The Purchaser Issue 19

A LETTER FROM THE EDITOR

Welcome to the latest edition of The Purchaser, where we delve into the ever-evolving landscape of business and procurement. In this issue, we bring you insightful interviews, thoughtprovoking articles, and expert perspectives that shed light on the dynamic nature of modern business practices.

We kick off this issue with an exclusive interview with Zach Peña of Empirix Partners. Peña shares his visionary insights on the future of business consulting, emphasising the importance of trust as a two-way road and the significance of building teams composed of talented individuals from diverse backgrounds.

Koray Köse delves into the intricacies of holistic risk management, highlighting its critical role in the supply chain and how adopting a holistic approach can enhance organisational resilience.

Axel Lundströme of Danone joins us for an enlightening discussion on the evolution of procurement, exploring how procurement has transformed into a powerhouse, driving strategic effectiveness and sustainability within organisations.

Roche executives, Sebastian, Nicolai, and Patrick, share their innovative approach to digital transformation and provide valuable insights into how Roche is navigating the digital landscape to stay ahead of the curve.

Joseph Martinez engages in a thought-provoking conversation on the importance of diverse teams and inclusive work environments. Martinez discusses strategies for creating a workplace that values and leverages the unique perspectives of every individual.

Finally, John Sitilides offers an in-depth analysis of current geopolitical risks, their impact on supply chains, and how they are expected to evolve in 2024.

We hope you find this issue of The Purchaser insightful and thought-provoking, as we explore a diverse array of perspectives.

We appreciate your continued support and look forward to bringing you more exciting content in the future.

&

CREATIVE DIRECTOR

EDITOR

EDITORIAL DIRECTOR

SENIOR DESIGNER

PRODUCTION MANAGER

JUNIOR DESIGNER

PROJECT MANAGER

Stroud & Clarke is a cutting-edge multichannel digital media company that produces exceptional technology, business and lifestyle content via our portfolio of digital magazines, websites and social media platforms.

© Stroud and Clarke Ltd 2024. All rights reserved. Whilst every effort is made to ensure that information is correct upon publishing, Stroud and Clarke Ltd is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this magazine is provided “as is”, with no guarantee of completeness, accuracy,timeliness or of the results obtained from the use of this information. This magazine may not be reproduced or used in any manner whatsoever without the express written permission of the publisher except for the use of brief quotations in a book review.

FOUNDER & COO CHARLOTTE CLARKE

FOUNDER & CEO JAMES PEPPER

TOM CAMP

FOUNDER

CRO JACK PASCALL

TARA QUINN

BECKY NORTHFIELD

HENRY ALLTON-JONES

HANNAH LEWIS

ALEX NEAGU

KIMBERLEY STOTT

CONTENTS

6. INSIGHT EXEC SUMMARY News, views and insight.

12. INTERVIEW

ZACH PEÑA - EMPIRIX PARTNERS

The future of business consulting, the two-way road of trust, and building teams of talented individuals, regardless of their backgrounds.

28. LEADERSHIP KORAY KÖSE

Discusses the intricacies of holistic risk management, its critical rolein supply chain, and how it can help organisations.

36. INNOVATOR

AXEL LUNDSTROME - DANONE

How procurement has evolved to become a powerhouse of strategic effectiveness and sustainability

46. PORTFOLIO TECH YOU NEED

Innovations for work, leisure and the environmentally conscious.

55. INTERVIEW

SEBASTIAN, NICOLAI, PATRICK - ROCHE

An innovative approach to digital transformation.

66. INTERVIEW JOSEPH MARTINEZ

On diverse teams and inclusive work environments.

76. INSIGHT JOHN SITILIDES

Current geopolitical risks, their impact on supply chains, and how they are projected to evolve in 2024.

86. TOP 10

86. TOP 10

TV shows about Advanced Technologies.

90. EVENTS

The best events for 2023.

EXECSUMMARY

A bitesize collection of news, content, ideas, thoughts, and papers from around the industry.

EXECSUMMARY

GOGORO CROSSOVER

Taiwanese company Gogoro is known for being a pioneer in the Electric Vehicle space, especially due to its specialism in swappable EV batteries. Now, Gogoro is continuing to break boundaries with the introduction of the Crossover.

Boldly claiming the title of the “first two-wheel SUV”, the Crossover is designed to be incredibly versatile and customisable, conquering rough terrain for outdoor adventures, but also taking to city streets with ease. Multiple colour combination possibilities allow for the user to truly feel as though they are making the scooter their own.

An all-terrain frame, increased storage capabilities, different cargo-carrying options, a long-lasting belt-drive system, and real-time online vehicle controls create the ultimate user experience, no matter your needs. This helps Gogoro achieve its goal of helping riders “ride across life’s diversities” and “live with no boundaries.”

GOGORO.COM

PROCUREMENT PATHWAY

Many companies are spending time mapping out potential pathways within their supply chain towards a more sustainable future, and multinational confectionary company Mars is no different. The company has published an action plan to push towards achieving Net Zero emissions by 2030.

Mars is planning to invest $1 billion into driving climate action over the next three years, focusing on transferring to entirely renewable energy, stopping deforestation within its supply chain, optimising their products’ recipes, and working with farmers on regenerative agriculture.

MARS.COM

INTERNATIONAL FEDERATION OF ROBOTS

The International Federation of Robots has published the New World Robotics report, which found 553,052 industrial robot installations in factories worldwide. Asia is the largest market by far, with annual installations of over 350,000. Europe and North America remain the second and third largest markets, and seeing installations increasing by 5% and 8% respectively.

Marina Bill, President of the International Federation of Robotics states that “in 2023 the industrial robot market is expected to grow by 7% to more than 590,000 units worldwide.”

WWW.IFR.ORG

PHOTO: RODION

HARNESSING AI

According to a study from award-winning digital transformation consultancy Daemon, with assistance from market research agency Vanson Bourne, 99% of 150 businesses surveyed are looking to seize new opportunities in the adoption of AI, with 98% already having a vision of where to implement it.

Despite recognising AI’s potential trajectory, 49% of senior leaders had low confidence in implementing AI in their organisation due to reasons such as it not aligning with current technologies, fear of security threats, and difficulty finding trusted vendors to work with.

WWW.DAE.MN

PHOTO:

SHORTS

Container x Change report shows that Panama Canal water levels are predicted to continue affecting trade in 2024.

Toyota expands a previous deal with Redwood Materials to source recycled materials for its battery supply chain.

Amazon will expand AWS capabilities with an additional four cloud application features in 2024.

Nestlé moves half of its global shipping needs to greener fuels.

PHOTO: ISRAEL ALBORNOZ

PHOTO: DANIEL ELEDUT

PHOTO: ALEX PAGLIUCA

PHOTO: ANDREA LEOPARDI

ZACH PEÑA ENABLING TRUST

ZACHARY PEÑA, MANAGING PARTNER AT EMPIRIX PARTNERS

DISCUSSES THE FUTURE OF BUSINESS CONSULTING, THE TWO-WAY ROAD OF TRUST, AND BUILDING TEAMS OF TALENTED INDIVIDUALS, REGARDLESS OF THEIR BACKGROUNDS.

A long and varied career path has led Zach Peña to his role as Managing Partner at Empirix Partners, yet now he’s there, it seems almost fated. Since leaving high school and joining the Marine Corps, Peña has travelled the world, gaining vital experience and people skills, developing the communication and trust needed to work with those across multiple industries and cultures.

“The basic forms of communication most definitely form the way that I connect with people and the way that I can have empathy with individuals,” Says Peña. “This enables interactions that focus on getting to that end goal. And I’ve kept that mentality all the way through.”

After leaving the Marine Corps, Peña moved to the University of Tennessee, achieving a degree in supply chain management, and quickly found himself going into industrial manufacturing at Georgia Pacific. Here, he found many benefits in being thrown in at the deep end of a new role, which he has carried forward in his career and into leadership roles.

“I got put into the food industry side of the house and I got to go and source a lot of things that they didn’t make. That forced me to, very quickly, become comfortable in a very uncomfortable space. That’s a core tenet in place at Empirix today, we make sure all of our employees have that ability to be comfortable being uncomfortable.

PHOTO: STEPHEN ELLIS

“I learned very quickly because I was going out and being trusted with probably way too much for my age and my level at working there.” He continues. “But I was travelling all over the United States, all over North America, and trying to figure out how to put a jigsaw puzzle together, upside down in the dark.”

CLIMBING MOUNTAINS

Peña got his first taste of data centres after joining Insight Sourcing Group. Here he was, once again, thrown into the deep end with a client, CyrusOne, and had to use his wealth of experience to keep up and adapt.

“I was very quickly humbled and understood that I had a giant mountain to climb. Over my time there, I helped run the entire global supply chain for CyrusOne, did new market entries into Europe, did a lot of things I’d never done before, and had to learn data centres from the ground up. I got all the bumps and bruises in and

it was great. That’s where I established many of the relationships that I leverage today. Without that role, being where I am now would be very impossible. After that, this little firm called Microsoft loved what I was doing and I went to work for them.”

Working for a company as large as Microsoft is a completely different ball game and Peña notes how he brought a lot of what he learned in the Marine Corps with him to help carry the weight and power that comes with working in such a fast-paced and respected machine.

However, he also recognises how, despite the scale of the company, it’s the relationships between people that can make or break a client experience.

“I found that relationships own the day, and I made that a core tenet of everything that I did,” says Peña. “I treated people as

PHOTO: JOEL RIVERA CAMACHO

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people, I treated suppliers as partners, and I treated everyone as they should be. That grew and grew and we reaped the benefits of it.”

Trust and relationships forged with clients and managers alike led Peña to a role at NTT

“Pre-COVID was the golden age of sourcing and data centres. People were responsible with their cash, but money was basically free from a financing perspective. People hadn’t really figured out how they wanted to deploy at scale and a big data centre was still 30 plus megawatts. Everything is different now.

“Data is my battlefield of information. I learned very quickly that I need to grab it, understand it, influence it, and effectively communicate it to others.”

Global Data Centres, tackling new challenges and building a supply chain department from the ground up, and then to Decennial Group, following the COVID-19 pandemic. After initially turning them down, DecennialGroup offered Peña the opportunity to become an SME and he couldn’t pass that up.

“ I Just didn’t think I would be at that level for a few more years because I had more stuff to do and see in the industry. But then they said, “We’re going to let you build your dream.” I went over as a partner at Decennial Group and very quickly formed this cool, new idea, finding a gap in the market in mission-critical. They need that trusted advisor to come in and be their right hand and provide them with all the key aspects of how to be successful in this crazy world we call supply chain, procurement and logistics. I started Empirix Partners just over 10 months ago and it’s been a whirlwind ever since.”

Over his career, Peña has undoubtedly seen a change in the roles that procurement and data play in organisations due to many key, evolving, and unavoidable factors. An obvious factor in the adaptation and evolution of any industry was the global pandemic.

“COVID hit and the world changed overnight. If you weren’t tracking the right commodities, harnessing data to do good things for you internally, and letting yourself be proactive in your communication, then you got hit by a truck. That was it.

“Data is king and I’ve had the mindset since I moved from the battlefield mentality to the corporate mentality, that data is now my battlefield of information. I learned very quickly that I need to grab it, understand it, influence it, and effectively communicate it to others.”

MISSION CRITICAL

When it comes to making a name for themselves in the mission-critical space, Peña has made it his mission to ensure that Empirix, (who provide strategic sourcing and procurement advisory services), champions transparency, trust, and strong relationships with those in the supply chain.

“These days people keep their cards very close to their chest. They don’t truly view the supplier, the vendor, and the service provider as a partner, and they never treat them as they should. That’s something that I’ve tried to do since day one, and it’s paid dividends.

“We’re building worlds.”

I’ve gotten rave reviews from people I’ve worked with, saying that I’ve given them the kind of transparency that builds trust and a vision they can believe in.”

Developing and implementing the concept of Empirix was not without its challenges for Peña and his collaborators. However, being given space to question procedures, develop tools, and find gaps in the market was greatly beneficial and allowed Peña to find a niche and put a stop to issues that he had previously run into throughout his earlier career.

“We’re building worlds. It’s the technological infrastructure for today and the future. You

would think that would be extremely complex and integral, and it would be this industryleading technology-driven space, but it’s not, which is wild. When we created all this stuff, we said, “Let’s give the people what they need. We’ve been in their shoes, so let’s make sure that when they’re going through the things that we went through they have a bridge to walk over instead of having to go through the pit of despair.”

