Offsets Challenges Transformation Making

years. Have you ever witnessed industry challenges like those faced since the pandemic?

My first contact with the procurement profession dates back to the end of the ‘90s and in the 25 years since, I do not remember being faced with so many different, huge challenges in such a short period of time. Supply chain challenges brought about by the outbreak of the COVID pandemic were followed by shortages of many goods and services as a result of reduced supply that could not cope with growing demand.

As if all that was not serious enough, geopolitical tensions and a terrible war in the heart of Europe has followed, leading to an explosion in the prices of goods and services. In the middle of last year, the prices of certain commodities reached doubled or even triple the prices seen at the end of 2020. In the past six months, those prices, including for energy, have reduced slightly, but are still ultimately high.

Finally, our industry - like many others - is also facing a labour shortage. Taking all of this into account, we can undoubtedly say that the industry has been operating in the conditions of a perfect storm for the past three years, with the potential to have a hugely negative impact on business performance.

How has Atlantic Grupa looked to weather the storm and reduce the subsequent risks?

My first contact with the procurement profession dates back to the end of the ‘90s and in the 25 years since, I do not remember being faced with so many different, huge challenges in such a short period of time.

The accumulation of out-of-stock situations, cost increases, and a forthcoming recession more recently, have led to a drop in private spending and purchasing power among customers. We have naturally had to adapt as a consequence, with greater procurement dynamism a priority.

First, from a risk management perspective, and to mitigate the challenges being faced, we switched to monthly - rather than quarterly - risk detections and assessments, while also expending the scope of these risk assessments, from tier 1 suppliers, to the whole upstream supply chain.

At the same time, we also introduced advanced technologies based on artificial intelligence (AI), which have enabled us to perceive a much wider portfolio of risks in a shorter time, using the minimum necessary resources for each activity.

We regularly share information about all significant risks that we detect in this way with all important stakeholders. Likewise, we define risk mitigation activities together with them and work jointly to minimise the impact of these risks on our business.

More specifically, how have you looked to combat the dramatic pricing fluctuations?

We have adjusted the specifications of some production materials, and raised material stocks in order to prevent shortages or rising prices of these materials. More broadly, in times of high price volatility of most commodities, there has been a need to continuously monitor procurement markets and price movements.

With the help of adequate tools and technologies for predicting price movements of these commodities, we were in a position to react relatively quickly, to prevent further increases in purchase prices by timely hedging. However, all of this would not have been enough without good management of supplier relationships.

During the period of a typical seller’s market like we had two years ago, it was extremely important to be the customer of choice to our suppliers who often had to choose which of their clients they would deliver their products to, as there were not enough to satisfy the needs of all customers. Now, with this time lag and in a situation where procurement markets are mostly normalising in recent months, we can say with great certainty that it is the excellent and open relations with our strategic suppliers that have led us to a largely uninterrupted supply chain even in the most rigorous of conditions.

As a result, we have been able to supply our customers with sufficient quantities of our products.

You mention the importance of relationship management there. Do you have any examples where this close collaboration has really helped to mitigate recent challenges?

I’d like to highlight our packaging suppliers in particular, as they too have struggled with the challenges of securing sufficient materials, with the costs of those materials, and with their own labour shortages. Even still, they have regularly supplied us throughout.

Whether it is the supply of metal packaging from Eviosys, or PET packaging from Alpla, they have been real examples of management excellence, crisis aversion and partnership fulfilment. In such challenging times, they never left us without deliveries for even a single moment. This is especially significant when we know how difficult it is to predict the needs of our customers recently, and therefore plan deliveries effectively. The operational teams made up of representatives of our suppliers and our procurement organisation did an excellent job; while Eviosys, Alpla and our other suppliers matched our level of flexibility and timeliness throughout.

How does technology fit into this adaptability effort? You touched upon AI, but presumably this is part of a much broader digitisation initiative?

Our digital transformation roadmap was actually created a few years before the COVID outbreak, shooting into two primary directions.

The first relates to strategic tactical procurement activities such as category management, supplier management, risk management, contract management and spend management. The second was targeted towards to the use of technology in the automation of operational procurement activities such as ordering, invoice management and preparation for payments of invoices.

