Ep. 16 - Splitting Efficiency from Strategy: A Bold Model for Modern Procurement - with Demetrios Kappos

Procurement doesn’t need a rebrand. It needs structure, speed, and people who take ownership.

In this episode, host Mike Jansen sits down with Demetrios Kappos, Management Consultant and former VP Global Procurement at EagleBurgmann, to explore how to shift procurement from a reactive service provider to a structured value driver.

Demetrios speaks plainly about what works—and what doesn’t. For him, transformation begins by separating operational efficiency from strategic effectiveness. It’s about knowing where buyers truly add value, making bold organisational decisions, and empowering teams to drive change—not wait for it.

From practical insights on ERP harmonisation and applying AI as a tool, to clear-headed reflections on leadership, resilience, and volatility, this conversation is as grounded as it is actionable.


You'll learn:

1. Why splitting operational and strategic roles creates real value
2. How to empower teams to lead transformation from within
3. The right (and wrong) ways to apply AI in procurement
4. What building resilience looks like beyond buzzwords
5. How to future-proof procurement with a data- and mission-driven mindset

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Get in touch with Demetrios Kappos on LinkedIn: https://www.linkedin.com/in/demetrios-kappos-94aa94147/


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About the host Mike Jansen:
Mike Jansen is an Associate Partner at H&Z Management Consulting with over a decade of experience enhancing the value that procurement delivers to organisations. Driven by a passion for tackling challenges, Mike thrives on competition—whether with others or himself. Outside of work, Mike enjoys quality time with his wife and children.


Get in touch with Mike Jansen on LinkedIn: https://www.linkedin.com/in/jansen-mike/

Transcript

SPEAKER_02 0:06

And we cut the seven phase in after the phase four and then we made a we made a cut and said okay one one area is commodity management. The focus to find the right supplier. The focus to make their matrix to uh define where to put which kind of supplier, which kind of commodity. And then we have the department dispos. They place the orders, so the high frequency processes. And the focus on commodity management is effectiveness to do the right things.

SPEAKER_00 0:48

Welcome to the Procurement Initiative Leaders Podcast, the ultimate resource for top-level procurement professionals looking to stay ahead of the curve and drive meaningful change within their organizations. I'm your host, Mike Jansen, associate partner at Agents at Europe's leading management consultancy. Join me as a sit-down with global leaders in procurement and other relevant areas to uncover the latest trends, strategies, and insights that are shaping the future of procurement. We tackle crucial topics like leadership, technology, value creation, cost management, resilient supply chains innovation, and many more. Ready to up your game as a leader in procurement? Let's jump into this episode of the Procurement Initiative Leaders podcast with me, Mike Jansen.

SPEAKER_01 1:32

Today, Demetrius Keppels, former Vice President Global Procurement and STM at Igor Burgmann, a member of EKK and Freudenberg, is with us. And Demetrius, welcome to our show. It's great to have you here. As an introduction, please give our audience a quick overview about your leadership roles in procurement and your background.

SPEAKER_02 1:55

Yeah, thank you, Mike, for inviting me. It is um, I was now the last five years at Igel Burgmann um responsible for uh procurement SCM as the VP position. That means I was reporting to the CTO. So that's the second level in the organization. Uh the team structure was about 100 people over the world. And how do we organize in Eagle Burgman? Eagle Burgmann is a joint venture between Freudenberg and EKK. That means we divided the world into three two areas. That means one area is the AC Mia area, that means Asia, um uh uh China, America, and EMER. And the other area area is the the Chai area, that means Japan, Asia and Pacific, and India. And in my role, I was responsible for the whole team in the AC Mia area. Um, and uh in we had uh the following division that means we have the uh commodity management for the direct material, we had the uh commodity management for the indirect material, we had our dispocenter, what we call dispocenter, that was the department which we moved to Romania, and they were responsible for placing the orders as much as possible in an automated way, uh, but sometimes you have to really place the orders and track the orders. Uh and then we had um the department um project procurement, that is all those activities uh where we have not only the single seal which we sell to the customer, a full supply system. So we we we supply our seals with uh dry gas, for example. And uh this is a big project like a project, which we have also in different other areas. Um, and um this is something what is a little bit more specified than the commodity area where you are responsible for really a commodity, you have to also manage the timeline of the project, so that's the people are responsible to coordinate more and more also the commodity uh activities and also the engineer uh activities and bring them together. And then um we have uh the the SCM department. SCM is then the demand management and production planning department. So normally we know them as a uh sales and operation planning, SNOP. Um, and then last but not least, we have a small department which were responsible worldwide for tools, um IT ERP system, SEP key users, uh artificial intelligence activities, so all those process activities to increase efficiency. That was my role in in Igel Burgman. Uh before I was working for Eagle Borkmann, I was working for the the Fair Friend Group. The Fair Friend Group is the third largest um machining company in the world. So we have uh Matzak and uh DMG or DMG and Max Matzak, and then uh the Fair Friend Group came. And in this area, we mostly made um project procurement because we had a long time for a year to build up those machines and the setup for the machines, and there was project, and before that I was working for for Lievolt. Libold is a vacuum company, also in the position of um uh director uh procurement and also reporting to the COO.

