[0:00] Radu Palamariu:
Hello and welcome to the leaders in supply chain podcast. I am your host Radu Palamariu Managing Director of Alcott Global. Our mission is to connect the supply-chain ecosystem in Asia and globally, but bringing forward the most interesting leaders in industry, and I’m very happy to have with us today Dan Bartel, who is the Chief Procurement officer of Schneider Electric. Schneider Electric was a global leader in the energy management field providing software, hardware and services solutions with a combined revenue of close to 26 billion euros last year then he manages Schneider Electric in the beginning of 2019 and is based in Hong Kong. In his current role, he is leading the 13 billion Euro procurement to spend that cut across 200 plus manufacturing factories and 100 plus distribution centers in 44 countries. It is the establishment of the processes, tools, systems, and organizational competencies to manage change towards the supply base as an extension of the company’s enterprise. Prior to joining Schneider Electric, he served several roles in procurement and logistics of ABB. Ultimately serving as the groups, as VP and head of procurement and logistics based in Zurich, Switzerland. He has 24 years of mobile experience improved if your marketing supply-chain management primarily in the energy and automation industries. It was a pleasure to have you with us today and thanks for taking the time.
[1:23] Dan Bartel:
Thank you Radu. It’s a pleasure to be here.
[1:26] Radu Palamariu:
I’ll start with a question from one of our listeners who have obviously been following you for a while because he read an article that you wrote, or you contributed to the three years back in which you were talking about industrial revolution 4.0 and you are asking at that time, a couple of questions and then linked to what are the effects of this fourth industrial revolution will have on procurement? What can leaders at the procurement function do to lead the change? This was three years ago, what has happened in this span of the last three years and how have things changed?
[2:06] Dan Bartel:
It’s quite interesting to reflect on that, and the first thing that comes to mind is Morris Law, which says that we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run. I think that applies to do some of those points I made in that article but while other points I think to have actually accelerated even beyond what would I anticipated three years ago. One things I talked about there were customer expectations and the fact that they’re shifting. What I’ve seen in the last few years is a dramatic shift in expectations with respect to response time with respect to agility. I think in today’s day and age forecasting are actually a few tiles, agility and speed are the keys to succeed with respect to meeting customer expectations.
[3:05] Dan Bartel:
We’ve seen one of the most dramatic cycles in the semiconductor industry in the last few years. For example, the most dramatic I’ve seen in my career which I think few people were predicting is the level and the degree to which that cycle came up on us, and now we’re seeing kind of the backlash of that as well in terms of excess inventories and stocks piling up. Being able to anticipate customer expectations I think is becoming more challenging and being able to react quickly to shifting expectations, is becoming a more key differentiator. I think I also talked in that article about how products are being more enhanced by data. What I’ve seen is, when I look at what Schneider is taking to the market today, the vast majority of what we’re selling are connected products, which was not the case a few years ago.
[4:02] Dan Bartel:
The eco structure is a Schneider’s IOT enabled architecture and the platform that we put in homes, buildings, data centers, infrastructure. It got innovation at every level, connected products are connected to the edge. Onsite with apps, analytics and services layered across the top and selling now, a value-based solution rather than individual products and so, that’s been a big shift. I also talked about partnerships on how new partnerships are being formed as companies learn the importance of new forms of collaboration, and I would say that collaborative innovation has become more norms in many industries. Procurement is playing a leading role in defining the relationships with suppliers in these collaborations, managing those commercial relationships with those partners, and I’d say in Schneider, we’re doing this not only with mature companies, but with a lot of startup companies that are bringing new innovations into the marketplace.
[5:06] Dan Bartel:
The last thing I talked about in that article was operating models and how they’re transforming in the industrial segment. I would say that it still has a lot of room to grow, but asset light is a trend that is becoming more and more prominent. When you think about a company like Schneider, one thing we want to be good at is current interruption, we want to develop the latest and greatest circuit breaker. That’s where we want to put our money, and we don’t want to put our money so much in a new surface mount electronic line or injection molding machines, non-core activities, looking forward to focusing on the core, go after that light lift production and make your investments, in your core technologies. So, I think a lot of changed, and somebody evolved as its anticipated somewhat much faster and other aspects, have proceeded much slower, but I think the trend and all the aspects I talked about with respect to the procurement role are still very valid in my view.
