Episode 29 - Interview with a Procurement Expert - Pt.2 - Procurement Zen

Episode 29 – Interview with a Procurement Expert – Pt.2

This is the 2nd part of the interview with Joachim Scheurich, who is a well-seasoned procurement expert. In the light of his vast on-field experience, Joachim shares with us the role of procurement during crises situations.

Major focus of this part of the interview is on changing environments in procurement.

(00:00):
All right, my dear negotiators, in this second part of the interview with Joachim, we talk about the future, we talk about what is important and how interesting and thrilling a career in procurement can be. If you missed out the amazing first part, make sure to head over to procurementzen.com/028, that's 028 for Episode 28 and listen to it, it's well worth the time. I will also repeat the last minute of part one in this episode so you can connect both sessions together. And now without further ado, let's dive right in.
(00:32):
Are you looking to up your negotiation and procurement skills? You're in the right place. Welcome to ProcurementZen, with your host, Phil Kowalski.
(00:39):
But there's also the relationship building part. In this crisis situation you want reliable information, you want it first hand and you want to talk to the decision makers. So these are just some examples of what strategic procurement can do in times of a crisis. There is 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 should happen right after based on the lessons learned.
(01:10):
And case in point, I mentioned the components allocation issue that we faced and the outcome was that after that, that we went and established a much tighter and more transparent relation with our key suppliers by implementing different logistics and replenishment models that would reduce the risk of any major impact from any future crisis tremendously. But it went with long-term agreements, it went with relationship building across multiple levels of management and it went with transparency across the entire steps of the value chain.
(01:42):
And I like that very much because that, for me is also to a certain extent key to the word strategic in strategic procurement, maybe ever there's this proverb that says " yeah, you know everybody can do this." Yes, everybody can come into a room and shout, "Give me 10% off." But these long-term measures also preparing and being at least to a certain extent, safe in crisis, be it the crisis we're currently in or other just economic crisis or whatever I think is a major part, and that's what we're here for. We have this holistic view, that's how I would interpret it on these relationships.
(02:19):
But what I also liked very much in what you said was a part where you said you also look, that was the first topic that you mentioned, that you also look at our customers. It's not purely we in our buying position and our suppliers or vendors in a selling position, no, we have to turn around and look at our customers and see what's maybe in a positive mood or positive translation. Next, what innovations or what topics come our way, but also in a crisis mode to look, "Okay, how do we need to adapt what we currently have to the situation of our customers because they may also be impacted?" And I like this very much, it's a very holistic view and it's not limited, I would say.
(03:01):
I totally agree. It actually can become a competitive factor, Phil, and because it makes a difference for a customer in times of crisis. Let’s take the example of the Fukushima nuclear disaster. Everybody is aware of it, everybody knows there's a problem but customers will differentiate and will appreciate if there are partners, if there are suppliers like our company was that provides them highly reliable, highly accurate information in times of crisis, because then their mitigation efforts are much more effective.
(03:32):
And I think to a certain extent the relationship that... I like that very much because I think the relationship part that we're now talking about also contributes to the, yeah, I would say to a certain extent to the overall image that a company has. I just remember when I was going into education, the automotive sector was very, very famous and maybe still is, I don't know, for pressing their suppliers, for putting maximum pressure on them. And looking a little bit into the future, I think it plays a role because I think it becomes more and more important to also get these talented people. The image of a company to a certain extent is very important because if you are known for pressing the maximum out of your supply market, you attract a certain kind of people and I think a company or an enterprise should carefully consider what kind of people, what kind of talent they want to attract.
(04:33):
I find this also in this regard, very, very interesting because for me personally, being in this profession also 15 plus years, I love procurement, so it's not just like, and then the next year I do something completely different. But that's what makes it so interesting, this holistic view and how it contributes not only to the commercial position of a company, of an enterprise of a business unit, but also how it contributes to the, yeah, let's say it to a certain extent, at least to the overall image that a certain company has, especially when you're talking about huge enterprises.
(05:08):
You're totally right. If you put this down on the micro-level on the buyer or purchasing professional level. When I hire somebody, I always look for people who have gone through situations where they have the power, the supplier have excess capacity and if they have gone through supplier markets. And because you need to experience both to be actually around it and be able to navigate the requirements and the situation to establish the right level of relationships with the suppliers. Everybody can have good savings when there is excess capacity on the supply side, but it's a totally different ball game when there are allocations and shortages and so it rounds out good purchasing professionals when they have gone through crisis and allocations.
(05:55):
Yeah. As they say, when the going gets rough, the rough get going.
(05:58):
ProcurementZen with your host Phil Kowalski, will be right back.
(06:05):