SPEAKER_01 5:45

Thank you for the intro. That's that's great, and that also stems a bit into the direction of our questions for today. So we want a deep dive into four topics today, which uh the first one is creating strategic impact. Secondly, we have the role of technology in procurement, we talk about building resilience, and last but not least, um, your view on the future of procurement. So I would say let's start. And I would like to know what is a common misconception about procurement's role in an organization and how can you change that misconception, both internally and among external stakeholders?

SPEAKER_02 6:28

Uh internally, I would say the the biggest uh misconception is that um a lot of people still believe uh procurement is a service provider. That means we have to service uh and place orders. That is the the topic of procurement. Um I still have some discussion with my former um VP engineer. He always said, yeah, uh you have to place the orders. Yeah, so this is not what procurement is is for, because procurement has to generate the value for the company. And it can, and it can. Um, but the behavior of the buyers have to also change, yeah. Because if you only say we would like to have, then you will not change um um the the feeling to your role. Yeah, so this is the the the major topic what we have to do, and this has to be going on into a transformation. That means we we have to know where we can buy what from. And this is a very important point because um it is not only placing an order, it is also to know also for the future what comes up. So, for example, in the past, a lot of buyers went to China and India and bought material there. And um this maybe is in the future still good, but not always optimized. So we have to find solutions uh to optimize the supply chain. This is the most important point. So the the the target of procurement is to optimize the supply chain and bring value into the company.

SPEAKER_01 8:21

So you say they are mostly perceived as opera as an operational function, and you say they need to and they have to bring strategic use on uh on those topics as well. So to act as challenges, also maybe to challenge demands. Is is the specification the right one? Um, uh or also to be the interface from the supplier market to know there might be something better on the market that might be requested from the demand owner.

SPEAKER_02 8:56

Correct, correct. So we we uh the the procurement is is also someone who has to bring the knowledge from um the outside into the company. Yeah, so um if we have I'll give you a short example. Um if in in Germany we like to make several different parts, yeah. Uh because we we we save one whole and we save a little bit of money, and then we have two different parts, modern whole and modern non-hole. Yeah, and to to um to uh use this is very critical for the buyers because we have two different parts. And now we would like to uh combine those two parts. We bring up the information from the supplier market and say, okay, maybe we can use only one part, have a bigger volume, and then we have the um uh we have no shortage of material and we have better price level, for example. So this is something what we have to bring into the company um and bring value for the company, yeah, for the company and the customer at the end of the day.

SPEAKER_01 10:06

Okay. And how can procurement professionals find the right balance between those operational demands and the need to deliver strategic value?

SPEAKER_02 10:18

I think this is also a quite easy thing, because we talk about the operational activities and we talk about the strategic activities. We don't have to say, okay, we only do strategic and then we do only operational. We have to combine them. So it means we only do something in a strategic way if it helps the operational way. Um giving a short example. If we did not define the right supplier base, we have topics in material shortage, or we have topics in uh costs, uh, or we have topics in cash. So first of all, we always have to think do we have a stable, uh resilient supplier base? This is the major focus of procurement. A stable resilient supplier base. And that means not only that we have no shortage of material, it only means that we have competitive suppliers for the cost level. So this is something where we have to uh really focus on, um, and if we then see that we have a stable supplier base, we lose 80% of the work and operational. Yeah, we only have to cover the 20% critical parts.

SPEAKER_01 11:45

But you also need to convince your stakeholders internally, externally, and on what to focus. So, do you have an example on how to do that?

SPEAKER_02 12:00

One example is that you have to talk with the people in their language. Um so, for example, if you talk with the CFO about costs, you will not listen. But if you talk with CFO about cross-profit three, that is the same thing at the end of the day, then you can win because then you talk with his numbers, with his um key. So you really um have to be aware of the keis of the CFO. That means PL is one of the major topics what a buyer needs to know in a balance sheet. Um and uh this is this is how you can can bring the value in the company. And also if you talk with the production people about production of your supplier, then you have the the uh the uh clear focus on this topics also from the production side. Yeah, if you only say he cannot deliver, then it's too easy and nobody understands. If you tell the production guys, you know, they have also production like you, and then they need time to weld something, and it takes them five hours, and they will work on Saturday, but they will not cannot work on Sunday because you don't also work on Sunday. So you have to bring the explanation into um the discussion what the people understand on the other side, and that is one major topic what procurement sometimes does wrong, and then they get in a defense situation. So, especially we had in the last years a lot of material shortage, and some buyers always said um they cannot deliver. And then the first question was from sales do you have a project plan? No, and then you lose. So you need a project plan, you have to go to the supplier, you have to have a focus on the suppliers, but it is like you know what's going on there to bring this information into the company on the right way.

SPEAKER_01 14:08

So, what I I've seen uh in in my projects is that there's often lacking um either the mindset or the time to focus on those strategic topics. So, what organizational changes are needed to create space and also the buy-in from your own team for more strategic work and procurement?