[6:20] Radu Palamariu:
If you were to make an expert guess, let’s call it like that, because ultimately nobody can predict the future. What would you say that in the next three years will be the evolution of procurement? Any big pointers and areas where you see it evolving and how exactly do you see the next three years from now?
[6:45] Dan Bartel:
Great question. The first thing that comes to mind is digitization, which is a kind of one hand, enabling what we do in procurement. On the other hand, the kind of challenging what we do and what I mean by that are, digital patient has absolutely had a super important role and enabling a kind of the traditional procurement processes from squeeze contract and from procure to pay. So, having our buyers and our supply-chain managers spending less time in front of computers and more time in front of suppliers and in front of internal stakeholders by my simplifying, digitizing the processes of the transactional processes of their daily jobs. On the other hand, you have an advanced analytics, and artificial intelligence, sitting on top of these giant data, and we’re able to collect, nowadays, challenging what we are doing and asking questions and getting insights that we didn’t consider in the past.
[7:48] Dan Bartel
Just one specific example from my recent past, we’re in an environment in Schneider Electric, and many of our competitors are in a sport environment where there are many different ERP systems and companies. So anytime we make a global contract, and we want to implement those terms in the system, a lot of transactions have to be done manually all over the world and dozens of different systems in order to apply those terms. In a recent role that I had, we did an analysis and someone asked a question, with a senior leader in the company challenged us and said, I think you’d probably have leakage on your payment terms, and you’re negotiating all these extended terms, but I’m not seeing it in the DPO of what’s going on. We ended up finding though, big data analytics, hundreds of millions in cash that was leaking because we weren’t current on our payment terms in all the different systems.
[8:40] Dan Bartel:
So that goes to show that, if you ask the right questions of your data and you apply these advanced analytics tools, to answer those questions, you can unlock the value that you didn’t know existed before. So digitization is absolutely something that’s on the core-front, in the next few years. I would say simplification is up there as well. I think, many supply chains have far too many suppliers and connections from suppliers to factories. A simplification of that network can also unlock a lot of value, so we spend less time on transactional topics and much more time on strategic supplier relationship development. Simplification plays a role and I talk about partnership that’s definitely something that will differentiate the winning procurement teams in the future and those that can truly collaborate with their suppliers.
[9:38] Dan Bartel:
Creating joint competitive advantages and taking advantage of the value that suppliers can bring to our own company’s product offering is an important differentiator in the future and less than at least, I bring to the point again of agility. Building an agile and robots supply network, one that is resilient and having teams that are agile and dealing with big changes in the external environment. I mentioned this cement conductor crisis that we had recently and you could also point to the ongoing trade war, which has tempered a bit in the recent past, but it’s still a real issue and a real risk for those teams that are most agile in reacting to those kind of situations are the one that will going to win.
[10:29] Radu Palamariu:
That’s an effect for sure, related to the C-level, the CEO and the role of procurement in the overall organization because sometimes depending on the organization, sometimes it’s a bit of a fuzzy line. How important procurement is and how strategic it is. I think everybody is trying from the procurement function to position the procurement as a business partner. How do you see the CEO seeing procurement, in this equation of adding it to the success of the company? And how is the procurement agenda in itself linked to the overall company in general?
[11:10] Dan Bartel:
It feels like I’ve been fighting my whole career for the relevance of procurement with these C-level, but I’ve seen, especially in the last five years or so, a big shifting, the understanding and the appreciation of the value of procurement can bring to the company. In fact, when I think about Schneider Electric, I’m relatively new in the company, and I came in March of this year, and one of the biggest reasons that I selected Schneider is because of this level of commitment that the company has to the function of procurement. The value that we can bring in supporting the top line and supporting the bottom line of the business when you look at the facts about a company like ours, 50% of the revenue is weaving the company through procurement and through external purchases.