“So, that’s what we did. We made sure to have very repeatable, regimented processes, procedures, and tools that we could very quickly deploy on day one, that are easy to

It’s harder than ever to build a world class supply chain program for mission critical projects. The right trust advisor unlocks the vault.

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Strategy Development

Program Development

Project Execution

Category Management

understand, easy to implement, and truly make an impact as soon as you put them in play.”

FOCUSING ON THE PEOPLE

Hiring the right colleagues and collaborators can be a challenge for any leader, especially if you’re in a space as intense as mission-critical. However, Peña says that he looks for three key things in new hires that allow him to place his trust in them to succeed in their roles and keep the human connection within the organisation alive.

“The first thing we look for is someone that’s extremely comfortable being uncomfortable. If they can do that, then we know that we can put them into many situations and they’re going to thrive. We can put them in front of clients they have never worked with before, and then because they have that skill, they can adapt.”

Peña highlights how his experience excelling at being thrown into multiple roles, in multiple fields, has influenced hiring processes.

“They don’t have to come from data centres and they don’t have to come from the supply chain. They could just be amazing people and very intelligent individuals. I’ve grabbed people from my past and I’ve grabbed people that knew nothing about data centres, but just knew how to build a business, and how to create solutions and products.

“The second thing we look for in new hires,” he continues, “are people who are great sponges. We need someone who can soak up everything, hold it, and know when to release it at the proper time. The third thing is simply good decision-making.

“If you can soak up the information, truly understand it, and then have the great decisionmaking to know when to release it into the wild from a communication standpoint, then that’s what we truly look for in an individual, regardless of their background or where they’re from.”

In the current world of remote and hybrid working environments, Peña has found that the trust he has always championed in his companies and their employees is more pivotal than ever, as organisations grow to find their new normals.

Having worked remotely for close to six years now, Peña explains that the sudden switch to remote being the standard felt more manageable due to his experiences, and his knowledge that he could rely on those around him.

“We have a shared headquarters with Decennial Group and some others within that ecosystem in Chicago, but we rarely use it. Even when we’re there, not everyone is there. Mutual trust is required when you’re working with someone you only see once or twice a month, who is often a little four-inch version of themself on your screen.

“You have to trust that you’re bringing on the right people at the right time and the right situations,” he says. “And they have to trust that we’re making the right decisions and we’re putting them in the right places to be the most successful. I wouldn’t say there’s any lesser degree of loyalty with the remote workforce, but the distractions of other opportunities are much more out there and accessible. If there’s that two-way road of trust, that’s pivotal to making sure that you get the right talent, you train the right talent, and you keep the right talent.”

It isn’t just in hiring that Empirix attempts to build bridges and stand out. The company brands itself as an advisory firm, rather than a consultancy, and makes it known to clients and partners that their advisors are not simply there to bring ideas to the table but to share in their successes.

“An advisor’s success is tied to your success and they’re not going to get paid unless you get paid. That’s the same mentality we have, that we want to come in and be a true partner and be that trusted advisor so that when things are going well, we can shake hands. We celebrate together. When things go wrong, they know that we have their best interest in mind. We’re there in the trenches with them, and we’re not just giving them things that look good on paper. We’re giving them things that are going to provide

“If there’s that two-way road of trust, that’s pivotal to making sure that you get the right talent, you train the right talent, and you keep the right talent.”

long-term sustainable value. I think that’s the big difference, consultants are great and useful at times, and I’d call them more like drop-ins when you need them to supplement. Advisors are there from day one through to day one thousand.

“Clients have to view us as a partner, and we have to view them as a partner because we’re solving problems together,” Peña continues. “You almost feel like you work for them and not for your firm, and that could be scary, but that’s a good thing. When the chips are down and you are going to solve a problem or jump over a hurdle together, they do look to you. They view you as part of the team and you’re not some thirdparty asset they brought in because they had to.”

Whilst the future of the industry is uncertain and ever-changing, Peña has a vision for both the future of Empirix, and their upcoming projects, and for business consulting and services in general.

“I can’t say too much, but we have current developments in the startup side of the house. We’re getting to involve ourselves at the beginning of the processes, to be that trusted advisor, and to build their supply chain as a whole, getting as much leverage out of that overall value chain as humanly possible.

“Opportunities like that are great as we get to amplify the skills that we have. We get to very quickly pass those along to the up-and-coming leaders within the organisation. It is just the best situation for us internally, commercially, and for the overall growth of Empirix.”

Despite the fact that technological development is a key factor in modern business consulting, Peña is optimistic about retaining the interpersonal connections with clients, suppliers, and teams that he has built into the DNA of Empirix.

“Being a consultant has drastically evolved from pre-internet times to now, with AI and machine learning. However, I do believe there will be certain functions within this preview of consulting that will eventually go away or will be drastically reduced. Just because it can be automated or data can save the day, it doesn’t mean that the need for someone’s opinion based on that data will go away. I believe that as long as humans are still running businesses, clients will want that human-tohuman interaction and that trust factor from the right people. I believe that will be there for a very long time.”

GLIDE PATHS FOR SUSTAINABLE GROWTH

Now in its 20th year, the World Procurement Congress has welcomed over 1100 CPOs to the stage and over 12,000 delegates through the door.

This remains the must attend event, providing inspiration through content, networking and social interaction for business leaders who have a strong desire to help progress the function, develop future leaders and create sustainable growth for all.

Leadership KORAY KÖSE ON MANAGING RISK

Across the globe, around 1.5 billion people do not have consistent access to electricity, and in places where electricity has become a necessity, demand is increasing rapidly. Therefore, any innovation that assists in a switch to more renewable energy should be brought into the light.

Today’s business landscape is rapidly, and constantly changing. You would struggle to find anyone, in any position, who would argue the opposite. That is why it is of paramount importance, now more than ever, that business leaders learn to carefully navigate the realm of risk, across the supply chain. We spoke with Koray Köse, Supply Chain expert and CIO at Everstream Analytics, about how essential it is for organisations to implement holistic risk management in order to enhance the company’s resilience to risk in an environment that is evolving every day.

The Purchaser: Let’s start with a brief overview of your career journey. Why is holistic risk assessment a topic that you are in an informed and passionate position to speak about?

Koray Köse: Throughout my career spanning over two decades, I have had the privilege of working closely with

CSCOs, CPOs, CIOs, and other C-level executives in various industries, including automotive, pharma, life sciences, IT, electronics, and FMCG. My professional journey has been marked by significant accomplishments in developing global supply chain and sourcing strategies, re-engineering and transforming business processes, and optimising financial resources for organisations. My experience extends to designing innovative business frameworks, implementing robust risk and governance processes, and deploying comprehensive ERP and procure-to-pay systems to drive efficiency through digital transformation. One of the key aspects of my career has been my ability to adapt and thrive in diverse industries, gaining insights into their unique challenges and opportunities. This breadth of experience has allowed me to develop a holistic understanding of risk management within supply chains, which is essential in today’s interconnected and rapidly changing business landscape.

In addition to my practical experience, I have contributed to thought leadership in the field through research and publications. My articles have been featured in prestigious publications such as The New York Times, The Economist, The Wall Street Journal, Forbes, and others. I’ve also had the privilege of sharing my insights as a guest speaker on television news channels like CNBC and CNA. Furthermore, I am actively engaged in initiatives that promote dialogue and collaboration between the private sector and organisations like NATO. My participation in the NATO 2030: NATO-Private Sector Dialogues, facilitated by GLOBSEC, underscores my commitment to addressing complex global challenges through meaningful partnerships.

In summary, my career journey, extensive industry experience, and thought leadership contributions have positioned me as an informed and knowledgeable expert in the realm of holistic risk management in supply chains. I am dedicated to advancing the field and helping organisations navigate the ever-evolving landscape of supply chain risk.

What is holistic risk assessment and why is it important?

Holistic risk assessment is a comprehensive and sophisticated approach to evaluating and managing risks across an entire organisation or a specific domain, such as the supply chain. It involves examining all critical changes, potential threats, opportunities both visible and hidden, internal and external, and considering their interconnectedness and potential impact on various aspects of the business. Loss prevention and opportunity cost in the context of value at risk and risk capacity are critical factors in this context. Holistic risk assessment is crucial and supply chain plays a vital role in it:

• Full-Scale Visibility: Full-scale visibility is fundamentally important for agility and resilience. It allows organisations to have real-time insights into their supply chain operations, enabling them to detect changes and potential risks and disruptions early on, from operational to strategic impact.

PHOTO: DREW BEAMER

• Interconnected Risks: Risks are rarely isolated. In the VUCA, PESTLE and other analysis approaches, it’s critical to consider the influence and causation. They often have cascading effects, where a disruption in one area can trigger a chain reaction of problems throughout the organisation. Holistic risk assessment helps identify these interdependencies and enables organisations to address root causes rather than just symptoms.

• Resource Allocation and Risk Capacity Management: It allows for better allocation of resources. It means more effectiveness and efficiency in manoeuvring uncertainties and sudden changes and events. Organisations have finite resources for risk management, bot utilization and mitigation. By identifying and prioritizing risks through a holistic approach, they can allocate resources where they will have the most significant impact.

• Supply Chain as the Anchor: The supply chain is often considered the anchor of holistic risk assessment because it is a critical and complex component of most organisations. The value generation and orchestration are executed and in most mature companies, also developed and deployed in supply chain. It involves numerous stakeholders across the board, processes, and dependencies, making it impactful but also vulnerable to a wide range of risks, including natural disasters, geopolitical issues, supplier disruptions, and more.

• Globalization and Complexity: In today’s globalized and interconnected world, supply chains have become increasingly complex and sophisticated. Raw materials, components, and finished products can traverse the globe multiple times, through multiple modes and nodes of transportation and activities before reaching the end customer and then its recycling or waste journey. This complexity amplifies the potential risks and underscores the need for a holistic approach to risk assessment as navigating in silos is not adding resilience or agility when exposed to a ripple effect.

• Customer Impact: Supply chain disruptions directly impact customers. Delays, stockouts, or quality issues can harm a company’s reputation and customer satisfaction and cause a lack of innovation sharing, collaborative and competitive development to advance fit, form and function of products and solutions. Therefore, understanding and managing supply chain risks is vital to maintaining customer trust, competitiveness and compliance.

• Regulatory Compliance and Governance: Many industries face stringent regulatory requirements related to supply chain practices. Failure to meet these regulations can result in fines, legal issues, reputational damage, and exclusion. A holistic approach ensures that compliance risks are adequately addressed, in the right context and by the right set of levers and stakeholders. Compliance isn’t just a legal or auditing requirement.

• Sustainability: Sustainability risks, including environmental and social factors, especially forced labour, have gained prominence and importance. A holistic approach considers these aspects, ensuring that organisations not only manage risks but also align their operations with sustainability goals and expectations for higher purpose-driven organisations

• Cybersecurity: In an increasingly digital world, cybersecurity risks have become paramount. Supply chains rely heavily on data and information exchange through digital technologies, making them susceptible to cyber threats. Holistic risk assessment incorporates cybersecurity as a critical component to safeguard operations and data integrity. It is a supply chain topic as much as an IT topic.

In summary, holistic risk assessment is essential because it provides a comprehensive view of all potential risks, their interconnections, and their impact on the organisation. The supply chain is central to

this assessment due to its complexity, global reach, and critical role in delivering products and services and generating revenue and cash flow for the organisation. By prioritizing supply chain risk management within the broader context of holistic risk assessment, organisations can enhance their resilience, agility, sustainability, and cybersecurity in an ever-changing business environment.

How does holistic risk assessment differ from traditional/siloed risk assessments?

Holistic risk assessment takes a broader and more interconnected view of risks, promotes collaboration, optimizes resource allocation, and enhances an organisation’s ability to adapt and thrive in a complex and dynamic environment. Traditional or siloed risk assessments, while valuable in specific contexts, often fall short in providing the comprehensive understanding and strategic alignment that holistic risk assessment offers. When organisations are looking to not only mitigate but optimise and even use risk in their value equation, holistic risk management is critical. Otherwise, it will be extremely difficult to orchestrate all dependencies and positively maximise the outcome result.

Why do you think that value creation and orchestration are still siloed in many organisations? What are some common challenges or obstacles you/companies encounter when implementing a holistic risk assessment approach, and how are they overcome?

The siloed nature of value creation and orchestration in many organisations can be attributed to several interconnected factors that only change by design and willingness but hardly by organic organisational evolution.

