Ep. 9 - Driving Procurement Success through Anchored Strategies and Ambitious Targets - with Lovisa Söderholm

Combining ambitious goals and solid strategies is where procurement 'magic' happens.

Join host Martina Buchhauser as she talks to Lovisa Söderholm, Senior Vice President of Purchasing at Volvo Penta, about driving procurement success. Lovisa shares insights on the dual objectives of cost and CO₂ reduction, emphasising the significance of engagement, cross-functional collaboration, and clear communication.


You'll learn:

1. How to accomplish cost and CO₂ reductions simultaneously
2. The importance of engagement, cross-functional collaboration, and clear communication
3. The impact of setting high targets and anchoring them in a solid strategy

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Get in touch with Lovisa Söderholm on LinkedIn: https://www.linkedin.com/in/lovisasoderholm/

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About the host Martina Buchhauser:
Martina Buchhauser is a global leader with extensive knowledge of the automotive industry, and its shift towards sustainable technologies and low-carbon business practices. Her leadership journey includes executive roles in Global Procurement and Supply Chain Networks at General Motors, MAN, BMW, and Volvo Cars, where she served as Chief Procurement Officer and on the management board. She is a senior advisor at H&Z Management Consulting and a non-executive director on several company boards. Martina enjoys hiking, golfing, and skiing, and values time with her family and friends from around the world. She is passionate about leadership and actively engaged in developing and promoting talent.

Get in touch with Martina Buchhauser on LinkedIn: https://www.linkedin.com/in/martina-buchhauser/ 

Transcript

SPEAKER_00 0:02

And if you look cross-functionally and you're working with your strategies, then is really where magic happens. And we're talking about, you know, changing completely the way you're thinking. Then the 70%, 20, 80% cost reductions and CO2 reductions freely comes up. That does not normally come up if you're not thinking very creatively, innovatively, and working together.

SPEAKER_01 0:26

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, Martina Buchhauser, founder of the procurement initiative Think Tank and senior advisor at HSET, Europe's leading management consultancy. Join me as I 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, Martina Buchhauser. Good morning, Lovisa. Hi, good morning, Martina. And welcome to our podcast theories of the Procurement Initiative. Today I have with me Lovisa Sörderholm. Lovisa is the senior vice president of purchasing at Volvo Penta. You are in located in Sweden, in Gothenburg. And I'm very happy that I got to know you years back when we were working together in the automotive business. So Lovisa, welcome first of all. Very happy to have you, and thank you very much for taking the time.

SPEAKER_00 2:08

Yeah, thank you so much for having me. It's uh very exciting being part of the procurement initiative. I think this is a great initiative, and we really learn from each other and share. So happy to be here today. Great.

SPEAKER_01 2:22

Well, so I'm gonna start and ask you a few questions, uh and we'll have a bit of a dialogue about uh you know what could be interesting for our audience here today. Um we're inviting procurement leaders, but we're also inviting uh other leaders in the industry, people who have gone through, for example, massive transformation, um have you know started partnering up with others, just a few hints for our audience to um to learn from, to uh jump on the same train, or whatever it is. And and that leads me a bit back to where we were when we worked together. And I think it was in uh short before COVID, I would say, uh, is when we met. And of course, um, in the automotive industry, we faced massive challenges with, let's say, the electrification going on, the uh the change, the transformation to uh fully electric vehicles, that development, um, that research engineering, uh, that changing everything that was right like a hundred years before and uh and then now was supposed to change, which hindsight we see that things haven't changed as quickly as they uh they were thought to be. But uh, and that's not what we want to talk about, but we want to talk about the fact that of course, at the time that transformation was in front of us and also clear, and that's I think something that we have in common with very much everyone in the audience today uh listening to the podcast, is that of course, as a procurement function, you still have the task to make room for all of these new technologies, right? And at the time we were trying to do that. Well, first of all, we were we were bringing in a lot more transparency into our supply chain, which helps us on all sides um to be more resilient, to be more cost efficient, uh, and also to be more sustainable. But what we have to do is really look into our cost structure and where you know where does the cost come from? And um, we we started a big cost program, right? But we also knew that we did not want to do as we might have done in the past at that time and just go to suppliers and leave it to them. Because obviously that's not where the real cost lies. The real cost lies in looking at something together, right? The whole product, the process. Where's the waste, right? So having done this and having gone through this massive program, I'm sure you have done something similar, you know, in your current role. Um, so can you talk a bit about because I I'm sure you have uh gone through uh the same how basically and what the success factors were. Can you share that with us?