[12:10] Dan Bartel:
Roughly 70% of the costs of goods sold is managed by our function so if we do that, poorly, we really can damage the company. If we do that particularly well, we can create a competitive advantage, and I think the CEOs and CFOs recognize that. Investments made in procurement enable us to support the financial performance of the company are a win frankly. To your point about, how do we link procurement to the overall company ambition? I think one thing that some procurement leaders can improve in how they communicate, what they do and how it supports the agenda of the business and how we position it in Schneider, is that we put the customer first.
[13:08] Dan Bartel:
Any smart CEO will be going to do that, and whatever the customer is trying to achieve, try to figure out your role in making that happen and for us, there are three things that we do. First of all, we support the top-line growth of the business, and we do that by ensuring good quality by bringing external technologies into our product offering. Secondly, we support the bottom line of the business, and that’s really the core of any procurement function driving cost reductions on a continuous basis, on a reliable basis, driving cash improvements through extended payment terms and inventory reductions. That’s the kind of the core of any procurement function needs to deliver for the business. Third, we need to do these things in a sustainable way, we have a certain corporate social responsibility that we need to hold our suppliers accountable, and we need to drive the compliance of our products to environmental and social standards as well. So, it’s about supporting the top line of the business, enabling the bottom-line growth and doing those things in a sustainable manner.
[14:19] Radu Palamariu:
A bit more detailed tactical question. What is the current organization design of Schneider procurement? Maybe, you could take all of it, or I could take with management regional heads and how do you structure it in a way that optimizes it for best agility, success performance?
[14:39] Dan Bartel:
I think there’s no right answer on what’s the ideal organizations? I think what we have in Schneider is not so bad, and I can say more or less fully centralized, and it hasn’t been about the last indicators. So, that’s a certain advantage that everyone in the company is now kinds of conditioned to expect procurement to do its job. We’re not so much fighting for a seat at the table, but we’re getting pulled from the business to execute the buy, which is for two places to start. How do we do that? We have three main pillars of the organization, first, one being category management with organization set up in the first game, category management, and we’re driving the sourcing strategy. We are leading the relationship of all of our strategic suppliers around the world, and we’re focused on some categories that are delivering the most value for the business.
[15:44] Dan Bartel:
The category management is one pillar and something that I think most procurement organizations, need to have in order to be effective. We have one team dedicated to offering creation or new product development sourcing. Their mission is to enable on time, on cost, product launches and they’re typically co-located within the business. They’re with the marketing and research and development teams ensuring that we bring in the external technologies that we need to support the product development and also that we comply with the sourcing strategies helped by the category management team and our supplier selections.
[16:23] Dan Bartel:
The third pillar is the regional pillars, and we have of course about 200 factories all around the world, and we embed procurement folks in all of those factories mainly driving execution. You have category management, setting the strategy, new product development, assuring that long-term we’re complying to those strategies, and we bring in the external technologies and the regional teams executing, getting the job done on a day to day basis. Then, one falls organization that is a global transversal driving and enabling around a few different topics. One being quality, something we’re trying to continue to improve. Sustainability, which is a big agenda for us in Schneider and of course the digital transformation, which is a big change and one that requires transformational support.
[17:17] Radu Palamariu:
Specifically, for the sustainability agenda, which is a big topic of discussion across the board in MNCs. How are you contributing to the sustainable agenda of Schneider from a procurement perspective? Maybe if you can give us some examples of sustainable sourcing methods or practices that you have in the company.
[17:42] Dan Bartel:
Sustainability is on the top of the agenda for Schneider, as a corporation mission with respect to sustainability is to provide energy and automation, digital solutions for efficiency and also for sustainability. On procurement, our mission is directly in line with that, and we are the standards for our suppliers with respect to sustainability and kind of two areas, one being corporate social responsibility and the other third being a product compliance with respect to the corporate social responsibility. We’re a French company, to comply to the French duty of vigilance law, which is mainly driving compliance and unsocial topics related to human rights and to the environment. We also drive compliance to conflict minerals, and this is a US regulation, and Schneider’s not subject to reporting, but we still feel responsible for making sure that we drive that social agenda forward.
