Driving Procurement Value in Turbulent Times: Webinar Replay
Webinar Transcript
Philip Ideson
Hi, everybody, and welcome to today’s AOPA live. My name is Philip Ideson, and I’m the founder and managing director here at Art of Procurements. And I’m joined through today’s session to help me ask the questions and facilitate the conversation by my co partner at Art Of Procurement, Kelly Bonner. Kelly, welcome to the, the webinar and thanks for joining me.
00:25
Kelly Barner
Absolutely. And thank you for joining everybody that’s here with us live or watching again later on demand.
00:30
Philip Ideson
You know, we have a really interesting conversation today. So just a little bit about logistics. If this is the first time that you’ve joined an AOP Live, it’s really all about questions. There is only one side, which is a poll result that we took in advance of the conversation, but the rest is just a conversation.
So we do invite you to ask questions. throughout the conversation, you’ll see there’s a chat window on the right hand side of your browser window. So feel free to just add any comments at any, questions you may have in there. And Kelly and I will definitely be keeping a watch on those as we go through the conversation.
There is also actually a Q&A tab that you might see, in that sidebar as well. You are welcome to pop questions in there, but typically Kelly and I are keeping a watch on the chat, and we’ll pull out any questions as we go through the conversation in there. Now, today’s topic, we tried to isolate driving procurement value in turbulent times.
It’s really all about kind of connecting the dots between value creation, between data, and then between storytelling. Because we often as procurement professionals, I think, focus on one of those or even two of those, but not necessarily all three. And really, when you put all three of those together, that’s when you really even you’re really able to articulate the value that we drive.
So it’s going to be an interesting conversation around that topic. And we’re going to be joined by two guests. We’re joined by Yannick Caharel, who’s the Chief Procurement Officer at Christian Dior Couture, and Pierre Laprée. Pierre is a friend of AOP, has been on AOP Live a number of times. Pierre is the Chief Product officer at SpendHQ.
So as we bring Yannick and Pierre onto the screen, there we go. Pierre, Yannick, welcome to the webinar and thanks for joining us today.
2:13
Yannick Caharel
Thank you Philip. Thank you Kelly.
2:17
Philip Ideson
Now I usually kick off with a, a question, at least to guests who haven’t been on AOP live before. So I’m gonna ask this to you, Yannick, and it’s really just to help give a little bit of context as to your background in procurement, but, did you find procurement or did procurement find you?
2:34
Yannick Caharel
An interesting question, Philip. I guess it depends on the way you look at it. But the truth is, the reality is that at the beginning, when I started my study and so on, I really wanted to join the luxury industry, and be on more on the most creative path, such as designer or marketing.
Okay. it happened at that time that I was doing the Bordeaux Business School in France, and then there was an MBA, specialized in procurement, and since I wanted to join the luxury industry, they had quite a quite a good connection with most of the top ten luxury groups in the world. And I decided to apply, and do this MBA. And here I am, 25 years ago, a creative guy at the head of procurement at the Christian Dior Couture.
3:30
Philip Ideson
So you’re one of the few of us that actually got qualifications by the sounds of it and didn’t just fall like, I think certainly I did, so you can probably teach us a lot from, you know, the educational side of procurement as well.
3:47
Yannick Caharel
Yeah, we can say that.
3:53
Philip Ideson
Yeah. Pierre, you know, we talk about data and quality data a lot, and it’s really come into sharp focus, I think, in procurement, thanks to, you know, growing kind of focus on analytics and AI, which is something that, you know, is really top of mind right now in procurement. What would you say is the current state of procurement relationship with data?
4:12
Pierre Laprée
So to make an analogy with, some aspect of our day to day life, I would say “it’s complicated.” It’s complicated simply because it’s hard. We have a lot of different systems. We have ERP systems, we have P2P systems and the quality of the data is not always great because a lot of it comes from manual inputs.
So we’re day to day struggling with the quality and the level of details we have on invoices, for example, that may not be captured at the right level. And we have to deal with that. So it’s hard also because there’s a lot of data and so quality plus volume means that the problem is basically compounded.
