ABB – Brochure 2020

ABB: Taking procurement to the next level in times of change

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ABB: Taking procurement to the next level in times of change As part of a broader digitalization journey, ABB looks to transform indirect procurement...

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D al e Bent o n Hey kel Ou n i

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he concept of procurement transformation seems almost old fashioned in the sense that

it’s something that all major businesses and organisations are currently going through. These transformations are often incredibly complex and full of any number of moving parts and so the challenge is breaking that complexity down into sizable and manageable actions that will allow the company to deliver major change.

Technology and the concept of digitalization is a common driver of change within a procurement transformation journey. To put it simply, gone are the days of experience-based decision making. In its place?

Data to create actionable insights.

As a technology leader that drives the digital transformation of industries all over

Procurement at ABB and Martin Tomczak,

the world, ABB is certainly no stranger

Head of Strategy, Process Excellence &

to the concept. With a history of innova-

Digital within Global Business Services

tion spanning more than 130 years, ABB

(GBS) Procurement & Logistics function at

has four customer focused, globally lead-

ABB. Procurement & Logistics being one

ing businesses: Electrification, Industrial

of the services delivered by GBS, which is

Automation, Motion, and Robotics &

ABB’s shared services organization, deliv-

Discrete Automation, supported by the

ering operational and expert services in

ABB AbilityTM digital platform. ABB is

Finance, Human Resources, Information

the go-to partner for digital transforma-

Systems, Procurement & Logistics, Legal,

tion, but what happens when the digital

Global Travel Services and Real Estate.

transformation comes to indirect procure-

With more than 7,000 people based in five

ment at ABB? This is the challenge facing

main hubs and front offices, GBS provides

Daniel Stumm, Global Head of Indirect

business services to ABB teams across the

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globe.

in those business lines, plus their indi-

“The value of indirect procurement

vidual procurement and finance teams,

at ABB is based on the fact that we are

to deliver greater value to our evolving

an internal service provider that aims to

business in line with their business prior-

create a positive bottom line impact for

ities, and drive tangible impact to the

each single business line, while also keep-

profitability.”

ing our ROI as an organization above benchmark,” says Stumm.

“With the decentralization of ABB

As procurement began to engage with the wider ABB businesses it became apparent that procurement spoke its own

launched in December 2018 we trans-

language; one that wasn’t immediately

formed from a headquarter-focused

understood by the business. “We needed

support model, to a service model that

to step back and put the emphasis more

benefits our businesses. Today we work

strongly on the business needs,” says

much more closely with the internal clients

Stumm. “We did this so that we could try 5

and realise their expectations in a way that would make them happy customers and add procurement as a true financial impact – creating an increased purpose as indirect procurement.”

Tomczak, as Head of Strategy, Process Excellence and Digital, knows all too well about the role of data analytics in enabling this true impact. “The time of decisions based on mere experience is over. We must listen to what our company’s internal data tells us and we do that through data lakes,” he explains. “Very early on as part of this journey, ABB was quick to create better transparency by breaking down data silos. Only then can we begin to connect the dots and make the right decisions based on the right data in a quick and effective way.”

The ‘right’ data Having the right data and making the right decisions quickly is fundamental in order to adapt and survive in an ever-shifting market. It’s written within the DNA of ABB that the company understands and acknowledges customer satisfaction and in order to do so, ABB requires data. Stumm highlights that customer satisfaction is a key KPI for indirect procurement. Indirect procurement measures the satisfaction of its broad internal customer range using Net Promoter Scores (NPS) on an annual basis with a defined group of internal clients. Running in parallel to this, they also measure service quality on a transactional level with customers that use its services. Whenever a customer completes a purchase request through the procurement system or ServiceNow ticketing system, they can rate it between one and five. Stumm highlights that this is similar to how travel and restaurant customers 6

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use TripAdvisor to rate their service, and

business intelligence dashboards and

how organisations use that information to

detailed spend analytic tools to enable

listen to the customers and improve.

quick decision making. First and fore-

As procurement works closely with each

most however, this team is not made up of

ABB business, Stumm believes that each

purely procurement people; it is a combi-

business has a ‘different flavour’.

nation of people in IT and analysts that

“While we are all part of ABB, there are different objectives across our four businesses– even in terms of expected

have a good understanding of ABB’s business intelligence.

