Ep. 15 - Beyond the RFQ: Building a Purpose-Driven Procurement Function - with Gao Kwintmeyer

If five purchase orders go wrong, suddenly everyone’s looking at procurement.

That’s the reality Ottobock CPO Gao Kwintmeyer knows well—and it’s why he’s spent his career building a procurement function that delivers far more than just cost savings.

In this episode, host Mike Jansen talks with Gao about what it really takes to lead procurement at a global scale. From navigating supplier quality issues and regulatory complexity to integrating AI with intention, Gao shares how he balances operational excellence with strategic impact. With over 27 years of experience, Gao offers a pragmatic, long-term perspective on elevating procurement’s role in the business—proving its value not just through process, but through purpose.


You’ll learn:

1. How to align procurement’s role with top management’s vision and expectations
2. Why relationship-building still outperforms AI with strategic suppliers
3. When (and when not) to invest in new procurement tech
4. How to tackle regulatory complexity with a pragmatic, risk-based lens
5. What makes a strategic buyer truly valuable in today’s procurement landscape

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Get in touch with Gao Kwintmeyer on LinkedIn: https://www.linkedin.com/in/gao-kwintmeyer-23890158/


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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_00 0:02

So if you report to the CFO, CEO, or COO, it doesn't matter. You need to really have a very clear understanding. What's the expectation? How do you see your role? And how does the person you're reporting to understand your role? That's one thing. And once you have that streamlined, of course, you also need to have that communication with your team members, with your department heads, you know. That really everybody is aligned to what's uh what's the main purpose of the procurement function?

SPEAKER_02 0:36

Welcome to the Procurement Initiative EDUS podcast, the ultimate resource for top-level procurement professionals looking to stay ahead of the curve and drive meaningful change within their organization. I'm your host, Mike Allen, Associate of AdAt Instead, Europe's leading management competency. Join me at the tip time 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 take up crucial topics like leadership, technology, value creation, cost management, resilience 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 by Jensen.

SPEAKER_01 1:20

Today with me is Gao Kindmeyer, CPO at Otto Bock. Gao, welcome to our show. I have a first question for you, and I would love you to tell me and our viewers and all the people listening about your company and what are you doing there.

SPEAKER_00 1:38

Right. Thanks for having me in your show, Mike, and uh it's my pleasure to be here. Yes, Otto Bock, it's not such a popular company like Ziemens or Mercedes, and we are having products which you necessarily don't want to have. So we are uh having prosthetics, orthotics, wheelchairs. But if you need something, we are a company which is supporting disabled people to regain their freedom of movement, which brings back to a certain degree their quality of life, of course, after an accident or whatsoever. That's what we are doing.

SPEAKER_01 2:12

And what is your role at your company?

SPEAKER_00 2:15

I'm the chief procurement officer of the Otto Bock group. We are we are not uh like a big corporation, but we already have more than 10,000 employees globally, and um I'm looking after all the global procurement activities, which means direct materials. We are a company which is designing and manufacturing its own products. Um we also have, of course, an indirect spend when you have such a company with different operation or patient care locations. We of course have indirect spend, so consulting, engineering services, energy, electricity, whatever you can think of. And um we also have product development, which means you need project bias for certain projects along the product lifecycle management from the first idea and concept until serial production. And one important function which is also integrated in my procurement team are the supplier quality engineers, which are ensuring that the suppliers have the right understanding of our uh quality requirements, that we choose the right approach, that we choose the right suppliers, and that not just the price is important, but as well the um quality performance overall.

SPEAKER_01 3:32

So uh you having purpose in your business, that's great to hear. And today we want to talk about three major topics. Uh, the first topic is the role of procurement in organizational success. The second one would be balancing people, skills, and technology in procurement, and last but not least, trends and challenges in procurement. And to start the first topic, my first question to you is what is the single most important thing organizations often misunderstand about the role of procurement?