So you have a lot of problems and bigger problems. Where I’m being hopeful to be honest, is that, a few trends are emerging. The first one is the availability of proper and vetted third-party data that you can use to either clean or enrich your existing data. So that’s, that’s a good thing. And as you mentioned, a lot of things have improved or maybe not improved, but have been rolled out much more massively thanks to AI as a whole. I mean, natural language processing has been here for decades. It’s just becoming better, easier; it came to maturity. And so we’ve been using that for more than ten years, but now we can go faster and on bigger volumes of data. So that also helps with this problem of quality of data, I guess.
So, very hopeful there because the progress is being very fast. So current state is, not great yet, but improving.
6:06
Philip Ideson
Right. So, interesting, you talked about availability of third party data because on the sell side, you know, sales teams have been using that and getting integrated data for a long, long time. When you think about CRM systems, for example, but it’s something that we’ve been a little bit slower to, adapt to or invest in, I think, on the procurement side.
6:25
Pierre Laprée
But that’s the massive opportunities that people are now realizing that after investing troves of data in employees, in sales, in the tools to drive top line, we are now starting to do that, to also, help with the bottom line and with addressing supply chain risk. So yeah, there’s clearly a lot more investment in that. And that’s a good thing for us because the technology is there. Now let’s get to budget in procurement to implement that.
6:52
Philip Ideson
So we always take a, a snap poll on LinkedIn before one of our AOP Live webinars. So let’s bring up the poll just so we can have a little bit of a conversation around it that we posed to our community before today’s webinar. And what I’ll do is, if anybody is watching this again later or can’t see the screen, I’m going to read this out in its entirety.
Now, the question that we asked is, “What is the most important factor in telling a successful data story to motivate improved decision making?”
And the results were, and we’re able to give four choices in the LinkedIn poll, the results to those four choices that we gave, at the top was “Selecting the Right Metrics” at 47%, 32% was “Providing Enough Context,” 12% was “Having Sufficient Analytical Skills in the Team,” and 9% was actually “Combining Internal and External Data.”
So when we look at those results, Pierre, what do you make of the kind of results that came back? And what do we mean when we talk about data stories?
7:55
Pierre Laprée
So a data story is really about, bringing facts to the conversation. We’re good at having conversation. We used to be not that good at bringing data there. And, you know, there’s this joke about, in God we trust all the others, bring me data. That’s what you need. You need facts to bring to the to the table because who would believe you otherwise?
So that’s very interesting because bringing data is interesting. But you need to bring relevant data. So if you bring data points that are of no relevance or that people don’t care about, you’re not helping with your story.
So, frame your message in a way that is compelling for the business and make sure that you bring the facts and the figures to back your claims. That’s the path to success, is credibility, and yeah, a compelling story.
8:47
Philip Ideson
Yannick, does anything stand out about these results when you compare them to your personal experiences?
8:54
Yannick Caharel
Yes. On this, 100% I fully align with what Pierre said, again, linked to our industry [the luxury industry], which is not always as mature as other industry in terms of procurement.
Because believe me, I am the first worldwide CPO of Christian Dior Couture. So, you can have all the data of the world you want; if you don’t have good storytelling behind that, never the CEO of Christian Dior Couture would have decided to bring me as a worldwide CPO. Okay, so first thing. Second thing, as Pierre said, being a CPO in a worldwide brand in such an industry is a nightmare when it comes to that data. Okay, not only because of, different systems, ERP and so on, but the way it is classified, the different categories and so on. My day to day, well, today is made of direct purchasing: obviously, when it comes to Dior manufacturer for textile, leather and so on and all, the other part is indirect: for marketing communication, IT, industry packaging, visual merchandizing, store and so on.
So if you don’t have the proper systems, the proper reporting, the proper metrics, you know, to, tell your story, what are you going to tackle first? What are you going to cover first? For which results and so on, in order to drive the growth of the brand, then you can be totally lost in a few days.