1. Historical, Static Organisational Structures:

Many organisations have evolved with hierarchical structures that emphasize departmental divisions. This legacy structure often leads to siloed operations, with each department primarily focused on its own goals and objectives. Even when Matrix organisations are put into place, it most often happens within a silo.

2. Functional Expertise: Departments or functional units often develop specialized expertise over time. While this expertise is valuable, it can also create silos when departments become isolated and protective of their knowledge and responsibilities. Internal trenching is a key impediment to value orchestration for higher-purpose organisations.

3. Incentive Structures: organisational incentives, such as performance bonuses tied to specific departmental metrics, can inadvertently encourage siloed behaviour. Employees may prioritize their department’s success over broader organisational objectives. Most often there is no sharing of KPIs or visibility to it. Organisations may even operate unknowingly competitive and conflicting KPIs with no balance.

4. Lack of Communication: Inadequate communication channels and mechanisms can hinder collaboration across departments. When information flow is restricted, it’s challenging to coordinate efforts effectively.

5. Technology Gaps: Legacy technology systems may not facilitate cross-functional collaboration and data sharing. Outdated systems can reinforce silos by making it difficult to integrate processes and data. This magnifies when holistic risk management needs to concatenate multiple tiers of partners inside and outside the organisation.

6. Cultural Barriers: Organisational culture plays a significant role. If the culture promotes competition between departments rather than collaboration, silos are more likely to persist.

7. Leadership Approach: Leadership that focuses on individual departmental performance rather than holistic organisational success can perpetuate silos. Leaders may not prioritise crossfunctional teamwork.

8. Risk Aversion: Fear of risks associated with change can deter organisations from breaking down silos. Equalising risk with “bad” or “negative” impact impedes holistic risk management. The unknown challenges of transitioning to a more integrated approach may discourage change.

9. Perceived Loss of Control: Some leaders and managers may resist change due to concerns about losing control over their specific areas of responsibility. A more integrated approach can challenge traditional power dynamics.

10. Time and Resource Constraints: Overcoming silos requires an investment of time and resources. In fast-paced environments, organisations may struggle to prioritise initiatives aimed at breaking down silos.

11. Lack of Digitalisation: organisations that have not fully embraced digitalisation may

find it challenging to break down silos. Digital tools and platforms are often essential for facilitating real-time data sharing and collaboration across departments.

12. Lack of Analytics Capabilities: The inability to leverage advanced analytics can hinder an organisation’s ability to gain insights from data across departments. Without data-driven decision-making, silos may persist as each department relies on its own methods and intuition.

13. Lack of Value Orchestration Platforms: Many organisations lack dedicated platforms or systems designed to orchestrate value creation across various functions. Without such platforms, it’s difficult to coordinate efforts and resources effectively. Emerging technologies are the driver of complex and sophisticated orchestration. Generative AI, ML, NLP and Graph Technology are a must for impactful value orchestration solutions.

PHOTO: LEVI MEIR

Addressing these multifaceted challenges involves a strategic commitment to change, strong leadership support, cultural transformation, and investment in modern technology solutions. Organisations must prioritise digitisation to augment cross-functional collaboration, open communication, and align incentives with broader organisational goals to break down silos successfully. The lack of risk appetite statements to govern holistic risk management programs is undermining the effort to orchestrate value. Implementing digitalisation focused on advanced analytics capabilities, and value orchestration are essential steps toward fostering a more integrated approach to value creation and orchestration.

What role do data analysis and data integration play in holistic risk assessment? How do you handle data from various sources?

Data analysis and data integration are foundational components of holistic risk assessment, playing pivotal roles in understanding, evaluating, and managing risks comprehensively.

Data Creation, Gathering and Aggregation:

• Data analysis begins with collecting relevant data from various sources within and outside the organisation, including financial records, operational data, supply chain information, and more.

• Data integration involves harmonising and aggregating data from disparate sources into a unified format. Unstructured data is hard to normalise without graph technology and at the same time critical as this ensures that data is consistent, accurate, and ready for analysis and creation of actionable insights.

Risk Identification:

• Data analysis enables the identification of potential risks by examining historical data, trends, and patterns and connecting them to a designated future state. The most prominent technique is called

“backcasting” in this context. It helps in recognising anomalies or deviations from expected norms.

• Integrating data from different sources provides a holistic view of risks that may span multiple departments or areas of the organisation and deeper into the supply chain. The biggest challenges are concealed and hidden in the tiers of the ecosystem.

Risk Quantification:

• Data analysis allows for the quantification of risks, assigning values to potential events – positive and negative. This helps in assessing the potential impact of identified risks and the value of actions to be taken.

• Integrated data provides a broader context for risk quantification, considering how risks in one area may propagate through the organisation and into the ecosystem and vice versa.

Early Warning Systems:

• By continuously analysing data, organisations can establish early warning systems that alert them to emerging risks in real-time. This proactive approach allows for timely intervention and utilisation of their strengths.

• Integrated data sources enable the early warning system to monitor multiple aspects of the organisation, providing a more comprehensive risk radar and concatenated with an action platform the perfect preventative enablement.

Scenario Modeling:

• Data analysis facilitates scenario modelling, where different risk scenarios are simulated to understand their potential consequences in a sandbox environment that can be replicated hundreds and thousands of times.

• Integrated data allows for a realistic

representation of scenarios by considering how risks across the organisation interact. It can also show the gaps of data that can be filled with synthetic data that helps to run faster and more efficiently.

Resource Allocation:

• Integrated data helps organisations allocate resources effectively by prioritising risks based on their potential impact. This ensures that resources are directed where they can have the most significant risk mitigation impact.

• Data analysis aids in optimising resource allocation by providing insights into which risks are most pressing.

Continuous Monitoring:

• Data analysis and integration support ongoing risk monitoring efforts. They enable organisations to track the evolution of risks and adjust risk mitigation strategies accordingly.

• Integrated data sources ensure that monitoring encompasses all relevant areas of the organisation.

Reporting and Decision-Making:

• Integrated data feeds into comprehensive risk management action platforms and subsequent reports and dashboards, providing decision-makers with a clear overview of the organisation’s risk landscape and the impact of their ongoing decisions operationally and strategic shifts.

• Data analysis assists decision-makers in making informed choices by presenting data-driven insights.

Handling data from various sources in holistic risk assessment involves:

• Establishing Data Governance: Implementing data governance practices to ensure data quality, security, and compliance across all sources. This is key for trust and safety.

• Data Integration Tools: Utilising data integration tools and platforms that enable seamless data harmonisation from diverse sources. Graph Technology databases are key in this area.

• Data Analytics: Leveraging advanced data analytics techniques, including machine learning and AI, to extract valuable insights from integrated data.

• Data Security: Implementing robust data security measures to protect sensitive information during integration and analysis.

• Cross-functional collaboration: Encouraging collaboration among departments and data owners to share relevant data and insights. This applies inside and outside the organisation.

In conclusion, data analysis and data integration are fundamental to holistic risk assessment, providing organisations with the means to identify, quantify, and address risks across the entire enterprise. Properly managed data from various sources enhances the organisation’s ability to proactively manage risks and make informed decisions in an everevolving business landscape.

AXEL LUNDSTROM PROCUREMENT’S STRATEGIC

FUTURE

AXEL LUNDSTROM, VP OF INDIRECT PROCUREMENT AT DANONE DISCUSSES HOW PROCUREMENT HAS EVOLVED TO BECOME A POWERHOUSE OF STRATEGIC EFFECTIVENESS AND SUSTAINABILITY.

Procurement has found its way to the very heart of business planning and performance, garnering greater strategic influence and impact than ever before. Particularly over the past two and a half years, enormous strain has been placed on the global supply chain from multiple sources including the COVID pandemic, Brexit, worker shortages and blocked maritime trading routes, airport disruptions and the Russian invasion of Ukraine.

For many organisations, the resulting disrupted manufacturing operations and materials delivery means that business continuity now hinges on the effectiveness of its procurement teams.

“A lot of potential has been unearthed in procurement because of these recent

challenges,” states Axel Lundstrom, VP of Indirect Procurement Danone North America, a purpose-driven company and an industry leader in the food and beverage category. “Procurement has been an overlooked category for a long time, and we’re now witnessing the effects of that neglect. We are seeing examples in our everyday lives, from chip shortages causing limited options in your new vehicle to delays in new home appliances and furnishings. This is evidence that many supply chains weren’t built resiliently or strategically.”

Lundstrom speaks from experience, having seen this picture unfold first-hand. A Danone North America employee of 15 years, he began in technical and operations-focused roles, leveraging a background in mechanical engineering to ensure the smooth day-to-day

PHOTO: JOHN MACDONALD

functioning of the company’s factories. Ten years ago, he made the transition to procurement.

“It was an area I wanted to better understand because it provides a much greater business context,” Lundstrom explains. “I like addressing complex problems, and with procurement you see a broader view of how the company operates, its challenges, and how they can be solved.”

A CHANGING LANDSCAPE

In this last decade, Lundstrom’s role has evolved significantly. Where his primary responsibility had previously been focused on improving the firm’s margins and bottom line, today his team is equally concerned with ensuring that key products are always available.

“I LIKE ADDRESSING COMPLEX PROBLEMS, AND WITH PROCUREMENT YOU SEE A BROADER VIEW OF HOW A COMPANY OPERATES, ITS CHALLENGES AND HOW THEY CAN BE SOLVED”

“It’s a big change,” he affirms. “This wasn’t a priority when there was an abundance of resources out there. However, today, there is a lot of pressure on organisations to think about how they are going to get the right materials from suppliers to the factory, to then produce products to send to the customer. Customer service level KPIs have always landed in the laps of sales and customer-facing staff, yet now it’s also a driver for both operations and procurement teams.”

Axel Lundstrom, VP of Indirect Procurement, Danone North America

Between an expanding role and growing reliance, it would be easy to think that organisations would simply rebalance the scales to invest more in supporting procurement teams. But for Lundstrom, simply pumping more money in is not a sustainable solution for addressing core issues long term. “If current challenges are to be overcome, procurement teams need to think more strategically and find ways to do more with less,” he explains. “That means focusing on consolidating SKUs, brands and orders, bringing in more repeatability and ultimately simplifying the operations.”

SMALL CHANGES, LARGE IMPACTS

Lundstrom’s advocacy of incremental and continuous improvement is reflected in Danone North America’s own procurement strategy, with the firm currently focused on optimizing its transportation network. This includes a meticulous emphasis on fully utilising the capacity of the company’s carrier network, while at the same time reducing the number of miles that each vehicle has to travel to reach its destination.

“Small changes can have a massive impact,” Lundstrom adds. “With these efforts we’re reducing the amount of labour and man hours needed to get the same amount of product from A to B, reducing the amount of time that our warehouses need to be open and the

utilities we use, which in turn lowers our costs as well as our carbon footprint.”

Be it future proofing the business with efficiency gains or reducing its environmental impacts, sustainability is a core focus of Danone at present, with the company also working to reduce its Scope 3 emissions by improving relationships with suppliers.

“We are starting to take a much longer-term view on our key partnerships,” Lundstrom explains. “Previously, the company would rarely entertain an idea of a long-term agreement – we have a farm that we work with on a cost-plus agreement that spans 25 years. This is almost unheard of, but we believe that if you can show your commitment to a supplier, they will show the same

commitment in return. And that helps you unlock so much potential.

“As an example, we are currently working with cleaning and sanitation partner Ecolab to find new ways to use resources more efficiently,” he continues. “By using less chemicals and increasing our machine uptime, we are finding ways to decrease transportation mileage and lower the carbon footprint in both our suppliers’ and our factories. By using the 3DT Omni system, we are able to quickly analyse real-time data and make adjustments to continuously optimise our systems. This combination of technology and resource management is an example of how we are moving into the digital age.”

As well as strong relationships, the VP of Indirect Procurement equally expresses the criticality of supplier diversity in enabling organisations to innovate and unlock new opportunities. Just as employee diversity can drive critical thinking, Lundstrom points to supplier diversity as another competitive advantage.

“It’s the same with suppliers – if you stay in your own box, you shouldn’t be surprised if you are not generating new ideas,” he states. “It’s not necessarily about forcing a KPI. People want to put a number on everything, but sometimes when those targets are set, you can lose sight of what the real goal is. Instead, it’s about getting the right culture and understanding in place as to why diversity is important and what benefits diverse suppliers can bring to the table.”

