Leaders in Supply Chain and Logistics with Radu Palamariu

#60: Dan Bartel CPO of Schneider Electric

November 07, 2019 Season 1 Episode 60
Leaders in Supply Chain and Logistics with Radu Palamariu
#60: Dan Bartel CPO of Schneider Electric
Chapters
Leaders in Supply Chain and Logistics with Radu Palamariu
#60: Dan Bartel CPO of Schneider Electric
Nov 07, 2019 Season 1 Episode 60
Radu Palamariu
Dan Bartel is the Chief Procurement Officer of Schneider Electric
Show Notes Transcript

Dan Bartel is the Chief Procurement Officer at Schneider Electric, which provides energy and automation digital solutions for efficiency and sustainability. Schneider combines world-leading energy technologies, real-time automation, software and services into integrated solutions for homes, buildings, data centers, infrastructure, and industries; with combined revenue of about 26 billion euros.

Discover more details here.

Some of the highlights of the episode:

  • Three main pillars of Schneider’s procurement 
  • Where is Procurement heading in 3 years
  • How Schneider is building relationships with startups and vendors
  • Key KPIs on how they measure success
  • Procurement and the CEO agenda
  • Helping suppliers be more efficient
  • Skills procurement professionals should have
  • “Take chances and never stop learning”

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Speaker 1:
0:00
Hello and welcome to the leaders in supply chain podcast. I am your host rather MRU managing director of edible bloat. Our mission is to connect the supply chain ecosystem in Asia and globally, but bringing forward the most interesting leaders in industry and I'm very happy to have with us today. Dan Bartell, who is the chief procurement officer of Schneider electric. As you may know, Schneider electric is a global leader in the energy management field providing software, hardware and services solutions with a combined revenue of close to 26 billion euros last year. Then Joni Schneider electric in the beginning of 2019 and is based in Hong Kong. In his current role, he is leading the 13 billion Euro procurement spend that cuts across 200 plus manufacturing factories and 100 plus distribution centers in 44 countries. It is the establishment of the processes, tools, systems, and organizational competencies to manage change towards the supply base as an extension of the company enterprise. Prior to joining Schneider electric, he served several roles in procurement and logistics of ABB. Ultimately serving as the groups, as VP and head of procurement and logistics based in Switzerland. Yes, 24 years of mobile experience improved if your marketing supply chain management primarily in the energy and automation industries. Then pleasure to have you with us today and thanks for taking the time.
Speaker 2:
1:23
Thank you Ryan. It's a pleasure to be here.
Speaker 1:
1:26
Um, and I'll start with a question from, uh, from one of our listeners who has obviously been following you for a while because he read an article that you wrote or you contributed to the three years back in which you were talking about industrial revolution 4.0 um, and you are asking at that time, um, a couple of questions and then linked to what the effects of this fourth industrial revolution will have will be on procurement. And also what can leaders at the procurement function do to lead the change? So this was three years ago. What has happened in this span of the last three years and how have things changed?
Speaker 2:
2:06
It's quite interesting to reflect on that. Um, the, the first thing that comes to mind, uh, is it's Morris law, which says that we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run. And I think that applies, uh, to do some of those, the, the points I made in that article. Um, uh, but while other points I think have, have actually accelerated even beyond what would I anticipated three years ago. Um, you know, one thing I talked about there was customer expectations and the fact that they're shifting. Um, what I've seen in the last few years is, um, a dramatic shift say in, in, um, uh, in expectations with respect to response time with respect to agility. Um, I think in today's day and age, uh, forecasting is actually few tile. Um, and it Judy and speed are the key to, to succeeding with respect to meeting customer expectations.
Speaker 2:
3:05
Um, you know, we've seen one of the most dramatic, um, cycles in the semiconductor industry in the last few years. For example, um, the most dramatic I've seen in my career anyway, um, which, which I think few people were predicting. Um, the, the, the level and the degree to which, uh, that that cycle, um, came up on us and now we're seeing kind of the backlash of that as well in terms of, um, uh, excess inventories and stocks piling up. So, uh, being able to anticipate customer expectations I think is becoming more and more challenging and, um, being able to react quickly, uh, to shifting expectations, um, is, is becoming more and more a key differentiator. Um, I think also talked in that article about how products are being more and more enhanced by, by data. What I've seen is, you know, when I look at what Schneider is taking to the market today, a vast majority of what we're selling, um, our, our connected products, which is not the case, um, just a few years ago.
Speaker 2:
4:02
Um, eco structure is a Schneider's IOT enabled architecture, uh, in platform that we put in homes, buildings, data centers, uh, infrastructure. Um, it's got innovation at every level, you know, connected products connected to the edge. Um, onsite with, uh, with apps, analytics and services layered across the top. And we're truly selling now, you know, a value based solution rather than individual, uh, one off products. So that's been a big shift. Also talked about partnerships, um, how new partnerships are being formed as, as companies learn the importance of new forms of collaboration. Um, and I would say that collaborative innovation has become more and more the norm, um, in, in many industries. Um, and procurement more and more is playing a leading role in defining the relationships, um, with suppliers in these collaborations, managing those commercial relationships with those partners. Um, and I'd say in Schneider we're doing this, um, uh, not only with mature companies, but also with, with a lot of startup companies that are bringing new innovations into the marketplace.
