Hélène:
Welcome to procurement game changers, the podcast for procurement leaders that make a difference today.
Our podcast will talk about: how can procurement reinvent itself to become more resilient to supply chain disruptions? And to ensure that question today, have the pleasure to receive Robert Copeland.
So Robert is a cost transformation professional helping global businesses to reset their spaces over the last two decades. He has held leadership positions in several major industrial organizations, including BAE Systems, Danone, PSA, and G4S.
Welcome to the show, Robert.
Robert:
Thank you. Good morning, Hélène.
Hélène:
So Robert, could you tell us what led you to procurement?
Robert:
Well, I’ve been in procurement now for 23 years and when I graduated from Nottingham University back in 1999, I applied to the usual range of companies and was offered a role at Peugeot Citroën in the UK. And from that, they put me into procurement, and I’ve never left.
I’ve always found it a fantastic function to be in with a lot of visibility across the business, across the environment. And I’ve enjoyed it ever since. And yes, 23 years and counting.
Hélène:
Wonderful. So for a long time, procurement has assumed that global sourcing will help secure supply. And the recent international events such as the COVID 19 pandemic, the conflict in Ukraine, the trade war between the United States and China, Brexit, have shown this notion untrue.
So why do you think that procurement needs to reinvent itself? (For supply Chain disruptions)
Robert:
It’s a really interesting topic. And I was in an event last week discussing supply chain resilience and the presenter put up onto the screen some photographs or images of some of the world’s events over the last 15 years. Many of them we’ve all sort of forgotten about: the volcanic eruption back 12, 13 years ago, the floods in Thailand, the Fukushima nuclear power plant disaster.
One can name a dozen major global events that have had an impact on the supply chain. And it’s certainly, I think, a lesson to us all that we should never take globalization for granted.
We should certainly be far more cautious about the liberal view that global trade will create global peace, although very admirable in its thinking.
What we’ve only seen recently with China and Hong Kong, we’ve seen obviously with Russia, with the Ukraine, is it simply doesn’t work. And therefore, procurement professionals, supply chain professionals need to really have a greater grasp of the geopolitical problems and what that will mean on their supply chain.
Now, if we just look at 2022 with the vastly increasing inflation in the UK, the inflation is at its highest for 40 years. Procurement is going to have to relearn many of the lessons of the past. It was only 20 years ago when I was at Peugeot in Paris. And there was a lot of focus on oil prices, on metal material prices, and putting mechanisms in place to protect the company from sudden shocks.
Over the last 20 years, since then, very little has been seen around inflation in the West. We’ve seen it in Argentina. We’ve seen it in some countries, but it’s only back in 2014 that in the UK, inflation was zero and they were talking about negative inflation or deflation.
So suddenly, a lot of lessons are coming back that need to be relearned. And the way that procurement needs to reimagine itself is to learn those lessons, to demonstrate to the business that there are solutions, and to have a vision around how can we assure supply. It’s not just about cost.
If you don’t have the product, your business has nothing to sell, and therefore it doesn’t matter how cheap it is. If you don’t sell, you have no company. On top of that, what are we looking around ensuring that we’ve got stability in the supply chain consistency. There’s a lot of planning.
Very lean businesses that have spent years reducing their stock, moving to adjust in time model suddenly are finding themselves completely limited by their inability to secure products. And you’ve seen that in the automotive industry with microchips and so forth, where the stock was minimal.
And therefore, the dependency on just in time has really shown some of the flaws in that principle. So what procurement has to do is to suddenly realize that we’re probably never going to go back to the happy days of globalization, where low-cost country sourcing was always going to guarantee a low price. Inflation was nonexistent.
Transport logistics was always going to be able to supply whatever you wanted wherever you wanted. There needs to be a level of caution and reinvention in that, but it also needs to be done in collaboration with some of the advances that have happened over the last 20 years.
We’re not going to go back to where we had an Excel spreadsheet. There is automation, there is AI, there are technologies that can help simplify that. But for me, the other point is we also need to start preparing ourselves for the future.
The shocks of today, they will subside. They will come down to what’s next. And then you only need to think, well, what is the big risk facing us in 10, 20 years? It’s cyber warfare; it’s cybercrime. It’s the ability to damage digital infrastructure. And how can you ensure that your supply chain is protected against that whopping risk? This is where procurement can be on the front foot by reinventing and discovering itself.
Hélène:
So how should procurement and organizations build on a practical standpoint their resilience? Where does it start?
Robert:
Well, firstly, the famous word is: it’s information. What are the facts that you are dealing with? What are the systems when people talk data lakes. But I’ve always seen the biggest problem that procurement has faced is data: rubbish in, rubbish out.
You will find dozens of, if not hundreds of, companies out there that will promise you the most fantastic solution. But when you dig beneath the surface, it’s only as good as the raw information you’ve got. But what does that mean in terms of building that resilience? It’s not just about collecting the data.