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PATRICK SEBASTIAN &NICOLAI

REIMAGINING DIGITAL PROCUREMENT

AN INNOVATIVE APPROACH TO DIGITAL TRANSFORMATION IS A CRITICAL ENABLER OF ROCHE’S NEXT-GENERATION PROCUREMENT TRANSFORMATION

You’d think, two articles into our series exploring the next-generation procurement transformation at Roche, I’d join Patrick Foelck and his colleagues knowing what to expect. In some ways, I do: bold ambition, a truly innovative approach to the profession, an understanding of not just how to change but why, and a confidence in the entire team’s ability to evolve, rise to any challenge or business problem, and bring real value to the organisation. That it’s all delivered in an honest, frank and engaging way makes it all the easier. But don’t think that makes each discussion any less inspiring or unique.

Rather, every conversation with Foelck or any of the supremely capable team he works with is a school day – and a good one, at that. The importance of taking calculated risks (think, turning your back on the large procurement technology providers out there to tell the

business you’re building something better, and from the ground up), the intricacies of working fast and flexibly with innovative tech startups in a way that few in the industry do, the sheer complexity of creating customised digital strategies that support broader transformation work, and building a procurement department centred around experiences and problem solving supported by technology. You name it, it’s covered.

Roche is in the midst of a journey to nextgeneration procurement built both on design and necessity - Foelck matter-of-factly told me during our first discussion, that if the procurement function doesn’t transform to offer superior outcomes and value beyond the savings story, it will get replaced by digital solutions and specialised external service providers. For Roche, next-generation procurement is based on an understanding

“Solutions out there now enable procurement for users and let the function drive a completely different role in the enterprise that isn’t self-contained or insular any more; it’s helping us to break out of the mould we’ve been set in for the last 30 or 40 years.” Nicolai

that it holds a unique value proposition that can only be unlocked by reinvention: end procurement for procurement’s sake, focus on value creation, ditch the outdated savings-focused approach to procurement performance, and embrace innovative approaches and technologies to support the delivery of solutions that meet real business problems like security of supply, shareholder value, ESG and more.

Digital transformation underpins the work of Foelck and the team. It is, he states, a critical enabler of the entire next-generation procurement evolution. But unlike in many organisations, for which ‘digital’ has simply become a byword for doing exactly the same but faster, or with less human interaction, technology is viewed with an entirely different mindset and culture by Roche’s procurement team.

In this instance, it is considered from the perspective of customer-centricity and user

experience, as a set of tools to enable those in the function to work differently and do new things, and in more value generating and innovative ways. It is a facilitator of transformational change rather than incremental improvements, and from a ‘bestof-both’ strategic stance: co-create a solid foundational core with a tech partner that can be simply and rapidly complemented with other digital assets, fit-for-purpose solutions built in collaboration with startups, and by creating and investing in a digital ecosystem that helps enrich and enhance procurement’s work. To find out more about what this looks like in practice, and the steps taken so far in delivering the vision, I spoke to Foelck for one last time. We were joined by Roche Procurement Digital Enablement

Lead Sebastian Ebers, and Nicolai Jensen, CEO of LeanLinking, one of several startups contributing to Roche’s transformation journey.

DIGITAL AS AN ENABLER

“Technology is critical for our future success, enabling our evolution to next-generation procurement,” says Foelck, expanding on how innovation is helping to drive evolution. “In terms of enablement, there’re a couple of ways you can look at it. Digitalisation lets us become lean, more automated and efficient, and enables a higher return on procurement investments. I call that the ROI choice – do what we do today, but do it more efficiently. The problem is, if you focus your digitisation efforts solely on efficiency gains, it becomes a threat to the function: in a highly digitised core-procurement process environment there’s limited value creation by the procurement practitioner and no meaningful communication between procurement and the business and, if everything is automated, we can no longer leverage the unique capabilities and great talent we have and hence may not be needed in the future.

“Rather, we see technology as the tool that lets us step up and take what we do to another level,” he says. “That means digitising or automating to augment what we do, and help us work more efficiently and effectively to then refocus/reinvest the freed-up capacity, the great people we have across the function and

their capabilities to deliver true shareholder value, develop solutions to business problems, bring ideas from the market and co-create with suppliers, and become embedded in the business. That’s the road we’ve chosen: use tech to become better at what we do today, invest in new value-add capabilities and deliver a user experience that delights the business and helps to strengthen the relationship through credibility and trust.”

Successfully navigating that road falls in large part to Ebers and the team he heads up, which shapes procurement’s digital strategy, identifies opportunities, scouts solutions and partners like Jensen and LeanLinking, and has built an effective backbone upon which a digital ecosystem can flourish. “I often talk about the two Cs,” he says, discussing the

evolving use of technology in procurement. “Previously, we’ve had legacy procurementcentred solutions that everyone in the function had to use, and which were set up largely for compliance and control reasons. The other ‘C’ – contribution – is where we’re focused. That means viewing technology as a vehicle to move away from just compliance, reporting and processing, to a future where we contribute to the organisation far beyond savings, and focus on ease of use and user experience to drive adoption of our strategies and solutions. Things like workflow automation, predictive technologies, Generative AI, cloud, low-code/ no-code, and more open up a whole new space for us to explore and make the potential we have really exciting.”

“Digital became the critical enabler to help answer that question, meet our ambitions and goals, become more efficient and reinvest in new valueadd capabilities and areas that we hadn’t considered relevant for procurement before.” Sebastian

“Sebastian is right,” says Jensen, a start-up leader with 15 years of experience in leading various tech companies and building and implementing innovative digital solutions and strategies for small and midsize businesses and enterprise clients. For Jensen, digital innovation is all about being truly bold and challenging the status quo - and always being user centric. “Regardless of whether any of these monolithic legacy solutions is good or bad, the point really is that since the 80s it’s been procurement for procurement’s sake, technology for the procurement community, focused on procurement‘s measures of success. But it doesn’t always drive a great deal of value and impact across the organisation in the broader sense. The solutions out there these days enable procurement for users and let the function drive a completely different role in the enterprise that isn’t self-contained or insular any more; it’s helping us to break out of the mould we’ve been set in for the last 30 or 40 years.”

BUILDING A DIGITAL STRATEGY

No change can occur in isolation. Roche embarked on its operating model evolution centred around shifting procurement from a reactive to a proactive organisation, building on the belief that procurement can deliver far superior outcomes through

an efficient core, new value-add capabilities and a stronger focus on customer needs and priorities. The team knew a dedicated digital strategy was essential. Within this, a core procurement technology solution represents a lean backbone focused on operational and transactional activities across upand downstream workflows, and is complemented with relevant innovative solutions from the digital ecosystem, delivering superior user experience, automation efficiencies and self-service capabilities. Fundamental principles of the digital strategy include co-creation and collaboration with external partners, a best-of-both approach, the ongoing engagement of multiple stakeholder groups, and the rapid deployment and ongoing evolution of solutions in order to drive continuous improvement.

“You can’t create a future-leading organisation without challenging your processes and your technology, and we knew from the outset that we wouldn’t transform if we looked at the typical pillars of people/organisation, process and tech in isolation – it had to happen together,” says Foelck. “We also knew there was no way we could rely on the traditional method of bringing in technology to a large corporation: select one big solution provider, spend years and significant amounts of time and money on customisation and, 5 years

later, realise it’s already outdated. It just wasn’t an option. Instead, we had to rip out what we already had and take a more creative approach driven by the best-of-both mentality and approach we’ve defined in the strategy.”

“The operating model evolution was built on a key question: ‘What do we want to achieve as an organisation?’,” says Ebers, which led to the new approach to technology. “Digital became the critical enabler to help answer that question, meet our ambitions and goals, become more efficient and reinvest in new value-add and business critical capabilities and areas that we hadn’t considered relevant for procurement before – it opened a very

perspective to this considerable programme of transformation. “You don’t see this kind of approach that often,” he says. “There’s a real perspective in Roche, as well as a clear vision and understanding on what to build and not build, and what direction we’re going in together. Very often, that’s lacking. The change management piece Sebastian talks about is essential in that. Often you see large corporations look at a typical transformation as 70% of your budget goes into the change you’re making and 30% has to go into managing that change. When it comes to digital transformation you flip it because it has such a big impact on the way that people work. To bring in digital effectively, you need

“We define our own roadmap, our own priorities and pace, and the people we work with who can bring innovative ideas, fresh perspectiv es and approaches to our business problems that we can incorporate into our journey and may never have considered.” Patrick

different procurement world. In terms of what that looked like, it came down to an openness to embracing new ways of working, thinking more about solutions, outcomes and user journeys, and putting the customer and their experience in the centre. Transferring this customer-centric approach to the digital transformation means running customer experience sessions, for example, for our user community both to get buy-in and understand what they truly need. It allows us to userenhance our digital ecosystem and drive up adoption, and digital and procurement strategy realisation.”

As a representative of one of the best-ofbreed startups, with which Roche is working to complement their backbone, Jensen has the enviable position of bringing an outside

a different mindset and approach to learning: think big, start small, move fast and keep innovating, while bringing everyone along with you. It’s critical to making this kind of strategic direction a success.”

THE BEST-OF-BOTH APPROACH

Equally as critical is the core foundational layer or backbone upon which digital assets and best-of-breed solutions are added. Says Ebers: “In the past, the decision always had to be ‘do we do best-of-suite or best-of-breed’, but we felt we didn’t want to make such a binary decision – there is no one size fits all, so the first step was working with our IT and business process management teams to have everyone agree with the direction and endorse the change of mindset. We believe in the

cloud and in standards, but we also believe in continuously adopting and enhancing in a way that makes sense to us as a unique business and not to the solutions provider’s roadmap, supporting their profit margin or growth agenda. We chose an established technology as our backbone to drive core processes, from sourcing and buying right through to paying invoices and it was really important to establish that base. But that’s also just doing procurement more efficiently, so best-of-both really means thinking how we can advance by complementing the foundational layer with a broad toolbox of innovative startups, content, and other point solutions.

“It’s an important point about e2e technology vs point solutions,” adds Ebers. “E2e Technology is good to address foundational requirements, but you only start to deliver real value and provide superior user experience when you complement it with innovative solutions. These solutions address specific challenges and opportunities you have and fuel the ecosystem with relevant content, and that’s what we can now do by working with startups – that’s where teams like Nicolai and

everyone at LeanLinking comes in. They have an idea, we have use cases and we bring them together and go on the journey collaboratively in an environment where we’re co-invested, joined up for the same outcomes, and learn and develop together. Yes, we believe in endto-end connectivity and having something as a connecting tissue, but we’re also inspired by tapping into all of the other opportunities out there because one solution just can’t have the best of everything. This way means we really can provide more value to the organisation faster.”

Foelck expands on why the best-of-both approach is the right one for Roche’s next-gen procurement vision. “As a large corporation and with the complexity we have in our business, it just wouldn’t have been possible to have best-of-breed startups addressing all our requirements and use cases, and somehow connect those solutions together effectively. We had to have a foundational layer to connect core workflows, and enterprise technology with processes and use cases we have covered by startups and point solutions. However, we had to keep it

light and agile – so, we didn’t invest heavily in time and money draining customisation and tailored modules that are too special and complex to ever change again. Our backbone partner was willing to go down this co-creation journey with us; be part of an environment in which we constantly evaluate new solutions to understand whether they fit existing or new use cases better or not, scale back or take backbone modules out of scope, and develop and connect startup and point solutions in parallel. It’s getting us closer to a true digital ecosystem customised to Roche’s needs.

“Sourcing and how we came to work with Nicolai and LeanLinking is an example,” he adds “We wanted a negotiation capability that would enable more and better negotiation outcomes, delivered faster. We understood that our existing sourcing module did not cover our requirements in terms of negotiation enablement. So we scouted the market for the right solution and partner, identified LeanLinking as a potential candidate, and went into a proof of concept phase following our own methodology on how to engage with and bring in startups. We truly co-created a solution almost from scratch together over the course of 18 months that we’re starting to roll out now, and which really helps our sourcing team to deliver more and better negotiations, and avoids spending precious training budget and hours on traditional procurement negotiations training.