Speaker 2:
5:06
Um, the last thing I talked about in the, in that article was operating models and how they're transforming. Um, and, and this is, uh, at least in the industrial segment, I'd say this still has a lot of room to grow. Um, but, uh, you know, asset light is, uh, a trend, um, that, uh, is becoming more and more prominent. Um, you know, when you think about a company like Schneider, um, one thing we want to be really good at is current interruption, right? So we want to develop the, the, the latest and greatest circuit breaker. That's where we want to put our money. We don't want to put our money so much in a new surface Mount electronic line or injection molding machines, non-core activities, looking to focus on the core, go after that light lift production and, and make your investments in, in your core technologies. So I think a lot of change, I think I'm, somebody evolved as, as um, a, it's anticipated somewhat much faster and other aspects have, have proceeded much, much slower. But I think the, the, the, the, the trend and the, the, all of the aspects I talked about with respect to procurement's role, um, are still very valid in my view.
Speaker 1:
6:20
And, uh, if you were to make, um, um, expert guests, let's call it like that, because ultimately nobody can predict the future. But what would you say that in the next three years, uh, will be the evolution of procurement? Any big pointers and, um, and areas where you, you see it evolving and how exactly do you see the next three years spending? [inaudible]?
Speaker 2:
6:45
Yeah, great question. Um, first thing that comes to mind is type station. Yeah. Um, kind of a, on one hand, enabling what we do in procurement. And on the other hand, really kind of challenging, uh, what we do. And what I mean by that is, you know, digital patient has been absolutely has a super important role and enabling kind of the traditional, uh, procurement processes from squirts to contract and from procure to pay, right? So having our buyers, um, and our supply chain managers spending less time in front of computers and more time in front of suppliers and in front of internal stakeholders by my simplifying, digitizing the processes, uh, that transactional processes of, of their daily jobs. And on the other hand, you have advanced analytics and, and artificial intelligence, um, uh, sitting on top of these giant data lakes and we're able to, to collect nowadays, uh, really challenging what we are doing, um, and asking questions and getting insights that we hadn't considered in, in the past.
Speaker 2:
7:48
Uh, just one specific example, uh, from, from my recent past, um, you know, we're in an environment in general electric and many of our competitors are in a sport environment where there is many different ERP systems and companies. So anytime we make a global contract and we want to implement those terms in the system, um, lots of transactions have to be done manually all over the world and dozens and dozens of different systems in order to apply those terms. Um, in, in a recent role that I had, we did an analysis. So if someone asked the question, a very senior leader in the company challenged us and said, Hey, you know, I think you'd probably have leakage on your payment terms. You know, you're negotiating all these extended terms, but I'm not seeing it in the DPO of what's going on. Um, we ended up finding through, through some, uh, big data analytics, uh, hundreds of millions of in cash that was leaking because we weren't current on our, on our payment terms in all the different systems.
Speaker 2:
8:40
So just goes to show that, um, uh, if you ask the right questions of your data and you apply these advanced analytics tools, um, to answer those questions, you can unlock the value that you didn't know existed before. So digitization, um, is absolutely something that's on the, on the, in the next few years. I would say simplification is up there as well. I think, um, many supply chains have far too many suppliers, far too many, uh, connections from suppliers to factories. Um, and a simplification of that network, um, can also unlock a lot of value. So we spend less time on transactional topics and much more time on, you know, uh, strategic supplier relationship development. So simplification plays a role. Uh, I talk about partnership. Um, that's definitely, uh, something that will differentiate the winning procurement teams in the future. Those that can really truly collaborate with their suppliers.
Speaker 2:
9:38
Um, creating joint competitive advantages. Um, uh, and, and really taking advantage of, of the value that suppliers can bring, uh, to our own companies, uh, product offering, um, is, is an important differentiator in the future and, and less than at least a, I bring to the point again of agility. Um, you know, building a, an agile and robots supply network, one that's resilient. Um, having teams that are agile and dealing with big changes in the external environment. I mentioned this cement conductor crisis that we had recently. You could also point to the, the, the, the ongoing trade war, which has tempered a bit in, in the recent past, but it's still a real issue and, uh, and a real risk, you know, those teams that are most agile in reacting to those kind of situations are the ones that are, that are going to win.
Speaker 1:
10:29
That's, that's, that's effect for sure. Related to the C level, the CEO and the role of procurement in the overall organization. Because, um, yeah, sometimes it's a bit of a, depending on the organization, sometimes it's a bit of a fuzzy line. Uh, how important these procurement, how strategic is procurement? I think everybody is trying from the procurement function to, to position procurement as a business partner. How do you see the South, do you see CEO, the CEO seeing procurement, uh, in, in this equation of, of adding it to the success of the company? And how is the procurement agenda in itself linked to the overall company in general?
Speaker 2:
11:10
Yeah, so, you know, it feels like I've been fighting my whole career for the relevance of DeArment with, uh, with the sea level. Um, but I've seen, especially in, in the last say five years or so, a big shift [inaudible] in the understanding and the appreciation really of the value that procurement can bring to the company. In fact, when I think about Schneider electric, it's, you know, I'm relatively new in the company. I came in in March of this year and one of the biggest reasons that I selected Schneider is, um, because of this, the level of commitment that the company has to, to, to the function of procurement, they see, um, the, the value that we can bring in supporting the top line, supporting the bottom line of the business. Um, so w w when you look at the facts in a company like ours, 50% of the revenue is a, is weaving the company, uh, through procurement, through, um, external purchases.