So all all what you all what has been said I’m fully aligned. Every day I’m working on four different pillars, at least four focuses of Christian Dior Couture. So first, I’m not building an organization. I’m building a worldwide network from Paris to New York to Shanghai, Tokyo, and sooner or later we’ll work on Dubai. We are bringing expertise, in terms of sourcing, into the company for category management process tools and so on.
Everything we do falls under the scope of sourcing excellence. So what is the impact the performance of the sourcing department within the organization? What are we saving and the different KPIs? I guess we’ll talk about it later. And at the end of the day, one of the difficulties is to manage confirmation program in terms of education and training through the internal stakeholder. This is the difficult.
11:31
Philip Ideson
So we will jump into some of those as we go through the conversation as well for sure. It’s interesting you talked about you know, being able to use the right metrics, kind of aligning with what the results of this poll were. And I imagine that that gets even harder the more data that you have access to.
Pierre talked about the fact that the availability of data, it’s exploding. So it becomes harder and harder to pick the right data to actually tell the stories that you want to tell, to influence the folks that you want to influence.
11:58
Yannick Caharel
Yes, yes, yes. And again, if I may, I had something, believe me or not, but, you know, most of the people when I joined the company asked me, okay, so what are you going to do? What are you going to take care of first, forward, and so on. So, I had to do a first presentation what we’ll do three years, five years action plan, and so on. But I had to tell the story based on the few data to tell them what I would tackle first: marketing and communication, the packaging, transport and logistics, and so on.
And aside from that I need to have resources in Paris, in region, you know, to start managing all the categories, project, and budget.
12:43
Philip Ideson
Yeah. That data gives you the, the road map, if you will, which is often missing, and helps you kind of build out where you need to go, where you need to prioritize, as you go on the journey and where you’re going to be more impactful.
Kerry, anything to add from you in terms of the results? And also just on this, the notion of using the information to tell stories. I know that that’s something we do every day at Art of Procurement with all the different content that we create.
13:09
Kelly Barner
Well, and I think even speaking from that experience, you know, it’s one thing to say, right, when you’re standing in front of the business, “This is how you’re going to contextualize and present the data.” But of course, we all know there’s a long process leading up to that point. You have to find it, centralize it, cleanse it, analyze it. Then you have to figure out what it means, not what it says, but what it means in terms of impact to the business. And then think about who you’re talking to about what, so that you can wrap it in a way that it means something to them.
I’m sure we’ve all had an experience like this where for the sake of a project, you live in a spreadsheet, you might live in that spreadsheet for 30 days or 60 days, and you can almost chart your pulse by that spreadsheet. You take a week away from it and you come back to the spreadsheet. I have absolutely no idea what any of these numbers mean. And so I think it’s sort of making an impression in that moment.
That is typically how procurement stakeholders feel every single time we share any data with them. And even though there’s a little bit of fatigue sometimes as we go through the data process, taking the time to figure out again what it means before figuring out how to tell that story.
I don’t think it’s easy, but I think it’s incredibly important, and it’s where we need to keep our eye on the ball in terms of connecting the data that we’ve worked so hard to turn into a resource with value that the business can then measure. And so I think it’s always interesting when you take the idea of a soft skill like storytelling and of course, a very proven analytical skill, like working with data, and really try to marry the two with a specific goal in mind in terms of outcome.
Now as we pull this down, one of the other things Pierre that I want to bring you in to ask about: when we talk about data, I instantly think spend, I think suppliers, I think savings, I think cost mitigation. But a lot of times, either those numbers or numbers that we analyze in the process are less about impact on the business and more about measuring procurement’s performance.
Do we need to think differently about the data in each case, whether we’re using it to motivate a business decision versus using what is, in a lot of cases, essentially the same data to demonstrate the impact that our team has been able to have?
15:34
Pierre Laprée
I would tie that to the to the point you made just before. You need to understand what you’re talking about. It’s always hard because some of the things you do may or may not have an impact on the business, but they may or may not have an importance, overall, because not everything you do has a direct impact on the business. How do you figure that out? And so, you know, there’s always this notion of leading and trailing indicators.