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(07:12):
Back to the show. ProcurementZen with your host, Phil Kowalski.
(07:20):
I really like that very much. And also looking a little bit into the future part that we addressed slightly when talking about "talent acquisition."
(07:29):
Looking at your longs-standing experience, what you say, will the future of strategic procurement change, or do you see the cycles up and downs that repeat every few years? What would you say, are we expecting huge changes in the future in how procurement acts?
(07:51):
Well, yes and no to the changes. I think there is a core responsibility that has been there and will always be there. I mean, there's not such a wide variety in core objectives. I mean, just for the sake of this discussion, just let's keep it to we want to have the lowest total cost of ownership for what we buy and we want to have goods and services when we need them. We don't want to have an early, we certainly do not want to have them late. But besides this foundation of objectives, there are changes that have broadened the view in area of responsibility for procurement.
(08:26):
It is a wider range of services that can be provided and there is no one-size-fits-all. It always depends on the specific situation of a company and its requirements, and these requirements change over time and depend on different factors. For example, is a company growing or contracting, is it a new or an old industry, is it a global or local supply base, are they changing regulations, and so on. There are different factors that play a major role in what the company needs from the supply side and that of course drives the work that the procurement department needs to perform.
(09:00):
And I've come across many different situations in the organizations I've worked for. There's of course the entire traditional cost reduction range of campaigns. There are design-to-cost activities forward looking work on the technology scouting or supply innovation side. There are also strange things like where in one role and we had to demonstrate to a monopolistic customer that our purchasing system would meet certain regulations. And that certification took half a year, eight, nine months, but was critical to receive a major order from that customer.
(09:43):
Here, instead of focusing all the resources on cost reduction and negotiating back and forth, here it was more a question of how do we set up the procurement infrastructure, the systems, the transparency, the processes, to make sure we meet this important customer's requirements, so that the customer then finally would say, "Okay, I trust that you can fulfill this contract with my best interest," meaning the customer's best interest in mind and that everything will go off without major risks.
(10:11):
That was almost a year of work for a procurement department. And while we have to sustain the normal work, it was a focus for a period of time, much like many listeners will probably be aware of those firefights when it comes to quick-win negotiations. If the costs need to be brought down, or if there's rapid growth, then certainly cost is not the major challenge anymore but the procurement is tasked to find additional sources of supply. It's a wide range. I think one can say that the traditional way of delivering services and to initiate work for procurement, that has changed and that makes it a wider range that can be handled.
(10:51):
And here I'm talking about specifically the emerging technologies that help you overcome particular search costs and search time for specific activities that in the past were simply not possible because you didn't have access to the internet, you didn't have all the data sources that are out there. Barriers that were there in the past that prevented procurement from going into different areas to provide value to the company, those barriers have come down. There's more that can be done but ultimately the fundamental objectives will always be the same.
(11:23):
And I like that you addressed that because the audience also know that to a certain extent, also not only passionate about procurement, but also about what is understood under the buzzword of digitization or digitalization. And we both, maybe it's interesting for the audience, we both had in our work relationship discussed these kinds of topics from time to time and I really enjoyed also your coaching and your view here on these topics. And I liked the statement that you say, "Looking at these core foundations," how you call them.
(11:54):
I think that it's nice to have the new shiny tool so to say. A good differentiator or a good question to ask is, when you want to implement those tools or approaches, or systems or programs, or whatever, is: do they support the core foundational tasks of procurement? Does a dashboard give more spend transparency so our negotiators can negotiate better, or do they predict trends so we know what potential demands may be coming our way? Or do they help us understand our suppliers better and leverage opportunities and these kinds of things? Looking at the buzzword, digitalization, in procurement, what kind of trends would you see there? Or do you see any? Do you think it supports the procurement function?
(12:45):
Well, I would say there was one big trend and that is that everybody wanted to run after digitalization and it showed up on everybody's image presentation. That something is being done, but I think it's like you said, Phil, it's very critical to note that digitalization is not a change in the way we approach our internal clients and suppliers as such. It makes our connections easier or even possible at all. But it's very critical to understand that there are tools and applications that make procurement's work, procurement's traditional work easier, faster, and more cost efficient. And every procurement department that wants to continuously improve its contribution to the business is almost required to adopt these tools, applications, methodologies.
(13:36):