SPEAKER_00 4:04

Well, I'm doing procurement now more than 27 years, and the role of procurement has evolved in several companies, but it pretty much depends what is your company at the end doing. Are they really producing something or are you just offering services or whatsoever? But um, especially when you're manufacturing and you have your own design department and you need to buy components, raw materials, and so on. Um, it's not just operational procurement anymore. And more and more the top management owners and so on have understood that procurement can contribute much more than just um sending out three RFQs or making three calls to find out who can deliver at the best price. Yeah, there are also benefits along the um supply chain, along the development phase in particular. Um, and companies don't need to own all the technologies and do everything on their own in-house necessarily. Yeah, it's important to have a good understanding, but it's more important, especially when you're a global company, to have the right partners along with you and to have the um good relationship management with all these companies and um who can contribute and support on different levels.

SPEAKER_01 5:28

Yeah, definitely. And do you perceive that uh procurement gets the recognition it deserves, or is procurement able to support all those tasks delisted?

SPEAKER_00 5:40

That pretty much depends on the procurement team, of course. At the end of the day, you need to deliver. Yeah, which means when you're um buying components which are going into uh uh operations, of course, quality, logistics, there are several topics nobody wants to discuss in serialize. Uh which means you really need to deliver the um uh quality in terms of quality requirements, logistic requirements in terms of pricing as well. And and that's what is very interesting, then for example, when when your company is issuing 10,000 purchase orders a year, yeah, and everything's running fine, that's good. But if you have just five purchase orders where you have big escalation where you are not able to deliver to the end customer, for example, then uh everybody's looking at procurement again. Yeah, so that means you need to be able to have a strong team, to build a strong team, to um work on global scale and to really make sure that all the suppliers are really identifying themselves with the targets and the mission, what your own company has, and that they really like to be in that business. Um, because when you look at our products in particular, um procedures, for example, we are not like an automotive or customer electronics, um, or consumer electronics, sorry, which means whatever we are consuming, no matter if we talk about metals or electric components, or the big players, it will last two shifts, three shifts maximum. Yeah, and that's our annual consumption, yeah. Which means there are other ideas and there are other um uh motivations um which your team and and your suppliers need to have.

SPEAKER_01 7:30

And based on our prior conversation, uh I think one thing after delivering is that also procurement leaders can better communicate their success, especially internally. Why do you think I the first question is how, and the second is why is that so important?

SPEAKER_00 7:49

It's very important because it depends on the size of your company. Um, when you have an executive board with four or five um uh directors in that executive board, one person is, for example, focusing on finances, another one on sales or marketing, and so on, you also have naturally conflict of interests in different levels. Yeah. And then, of course, it is important to always make sure that you have a very good functioning stakeholder management, that you also communicate very open and clearly what are the benefits in strengthening the cooperation with the procurement department, early involvement of the procurement department. And um, at the end of the day, you do not just communicate what benefits you can potentially offer. At the end of the day, again, you need to deliver, you really need to show uh and you need to have a proven track record within that company as well. And then suddenly what you will see is that um other stakeholders are happy to cooperate with you because you have been able to support them in in different projects or uh awards, and um you were able to tackle also more difficult situations.

SPEAKER_01 9:02

And can you share one specific success story uh to our audience that showcases how you in procurement also benefited from from sharing those success stories?

SPEAKER_00 9:16

Yeah, sure. There are different smaller stories uh without giving too many details. One thing is, for example, we had uh when when I started uh at Otto Bock in 2019, we had one case which was not so nice. We had a big quality issue uh with the supplier, and we even had some recalls because it was a safety critical component. And I got involved because there were certain timelines which you need to uh respect. And um I have been in contact with the supplier, with the managing director of that supplier, um, and we were able to solve that topic, not just in terms of quality improvements, but also in terms of reimbursement, because we had we have had damages at that time, and uh I was able to also get the money back. Yeah, and it was one of the good cases at the very beginning, uh after I took over the role at OttoBok, which has um proven that procurement can deliver more than just comparing prices. Yeah, that's one thing. The other thing is, for example, um we have had a cut in terms of um uh uh operational expenditures, yeah. Um also small things like how how to reduce a paper waste, reducing number of printers, things which are maybe not so attractive or don't sound very popular, but uh also there it was interesting to see people got along with a new structure. We were also able to present and to communicate in a positive way, for example, how many trees we are saving by just changing this and that behavior and switching off this or that feature, which which doesn't hurt the business necessarily. That was another interesting project.

SPEAKER_01 11:04

Yeah, and how did that uh affect then the relationship with your stakeholders? And how did you effectively communicate those those wins?

