Episode 28 - Interview with a Procurement Expert - Pt.1 - Procurement Zen

Episode 28 – Interview with a Procurement Expert – Pt.1

In this episode, I interview Joachim Scheurich, who is a well-seasoned procurement expert. Joachim shares his profound experience in this field and shares out of public view of the field. 

He shares with us, how he started and how he grew in his role. You will hear a lot about great relationships and focusing on your customers.

Phil Kowalski:
Hello and welcome to ProcurementZen. In this episode, I have the pleasure to interview a well-seasoned procurement expert. We have been working together in the past so I could gain firsthand experience with him. Besides being an excellent coach, he also gives you a look behind the curtain. We will discover how he started, how he grew into his role, and how it has developed for him. You will hear a lot about great relationships and focusing on your customers. So without further ado, let's dive right in.
Audio:
Are you looking to up your negotiation and procurement skills? You're in the right place. Welcome to ProcurementZen with your host, Phil Kowalski.

Phil Kowalski:
Hello everyone. This is Phil, again, and I'm quite happy that I have today the chance to interview a very seasoned procurement executive here. It's a person that I have personally worked for and worked with and it was a great experience. Please welcome everybody, Joachim Scheurich. Joachim, welcome to the show.

Joachim Scheurich:
Thank you Phil. I'm glad to be here.

