Fabian Heinrich: Welcome to another episode of Procurement Unplugged. We are very delighted to have Pauline King as a guest today. Pauline has more than 20 years' experience in procurement and has seen sides in the US as well as in Europe and even wrote a very respected whitepaper about certain challenges we still face today in procurement. So, Pauline very happy to have you here today.
Pauline King: Great to be here Fabian. Great to be here.
Fabian Heinrich: So maybe you can quickly introduce yourself and let our audience know how you kind of found your way into procurement.
Pauline King: Alright. Well, I'm American but I've been living in Europe for over 30 years now and my start in procurement was by chance. I was working at UBS and one of my... ...doing NT rollout and one of my clients was corporate sourcing. And then I ended up taking a job in corporate sourcing, back in the late 90s at UBS. And that was how I started my journey into procurement and then I did a few years at Accenture selling Procurement Services. Then I was head of indirect procurement at Syngenta for a bunch of years. So, we did a transformation there. And now in the last five years, I'm independent consultant working in indirect procurement and specialized in the finance processes around procurement and bringing savings to P&L.
Fabian Heinrich: It sounds like a truly amazing journey. So, over all those years and all those different stops of your career how has procurement changed over those 2, 3 decades.
Pauline King: Well, I mean if you look at indirect procurement one of the interesting things about it as a function is that, 20 years ago it was still a very kind of accounts payable, receivable, administrative job, which turned into what was called strategic sourcing for a while. So, staying in the indirect area. And then that has evolved into now what we call procurement and sourcing and all of these things. So, some of the shift has been moving into this more strategic aspect. But in other way, it hasn't changed so much from the first days of it was more of an AT Kearney concept back in the day and some things haven't changed. So, depends on the company, some companies are still very immature and some are really very sophisticated and mature how they go to market.
Fabian Heinrich: So, you would say even after 25, 30 years indirect procurement still has not that kind of prestige or signaling like direct procurement.
Pauline King: I think it really depends on the industry and the company, but yes. So, it is still an area which is sometimes underestimated which is of course crazy, because it's so much money in a from a company. So, you do have the big companies, do have a more sophisticated approach more from manufacturing side. And services, banks are still I would say less mature in that area. But one thing we were talking about was one whitepaper that I've kept since 2000 when I wrote it at UBS and this was about marketplaces and changes there. And in some ways not much has changed. So, there have been steps forward, but it's always funny to go backwards and look at these things and see what has not changed yet.
Fabian Heinrich: Yeah, maybe you could elaborate a bit on basically what was the topic of your whitepaper and to find a and how things have changed or not changed in the last 20 years since 2001.
Pauline King: Well, you know what, we were looking at that paper was more around the goods part of the indirect portfolio and the concept was to take the buying power. It was a big bank of the bank and make that available as a platform to own clients. So, kind of a mix between a B-to-B and a B-to-C, kind of a marketplace. So, now you do have some big marketplaces that are working. But for example, if look at like more complex categories, really there's not much out there. So, there are some things around electronic, RFI, RFP processes which work somewhat but which aren't easy to use. And I think so far, the promises is not really there yet.
Fabian Heinrich: I mean it's very interesting that not much development has been happening in those areas. But I think if we if we further look into the key challenges. I mean what was, like if you look back to all those years what do you think are kind of the key challenges and obstacles of indirect procurement? I mean you've seen various huge organizations, but also different industries. So, I think that will be super interesting to touch on that.
Pauline King: Yeah. I mean I think the big challenge of indirect procurement is always one of the key things is around the savings. And so, the procurement teams say we have achieved savings and then it's not reflected from a financial perspective in the PNL. And the big gap there is simply there's no automatic link between cost center and whatever your financial reporting might be around savings. So, it's not like cogs. And I think this is one of the big challenges that remains because it's a manual process between procurement, finance and a cost center owner. And making that work is actually more of a management process and I think that's why people find it challenging.