“From the start we’ve known it’s an approach that requires a very different mindset and a different way of looking at risk taking,” says Ebers. “It’s quite unique to find an organisation of our size working with very small, but very innovative startups like this and truly co-creating together something that has a big impact on the business. Selecting and implementing products from a well established and big solution provider often doesn’t win you many brownie points in terms of user experience and value-add but also doesn’t get you into much trouble. But, having taken the decision to say ‘no, we don’t want the big approved solution providers with their often functioning but one-size-fits-all solutions and multi-year roadmaps’, it means a lot of risk and responsibility falls on us. The flip side

of that of course is that it absolutely puts us in the driver’s seat. Usually when you select technology and work with larger partners, you’re dependent on their roadmap and development strategy to a degree. Here, we define our own roadmap, our own priorities and pace, and the people we work with who can bring innovative ideas, fresh perspectives and approaches to our business problems that we can incorporate into our journey and may never have considered. It’s a fundamentally different approach to excellence and succeeding that will enable us to achieve next-generation procurement much faster while delivering superior user experience and greater returns from our tech investments along the way.”

THE POWER OF CO-CREATION

LeanLinking was built on a vision to transform supplier relationships and negotiation management in order to help organisations like Roche capitalise on the value creation potential that exists in procurement. It has two solutions it is working with Roche on: LeanLinking RELATIONS and LeanLinking DEALS. The former is a solution that helps Roche effectively manage supplier relationships, governance, and performance on the strategic, operational and tactical levels. The latter is centred on empowering and enabling negotiators to deliver the best possible negotiation outcomes faster and more efficiently for all parties involved. It uses Roche internal and external data, and market intelligence to guide users through best-practice negotiation workflows, while providing automated insights and benchmarks along the process.

“What Roche has managed to do,” says Jensen, reflecting on the two companies’ cocreation journey from a partner perspective, “is to have created a nimble and flexible organisation that doesn’t feel like working with a large enterprise customer – as the solutions provider it makes it very easy to buy into that culture and the transformation that’s happening. The best-of-both approach makes a material difference in, first, how solutions are selected to plug into the backbone, and secondly, how the engagement with us as

a solutions provider happens. It’s far more targeted, we are very much part of one transformation team, and I’ve not really run into any other companies that are building their technology capabilities in this way.

“We’ve two key programmes,” he continues. “One is around managing supplier relationships for larger strategic and business critical suppliers that drive a lot of value and/or are key to Roche’s ability to operate and continue providing life-saving medicines to patients. The second is centred on empowering and enabling negotiators to deliver the best possible negotiation outcomes faster and more efficiently for all parties involved. When Roche first approached us, they explained very clearly that they needed a supplier management solution that meets their needs, delivers value in practice within months not years, and one that can complement their technology backbone. This gave us the opportunity to really demonstrate the benefits of working with a startup,

in terms of approach, mindset and actual solution performance. Because we’re smaller and more focused, we are more agile, go faster and deeper than larger solution providers that claim to do everything. And that was really needed. Roche has a large number of suppliers on its books that support many different business areas with varying requirements across the globe, and that level of complexity can’t be managed with the same diligence – you have to have the ability to segment, prioritise and align with specific processes, while providing a practical and scalable solution. That was the capability we brought.”

From this initial scope of work, says Jensen, the relationship between the two organisations quickly developed with LeanLinking presenting its supplier negotiations solution concept and its potential to create more impact faster, and deliver better results with less effort. “We pitched it, and the team said very quickly ‘let’s do it, you bring the

technology and we’ll bring the content and the subject matter that makes your solution relevant’. This true co-creation approach is really important to recognise in terms of how we collaborate. As a solutions provider you can bring technology, and that’s great, it works and helps. But it’s only really useful if you furnish it with the right content and within the context of an organisation that wants to do things the right way. That’s why, in terms of what we’re talking about, one plus one makes far more than two and our relationship is closer to that of a joint venture than a technology provider because Patrick, Sebastian and the team work very differently. From our side, it requires a willingness to jump in and take the risk and the ability to invest in constant market exploration so I can have an intelligent, informed conversation with the team and bring the right external perspective to supplier relationship management and negotiation to constantly evolve and enhance the solutions.”

CONTINUING THE JOURNEY

There is, of course, always inherent risk in any transformation of this magnitude and Foelck concedes the work to date has been challenging. The team under Ebers, he says, is fundamental to the success of the programme, explaining that the nature of the approach to bringing in multiple innovative digital solutions that complement the backbone whilst deploying it across 150+ company codes across the world, meant it was essential to build up new capabilities and bring skills to the organisation.

“We have a ‘one team’ mindset, and open and honest conversations,” says Ebers. “It’s a different set of skills we’re looking at, it’s not traditional procurement 101. We have someone dedicated to user experience, for example, which traditionally isn’t a capability you would find in procurement. You need to step into the users’ shoes, bring tech that they see value in and tell the story

using their words; our role is to ensure everyone in the business understands how the technical landscape translates into their work and what the benefits of the tech we bring are. That drives buy-in and adoption and that’s why it is important to care about user experience rather than just focusing on getting the job done. We have tough conversations across the organisation, balancing different, sometimes conflicting, requirements and priorities, e.g. functionality versus user experience, and that’s this team – right at the intersection between the wider internal community and our needs, as well as our partners internally and externally.”

Roche is just over a year into its new operating model and well on the way to next-generation procurement. Specifically with regards to technology and the delivery of the digital strategy, Ebers explains that driving adoption, tackling new challenges and opportunities and continuing to develop as a team will be key. “It’s a case of bringing stability to the organisation, while continuing to change most of what we are just getting used to,” he affirms. “We’ve established the core and are now enhancing it based on usability and functionality topics in order to further drive value for the business, for our suppliers, and our colleagues in procurement. We’re also embarking on co-innovation initiatives when it comes to enabling things like Roche’s sustainability roadmap, supply chain continuity, and risk management frameworks. It’s not just point solutions, but what I call platforms that enable so many more use cases to be explored and connected. That’s not just about working differently, but together in that wider ecosystem to really increment the value delivery.”

“The framework stays the same, but what evolves is the value each of the solutions can bring,” says Jensen. “That comes down to continuous learning, exploring and development. Take the negotiating solution as an example. It was originally built around a few use cases for a smaller group of procurement users working with strategic suppliers. But now the environment is evolving, there’s a new influx of talent, inflation and other disruptions that mean

we already need to change and evolve the product so it addresses more use cases and is accessible to a wider audience in Roche. Roche procurement has a huge agenda around bringing in solutions to complement the backbone, which means we have to constantly be very sure we’re addressing the relevant pain points and challenges at any given moment.

“The house is built, now it’s about content furnishing, fueling the solutions with data and information and continuously evolving our digital ecosystem based on user feedback to bring the technology to life,” Foelck expands. “For everyone, this notion of supercharging technology with knowledge will be critical. Our function has never been more important. We need knowledge from a broad spectrum of people built into the solutions that are being brought forward, be it risk, sustainability, negotiations or anything else, which will also allow us to be a catalyst for talent in procurement. If you bring somebody from finance, from manufacturing, from a commercial function into procurement and allow them to leverage the talent that they have within the context in procurement enabled by the solutions we have deployed, then you have a material step forward to drive more value from our procurement function.

“We are well underway on our journey towards next-generation procurement, already delivering significant value in areas far beyond the traditional procurement scope and known measures of success; digital plays a critical role enabling our step-change in performance, functional productivity and user experience, and allowing us to invest in new capabilities and value-add services.”

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JOSEPH MARTINEZ

THE CULTURE OF TRANSPARENCY FORMER CPO OF BNY JOSEPH MARTINEZ SPEAKS ABOUT HIS LENGTHY CAREER, AND WHAT EVERY LEADER SHOULD HAVE TO BE A CHAMPION AMONGST THEIR TEAM: DIVERSITY. WITH A RICH TAPESTRY OF INSIGHTS, EXPERIENCES, AND SKILLS, FORMER GLOBAL CHIEF PROCUREMENT OFFICER FOR BANK OF NEW YORK MELLON JOSEPH MARTINEZ IS SOMEONE YOU WANT TO TALK TO IF YOU NEED ADVICE IN LEADERSHIP.

His impressive career in procurement has spanned 25 years and having spent over a decade living and working internationally, Martinez has driven significant transformations in many procurement organisations. He has transformed supply chains from tactical to strategic functions, delivering value across enterprises while improving risk profiles, cost to income ratios, and ensuring sustainability and enhancing overall supply chain agility.

Working in culturally diverse regions has seemed to enrich Martinez’s procurement and leadership capabilities in many ways. “I believe that a leader with international experience is a bit more culturally sensitive and adaptable to challenges that arise in the determinant supply chains,” he says.

This wealth of experience has led him to create more inclusive work environments, enabling team members to work together across diverse backgrounds, different teams and geographies, “I believe we ended up collaborating much more effectively because of what I’ve woven across multiple geographies – teams that look at each other as a team as opposed to individual markets.”

Martinez believes negotiating and building relationships with suppliers from

different cultures requires understanding of business etiquette, negotiation styles, and communication preferences. For instance, he says with Japanese business culture, it is critical to build trust.

And working with some Latin American cultures, they emphasised more on personal relationships than in other regions. “Having these experiences has really helped me to thrive in a global organisation where cultural sensitivity and adaptability are keen attributes for leading a global team.”

Martinez has been running entire departments through SIG certification, which he says builds consistency and understanding: “Allowing your sourcing professionals in various sub towers to go through this creates consistent understanding of the industry vernacular and its concepts.

“Enabling your team members to utilise this training gives them an investment they can take with them when they leave the organisation, providing opportunity for individuals to move between functions and ultimately to improve their career opportunities.”

Martinez believes leadership of teams, especially in the context of procurement, is multifaceted. “It’s not just about running

an organisation smoothly or helping digitise it. It’s not just about achieving cost savings or ensuring you’re having the approval level of risk management in your program. It’s about guiding a diverse team in a rapidly changing environment, and it’s fostering a culture of continuous improvement with ethical decisionmaking, and I can’t emphasise that ethical component enough.

“To me, leadership is a balancing act – the strategic vision with the ground realities of having to deliver an outcome. Driving value while ensuring you’re leading a team, that you know how you’re able to collaborate, you’re agile, and you’re fostering a culture that’s going to help you to achieve your objectives.” Martinez says the ideal culture in an organisation is where people are expected to help brainstorm, and how they can improve the overall organisation. “You need to foster a diverse and inclusive environment.

I absolutely believe that professional development, i.e., investing in training, certification, skills development, are crucial if you’re going to be successful as a leader.”

Martinez says leadership is one of the most crucial elements. “We must be the champions for transformation, we must set and drive a vision, and inspire our teams to ensure we have alignment to these broader organisational goals,” he adds. He believes you must be willing to have the backs of team members and stakeholders, while balancing the needs for re-engineering and performance metrics.

“I quote this guy all the time, Edward Deming, and he said, ‘That which is valued is measured, and that which is measured gets done.’

“And that’s why I’m such a fiend for measuring and monitoring whatever we’re doing in a transformation,” Martinez says.

RICH TAPESTRY

By working in multiple regions, it has significantly enhanced his leadership and procurement capabilities. “It provided me with a rich tapestry of insights,

“We’ve been able to evolve into more of a recognised strategic function that delivers value beyond cost savings.”

experiences, and skills that have been quite valuable in driving and delivering value across the interconnected global supply chain and activities I’ve had the privilege to lead.”

And experiencing crises in his career has helped him to be more innovative in times of trouble. His experience of working in Japan was vital when it came to his actions in the outbreak of Covid-19. “In 2011, there was an earthquake and tsunami in Japan. We had to shelter and place about 1,500 employees and help relocate our trading floor from Tokyo for a period, working with regulators, IT, and stakeholders, to make sure we were compliant, whilst taking care of our people.

“In 2020 with the pandemic, my experience enabled me to think about disaster planning and execution. I worked more effectively with third party suppliers to ensure we were regulatory compliant, so we could shift from working in an office to work from home, not just for our employees, but also our supply base. You must do that by working with legal, with risk and other parts of the organisation.”

PROCUREMENT EVOLUTION

Procurement has most definitely evolved. When Martinez began his career, he says it was seen as a back-office function that was solely focused on cost – on the lowest price. “It now plays a more strategic role across the industry. We’ve been able to evolve into more of a recognised strategic function that delivers value beyond cost savings,” he adds.

This includes third party risk management, supporting innovation, and helping deliver sustainability goals, “which is crucial and enhances the overall business agility. I believe we have a positive impact on the earnings-pershare for companies we serve.

“Also, advancements in technology have allowed us to streamline and effectively manage operations more significantly. You’re starting to see procurement using AI driven analytics to streamline and enhance visibility across the supply chain and facilitate more informed decision making. I like to call it speed to insight.”

