Insights for Procure-to-Pay and Finance Leaders

Welcome to Supply Change, our new podcast on the future of the supply chain

The supply chain world moves fast—new technologies and global forces drive constant change across the industry. To help you keep up, we’ve started Supply Change, a podcast that explores the modern supply chain and everything impacting it.

It’s hosted by Roy Anderson, our CPO and Digital Transformation Officer, and Ron Volpe, our Chief Supply Chain Evangelist and Vice President Apps Business Development, and it’s available now, wherever you already listen to your podcasts.

Roy, a well-known thought leader in procurement, previously held a number of key procurement leadership roles in financial and manufacturing organizations including MetLife, State Street, and MetaProcure/GoProcure. And Ron, an innovator in the field, has worked to integrate the supply chains of trading partners for over 25 years across more than 30 countries.

Take a look at what we covered in the first episode below:

Looking back to look forward

Companies and entire industries have tried for years to address persistent problems along the supply chain, but dysfunction remains. Much of it comes from company to company miscommunication and, from a procurement perspective, the failure to keep up with innovation. So how do we fix these problems? Two new approaches are emerging:

1. The role of design thinking

Ron Volpe’s work centers around applying design thinking to supply chain innovation. A Harvard Business Review article inspired him to collaborate with Ideo to redesign supply chain processes.

2. Bringing a human touch to procurement

Roy’s journey took him across the whole world of procurement, from Raytheon to Metlife and Mutual Insurance, and eventually to Tradeshift. By far, the most exciting part of his  work has been what he describes as “going beyond the bits and bytes,” to find the human interaction. “When you have a wide variety of customers, you have to be able to explain to them why they should use better, more innovative suppliers, even if that means change,” he says.

The grieving process of change

This just in: people don’t like change. We know, shocking, right? Change can trigger a grieving process which forces you to work through why something painful is happening and how it’s going to affect you. With respect to the supply chain, this means helping customers see why a new way is better before you ask them to use it.

Change is relentless…and that’s okay

Keeping things the same for the sake of keeping things the same has never worked for any industry, and the supply chain is no different. Imagine a world before smartphones, laptops, and email. It’s hard, isn’t it? But just as we digitized our daily lives, we’re finally digitizing the supply chain. And that means constant change, not only in how you’re doing it but also in what you’re doing. There are going to be new relationships and new sellers that you’ll have to build relationships with that don’t even exist yet in fields that you would have never expected. But relax, that’s the exciting part of working in procurement today, and preparing is what will help you create resiliency within your supply chain.

We’ll be dropping another episode in a couple weeks that’s a discussion about why people “hate” procurement. Join us as Roy uncovers where this stems from and how innovation in the field can alleviate frustration.

Subscribe to our blog and be the first to know when the next episode of Supply Change drops.

Show Transcript

Transcript

I’m Ron, and I’m Roy. Welcome to Supply change.

Roy :24

Just a little bit about why we’re here. The world of the supply chain is fast evolving new technologies, new approaches in the supply chain itself are much more important to the success of companies today than ever before. And what we want to do in this podcast is to be able to explain some of the elements of that supply chain, the technology that’s being brought forward, the new suppliers that are there, you know, what are the issues that have been historically a problem with this space? And why do people have the opinions of procurement and supply chain that they have? And let’s see if we can have a discussion that explains from our perspective, what really matters. So Ron, why don’t you tell me a little bit about yourself.

Ron 1:00

I lead the app ecosystem development team, as well as being what I consider the chief supply chain evangelist at Tradeshift, my background is both supplier and retailer. So I spent many years in the supply chain at Kraft Foods, leading organizations globally around the supply chain. And one of the things we tried to do during my time at Kraft was relate better and connect better with retailers, so our customers. Lots of challenges and supply chain, lots of opportunity.

One of the challenges we always had, and that we always battled, was how do we connect well as retailers? So we really made this an end-to-end supply chain after Kraft. I decided one way to work to solve this, if we couldn’t solve it for one end was to go to the other end. So I joined a Coles, an Australian grocery retailer to see if we can solve it from that. And so having worked on the supplier and tried to fix those jobs just went to the retailer end and started to work on connecting back upstream with suppliers that was partly successful. And moving over to Tradeshift was a logical next step for me, because it was an opportunity for us to solve some of the disconnects we had from a technology perspective.

Roy 2:12

So a little bit about who I am. My background has been in procurement my entire career, I had the opportunity to meet with the chief procurement officer at Raytheon and liked my story. And like the work that I’ve done and said, Would you like to travel to the west coast and become a buyer, all I heard of that conversation is travel to the west coast.