[18:46] Dan Bartel:
We hold all of our suppliers accountable for compliance to the conflict minerals and regulation in the US and I think 26,000 is the standard that we hold all of our suppliers accountable, and then we executed through our partner eco-Vegas. Those are the main social responsibility aspects from a product compliance standpoint, in different companies organize in different ways. In Schneider, we’ve decided to lead product compliance, from procurement, mainly because most of the works are interactions with suppliers and confirming the content of the products that we’re buying from them. What I mean by product compliance or things like reach roll house compliance to California’s proposition 65. There are many others that certain products need to comply to and then maybe the last remark to make on the topic of sustainability is related to a recent announcement of our chairman and CEO, Jean-Pascal Tricoire.
[19:51] Dan Bartel:
Previously, Schneider had the commitment to be net zero carbon by 2030. We’ve recently announced that we’ve moved that up to 2025 and in addition to that, we’ve made a commitment to have our entire supply chain a net zero carbon by 2050. Now 2050 sounds pretty far away, but we have tens of thousands of suppliers, all of which emit carbon to some degree. It’s a big challenge that on our plate now, and that’s been put in front of us to drive toward a net zero carbon supply chain in the future.
[20:27] Radu Palamariu:
Definitely good to hear and I’m really hoping that more companies will follow. We’ve seen some great announcements, and I will name them because I think that they do need to be named for all the good work that they’ve done as well. Unilever specifically, they’ve done some tremendous work in the sustainability aspect of their supply chain and you, Schneider Electric is leading the way as well. Actually through your solutions, I think you can enable and continue to enable a lot of your clients to manage their energy consumption better and obviously the energy does translate into a more sustainable way of doing business if you do it well. That’s always great to hear because obviously it’s something that we should all care deeply about, since we only have one planet. I also want to shift a little bit of the conversation to something that you mentioned. You mentioned agility and there is definitely an innate challenge between an agile and a flexible type of approach and a standard sourcing process that a lot of times needs to be put into place. How do you and is there a way in the first place to manage this conundrum and maybe if you can share some examples of where sourcing processes still age are whilst maybe streamlined in some other ways.
[21:57] Dan Bartel:
|We definitely need to be flexible and more agile with these processes on one hand, we want our stakeholders internally to be compliant and there are two procurement processes so that we assure you that no professional job is done in sourcing the products and services that support our business. On the other hand, because our customers’ behavior is becoming more diverse and more unpredictable, we have to become more agile and more streamlined in those processes. It’s definitely a well-recognized conundrum from my side and a couple of things that we can do about that, is first and foremost because of the digitization, which I talked about before. If, you can take those processes and make them as touchless as possible then that’s a boost.|
[22:49] Dan Bartel:
But that’s not the entire answer, not by a long shot. I think partnering with suppliers can really simplify things and what I mean by that is we’ve had a selection of a handful of what we call strategic end game suppliers. These are the suppliers where we’ve made a long-term commitment to each other to grow the business together, and we’re shifting substantial amounts of business from our tail suppliers into these strategic ends game suppliers. In doing so, rather than sit and negotiate every individual alignment line item, we’ve agreed to shift the large chunks of business kind in the market baskets and not to worry about haggling over each individual price. We set up some commercial rules as to how pricing will be automatically calculated so there are things that can be streamlined.
[23:45] Dan Bartel:
One other good example I would say is the negotiation process and maybe coming back to the topic of electronic components. We in the past, have spent hours and even days sitting together with suppliers with a list of hundreds or even thousands of numbers, haggling over individual prices. We do it because we want to drive productivity, and we need to get cost reductions to the business, and we’re an engineering company, we’re detail oriented, and we think that it is a good way of driving value. The problem is it’s terribly inefficient. It takes a lot of time for both of us and the supplier, and we’ve totally changed it in the last few months the way that we run these negotiations. What we do instead is we invite suppliers usually around 20 to 30 on any given day, we have some executive speeches with them, letting them know what’s going on in our business.