Martinez says that in CLM tools today, you can manage the contract lifecycle and monitor compliance using AI and ML – inside that, there are now low-code and no-code workflow tools that enable you to allow end users to interact with you, eliminating paperwork and having to log into multiple systems.

Martinez also believes that in today’s environment teams need access to supplier intelligence platforms that help supply chain and procurement professionals monitor, evaluate and discover suppliers to help build an unbreakable supplier network if they are to be successful.

“In the old days, focus was on price, quantity, surety of supply,” he says. “Today we think about things like supply chain resilience. So, we factor in geopolitical risks, global pandemics, climate change etc. There’s more of a push for us to have a more diversified and flexible supply network, which is helping us rethink the art of the possible.”

The end of globalisation is driving the industry to regionalisation. In previous years, there was focus on cost efficiencies – “we’ve now transitioned over to more of a value-centred environment, emphasising ethical sourcing, sustainability and social responsibility,” Martinez says. “Obviously, cost is important, and we think through how things like supplier diversity impacts not just our communities, but also the bottom line of our companies.

PHOTO CREDIT: ERIK EASTMAN

“The days of vendor management, where historical relationships were transactional and focused on price negotiation, are gone. Third Party Risk Management and Supplier relationship management are the new functions, where we emphasise building longterm strategic relations with them.”

IN-DEPTH UNDERSTANDING

When Martinez first started, people ‘fell’ into procurement. “Now you can get a university degree in supply chain management, all the way up to a PhD. We have a broader skillset that encompasses analytics, relationship management and strategy development, true consulting, and getting an in-depth understanding of risk,” he says.

Some key drivers are digital tools, so stakeholder expectations have changed significantly. “Before it was ‘get me what I want and don’t worry about anything else. I just need it when I need it’. Companies are now expecting us to be leaders in sustainability and ethical sourcing, making sure that we look at local market impacts and how we deal with that.”

To do this, leaders must look at economic shifts and geopolitical tensions – “while it’s increasing in complexity, it’s also giving

us a better perspective as professionals in procurement as to what models we need to put in place, and what regions we need to invest in,” Martinez says.

“We must make those decisions now; we have moved from the order taker, to being true leaders in helping drive it.”

Martinez admits his passion for procurement transformation, and it is necessary to ensure the function not only remains relevant by adding value, but transcends to be more strategic. He says any successful transformation is going to require a holistic approach to considering technology, the people, the process, and ultimately the leadership. Given the strategic importance of procurement in business, it requires transformations to be executed seamlessly. “This will enhance our competitiveness and resilience of our supply chains,” he adds.

“Procurement transformations are about adapting to change and stakeholder management and understanding changes for an internal and external environment. Leveraging these opportunities ensure we, as a function, are continuously delivering optimal value to our stakeholders and partners.”

As procurement professionals, Martinez says you need to harness the value of technologies

PHOTO CREDIT: ADEOLU ELETU

like blockchain and advanced analytics. “And if we don’t do that, we’re going to miss out on the benefits it will impact our shareholders and ultimately relegate our organisations to irrelevance,” he adds.

“Let’s not forget about why we’re doing this,” Martinez quips. “It’s our stakeholder expectations, and I can tell you this, having worked in banks for many years, stakeholders are really demanding.“They want to have an Amazon-like experience because what they can get in their personal life, they keep saying, why can’t I get that in my corporate life? They want to use tools that help them through their processes,” he says.

A successful procurement transformation must have a clear vision and strategy, and strong leadership. “This needs to be tied very concisely to the business strategy of your enterprise,” says Martinez. “If you are not tying your sourcing strategies to your business strategies, you’re going to create a disconnect.”

He says you must know how to reduce or remove redundancies, “how to eliminate what I call exported controls, and streamlining your workflows to ensure everything you’re doing is in alignment with the broader strategies. Otherwise, you’re going to fail.”

He says exported controls are important – a different organisation or department within a company doesn’t have a way to implement one of their controls and they push it into the supply chain. That becomes a roadblock in the end-to-end process. “I’m a fiend for getting rid of that stuff,” Martinez laughs.

He also believes you must have a continuous improvement mindset.

“Continuous improvement and agility must be in the DNA of your culture. You need to put the parameters in place, so your team members know that it’s okay to go in and say, ‘Look, this isn’t working, Joseph, why do we do this?’”

So, with all that in mind, why does the financial industry appeal to Martinez so much? “It offers dynamic and challenging environments. It requires a more strategic and holistic approach to procurement and risk management than perhaps some other industries,” he says.

He keeps himself updated with the latest trends and industry developments, exploring new opportunities for innovation “with the lens towards helping to improve our earnings per share.

“There’s more of a push for us to have a more diversified and flexible supply network, which is helping us rethink the art of the possible.”

“At the end of the day, if whatever you’re doing can’t be pulled through your financials and you can’t tangibly demonstrate that you’re positively impacting your cost income ratio and ultimately the earnings per share of your firm, you’re wasting your time,” he reckons.

VALUE IN CREATION

According to Martinez, financial services is an industry where procurement is not just transactional, but a primary contributor to value creation and has an absolute impact on earnings per share. “That’s why I absolutely love it,” he says.

Having accomplished many change programmes in his career, Martinez is especially proud of a recent time that he was able to implement a contract lifecycle

management tool, automating the internal lifecycle of the organisation’s contracting process. “And it really bore fruit,” he says.

“Even before we fully implemented the solution, we used the AI component and were able to identify millions of dollars of opportunity in what we were conducting. We looked at two global suppliers, audited them, and it led to the recovery of millions of dollars prior to even the full implementation of the tool.”

Martinez has also taken a non-integrated country and markets and transformed them into global sourcing organisations, aligned by category management, by sourcing expertise. “I’ve done this multiple times in my career, both as the CPO and when I was a report to the CPO. I did this in Asia Pacific when I worked for Deutsche Bank,” he says.

When he arrived at Deutsche Bank, “there were 17 countries doing whatever they wanted.”

Impressively, “within eight months we had them working as an integrated team at a regional level, and then we integrated them into the global area. And to this day, that still works very effectively for them,” he says.

MANA GING RISKS

Martinez is a stickler for risk management. “Over the last couple of years, the increase in supply chain resilience was at the forefront. Disruptions of vulnerabilities that extended across global supply chains, not just within financial services but within all industries.

“It got people thinking about how their procurement needed to be leveraged for strategic improvement, and how that tied into what they’re doing from a risk perspective,” he says.

This meant prioritising the building of resilient supply chains, emphasising local

regional sourcing or diversifying the supply base, and “we needed to manage supplier relationships and the risk associated with that.”

When risk management guidance OCC 21329 came out 10 years ago, it moved financial services procurement professionals to the forefront of identifying and mitigating risks across the supply chain.

Martinez says these types of regulations are making procurement leaders ponder on how they manage strategic relationships, how this impacts the risk appetite of their organisation. And you must balance cost mitigation with risk complexity. “Depending on what part of the world you live in, ethical and sustainable sourcing have become pressures, not just for financial organisations, because visibility, analytics and speed of insight are really coming into their own,” he says.

“Inflationary pressures and uncertainties we’re seeing in the marketplace means companies are increasing their cost and efficiency,

and we must identify how we become more effective as a supply chain.”

Martinez says that over the last 10 years, risk management has become a crucial aspect of the procurement lifecycle, and all organisations need to understand and navigate it to remain competitive. “Effective governance in procurement is not just about rules and oversight or being the procurement police,” he adds. “It’s about creating a culture of responsibility, transparency and continuous improvement. Procurement organisations are under extreme scrutiny, not just from stakeholders, but from regulatory bodies.

“Strong procurement governance has become an essential component of corporate governance in the subset of risk management.”

He adds that by putting a framework in place, so you have alignment with organisational objectives and regulatory requirements, you’re able to put your activities in a process that is repeatable, measurable and consistent.

PHOTO CREDIT: MIKA BAUMEISTER

JOSEPH MARTINEZ

SOUND TRAIL

Martinez created and led the Enterprise Sourcing Advisory Council (ESAC), which provides consistency for procurement decisions across the organisation. “Representatives from the CFOs, the COOs, the CIOs, the lines of business, etcetera, can come in and have influence in terms of how initiatives are going across the life cycle. It’s providing transparency in terms of high value and high risk,” he says.

If there are changes in procedures or roles and responsibilities, Martinez says this is a forum that can be used to clearly identify and communicate changes. “It’s an oversight mechanism to establish the right decisions and make sure they’re made at the appropriate level with the correct level of scrutiny and governance, and policies and procedures are being reviewed.

“It gives us a sound audit trail which helps us get feedback from stakeholders so that we use it as a continuous improvement loop,” he adds.

The ESAC is used to increase visibility. “There’s scrutiny from our stakeholders and the organisation, in terms of the decisions that are being made that are going to impact our cost and our risks associated with the supply chain,” he says. “It’s something every organisation should consider.”

“The days of vendor management, where historical relationships were transactional and focused on price negotiation, are gone.”

PHOTO CREDIT: RYAN QUINTAL

PRIDE IN BNY

Having recently retired from Bank of New York Mellon, Martinez has an amusing story to tell. “When the founder, Alexander Hamilton (he’s the gentleman on the American $10 bill) left the organisation, he was walking out the door, looked over his shoulder and shouted, ‘Don’t change anything until I get back.’ And in the supply chain, they didn’t, until I got there.”

Among many accomplishments at BNY, Martinez established an offshore procurement centre of excellence in Poland, which did not exist before he arrived, and enhanced the centre of excellence for procurement in India. He also established a reporting analytics team to provide information required for visibility to data and processes. “One of the things I’m proud of is that we negotiated one of the banking platforms, and we did it in one tenth of the time it normally takes and got it successfully implemented.

“It was setting the vision that we needed to change, that the status quo was not something that could exist,” he says.

And what about the future?

“As procurement evolves, it will become more strategic, and the focus is going to be on value creation rather than cost reduction,” Martinez reckons. Procurement will align with the business objectives and priorities more seamlessly, leveraging data and analytics to optimise decision making in performance.

He also sees procurement playing a role in managing risk and compliance more effectively, and “procurement practitioners are going to become third party risk managers, and third-party risk managers are going to migrate and become procurement professionals.

“I also believe procurement will be seen as a place where talent comes from, not where deadwood goes. I think it’s changing for the better.”

GEOPOLITICS & SUPPLY CHAINS

John Sitilides discusses current geopolitical risks, their impact on trade and supply chains, and how they are projected to evolve in 2024.

The concept of “supply chains” was largely esoteric to most people in recent decades, known well to a highly specialized industry core of manufacturing, transportation, logistics, and just-in-time inventory experts whose professions flourished during the era of commercial globalization, largely the three decades from the early 1990s until the national lockdowns enforce by governments worldwide after the COVID-19 pandemic outbreak from Wuhan, China.

The sudden and massive lockdown disruptions to supply chains, from medical, pharmaceutical, and personal protective equipment at the strategic level, to automobiles and toilet paper for everyday consumers, introduced the curious phrase to billions of consumers rather quickly.

At the same time, the general sense of growing tensions among the world’s most powerful nations accelerated with China’s more flagrant threats against Taiwan in 2019 and Russia’s 2022 second invasion of Ukraine, following its first invasion in 2014. The broader respect among most nations for a rules-based international order seemed to be collapsing and retreating into a more brutal global security environment marked by the return of geopolitics and its accompanying exercise of raw power on the international stage.

Geopolitics is a term often and mistakenly confused with the complexity of international relations. That is partly

correct. More precisely, geopolitics involves the immutable aspects of geographic realities that incentivize or constrain national leaders in the political decisions they make, and the trade-offs they must ultimately accept, in the conduct of their diplomatic and military relations with neighbouring and regional countries. For a great power such as the U.S., the geopolitical considerations are often global in scale. For aspiring powers such as China, Russia, and Iran, the considerations are mostly regional – though China is openly proclaiming its geopolitical objective to match and surpass the U.S. as the world’s leading power within the next three decades.

In joining these two concepts, a serious consideration of the geopolitics of supply chains begins with the core premise that 90% of the world’s commerce, and 80% of the world’s oil and liquefied natural gas, is shipped around the world on the global oceans, waterways, and seas that comprise 70% of the Earth’s surface. This free and open international trading system is dependent upon shipping lanes that are protected by the U.S. Navy and supported by American taxpayers, in conjunction with the military forces of our allies and partners primarily in Asia and Europe, which are most vulnerable to disruptions of imported energy, natural resources, and foodstuffs.