SPEAKER_02 14:35

So, what we did uh what we did is we divided, we we looked at the procurement process. The procurement process has seven phases, and we cut the seven phase in after the phase four, and then we made a we made a cut and said, Okay, one one area is commodity management. Okay, they focus to find the right supplier, they focus to make their cry matrix to to uh define where to put which kind of supplier, which kind of commodity, and then we have the department dispo center. They place the orders, so the high frequency processes. Uh is effectiveness to do the right things. Uh so make it really smooth, yeah, increase increase automation. Uh, that is the focus of those two. So if you divide them, you can put more focus on uh let me say strategic things on one hand and focus fully on the operational things. Yeah, that was the idea behind what we did, and then for sure we also shift then the dispo center to Romania.

SPEAKER_01 15:57

Okay. And can you share an example where improving efficiency freed up those resources to work on those strategic topics that bring value?

SPEAKER_02 16:09

Yeah, I mean what we see in in um the operation procurement is or the dispocenter, how we call it, is um that we um increase relative efficiency. We work with with uh um with uh mass upload, mass download, we work with uh the BI tool, and we also use this in the commodity management when we have, for example, new negotiations. We don't go with our SCP line by line in there. We we we take the mass download from the information, we negate the the new prices, the new payment terms, also um the new delivery dates with the supplier um directly uh based on an Excel list, and then we upload this fully in one stage into the ERP system. So this is something where we um use this system and let me see. One more major topic what we have now is the global procurement organization. That means we have one organization, an SEP, which we call 5000, uh which is above the the country SEP, and we bring up um negotiated products into 5000 eras where everybody can pick off. That means uh if someone buys the material from one supplier, because we have global suppliers also in America, he doesn't have to negotiate this anymore in America because it is once negated by Germany, for example, or the other way around.

SPEAKER_01 18:01

So to increase the transparency and to see what has been done.

SPEAKER_02 18:08

And to reduce the workload for every country has to negotiate this part again by the same suppliers. So we have one supplier for one part for global part, for example, and this has to be not negotiated anymore in in the US because they have the same price level, they have the same plant delivery time, the only thing is different is the transportation time.

SPEAKER_01 18:33

Okay, so negotiated framework contracts for all the divisions and agencies. So you talked about efficiency and efficiency gains. I would say nowadays no conversation seems to be complete without bringing up AI. How do you see AI helping your procurement teams to increase their efficiency?

SPEAKER_02 18:59

AI is a big word. Yeah, everybody's talking about AI. And a lot of companies, software companies come around, yeah, you need our AI, and then you don't have to do anything anymore. Forget about this, first of all. Yeah, you have to make a clear clear matrix where they want to start and what kind of impact brings it. And my recommendation is to really start with the low-hanging fruits. Is for example we have a contract database, so we put an IAI on it and say, okay, we want to see of all our contracts, that's very easy, if there is um the ESG in there, or what kind of um um penalty is in there. Yeah, so we can take this out. It's very easy with an AI. You can you can go across the contract, or um you you can use other things to really smoothen your processes. Yeah, so uh this is one point. The second point is, and this is something where where we have to think about that at the end of the day, is that uh the AI identifies for your uh buyer a clear source to go for and gives you this in a table. That means and then is the high level, but this is this is the future of what I see. If you type in there, like in Chat GPT, I want to have this part um with this kind of specification, and then after five minutes, there comes up offers from five or six suppliers and a big table, and you can go in there and say, Okay, this makes sense or this makes no sense. So it is a dish decision support, yeah. And because it takes it takes weeks to get to that point, not in full time, yeah, but it takes weeks to get to that point. Uh and if you have this in minutes, you have a lot more speed, um, and um you you improve your your effectiveness.

SPEAKER_01 21:13

What I would like to know, because what I see is that there is often the question, how do you stay on top of the developments on the market? You you said that you need to you need to focus, and there are so many developments, new tools, new ideas, and you said you need to you need to focus on what's really brings you forward. So how do you how did you decide what are the most important topics that might get supported by AI? And then how did you decide on what is the right solution for you?

SPEAKER_02 21:54

So we did it on a on a um clear waste and value analysis. Analysis. So we went through our procurement processes and said, okay, where do we have a lot of waste in there? Or let me see, waste is maybe not the right word for it, but where we have a lot of um where we need a lot of time for for making decisions, handle things. So this is for us the the first focus. And then we identify, okay, let's start with the low-hanging fruit. It's the easiest way and try to reduce um the extra work um and automate this this extra work. So the idea was also to bring the the dispo center to Romania because we could not reduce the the work. And the next level we have to automate the work, and the third level we really have to cut them off. We are on the third stage, we are we are working now with AI. This is this is all nice, um, but this is only let me see. First thing is efficiency. We have to go for effectiveness. Uh we have to go in this point, uh, because this is then the the the next level. Uh um because the most important point at the current situation is we have to be very um speedful.

SPEAKER_01 23:29

Yeah. So, but your recommendation is so to say, rather than trying to make or to see how does the next big solution fit into your company, doing a bottom-up analysis, where are your pain points, and then to see what might be a solution for that kind of problem.