Before introducing new technologies, we conducted a comprehensive business process redesign project where we first mapped all existing processes within the company and analysed areas of potential efficiency improvements, and the removal of gaps or overlaps across processes. After that, we looked at which technologies and tools would help us improve these processes and give them an additional quality, while reducing the need for human interventions in the field of operational work. As far as procurement is concerned, we clearly recognised the need to introduce a procure-to-pay tool to support operational procurement processes, which until then were quite manual.

Despite the outbreak of the COVID crisis, it was at that time that we started implementing the selected procure-topay tool, but rather than simultaneous deployment across all countries and operating companies within Atlantic Grupa, we enacted more of a phased rollout. In this way, we could react and fix any issues that arose, with each implementation then becoming more robust and advanced.

How responsive and positive has the team been to this period of digital transformation?

It was clear to us that the implementation of new digital tools couldn’t take place unless it was accompanied by appropriate change management. It was very important to us that satisfied users of these tools and processes, who are not from the purchasing organisation, would spread information about their satisfaction with the newly implemented processes, and that they would act as kind of brand ambassadors for these changes.

That being said, the transition was made easier by the fact that digitisation has been occurring within the business for around 15 years. We started then by digitising the tactical element of procurement activities such as category management (integrating both supplier and supplier relationship management). We implemented a tool that, at first, helped us to create a digital record of our view of procurement categories to facilitate optimal strategies that maximised the value of procurement category management. The tool was created by a Croatian-Austrian company (then, startup) called Cirtuo who sought to continuously improve the tool and its functionality.

In the meantime their tool integrated many advanced functionalities that enabled a structured approach to category management, and a simple sharing of information within the purchasing organisation, as well as with a wider base

Procurement is at a turning point. Pandemics, natural disasters, war, increasing inflation, rising interest rates, soaring prices, political instability, and talent shortages continue to send ripples through global supply chains, creating the perfect storm for Procurement. While some saw it coming, most have not.

Organizations with strong category strategies that balance risks and opportunities have weathered the storm better than their peers. While they have no crystal ball, an established category management methodology and process increases organizational resilience through identifying and mitigating risks, diversifying the supplier base, and identifying cost savings opportunities. But Procurement still heavily relies on disconnected tools and information to manage their core competence, which makes responding to challenges cumbersome and inefficient. Therefore, category management is at a turning point, too.

Cirtuo is pioneering the digitalization of category management and category strategy creation in Procurement. Based on the original consulting blueprint for category management and refined in countless workshops with clients, Cirtuo distills the insights from hundreds of category strategies across global and local procurement organizations and spend categories into a digital consultant: Cirtuo Guided Strategy Creation™.

Organizations such as Atlantic Grupa are developing category strategies tailored to their internal demands, business requirements, and external market developments with the help of Cirtuo. Through the integration with market intelligence provider Beroe, Procurement teams have access to external insights on nearly 2000 categories, over 3.5 million discrete data elements, cost breakdowns, and real-time intelligence on market and price movements throughout the strategy creation process.

The Cirtuo Guided Strategy Creation™ platform allows category managers to utilize information effectively by contextualizing it within the strategy development process. The systematic and standardized approach to category management combined with AI-powered recommendations increases the agility of category managers and the quality of their category strategies. This way, they can respond to changing market developments quickly and achieve their goals during volatile times.

Strategic category management makes Procurement the real differentiator for their business and their stakeholders. While objectives for strategies vary, from risk management to supply chain continuity, supplier relationship management to supplier innovation, ESG compliance to supplier diversity, or organizational efficiency to cost savings, the structured framework combined with efficient and intelligent technology is the key enabler for successful Procurement teams.

While formal category management has historically been in PowerPoint and helped mostly large and mature procurement organizations to keep their teams ahead of the curve, Cirtuo’s Guided Strategy Creation™ platform simplifies and democratizes the creation, management and tracking of winning category strategies. The unique combination of guiding questions, external insights, and AIpowered recommendations allows organizations of all sizes to harness the benefits of digitalizing their strategic procurement processes. With this, category management moved beyond its turning point. It is time for Procurement to do the same.