SPEAKER_00 11:15

So we have different ways to communicate such projects. Um we have internal announcements, we have an internal share SharePoint uh site and website, and uh so that's one way to communicate it via the intranet. Yeah, uh, another way, of course, is um smaller presentations for the stakeholders which are affected, and then what is very important, um you need to have regular meetings with your stakeholders, and that's what my department heads are uh having, of course. We are having um frequent reviews about um day-to-day business, performance, KPIs, and so on. And um, but a part of that, for example, when you look at indirect, which is um to a certain degree much more project-driven, of course, than than serial business, um, there it's also very important to meet with your stakeholders, even if there's not a project running right now. Yeah, but there are things coming up to better understand what problems are in the future, uh, what's in the pipeline, maybe not now, but in nine months or something, and then just to keep in touch.

SPEAKER_01 12:20

So you would say that you have to live the role as an interface as procurement to really add value.

SPEAKER_00 12:29

Yes, yes, as an interface and as a relationship manager.

unknown 12:33

Yeah.

SPEAKER_00 12:34

And that's um uh you're also like the chief relationship manager because you need to manage the relationships to your suppliers. Yeah, uh, you need to be able to manage the relationships to all the functions where you have which have conflicting interests, let's say, for example, logistics and who are looking after the inventory, for example, and that you don't have too much inventory, um, and also uh to RD quality department and so on.

SPEAKER_01 13:02

So you mentioned at the very beginning the role of the executive wards. Um which advice would you give to procurement leaders to secure a stronger support from the top management?

SPEAKER_00 13:16

My advice would be A, you need to define what's your role in the organization. Yeah, how do you see your role and what's the expectation from your direct boss? So if you report to the CFO, CEO or COO, it doesn't matter. You need to really have a very clear understanding. What's the expectation, how do you see your role, and and how does uh the person you're reporting to understand your role? That's the one thing. And and once you have that streamlined, of course, you also need to um have that communication with your team members, with your department heads, yeah, that really everybody is aligned. What's the main purpose of the procurement function that's set up? Because, as I said at the beginning, it pretty much depends on what kind of um organization you're in. Are you just um uh uh in financial services or are you in manufacturing, which is of course a fundamental difference? And once you got that very clear, then there are no surprises in terms of expectations and what you need to deliver. And then um, with a good stakeholder management, you have to be able that you're early involved the way you need it, that you get the information the way you need it, and that you deliver the results the way it's um expected. So that's most important from my point of view.

SPEAKER_01 14:41

And um, my personal experience is that sometimes the vision of the top management does not necessarily is the same as what you think or what you can or what you're able to deliver. Do you have any advice on how to showcase what procurement can be and can deliver if they support you uh as you need it?

SPEAKER_00 15:07

Yeah, I mean, there again, where does it all start? Typically, the company should have a mission and vision, the company as such, yeah. And when the company has a mission and vision, they also have a plan typically for the next five years, how they're going to develop, which markets they want to win, with which kind of products they want to win. And then, of course, it's up to you to have a good understanding when you see, okay, which regions are important, which technologies will play a major role in the future, then of course, um, you with your procurement team have to be able to tell the business where they can get it. Where do they get uh the components or services, engineering services or whatever they need to reasonable um at reasonable costs or prices. Yeah, and that's then um one of the main benefits what you can deliver to the organization. But of course, at the very beginning, uh there has to be uh a mission and vision on corporate level.

SPEAKER_01 16:10

I agree. So you need to somehow fit in and then see how you can expand and play a role there. And you you mentioned your team now one or two times. So speaking of the evolving role of procurement, what role do interpersonal skills still play in procurement in our increasingly tech-driven and AI-driven world?

SPEAKER_00 16:38

That's where I believe uh it still plays a major role. And uh, me personally, I'm convinced that it will also play a major role in the next 10 to 15 years. Now, when you look at negotiation skills, for example, there are negotiation bots, there are AI-driven solutions out there, what you mentioned. But especially when you're in a business like we are, we are having lots of smaller companies we are cooperating with. We have family businesses which are our suppliers. Family businesses where you have which have a size of 10 to like 100 employees. And that's what I'm saying, where the relationship management plays a crucial role because you cannot just approach such companies with an AI bot or something like that. Yeah, um, we are very proud to have companies which which fight with us in our business since more than 20 years, yeah, which have grown with us together and which are also contributing and delivering in a different way. It's not like when we have smaller obstacles or one change here, one change there, that they always come and say, okay, that will cost you five euros more, that will cost you 10 euros more. It's really a very good, trustful um relationship and cooperation. And my personal expectation is also that that a good supplier will always behave like one of your good team members. Yeah, they will look out for you, they will get back to you, they will escalate on time if they see any difficulties, and they do not just sit there and wait for the purchase order or change order or whatsoever.