SPEAKER_02 23:50

Correct. And then we call those companies who provide artificial intelligence. And the only thing I can always say is be careful if if the software companies come to you. We had a lot of experience, yeah, for example, in the Supply Chain Act, yeah, uh, where we have to educate those companies in really what is how does it work? Yeah, and that's why have a clear idea from what you need, then go to the um uh software companies and then uh find the right solution with that.

SPEAKER_01 24:24

I mean, we we're talking about technology for the past minutes now. So, how has technology itself changed the way procurement teams operate, especially in the last five years?

SPEAKER_02 24:38

I'm a big fan of SEP. Sorry for to say that, yeah, but I'm a big fan of SEP. Um, it's not a commercial situation here, but actually, um this is a this is a this is a big ERP system where you can use a lot of things. And um, this is the backbone. If we are clear that this is a backbone, and if you have a global company like like we had it in the last five years, is you need one ERP system around the world. That is the main big backbone what you have. And if you ask me what what have we done in the last five years, yes, if you look into the companies, they have not one ERP system. That's the most critical point in there. Yeah, and this is a this is really a big, big weapon if you have one ERP system. You can improve immediately and you have fully transposing. So when I came to Eagle Burgman five years ago, I was asking, please give me your spend cube. And they could not, because we still have now different ERP, but I would say 80% of our ERP is now one backbone. Um, but we had five, six, seven different ERP systems, and and then you they have to communicate with each other. So this is the the major point what has changed and will change in the future. Um and and if you don't have this, you will not win the game. If the controller says no, we want to save one um equalized ERP system, uh then you will lose the game. You cannot be um you cannot even use the AI. That's also the next point. Yeah, the people tell you in the moment, yeah, you don't need this, our AI works with this. Mostly does not, uh, because it doesn't know which field has to fit it in, and and if nobody is really clear, then you put in meters in one system, and the other ones you put uh pieces in there, so that will not work. We had so much trouble about that. Yeah, you it can work a little bit, I can support a little bit, but it cannot work. So you need to first the backbone, and with the backbone, you can build up transparency, you can build up um efficiency, and this is the the major topic where you have to work on.

SPEAKER_01 26:54

I mean, the counter-argument for a joint ERP system is often the cost to it's a huge project, it takes some time. Uh so can you share your best practices? How did you convince the company? What was the business case for you? So that you said, or that they said, yeah, we have to do that.

SPEAKER_02 27:21

I mean, the good thing was that the CFO and the VPIT also were working in this direction. So that was a little bit easier for me. Uh but general, um, how did we deal it? We said we want to have standards. That means I give you a very small example. A lot of people think the buyers have to sit in the area where they work for. You don't have to. If you have an uh equalized ERP system, you can work from Turkey for Germany. It doesn't matter. You can work from Turkey for the US or Mexico, from Mexico to Germany. It doesn't matter. So you can be way up more um efficient in your in your doing. Yeah. Um, if you don't have it, it's not possible. So the the efficiency is increasing if you have one equalized ERP system, and you are more flexible. Uh, we know that in the last years we have um uh shortage of qualified people. Uh and um in this case, we are looking for people in Turkey to support Germany because we could get them there. Yeah, so this is something you're more flexible, uh you have more transparency, you have more efficiency. And that's the reason, and you can calculate this, and and and Bright is the the CFO, um, and we also did this. Um it takes a little bit of time after you equalize this, but then you use more and more instruments, like I explained with the the global purchasing organization, which also increased the effectiveness and efficiency. Um that is something what you what you have to do then, and then you see all the benefit.

SPEAKER_01 29:14

Okay. So I would like to know what kind of challenges did you face in the rollout across with all the global locations, and how did you address them?

SPEAKER_02 29:26

So the first challenge was it takes longer, I don't want this, it doesn't have the same look and feel like my uh previous uh tool. So that's a really a change process. You have to make the change with the people. If you only tell them this is a new software and now work, that's what we did in the US in the first one, it did not work. Um, then we changed it. Then then the people of my process department went across um uh the the uh across to Mexico in the US to educate the people, to explain them what you can use. We used the Fiore apps, for example, then for the process KPI. We used the BI tool, we explained them what they can see and what kind of benefit they can take out of that, and how do they improve their work? So it is a lot, it's really it's a change process. If you don't do the change process, if you only say, okay, we make a new tool, uh, here is SCP, uh S4 HANA, and use it, they find ways to not use it.

SPEAKER_01 30:33

And how did you overcome that? So, how did you get them on board?

SPEAKER_02 30:40

We made this change process for for over one year. We we brought people um to the areas, we we uh explained them in the beginning, so we have those uh people who are the key um uh the key users who go over into the areas to to go there and explain the people and educate them. And very important, bring the benefit to the people. Uh, they have to understand, okay, if I use this system, if I can make a mass upload, I don't need so much time. It's a lot easier. Yeah, so you have to explain, and and you also have to give them the possibility to do it. That's sometimes what what people also don't do. Uh in the beginning, we all said, okay, there is a regulation, not everybody can do that. No, stop this. Yeah, give them the possibility to do it, uh, and then they can they can do it.