When I got there, I found out that I was actually going to become a buyer. So then I had to find out what in the world a buyer is all about. What I learned is that I love the concept of how technology was impacting that space. So at Raytheon, one of the wonderful opportunities they gave me was to say, how do we take this mainframe environment we have in a paper based activity. Now, this was in the last century, of course, and be able to streamline that process. So I was able to bring the mainframe programmers to say, can we connect this supply base with, with our mainframe output a product in the bill of material to create a more accurate solution. The impact was phenomenal. I mean, the amount of accuracy and speed of the process changed the entire world as to how Raytheon handled procurement going forward. So I quickly learned that technology in the procurement was going to be a driver for everything we did.

And then I got called to move from manufacturing into financial services in a small company called Fidelity Investments was looking to build out a procurement function. So that back in the 1990s fidelity was 100% digital with a homegrown procurement system and an epi back end for orders and invoices. I took that experience and worked with John Hancock when they were going public, 125-year-old Mutual Insurance Company going public — big changes and how companies did business and worked with a company called Netscape, which many of you may have remembered from the distant past and built out a HTML based e-procurement system with Netscape and working with the MIT Media Labs with frictionless commerce who ultimately became part of SAP to be able to put in the sourcing contracts management structure p2p solution back just before y2k, and for those that don’t know y2k that’s year 2000 when everything was about to shut down, Supposedly.

Then I had the opportunity to work with Metlife and take the arrival solution global work with State Street and Oracle and spent a few years working with a company that was trying to manage tailspin with GoProcure before I started with Tradeshift.

Ron 4:52

So you know, one of the most exciting parts of my career over the last 15 years, I had an opportunity to work with a company called Ideo in Palo Alto and learn really how to get deeply into design thinking. So I think hopefully, we’ll have an opportunity in a future podcast to talk about design thinking. But the challenge we had a craft was I think we were we had  approached it was a bit of “build it, and they will come” to supply chain programming. And what I learned when I went over and spent five or six years with Ideo working on design work in supply chain is that the notion of design thinking, the notion of empathic design, the notion of understanding what our end user really wants in a product was really a pivotal moment for me from a career perspective.

And, honestly, it was, it’s what I think changed the way I thought about supply chain for subsequent years. So you know, the way that story started, and as I said, it was a pivotal moment, was I had read an article in the Harvard Business Review about Ideo and the work that we’re doing in design thinking, and the work that we’re doing making product for Apple and others and rang them up and said, you know, what, I don’t make any products. What I do do is build supply chain design, do supply chain design work, and but it’s transactional, it’s process-based. Coincidentally, they were building out an area in their organization called transformation by design. At the time, it was really about how do we build processes using design thinking that use for product development. So we began a process at Ideo, this goes back 10 years to start to redesign supply chain processes, a craft using this kind of thinking, and, and honestly, and we’ll talk more about it. But this is probably one of the most pivotal and exciting moments in my career so far.

Roy 6:38

You know, what I find really exciting about the procurement space is that this is more than just bits and bytes of data, but it’s actually about human interaction. So when I’m working with internal customers, and internal customers are very wide variety. So at Raytheon, I was dealing with rocket scientists. And I’ll tell ya, when you’re dealing with rockets, scientists, they are very, very specific that they fully understand what’s going to happen. And some kid out of college wasn’t about to tell them that they’re going to need to change their product, or their specifications or their supplier, all the way to dealing with advertising agencies working with the large insurance companies. And what’s really interesting is when you get into the hedge fund managers who are spending, you know, half a million dollars at a whack on a particular item. And when I’m talking to them about saving $50,000 or $100,000, and they came back to me and said, well, Roy, I’m making over $100,000 an hour for this company. I’m not sure if your savings really matter to me.

So when you have a wide variety of internal customers, and you need to be able to explain to them the opportunity to be able to use better suppliers, more innovative suppliers, but it would require change. And what I found most interesting is the concept of change management inside the procurement function. Because whenever there’s a product or service and procurements getting involved, I’m sourcing it to be able to find a better supplier or a better product or service and, or how we are buying that product or service.

So each case, the internal customer has to relate differently to that new environment and getting them to buy in now, you would think that would be pretty simple saying, Hey, I’m going to save you $100,000 on this item. But the internal customers see this very egocentric Lee they look at their own area and saying, Well, if I try this new item, it could create risk for me and my, in my job is now at risk, because I’m moving to something new that I’m not familiar with.

People don’t like change. Actually, what I found is, I was told by one individual, that that change is actually a grief process, that you actually have to go through this concept of, you know, “they’re doing something to me, this is painful, this is the end of the world” and you have to help them find the other side of that change. So I see procurement as not only a technological change activity, but more importantly, how humans interface with that technology and with their suppliers to do better.