[24:43] Dan Bartel:
We have some workshops with them around, the new digital tools that we’re rolling out, and then we sit with them individually and have negotiations. We limit the time to only two hours, and we don’t talk about individual line item pricing. We talk about the entire package, we put all the commercial issues on the table, we resolve them in a matter of a couple of hours after a couple of months of preparing for the meeting but the interaction itself is very streamlined. At the end we sign a term sheet, on both sides that confirm, what our agreement is and the negotiation are done. I think, just a sort of recap, we have to do things that we’re always going to have to do just from a compliance standpoint, and we have to digitize as much as possible to get rid of that transactional stuff. Partnering with suppliers and raising that level of trust between the suppliers and us are an important aspect and then, things like this negotiation process change, we have to change the business processes themselves to make them more agile and more streamlined.
[25:43] Radu Palamariu:
Moving to a specific group of companies, which are startups. When you deal with startups, we know for a fact that innovation to a large extent is driven by small companies, it is driven by nimble companies and is driven by this startup, that has been around for one or two years on the market.
[26:14] Radu Palamariu:
You’ve already given some examples, but specifically for this category of engagements, do you have certain other ways or more particular ways in which to connect to make sure that you don’t miss out on this rich innovation coming through the startup environment? You have all these payment terms, and you have legal aspects to take care of, you have a bunch of considerations when you make a contract, and start-ups are quite a different ball game to deal with altogether.
[26:42] Dan Bartel:
If we apply our standards and practices, for a startup, they will never make it through the first gate, especially in the early phase startup company. Absolutely a customized approach is required and for me, there’s a handful of things that need to be done differently. This is how we manage it in Schneider, first, the team that is managing those relationships is special that they need and not necessarily dedicated to what they need to be. I had the right level of experience in managing these complex relationships and they need to less the procurement professionals and more kinds of business professionals with a real business mindset and entrepreneurial mindset so they can communicate well with startups
[27:38] Dan Bartel:
It helps a lot to have some real tangible expertise in the category so that they can speak intelligently to the founders, and they need to be agile, adopt, learn how they work. I can’t be too rigid from a process standpoint, and you have to be kind of the type of people running those relationships. A second would be the process, and the tools that you use that need to be special, they need to be much leaner and more flexible than the traditional tool. I mentioned the qualification process, we’d have aged qualification process for startups that we follow and that’s not really qualification. It’s more on assessment resulting in an improvement action plan that we agree with the founders.
[28:30] Dan Bartel:
We also check much more closely with startups on the strategic fit which we don’t assess their business processes because usually they don’t have many, we assess instead their business plan, where they’re taking their company, just to make sure that it’s well-aligned on how we see that technology in that relationship developing. Third I would say is the connection with stakeholders internally, we can have a marketing manager, who’s super excited about developing a relationship with a startup. We need to connect with that person, an early process to make sure that they are following our processes while their processes are streamlined, we still need to follow the federal procurement process to make sure that we bring the relationship up in the right way.
[29:19] Dan Bartel:
A continuous risk assessment is also something that needs to be done together with the stakeholders to make sure that we create something together with the startup that in the end is viable. I would say just the last point, would be coaching and development it’s a different kind of thing. We were with a more mature company, and you just set an expectation, point out the gaps and let them do the work with a startup, you really have to help them along. We really need to help them through that development plan, bring them the resources they need, to close the gaps, help them hands-on with their business model as the relationship goes forward and helps develop it into something that can bring value to Schneider, it’s definitely an area where I see an opportunity to support. Coming back to one of your earlier questions about how do you see us aligning to the goals of the business? Our collaboration with startups and our work in procurement in developing those relationships is to enable the revenue and the top-line growth of the business.
[30:33] Radu Palamariu:
Since you’re on this point, I need to ask you the million-dollar question. How do you measure and what are the metrics that you used to measure success of procurement in Schneider Electric? I think we have that saying across procurement, on how to measure value beyond savings because in a lot of organizations and unfortunately, I don’t know what to call it and procurement can cut the cost. This is the only or the primary measure of success, but we both know that there is no partnership, and it’s not a long term necessarily view. How and what is your metrics for knowing that procurement Schneider Electric is successful?
[31:17] Dan Bartel:
We all have KPIs, we’ve got a lot of them, and some are traditional, and we’ll always have those traditional KPIs by the way. Some are a little more progressive maybe I’ll talk about the traditional ones first. First and foremost, it’s cost reduction or savings or what we called productivity. A year over year of the external is always going to be the center stage of procurement in my view, we talk about all these interesting, sexy things about growing the top line of the business, sustainability and all of that, which are absolutely the future and are absolutely more relevant in procurement, but if you’re not getting the cost production, then it’s hard to engage in all those other discussions with the business.
