In today’s dynamic, global market, agility and the ability to act quickly are fundamental to supply chain and procurement success. To better understand the developments, needs, and future trends of how these functions have and will evolve, Grand & Toy commissioned Leger Marketing to conduct research with Canadian supply chain and procurement executives to uncover the challenges and opportunities that lie ahead, as well as organizational preparedness and global competitiveness.

The businesses that are able to adapt, stay competitive by deploying agile and responsive supply chain and procurement strategies and processes. Doug Breitenbach helps organizations bring customers the latest technology by choosing suppliers that he can build strong relationships with, rather than just choosing those that offer the lowest prices.

Doug Breitenbach participated in the qualitative interview stage and the following is the transcript from his interview.

WhaT Issues In proCureMenT keep you up aT nIGhT? I worry that companies are not complying with corporate contracts and are buying off contract. I want peace of mind that companies are striving to be best in class (based on buying power) and beating market rates. The continued explosion in fashionable electronic and hand-held devices has made product obsolescence at the resale level a major concern for many companies.

Does ThaT Mean ThaT proCureMenT peopLe neeD To sTarT havInG a LeveL of experTIse aBouT proDuCTs/equIpMenT/servICes ThaT Goes far BeyonD WhaT you WouLD norMaLLy expeCT?They need a different mindset when buying products for resale vs. internal consumption which focuses primarily on cost savings. Procurement aids marketing and sales in looking at the total end-to-end cost to revenue opportunities. Margin preservation or enablement is key. Negotiate so you can enable larger margins.

Today’s buyers have to immerse themselves with a lot more market and product intelligence. Whether that’s through tradeshows, specialized media, analyst reports or meeting vendors, they need the savvy to understand and react to changes in their respective markets. Where’s the technology and market going, and how to minimize inventory obsolescence - these are critical considerations.

Doug Breitenbach Senior Vice President

supply chain & procurement insights report

Focus interviewKingsight consulting inc.

Douglas Breitenbach is a seasoned executive in Procurement, enriched by a vast experience in Process Improvement. He is an able communicator whose leadership and vision have contributed to increased profitability in the Telecommunications field, notably in Strategic Sourcing and Cost Transformation initiatives.

Mr. Breitenbach has over 37 years of consulting and senior management experience within the Supply Chain and Procurement field. At Bell Canada, he held various senior management positions that involved all aspects of Procurement and Supply Chain. Before leaving Bell in 2006, he was Senior Director – Corporate Procurement.

Mr. Breitenbach studied finance and marketing at Sir George Williams University.

Is ThIs DIffICuLT To Do ConsIDerInG TheIr aCTuaL joB funCTIon Is proCureMenT?Whether you are a tactical buyer or strategic sourcing expert, you need to understand what you’re buying and the market dynamics. It’s part of your tool bag. This doesn’t mean you have to be an engineer or marketing guru. are There Ways To InTeGraTe proCureMenT sTaff WITh oTher areas of The CoMpany so They GaIn More knoWLeDGe?Yes. In some cases sitting within a Marketing or Technology business unit with a dotted line reporting to Procurement would definitely benefit a buyer’s development.

Is ThaT The roLe of The Cpo - To ensure ThaT CoMMunICaTIon or InTeraCTIon exIsT?Yes. They coordinate with business unit leaders to define procurement priorities, resolve issues and oversee progress. Don’t forget procurement is a team approach. At the end of the day you need client buy-in and approval on your final recommendations. Team members may vary from project to project. Teams may include legal, finance, marketing and technology development folks. Specifications or product requirement documentation are the corner stone of any buying initiative.

anD you Can’T jusT Make up The speCIfICaTIon In IsoLaTIon rIGhT?Yes. It’s the interaction between the team members that gets you a proper set of overall project specifications. In many cases, the supplier community will recommend alternatives to your requirements that would need to be studied by the entire team.

WhaT aBouT sTraTeGIC sourCInG?Over the years, more and more companies have moved resources towards strategic activities. Strategic sourcing demands a disciplined and systematic approach to reducing a company’s total cost of goods and services while maintaining or improving quality and service.

A “Mega-Supplier” strategy is being used more and more these days. This strategy is used to leverage the entire spend with one supplier, across all categories, into a comprehensive negotiation strategy. This strategy is more effective than negotiating an individual category, as it leverages the areas of spend (expansion) where your company has more choices to extract savings, where it is hard to switch from the current incumbent. The expansion spend can be used to both entice and threaten suppliers, by using the “carrot” and “stick” formula. Another advantage of this strategy is that it positions your company favourably in negotiations, as the supplier would prefer the “divide and conquer” strategy as they have little incentive to bundle negotiations.

WITh a MeGa suppLIer, Is proCureMenT soMeThInG ThaT enCoMpasses More Than jusT proCureMenT peopLe?Effective strategic sourcing teams should be cross-functional, incorporating procurement and business unit expertise. Traditionally, this type of negotiation strategy includes the CPO and other senior executives.