Speaker 2:
12:10
Um, roughly 70% of the costs of goods sold is, um, is managed by, by our function. So if we do that, um, poorly, we really can damage the company. If we do that particularly well, we can create a competitive advantage. And I think, um, you know, the, the, the, the CEOs, the CFOs that, that recognize that, um, and that make investments in procurement to, uh, enable us to, to, um, uh, support the financial performance of the company are the ones that are, that, that are, that are a win frankly. Um, and to your point about, you know, how do we link procurement to the overall company ambition? Um, I think one, one thing that, uh, some procurement leaders can improve is just in how they communicate, what they do, um, in, in what they do and how it supports the agenda of the business. And how we position it in, in Schneider is a, you know, we put the customer first, right?
Speaker 2:
13:08
Any smart CEO, what's going to do that, whatever the customer is trying to achieve, try to figure out your, your role in making that happen. And for us, there's three things that we do, um, to do that. First of all, we, we support the top line growth of the business, right? We do that through assuring good quality through bringing, um, external technologies into our product offering. Right? Um, secondly, we support the bottom line of the business and that's really core to any procurement function driving, you know, um, cost reductions on a continuous basis, on a reliable basis, driving cash improvements through extended payment terms and inventory reductions. That's kind of really core to what, um, any procurement function needs to deliver for the business. And third, we need to do these things in a sustainable way, right? So we have, um, a certain corporate social responsibility that we need to hold our suppliers accountable to and we need to drive, you know, uh, compliance of our products, uh, to environmental, um, and social social standards as well. So it's about, you know, supporting the top line of the business, uh, enabling the bottom line growth and doing those things in a sustainable manner.
Speaker 1:
14:19
A bit more detailed tactical question. What is the current organization design of Schneider procurement? My comes to, maybe you could take all of it or I could take with management regional heads. How do you, how do you structure it in a way that optimizes it for best agility, success phones?
Speaker 2:
14:39
Yeah. You know what? I think there's no, um, one, what's the ideal organizations? We haven't, vendor's not so bad though. Um, it is, um, I say more or less fully centralized, um, and it hasn't been for about the left caters. So that's a certain advantage. So, um, everyone in the company is now kind of conditioned to expect procurement to do its job. So we're not so much fighting for a seat at the table. Um, we're, uh, we're getting pulled from the business to, to, to execute the buy, which is for two places to start. And how we do that, we have, uh, three main pillars of the organization. The first one being category management with organization set up in the first game, category management and with category management, we're driving the sourcing strategy. Um, we are, um, uh, leading the, the relationship of all of our strategic suppliers around the world and we're focused on some categories that are delivering the most value for the business, right?
Speaker 2:
15:44
The category management is, is one pillar and something that I think most procurement organizations, uh, need to have in order to be effective. Um, we have one team dedicated for offer creation or new product development sourcing. So their mission is to enable, you know, on time, on cost, product launches, um, and they're typically Kobo located with the business. So they're with, you know, the, the, the marketing and research and development teams. Um, during that, um, we, we bring in the external technologies that we need to support the product development and also that we, we comply to the, the sourcing strategies helped by the category management team and our supplier selections.
Speaker 2:
16:23
Um, and then the third pillar is, is the regional pillars. So we have of course a about 200 factories all around the world. Um, so we embed procurement folks in all of those factories. Uh, just mainly driving execution, right? Um, so you have category management, setting the strategy, new product development, um, uh, assuring that longterm we're complying to those strategies and we bring in the external technologies and the regional teams executing, getting the job done on a day to day basis. And then one fall organization that is, is a globally transversal driving and enabling enablement around a few different topics. One being qualitative, right? Something we're trying to continue to improve, uh, sustainability, which is a big agenda for us in Schneider. And of course the digital transformation, which is a big change. Um, and one that requires some global principles or, Hmm.
Speaker 1:
17:17
Specifically for the sustainability agenda, which is a big topic of discussion across the board in MNCs. How are you contributing to the sustainable agenda of Schneider from a procurement perspective? Um, also maybe if you can give us some examples of sustainable sourcing methods or, or, or practices that you have in the company.
Speaker 3:
17:41
Okay.
Speaker 2:
17:42
Yeah. You know, sustainability is, it's on the top of the agenda for, for Schneider, um, as a corporation mission. Um, with respect to sustainability is to provide energy and automation, digital solutions for efficiency and, and also for sustainability. So procurement, our mission is directly in line with that. Um, we really are standards for our suppliers with respect to sustainability, um, and kind of two areas, one being corporate social responsibility. And the other third being, uh, product compliance with respect to the corporate social responsibility. You know, we're, we're a French company, uh, to comply to the French duty of vigilance law, right? Which is mainly driving compliance and unsocial topics related to human rights and, and to the environment. Um, we also drive compliance to conflict minerals. Uh, you know, conflict minerals. This is a U S you know, sec, uh, regulation, um, Schneider's not subject to, uh, sec reporting, but we still feel responsible to, to make sure that we drive that social agenda forward.