Ron 9:21

Roy, out of curiosity, what’s been the most frustrating part of your career so far?

Roy 9:26

So what I found is the transactional nature of procurement is painful. Now, it is clear that every single item needs to be bought. And there has to be a back and forth between the internal customer and the supplier. And of course, there’s incoming receiving and accounts payable. And now you have your auditors and finance and compliance people that are all looking at the process to make sure it’s clean and neat and easy and fast and appropriate. But we end up doing so much work with transactional activity, that there are so many procurement functions that think their strategic, but in actuality, they’re just still mired down in that heavy duty transactional work. A good example of that is, I go into a company when I spent some time doing consulting, and I asked them, you know how strategic they were. And they said, “well, Roy, where we moved totally just to the strategy side of the procurement function, strategic sourcing, demand management innovation.” And in actuality, they had buyers on the side, still dealing with paper.

And one of the things that really bothered me the most, that frustrates me the most, is that the rule of no PO, no pay. Now some people think that would be a great thing. But what it what it caused was accounts payable, looking at a paper invoice with no purchase order on it, and then just sending it to purchasing and then purchasing group, would then have to create a purchase order after the fact that concept adds no value, and actually creates more errors than it could ever solve. But it is the driving of that transactional work.

So my goal was always to eliminate transactions through the technology through third parties, it through the supplier doing the work themselves so that the very important senior procurement people can actually spend their time with their internal customers, the leaders of the company to be able to understand what’s required one, two, and even three years out, so they can bring supply chain solutions to that. So that transactional nature that used to bog people down was absolutely the most frustrating. Have you experienced that Ron?

Ron 11:41

Yeah, so if I was going to call it the thing that I think is most frustrating from a supply chain perspective is, it’s I think people don’t realize and organizations don’t realize is that it’s a shared supply chain. And we used to, when I was running supply chain workshops around the world, using this design thinking, we would always start with the notion of, “if you are one supply chain, how would you do things differently?” And it was a way for people to think differently about kind of where they sat in the organization.

So I think the, the, the thing that got in the way and gets in the way most to optimize supply chain is the fact that there’s silos — and there’s internal silos and there are silos across companies, and your ability to break down those silos. And your ability to think about end-to-end processes is something that really can get and create new value that it hasn’t existed in the past.

Now, I’ll relate it back to what we’re doing it at Tradeshift. So we’ve tried to solve that problem in the past again, when I was on the supplier side around the world. And then when I was on the retailer side, in Australia for a while, we’ve tried to solve that in really relatively primitive ways. So really fairly manual ways, a lot of relational kind of things to try to solve that.

The reality is the greatest way to collaborate, frankly, is through data. And I think Tradeshift offers kind of a new way. And that’s really why I came. That it offers us a new way to break down some of those silos by leveraging data and collaborating around that collaborating around the data rather than collaborate around particular individual shipments or organization. So it’s really exciting, I think, it’s a new way to work. And I think it’s honestly it’s what drew me to come and be a part of tradeshift.

Roy 13:22

Hey, now, Ron, now over the last five to 10 years, what have you found that so different between where you were 10 years ago and where we’re going now.

Ron 13:31

My friend Gary Hamel from the London School of Business has said before that “the world is becoming more turbulent faster than organizations are getting resilient.” And I think that’s a massive opportunity for us. I’ve heard our CEO Christian talk about it. And the reality is the proliferation of data, the opportunity, the proliferation of technology has really made the landscape quite different now than it was five years ago. And as a result, changes and examples, and I read an article recently that gave examples around global warming and gave around examples around tariffs. It gave examples around labor situations that the changes and the impact that these kind of things are happening in the in the world is increasing exponentially. And organizations just aren’t built to be resilient and work through those. So there was also in that same article, they talked about the fact that supply chain disruption has on average of 40% impact on corporate earnings, significant supply chain disruption. So again, the issue is resilience needs to be built up. I think Tradeshift can do that. And it really has an impact directly on bottom line earnings. How about yourself?

Roy 14:56

So I was teaching a class at Northeastern in supply chain, and most of the students in there were finance or accounting players that took the supply chain as an extra class. So I asked them, I said, “Go back to a company that you’ve worked with, because they do a lot of co-ops and look at their income and expense report from 10 or 15 years ago, and then compare it to your expense report today.” And what they found was very, very telling is the fact that the amount of labor salary compensation costs were dropping rapidly, almost 50% of the cost dropped and all those expenses were moving into suppliers. So the concept of outsourcing. IT outsourcing to India, or manufacturing outsourcing to organizations around the world, even your HR function, your mailroom function, your R&D function; all of those functions have gone through a process where you’d have core key people that stay inside the company. But the rest of the spin has all moved out to yourself supply base. So therefore, you have a significant increase in how suppliers are impacting the success of every organization. They’re going to be the place where more innovation is coming from. So it is vital that those that are managing that supplier relationship are now pulling new information innovation from their suppliers more effectively, because it is becoming a larger and larger part of a company success.