SPEAKER_01 31:35

So, in our um former chat and talk, you said that also one of the benefits was that it helped you to build up the resilience. So, and resilience in the past years, to me it has somewhat become of a buzzword in procurement, uh, especially as I said in the recent years. So, what does building resilience mean to you, especially with the focus on supplier relationships, and how did you approach that at Eagle Bookman?

SPEAKER_02 32:08

Yeah, let me so a lot of people use this and and say, yeah, resilient. No. Um in the in the last three years, it was more to cover the shortage of material in a structured way, in a strategy way. Um so I give you an example. When when COVID was passed, anybody reduced the stock levels, also our suppliers. Um, we had with some suppliers very, very good relationships, and um also good contracts, also we we we had our ear at the supplier, and this worked quite good, and other ones we did not had our ear at the supplier, and we did not had good uh contracts, and we did not had a good relationship, and this don't work. And um the good thing is if you have a global organization, you can support each other with all this information. So we have suppliers, for example, who have just to give you a number, it's not a correct number, um, 10,000 euros spent in America and 1.1 million in the in in Germany. You did not have this view in before because you had two different EIP systems. Now you have the view, you have then uh also on the other level your key account, which is not a local key account, but it's a global key account, and then you can support your company with the 10,000 euro spent also because it belongs to the 1.1 million. Yeah, and that gives you the possibility to increase uh or let me see, reduce the material shortage and um uh increase your power to your suppliers based on the transparency, what you have in the system?

SPEAKER_01 34:10

I would like to know because a disruption in your supply chain can be caused by different reasons. So not necessarily only the the relationship or the contracts. So what is really the essence of resilience to you? So and how do you how do you secure that your supply chain stays resilient?

SPEAKER_02 34:38

I guess we learned a lot in the last years because we had um strategies which was only one-dimensional strategy. That means we go to the east because the east is cheaper, we have to look to get most possible of those materials from there, uh, and we had no plan B. Now, and you know, now we also have the discussion about local for local. Uh this is only one plan, it's only one dimension strategy. You have to be careful with these things, yeah. Uh and now we are we have more than one dimension what we are looking at. So we are we are not saying okay, we go straight to to east. We have also possibility to have uh suppliers in in the west side or in in Europe um to use them. We don't use them for all, we use them only for partly, but we can use them for all. So we have the possibility to switch. And that was something that was also very important in the phase after COVID. Uh we had shortage on some materials, but in some materials we were so flexible. Um, and we also brought the suppliers together because we had a defect of a machine at one supplier, and but the other supplier has the machine, so he made a uh pre-assembly, and then he finalized this by the second supplier. So we brought the the suppliers even together to reduce the shortage of material.

SPEAKER_01 36:11

Yeah. And I mean, when we're looking at the the last weeks, there's one word that somehow dominated, especially in the international or global procurement community, tariffs. So, what is your view on that? How to how to manage that, or how to be prepared to whatever happens in the next weeks?

SPEAKER_02 36:36

That is a very, very new point for us. Because we we to be honest, procurement did not care about tariffs. Yeah, the world was ours, so we could buy everywhere. And um I hope this will come back to this point again because it is hard for me to understand that we take areas of the world out and don't use them anymore because we should use the areas where it is the best way to produce, but terrace will stay for a long, long time. Uh, I don't know in what kind, but we have to be prepared for this. That means we have to really not go for local for local. That makes, for my point, not in general sense. It can make sense for certain parts, but not in general. Um we have to have more dual multiplied sourcing possibilities. Uh this is the this is the the the the future. Um and we have to be very flexible. If we I give an example now. In in the US, they discuss now about um reducing the tariffs of the supplier parts for the automotive industry. They have to do that because it is such a global market there. So it could be that in the future the the final product has a big tariff, and the supplier parts don't have. So maybe we will not buy a final machining part in the future from India or China. We will buy maybe um um a pre-assembled part and then finalize this in Hungary. So we have to build up new supply chains also, um, not only dual those or multipliers, also, also to look in the supply chains where you have to make the cut, um, and uh uh then uh finalize the production in your area in your country with a higher cost.

SPEAKER_01 38:56

Um but to to be able to do that, this comes also back again to transparency, right? So you need to know how is the product that you want to buy, how how it's structured, what is the cost structure, what are the what are the different parts where they're coming from. So also to deepen the knowledge of the supply chain even more.

SPEAKER_02 39:20

Correct. So so I guess the the a buyer today has to have a good for his commodity, a good manufacturing knowledge. So we have to know how this process is working. That's one point. He has to have also a good knowledge about um balance sheets and PLs for his own company, but also for the supplier. So to understand where do we have problems, where don't we have problems, and where can we, and then we come to the next point. Maybe we are looking now more and more to direction costs, and then to identify where is the the potential for cost reduction.