Speaker 2:
18:46
So we hold all of our suppliers accountable for, for compliance to the conflict minerals, uh, regulation in the U S um, and then, uh, I sub 26,000 is it is a standard, right that we hold all of our suppliers accountable to and then we execute through, through our partner, um, echo Vegas. So those are the main social responsibility aspects. Um, from a product compliance standpoint, uh, in different companies organize that in different ways. In Schneider we've decided to lead product compliance, uh, from procurement mainly because, uh, most of the work is in, uh, interactions with suppliers and confirming, uh, the content of the products that we're, that we're buying from them. So what I mean by product compliance or things like reach, uh, rowhouse compliance, uh, to California is proposition 65. There's many others, um, that, that certain products need to comply to. Um, and then maybe the last remark to make on the topic of sustainability is, is related to a recent announcements of our chairman and CEO, John pesto frequent.
Speaker 2:
19:51
Um, you know, previously Schneider had the commitment to be net zero carbon by 2030. Uh, we've recently announced that we've moved that up to 2025. Um, and in addition to that, we've made a commitment to have our entire supply chain a net zero carbon by 2050. Now 2050 sounds pretty far away, but we have tens of thousands of suppliers, all of which emit carbon, uh, to some degree. Uh, so it's a, it's a big challenge that that's on our plate now. That's just a been put in front of us to, to drive, uh, toward a net zero carbon supply chain in the future.
Speaker 1:
20:27
Mm. Well, I mean, definitely good to hear and I'm, I'm really hoping that more and more companies follow. Um, we've seen some, some great, um, great announcements. Also. I will name them because I think that they do need to be named for the, all the good work that they've done as well. The Unilever specifically, they've done some, some tremendous work also in the sustainability aspect of this supply chain. Uh, you are spender, electric or leading the way as well. And also, I mean actually through your solutions. Um, I think you can enable that. You will continue to enable a lot of, a lot of your clients to manage their energy consumption better and obviously the energy does translate into a more sustainable way of doing business if you do it well. Um, so that's always great to hear because obviously it's something that we should all care deeply about since we only have one planet. Um, I also want to shift a little bit, uh, conversation to something that you mentioned. You mentioned agility and there is definitely an innate challenge between a agile and flexible type of an approach, uh, and a standard sourcing process that a lot of times needs to be put into place. Um, how do you, and is there a way in the first place to manage this conundrum and, and maybe if you can share some examples or examples of where sourcing processes still age are whilst maybe streamlined in some other ways.
Speaker 2:
21:57
Yeah, no, we definitely need to be flexible and more agile with these processes. You know, on one hand, we, we want our stakeholders internally to be compliant, right? And, uh, two to procurement processes so that we assure you no professional job is done in, in sourcing the products and services that support our business. But on the other hand, you know, um, B because our, our customers, uh, behavior is becoming more diverse and more unpredictable. We have to become more agile and more, more streamlined in, in those processes. So it, it definitely is a, a well recognized, uh, conundrum from, from my side. Couple of the things, um, that we can do about that first and foremost of the digitization, which I talked about before. You know, um, if you can take those processes and, and make them as touchless as possible, um, then, uh, that, that's a boost Stripe.
Speaker 2:
22:49
But that's not the entire answer. Nope, not by a long shot. Um, I think partnering with suppliers, um, can really simplify things. Uh, and what I mean by that is, you know, um, we've had a selection of a handful of what we call strategic end game suppliers. These are the supplier is where we've made a longterm commitment to each other, right? To grow the business together. Um, and we're, we're shifting substantial amounts of business, um, from our tail suppliers into these strategic end game suppliers. And in doing so, you know, rather than sit and negotiate every individual alignment line item, we've agreed to, uh, shift the large chunks of business kind of in, in market baskets, right? And not worry about haggling over each individual, uh, price. Rather, we set up some, some commercial rules as to how pricing will be automatically calculated. Um, so there's things like that that can really streamline.
Speaker 2:
23:45
And one other good example I would say is a, the negotiation process and maybe come, coming back to the topic of electronic components. You know, we in the past have spent hours and even days sitting together with suppliers with lists of hundreds or even thousands of part numbers, haggling over individual prices. Um, and we do it because we want to drive productivity. We need to get cost reductions, uh, to, to the business. Um, and, and we're very, we're an engineering company. We're very detail oriented and we think that is a good way of driving value. The problem with it is it's terribly inefficient, takes a lot of time for both us and the supplier. So we've totally changed in the last few months the way that we run these negotiations. Um, what we do instead is we invite suppliers in, um, usually around 20 to 30. Um, uh, on any given day, uh, we, we have some executive speeches with them, let them know what's going on in our business.