But then there are many applications that are useful for specific industries, for specific tasks, but that doesn't mean that every procurement department should jump on them and buy them and implement them. And here to me this first wave of digitalization, it has not clearly helped to peel the famous onion to the point that each organization asks itself the question, "What actually will move us as a team, us as a function, us in the procurement process forward based on what our business needs today and in the future?" We don't want to lock ourselves into using tools and applications that are not really what our internal stakeholders are looking for or that help us to provide what our internal stakeholders are looking for. It's a two-edged sword, so to speak.
(14:22):
There are good applications and that make the core tasks faster and more cost efficient but then there's a wide variety of tools and applications where one needs to take a closer look if that everything that is heavily promoted today is the right tool and application for my business. It is very important to keep an eye on that and work with the internal stakeholders to then jointly select the ones that move the entire process, the cross-functional community forward. The other aspect that digitalization and procurement brings with itself to me is more a scary one because it has to do with people. Not that people are scary to me, I'm not trying to say that. But when I look at the various flavors of digital applications and what can be done, the question for me is always, do we have the right people?
(15:10):
And when I ask the question, do we have the right people, the next question is, what people are looking for? What is the right qualification and skill set? And this is something that many listeners will probably confirm is that when we look at our job descriptions, they were written five years ago or maybe even longer ago. The modern skills related to digitalization, to tools, to apps, to software, the whole attitude towards trying new technology, it's not properly reflected in those job descriptions. I personally have never made it to the point that I could adequately amend the existing job descriptions to ensure that if we hire some replacement for an individual in a certain position, that these new qualification requirements are actually part of the job description.
(15:56):
There's a whole work stream on the job description on the profiling side, where I believe our functional community needs to do a better job in determining who we are looking for down the road and then making sure that if we're looking for a certain qualification and our incumbent staff doesn't have the qualification, that of course, that we take the money in the hand to actually enable them to earn these qualifications and grow into those positions . And if that's not possible, and that can be the case, then of course, at least we have job descriptions that are forward-looking and allow us to find the right people in the marketplace. But it's very important that procurement organizations determine for themselves, how should the job description and the job landscape change now that digitalization has entered our profession.
(16:44):
And I like that very much. Not only because I have experienced exactly that mindset when I worked with you, I would describe it maybe as we have a senior management buy-in, yes, we want to do something here, but it's also to enable the people. Sometimes I fear also when it comes to digitalization that it goes more, I'm not sure if it's a classical route, but it's like "Here dear IT department, here's my idea. I translate it, please execute." And what I have experienced is if you can keep these programs and tools and whatever is out there close to the domain experts in our role and in our function, maybe the buyers or the team leads so they can use it and adapt it to their daily business(17:32) I think the outcomes are much higher as if we go down a classical route, not sure if it's a classical route, but this route where we say, "Okay, dear IT department, please develop, please implement." And then we use it because at the time, maybe, and that's the discussion that have in all of agile working and new working and so on, but maybe at the time when the tool is finished, the world again has changed. And the question is, does it provide the core foundational tasks? And it's always the same question. And I really like that also in our work relationship but also in other circumstances.
(18:10):
We always have a, "Look at that, may be a nice-to-have feature." But does it contribute to negotiation? Does it contribute to improve payment terms, to get better savings, to build a second source or whatever. And I really, really like that very much. It's always under this umbrella or under this theme so to say, to really support the core foundational tasks. And it's a tool, basically, digitalization in itself it may be a trend but in the end it's also a tool.
(18:42):
Totally agreed. And your point there, I always call it “the-push- and the-pull-principle”. I think in the old days new tools came and they were pushed into the departments because somebody saw value somewhere. Or if people worked in larger corporations then somewhere in a central function people decided this is a tool we need and then it was essentially crammed down into the rest of the organization, whether these people then were ready for it or not. Digitalization today allows us more the other way around, like you said, where a buyer or a department can determine what is a tool that will help us with our day to day work, where can we gain efficiencies? How can we make our lives easier?
(19:20):
And that way with modern tools and low-code programming languages that are relatively easy to learn and in other applications. I think it's through the whole cloud technology, it's much easier and less costly to adopt certain solutions or create them when I think about the low-code programming part and move the department forward that way. There's definitely a change but in order to adopt this “pull principle”, you have to have the right mindset and the right culture. People are curious, coming back to that keyword, are curious to find out, "Okay, what's out there that can help me?"
(19:57):
And I think in addition, you also need to a certain extent that the management buy-in to say, yeah, you can spend a certain effort or a certain amount of time on this specific topic, and maybe in the first phase also find your way through it. I have experienced that sometimes it's not the expectation I want. Now, when you start that journey you have to promise where it leads us, but give a rough direction, so to say, so of course again, but also use your curiosity and see what we find along the way.