SPEAKER_00 5:58

Absolutely. So thank you, uh Martina. Great introduction here. Yeah, so you you were right. Uh looking back now, we had this uh very interesting and very successful cost program in an automotive industry, not so far from uh not so far from where I am today. Uh, where we actually, as you said, we brought operations together, technology, the suppliers, and purchasing as well. Really looking into the details, going through in a fact-based way. Really, how do you do that together with the suppliers? How do you prepare them? Because that was really one of the success success factors that we were extremely well prepared, we were very fact-based, um, and we worked very closely with the suppliers but also internally. So we sent out letters well in advanced. We uh we looked through a lot of levers that we have then in our toolbox. How do you do the clean sheeting? How do you do the benchmark also between different similar products? Actually, we were physically taking the path of weighing them. Is the raw material the right way? What can we also bring in-house? What can we remanufacture? So that's uh that's a lot of things that we actually did. And I brought that with me to the role where I'm in now. But on top, we brought in the CO2 uh reduction on top. And I think that was really introsting. Everyone is kind of juiced to work with cost. But to bring the cost and CO2 together, that was really something that sparkarat the energy further in the organisation and brought more engagement in from other areas uh as well, also from the suppliers, I have to say. It's a learning process here because everyone kind of knows what about the part cost. But do you really know how much CU2 you have in that part?

SPEAKER_01 8:16

Well, that's one thing. And the other thing is, well, do you really know what the part costs? Yes. Uh uh, yes, but can you where are the levers to take cost out even further, right? And then you're not talking just um, you know, just uh long-term agreements or something. Then you're really talking about going deeper into the product and into in the process, into the logistics, and to see, you know, where where do we maybe even create waste with too many variances, with too much complexity, right? Yeah, and I think that's always something where suppliers might, anyway, have come in in the past and said, hey, you know, you might not even need the requirement as you have specified it. It's too much, uh, you know, because they see in comparison, they see a bit more. Um, but it's probably so that we have closed our eyes and ears a little bit in the past, but but opening up to a more you know joint collaboration of well, how can we take waste and cost out together? That is always more fun. But then adding CO2, where CO2 is always a bit still a myth, right? Yes, everyone is of course trying to calculate it, but there's also a lot of belief that, well, CO2 and changing to um less CO2 emissions is going to be too expensive, so it's gonna go against the cost targets. How did you how did you manage that kind of myth and old belief, which I think is not true? Yes, in some cases, of course, but then also you need to find new ways. But but how did you uh how did you make sure people were not you know kind of put off right away?

SPEAKER_00 10:12

No, I it was very good. We have we had some support uh doing this program from a very knowledgeable company. So there were some trainings and there were also some examples that they clearly brought up, you know, showing two similar products, um, but they were designed in a completely different way. You doing the same thing, but the other one was designed for you know lower cost and lower CO2 because the weight was lower, it was less parts, as you said, less complexity, and the other was so much more complex. And the cost difference was 30%, and actually the CO2 was 50% less. So, and that was what we actually found out also when we looked into the you know, having all these uh teardowns, doing all the cost walks, doing all you know the transparency walks together with the suppliers and also internally, then that in many many cases that's not valid for all, but in many many cases, actually bringing down the cost is also bringing down the CO2 because you're bringing down the weight, as you say, bringing down the complexity, you're using more recycled materials. Steel is very difficult, I have to say, but for the other materials, we have uh we have some really good examples here when it comes to aluminium, um, changing then to you know where you're buying cleaner aluminium for the plastics, going to recycle plastics, but also looking into you know what parts can you instead of buying new, new, how can you remanufacture those? So that was also something that we looked into. So that's uh that's been a great experience and very good learning and good experience, I think, for for everyone and good engagement. CU2 and the sustainability is something that really engaged people.

SPEAKER_01 12:04

Well, the thing is, people want to do the right things, right? I mean, uh everyone knows that if we don't do something, uh, and of course the the big impact is in the industries, right? In the various industries, not just automotive, but but this is where the impact lies, really. And um, if we don't, if we don't uh give our share there, right, to uh to come down in in CO2 footprint, then of course it's gonna be very hard to do it. Do you have um some examples of like the remanufacturing, the um, you know, taking more um instead of always virgin material, taking more recycled material? Do you have some some concrete examples so that the audience can uh can maybe see a bit how they can relate and uh apply that in their areas?

SPEAKER_00 13:03

Yeah, absolutely. Uh so I think in general, then we had the big aluminium part, costing part that we was that we are buying from from India. In India, they were using uh aluminium source that you know was not using clean energy. So, how can you then you know move to another aluminium source that is using clean energy and more recycled? So that we have done. Um we had various parts actually of uh plastics where we were then changing uh material. Plastics is uh good example there. You can find different grades, and then you also get lower weight and lower CU2. So that worked different plastic parts, and then on the manufacturing, we have uh actually just uh taking a serve a servo uh part and you know, and then bringing it into the manufacturer to the remanufacturing. We know that that is a bit tricky to find, but if you have big parts, you know, um high value, I think that's what you should start then when you have the remanufacturing part. So we have we have uh very good examples that is going well. You're saving cost uh or at least cost neutral, you're saving weight, and you're saving then CU. C2.