Speaker 2:
24:43
We have some workshops with them around, you know, the new digital tools that we're rolling out, for example. And then we sit with them individually and have negotiations. We limit the time to only two hours and we don't talk about individual line item pricing. We talk about the entire package, we put all the commercial issues on the table, we resolve them in a matter of a couple of hours after, you know, a couple of months of preparing for the meeting for sure. But the interaction itself is very streamlined. And at the end we, we sign a term sheet, uh, on both sides that confirms what our agreement is and the negotiation is done. Yeah. So I think, um, just sort of to sorta recap, we have to do just things we're always going to have to do just from a compliance standpoint. So we have to digitize as much as possible to get rid of that transactional stuff. Partnering with suppliers and raising that level of trust, um, between us and the suppliers is an important aspect. And then, you know, things like this negotiation process change, we have to change the business processes themselves to make them more, more agile and, and more streamlined,
Speaker 1:
25:43
moving, moving a toe, very specific, a specific group of companies. And we try, actually it's not, I mean, yeah, your company's, it's it startups, right? So when you deal with startups, because we know for a fact that innovation to a large extent is driven by small companies, it is driven by nimble companies, is doing driven by um, this type of startups that have been maybe around four one, two years, um, on the market.
Speaker 2:
26:13
How
Speaker 1:
26:14
is there, and you've already given some examples, but specifically for this category of, of engagements, do you have certain, um, other ways or, or more particular ways in which to connect to make sure that you don't miss out on this rich innovation coming, coming through the startup environment? Because you have all this payment terms, you have legal aspects to take care of, you have a bunch of considerations when you make a contract and start ups are quite a different ballgame to deal with altogether.
Speaker 2:
26:42
Yeah. If we applying our standard practices with respect to like, we'd never make it through the first gate, especially in early, um, early phase a start up company. So absolutely a customized approach is, is required. And for me, there's, there's a handful of things that, um, need to be done differently. And, and, and this is how we manage it in, in Schneider. Um, first of all, you know, the, the team that is managing those relationships is, is special that they need to be, um, and not necessarily dedicated to that, but, um, uh, they need to be, uh, had the right level of experience in managing these complex relationships, right? Uh, and that they need to be less so, you know, procurement professionals and really more kind of a business professionals with a, with a real business mindset and entrepreneurial mindset so they can communicate well, right.
Speaker 2:
27:38
With, uh, with, with the startups. Also, it helps a lot to have some, some real tangible, uh, expertise in the category. Um, so they can speak intelligently to the founders, right? Um, and they need to be agile, adept, lean in how, in how they work, right? Can't be too, too rigid from a process standpoint. So you have to have kind of the right, um, uh, say type of people, uh, running those relationships. A second would be that, you know, the process and the tools that you use need to be special. They need to be, um, much leaner, um, and, and more flexible so than, than the traditional tool. So I mentioned the, the qualification process. We'd have, um, aged qualification process for startups that we follow. Um, that is not really qualification. It's more assessment resulting in an improvement action plan that we agree with with the founders.
Speaker 2:
28:30
Right. Um, we also check much more closely with startups on the strategic fit. So we don't assess their business processes. Could you do, they don't have many. We assess instead their business plan, right? We're where they're taking their company, uh, just to make sure that it's well aligned with, um, how we see that, that technology in that relationship developing. Um, third I would say is the connection with stakeholders internally. You know, we can have a, a marketing manager, um, who's, who's super excited about developing a relationship with, with a startup. We need to connect with that person, um, very early in the process to make sure that they are following our processes. You know, while their processes are, are streamlined, we still need to follow the federal procurement process to make sure that we, we bring the relationship up in the, in the, in the right way.
Speaker 2:
29:19
Um, you know, a continuous risk assessment is also something that that needs to be done, uh, together with that stakeholder to make sure that we, we, we create something together with the startup that in the end is, is viable. And then I would say just the last point, um, would be coaching and development. You know, the, the, it's, it's, it's a different kind of thing. We were with a, a more mature company, you just set an expectation, point out the gaps and let them do the work with a startup, you really have to help them along. Um, they were really at to help them through that development plan, bring them the resources they need to, to close the gaps, um, really help them hands on with their business model as the relationship goes forward, um, and, and help develop it into something that, um, that can really bring value to Schneider. So it's definitely an area where I see, uh, opportunity, uh, to support. Coming back to one of your earlier questions about how do you see us aligning to the, the, the goals of the business? Um, you know, our, our collaboration with startups and our work in procurement in developing those relationships is, um, a very big enabler, um, to, to, uh, the revenue, the top line growth of the business.
Speaker 1:
30:33
And since, since you're on this point, I need to ask you the million dollar question. Um, how do you, how do you measure what, what are the metrics that you use to measure success of procurement in electric? And I think we have that saying across procurement, uh, how to measure value beyond savings. Cause in a lot of organizations, and unfortunately, fortunately I don't know what to call it and procurement this, okay, can you cut costs? Can you cut cost? And this is the only or the primary measure of success, but we both know that there's not really a partnership and it's not really a longterm necessarily view. So how, what's your metrics for knowing that procurement [inaudible] electric is successful?
Speaker 2:
31:17
Yeah, I've all, we all KPIs, so we've got a lot of them. Um, and, and uh, some are traditional. Um, and we'll always have those traditional KPIs by the way. And some are a little bit more progressive. So maybe I'll talk about the traditional ones first. You know, first and foremost, it's, it's cost reduction or savings or what we in tonight are called productivity. Um, you know, year over year of the external by, um, is always going to be the center stage of procurement in, in my view, we, you know, we, we talk about all these interesting, sexy things about growing the top line of the business, sustainability and all of that, which are absolutely the future and are absolutely more and more relevant in procurement. But if you're not getting the cost production, um, then it's hard to engage in all those other discussions with the business.