It’s been able to then process it, provide meaningful insights that can empower senior leadership to make effective and quick decisions. Because what, for me, the resilience, it’s not resilience in the old style of being able to resist an outlast problem. It’s about agility. It’s about the ability to anticipate and react to the fast-changing problems.
And therefore, that will be a data-driven solution. On top of that, there is the old-school sourcing strategy. The So What, the Five Whys that you should always be asking yourself. Does your supply chain have that ability to meet sudden shocks? Have you got dual sourcing? Have you got alternative products, alternative solutions?
What can procurement go back to the business with and say: “look, here’s a problem that we weren’t expecting. However, these are the solutions we’ve got.” But that requires for me working with the business.
We talk about collaborative working. Procurement can never solve problems on its own in a silo. It’s got to build together either people within a company or indeed people within an industry or a sector need to be able to talk to each other and understand how they fix it.
You only need to look at the climate crisis, climate change, and so forth. No single company is going to fix that on their own. It is a common problem. And therefore, I see buyers having to develop their emotional intelligence to possibly be slightly less process-driven and slightly less dogmatic but to have that flexibility and that engagement with the business to find those solutions.
Hélène:
So from what I hear, there will be benefits beyond building the resilience for implementing those new practices.
Robert:
Very much so. And some companies are far further advanced when I worked in FMCG in Danone, we’re talking 10, 15 years ago, it was already on the front foot when it came to the environmental, the ethics piece. It was on the front foot when it was talking about supply relationships, SRM, and all of that. Many industries are still playing catch up.
And when I was at Danone, there was the phrase “Danone is a preferred customer”, and that is more relevant than ever. If you are trying to source components, if you are trying to source products or indeed services, you want your organization to be at the front of the queue, where they put the best people, the best innovation, the best capability. And they will do that if they see you as a valued customer.
And that could be simple things such as paying suppliers promptly, communicating with suppliers, eliminating that transactional mindset that a lot of people have, such as: “that supplier is there to provide me a product. I will tell them what I want and they will give it to me.” Well, actually, suppliers want to feel as though they can anticipate. They’ve got supply chains themselves. They’ve got planning, they have cash flow challenges as well.
And therefore, the more dialogue and engagement with them they can then start planning and ultimately build that rapport. Now that doesn’t mean as they say in English, “rolling over and having your tummy tickled” by caving into every whim of a supplier.
There still often will be robust negotiations, but there is that mentality of how do you develop that relationship to give your organization the competitive advantage? So, yes, there are plus points beyond the simple assurance of supply. It can develop the whole competitive advantage that many businesses are looking for.
Hélène:
So what will be, in your view, the main roadblocks and how to overcome them? (in procurement and supply chain)
Robert:
I think the number one problem that I see with procurement is how it’s measured. You only need to put a load of buyers in a room and ask them one question: ” what is the primary unit of measurement for your success?” They’ll all put their hands up. Or most of them will say: “oh, it’s about savings.”
So behaviors, when it comes to a buyer wanting to secure a bonus or reward at the end of the year, their behaviors are often driven through a very narrow prism of performance. It has to have the courage of a business to start saying: “alright, what are the other metrics that are important?”
Can I have that difficult conversation with a business to say, look, you might end up paying more, but you’re going to have greater visibility, greater stability in your supply chain, the greater ability to Excel in what your customers want.
So there will certainly be that difficult question around what is important for a buyer. It’s great talking about environmental. It’s great talking about these things, but actually, when push comes to shelf, what is it that ultimately it boils down to? And that, I think, will be a blocker because for as long as it is [there], it maintains a cost reduction mindset as the unique measurement, then that will drive a lot of the behaviors.
I also see that procurement people need to become, and it might be quite a controversial point, more commercially and emotionally agile. Procurement people, in many countries, have been developed and have matured through rigorous process and following process, which again is important. It cuts fraud; it cuts a range of other problems.
But at the same time, it also hinders some of the agility that I’ve talked about earlier. So buyers are going to have to become a lot more adaptable in how they react. And can that be trained and reeducated, or are we having to look and wait for a new generation of procurement people to come in? So those, for me, are probably the two big challenges facing procurement.
Hélène:
Yeah. So what you said is [that] probably the profile and the competencies that are needed for procurement and corporations that want to continue to be profitable, have to change a bit. We need to explore new areas or new ways to recruit people in procurement. Is that what I hear, correct?
Robert:
Yes, partially. And I’ve seen this in many companies where you look at the competencies required from a buyer, you have a behavioral competency, and you have a technical competency. It’s often very easy to train and educate people on technical competencies. How do you go buy? What’s your process?