SPEAKER_01 14:19

Yeah, so it yeah, it seems if if you start digging into your supply chain and becoming more, you know, finding what's really going on, there is so much transparency then uh that you find a lot of opportunities. It's just a matter of bringing that transparency about, right? Which of course is not easy. So, how do you then it's a bit the question? I mean, because we've seen, even you know, when when we work together, we've seen the engagement of people when you know when you're tasked with something that just concerns everyone, concerns the planet, concerns next generations, concerns, you know. So um there was always a lot of engagement. Um, how how do you manage? How do you make sure that people jump on the train? Because it always seems a bit like it's more work, right? So now I also have to take care of this and that. And and of course, first things we always heard was like, oh, okay, and how when should I do this? Because let's also be honest, there is no such tool that you know, you just do this and oh, suddenly, you know, exactly all your tiers down in the supply chain. It is a bit of work, if we're honest.

SPEAKER_00 15:42

It is, yeah, yeah, I I agree. I agree. I think yeah, I'm fortunate now to be in a company that has this very high on the agenda because it is, as you say, it's a prioritization. You need to prioritize uh uh to do this. Uh and yeah, the company with the company I work in in Volvo, we have signed to the science-based targets, and we have very clear targets to become then fossil-free. So that uh is you know something that is really then also supported, you can say, from top management that we should work on this. So that is really, and then we have it also in in the strategy, uh, very clearly set that yes, responsible sourcing uh or responsible supply chain is really something that we need to work on. So that is also then very clearly expressed and also followed up. We are also having special tools to really do this. We are having trainings to also engage people and then we are working on continuous programs, then together, really, to have everyone engaged, and at the same time, as you're saying, trying to offload uh the more daily, you know, snitty-gritty tasks that you also need to do in a purchasing organization. So, how can we really have someone else then a back office or whatever to do this instead? So there can be more focus on these strategic areas.

SPEAKER_01 17:11

Yeah, I like it uh as you said it right now, because I've I've seen differences in whether the top management actually has CO2 footprint, let's say sustainability in a in a broader context, even, you know, then we also talk about protection of human rights and diversity and everything. Exactly. So it's a difference if the top management has this on the radar and really supports the organization and puts incentives and goals in a way that let people collaborate on those very important things. And of course, as a procurement organization, you always value if your top management also incentivizes everyone in the company to work on cost reduction and not just uh you know give that KPI to procurement. So I then it's difficult. Very difficult. And that's really nice to hear that this uh this seems to be the case in the company you're working at. And uh, but yes, it is a difference. And because I mean you can do a lot from a procurement perspective, I think. Um you can kind of rally your suppliers and make sure suppliers see that you mean it and that you want to collaborate and you're open to all their ideas. Because I mean, if we're honest, right? Pure magic sometimes happens in the supply base. Often happens in the supply base. Every day happens in the supply base. Yeah, absolutely.

SPEAKER_00 18:50

And we have it also in one of our requirements that we follow up when we do the sourcings. You know, we have the transparency then of the CE to because that is really then when you can make a difference.

SPEAKER_01 19:00

Right, exactly. Yeah, and so so then that that helps a lot, I think. Um, but there is a certain point where, as a procurement organization, you do need the support from other functions in the company, right? Absolutely. And then it's the question how, and I know you've done that, we've done that together, but um, how is there is there anything, you know, any hints you can give to uh to the audience here today on how do you manage, how do you get, you know, besides your team and the suppliers, which is a big deal, but how do you get other functions uh you know uh to the table uh to collaborate with you in a way that even product changes are necessary, process changes are necessary, you name it.

SPEAKER_00 19:50

Yeah, I think we talked a little bit about it before, but I do think that it needs the support from the top management area there as well. You know that this is a priority, that we have a common goal here and common targets, uh, and that you set then a governance that is you know, not only purchasing, but really have then the stakeholders in the governance follow up what we are working on, setting the priorities, uh sorting out challenges uh together so you can create that working environment. And I do that quite a lot then with having uh information, uh you're sharing, your training, and then you're also having then, as I said, the governance where we have everyone involved and engaged. If it's only purchasing, you can do so much, but you cannot do it all. So you need to have your top management and then the governance in place. And then start uh small, take it step by step. I think it's I think that is uh that is one thing that I have learned over the years. If you you do everything at the same time, nothing kind of gets done. So start small.

SPEAKER_01 20:57

I think that is a great hint. Uh start small, let people see that it works actually.