Speaker 2:
32:08
So, uh, productivity, I see that as the thing that keeps the lights on, if you will, for, for procurement something we always have to deliver a similar with cash. Um, so driving cash improvement in terms of average payment terms, um, uh, in terms of purchase material inventory, uh, driving improvements, they're real improvements. Um, uh, is, is a relevant KPI. And of course you have the, the operational performance, uh, metrics like quality on time delivery, lead time of, of, um, of your suppliers. Um, and then maybe the last of the real traditional things would be just compliance, right? So a compliance to, to, um, our quality audits, compliance to all the sustainability requirements that we talked about earlier, relatively black and white things, right? I would say looking a little bit more on the leading edge of what I see as the, the KPIs that are really going to help us drive the transformation we're trying to drive.
Speaker 2:
33:10
Uh, first and foremost, you know, complexity. Um, we have a very complex supply base, mostly because of just the heritage of our company. Um, it's a collection of dozens of, of individual companies that have come together over the course of the last few, few decades, right? So we have a very highly, highly fragmented spend, um, a lot of suppliers. So we measure of course the number of suppliers. We also measure how many connections do we have from supplier to factory, right? And we have specific targets around reducing those things. And, and what we're seeing is as we produce those, the number of suppliers, as we reduce the complexity, we free up resources and free up energy in our, in our organization. So for example, we went from a couple of hundred, uh, packaging suppliers in Europe, continental Europe, um, a couple of years ago to today we have one, just one. Um, we used to have eight people, uh, in procurement, managing packaging and now we have one, right?
Speaker 2:
34:07
And one is probably too many even right? Because, uh, it's tremendously simple. We'll just, just one supplier. So, uh, complexity measures are I think very relevant, at least for our business and hopefully for many others. Um, you asked me about startups, you know, we're measuring how many innovations are coming in, um, to, to the business from startups and from mature companies. Uh, what's the resulting business impact in terms of revenue, in terms of, of bottom line from those innovations. That's something that we followed. Um, we're following stakeholder satisfaction, you know, while on one hand we want to drive compliance to our processes internally. On the other hand, we want to make sure that our, our internal stakeholder stakeholders have a good experience so they keep coming back to us instead of trying to get around us. Right. Um, we also measure, um, the engagement levels of our people, of our teams. That's super important. Um, and we want to have an engaged workforce. Uh, so we have an annual survey that, that Schneider runs on a global basis, um, that we in procurement, uh, slice and dice our segment of that really understand, you know, where people are engaged, where they're not. Y we create action plans, um, around that. Um, and maybe just one other KPI dimension that said, we have a lot. I wasn't kidding. Yes, definitely weren't kidding. Yeah.
Speaker 2:
35:29
Instead of measuring a lot, it was last year, um, the amount of revenue that we're generating from suppliers. So this is not a procurement KPI, definitely a sales KPI, right? But as you mentioned, um, you know, we have products and solutions that can really help just about any kind of manufacturing company, uh, in terms of, uh, driving energy efficiency and sustainability improvements or that have a real bottom line impact on, on their business. So we, what we've been doing in procurement is opening doors for our sales teams to ours, uh, mainly focused on our more strategic suppliers, uh, to bring in the ecostructure suite of solutions to help them drive, um, efficiencies in their business, which by the way, when it works well, we ended up benefiting from because our suppliers are becoming more efficient and they can offer us more, more cost reduction. Right. So, um, it's something that I think is unique and, and honestly, you know, as a procurement professional that the last thing you want to do is, um, complicate the relationship of your supplier with cross trading topics.
Speaker 2:
36:32
So it's not about that really. Um, we really kind of, um, are doing this strictly on a basis of, of helping our suppliers become more efficient. Sometimes they go for it, sometimes they don't, we don't hold them accountable either way. Um, we just opened the door and we've seen, um, a tremendous amount of, of growth because, you know, especially the most strategic suppliers are, are, um, are always gonna listen to the sales pitch. Right. Um, and, and if they buy into it then, then great. If not, not then we haven't lost anything. So, uh, one thing that I think is innovative in terms of the KPIs that we measure,
Speaker 1:
37:05
yeah, I've never heard about this section. Well, so far I've not really heard of there. So that's quite a, that's quite, that requires quite a different, uh, I mean, obviously a, you know, in procurement typically, uh, there's, there's one type of skill set, but this almost is, you know, it's not almost, it is sales. It's a sales pitch. Um, so very interesting, very interesting approach. And ultimately, as you said, if, if your, um, suppliers find it useful, why not? Um, you know, if you don't ask, you don't get so, um, very interesting.
Speaker 2:
37:38
I could, if I could just clarify on that a bit as well. So we're not selling anything right in procurement. But for example, uh, we had our, uh, recently, um, in Barcelona just a few weeks back, our global supplier day where we invited 120 or so of our most strategic partners say, um, for, for a day of exchanges on the usual topics. Right? Um, and on the second day, uh, one of the things that we offered to suppliers optionally is come, come, have some, some what we call B2B workshops, business to business workshops where we add our sales team, basically pitching our solutions to our suppliers. Um, and that was tremendously successful. So that's not a job that, that procurement did, right? We just invited the sales guy into, to, to make this pitch. Um, uh, and again, we just opened the door, right. Um, a heck of a lot of effort from, from procurement. And it brings tons of value to the business, um, when, when you do stuff.