This U.S.-led system, in many ways inherited from the British Empire after

the end of the Second World War, is essential to deterring and thwarting historic patterns of piracy, paramilitary forces, maritime terrorism, and outright imperial or nation-state aggression on the high seas and especially within or adjacent to the most critical choke points that can easily disrupt the most import commercial routes.

Supported by international legal frameworks and treaties to uphold navigation freedom in international waters, as well as in corresponding international airways, this global trading system has benefitted not only the U.S., naturally as its leader and preponderant protector, but also America’s adversaries, rivals, and enemies.

Ironically, the greatest non-U.S. beneficiary is the Chinese Communist Party (CCP), which rules with an increasingly rigid Leninist absolutist grip over a Chinese nation comprised of 1.3 billion citizens. The historical industriousness of the Chinese people is welldocumented, as China and India respectively presided over the world’s largest economies for most of the past two thousand years, until

their encounter with the British Empire and with dominant Western industrial and military technology starting in the mid-1700s in India and the mid-1800s in China.

Nonetheless, there is no rational strategic argument for Washington having accelerated Beijing’s economic rise on a frenetic trajectory by supporting China’s membership first as a Most Favored Nation trading partner of the U.S., followed by entry into the World Trade Organization in 2001. That was the threshold event after which China’s astonishing annual GDP growth rates of 10% or more catapulted it past the United Kingdom, Germany, and Japan in short order to its current status as the world’s second-largest economy.

The willful outsourcing of U.S. and European manufacturing to low-wage, highly efficient, and environmentally indifferent factories and logistics centres in China only hastened the hollowing out of middle-class manufacturing industries in leading Western countries, especially across the American Rust Belt and Midwest regions.

PHOTO: TOM FISK

Today, CCP General Secretary Xi Jinping seeks to propel China towards the Great Rejuvenation, in which China will regain its global economic primacy, essentially toppling the U.S. as the world’s largest economy by nominal total GDP, even if continuing to trail in per capita GDP, given the relative $64,000 wealth in 2023 of the average American compared to the significantly poorer Chinese counterpart at about $13,000.

Beijing has used this spectacular growth to undertake the greatest peacetime military buildup in a century, since Germany in the 1930s. The People’s Liberation Army has enjoyed a 900% increase in the military budget since the 1990s, and the Chinese Navy is now larger than that of the U.S., even as American lethality and overall power projection capability is superior for now.

China is rapidly growing its nuclear arsenal, once considered largely defensive at just about 60 warheads in 1970 to deter a Soviet or American attack.

Today, China is rapidly expanding its warhead arsenal to about 500 and is projected to deploy 1,000 nuclear warheads by 2030 and 1,500 by 2035. Beijing nuclear scientists are surpassing their American peers in developing hypersonic technology to enable intercontinental ballistic missiles to enter and exit space orbit and evade defensive antimissile systems, potentially rendering the continental U.S. vulnerable to a first strike.

At the conventional level, the CCP is determined to expel the U.S. military from East Asia. American forces have been stationed in Japan and South Korea for seventy years, to prevent the rise of a hostile hegemonic power on the Asian continent and to deter a North Korean invasion of its southern neighbour. Beijing perceives the U.S. military presence not as a benign force protecting the free and open shipping lanes that enable China and every Asian country to trade regionally and globally. Rather, it sees a foreign power from the other side of the planet constraining China’s natural ascension to Asian hegemon and restoring its historic place at the centre of a continental tributary

system whereby all of its smaller and weaker Asian neighbours must assent to its political, diplomatic, and military will.

China’s relationship with neighboring Vietnam highlights this American conundrum. The Biden Administration is actively seeking to graduate Vietnam from a non-market economy to a market economy, which would relax the current framework of the Commerce Department’s enforcement of U.S. antidumping and countervailing duty laws. The main purpose is to accelerate the rerouting of supply chains from China to Vietnam, as well as other Asian countries such as India, Indonesia, and the Philippines, as part of the broader U.S. strategy of derisking U.S. trade from overdependence on Chinese factory floors. President Biden’s visit to Vietnam in September 2023 underscored his administration’s intentions.

The problem is inherent in the governing system in Hanoi, like Beijing ruled by a rigidly ideological Leninist Communist Party, as well as in the geopolitical limitations Vietnam’s 806-mile-long border imposes on its political leadership. Vietnam currently imports more intermediate goods from China than from any other country, exceeding those from Japan, South Korea, Singapore, and the U.S. combined. Its position as a final assembly point for Chinese products makes it one of the largest sources of transshipped Chinese goods in the world.

Several U.S. Senators have complained to Commerce Secretary Gina Raimondo that graduating Vietnam to a market economy would enable Beijing to more effectively circumvent U.S. anti-dumping laws and sanctions imposed on Chinese exports due to human rights abuses. Washington’s effort to reshore supply chains in Asia would fail under the growing number of CCPrun businesses that have already begun “offshoring” to Vietnam in anticipation of Hanoi’s elevated trade status, to increase exports of predatorily priced Chinese goods into the U.S. market. In December, Xi Jinping visited Hanoi, which declared its wish to join the Beijing-led “community of nations with a common destiny,” and entered into 36 trade,

logistics, defence, and security cooperation agreements with China.

Beijing’s “strategy of the periphery” is geopolitically most evidently manifested towards Taiwan, the self-governing island of ethnic Han Chinese since 1949 which the Communist Party considers a rogue entity that must be unified with the Chinese mainland. Taiwan has never been ruled by the CCP, and it rejects any pressure from Beijing to come under its rule. The fate of Taiwan is of strategic importance to the U.S. and its advanced industrial Asian allies for several reasons.

Taiwan is home to the company that manufactures the most advanced semiconductors providing the computing power of the modern world. The microscopic integrated circuits produced by the Taiwan Semiconductor Manufacturing Company (TSMC) enable the most advanced military technologies, satellites, and space vehicles, as well as the frontier technologies such as artificial intelligence and quantum computing that will power the leading global technology sectors in the decades ahead. China’s potential capture of TSMC would disrupt one of the world’s most vital technology supply chains and leave the U.S. and most advanced industrial countries in the G20 and beyond at the mercy of the Communist Party in Beijing.

Political control over Taiwan would render Japan highly vulnerable to further Chinese military expansion. Japan’s main islands are distant from Taiwan, but its lengthy archipelago of smaller islands bends southwest to the north and east tip of Taiwan. Beijing could use the island as a launching base for expeditionary operations against sovereign Japanese islands, several of which Beijing has claimed as Chinese for more than a decade. Given that Japan is a treaty ally of the U.S., Washington would be compelled to defend Japan, threatening yet another potential conflict with China’s powerful, nuclear-armed military.

The People’s Liberation Army could extend its reach beyond Japan and project power closer to Guam, America’s westernmost island in the Pacific Ocean, 1,700 miles east of Japan and

Taiwan. Guam hosts 10,000 U.S. Marines who supplement military operations to protect and defend international freedom of navigation near Asian waterways, especially the South China Sea. Approximately 30% of annual global trade traverses this strategic waterway annually, and China, Japan, South Korea, Taiwan, and many southeast Asian economies depend upon access to this vast sea for existential energy and food imports, and to connect to distant trading markets in south Asia, Africa, the Middle East, and Europe. Chinese control over Taiwan directly threatens American capability to defend the high seas, and to deter Beijing from undertaking military aggression against its immediate neighbours – so far.

Another recent encounter with the geopolitics of supply chains occurred across the Eurasian continent after the Russian invasion of Ukraine. As the war enters its third year of trench warfare attrition, reminiscent of the carnage of the first world war a century ago, global markets have somewhat adjusted to the initial supply chain shocks to global trade in essential foodstuffs and fertilizers without which entire societies in Africa, the Middle East and South Asia might have confronted mass hunger. Freight and shipping charges were directly impacted in early 2022 just as many economies were emerging from the destructive COVID lockdowns, which had already shaken global commercial shipping and led to massive logjams at critical ports in the U.S. and other countries.

Among the most decisive supply chain effects were the self-imposed cutoffs by Brussels of Russian seaborne oil and gas to European Union countries. This was not uniform, as several EU members far more dependent on Russian hydrocarbon supplies were granted a measure of relief. Moscow in turn shut down pipeline natural gas to almost all of its EU customers.

The EU sanctions did contain additional loopholes. No sanctions were imposed on the import of Russian liquefied natural gas, and the EU as a bloc was expected to purchase more LNG from Russia in 2023 than in 2022, with the bulk sold to Belgium, Spain,

and France. Europe’s LNG purchases totaled about $1 billion monthly by the end of 2023, providing Moscow with essential financial resources to continue building up its military to attrit Ukrainian defenses and erode its will to resist.

A Russian natural gas pipeline that crosses Ukraine west into Slovakia continues to provide LNG to that country, which then connects with LNG markets in the Czech Republic and Hungary, all with Brussels’ approval. According to Columbia University’s Center on Global Energy Policy, Austria and Slovakia still derive a substantial portion of their LNG imports from Russia, while Italy and Hungary have been drastically reducing their Russian dependence. Ukraine has been earning about $7 billion annually in transit fees from Russian companies Gazprom and Naftogaz to continue the flow of Russian pipeline gas through Ukrainian pipelines to eastern European countries, under a deal that expires this year and which Kyiv is not expected to renew.

In addition, the U.S. continues to purchase about $800 million annually in uranium from Russia to power its nuclear energy plants, dependent on an international nuclear fuel supply chain to provide one fifth of America’s electricity needs. In December, the House of Representatives passed a bill to ban further imports from Russia starting in 2028. The state-owned Russian uranium company Tenex warned that Moscow was considering preemptively barring exports to American electric companies immediately if the bill is signed into law, potentially devastating U.S. nuclear power generation.

The scramble to identify new energy supply chains in the wake of the Russian invasion of Ukraine underscores the continued importance of the Middle East and its vast oil and natural gas resources. The technological breakthroughs of hydraulic fracturing and horizontal drilling in the past two decades has transformed the U.S. into an oil and gas superpower and net exporter. Russia remains the world’s second largest gas producer and

third largest oil producer, second to Saudi Arabia. As Europe importers and American exporters reconfigure global energy markets, Asia’s leading economies depend on the Middle East for about 80% of total energy imports.

According to the American Enterprise Institute’s China Global Investment Tracker, China is now the world’s largest importer of oil, purchasing just under 50% of its total $176 billion supply from Saudi Arabia, and another 20% from Iraq, Oman, United Arab Emirates, and Kuwait. Beijing has also been circumventing the U.S. & EU sanctions on Iran, and is Teheran’s highest-volume customer, purchasing about 40% of Iran’s total annual exports. China also purchases about 20% of its total LNG from Qatar.

The world’s third-largest economy is also heavily dependent on the Middle East for its energy supply. Japan is the world’s fourthlargest importer of oil, with 95% of its crude supply dependent on Saudi Arabia, UAE, and Kuwait. South Korea purchases about two-thirds of its oil supply and one-third of its gas supply from Middle Eastern countries. Taiwan is similarly dependent on maritime crude oil imports for more than 40% of its total energy needs, with almost three-fourths of its oil imports sourced in Saudi Arabia, Kuwait, UAE, Oman, and Iraq.

EU countries now mostly cut off from Russian oil and pipeline gas have turned more towards the U.S. to meet domestic energy demand than to the Middle East. The one exception is the number of long-term contracts by several European countries to secure LNG supplies from Qatar. In October alone, France, Italy, and the Netherlands entered into respective multi-decade agreements. Germany has been planning to enter into a similar arrangement with Qatar, but Berlin’s political leadership is locked in a debate over Doha’s financial support and haven provisions for Hamas and its leaders, especially in the wake of the October 7 assault in which 1,200 Israeli civilians and 39 Americans were killed and more than 200 individuals, including Americans, were taken, hostage.

Qatar’s role as Hamas’ diplomatic protector has come into the energy spotlight, but the longer-term concern regarding Middle East stability to ensure continued access to regional energy supply chains necessarily focuses on Iran. The U.S. Department of State has designated the radical Shia theocracy as the world’s leading state sponsor of international terrorism since 1984, across Democratic and Republican administrations. Iran openly aims to destroy Israel and destabilize its Sunni Arab neighbours in order to achieve hegemonic status that determines the fate of the Middle East.