So a trailing indicator is something you’ve looked at in the past in that tell you what happens. And that’s good. But sometimes it’s hard to respond to that. There are also leading indicators, things you see today that you know will have an impact later on down the road. If we take an example with a pipeline of sourcing projects, you know that if your pipeline is drying up, i.e. if you don’t have enough projects, you cannot have bottom line impact down the road because you just don’t have what it takes today to deliver savings in 6 or 12 months.
So there are a bunch of these indicators that the procurement could be using. On really the performance management side: what is the state of your pipeline of project? What is the level of risk on this project? What is the capacity of your team versus what you have in the pipeline? So all of these are good leading indicator of the capacity of procurement to drive value down the road.
There are also things that you can tie with your spend information. You might have spent, from the previous year that will indicate how the spend will fluctuate so that you can anticipate that, I see a question on the chat that talks about payment terms. That’s the same. It’s what are the things you can have an impact on directly or indirectly?
Figure these things out. That’s probably the best way to address that.
17:34
Kelly Barner
Yeah. And everything that we’ve talked about so far is hard enough in its own right. But one of the things we wanted to focus on today was then also trying to do it in the midst of uncertainty, turbulence. We’ve had economic questions, geopolitics, changing regulations. Yannick, when you think about, the uncertainty that your team has had to face over the last few years, has that affected the way that you use or relate to the data that you have?
18:08
Definitively. Again, here in the context of a strong business growth and so on you often bring a lot of money within the supplier system and so on. So when you are building more and more boutique, you buy more and more packaging. You spend more and more on events or logistics and so on. Then it becomes a matter of business growth, profitability and the cost of doing business okay.
And this is why Dior Couture decided to create this organization, to be honest. Okay. Because the cost of doing business became very, very important at this scale of Dior Couture. Okay. So, yes, more than, more than ever. We need to not only to, to monitor, to control, but also to reduce this. Okay. Our business priority, as you may know, is to create the most beautiful boutique in the world, to bring the most beautiful experience to our clients in the world, and so on.
This has a cost. And somehow in this uncertainty, turbulent time where everybody’s trying to maximize the profitability, you need to have people in charge of this part. And again, data in this context is critical, so to make sure that whatever I do in Europe, again, in US, or in Asia Pacific is relevant for somebody from the business somewhere in the world. Otherwise I can be very, very quickly useless or you relevant.
Okay. and I’m being very clear about that. And one of my, one of my goals, of course, is to sell the economic interest of Dior Couture while preserving the quality of all we do all around the world.
10:01
Kelly Barner
Now, it’s funny to think about you starting in your position and other people in the company saying to you, “Yannick, what are you going to do?”
I mean, that is definitely a sign of an organization that is not used to having formal procurement. I think most procurement professionals and teams are, I always think of the image of the duck. We try to be cool above the water but below the water, oh my gosh, there is paddling and splashing. And I’m curious about as they’ve had the opportunity to see how having you in place and taking a formal approach to procurement can change how successful they are, has it also changed the way that they rely on data, the data that they expect to have before making decisions? Has there been sort of like an organizational change that has followed on to their adjustment in terms of understanding more what you do.
20:51
Yannick Caharel
Yeah. Okay but again, going back to your first comments, to be honest, at the beginning people were afraid. Because suddenly you have, procurement coming into the organization, transition, and so on. So going back to the question, what are you going to be to do? Are you going to annoy me, are going to bring something to us, and so on. Okay. So after a few months now, main key stakeholders understood the value added of, of the sourcing department and so on. Okay. And if you bring the relevant data in terms of, spend, potential, and so on, of course, immediately they see the value added in terms of savings, but not only in terms of savings now, and again I think we will talk about that later on, but slowly, we are moving to CSR [Corporate social responsibility], innovation, maturity of the organization process, end to end process simplification, digitalization, and so on. Okay. So this is a long journey, and I’m just at the very, early stage of this, journey. But I think people already start to change the way they approach or view the procurement organization.