Speaker 1:
38:37
Got it. No, no, no. It's clear. Yeah. It's still, it's, it's a, you know, it's a, it's a good initiative and, um, good way to put things. And again, it's a good way to position procurement as a partner to the business, um, as an equal to the business. This was a very good kind of moving to the final bit of discussion. Uh, and maybe, uh, lastly, but, uh, but not a total. Lastly, if I can do, I can say that it about talent and about people and about the type of skills that we need and procurement for the future. Where, where do you see it going? Um, specifically let's touch upon a sensitive topic, right? So we talked about data lakes, we talk, so we talked about automation, AI, artificial intelligence is thrown about every conference, I think way too much, too many times, but there is a reality that then machine learning, that automation that that's going to be, um, a lot of things that will be streamlined and, and automated in procurement. So where do you see the skills that procurement professionals will need in the future increasingly to stay relevant in the first place?
Speaker 2:
39:41
Yeah. You know, in, in Schneider we want to position ourselves to be the most attractive employer for procurement in our industry, right? So, um, hopefully some of the things that I've described supports that. Um, but, but one, one thing that, um, is going to make us different from all the rest is definitely the people because you know, we can all the best processes and all the best tools and technology, digitization in the world, but all of that can be copied. But for me, the one thing that can't be copied is, is, uh, the, the capabilities, the energy and the engagement of, of the teams, um, and the quality of the people. So it's absolutely, um, uh, it at center stage for me in terms of enabling all the things that we've talked about today. Um, and I think you, you, you're, you've strongly hinted to some of the things that, uh, I see as, as gaps in Schneider and probably in many other companies as well.
Speaker 2:
40:38
And that's, um, you know, digital acumen for sure. Um, myself included in this, right, really understanding the arc of the possible with respect to digitization, what it means for, for daily work. Um, this is a, um, a, a skill, um, that is absolutely something that needs to be amped up. I think in many procurement organizations. Uh, another thing that I would highlight is, is business acumen. Um, again, many of the things that we talked about, uh, require us going well beyond, say, the traditional, uh, competencies that we have in procurement, right? Yes, we have to be good at negotiation for sure, right? We have to be good at contract management. We have to be good at these kind of traditional procurement processes, but really did you take it to the next level? And we have to be business people. We have to understand, you know, what is it about our business model that creates value for shareholders and what are all the things that procurement could be doing to, uh, enable that.
Speaker 2:
41:40
Right? And, you know, we're, we're a function that works very, uh, cross-functionally. You know, we're, we're everyday sitting with R and D with finance, with, with manufacturing, with quality, et cetera. Um, so to really understand how the whole network of of business operates, um, and kind of being the one that fills the gap in between functions is, um, is key. So we need people that are, that are open minded and willing to step in and fill those gaps. And I can give you an example from, from my past. Um, way back when I was, I was, uh, my first CPO gig was in Thomas and Betts, uh, in the U S um, this is like 10, 12 years ago. And one of the gaps we had was between purchase price on raw materials and the selling price of finished goods. You know, eh, in procurement we absolutely had the responsibility to buy as well as we could.
Speaker 2:
42:34
And in sales they absolutely had the responsibility to, to execute, um, uh, you know, price increases. But what got lost in between is the translation of, of those, of inflation in raw materials and to individual product pricing. So we took the lead in procurement, we developed tools and the systems to make those calculations. So if aluminum, copper and steel went up by X, Y, and Zed percent, what did it mean for a particular product that had different levels of content of all those materials? Um, so we served on a silver platter to the sales team, exactly the, the, the price realization they had to get in, in the market to cover that inflation. And I don't think, you know, traditionally in procurement you wouldn't do such a thing. You would just, um, you know, uh, by as well as you can, right? So jazz people that are, that are willing to do step one step beyond at least, uh, kind of the boundaries of the traditional procurement function a and B, be brave to just step into that world, uh, is, is important and is I think something that can really differentiate, um, a procurement team.
Speaker 1:
43:43
And I wanted to ask you, actually, we, we, we got together through the procurement conference event that you will be attending soon. And, uh, the important topic that you mentioned is also about developing talent, right? So it's, it's, it's attracting talent is, is one that, that's your employer brand. That's, you know, your, your image in the outside, but then once you get them in, there's, there's obviously a plan to develop and retain your top procurement leaders. What are you doing at Schneider electric on this two topics? Developing and retaining talents. And in actual effect, a lot of the times retaining comes because of developing, isn't it? So tell me a little [inaudible].
Speaker 2:
44:20
Yeah, yeah. Great, great point. You know, fundamentally the organization's set up of supply chain, um, in, in Schneider is a big supporter of this. Now org design doesn't solve everything, but, um, you know, I mentioned procurement is fully centralized and we're, we're actually part of a broader global supply chain organization that has also really centralized. All right. Um, my, my boss is the chief supply chain officer and basically every factory in the company is reporting into him. So with that we have, um, you know, these, the procurement, which mystics, uh, planning, you know, all the main supply side functions, uh, together with manufacturing's in one large organization. And with that, you have massive career development opportunities. It's, it's much easier for us in Schneider to share talents. Um, and to give the best talent, the best opportunity at the best time, um, as compared to a company that is more segmented and fragmented by, by business or by geography.