This is particularly important and bene-

service quality from us,” he says. “The

ficial for ABB throughout the COVID-19

customer is our business and so we’ve

pandemic. “Indirect procurement needs to

implemented an internal ecosystem that

react fast in terms of cutting discretionary

enables constant dialogue with the busi-

spend, an example of which being market-

ness and therefore the customer. It’s about

ing events that have been canceled,”

making them a part of the decision-making

explains Stumm. “In order to resolve this,

process so that we are together from the

the team needs to be able to quickly

very beginning of a project. If we feel friction on something at the early stage, then we can address it together and overcome it. The only way we are going to succeed is by doing it, and failing in some regards, together.”

The power of analytics Analytics then, is crucial to this ecosystem and constant dialogue within ABB. This in turn redefines the very profile of procurement. ABB built a team of dedicated data analysts, called a ‘Performance Management Team.’ This team, situated in ABB’s Krakow and Bangalore GBS hubs, is focused on the fast development of 8

“We have to accept first of all that we are not there yet. We may be close to the Champions League in some areas and in the Champions League in places, but we still have to improve” — DA N I E L S T U M M , G LO B A L H E A D O F I N D I R E C T P R O C U R E M E N T AT A B B

access and check the cancellation fees of the contract and explore the options available.”

In order to achieve this, a tracking system was needed.

“Thanks to our Performance Management Team and their IT expertise, we now have digital dashboards implemented and operating within our Bangalore and Krakow offices,” explains Stumm. “They really stepped up big time. It’s not just us (the management team) who need the access, but our controllers, finance people and people from the business. We now all have an overview on the overall exposure to ABB so we can see, in real time, just how we are working to reduce the exposure to ABB. I think that’s a completely new field of play for the indirect procurement teams, thanks to digitalization.”

Data storage and analytics continue to be of great significance to ABB moving forward. This has completely revolutionised a number of ways in which ABB indirect procurement monitors its operations. For example, with regards to travel, ABB now uses one global travel agency, connected via one global platform.

continues in pg 72 9

Accenture: a trusted partner to help solve procurement’s new value equation Accenture has worked closely with ABB to assess its procurement maturity and define the transformation journey. The challenges facing ABB’s indirect procurement team are not uncommon – enable procurement to reveal greater value to a broad set of stakeholders with different business priorities, become a trusted business partner and optimise digital investments to benefit from the power of digital.

Markus Hoppe, Principal Director at Accenture Strategy

range of specialised, high-value apps to create a vastly

explains: “many procurement teams now realise they

improved experience across the value chain.

must revisit their propositions to make them better suited

Finally, with technologies like machine learning

to the digital age. In practice, that means more closely

and artificial intelligence maturing fast, procurement

aligning their services with business needs and adopt-

leaders are looking at how related applications can

ing new technology to increase operational quickness.

be used to boost the performance of their workforce

And as this is happening at a time when digital skills are

and even fundamentally reshape procurement roles.

in short supply, procurement teams are also having to

By deploying smaller, more focused teams armed with

invest in reskilling their team members.”

new skills and working alongside machines, procure-

In its work with procurement organisations from some

ment organisations can help address the skills gap.

of the world’s largest companies, Accenture has iden-

Moreover, the approach allows procurement teams to

tified a three-step process by which procurement can

tack away from transactional tasks towards a new role

release value in their enterprises.

within the business as architects of value.

First, procurement teams must look at how to best

These three parts of procurement’s new value equa-

turn data into value. Leading procurement teams are

tion underpin ABB’s own transformation and have in-

building data lakes on top of their ERP systems to

formed a roadmap that will allow procurement to make

consolidate data from across their enterprise. Ad-

a new role for itself. The plan was made before the

vanced analytics is then applied to the data, provid-

COVID-19 pandemic hit, yet despite the huge changes

ing procurement with unprecedented visibility and

that COVID-19 will bring in the years ahead the prior-

insight. This data reveals much more than just what’s

ities identified by Accenture remain valid. If anything,

being bought from which supplier and sheds light on

the COVID-19 crisis reiterates the need for responsive

the material’s provenance, the supplier’s service level

and flexible procurement practices that match exactly

agreements (SLAs), delivery and performance, and

to the needs of the business – precisely what ABB’s

even sustainability practices. This information allows

transformation is all about.

procurement to answer a wider variety of questions and gain valuable insights for better decisioning.