They did a review down at Ford and the Ford Mustang, the chair of Ford at the time came back and said, the Ford Mustang 70 to 75% of the value of that car came from suppliers. So all of their work, all of their manufacturing was being done by suppliers. And they were just basically doing final assembly and test so the company was much more R&D and marketing and then suppliers providing all the components and then doing final assembly test before they shipped it out to there the dealerships but is that fact that the suppliers are becoming a bigger part of every company and it’s growing faster and faster than it’s it’s made a huge difference in how procurement needs to act and the level that it has to have, you have to have individuals that are there more aware of the world the issues, they have to understand the risks inside the supply chain and be able to take mitigating facts against that. The changes are not only faster in the last 10 years, the next five years is even going to be faster. And the ability to have the right technology and the speed of that technology is going to make a huge, huge difference.

Ron 17:43

And you know, Roy, to build on that I think, you talk about technology, I think one of the things we’re going to start seeing is development of new business models. And related to something we did a very manual way in the past were working with when working on the craft side, on the supplier side — working with a retailer, we decided to go all in from a supply chain perspective and say, we’ll put all the costs in one bucket and all the benefits. And the other bucket and we’ll share in both. And I think when you were able to do is create significant new value when you start thinking about if we’re both invested in the cost to deliver product. And we’re both invested in a benefit that comes out of it increase sales, for example, I think when we start thinking differently about the things we do, that’s not easy. That was really hard, it was heavy lifting to get that off the ground. I think more and more though, as data connects companies in ways they haven’t in the past, I think we’re going to see the proliferation of opportunities to continue to manage supply chain it far more and, and way that we have in the past.

Roy 18:39

And the idea that this is not just a supplier and a technology and a stock keeping unit or SKU, but it is actually the services. So when you think about work done, so when I was at Raytheon though we had a huge bill of material and we produced very large products for the for the military and the commercial side, we were producing products for the digital technology age, computers and word processors. When you looked at the activity, the spend of the company 40-50, even 60% of spend was in the service element. So we’re talking the consulting and staffing activities, that is a whole new look at what’s required.

So SKU has a specification that’s very specific, and you find the right products and materials. But when you get into services, you’re talking about dealing with people and deliverables and capabilities. And when you have third party scenarios, then your internal customers are impacted each and every day, by the results of those suppliers. So that human interface becomes an enormously important value. So employees have to become the skilled knowledge direction and have the culture of the company where the suppliers are providing that innovation and thought leadership as they go forward.

There’s someone was a concern, they said, “Roy, as you outsource this activity, do you feel bad that there are some people that lose their job inside that company?” And, my point to them was one, many of those people move into the supplier, and therefore they have the opportunity to grow inside of their skill set more effectively. But I remember the Reader’s Digest article that said, 150 years ago, 97% of everyone in the United States worked on or for a farm. So today, less than 2% of the people work on for a farm. And I personally am so happy for those 2%. But that means 98% of the people and now doing radically different things.

They’re saying that kids going into school today are preparing themselves for a job that hasn’t been invented yet, that there’s going to be new relationships and new suppliers that we’re going to have to be able to get to. And that’s the exciting part of being a part of this structure.

Do you see that same same scenarios?

Ron 21:03

Yeah, absolutely. Absolutely. And look, there’s an article out there, they talk about the fact that supply chain overall is going to look completely different in five years, that is, you know, and the digital supply chain is coming on a hard and fast. And the reality is that while there may be the same number job, they’re going to be very different job than we’ve had in the past and supply chain. So, I think one of the things I hope we can explore future conversations about is, is how do we help organizations navigate that path to supply chain digitization, I think we offer an opportunity to on ramp in a simple, efficient and fast way. So I’m hoping we can explore that in future conversations.

Roy 21:41

Yeah, and then we’ll also be talking about like, you know, why do people have such a bad opinion about procurement and supply chain today, and how can we help fix that? And, you know, the chief procurement officer, the C-level person, why are they not actually sitting at the C-level? So, we’re going to get into those types of discussions. And Ron, as you mentioned before, I think will be just talking about design and I look forward to being able to have that conversation with you.

Ron 22:04

People are going to love procurement after they hear more and more from you. So it’s gonna be terrific.

Roy 22:09

All right. Let’s see if we can make that happen.

Ron 22:11

You’ve been listening to Supply Change. A Tradeshift podcast. Thanks for joining us.