SPEAKER_01 18:18

And um how do you integrate still that kind of technology while ensuring it doesn't overshadow the human aspects of procurement?

SPEAKER_00 18:29

Um yeah, to be honest, at Dr. Bock, we have not spent that much money yet. Yeah. Of course, we have an ERP system which is SAP. Yeah, but uh we are just about to start, and we are just about to roll out one of the SRM tools in a name, which I would not mention today, but uh we can talk about that next year. And that's that's a thing where I say it's absolutely necessary to have such tools nowadays, also to support you in other functions, but at the end, it's still a support and just a support. That tool will not take over the important communication what I'm having to different managing directors or owners of um um um yeah, of smaller businesses.

SPEAKER_01 19:16

Okay, so do I get the right sense that you're still a bit skeptical in terms of what AI might support in the future?

SPEAKER_00 19:27

Or um so yeah, no, it's not it's not skeptical. Um we are careful in in finding the right solution, yeah, because we do not want to spend money for a solution which does not really fit 100% to our organization. That's that's the main thing. When when we enter into such a relationship again, then it's not a contract which uh where we which will run like two years or three years, it will go for five years or longer. Yeah, okay. And that's what I mean. We are Autobok is a family business. We are not just thinking from quarter to quarter, we are really uh looking for solutions and relationships long term.

SPEAKER_01 20:10

And uh is there any any view on global players in terms of you said uh you you grew with your suppliers, uh, you fought together in in the past, but I mean the the world around is currently heavily focusing on certain topics. So um is what what is your view on what is happening right there out now in the business at the moment, besides at Otto Bock? Is it something you're you're skeptical, you're aware of? Uh how do you monitor it?

SPEAKER_00 20:48

Um of course we are aware of, and uh there are also topics I have to say uh admit I find them annoying personally, because there are lots of topics where I say we are not just procurement, we are like regulatory affairs. When you look at uh in Germany, the Lieferketten-Sorgfaltschlichten Gesetz, yeah, or on European level CS Triple D, when you look at CBAM, when you look at PFAS, EUDR, you name it, there are so many rules and regulations which are uh also confronting global procurement with totally new challenges. Yeah, um, where I'm saying, wow, uh, for a lot of topics there are already laws in place. Yeah, and I don't want to get down to a political discussion, but but you know what I mean when you look at labor rights or minimum wages and things, there are laws in place in the different countries, and now procurement has to make sure that those laws are obeyed, but um that's a different discussion again. Those are challenges we also we are also facing, and and that's what I mean. Of course, I'm happy if there's a Good and reasonable solution which will support us in tracking and uh and making sure that we are compliant with such laws. Yeah. And that's of course one thing. Oh yeah, that's also one thing the new SRM tool will support us with. Yeah. So these are things which are keeping us incredibly busy. And even though we have so many people globally, why do we have so many people? Because the products we are selling, you imagine you lose your leg after an accident. It's something where you can't just go and find something suitable in the internet and buy it from a website. So you really need some consulting, you need some training and fitting and so on. And that's why, of course, we need so many people in our patient care centers to really take care of the patients. Yeah, and the the other topics I'm I'm really interested is to see how is it going to develop further in future? Because uh we can already see today, like with the LKSG in Germany, it's it's softening somehow. Yeah. And um with a company of our size, I'm not willing just to hire five people to take care of all these laws and regulations. Yeah. And what does it mean to our strategy? The good thing is the the way, of course, we are sourcing global globally, yeah, and um, but we still have a significant uh portion in Europe, in Western Europe, or we we are building also up in Eastern Europe, but still within the European Union, which was also supporting us during COVID. Uh or you may remember the supply chain issues from Asia uh during COVID as well, yeah, and also where transport rates were going up, where you had to pay more than 12,000 for a container uh for seafreight. Yeah, so that was also supporting us uh and and preventing that we had to pay more. So I'm I'm really looking with the team, which decisions make sense long-term, and where do we need to react? What are the things we need to comply with now, and what actions do we need to take? And where does it make sense to spend the money? And where can we say, hmm, okay, uh, we will watch it for some time and see.