[32:08] Dan Bartel:
Productivity, I see as the thing that keeps the lights on is when procurement something we always have to deliver, a similar with cash. Driving cash improvement in terms of average payment terms of purchase material inventory, driving improvements when their real improvements are a relevant KPI. Of course, you have the operational performance metrics like quality on time delivery, lead time of your suppliers and then maybe the last of the real traditional things would be just compliance. A compliance to our quality audits, compliance to all the sustainability requirements that we talked about earlier, relatively black and white things. I would say looking at a little more on the leading edge of what I see as the KPIs that are really going to help us drive the transformation we’re trying to drive.
[33:10] Dan Bartel:
First and foremost, complexity. We have a very complex supply base, mostly because of the heritage of our company, it’s a collection of dozens of individual companies that have come together over the course of the last few decades. We have a highly fragmented spend, a lot of suppliers, and we measure of course the number of suppliers. We also measure how many connections do we have from supplier to factory, and we have specific targets around reducing those things and what we’re seeing is that we produce a number of suppliers, as we reduce the complexity, we free up resources and free up energy in our organization. For example, we went from a couple of hundreds of packaging suppliers in continental Europe, a couple of years ago to today we have used to have eight people in procurement, managing packaging and now we have one.
[34:07] Dan Bartel:
One is probably too many even because it’s tremendously simple, we’ll just one supplier. The complexity measures are I think very relevantly, at least for our business and hopefully for many others. You have asked me about startups, we’re measuring how many innovations are coming into the business from startups and mature companies. What’s the resulting business impact in terms of revenue, in terms of bottom line from those innovations and that’s something that we followed. We’re following stakeholder satisfaction, while on the one hand we want to drive compliance to our processes internally. On the other hand, we want to make sure that our internal stakeholders have a good experience, so they keep coming back to us instead of trying to get around us. We also measure the engagement levels of our people, our team and that’s super important, and we want to have an engaged workforce so, we have an annual survey that Schneider runs on a global basis, that we in procurement, have sliced and diced our segment to understand where people are engaged and where they’re not. We create action plans around and maybe just one other KPI dimension that said, we have a lot. I wasn’t kidding. Yes, definitely weren’t kidding.
[35:29] Dan Bartel:
Instead of measuring a lot, it was last year, the amount of revenue that we’re generating from suppliers. This is not a procurement KPI, it is definitely a sale KPI. As you mentioned, we have products and solutions that can really help just about any kind of manufacturing company, in terms of, driving energy efficiency and sustainability improvements or that have a real bottom line impact on their business. We’ve been doing in procurement is opening doors for our sales team to ours, mainly focused on our more strategic suppliers and to bring in the eco structure suite of solutions to help them drive efficiencies in their business, which by the way, when it works well, we ended up benefiting from, because our suppliers are becoming more efficient, and they can offer us more cost reduction. It’s something that I think is unique and honestly as a procurement professional that the last thing you want to do is complicate the relationship of your supplier with cross trading topics.
[36:32] Dan Bartel:
It’s not about the kind of doing this strictly on the basis of helping our suppliers become more efficient. Sometimes they go for it, sometimes they don’t, we don’t hold them accountable either way. We just opened the door, and we’ve seen, a tremendous amount of growth because the most strategic suppliers are always going to listen to the sales pitch, and if they buy into it then, great. If not, then we haven’t lost anything and one thing that I think is innovative in terms of the KPIs that we measure.
[37:05] Radu Palamariu:
I’ve never heard about this actually. So far, I have not heard of this. That requires quite a different, I mean, obviously in procurement typically, there’s one type of skill set, and it is almost, not almost, it is a sales pitch which is a very interesting approach and ultimately, as you said, if your suppliers find it useful, why not? If you don’t ask, you don’t get so and that is very interesting.
