supply chain.”

WWW.CISCO.COM

F I V E L E A D I N G S U P P LY C H A I N S

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Rehiring from within: How to increase employee engagement and retention to drive profitability Iain Campbell McKenna returns to 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 in a post COVID19 world. WRI T T EN BY

Iai n C am pbel l M c Ke n n a

S O U R C I N G S O LV E D

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A recent study reports that 63.3% of

the required skill sets to deliver on their

organisations indicate that retaining

strategic goals. However, another study

employees presents a more significant

reports that organisational investment in

challenge than hiring them.

employee training continues to decline

As you ponder that revelation, here is another interesting fact; 71% of exec-

year-over-year. Is this a cause and effect scenario?

utives believe that employee engage-

Are the continuing cutbacks in employee

ment is critical to the companyâ&#x20AC;&#x2122;s

training investment a contributing factor in

success. The findings from a separate

the apparent CPO non-confidence vote in

study seem to support the previous

their teams?

figure in that organisations with a higher level of employee engagement are 21% more profitable than those whose employees are less engaged. The above data raises one remarkably interesting question; if companies are having trouble keeping employees, are they in a position to compete for talent in what is an increasingly competitive job market?

Employer Brand You are probably familiar with the old saying that a â&#x20AC;&#x153;bad workman blames his tools.â&#x20AC;? In the context of the retention challenges that companies are facing, is it an employee issue, or is it a company issue? For example, late last year an article referred to a CPO survey in which the majority of those who responded said that they were not confident that their procurement teams possessed 82

S O U R C I N G S O LV E D

Taking it out further, is a declining investment in employee development a

symptom of a much larger issue – one than makes retention a problem? An equally pressing question is what impact does it have on your company’s brand as an employer to which the

“ Are the continuing cutbacks in employee training investment a contributing factor in the apparent CPO nonconfidence vote in their teams?” Iain Campbell McKenna, Sourcing Solved

answer takes on greater importance in a post-pandemic world.

A New and Uncertain World Few would argue that the continuing impact of COVID-19 on all areas of our daily lives continues to cast an inescapable shadow over everything we do and plan. According to a May 4th article in The Guardian, 6.3 million people in the UK alone were temporarily “laid off” or “furloughed” by 800,000 companies due to the pandemic. Globally the number is even more staggering. While we do not have an exact figure on how many of those were procurement professionals, it is fair to say that there were more than a few. At least there were enough that one significant procurement association in another country established a workforce marketplace to provide laid-off professionals with free access to potential job opportunities. Of course, what this means from a big picture standpoint is that there will be a great deal of movement as laid-off w w w . c p o s t r a t e g y. c o m

employees contemplate whether they should return to their existing company or test the job market waters. In this new and uncertain world, rehiring current employees should be a top priority for organisations who, as previously stated, are already finding it challenging to keep the staff that are already in their employ.

The Positive Side of a Negative While having to win back existing employees is by no means a slam-dunk exercise; it does provide an opportunity for companies to re-examine their internal policies and processes. It is a positive in that they can identify the internal gaps that are contributing to issues with retention, or in this case, rehiring current employees. In addressing existing gaps, the companyâ&#x20AC;&#x2122;s leadership can lay a new foundation to build a more robust employee engagement model that will both attract and retain the best and brightest from what will be a dynamically evolving talent pool. From a procurement standpoint, better engagement begins with broadening the areas of involvement and influence, including the development of new skills to complement existing ones. These new skills include relationship management, negotiation development (and not in the traditional sense), time management, strategic thinking, and change agility. To understand the application of these newly acquired skills, letâ&#x20AC;&#x2122;s consider the role of strategic thinking in dealing with cash flow concerns resulting from the COVID-19 pandemic. 84

S O U R C I N G S O LV E D

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Self-Preservation Versus Collective Preservation Speaking with many procurement executives since the imposition of social distancing measures globally brought commerce and with-it cash flow to a trickle, most organisations looked to preserve capital by extending payment terms with suppliers. It seems like an obvious strategy. After all, when the inflow of revenue decreases, the outflow should be adjusted accordingly to reflect the new reality. However, is it the best way to deal with a cash flow problem, i.e., passing it on to your supply partners. It is in situations such as this that strategic thinking comes into play. A handful of procurement executives did something â&#x20AC;&#x153;strategicâ&#x20AC;? when they suggested that they could generate significant savings by proactively seeking early-pay discounts from suppliers. In other words, rather than closing the tap off entirely, they changed the flow by negotiating with suppliers in

to emerge to find decimated supply chains, they could help to preserve the supply network. Without going into the specifics of

certain situations where it made sense

each initiative, what stood out was in

by offering to pay invoices immediately

recounting their involvement in taking

for a discount.

such creative measures, the procure-

The premise here is that instead

ment executives and their teams

of shutting payments off and hunker-

were involved and energised. Some

ing down to ride out the crisis only

even felt proud to have facilitated an

S O U R C I N G S O LV E D

â&#x20AC;&#x153; ...since the imposition of social distancing measures globally brought commerce and with it, cash flow to a trickle, most organisations looked to preserve capital by extending payment terms with suppliersâ&#x20AC;? Iain Campbell McKenna, Sourcing Solved

initiative that not only demonstrated

that the procurement team who came up

strategic thinking but change agility as

with the early pay discount plan will be

well. There was also a sense of pride

motivated to stay with their company? Of

in being able to help their suppliers

even greater interest is how likely they

through a tough period.

are to become brand ambassadors for the organisation?

A Participant or Spectator Role

If you were to ask yourself that same

Going back to the focus of this article

question, what answer would you or the

and the importance of engagement to

other members of your procurement

ensure retention, what is the likelihood

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

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