SPEAKER_01 24:32

So, one aspect are the big solution suits uh or suites that you find on the market supported by by AI. But another topic is the personal efficiency. So, uh, do you use, I don't know, ChatGPT or other tools for efficiency gains in your daily business? And what is your view on how it may support your team as well?

SPEAKER_00 24:59

Yes, we do use such tools. Uh, in fact, it's uh, but it really depends on uh on the function who is using what kind of tool for what kind of report. And we can see that in in certain functions, um, like when when people had to write a report which where they needed four hours, for example, in the past, uh, they can finish that report within 45 to 60 minutes now because of such tools. But it's still a support function. The person who's signing on that report is fully responsible, of course, and and they uh have to finally read through and approve whatever the tool has um supported them so far. But we see that it's uh that it makes sense in different occasions to use such tools as well. Yeah, but then we are also using mostly free versions and not the version which will cost a lot of money.

SPEAKER_01 25:54

Yeah. Um are there specific areas in procurement where you believe that they can benefit most from technology in the AI? So, or where you're looking for the next big solution?

SPEAKER_00 26:08

Right now, when I look at um the out-of-box spend, then uh I see the biggest benefit in indirect procurement. And that's where I see the biggest benefit. Because when you look at the direct spend, you have the bill of materials, you have the article numbers, you have some very clear article descriptions and so on, you have the drawings and everything, which means uh there's not um there are not so many deviations possible left or right. Yeah. Um, but if you look at indirect, that's a thing where I say it can support pretty much in terms of purchase requisitions. What is the um stakeholder? What does a stakeholder who's asking for it, what does he really need? How can we um um analyze the market more easily and deliver better solutions? That's an indirect sense.

SPEAKER_01 27:02

Okay, so you mentioned now a few times that you see there is a supporting argument for AI in procurement. And how do you see in the future the balance between human expertise and technologic uh technological innovation or AI in procurement evolving?

SPEAKER_00 27:22

So for indirect and also for C parts, I would expect that AI can play a much more important role. Yeah, that it can really support more and more the procurement functions. And with support, I do not necessarily mean just to lay off people, yeah, but to really ensure that the people will become more effective and that people, like when you're in an organization and you have hundreds of millions of indirect spend, yeah, that you do not only uh take care of the big tickets, uh, but that you can also improve the long tail spend and that you can also improve the supplier management supported by AI. Yeah, that's what I would expect. That you don't necessarily have whatever 3,000, 5,000 or 8,000 suppliers in in indirect, but that you can really streamline, that you have a totally different transparency. You know, that you the pipeline which is then filled that you can really make the right decisions and consolidate further.

SPEAKER_01 28:28

Um, so me personally, I think that also there's a chance to have more information available in procurement, so that uh you can shift from a supply security or price-driven focus more onto other exp uh aspects of strategic procurement, especially in the volatile environment we are currently in. So um I think, or I I agree with you that uh people will still play a major role in the future as well, but hopefully, hopefully with a different focus than now.

SPEAKER_00 29:02

Yep. Yes, but I mean when you look also at the people now, when when you look at big negotiations uh negotiations in general, the the biggest contribution for procurement, the strategic buyers can deliver where you have such big tickets and where the relationship management plays a crucial role. And typically not in C parts, of course.

SPEAKER_01 29:27

And you I mean you still need someone to put up a convincing storyline and to convince the people sitting at the other side of the table. Yep. Okay, so let's shift to the next topic trends and challenges. And you said it before, you have now 27 years or more in procurement. How has the role of procurement evolved and what lessons stand out for you the most from your personal experience?