SPEAKER_01 40:07

And then that's an interesting topic because how do you prioritize resilience while managing the competing pressures like cost efficiency, especially on the material costs, all the geopolitical risks, and so on. So, how do you find the right balance?

SPEAKER_02 40:26

We lost this balance in the last years, to be honest. Not in the last year, but the years before. I was really wondering when my CFO told me, and my CTO told me, don't care about costs, we need the material. Yeah, and what happens then is that the mindset is changing. There was, you know, uh a situation where we we were getting crazy and um we did not have any more the focus on the material. I even my CETO told me pay the suppliers more. I said, no, we will not do that because we will not come back anymore. So we we really um keep the behavior of we have to generate value for the for the company, and that means also that we have competitive prices. Um and we always have to keep this in mind, we don't lease the lose the momentum for all the cost reduction, yeah. And not only cost reduction, also cash improvement. That's the next word. What we also have to use is cash improvement. Those two things we also have to keep in mind, even if we stabilize the the processes, as I said before, you know, you can it's the easiest thing. You can say, okay, you get the suppliers uh um 10% more, and then he works for you. And then the next customer comes and gives him 11% more, and then he works for them. Um so based on the on the on the on the uh material shortage, it is more important that we identify what is the problem for the long lead time, what is the problem for the shortage of the material? What can we do? As I said before, we had two suppliers that had a broken machine, the broken machine took to repair them one year. It was a very um outstanding machine, and so we brought those two suppliers together and said, okay, can he do the last process at your company? And we had to pay a little bit more, but we had no shortage of the material.

SPEAKER_01 42:45

And that is how how you have to go in there. We talked about different reasons for uh disruption in a supply chain. So here again, you say transparency or to to be aware of what might happen, what is the reasoning behind that is key to also come up with the right solutions. So that comes also down to your team, right? So they need to be able to adapt quickly to those changes. How do you educate and develop the team to be more agile, to be responsive to those changes? Because that can lead to the edge in comparison to your competitors.

SPEAKER_02 43:35

Yeah, I mean that is the the most important point. You as a leader cannot do everything by yourself. Team has to has to fulfill the um the transition. So you need a clear, clear mission and vision statement. Actually, our mission statement was that the The mission of procurement is to gain a competitive advantage for Igor Borgmann and the customers by acting efficiently in a global network with a high performance and innovative supplier base. If you have this mission where you can always discuss with your people, um, and you have a clear organization structure which we build up, and then we get the awareness of the people, they feel responsible, and then we have a KPI set from a value KPI, where we see okay, what is the cash derivation in this commodity, what is the cash derivation in this commodity, or whether we have an OTD issue in this commodity or not in this commodity, and then we have also a process KPI set where we can see how efficient the people are in working this. So how much purchased orders they have, um how long it takes them to um fulfill this, are they late, not late? So we have this process KPIs behind it. And um mission, organization, leadership. Yeah, so also my leaders have to have also this this this mindset and bring it to the team, um, and then uh you can empower the people.

SPEAKER_01 45:22

And did you change anything in the recent years as the volatility or the disruptions increased in magnitude, in uh in frequency? So how did you need to adapt that kind of leadership style in the recent years to be more flexible?

SPEAKER_02 45:45

I mean, we had something also what happened in COVID. Uh, everybody maybe still remembers. We had to work from home. So when I started in Eagle Burgman, it was end of 2019, and COVID came in in uh in spring 2020, and then we had to move out in the in the home office. Um, and this was very important for us because we learned that some people can work in home office um and other ones cannot. Um, and so you have to change your leadership. Leadership is not like before, let me say, five, six years ago, you go through the room and shake the hand of everybody and then uh say, okay, you do this and you do this too today. No, leadership is driving with targets. That is very important, driving with targets. And then the the task will be done by the people by themselves, and you are then only a sparing partner. Uh, and yes, we adapt the targets, we adjust the targets that is depending on what's what is in the current situation. For example, in in 2020, one of the major targets was uh inventory. Uh uh, then in the next years it was uh doesn't matter anymore. We we go for uh uh maximum uh material, um, and then costs also. So we have to still have we we always have the three major kepis from the company. It's eBid, it's cash, it is uh turnover. And this is then based on our kepis in procurement, um, which is for example cost reduction, what is payment. And sometimes the KPIs are changing, the focus of the KPI is changing. So one time is more cash, one time is more eBIT. And this is what you have to balance with your leadership, but you try by targets.

SPEAKER_01 47:48

Yeah. And I think there's also again the link to the supporting tools to have more transparency on certain topics. Uh so your internal KPIs, but also what's happening outside of the world to be able to react. I mean, there's another dimension to that. Often in those times, the question is: is my organizational setup the right one to tackle all those challenges? What is your view on that?