Phil Kowalski:
Thank you. Joachim, I know you a little bit because of the previous work that we had the chance to do together, but maybe you can tell us a little bit about yourself, about your history in procurement so our audience can get a better insight in what you have experienced so far in your procurement career.
Joachim Scheurich:
Yeah, I'd be happy to do that. I'm 53 years old, so technically a senior, not just in the profession but getting older. I have a business degree from the University of Cologne and this one was the actual phase for me where it actually started with the procurement and supply chain interest. I was one of the lucky ones who had the opportunity in the mid to late '80s to actually study at one of the few faculties that actually had a specialization in procurement and supply chain management. I got the bug there, wrote my thesis about strategic procurement, and was lucky enough to have my first job with one of the larger global corporations in an advanced global sourcing department where I took first role as a planner buyer. It's allowed me to learn not only the basic strategic tasks, but also have a lot of exposure to the actual day-to-day operational work when it comes to inventory management and making sure that the lines are running with the materials I was responsible for.
Joachim Scheurich:
After about two and a half years, I took part in an exchange program of staff between the division I was working for and a company they had acquired in the United States. I moved to Austin, Texas, and for the company, U.S. colleagues were moving to Germany. It was a true swap in order to help to merge the companies more quickly and more effectively there. I took a role as a strategic buyer, a senior buyer, in Austin, Texas, at that point in time, made my way through the roles and responsibilities there.
Joachim Scheurich:
While I was there in our overall strategic procurement department, actually started to introduce more advanced roles globally. They were aiming to leverage the entire buying power of the division across all the factories around the globe. I was asked if I wanted to be a commodity manager with the primary objective to leverage the entire spend in the commodity that I was assigned then on global scale.
Joachim Scheurich:
It was a very interesting past and has led me to take an additional role as one of the members of our corporate leverage buying team where the representatives of the divisions with the largest demand in a certain commodity are coming together and trying to leverage the entire scale of the requirement inside the company towards the supply market. So, it make me move back across the Atlantic to Munich into the corporate supply chain headquarters at point in time. This ran parallel with my job into division, and that division went through a tremendous growth phase in the late '90s and early 2000s.
Joachim Scheurich:
I was asked to come back home, so to speak, to one of the factories where I started my career. I took a leadership role to build up a global sourcing department for one of the business units there. Something very interesting and very inspiring for me personally. After a few years in that role, I had the opportunity to move back to the United States, so at that time across the Atlantic for the company. I became the North American procurement head of one of the divisions of the corporation I was working for.
Joachim Scheurich:
After five years in that role, I moved to a business unit that the company had bought. This business unit had its headquarter actually in the United States and needed a seasoned procurement leaders to actually help to merge and integrate the procurement community of that business into the procurement network of the company I worked for.
Joachim Scheurich:
After that I was asked to lead another wire company's procurement department. I've done this for eight and a half years and it's a totally different industry than I have been in before. But when I sum it all up, I've had a very interesting and mentally challenging career. I've been exposed to numerous different industries, numerous different market types. I've been active internationally, have leadership positions with regional and global responsibility. There's a lot that you can do inside the procurement function if you are with the right company, if you are mobile, and if you remain curious about what's out there and set yourself goals.
Joachim Scheurich:
So, a very, very, very long career but very rewarding. I like to tell this story because it shows what is possible inside the procurement function.
Phil Kowalski:
Yeah. I think one could easily recognize that there is a passion for procurement. That's at least what I recognized in your story. What I really liked is what you said last about this kind of curiosity that you need. Would you say that this is something like a core skill starters in the procurement area should potentially have?
Joachim Scheurich:
Yeah, absolutely. Curiosity is not only for procurement but I would say in any job, very important in order to grow. Curiosity leads usually to learning. It leads to trying things and it's absolutely fundamental personality trait for successful purchasers.
Joachim Scheurich:
There are different personality traits that make up a good purchaser or procurement professional or good procurement leader. But when we look at what is all common to them, it's that part, curiosity, for sure is in there among other things. But it's something I definitely would recommend people to focus on.
Joachim Scheurich:
Never stop asking. Look behind the curtain. Try to really understand the why of certain practices and you will discover probably opportunities to leave your fingerprint on improvement measures and new ideas.
Phil Kowalski:
That sounds quite interesting. I mean everybody nowadays says, "Yeah, you have to keep on to continuously learn." I really like the part where you said, "There are different kinds of tasks." It's not all that you stick to one commodity for the rest of your life, but if you stay curious and if you're willing to learn, it opens up a whole world still in the same "function," maybe not in the same role but in the same function, in our case, here, procurement.
Phil Kowalski:
I personally think, and maybe you can spend a few words on that as well, I personally think that this experience and being close to procurement and negotiation and maybe in your case also procurement leadership situations also helps you to have a very realistic view on things because these days all kinds of buzzwords are floating around. I think if you're a certain time in procurement you can evaluate them with with a reality check, so to say. What would you say?
Joachim Scheurich:
Absolutely. I mean procurement or purchasing is a function that has touch points essentially into every department and almost every process that is done in a company. If the department is large enough or skilled enough to actually learn to play the game in all these processes and with all the internal clients, the department can provide a tremendous value to a company. It's not only negotiation of prices or finding suppliers, they have a lot more that can come from the procurement side. But, it is the large number of interfaces, of direct engagements, that makes it so interesting and diversified.
Phil Kowalski:
Great. That's really interesting.
Audio:

Phil Kowalski:
Looking at also your personal history, I would interpret that in a way that you... I don't want to call it the career ladder, but as you said, you started with classic buyer function all the way up to executive management. Can you maybe share some thoughts about what you think are classic challenges that strategic procurement in particular has to face?
Joachim Scheurich:
Yeah, I'd be happy to. It depends on how much time you have, but there is, of course, a long list as I assume most of the listeners will be able to confirm. It starts with a very simple mindset and attitude. Topics, such as the question whether a strategic procurement department is seen in a company as a potential provider of tremendous value or if strategic procurement is just a synonym for a department that places purchase orders or acts otherwise exclusively on the tactical side. There's already been the reputation aspect of it.
Joachim Scheurich:
What technical challenges are associated also? Unfortunately still in this day and age was the lack of transparency over the spend that the department is responsible for. The local procurement department, for example in a factory, or be it strategic procurement team responsible to manage the global space, I saw first hand the impact that spend transparency can make very early in my career.
Joachim Scheurich:
Because as one of the precursors to the introduction of a global commodity management in the division I was working in, the procurement leadership at that point in time decided to implement a spend transparency database into which all of the factories that we wanted to leverage entered their data. It's absolutely critical for someone who is asked to negotiate using the entire demand of an organization that he or she knows how big that demand is, who the suppliers are, and what can be brought to the table. So this introduction of a data system was critical.
Joachim Scheurich:
I was in Austin, I could get a report showing me that a man in my commodity, the average paid prices, the part numbers used for that commodity, built up by our factory in Shanghai, our factories in Germany, other factories in the U.S. I had all the data at my hand and that was in the '95, '96 timeframe. It was a huge, huge difference for us because we would not have been able to leverage the entire spend, which was the core of our responsibility, had we not found an automated way to have spend transparency.
Joachim Scheurich:
This is, of course, anecdotal evidence, but it's still out there today. It is difficult to figure out how to get the data and truly see what spend is out there because a supply management department can only manage spend that it knows is there. That's one of the critical aspects, is the lack of spend transparency.
Joachim Scheurich:
Then, of course, classic, not being at the table when procurement relevant or even sourcing critical decisions are made, specification freezes without supply market input, supplier selections without procurement input regarding preferred suppliers, and negotiations being held by people other than strategic procurement. You saw this is a whole range of problems that occur in every company, unintentionally or intentionally. In most cases, unintentionally. It's just that the company culture has not led most organizations yet to the point that certain tasks are led and executed exclusively by the strategic procurement department.
Joachim Scheurich:
Having no seat at decision tables, then goes into that direction, and that also means being not recognized in the executive pecking order in the company, being not recognized by having a seat at a relative high level. The same level where the most important, less functional leaders are located. That's where I think the strategic procurement function should be about.
Joachim Scheurich:
This is a rough list of things that are classic challenges, strategic procurement and phase. It's not all inclusive. There are more things that I could list, but I think I leave it at that. To me, as I said, the biggest one is the lack of spend transparency because if a strategic procurement department knows that a man has an idea of what's out there, what the average prices are, then suddenly there's a lot more control over the things that are going on then if that data's there.
Phil Kowalski:
I like that one very much. I find it quite... I'm not sure if I should say quite amusing, but to a certain extent, it's funny. You said that you experienced that challenge already like 20, 25 years ago and it's still a challenge. Although everybody today speaks about data transparency and data lakes and everything is there, but it is still a problem. That's one point. I really like them.
Phil Kowalski:
The second one is I like that phrase of having a seat at the decision table. I have said that in previous episodes as well, especially for people who are sometimes not even aware that there is a procurement function. You hear sometimes maybe a little bit funny, with the funny intention, where sometimes people say things like, "Ah, you know, at the end you come, you take your hammer out, you ask for 10% off, and then you leave the room again.
Phil Kowalski:
I'm not sure if it ever was like this, but looking at our highly complex world, we as buyers, as procurement people, experience today, I would say that is an old fashioned approach. If it has ever worked, I don't know. But, I would say these days it doesn't work at all. Hence, we need that seat on the decision table.
Phil Kowalski:
Listeners to this show know how passionate I am about early involvement and preparation, but I think the seat at the decision table is core to all these measures, to early involvement, to preparation and planning, because it's actually not a man with the hammer or the lady with the hammer coming in the last minute and asking for a generic 10% off.
Joachim Scheurich:
Right, Phil. The decision table and early involvement happen together. Quite often, and I'll give you an example. At one point in my career, I was responsible for a commodity where we had excellent global pricing across the commodity for standard specifications. Some of our R&D departments who were tasked with developing the next generation of product started then to play around with niche parameters in the specifications. And then unbeknownst of each other, one department decided to go with a difference. It was an electronic component with a different supply voltage of the component which the suppliers were happy to deliver. However, it costs us to pay an add-on of 10%.
Joachim Scheurich:
The department that laid out a printed circuit board assembly started to tinker with different packaging of the electronic component and all of a sudden there was another 15% adder coming even though these departments didn't work together and for sure did not look at the cost impact. As I was responsible to negotiate these requirements, I had to hold the price metrics for the standard components and then provide the offset that their decisions had to our target cost for the product instead of using the standard components with a very competitive pricing. Suddenly our bill of materials went up because of those choices.
Joachim Scheurich:
Had I not had the chance to work with these R&D colleagues directly, that transparency, the impact, the business impact, the financial impact, their decisions had on the cost of the product would not have been visible and they would have been flying blind. So, the seat at the table is not just at final decision table, the negotiation table, it is also when some of the decisions are made that determine cost drivers like form, fit, and function of certain materials or services.
Phil Kowalski:
That's what's maybe also covered in what I repeat so often, is this early involvement topic. It doesn't mean that I make any technical decisions, but for us as an enterprise or for us as a company, it is good to know about changes so we can approach them early on. I think it's always the worst situation when you sit in a negotiation and supplier or sales reps looking at your saying, "Oh, you didn't know that the spec changed?" That's these kinds of embarrassing situations. So yeah, sitting at the table for me, or that's how I understand it, refers to knowing of it. It doesn't mean that I have to talk all the time, but I need to know. I need to be aware of potential changes and make others aware what that means for the overall product.
Phil Kowalski:
One thing I'd like to ask refers maybe also to challenges, but at the time of recording this interview, we're in the midst of the corona crisis, which is at least for me, very, very special. I have not experienced something like this before. I wonder what, from your executive level on having this long standing experience, what do you think if and how strategic procurement can add benefit to the enterprise, especially in these challenging times that are different than standard business operations, so to say?
Joachim Scheurich:
I don't think it's that different to standard operations if you really look at it from an overall perspective. When we ask ourselves what strategic procurement can add as benefits to an enterprise, then strategic procurement will always be able to add benefits if it can bring the organization and the internal stakeholders to make better decisions for the business. Those decisions are made better if critical and relevant information is provided in time to those decision makers. Procurement, as a highly connected and networked department or function inside a company, can certainly provide that.
Joachim Scheurich:
There are lots of examples of what procurement can provide. It starts with information like spend data, transparency, market pricing, supplier intelligence, supply chain mapping, innovation suppliers bring to the market, information that procurement has at hand about the fiercest competitors of a company, is just one section. And then, of course, procurement can provide skill sets that can be leveraged in certain situations. When external parties are involved, for example, the negotiation skills. I'm not so much talking about the actual face-to-face negotiation, but I'm talking about what all happens before and after the face-to-face negotiation level, planning and follow up.
Joachim Scheurich:
Skills can be leveraged by the company, and if we translate that then into a crisis situation there is, of course, an integral role for strategic procurement when there is a crisis occurring. Companies always want to know two things. Number one, how does this crisis affect my customer? How does it affect my ability to fulfill my obligations towards my customers? How can I keep making my customer successful? That's the first part.
Joachim Scheurich:
The second part is, will I receive from our suppliers everything I need to sustain operations to continue the business? If not, how big is the impact? Strategic procurement is an integral part, of course, on the mitigation side in the crisis. It's examples of finding supply, obtaining a reliable firsthand supply information about any impact from the crisis, helping with planning data, looking for alternate sources, negotiate what market purchases in a damage control mode, meaning, negotiate prices hard while obtaining materials that are needed. If it's a longer term crisis, of course, securing supply with long-term agreements.