SPEAKER_00 30:00

Yeah, I mean, when I started in procurement, uh, that was when I was working for Siemens and I was working in the gas turbine factory in Berlin. At that time, I mean, I had didn't have a mobile phone, for example, yeah, and there was no internet in use, and you could not just Google something or something similar. Um, and there was also no difference between strategic or operational procurement, which means I was in that function responsible for procurement for a certain category. I had to uh summarize the demands in Excel, I had to think how can I uh negotiate it, I even had to print purchase orders and send them via mail and paper. Yeah, uh, I also had to take drawings out of a folder where the uh uh approved drawings were and so on. So those were totally different times, yeah. Which means procurement was just procurement. Yeah, what we have nowadays in very uh what you will find very often is that you have a separation between strategic and operational procurement, and that's one of the big shifts to differentiate yeah, what kind of day-to-day work is more tactical, what kind of job description and requirements do you have in that role, and which are more strategic. What I find now is with all the evolvement and well, let's call it also in some areas revolution, what makes sense is to really show which part of the work is contributing more to the business and it's is more important. Yeah, but at the same time, what I don't like is to have procurement teams where like the operational buyers like second class and strategic buyers first class. Uh, that's what I don't like, for example, because all the roles at the end of the day are very important. Yeah, and yes, of course, it depends what kind of person, personality, character should take over, what kind of role, but it's still important to uh have them together as a team. And that's where I believe that when the people are sitting together and work together as a team, that uh uh the procurement function overall will deliver better results.

SPEAKER_01 32:21

Yeah, yeah, definitely.

SPEAKER_00 32:23

That's uh the one important thing where I think uh don't don't give uh operational bias the feeling that they are just second class or something, it doesn't make sense. What is then more important because at the same time, some people talk about our strategy, strategy. Where does strategy start? Does it start because you send out three RFQs? Is that already a strategic function? You know what I mean? And um it's also a topic where where people are using using the term strategic purchasing uh very often in the wrong way.

SPEAKER_01 32:58

Yeah. So what I see quite often now is that you have strategic where you encompass the topic of vision and mission, what you said at the very beginning. Um the more tactical parts like setting up, sending out their RFQs, and then the operational work in the daily business, right? But uh in the end, everyone has to play play their part. And uh, as you said before, it it really comes down that procurement not just only works in their silo, but to uh to be the interface between the stakeholders, the internal departments, and the market, and and to to navigate and also to facilitate between those different counterparts.

SPEAKER_00 33:44

That's that's why I have, because you asked about my experience and uh how things have evolved over the last years. My expectation is if somebody wants to be a real good strategic buyer, whatever level, if it's junior or senior level, he really needs to have a good understanding of all the aspects and uh topics which are driving costs at the end of the day, which does not only mean uh calculation and comparing prices, he needs to have a good understanding of uh supply chain logistics topics, because inco terms are influencing the prices, of course. He needs to have a good understanding of quality. So he needs to understand the quality requirements basically. He needs to understand the uh um challenges on uh on these components and on the drawings, how many uh measurements are taken, what are the uh critical characteristics on that drawing and on that part, and what are the measurements and then what does it mean in terms of testing uh all those components, for example. The person also needs to have a good understanding of um of law, yeah, which which um which clauses are very important for that relationship, especially if it's uh an international one. Yeah, and and that's what I mean. That's what it really makes in a more strategic function when I when somebody fully understands the role and the importance what the person has in procurement and how he can develop his supply base and and uh support the business by really contributing more.

SPEAKER_01 35:16

Okay. And now let's get back to the current state. What is the biggest challenge your team currently faces and how do you address it?

SPEAKER_00 35:32

Yeah, we are all happy that um um uh COVID is history now, yeah. But of course, we have challenges when you look at the general inflation. Inflation is still a topic which is hitting us every day. So uh as a private person, or uh also if you need to invest something, you can see that um direct labor, or not just direct labor in general, wages have gone up, minimum wages have increased in in the past four years more than 23 percent. Uh you see electricity is going up. So that's one of the big challenges. How do we deal with the inflation? Yeah, and one thing is of course, um we uh need to understand the pricing in detail, we need to understand the calculation in detail. What does the inflation really mean to the um material what we are buying? Imagine you buy you buy plastic components. Yeah, then of course you need to fully understand uh typically you have an index, uh, you know exactly when when that component, for example, uh had its kickoff three years ago, then you can easily see what was the price per kilogram three years ago, what is price now per kilogram, what does it mean to our component, what was the electricity price, what was the direct labor content, and so on. So typically what you have in a cost breakdown. Yeah, so that's one way transparency. Yep, that's one way to tackle it. Even though, of course, we are not an automotive, which means we don't have a cost breakdown template what we are sending to our suppliers. Yeah, nobody would fill one or two pages for our quantities. But the strategic buyer, just by asking the five, six, seven questions, you can build your own cost breakdown. Um that's the one thing to tackle it. The other thing is then, of course, uh you need to create the competition, you need to see uh in which region you are buying it, because for example, electricity, what I just mentioned, it differs very much if you buy it in Germany or if you buy it in China or in somewhere in Eastern Europe. Yeah, and that's the other thing where we where we see where do we have the greatest demand, in which of our locations, and where does it really make sense um to buy it in the future? Could it be in Germany, in Turkey, in Romania, or whatsoever?