(20:29):
I think that really helps from a cultural and from a mindset perspective when you look at all these digitalization topics and that's what I've experienced as well. We now have talked a lot about the future. From your experience, can you share some insight what do you think what are from your point of view the most important stakeholders in the company? And also do you think they will change with changing environments be it by crisis or by digitalization or something completely different?
(20:57):
I'd be happy to. When we're talking about inside the company, and the most important one is of course whoever escalates issues the fastest to the CEO or CFO … I'm just kidding. Not always who screams the loudest is most important, though. There are in my point of view, three groups. And in order of priority, there's the procurement staff because without trained, motivated, talented purchasers nothing would go in the right direction. Equally important are the major internal clients. I mean, these are the people who need the services, who need goods and services from suppliers, who need information and you can find them depending on what business you're in. And they are along the PLM process, they're in the project or solution business, they are along the project management process.
(21:44):
Then of course, when we look at the whole execution part in the supply chain management building “plan, source, make, deliver, return”. People in those functions they are key and the third group are the executives. I mean, they are the link to the company, shareholders, the stakeholders, and they of course have also a high level of importance when it comes to where procurement is looking from a perspective to shape what's being done in the department. So these three, procurement staff, major internal clients and the executives.
(22:13):
That's very interesting. I like that you also mentioned our colleagues, our procurement staff members, because with this classical question about who are the stakeholders, our own people I feel sometimes are a little bit forgotten. But in the end you need also the people executing all these programs, initiatives are at least to a certain extent, sometimes also do all of the hard work. You can plan forever but if you don't have anyone who executes it doesn't matter in regards what benefit the company receives.
(22:46):
Totally agree. I mean, it goes back to the what the department is providing. I have yet to see a purchasing department that is not working extremely hard to satisfy all those urgent and important needs that organizations might have. But it makes a big difference if that procurement staff feels like they are part of the greater total and they are part of the supplier selections, when they are part of the strategy, when they hear what impact their work actually has, when they see KPIs, when they are mentioned, when they are, you know, it doesn't happen often enough, when they're openly praised by people in the chain-of-command it makes a world of a difference in the motivation of the procurement staff. They are going the extra mile anyway but if the company culture is right, if all those key stakeholders recognize each other and work together, then they're not just going the extra mile they're going the extra mile with a smile. So, very important to highlight that the functional staff, that procurement professionals are key to the function being able to deliver the value.
(23:50):
And I think that pretty much sums it up very well because we have had a long journey throughout your own experience, but I think there is a lot of information that the audience and the listeners to this show can take away. And I really like that we, to certain extent "ended" here on this statement that we say, "Our own people are key. Without them procurement success however you define it as simply not possible." I like this very much.
(24:17):
And thank you very much for your deep insights and also your experience. I think it was very entertaining and it will be a lot of information to take away. As always to our listeners, if you go to procurementzen.com/030, that's 030 for Episode 30, you can find the show notes and also the whole transcription of the interview I did with Joachim. Joachim, one final question. It's more classical question, maybe. If people want to reach out to you where can they find you?
(24:49):
Phil, thank you for the question. And I am on LinkedIn and you can find me under JOACHIM-SCHEURICH-CPSM. So under joachim-scheurich-cpsm you'll find me on LinkedIn. I'll be happy to answer any questions or provide comments and feedback to any listener who wants to reach out.
(25:14):
Great. I also put a link to that into our show notes. This was the second and last part of the interview with Joachim. As always, you can find the show notes over at procurementzen.com/029, that's 029 for Episode 29. We have a few more interesting interviews in the pipeline so make sure to like, subscribe, and comment over at procurementzen.com. That's it for today. Always happy negotiations, yours truly, Phil. Bye.
(25:43):
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

  • Understanding procurement in relation to crisis
  • Looking at procurement holistically ; how it not only contributes to the commercial position of a company, but also its overall image
  • Joachim answers the question “what will strategic procurement in the future be like?”
  • Understanding “digitalization” in terms of procurement
  • Who are the most important stakeholders in a company?

Key Points

  1. Change in environments, like situations of crisis or digitization, does impact procurement, but the core foundations and objectives of procurement always remain the same.
  2. Certain tools help to make procurement work in specific departments faster and easier, that does not mean every department should jump on it.
  3. Our own people are the key, without them procurement success is not possible.

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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