[37:38] Dan Bartel:
I could just clarify on that a bit as well. So, we’re not selling anything right in procurement, but for example, we had our, recently in Barcelona just a few weeks back, our global supplier day when we invited 120 of our most strategic partners or a day of exchanges on the usual topics. On the second day, one of the things that we offered to suppliers optionally is what we call B2B workshops, business to business workshops where we add our sales team, basically pitching our solutions to our suppliers and that was tremendously successful. That’s not a job that, procurement did, we just invited the sales guy, to make this pitch and again, we just opened the door and a heck of a lot of effort from procurement, and it brings in a ton of value to the business.
[38:37] Radu Palamariu:
I got it. It’s clear. It’s still, it’s a good initiative and good way to put things and again, it’s a good way to position procurement as a partner to the business as an equal to the business. This was a good kind of moving to the final bit of discussion but not a total lastly, if I can say that. About talent, about people and about the type of skills that we need and procurement for the future, where do you see it going? Specifically let’s touch upon a sensitive topic, we talked about data, so we talked about automation, AI, artificial intelligence is thrown about every conference. I think way too much, too many times, but there is a reality that then machine learning, that automation that’s going to be, a lot of things that will be streamlined and automated in procurement. Where do you see the skills that procurement professionals will need in the future increasingly to stay relevant in the first place?
[39:41] Dan Bartel:
In Schneider, we want to position ourselves to be the most attractive employer for procurement in our industry. Hopefully, some of the things that I’ve described support that, but one thing that is going to make us different from all the rest is definitely the people because we can do all the best processes and all the best tools and technology, digitization in the world, but all of that can be copied. For me, the one thing that can’t be copied is the capabilities, the energy and engagement of the teams and the quality of the people. It’s absolutely at center stage for me in terms of enabling all the things that we’ve talked about today, and I think you’ve strongly hinted to some of the things that I see as a gap in Schneider and probably in many other companies as well.
[40:38] Dan Bartel:
That is digital acumen for sure. Myself included in this, really understanding the art of the possible, with respect to digitization, what it means for daily work, and this are a skill that is absolutely something that needs to be amped up. I think in many procurement organizations, I would highlight the business acumen, again many of the things that we talked about, require us in going well-beyond the traditional competencies that we have in procurement. Yes, we have to be good at negotiation, and we have to be good at contract management. We have to be good at this kind of traditional procurement processes, but did you take it to the next level? We have to be business people, and we have to understand, what is it about our business model that creates value for shareholders and what are all the things that procurement could be doing to enable that?
[41:40] Dan Bartel:
We’re a function that works on a cross-functionally, everyday sitting with R & D, with finance, with manufacturing, with quality, et cetera. To understand how the whole network of the business operates and the kind of being the one that fills the gap in between functions are the key. We need people that are open-minded and willing to step in and fill those gaps, and I can give you an example from my past. Way back when I was, my first CPO gig was in Thomas and Betts, in the US this was 10 to 12 years ago and one of the gaps we had been between the purchase price on raw materials and the selling price of finished goods, in procurement we absolutely had the responsibility to buy as well as we could.
[42:34] Dan Bartel:
In sales, they absolutely had the responsibility to execute the price increases but what got lost in between is the translation of inflation in raw materials and to individual product pricing. We took the lead in procurement, and we developed tools and systems to make those calculations. If aluminum, copper and steel went up by X, Y and Zed percent, what did it mean for a particular product that had different levels of content of all those materials? We served on a silver platter to the sales team, the price realization they had to get in the market to cover that inflation, and I don’t think traditionally in procurement you wouldn’t do such a thing, and you would just buy as well as you can. To have people that are willing to step, one step beyond at least, the kind of boundaries of the traditional procurement function, and to be brave to just step into that world, which is important, and I think something that can really differentiate a procurement team.
[43:43] Radu Palamariu:
I wanted to ask you, we got together through the procurement conference event that you will be attending soon and the important topic that you mentioned is also about developing talent and it’s attracting talent is one, that is your employer brand, that is your image on the outside. But then once you get them in, there’s obviously a plan to develop and retain your top procurement leaders. What are you doing at Schneider Electric on these two topics? Developing and retaining talents in actual fact, a lot of the times retaining comes because of developing, isn’t it? So, tell me a little bit about this.