As the Israeli Defense Forces continue their mission to degrade Hamas and prevent it from ever governing Gaza again, Jerusalem is also warily eyeing Iraniansupported Hezbollah forces in southern Lebanon across the northern border. Hezbollah fighters are believed to possess an arsenal of over 200,000 rockets, many of which have been transformed into precision-guided missiles thanks to the technical support of the Iranian Revolutionary Guard Corps (IRGC), the external paramilitary force of the Iranian armed forces.

An expansion of the war against Hamas could pull Iran into direct hostilities with Israel, at which point the narrow choke points around the Arabian peninsula become more vulnerable to military disruption. In March 2021, the world learned a valuable lesson in the importance of maritime choke points to global supply chains. A 1,300-footlong container ship lodged sideways for almost a week in the Egypt’s Suez Canal, at the northwestern vector of the Middle East connecting the maritime superhighway of the Indian Ocean through the Red Sea to the Mediterranean Sea and its many large European ports. The flow of finished goods along with petroleum and LNG supplies was cut off for days, delaying the passage of hundreds of other vessels and costing the global economy billions of dollars each day that maritime traffic flows were impeded. In addition, shipping was thrown off schedule for months, and available cargo capacity was cut 20%-30% for several weeks.

About fifty ships pass daily through the Suez Canal, but more than seventy pass daily through the Strait of Hormuz, along the eastern shore of the Arabian peninsula atop which sits the Iranian landmass. A wider Middle East war could lead to military attacks on shipping that delay or prevent the passage of oil and LNG supplies vital to the functioning of the Chinese, Japanese, and other Asian economies.

A key phase of the 1981-1988 Iraq-Iran involved attacks on oil tankers and commercial ships – mostly bulk carriers and freighters – in the Persian Gulf. Both Iraq and Iran deployed anti-ship cruise missiles or air-tosurface missiles in the course of the “Tanker War,” as the phase came to be known. Though most attacked ships sustained little damage,

shipping and insurance rates skyrocketed, and Kuwait’s ability to export oil through the Strait of Hormuz was severely obstructed. The emirate secured the support of the Reagan Administration to reflag Kuwaiti tankers into U.S. ships eligible for safe naval escort and passage in and out of the strait, as well as for shipping for neutral Gulf countries.

Given the enormous cash flow into Tehran from oil and gas exports since 2021, as much as $80 billion according to the advocacy group United Against Nuclear Iran due to lax sanctions enforcement by the current administration, Iran has little incentive to close off the Strait of Hormuz. Major energy customers such as China could dispatch their naval fleet from the South China Sea, or from

Beijing’s first overseas base in Djibouti, at the southern mouth of the Red Sea, to ensure safe passageway for its critical supplies.

Currently, the Djibouti base will prove to be decisive in protecting not only Chinese but all international shipping entering the Red Sea through the third critical regional choke point at Bab el-Mandeb, through which about sixty ships pass daily. The small country, the size of New Jersey, nestles between Somalia, Ethiopia, and Eritrea on the northern corner of the Horn of Africa. Djibouti’s strategic geographic location at the intersection of the Red Sea and the Gulf of Aden has enabled it to host military bases for China and the U.S., as well as for France, Japan, Italy, Germany, and Spain.

Across the Red Sea from Djibouti lies the wartorn country of Yemen, whose Saudi-backed Sunni government has been under assault by Iranian-sponsored Houthi rebels since 2004. In the weeks after the Oct. 7 Hamas invasion of southern Israel, Houthi rebels began attacking Red Sea shipping they believed

was bound for Israeli ports. Just as Hamas would not have attacked Israel without Tehran’s prior approval, just as Hezbollah would not launch a full-scale attack on Israel without Tehran’s prior approval, so are Houthis attacking Israel-bound shipping with Tehran’s approval.

By late 2023, Houthi militants escalated their attacks on merchant ships, leading several of the world’s largest container shipping companies, including Italian-Swiss giant Mediterranean Shipping Company, France’s CMA CGM, Germany’s Hapag-Lloyd, Belgium’s Euronav, oil giant British Petroleum, and Denmark’s A.P. Moller-Maersk – the latter alone accounting for 15% of global container freight –to pause transits from Asian ports and the Indian Ocean through the Bab el-Mandeb Strait and consider rerouting around the entire continent of Africa to otherwise reach their European destinations, adding up to three additional weeks and reduced efficiency to the shipping routes.

PHOTO: JOEY KYBER

About 12% of all global trade, worth as much as two trillion dollars, including 12% of oil and 8% of LNG traded by sea depends on access through the Bab elMandeb and the Suez Canal, according to the U.S. Energy Administration. Egypt depends on Suez Canal transit fees to generate nearly $10 billion, about 2% of its annual GDP. Though the Houthi attacks are intended to paralyze the Israeli economy, European economies are also expected to suffer due to the huge volume of imported refined fuels from the Middle East, especially LNG from Qatar, since halting imports from Russia over the past two years. The lengthy route around Africa adds thousands of miles to the trade routes, with attendant increases in fuel costs, climbing insurance costs, as well as significant cargo delivery delays.

In recent years, Houthi missile and drone attacks have included oil installations and vital infrastructure targets in Saudi Arabia and the UAE. The Houthis possess Iranian-modelled ballistic missiles and armed drones capable of striking targets including Israel within a 1,200-mile range. They have also acquired advanced anti-aircraft missiles, naval missiles, and helicopters, though they prefer using fast boats armed with machine guns in their operations against shipping.

Just prior to Christmas, Washington unveiled Operation Prosperity Guardian, a U.S.-led multi-national task force including the United Kingdom, Bahrain, Canada, France, Italy, Spain, Greece, Seychelles, Norway, and the Netherlands to respond to Houthi ballistic missile and drone attacks with military strikes to protect shipping and preemptively eliminate offensive weaponry, cautious to avoid possible escalation of hostilities with Iran.

The asymmetrical nature and economic cost of this peculiar military operation, where the U.S. will use complex $2 million missiles to destroy easily replaceable $2,000 Houthi drones, will test the fortitude of this multi-national force. The Houthis control the Yemeni capital of Saana and most of the western regions of the country along the Red Sea coast. Washington will likely need to assess the trade-off between attacking the missile, rocket, and drone bases

in Houthi-controlled Yemen, let alone IRGC military assets within Iran proper, without escalating the Israel-Hamas war in Gaza to draw Iran in directly.

The precarious international security landscape in these early weeks of 2024 will likely intensify in the months ahead. Iran is determined to weaken Israel and its Sunni Arab neighbours while it advances its nuclear weapons program to deploy warheads atop increasingly accurate ballistic missiles that can strike into Europe. The war between Russia and Ukraine may be reaching a kinetic stalemate, as U.S. and European weaponry to Kyiv begins to scale down and Russian sustains a multi-layer strategic in-depth defense through which it may launch another offensive across eastern Ukraine by mid-year. In Beijing, the Communist Party awaits the decisions and directions of General Secretary Xi Jinping regarding the balance between economic growth, internal repression, and regional aggression that will determine not only the fate of a vast and complex society but also that of Taiwan’s 24 million free citizens and the semiconductor industry that powers the advanced industrial markets of the world. The resilience of the global supply chain networks and their impacts on procurement and purchasing operations are being tested more dynamically than at any time in nearly a half-century.

ABOUT THE AUTHOR

John Sitilides is a geopolitical strategist at Trilogy Advisors in Washington, D.C., a Senior Fellow for National Security at the Foreign Policy Research Institute, and a diplomacy consultant to the U.S. Department of State under government contract since 2006. A corporate keynote speaker on geopolitical risk at major industry and finance events, he holds a master’s degree in international and public affairs from Columbia University. For more insights, follow him on LinkedIn and at sitilides.com

MOVIES FEATURING BUSINESS, PROCUREMENT, AND SUPPLY CHAIN

THE SOCIAL NETWORK

Written by legendary screenwriter Aaron Sorkin and directed by David Fincher, the biographical drama The Social Network stars Jesse Eisenberg as Facebook founder Mark Zuckerberg. Whilst the movie focuses heavily on Zuckerberg himself, and his personal relationships, The Social Network explores the early days of Facebook and Zuckerberg’s journey, alongside his peers, to build, grow, and manage the rapidly growing platform that has become the multi-billion dollar enterprise that we now know it to be.

TOP10 1. 2.

STEVE JOBS

The 2015 biographical movie Steve Jobs follows the Apple co-founder over a 14-year period, from 1984 - 1998, as he prepares for the company to release various versions of the Apple Mac computer. The movie focuses on Jobs’s personal struggles and relationships with his family, but it also explores the difficulties that Apple had with sales and the subsequent financial fallout.

3. 4.

Based on a true story, the 2000 legal drama Erin Brockovich follows Julia Roberts in the titular role of Brockovich, an American paralegal who was responsible for initiating the legal case against Pacific Gas and Electric Company due to its part in the Hinkley groundwater contamination.

Whilst the movie is primarily a courtroom drama, it also touches on utility company responsibility for managing resources and explores the details that lead up to the supply of water being contaminated.

ERIN BROCKOVICH THE DEVIL WEARS PRADA

Whilst The Devil Wears Prada is fictional, the 2006 comedy-drama, and the novel on which it is based, are informally based on the author, Lauren Weisberger’s, experience of working as an assistant to Vogue’s Anna Wintour. The film revolves around the fashion industry and the highs and lows of supply chain management in high-end fashion. The clothing and accessories used within the movie are almost all authentic, high-end garments, making it one of the most expensively costumed movies of all time.

5.

THE FOUNDER

The 2016 drama The Founder follows businessman Ray Kroc in 1950s America, as he journeys from milkshake machine salesman to CEO of one of the leading global fast food chains. When he discovers a drive-in restaurant named McDonalds in California, Kroc convinces the McDonald brothers to franchise the restaurant and becomes the real driving force behind the company’s growth. Naturally, the movie delves into business, franchising, and supply chain management logistics.

6. 7.

Almost everyone is familiar with the story of Willy Wonka and the Chocolate Factory. Based on the novel by Roald Dahl, the movie follows a group of children who get invited to explore the infamous chocolate factory of Willy Wonka. Whilst the film is obviously targeted towards children, and incredibly stylised, it does actually explore many aspects of Wonka’s supply chain, production, and distribution of the company’s candy. Audiences are able to see everything from sourcing the cocoa beans used in the chocolate to the inner workings of the factory to distributing Wonka’s famous bars internationally.

WILLY WONKA AND THE CHOCOLATE FACTORY JOY

Jennifer Lawrence stars as Joy Mangano, an American entrepreneur, in the 2015 biographical comedydrama. The film follows Joy’s journey from a struggling airline booking agent to a successful inventor through the invention of the Miracle Mop. Joy sees the titular character struggling with investors, coming to terms with the ordeal of distributing her product, and forming relationships with California suppliers in order to manufacture parts for the cheapest price possible.

8.

THE INTERN

The Intern is a comedy movie starring Anne Hathaway and Robert DeNiro as a workaholic CEO and a seventy-year-old ‘senior intern’ respectively. Whilst the film is predominantly a buddy comedy, it also explores the inner workings of the business the characters work for, a successful e-commerce fashion startup in Brooklyn. The Intern shines a light on the role of the CEO, the responsibilities that come with the position, and the relationships that need to be forged with investors and suppliers.

9. 10.

THE CHINA SYNDROME

The China Syndrome is a 1979 thriller film that follows a TV reporter and her cameraman who discover that safety hazards are being covered up at the Ventana nuclear power plant near Los Angeles. The movie deals with topics such as risk assessment and management, transparency in supply chain operations, and the dangers of businesses putting profit above safety.

HOUSE OF GUCCI

Whilst Ridley Scott’s 2021 drama House of Gucci may be best remembered for Lady Gaga’s eccentric performance as Patrizia Gucci, the movie takes an in-depth look at many aspects of taking control of and running an internationally successful fashion brand. In between arrests, disinheritance, and assassination attempts, the Gucci’s also have to deal with supplier relationships, competition from knockoffs, and outlandish business plans causing incredible harm to their company.

EVENTS

WORLD PROCUREMENT CONGRESS SUPPLY CHAIN SYMPOSIUM

06/05/24 - 08/05/24

ORLANDO, USA

Top supply chain organizations navigate through the turbulence by solving present-day issues.

14/05/24 - 16/05/24 LONDON, UK

Now in its 18th year, the World Procurement Congress has welcomed over 1100 CPOs through the door.

PROCUREMENT SUMMIT

12/06/24 - 13/06/24

HAMBERG, GERMANY

The Procurement Summit is the exhibition for digitalization and innovation in the procurement sector.

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