Second, procurement teams increasingly see the value of creating a seamless and throughout experience across procurement, suppliers and internal business

Markus Hoppe Principal Director Accenture Strategy markus.hoppe@accenture.com

customers. This move requires a much more flexible technology stack that focuses on functionality, ease of use and driving desired outcomes. As a result, many procurement teams are ‘hacking the stack’ by augmenting their new cloud-based ERP solutions with a wide

Karin Larsson Senior Manager Accenture Strategy karin.larsson@accenture.com

w w w. cp o stra te g y. co m

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Through this dashboard, controllers and

stepped up, consolidated down to one

decision makers within ABB can see where

travel agency, and made that enhanced

people travel, understand the negative and

life.”

positive outliers in that travel and they can

Another area of significant change is

even see whether a booking was made

temporary labor. ABB is working to imple-

on time - all in line with GDPR. “We really

ment an analytics system that will provide

have a new level of transparency with this

complete visibility on its total external work-

approach,” explains Stumm. “That wouldn’t

force. This has redefined the approach

have been possible if procurement hadn’t

entirely, particularly in ABB’s Switzerland

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operations. “We’re no longer just negotiat-

alternative, we can now ask the question as

ing markups for temporary agencies, where

to whether these roles could be filled with

we take a little bit at total cost. We have the

apprentices too.”

ability, thanks to all the data, to analyse the temporary labor workforce individually.”

“We can then look at things like; are they

Stumm believes these conversations, thanks to analytics, represent the huge power of procurement and indi-

working longer than the usual 18 months

rect procurement. Indirect procurement

within the company? Rather than wonder

can look even further at how it influences

whether they can be in-sourced as an

not just spend decisions and investment

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decisions, but also other areas, like sustain-

Hoppe, Principal Director of Accenture

ability, travel and labor.

Strategy, has worked closely with Daniel and Martin as part of this assessment and

Benchmarking

will continue to do so throughout the trans-

All of this talk of data and customer satis-

formation journey. The remit was simple,

faction speaks to the broader concept of

define the plan for the future within this

benchmarking. Capturing and analysing

decentralised model. “Procurement in

the data is one thing, but you need to be

leading companies is beginning to look

able to benchmark against the market

starkly different from what it used to. This

and against others doing the same. “In

requires that you look beyond simply;

soccer terms, my ambition is to play in

this is where we are today and where we

the Champions League,” muses Stumm.

could be tomorrow,” he says. “It requires

“We have to accept first of all that we are

you to think about how you can reinvent

not there yet. We may be close to the

yourself and work out what is the art of the

Champions League in some areas and in

possible, fueled by pockets of excellence

it in others, but we still have to improve.”

that we see in the market?”

“It’s about putting the facts on the table and going back to the business, involving them in our development while also working with the outside world and benchmarking ourselves. So not locking ourselves in our small castle, that’s key to improving.”

To that end, ABB called upon the services of Accenture to develop a strategic roadmap. This began with an exercise in assessment and an in-depth analysis of how ABB’s indirect procurement operates by speaking with its customers, its internal teams and with leadership.

Markus Schebitz Managing Director at Accenture Strategy, along with Karin Larsson, Senior Manager and Markus 14

“We have to move away from searching for the right problem for a particular solution. Therefore, a proper demand collection process is key to drive digital transformation. It allows us to focus on the best possible solution approach for each identified opportunity and its underlying business case” — M A R T I N T O M C Z A K , H E A D O F S T R AT E G Y, P R O C E S S E X C E L L E N C E , D I G I TA L , G B S P R O C U R E M E N T & LO G I S T I C S , A B B

Accenture took the ABB leadership team on a ‘Procurement Digital Safari’ to deep dive into the platform and niche solutions in the market and how those solutions could benefit ABB in its journey. 30 key focus areas were identified and together the two companies explored and identified gaps and current capabilities and how to improve them. Through this, a roadmap was born.

One that was accessible and developed with a top-down approach.

“You need to ensure that you bring leadership on the journey and the solutions actually help them solve the problems that they have on the ground,” says Schebitz.

“You need to realise you can’t become the leader in everything. It’s just impossible. You need everyone from the top down involved.”