Joachim Scheurich:
I've actually a personal experience in this area. One of my roles as a commodity manager in the late '90s, early 2000s, we negotiated from a position of excess capacity and didn't treat our suppliers too well. Let's put it this way, because we had the buying, we had the power on our side. However, at a certain point in time, one key product that consumed this commodity in great volumes was in a boom and we did not notice that our supply market shifted from a buyer's market into a seller's market. Components were under allocation and our entire growth in the division that I was working at was at risk. It was not pretty. Immediately, it made it all the way to the managing board members. Everybody in the end pitched in, but there were lots of hard lessons learned of what to do and what not to do and that leads me from the mitigation part to the prevention part.
Joachim Scheurich:
Then, of course, this story then continues on the prevention side. But, the strategic procurement aspect on the prevention of a crisis or at least limit the impact of a crisis, goes to advanced supply chain risk management methods as there are operations to have the internal sites, all the information at hand, that the board might need to understand how big the risk is.
Joachim Scheurich:
For example, do we know we have the materials which we are at risk of obtaining? Do we know in which finished goods these components or materials are used? Do we know which customers have which orders in place? What's in the pipeline? How much can we still ship? How big is our inventory and so on.
Joachim Scheurich:
There's an internal readiness aspect to this that strategic procurement plays a major role in. Very important is to note that this is not an activity that can be started in the middle of a crisis. This is work that needs to be done in the good times.
Joachim Scheurich:
Another aspect is to also negotiate smarter agreements that lead immediately to the roads towards the suppliers and their supply chain. Now we are talking, I would call it here, internal readiness and supplier readiness. How you want to understand how the value chain looks overall on the supplier side. You want to really understand the supplier supply chain and any risks potentially hidden there, but there's also the relationship building part. In this crisis situation, you want reliable information. You want it firsthand, and you want to talk to the decision makers.
Joachim Scheurich:
These are just some examples of what strategic procurement can do in times of a crisis. There's, of course, the firefighting mitigation part, but then there's also the prevention part that is not in the immediate happening of a crisis but it should happen right after based on the lessons learned. Case in point, I mentioned the component allocation issue that we faced and the outcome was that after that, we went and established much tighter and more transparent relations with our key suppliers by implementing different logistics and replenishment models that would reduce the risk of any major impact for any future crisis tremendously. It went with long-term agreements, it went with relationship building across multiple levels of management, it went with transparency across the entire steps of the value chain.
Phil Kowalski:
This was the first part of this two-part interview. Joachim shared some amazing insights. We heard about lessons learned from a crisis, and we discovered how to apply this knowledge in future situations.
Phil Kowalski:
Next week, we will discover even more great insights. We will talk about digitalization, what should be key there, and more great stories from decades of procurement and negotiation experience.
Phil Kowalski:
As always, you can find the show notes for this episode over at procurementzen.com/028. That's zero, twenty-eight for episode 28. Make sure you subscribe so you don't miss out the second part of this amazing interview. These insights will truly benefit your career and help you to grow.
Phil Kowalski:
Until next week, and always, happy negotiations. Yours truly, Phil.

Thanks so much for listening to this episode of ProcurementZen with Phil Kowalski. For more great content and to stay up to date, visit procurementzen.com. If you enjoyed today's episode, please review and subscribe, and we'll catch you next time on ProcurementZen.

Episode Highlights

  • Phil Kowalski introduces Joachim Scheurich
  • Joachim Scheurich shares his experience in procurement
  • Joachim Scheurich shares his view on what challenges strategic procurement has to face
  • Why is “seat at the decision table” important?
  • As an enterprise it is crucial to know any changes in term to avoid embarrassment
  • How can strategic procurement benefit an enterprise especially during the wake of the current covid-19 crises?
  • What lessons can we learn from current crises & how can we apply them in future situations?

Key Points

  1. Curiosity is very important in any job including strategic procurement
  2. Having no seat at the decision table means not being recognized in the executive pecking order?
  3. There is a lot you can do inside the procurement function if you are with the right company, if you are mobile and if you remain curious about what’s out there.

Resources Mentioned

Phil Kowalski

I am passionate about helping others to achieve more in their negotiations. I love to prep, design and execute successful negotiations. With more than 15 yrs procurement experience I sometimes feel like the Obiwan Kenobi behind this blog and my podcast.

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