[44:20] Dan Bartel:
Great point. You know, fundamentally the organization’s set up a supply chain, and Schneider is a big supporter of this and now organizational design doesn’t solve everything. I mentioned procurement is fully centralized, and we’re actually part of a broader global supply chain organization that has also really centralized. My boss is the chief supply chain officer and basically every factory in the company is reporting into him, with that we have, the procurement which logistics, planning and all the main supply side functions that get together with manufacturing in one large organization. With that, you have massive career development opportunities, and it’s much easier for us in Schneider to share talents and to give the best talent, the best opportunity at the best time, as compared to a company that is more segmented and fragmented by business or by geography.
[45:21] Dan Bartel:
We have this environment that is well-suited for developing talents, and I think we have a good purpose. This is a meaningful place to work and with Schneider, the world is becoming more electrified. Schneider is delivering to the market, digitized solutions that result in very tangible and substantial improvements in energy efficiency. It’s being a part of something that is meaningful to me is very fundamental to the engagement of employees, and it’s a very personal topic for me as well. It’s one of the main reasons that I came into this company and having that meaningfulness opportunity, to move around into more interesting roles, and we have a leadership team that is very willing to take chances on young talent with hypertensive, and we do that on a regular basis.
[46:23] Radu Palamariu
Final question from me in terms of all the younger professionals in procurement listening to this podcast. Now, aiming to one day to become a Chief Procurement Officer and as well as listen as in general, what was the best career advice you ever received that helped you most in your, in your progress so far to CPO?
[46:47] Dan Bartel:
That’s a great question. There’re two things I think maybe I’ll mention first and foremost, is the advice that I took from my wife a long time ago, and in case you were witnessed to this, I must say that it’s the best advice I’ve received. I was working, for the first seven years of my career and it was a very safe company and interesting place to work. I had many different roles, I was always challenged, always engaged, but I was getting a little bored, and I found an opportunity for a company called Danaher, which probably everyone knows now because you know what Larry Culp was the former of Danaher, now the CEO over at GE. I had an opportunity to jump to Danaher at a time when no one had heard of this company.
[47:38] Dan Bartel:
I think Larry Culp was just one or two years into his 10-year tender tenure as a CEO. It was a big risk, I perceived it as a big risk. It was a relatively small company at the time, a few billion in revenue, and it was my wife actually that convinced me. She was like, what do you have to lose because I work out just to figure something out? So, it takes chances are the message here because I made that jump and Danaher is a company still today where, if you have an energy and potential, they’ll just continue to pile on more challenging work. I was only there for three years, but it was, I’ve probably received 10 years of experience in that period of time because of the environment that I was in.
[48:26] Dan Bartel:
So, take a chance when you have an opportunity, go for it, and if it doesn’t work out then, something else will. The other thing that I’ll mention with respect to career advice is a former opportunity mentor of mine, when I was having my first development discussion with him, he asked me what my ambition was, and I indicated the heavier job, he was the CPO at the time over at ABB. He said, you can’t do that unless you get your MBA, get your advanced degree and at this point, I was already 40 years old. I thought I was too old for that, but he convinced me to look around. I found a program that I like, and I went for it, and that was one of the best decisions I’ve made professionally.
[49:09] Dan Bartel
I went to an executive program for about a year and a half and It was a challenging year and a half but from that I’ve developed a whole new level of leadership skills, I’ve developed a lifelong professional contexts and friendships, frankly, that are totally invaluable and also I’ve realized a kind of a new thirst for learning. I read books now regularly, which is not something I was doing prior to doing the MBA. So, take chances and never stop learning are my two biggest pieces of advice.
[49:50] Radu Palamariu
Or if I can rephrase it, marry wisely. That’s great. Those are a great piece of sharing, and I’m also convinced that I have a fundamental family and our wives play an important part in our development as well as lifelong learning is so crucial, especially in today’s environment with anyway and everything changes, drastically and rapidly. Thanks a lot for all the sharing for all the case studies for all the good examples. It was a pleasure to have you with us today and all the best in your future endeavors. It’s either the next week, have a great night. Thank you.
[50:44] Radu Palamariu (Outro)
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