Schebitz compliments the way in which ABB have collaborated with Accenture in allowing them to understand what ABB wants to be. Schebitz feels this was important in finding the right priorities for this journey. “We spent a lot of time with the leadership team to enable them all to be able to articulate this,” he says. “That for me 15

has been the key input to ensuring that

so. Tomczak reflects on the role in which

the roadmap that they’re putting in place,

Accenture has played in this.

is actually in line with where they need to improve.”

“Working with Accenture, we’ve been able to identify smaller initiatives complementary to the ones we had on our

A focused approach to technology

agenda already ensuring alignment with

Digital transformation can become awash

the bigger transformation picture,” he

with buzzwords and inundated with tech-

says. “Managing this complexity can be

nologies that may or may not provide

very difficult especially for decentralized

value. Schebitz admits that it can be easy

companies with a strong global presence.”

to fall victim to this and invest because

Through this roadmap, ABB can look

of market trends. The approach to digital

closer at the procurement tools at its

transformation is something that Tomczak

disposal and how best to streamline

in particular is keen to rethink. “We have

processes. This includes the use of

to move away from the traditional thinking

Amazon Business Services as a market-

of digital transformation where we feel it’s

place for tail end spend, something which

all about this one big project that solves

Stumm highlights was inspired from the

our problems but in reality, will never

B2C experience. “We also still push e-auc-

get implemented,” he explains. “We also

tions which is nothing new, but it’s some-

have to go away from searching for the

thing that’s still not used sufficiently in the

right problem for a particular solution. A

area of indirect procurement from our

proper demand collection process is key

point of view,” he says. “Using e-auctions

to driving digital transformation. It allows

is an important basic step to truly digitalize

us to focus on the best possible solution

sourcing, laying the groundwork for sourc-

approach for each identified opportunity

ing automation.”

and its underlying business case.”

In building a demand collection process,

ABB also collaborates with big as well as smaller tech companies to utilize the latest

ABB will avoid focusing on solutions such

technologies. The outcome of such collab-

as Robotics Process Automation (RPA),

orations are projects and studies around

chatbots or machine learning in the first

the usage of Robotic Process Automation

instance but rather on the opportunity to

(RPA), chatbots and text mining as well as

transform the perceived value by doing

an agnostic user interface to drive usability

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and offer internal employees one go-to

journey. “The average age of our team

service point for their requests. Usually the

members is quite young. So technology is

biggest value derives out of projects that

really close to their heart as they’ve grown

take the strengths of different technolo-

up in a digital world,” he says. “In order for

gies and combine them into one solution

us to leverage the capabilities of the new

design.

technology and the digitalization of our department, it’s also a question of mind-

Empowering people

set and having those people that are in

Around 60% of ABB’s Indirect

tune with the technology driving it. There

Procurement Team are located in Global

are those who aren’t as tech savvy, but

Business Services main hubs situated

we see that the rest find it easy to follow

in five countries, including India, Poland,

because with the footprint that we have, it

Estonia, Mexico and China. Stumm is

comes naturally.”

keen to highlight the importance of bringing procurement practitioners along this

Stumm notes that, where necessary, ABB will invest in upscaling its staff because 17

“It requires you to think about how you can reinvent yourself and work out what is the art of the possible, fueled by pockets of excellence that exist in the market” — M A R K U S S C H E B I T Z , M A N AG I N G D I R E C T O R AT AC C E N T U R E S T R AT E G Y

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they will be closer to the customer - the key stakeholder.

These customers need to be brought along the journey.

As Stumm highlights, customers in the digital age may favour self-service but that does not mean removing face to face human interaction. “ABB has done a tremendous job in the past with digital workspaces and new ways of working to enable efficiency independent from locations, time zones and age. In addition, it allows us to engage with our stakeholders around the world” says Tomczak.

With a roadmap in place and eyes set firmly on making the right decisions now in order to enable a better tomorrow, Stumm is committed to his belief that ABB’s Indirect Procurement needs to be playing in the Champions League. He also recognises that, even when the company gets there, the job isn’t done and the journey doesn’t really end.

“We’ve benchmarked and outlined where we want to go with the help of Accenture. But that’s just part of the journey,” he says. “We still have a lot we need to do.

What’s important is that we never stop and that we never stop listening to our internal clients. We must continue to benchmark ourselves against the market and therefore provide true value to ABB.” “It goes back to what I said earlier, we need to involve as many people as we can and not lock ourselves in our small castle within procurement. Only then can we continue to provide better service quality.”

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