SPEAKER_02 48:20

You have to be clear how you would like to have your organization. And yes, the organization can change over the time, has to change over the time. Um, so what we did, I mean, I know only three types of organization uh in procurement. It's one of this is a decentralized organization, it's a hybrid organization, and it's a centralized organization. Um, we build up a hybrid organization, but we also just uh adapt this a little bit. We say, okay, in some areas where we have global suppliers, where where we have a clear commodity with a clear supplier base behind it, we go more into the centralized. So this is this is then global activities. And now coming to the local for local, and some areas where where you buy machining parts. Yes, you can buy the machining parts local for local. You don't have to uh buy them on a global view, yeah. So then we have again people which are more decentralized. Yeah, so you have to balance this a little bit and you have to look how the current situation is. Yeah, but now the people I I hear this in the press sometimes, they give the focus local for local. I say, uh why does it make sense to buy local a keramic part which is produced in Germany and it's only the producer in Germany because they have the only knowledge of this, yeah? Or why do you have to buy uh magnets local? You cannot. You can only buy magnets in the China, uh uh because they have the the the the raw material for that. Yeah, so it's uh it's nonsense to to say we buy it local for local. Yeah, yeah, but it doesn't mean that I I don't say that local for local is not good for some certain parts, yeah. But you have to be careful to make this a channel of view, yeah.

SPEAKER_01 50:17

But I the question still is is it the right one? So are there some clear indicators for you in those times to to check and to see if everything is alright? And in our prior call, you said that is one perspective of procurement, but also the rest of the organization as well.

SPEAKER_02 50:43

Yeah, yeah, sure. I mean you have to always look into uh into the global organization, into the organization. If your organization in in the company organization is changing and your setup doesn't fit anymore, you have to adapt it. Yeah. At the moment, we we um we adapt on smaller issues, yeah. Um but we we don't have to move it complete in a different direction. Uh we say, okay, uh certain commodities we do on a local area, and certain commodities we we do on a global area, and we have then the focus on on those uh from a from Germany or from the US or from Turkey, depends on. Um and and we really um manage this based also on the organization of the company. You have to connect your organization with the company, if not, it does not work.

SPEAKER_01 51:47

Yeah. So the bottom line you could say is as we had in procurement, uh procurement targets and itself needs to be aligned on the vision and mission of the company. Also, the procurement organization needs to orientate themselves towards how the rest of the company, the rest of the business is somehow structured. Would you would you agree on that?

SPEAKER_02 52:13

Completely, yeah. And just to give you a short example for this um once a month we have the group results in the in the top level, top level. So that the CFO presents us the group results. I take the important sheets and discuss it once a month with my team. I explain them where their impact in this balance sheet is. And to make it easy, I said before, there we have uh we have more, but this is the three major companies' keep eyes is eBIT, cash, and and uh turnover. And I made a small diacrum where I said, okay, uh eBIT is saving for us, for example. Yeah, uh cash is uh payment terms is inventory. So I explain the people where we bring impact to the company. So if we disconnect this, if you talk about, I said before, if you talk about saving and don't use the language of the CFO, they will not accept you. And then you also see where, and then the people get happy if they see, okay, in GP3, for example, we improved, yeah, because we had generated savings, yeah. Um, then um the the the the colleagues and the buyers and and all the people are really um getting happy because they see they see their impact on the company a bit.

SPEAKER_01 53:51

Okay. So we talked quite a bit now about the past. Let's switch the perspective towards the future. Um, how do you see procurement evolving in the next three to five years?

SPEAKER_02 54:08

The procurement um will have a very, very big impact uh on the company in the future. We saw this in the last years. They have to speed up to be in front of the wave. I always say in front of the wave um to understand what's going on there. I also say they have to have a knowledge about the stock market, uh, because in the stock markets you see indicators, what impacts you in procurement. Yeah, we see it now with the tariffs, yeah. And don't get crazy, you know. The point is uh you you could you could know that what Mr. Trump makes now, end of last year. Um the election was there, and you could maybe not in detail, but you could see something goes in this direction. So you could be prepared in in December, not in April. And and not fully. What I mean there is very clear you you have to be in front of the wave, way up stronger than the past, because we have small and and a lot of waves going on. Not only one big wave, and then you're in front, and then for the next five years, you can do this. No, you have smaller waves, you you move every quarter of a year, every half of a year, you have to be uh know what's going on and adapt your supplier base. At the end of the day, it's all about the supplier base. Your supplier base has to be resilient, have to be competitive in all kinds of ways. Now we know it's its costs, um, and we will see cash more and more coming up now in the future. Um, we will see maybe sometimes not because we have shortage in the market, but we see shortage because based on tariffs, or what's happened at the moment, that uh China is uh make a restrain uh restriction on materials, and then we have again issues. Um I give you a short information or a short example. What my my CTO asked me when when the Ukraine war started, what what comes up if if China is taking Taiwan? And we have an embargo. Um, do we have enough suppliers out of China that we can cover this? So we don't use China anymore. And we make this analysis and we figured out it's not possible. And that was, and now we talk about this, but that was in the beginning of 2022. We identified we need magnets, magnets, um, and it's only possible to buy magnets from China. Not that that the final assembly is not made there, but the the raw material is not there. And um so I said notes are possible. And the second point is it is also not um um good because we we we we increase our costs and we are not competitive anymore. So the decision was we stay with China, also with the materials which you can buy somewhere else, and then we have to define stock levels for the critical materials to maybe have reach for for half a year, three-quarters of a year. So we have to increase stock levels there. And the second point was um we have we have suppliers around the world which can cover those materials which we get way up cheaper in China. I was last year, two weeks in India, to focus more on India, but we still see a delta between India and China.