22:12
Kelly Barner
Which is awesome, and to the point about it being a long journey, You know, Pierre, the longer you stay around, the more you realize that all of this is cyclical, right? And so, you know, we’ve all been in such a unique set of circumstances with the pandemic. Hopefully that’s the only time any of us have to deal with that. But there have been other things, you know, we’ve had recessions, there have been other wars, there have been other types of disruptions.
And so, as we have the opportunity to take a step back and think about how those cycles go and the data that allows us to understand how they’re going to impact our decisions and the circumstances that we’re working in, how have you seen that cycle also affect the business’ relationship with procurement?
22:57
Pierre Laprée
It has, I would say, a few impacts. One of them is that the expectation from procurement might be different in certain times. You remember we had airline and hotels client during COVID. I can tell you that there was a hardcore focus on taking cost out and increasing payment terms. So we could argue it was a bad thing because we were coming back to our old ways.
But that’s what the business needed, and it needed it badly. Now, I want to be optimistic and say that things are slowly getting a bit better, maybe a bit more uncontrolled. So now we see that there are also expectations from the business and from the broader business community, even the stakeholders as a whole, around driving impact that is not only financial in nature.
In the US here, there is a big focus on diversity, spend with diverse suppliers. In Europe, it’s more the environmental, emphasis on carbon footprint or as a whole resources consumption. So that’s what the business aims at measuring to. And so how can procurement help that? How can they bring a more holistic view to performance? That’s I think, one of the things that has changed and what procurement can have a say and make an impact.
24:26
Well, when we assume uncertainty, you know, you made the point earlier about leading versus lagging indicators. Instead of just always looking to satisfy or calculate the data associated with business objectives or performance metrics, should procurement also regularly be looking at the KPIs and metrics themselves to say where do we think we are in that cycle? What is the business asking of us? And so do we need to change it? If it’s not adding KPIs and metrics, maybe putting more focus on that data or on the storytelling effort around it? What sort of metric based effort does procurement need to be making?
25:05
Pierre Laprée
I will take the easy way out of that question, Kelly. It depends. But the more fundamental point here is you need to align with the business. [SpendHQ] just released something that helps our clients set, what we call goals. And that’s looking at what are the overarching strategic goals of the organization. Because for some, it will be EBITDA, some it will be diversity, some it will be increasing the top line.
So procurement will not be relevant and useful in the business if what they do doesn’t serve those objectives. So what we are helping our clients do now is how do you take those goals, make them visible within procurement, and how do you tie your action and your contribution to those goals? Because if there is an objective to increase EBITDA, procurement can help.
Procurement will not help with 100% of that objective because some will come by with increasing margins, for example. But how can procurement tie that action to that, saying, “Hey, as an organization, we want to increase EBITDA by two percentage points. We can contribute .75 or 1%. And that’s what we put in front of the business to support that goal.
I think this is really the critical part. It’s not so much about what is the KPI? It’s “Do your KPIs align and help understand the contribution of procurement to the broader business goals? That’s the key.
26:33
Kelly Barner
Yeah. And that can be hard sometimes too because sometimes it’s not about savings. Right. And so the business can make a decision that’s exceptionally good for them. But we get back into this situation where that doesn’t necessarily help procurement satisfy very narrow traditional performance metrics. And so I guess back to the storytelling skills, Pierre, we have to be thinking about how do we capture the impact that we were able to have. Savings maybe doesn’t work in this case, but there might be something else around risk or sustainability or diversity or even margin contribution, depending on what the revenue expectations are in that case. But it continues to create a challenge for procurement.
27:12
Pierre Laprée
Yeah. But so, I tend to have a relatively basic view of the situation. If your goals, well, if you deliver something that is not good for the business or if something is good for the business, but not for you, there are two things. Either you’re not tracking the right things and you should change, or you’ve been tracking the right thing, but the situation has changed. So if you have a good conversation line with the leadership, then it’s always a good opportunity to adjust, and this agility, this flexibility is really important, to equal to the theme of this webinar, in turbulent times. Procurement needs to have this agility and have the ability, through data and tools, to adjust what they are tracking, because the business reality might require different KPIs, and that might change 2 to 3 times in a year.