So, you need to be able to baseline projects, which procurement goes on and on about cost avoidance which people actually don't care about from a financial number. It's not a financial number. And so, there needs to be a shift in procurement to adopt the language of finance. There needs to be a change in the relationship between finance, procurement, and the business. Talking about numbers and making that relevant to the PNL. And that becomes a virtuous circle when you can really show the impact. There's often an aha effect for senior management which then opens doors. Which allows you then to also go into projects which are perhaps more shall we say not controversial, but which touch the business more.
So, the minute you start getting into complex categories. It's touching on a more strategic side of a company and so then you get more resistance. Nobody cares about pens, but they care about creative agencies for marketing, for example. So, this is a little bit the dilemma that indirect procurement finds itself in and then I think the other big thing is they don't do enough selling. So, a big part success in indirect procurement is managing all your stakeholders and basically doing selling internally on the value also on projects that are not financial projects, risk reduction, etc. you need to tell and communicate the story. Which procurement doesn't do, or it needs to do better on. Let's say that.
Fabian Heinrich: Basically, you're saying like a huge challenge is the collaboration with the stakeholders, yeah. I mean as of now are there any tools or have you seen in your like 20, 30 years of procurement history? Any tools or is the collaboration what you're like emphasizing on is that still pretty much offline and analog.
Pauline King: Very much offline and analog. There are tools out there in theory on collaboration. But when you kind of drill into it, they're hard to use. So, you have things like gathering supplier feedback on suppliers. So, in theory you can do that there are solutions for that, but in reality, when you're actually trying to roll it out and actually getting people to use it, it's hard. It's not intuitive and so people don't use it. So, then you're back to email and exchanging things like that. I mean this is what happens.
Fabian Heinrich: So, like along with the collaborate a lot of manual and tedious work even like in 2021.
Pauline King: Yes. I had a client recently and that was exactly it. So, they had spent a lot of money on a big technical rollout and there was the desire to make everything more less email driven and it was a total just didn't work. There were issues around master data and collaboration and ease of use, and actually it was easier to use email than to use the tool. So, they didn't use it.
Fabian Heinrich: And would you say that's predominantly a challenge of indirect procurement or also you see that behavior or that kind of challenges in direct procurement?
Pauline King: I think that's actually a general challenge especially in terms of supply relationship management. So, I don't think that's especially an indirect challenge. It's across I would say that's across to be honest.
Fabian Heinrich: So, the unique thing about Indirect is that kind of selling job with regards to the collaboration with the end user.
Pauline King: Yeah. So, it requires sophisticated stakeholder skills, engagement skills, but also communication skills etc. So, there's lots of collaboration tools out there. I'm not talking about that in the general. But a lot of the things out there just don't live up.
Fabian Heinrich: Yeah, I mean that's also very interesting if we speak about the skills. I think if you look like 20 years back, I think the skills required from a purchase were also different than the skills someone needs now. Or how do you see that kind of expected skills from a procurement person or how they have changed over the last 2, 3 decades.
Pauline King: Yeah. I mean if you look way back you know that's clearly a completely different role profile actually. So here you're really talking about, you know pay the invoices you know bookkeeping type of profile. So, today the sophisticated category managers that's a completely different type of person. These are different kind of educational background etc. So, the function has changed dramatically and the kinds of people are really different. I do remember at the beginning of my journey in indirect. You still had a lot of conversations with the with the bookkeeping people. That's over. That's just part of P-to-P processes and things around sourcing as a completely different field, person etc.
Fabian Heinrich: Yeah totally. I mean our world has changed a lot. I mean previously that certain organizations they still operate to a certain degree immature or like indirect procurement in particular is immature in like many organizations also depending on the industry. I mean like given that you've seen and advised so many companies. What would you advise those companies?
Pauline King: Well, the very first thing depending on where a company is at. But honestly the very first thing is to look at the money. And so, if they don't have their kind of more or less their spend under control and the kind of where is the flow of the money? Do they have savings baselines? Do they have a pipeline? Are they forward thinking at all? How is the relationship with finance? So, I always start on that core pipeline, is their pipeline maximized? Are they working on stuff they shouldn't be working on?