SPEAKER_01 58:03

So again, bottom line is procurement becomes more of a knowledge manager, and in terms of mass data um knowledge about how products, how supply chains are working, and also what kind of potential risks are out there and how to mitigate them even more in broader and to be more flexible as it has been in the past. Um so that that might be quite a transformation to get to that point to be able to do that. Are there any lessons that you've learned in the past that will help to prepare for those future procurement challenges? In the transformation that we did, um we had to um empower the people.

SPEAKER_02 58:59

Empower the people to do the what what what is needed, yeah, to follow the mission. Um and that there to be very honest, there are people you cannot empower. Um and you have to look at that field and say, okay, uh, it makes no sense um that uh that you continue to work with them. Uh that's also to be very honest, yeah. You have to do this decision, and the other way is you have to really take your time. It is a time, you know. Transformation and change looks always it's easy. If you if I talk with my CFO and I say we make the transformation, next day that's okay, it's done now. Yeah, no, it's not done. It takes the time. So it it takes it took us one and a half years, one three-quarter of a year to really um boost the transformation. Yeah, in the beginning it was very slow, and at a certain point it boosts. And that is that is you need education for the people, you need um change management, the leaders have to lead. I always say in a critical situation, everybody has to go on the top of the ship. Uh um because especially leaders have to then communicate. Communication, uh, leading, change, and if you empower the people, it works by itself. That's a good thing. Yeah, and then you have to maybe give a next direction. And this is something what what is the great outcome of a transformation. That on a certain period, if you do it correctly and and you really empower the people, it moves by itself. You cannot stop it anymore, and you don't want to stop it.

unknown 1:00:50

Yeah.

SPEAKER_01 1:00:51

I think that is a very valuable point to say. Uh, those kind of decisions are not just made on the strategy paper, but to to be very cautious. Uh and in then is it a way with the team to always reflect where we're standing now and to to get the people on board? Okay, thanks a lot, Demetrius. Um, to wrap up um this show, I would like to ask you five rapid fire questions. So please answer with the first thing that comes up to your mind. First question is how did you originally get into procurement?

SPEAKER_02 1:01:30

I I filed my study as a mechanical engineer 1995, and there was a big crisis, and um uh and I got this information to to go to the company Siemens Dental System uh for uh uh for possibility to work for, and that was in procurement. It was not my my way to go there, but I loved it after the end of the day. Uh I really loved it.

SPEAKER_01 1:02:00

Okay, do you have a recommendation to anyone who wants to have a successful career in procurement?

SPEAKER_02 1:02:12

The first thing that comes in my mind is you have to be interested in companies and manufacturing companies, and you have to be interested in um in economy, and you have to be interested in in stock market and and and all those business things. Yeah, you you I have to be interested and you do it by yourself. You in the morning you you go through the newspaper, yeah, and that is important. If you don't like this, if you don't like business.

SPEAKER_01 1:02:45

Okay, that are two valuable insights, I would say. Who should be our next podcast guest and why?

SPEAKER_02 1:02:53

Uh I really like uh Dr. Andreas Wendt. He is the former CPO of BMW, um, and he is also and the interesting thing of him is he was long, long, long time working in BMW for manufacturing. And then in the last years of his career, he he trains and switched to procurement, and he also, and that is something interesting, transformed uh let me see, uh made a transformation from from the the knowledge of his knowledge of of of uh manufacturing to procurement, and he also empowered the people there.

SPEAKER_01 1:03:34

Okay, then we will see how to to move on on to that. Um now you can directly address our audience. Is there anything they can help you with?

SPEAKER_02 1:03:49

I think we should stay in contact. Yeah. Um that is that is that's very important because um I would like to really also get information from the audience, uh, feedback from the audience, uh on on special topics. Uh, how do they empower their people? Uh what do they did uh different?

SPEAKER_01 1:04:11

Yeah. Okay, and how do and the people get in contact with you?

SPEAKER_02 1:04:18

There are two possibilities. First of all, I have a LinkedIn account, and um the second point is uh as you said before, I was the former um uh VP procurement SCM for Eagle Borkman. I now um uh founded my own company uh it called value minus edit minus scm.com. So you can go there and and reach out to me. It would be would be nice uh to stay in contact. Yeah, I really would like to stay in contact um with the people and get also their feedback. Uh how they um make a transformation, how they see the future of procurement.

SPEAKER_01 1:04:58

Great. Dimitrius, that's a wrap. Thank you for being on the show and have a great day. Thank you for having me. Thank you for joining us on the Procurement Initiative Leaders podcast. I really hope you enjoyed it. Looking for more procurement insights, tips, and developments from meeting procurement professionals? Join our procurement initiative community on LinkedIn. Just open LinkedIn and search for the Procurement Initiative. And be sure to hit that subscribe button to never miss an episode.