SPEAKER_01 37:56

Okay. And besides the general inflation, um, how do you prepare for other geopolitical or economic disruptions? I mean, tariffs uh was very present in the in the past weeks, uh, or you mentioned the regulatory changes while also expanding your supplier base.

SPEAKER_00 38:17

Yep, of course, that are topics where we have um teams sitting on it, of course, like PFAS, for example. PFAS is a topic you can't tackle it just as procurement alone, the same like LKSG and other topics. So we are analyzing in detail um for all the laws which uh which are coming up, uh, also EUDR, what does it mean for us? What's is what's our exposure as a company, and what are the right decisions to take? Yeah, and in some cases, it may make sense to introduce a tool and to uh ensure compliance. In some other cases, it could also mean that um that the risk exposure what we have is not significant. And then in some cases, it might even be the better solution to pay the penalty and do nothing because the penalty what you pay is so little. Yeah, the good thing is here at Otto Bock, we are not having like a general target. We need 30% low-cost country sourcing or something like that. Yeah, uh, so um we really we also don't have a clear target how much we need to source from China or something. So it really uh differs from category to category where we see what is the best country to buy from, where we have uh less exposure, where do we have the right suppliers uh who are willing to cooperate on that level uh with us and and um who are still competitive, because that's at the end of the day what still counts the competitiveness.

SPEAKER_01 39:55

So, what might be interesting to our audience is how do you prioritize all those different topics and also the ad hoc topics like terrorists in the in the past weeks. So, how do you balance and to to know what to focus on with your teams?

SPEAKER_00 40:14

Yeah, priorities. Um, one priority is also always we need to be able to deliver to the customer. That's top priority. You know, if we have anything coming up which is jeopardizing uh the availability of components, then it has automatically top priority. This could be because of logistic issues, quality issues, or um typically not because of regulatory stuff. Yeah, but that's uh that's the thing what we are looking after, that we can always uh uh satisfy the customer needs because you can imagine if if a customer uh is sitting at home um in his wheelchair and waiting uh uh uh for his prosthetics, uh if ours is not available, uh he will not wait three months because it would mean he can't walk for three months. And he would standable.

SPEAKER_01 41:02

Yeah.

SPEAKER_00 41:02

Yep, yep. It's not like a mobile phone that may not hurt if you wait two, three, four weeks or something. So that's uh what's most important. The other thing is, of course, we are looking uh in areas um where we are maybe not competitive enough, where the profitability is suffering. Yeah, and then the third thing is uh we are looking at developments where we need to consolidate and where we need to make sure that when the development phase is close and we are uh uh kicking it off and and launching the product, that we are competitive latest at that time. The other things like tariffs, what we mentioned, we are analyzing in detail, we are looking in detail, but um you can also see that some decisions are today it's going up, then next day it's going down, and who knows what's happening next week. So we don't overreact, that's what I would want to say.

SPEAKER_01 41:59

So sometimes uh a good advice is to take a deep breath and exactly see what it's worth. Okay. Um, one thing you mentioned in in the prior conversation was that during COVID you you built something that helped you to show also the value and also from a procurement perspective to steer the company. So, what steps can leaders in procurement do to ensure that procurement reporting contributes effectively to the broader business results?