WhaT’s proCureMenT’s ChIef roLe When everyone Is InvoLveD In a sTraTeGIC neGoTIaTIon LIke ThaT?They play a key role in the development of the negotiation strategy and lead the supplier negotiations. There’s only one voice in front of the suppliers and that’s procurement.

If you Look aT a TaCTICaLLy foCuseD proCureMenT orGanIzaTIon 15 years aGo anD CoMpare IT WITh an orGanIzaTIon ThaT has IMpLeMenTeD sTraTeGIC sourCInG, hoW Can The neCessary experTIse Be DeveLopeD?It depends on where you’re starting from. Hire the talent or develop it over the years. A lot of large companies have gone out and hired consulting firms to train their buyers. If you’re lucky enough you’ll have people within your organization who have worked and been trained in strategic sourcing.

have you ever Been InvoLveD In ThaT?Yes, I led the Procurement Cost Transformation initiative at Bell Canada. We realigned the procurement organization to institutionalize best practices, upgrade talent/skills and sustain savings.

I’M assuMInG There Was a senIor ManaGeMenT Buy In proCess...Most definitely. Traditionally procurement faces organizational barriers when trying to lead sourcing activities. You have to have buy-in at the CEO and executive levels to succeed.

anD WhaT’s The proCess of GeTTInG TheIr Buy-In?That’s a fair question and not easy to resolve. It needs to be a top down effort, with EVERYONE working towards reducing external spend. Your job is to demonstrate that you have a robust sourcing process that is adhered to on a consistent basis. hoW Do you Go aBouT sTrenGThenInG your reLaTIonshIps/reDuCInG rIsks WITh suppLIers ThaT are reaLLy IMporTanT To you?Over communicate. Provide a deeper level of visibility into your business needs and vice versa. You don’t want to only see suppliers in your office when you’re signing contracts. You need to establish business reviews be it monthly or quarterly with your key suppliers.

Kingsight consulting inc.Doug Breitenbach — Senior Vice President

supply chain & procurement insights report

Focus interview

Mitigate risk by reviewing your supplier’s financial strength. CEOs do not want to hear about one of their key suppliers filing for Chapter 11. It’s not an easy task to replace a major supplier. So if you’re not spending time with your suppliers and working with them, you’re not doing your job.

so IT’s a quesTIon of enGaGeMenT anD neeDs To Be parT of hoW your proCureMenT orGanIzaTIon Works?You need to take the necessary time to build and maintain the relationship. That’s easier said than done, considering the focus today is primarily on cost reduction.

so IT May Be DIffICuLT To Do IT?It shouldn’t be. It’s all a matter of workload prioritization.

hoW Do you Make your CoMpany CusToMer of ChoICe When The suppLIer has MuLTIpLe venDors To Choose froM?You need to demonstrate that there are real tangible advantages that you can bring to the relationship, be it distribution of their products or the relationship we have with our customers. How will we sell his product, in what form and to whom? You can offer exclusivity or offer to showcase their products within your business or network. You need to restore a sense of loyalty and commitment. You just don’t change a supplier for a 10 cent price difference.

Do you ThInk ThInGs WILL shIfT aWay froM a soLe foCus on LoWesT possIBLe CosT?To a degree. Cost reduction is important but you need to look at the total cost of ownership. Building a stronger relationship with your suppliers will more than compensate for the 10 cents.

so you’ve DesCrIBeD ThaT MayBe proCureMenT has Gone Too far In one DIreCTIon anD WILL Move BaCk In The DIreCTIon of sTronGer reLaTIonshIps…Most companies have too many suppliers within their supply base – they need to be reduced. Focus on suppliers who are core to meeting your current business needs. Work with them in meeting tomorrow’s business strategies.

If you haD To suM ThInGs up hoW Do you ThInk proCureMenT WILL ChanGe In The fuTure? Procurement will continue to search for an identity within many corporations until their CPO has an equal seat at the table. Procurement will have a broader, more strategic mandate. They have and will continue to be instrumental in delivering overall cost reductions that directly impact the bottom line.

WhaT Is your aDvICe To The Guy Who neeDs To GeT ThaT pLaCe aT The exeCuTIve TaBLe?Don’t give up. You may elect to do a road show with key executives, covering the group’s prior accomplishments and your larger cost transformation plan. This would be followed up with a Leadership Council as a monthly forum to highlight more accomplishments and have the executives make decisions. Continue challenging the status quo. For immediate results you should go after the low hanging fruit.

hoW Do you fInD Those LoW hanGInG fruIT?Look at your discretionary spending. Non-core expenditures such as travel and entertainment – unless you have a formal program. You would be surprised how much you can save by cancelling newspaper and magazine subscriptions. Review your entire addressable spend baseline to identify and prioritize your initiatives.

supply chain & procurement insights report

Focus interview

Doug participated in the research for 2012 supply chain & procurement insights report: canada, are We Falling Behind?

To download a complimentary copy of the full report, visit:

granDanDtoy.com/2012report

Interview conducted in February 2012 with Leger Marketing.

Kingsight consulting inc.Doug Breitenbach — Senior Vice President