Speaker 2:
45:21
So, um, we have this environment that is well suited for, for developing talents. Um, and, and I think we have, um, uh, a good purpose, right? This is a meaningful place to work, right? Um, Schneider, you know, the, the, the world, uh, is becoming more and more electrified. Um, Schneider is delivering to the market, uh, you know, digitized solutions that, um, results in very tangible and substantial improvements in energy efficiency. So it's being part of something, um, that is meaningful to, to me is very fundamental to, um, the engagement of employees. And it's a very personal topic for me as well. It's, it's, um, one of the main reasons, um, that I came into into this company. So having that meaningfulness, having, you know, the, the opportunities to, to, to move around into more interesting roles. And we have a leadership team that is very willing to take chances on, on young talent with, with hypertensive. And we do that on a, on a quite regular basis.
Speaker 1:
46:23
Final question from me in terms of, uh, all the younger, um, professionals, uh, in procurement listening to this podcast now, uh, aiming one day to become a chief procurement officer and as well as, you know, listen as in general, what was the best career advice you ever received that helped you most in your, uh, in your progress so far to CPO?
Speaker 2:
46:47
That's a great question. There's two things I think maybe I'll mention. Um, first and foremost is advice that I took from my wife a long, long time ago. Um, and, and in case you were witness to this, I must say that it's the best advice I've received. I was working, um, for [inaudible], uh, for the first seven years of my career and it was a very safe company. Um, interesting place to work. I had many different roles, right? Um, uh, I was always challenged, always engaged. Um, but I was getting a little bit bored and I found an opportunity at a company called Danaher, which probably everyone knows now cause you know what Larry Culp was the former of Danaher, now the CEO over at GE. Right. Well I had an opportunity to jump to Dan or her at a time when no one had heard of this company.
Speaker 2:
47:38
Um, I think Larry Culp was just one or two years into his, uh, 10 year tender tenure as, as CEO. So it was a big risk. I perceived it as a big risk. It was a relatively small company at the time, a few billion in revenue. Um, and it was my wife actually that convinced me. She was like, what do you have to lose because I'm workout, just, uh, just figure something out. Right. Um, so it take, chances is, is is the, uh, the, the message here because I made that jump and Danaher is a company still today where, um, if you have a energy and potential, um, they'll just continue to, to pile on more and more challenging work. I was only there three years, uh, but it was a, I've probably received 10 years of experience in that period of time because of the environment that I was in.
Speaker 2:
48:26
So I take a chance when you have an opportunity, uh, go for it. And if it doesn't work out then, then, um, uh, something else will. The other thing that I'll mention with respect to career advice is, uh, a former Boston mentor of mine. Um, when I was having my first development discussion with him, he asked me what my ambition was and I indicated while about the heavier job, he was the CPO, um, at the time over at, at ABB. And he said, well, you can't do that unless you get your MBA, get your advanced degree. And at this point, I was already 40 years old. I thought I was too old for that, but he convinced me to look around. I found a program that I really, really liked, um, and I went for it. And that was one of the best decisions I've made professionally.
Speaker 2:
49:09
Um, uh, I went to an executive program for about a year and a half. It was a very, very, very challenging year and a half. But, um, from that, I've, I've, uh, developed a whole new level of leadership skills. Um, I've developed also, you know, lifelong professional contexts and friendships, frankly, that are totally invaluable. Um, and also I've, I've, um, they, uh, realized kind of a new thirst for learning, right? I read books now regularly, which is not something I was doing, uh, prior to to doing the MDA. So, um, take chances and, and uh, never stopped warning our, our, my two biggest pieces of advice [inaudible]
Speaker 4:
49:50
or if I can rephrase it phrase marry wisely and there's the,
Speaker 1:
50:00
Oh, but then that, uh, you know, that's great that there's great pieces of, um, pieces of sharing and I'm also a, you know, I'm also convinced that I, um, uh, I am fundamentally family and, and our wives play very, very important part in, uh, in, in our development. Um, and as well as lifelong learning is, is so, so crucial, especially in today's, uh, today's environment with anyways and everything changes, uh, drastically and rapidly. Um, then thanks a lot for all the sharing for all the case studies for all the good examples. It was a pleasure to have you with us today and uh, and all the best, uh, all the best in the future endeavors. It's either the next week, have a great night. Thank you.
Speaker 1:
50:44
You listening to our podcast. If you liked what you heard, be sure to go to www.ellicotglobal.com and click the podcast button for all the show notes of the interview. Also subscribe to our mailing list to get our latest updates. First. If you're listening through a streaming platform like iTunes or Spotify or Stitcher, we would appreciate a kind with you. Five star works best to keep us going and our production team happy and of course share it with your friends. I'm most active on LinkedIn, so do feel free to follow me. And if you have any suggestions on what what to do and who to invite next, don't hesitate to drop me a note. And if you're looking to hire top executives in supply chain or transform your business, of course, contact us as well. To find out how we can help.
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