Danieli China – Brochure 2020

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Danieli China: How procurement agility provides a competitive edge

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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...

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

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W

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 4

“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

Thyssenkrup and now with Danieli China, 5

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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

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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. “In effect, the size of your company and your structure has to fit the market. The 8

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CONTENTS

No.290 Chuangxin Road, Chengjiang Town, Jiangyin City, Jiangsu Province

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

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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, 12

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 13

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25 Shangde Road High-tech District Changzhou, China

T +86 0519-8511 6598 E mk@cztshi.cn www.cztshi.cn/en

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

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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,� “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.�

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 16

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C LIC K TO DIS C OVER MO R E

“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,” 19

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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.”

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www.danieli.com