A lot of a lot of times you go in and you have expensive resources working on stuff which is the savings is going to be $1,000. You're like why are you working on that? So, sometimes it's a maximizing of the portfolio, but you should not be doing which you're doing more intensively. And then projects that they haven't tackled because of internal politics or they're afraid to more project. So, that's one side and then the other side is the measurement and getting those savings captured into the budget cycle is essentially what the game is about. That's the core of what you have to do first. And a lot of times companies are focused very, I don't know they're focused on putting in sophisticated tools where they don't even have the basics in place yet.
So, these you have to address the whole portfolio of what you do in indirect, but that's the first core step that I always recommend. And that's where the money is. And when you show the money, that increases your credibility with senior management. This gives you more space for maneuverability etc. So, it's a way to make a positive circle.
Fabian Heinrich: Very interesting. Makes completely sense and I mean if you talk about the more mature organizations who use already like certain procurement systems. You were saying earlier on the key challenges where the collaboration, the aspect and the manual work along the sourcing process. So, I mean do you have any solutions or ideas how to overcome those challenges?
Pauline King: Yeah. I mean the minute you sort of have the basics and then you're getting into more complex categories, then it is about what projects do you go for? How do you engage with your stakeholders? So, some is very basic you know stakeholder engagement, stakeholder mapping, communication planning and really doing that in the German word consequent way. Which people just don't do, I don't know why. Then do are people using the collaboration in the best way? Are they doing everything by email? Are there other ways to do it?
But there is a kind of a core of how do you for, very complex things like a creative agency? How do you break that down? So, this is a dilemma which is why it's more difficult. So, you have highly specialized categories with highly specialized levers and what are all the things in there and how do you break that down. That's let's say the big challenge that's out there. Which is all one can break.
Fabian Heinrich: Yeah. And yeah, I mean like if we then look further into the future. I mean, what would be the vision for you with regards to procurement and also in particular with regards to indirect procurement?
Pauline King: I mean I really think this this game, this endless, this topic of what is the really value added things, how can you break down categories and really looking at, what are the things which really need brains brain power? And what are the things which are repetitive which can be done in a different way? I think this is always what's going forward. I'm not an expert in AI and all these things, but there's the promise and the hope of that, that maybe that improves on that side. But I think this is the game. You Know what are the spaces looking at the low ends and who's doing it? Maybe that needs to be automated.
So, there's a lot of things that can be simplified and automated. It's just need to happen. So sometimes it's more an organization is clinging to projects which are low value. When they should just stop doing that. And do it in a different way. If that makes sense. Sounds very generic, this is what you find. People are really invested in working on stuff which is not value adding.
Fabian Heinrich: Yeah, I mean we've heard a lot about like autonomous buying and so on. Is that also something you can envision in the future that in indirect procurement we can enable the end user to do autonomous buy you?
Pauline King: I don't know how far that can go, but for sure more than what it does today. For example, if you look at marketing and you look at creative agencies, you can break that down. There are parts of that which are actually repetitive and in theory should be able to be automized. Get the right word, automated.
Fabian Heinrich: Automated.
Pauline King: See a mixing term. And I think there are other areas which are more qualitative which perhaps are don't lend themselves to automation. But yeah, there should be more and I think people have a tendency to mix the things which are qualitative with the things which can be more quantitative perhaps. And perhaps splitting those two things out helps to look at, okay this part we can automate and this part now not yet. If that makes sense.
Fabian Heinrich: Yeah. I mean, no, I think that makes a lot of sense. I mean basically what you are saying and advising our audience is like to really break things down not shoot for the big vision. Because we never know if that vision of autonomous buying really scales and works for all the categories. And then, see in what category we can automate certain things and maybe with the more complex categories. We just atomize certain steps. So, I think that that's a very smart but also tangible and achievable approach.
Pauline King: Yeah, exactly. It's more practical. And so yes, actually 100% agree with that.
Fabian Heinrich: Yeah, we've already reached the end of our little podcast session. It was a true pleasure to have you here to talk about the development of indirect procurement over the last 25, 30 years. And how you were seeing the challenge of the leg of B-to-B platforms already liked exactly 20 years ago. So, very interesting insights. Thanks a lot.
Pauline King: Thanks a lot.