But the behavioral piece is a lot harder. And how do you drive that? How do you develop people to be more commercially agile in their thinking? And that’s not easy, but some companies have grasped it very well. Some, I think, have struggled. And as a consequence, their procurement capabilities are probably less supple than one would hope.
Hélène:
I see. And what does all that mean in terms of positioning of procurement within the organization?
Robert:
Many people ask me the question: “oh, should procurement be on the board?” And the answer is possibly. Procurement has to make sure its value proposition is crystal clear. It’s got to have the courage of its convictions to push back. It has to challenge in a constructive way.
People talk about procurement as an enabler, which makes sense, but not as a kind of passive enabler, but as someone who ultimately says: “Right, what is wrong with the business? What are the problems that the organization is facing in its supply chain that I can fix? Do I have the capability and capacity within my function to be able to deliver value?”
And often, as I’ve seen in previous companies, will the business have the trust in procurement to allow them to play with their train set? Supply Chain is an incredibly sensitive area. If things go wrong, businesses cease to function.
So procurement [needs] to be enabled, to influence not just the unit price, not just who the supplier is, but the very product and demand that is being sourced. That level of trust needs to be ramped up to an extent that the business will let go to an extent and allow procurement to add value.
But it’s a double-edged sword. If procurement gets that wrong, that trust is very quickly lost. And then you are, you’re not just back where you were; the door is slammed shut. So words of warning, when one does it, think carefully. Can I actually do? Will my systems that I have promised that will create a product or a service? Will they do what the business and the customer want?
Hélène:
Yeah, that’s a very good point. I was thinking while you were talking, we often talk about moving from tactical to strategic procurement, right? Saying that we move from savings to value. And what I hear also is that we need to move from reactive to anticipating some way.
Procurement has to not only be accepting the orders from the business lines, but also anticipating and be ready to shift the path if something is happening.
And that means understanding their business and, therefore the commercial mindset of procurement that needs to understand what’s happening and what could be the impact of that solution or that solution. That’s, you know, what I hear, and I think that’s interesting in the way we see procurement evolving, and the evolution is multifaceted, going in many, many directions. And I think that’s what makes it super interesting. Yeah. So from what we said, we talked about procurement in general.
You know, I work on indirect procurement. And so I was wondering, from your perspective, how does that apply to indirect procurement and, in particular, the consulting category?
Robert:
Well, the challenges that we’ve seen today are not unique to physical goods. It’s possibly more visible when you see a cargo ship stuck in the Suez Canal, but the reality is one of the big challenges facing the West at the moment is, is the shortage of labor. So when we talk about services, that could be temporary labor, that could be professional services.
There is a sudden shortage, and it was only announced in the UK press today, or like this week, that for the first time since records began, there are more jobs than people seeking work. So we’ve got this scenario where that’s not just unskilled labor; we’re talking skilled labor.
So the ability for companies to provide the value-add from professional services, consultancy, and temporary labor. It’s limited because they’re just simply are not the people and the flexibility.
Now that’s happened in the hospitality sector. We’ve seen with the pandemic a lot of people leaving industries, seeking employment elsewhere, suddenly [the business is] coming back. You only need to go to many of the airports at the moment and find how overloaded they are.
Simply customers have come back faster than the ability of airports to provide the staff in security and what, wherever.
So, yes, the problems today are still incredibly prevalent in the indirects, even if not physically and visibly a problem, they certainly are there. And the same mechanisms apply.
If you are seeking services, what relationships have you got with your suppliers to be at the front of the queue? Because if you are not, if they see you as a transactional organization, you probably won’t get the solutions that you’re looking for in the timelines that you need.
Hélène:
Right? So now it’s time to wrap up. So if we had one takeaway, one thing that you want our fellow procurement leaders to remember from that conversation, what would that be?
Robert:
For me? There are three bullet points, I would say. A buyer should always be asking themselves three questions. Does the procurement solution, that you are proposing, make things better for the end-user and customers?
The second thing is, what is the cash flow and profit improvement to the change you make? Cash flow is critical now. It can make and break a company, even more so, given some of the challenges we’re seeing. So no matter how innovative, and exciting your solution is, the business will be asking itself: “What’s the OCF [Operating Cash Flow] impact? What’s the profitability impact?”
And thirdly, does the business have the capacity and the capability to implement successfully the change? I’ve seen many great projects in the past crash and burn because the business just simply didn’t have the strength in its arms to deliver that change. And that is what a buyer should be asking upfront is it’s all going well, great solution, but can the business implement it successfully?
Hélène:
Thank you. Thank you, Robert. So now it’s your turn to tell us about your experience and your challenges in the comment section. Don’t forget to subscribe if you want to be notified when a new episode is out. Thank you for listening. Thank you again, Robert, for your perspective.
Thank you. Happy sourcing to you, everyone.
And bye. And au revoir.
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