SPEAKER_00 42:37

That depends in general, of course, what kind of reporting you already have in place. What is very important for us to have like an early warning and some simulation, yeah, so that we can really see whatever is happening, what does it mean to the business? Like now it's end of April. And um which means end of April, I only have the results for the first quarter, yeah. But what we are typically doing, we are looking until the end of the year, how is the performance going? We are simulating towards the end of the year to really see how is our contribution, for example, on the savings side. Yeah, how are we uh with the data what we have as of today, how is it going to develop? And are we still in line with the budget or not? Which means we cannot just, and that's my expectation to procurement leaders, you cannot just sit and wait and find out all the end of October that um you're going to miss your targets. Yeah, because if you only have like two and a half or three months left, it's impossible typically when when you have a when you have a bigger gap. Yeah, which means that's uh that's one crucial thing where I say you need to uh find a way to have a continuous early warning and simulation of the data what you have.

SPEAKER_01 44:00

Forecasting.

SPEAKER_00 44:01

Yep. Yep. Exactly. But but not just forecasting by oh, okay, I think this will kick in like this, and I think we will have that result. It's really data-based.

SPEAKER_01 44:12

Yeah. So KPI-driven steering of the procurement function.

SPEAKER_00 44:17

Yes.

SPEAKER_01 44:17

As well.

SPEAKER_00 44:18

Yes, that's that's still, I mean, um, that's why we're here to to deliver in terms of KPIs and not just some soft factors because I don't know, we we we are having a nice uh tea with the stakeholders or whatever.

SPEAKER_01 44:33

Okay. So to wrap things up, I have five rapid fire questions. So please answer with the first thing that comes to your mind. Okay. So how did you originally get into procurement?

SPEAKER_00 44:47

I had a project running. I was working at internal auditing at that time, and I was looking how to improve the processes in procurement. And then the commercial head of uh the gas turbine factory said, Oh, yeah, some some very good suggestions. Why don't you go and implement them yourself? And I said, Oh, interesting. Yes, why not? That's how I ended up in procurement.

SPEAKER_01 45:09

So uh by opportunity.

SPEAKER_00 45:12

Yeah, more or less.

SPEAKER_01 45:14

Okay. And what do you recommend to anyone who wants to have a successful career in procurement?

SPEAKER_00 45:21

I would recommend to really think things over. Are you willing to go into situations which are not always very nice? Because you will have a lot of conflicts. You will have conflicts with your own colleagues and peers, you will have conflicts with uh uh stakeholders, you will have conflicts with suppliers, which means are you really the person who likes to have such conflicts? And I'm now talking about strategic procurement. Are you really the person who who uh uh likes to have such challenges and is understanding a conflict as a challenge to prove that you can deliver? And if you say yes, then you're the right person.

SPEAKER_01 46:02

And if you are the right person, do you have one single best tip to to follow to be successful?

SPEAKER_00 46:12

Yes, that's what's your soft skills and relationship management because AI is important, but you always have to communicate with certain leaders in person, which means you need to be aware uh how to deal with those people, how to approach those people. And when when you approach somebody, you need to be aware how do you appear, and and um yeah, what's your outer appearance and what does your package look like?

SPEAKER_01 46:42

So it's still people business, yeah. Um okay, who should be our next guest on to the podcast and why?

SPEAKER_00 46:53

Wow, uh difficult for me to say. There are so many great leaders in procurement, and um but I would say take somebody who's not in procurement but who is uh judging the procurement performance. That's what I would take a CFO or whosoever, and uh to have their view as well and their expectations to bring in a different perspective, yeah.

SPEAKER_01 47:21

I think that that's great. So and now you can directly address our audience. Is there anything that they can help you with?

SPEAKER_00 47:31

Um right now I'm I'm very happy. I'm happy uh with the team I've got. We got good stable performance since quite some time now, and we are running the business um pretty successful. But I'm always happy also to meet new persons, to uh yeah, to have a broader network and to go in into some deeper discussions about um how to develop, how to develop relationships, how to tackle negotiations differently, supported by AI, um, even though at the end of the day, as I said, it's relationship management, especially for the bigger contracts. But um but still, what is very interesting for me to see how to support that relationship management with AI.

SPEAKER_01 48:20

And to follow up on that, how can people get in touch with you?

SPEAKER_00 48:26

Yeah, you will find me at Otto Bock. There's just one CPO at Otto Bock, and you can find me on LinkedIn, of course.

SPEAKER_01 48:33

Okay, thank you, Gao, for taking your time. Um, for me and our audience. It was a pleasure and uh looking forward to talk to you the next time. Thank you very much, Mike.

SPEAKER_03 48:47

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 leading 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.