SPEAKER_00 21:03

Yeah, exactly. Start with uh, you know, where you know that you can succeed, start with the people uh that uh that are positive, spend the most energy on on those uh in and really see that uh and then bring out the success stories, then it it follows easier. Of course, if the priorities sometimes change, uh then we can go always go back to the negotiation, but then again, you need to prepare also the negotiation very thoroughly. That is 90%.

SPEAKER_01 21:34

And it feels like negotiations uh you know have also changed a lot. Um because nowadays you you don't only want to talk about cost, right? Yes, you have to. Uh yes, you have to make room for new technologies and uh absolutely or CO2 reduction, yes. Um but I think There's so much more, or there the potential is way higher if you look at the whole picture. Yeah. Don't just try to take something out, you know, by by maybe changing production sites. There's so much more in the product, and the the potential will will be so much more and higher if you look at the whole the whole story, right?

SPEAKER_00 22:27

Cross-functionally. Right. And you're working with your strategies. Then then is I agree with you. Then it's really where magic happens. Then we're talking about changing completely the way you're thinking. Then the 70%, 20, 80% cost reductions, NCO2 reductions freely comes up. That does not normally come up if you're not thinking very creatively, innovatively, and working together. So yeah, magic happens when we work collaboratively.

SPEAKER_01 22:55

And could it be that, and that's a very theoretical question now, could it be that if you if you set a really, really high target where everyone is like, you guys are, you know, on a different planet, isn't that when we realize that real magic happened? Because then only people think completely outside of the box, right?

SPEAKER_00 23:19

Yeah, exactly. So I think that is absolutely something that we you need to set a very challenging target. And then of course it is uh challenging, and then some people get a bit scared, otherwise get a bit again, you know, excited. We we are triggered by different, but then work with the excited ones. Yeah. Yeah. And uh I know when when we work together, we had a super, super high target, and we almost reach it. Everyone was saying that's it, it's not possible. But um, yeah, absolutely. Almost possible. So if you start, you know, setting a low target, yeah, you you you probably reach that. But if you set the higher target, then you reach higher. You shoot arms and you uh you end under the moon, but still you know you're doing a little bit more than ending up in the top of a tree, right?

SPEAKER_01 24:12

You can't do this every year, probably. No, you're right. But uh, but yeah, I mean it it really helped to uh and we I think the other thing was to to kind of engage people in a way that any idea is a great idea, right? And uh and I also think that's something if people can actually bring in their ideas that they might have held back and might have even had before and were then held back by others. But now if the if the target to get the joint target is so high, well then suddenly, you know, you have to talk about the crown the crown jewels basically. Yeah, exactly. Uh and uh and you know, change processes. And we had invited, you know, and actually had product uh management, that team and the sales team on board to come in with ideas, and and that that made a real difference, right? Yeah. Any more recommendations you could give, maybe as a final um question here, you can give to um, you know, bringing everyone on the train, on the train of how can we manage together to take cost out and make this a more resilient uh place, more sustainable, resilient, and competitive place. Any more recommendations from your side, Louis?

SPEAKER_00 25:41

Yeah, I think it's uh about uh, you know, you have this with the that we should have everyone involved, but you have to think about the communication quite a lot. And different people have uh yeah, gets uh information and gets to the heart in different ways. So you need to think about the different channels you are using: mail, face-to-face, videos, uh, you know, it could be workshops and so forth. Then we also need to think about the change curve. So, where are people really? You know, in the beginning, it might be some resistance, uh, then it's a little bit more of an acceptance, and different people are also here in the different uh stages, and then uh in the end, you know, people are hooked, and hopefully, you you know you get the uh you really get the process to you, and then also um as we talked about challenging targets, but also make some quick wins and really communicate uh this. And then you have to trust the process, you know, it will take uh time. You have the change curve. Uh everyone is not jumping on the train uh from the start. Uh and the ones that are leading, they are probably, you know, they are if you think about a train, you think about a tunnel, and you think about the station. So, you know, the ones we that are driving, we are in the front of the train. And then you have some that you know are really standing still on the stations, and then some are in the tunnel. So you really need to think about, you know, trust the process, continue the communication, continue the engagement, continue with the with the good examples, even though they are small, uh and trust that this uh the process will support. So I think that's uh something that is really, really important.

SPEAKER_01 27:25

Well, that sounds like some really nice ending words in this uh podcast, but what I would add, uh, and that is something that um comes to my mind when I look at you, uh, is really role modeling all of what you said today. Um thank you. And I appreciated that very much with you. And I think that's also the key to uh engaging people and make everyone come on the train, right? So, with that, uh, role model, uh Lovisa, thank you so much. Uh, it was a pleasure having you here. Thank you so much for sharing all those insights. Hopefully that's interesting for our audience. And uh we'll be back with the next podcast. And thanks again very, very much. Thank you. 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 community. And be sure to hit that subscribe button to never miss another episode.