“The world around us is changing rapidly — the train has already left the station.”
Speaking to us exclusively at DPW Amsterdam 2024, Sebastien Bals, Chief Procurement Officer at Merck KGaA, doesn’t mince his words.
Indeed, procurement functions are already in the midst of equipping AI tools into their operations amid an accelerated interest in digital transformation.
AI, and in particular generative AI (GenAI), is one of the biggest buzzwords today in procurement. And the reason is clear. The ability to offer exponential cost savings and deliver efficiency is music to many CPO’s ears. According to Gartner’s predictions, 50% of supply chain organisations will invest in applications that support artificial intelligence and advanced analytics capabilities by the end of 2025. It is a key reason why supply chain organisations are leveraging AI and advanced analytics in order to navigate an ocean of data to figure out what is happening in their business now and in the years ahead.
Procurement transformation
Bals believes that the acceleration of GenAI acts as a critical enabler for procurement and those who embrace the latest innovations are poised to succeed long-term. “We can’t continue relying on solutions from the past. This is an exciting time to be in procurement, but only for those who are ready to embrace it,” explains Bals. “For those who aren’t willing to adapt, it’s going to be a frustrating time. It’s not about the train leaving, it has already left. You’re either on it or you’re not. If you’re on it, you’re in for an incredible ride. For those who aren’t, they’ll have to figure out how to catch up when it comes back around.”
Having been involved in procurement for the past 15 years, Iris van der Harst, Chief Procurement Officer at Equans, explains the reason she is so passionate about the space is the function’s ability to transform over time. “When I was younger there weren’t many further education courses in procurement that you could do. Everyone just grew into procurement from different backgrounds,” she says. “The reason why I still love being in procurement is that it evolves all the time. It’s always changing and it’s getting increasingly relevant. It is an exciting time and I think it still will be in 10 years.”
Like van der Harst, Michelle Baker, Interim Chief Procurement Officer at Virgin Money, has also had a front-row seat to procurement transformation and believes technology is the heartbeat to business strategy today. “Technology has always been an interesting thing and I’ve grown up with it,” reveals Baker to us at DPW Amsterdam 2024.
“So when I started work, there were no PCs on desks. The only person who had a typewriter was the managing director’s secretary. So technology for me has always been really interesting in terms of how it can augment our lives. If you look at DPW behind me, we’ve got 1,400 attendees excluding exhibitors. That is a massive number of people who are interested in technology now. If we’d had the same conference 10 years ago, we’d barely have filled a room of 100 people. I think there’s a sense now that data analytics, digital, all of these cool words actually have an impact upon your business and it’s an inescapable, unavoidable impact.”
Change management
Jurriaan Lombaers, a procurement senior executive and formerly Chief Procurement Officer at Air-France KLM, explains that one of the most important areas of consideration for CPOs today is around how to navigate change management successfully. “Scaling fast is all about adoption,” reveals Lombaers. “There’s still a long way to go to get these things embedded into the organisation. That’s why you have to start small and take people by the hand. People might be a bit frightened about all the automation on offer because it is taking work away that they have done for many years. What we need to learn is that it’s taking some of the more administrative or repetitive work away. Secondly, as part of 10X, there’s so much more that the business is asking of procurement that needs to be done that can be utilised by the time you gain from further automation.”
But change management comes from within and ultimately the workforce is most impacted. Recognising this all too well is Chris Platts, Director of Procurement Operations at SSE. Without good people, success is impossible which means getting the best out of procurement teams could hold the key. “A big piece of this work is ensuring they’re not bogged down by poor processes, excessive admin, and constant queries,” says Platts. “How can we free them up from these inefficiencies? It’s a major challenge, but I believe there are solutions out there that can help.”
Platts adds that as a result of the geopolitical risks scattered throughout the supply chain, complexity is to be expected. “Most organisations, including ours, have a global supply chain, so we need to navigate many increasing geopolitical challenges, work out what kind of relationship we want with high-risk jurisdictions and ensure our supply chains are as resilient as possible in the event of a global shock.”
Sustainability drive
Driven by regulatory and customer changes, sustainability is another key topic on the agenda for many CPOs. At DPW Amsterdam 2024, Kristina Andric, Product Sustainability Director at Tetra Pak, tells us that she recognises three factors that influence a greater sustainability focus across companies. “One issue is that people generally want to contribute, but they often don’t know how or struggle to see the impact of their efforts, when it comes to sustainability,” she explains. “The second issue is the perception of sustainability as a cost driver rather than a value driver. Companies need to recognise that sustainability goes hand in hand with the total cost of ownership. While there may be higher upfront costs, it ultimately leads to long-term benefits and cost savings. Finally, companies often deprioritize sustainability in favor of other initiatives, creating another challenge.”
The sustainability boom is driven partly by the Paris Agreement which is a legally binding international treaty on climate change. Adopted by 196 parties at the UN Climate Change Conference in Paris in December 2015, the mission is to unite countries and stakeholders for people, planet and prosperity. Climate action sits among 17 Sustainable Development Goals with the aim by 2030 to hold the increase in the global average temperature to well below 2°C above pre-industrial levels and pursue efforts to limit the temperature to increase 1.5°C above pre-industrial levels.
“This is why that mobilisation is very, very important,” Bertrand Conquéret, Co-Founder of Together for Sustainability (TfS) and The Sustainable Procurement Pledge (SPP), tells us. “At the same time, many companies and countries have also committed to sustainable goals in 2025, 2030, 2040, etc. But the how is the challenge. We have very limited time, so we need to manage the how now. That’s why we have that scalability requirement. This is what we have learned through the TfS initiative that there is the possibility to enable change through that collaboration at scale. The power of collaboration through business sectors is visible through procurement. We have learned that in our companies when it comes to collaboration internally and with strategic relationship management with our suppliers. Together, we are stronger.”
Future facing
Working collaboratively with TfS since 2019 is The Sustainable Procurement Pledge. The SPP is working to make the industry more sustainable by embedding all procurement practices with the UN Sustainable Development Goals and Science-Based Targets by 2030. “I would say the underlying principle is that this is a challenge that we need to do together in an open, inclusive and collaborative manner,” explains Thomas Udesen, Steering Committee Member for TfS and a Co-Founder for SPP.
“That ideology is something we get from TfS because we have been living it now for the past 13 years. And it was also that spirit that triggered us to think that despite our company hats along with all the other CPOs in our day jobs, we have an industry dimension where we work within certain boundaries, but we also have a procurement community that we need to tap into. It’s really those three dimensions that we want to boost all the cylinders because at the core of this sits the same knowledge. It is about the likes of decarbonisation, a responsible inclusive economy, supplier diversity and water usage. Our role at SPP is to empower and equip all the practitioners along the value chains to do the same thing. The essence of what good practice looks like is universal and something that we can improve together.”
Looking ahead, today’s Chief Procurement Officer has a lot on their plate. From navigating the best way to unleash AI into processes, to managing the next generation of talent and adopting more sustainable practices amid changing legislation and customer demands, there isn’t a moment to lose. But procurement holds the cards and it is up to the function’s practitioners to determine when to play them correctly.