That’s annoying, but that’s the case. So, yeah, agility, making sure to track the things that are aligned with the business objective and have the ability to respond to the changing business environment that’s fundamental.
28:29
Kelly Barner
Yeah. And Yanick, you talked about this as well. You talked about the business having sort of that response like, oh great. Now we have procurement. Are you here to annoy me? Are you here to help me? I mean, in most cases, if we’re doing our job, the answer is probably a little bit of both. Not that we’re trying to hold them back from hitting their objectives at all, but it’s a new group of people asking a new type of question, right. Making them think a little bit harder about their decisions.
Have you found yourself in situations where you’re trying to manage that balance between helping the business ultimately do what it needs to do and sort of put concerns at bay about, you know, procurement is going to force me to choose the least expensive or they’re going to force me to go against, what I’m ultimately looking to decide. How have you managed that balance?
29:16
Yannick Caharel
Every day, Kelly. Every day. But again, it’s linked to the complexity of our business and the people, the internal stakeholders I have in front of me. Just take a, for example, when I engage into a discussion with our worldwide marketing director, he will probably not be interested in it for me to talk about savings or just, you know, he will be more focus on what are the budget we are ready to engage into a Dior show and event and what are the ROI in terms of sales, engagement on social media, brand image, and so on?
Okay, so this is one approach. The same approach with, I don’t know, with somebody who is more into supply chain, packaging, the priority will be unique. You negotiate wherever you want, but I want my packaging, my shopping bag, my coffee to be on time in full in Shanghai, in Los Angeles, in Paris.
Okay. So of course we have different of level of discussion, a way of measuring our impact. And I need to adapt my strategy, my organization, into this context. Of course, this is a big challenge. And I’m trying, you know, to harmonize the way we are speaking to, to all of them, which is not easy, but again, my strategy is,a mix of, return on investment, savings, on time in full delivery to our boutique, bringing wonderful experience. That’s not easy, but this is one, one of the target to harmonize this.
31:07
Kelly Barner
But it’s an important process of discovery, right? So, I mean, I think anybody in procurement that’s had a conversation with marketing has seen and heard the head explode if you say the word savings. But as you’ve come in to Dior Couture, you’ve had to have these different talking and listening sessions with all of the different functional groups to find out what is it that holds currency for them, what do they care less about? What do they care more about? I’m sure it took a while to figure out, even on an individual decision maker type of basis, what type of storage you need to tell, what data do you focus on? What’s ultimately going to motivate the decisions? Has it been an interesting process as you sort of worked out the early stages of that puzzle?
31:50
Yannick Caharel
In fact, people are ready to listen. And to be honest, they are quite collaborative, especially in this turbulent time and uncertain time, which makes my life easier, you know, in bringing this organization into Dior Couture.
But again, I have a different mix of people, different mix of priorities. And as you said, and as Pierre said, as long as I align with the top, top management of Dior Couture, as long as I am relevant to business priority, you know, wherever they are or get on the planet. the organization will be visible, will be valuable and recognize as such.
Okay. But again, that’s it. That’s not an easy game, you know, because you can be lost very quickly, you in such a world wide organization.
32:44
Kelly Barner
Yeah. Now, Phil, as we’ve been chatting about this, I know we’ve had a bunch of questions that have come in from the audience. Do you want to pause here and maybe bring some of those into the conversation?
32:53
Philip Ideson
Yeah, I’m just looking through some of the questions and really, there’s one that’s from Aaron that I want to just ask a little bit later. Just it ties in with kind of the second half of the conversation. But we’ve got questions from Dave and from Luca, who are essentially asking, think kind of the same thing.
So, Yannick, I’m going to, pose this to you. And the question really is kind of paraphrased, how are you thinking about linking and how do you link the spend analytics with, which is you know, just kind of every day the data you’re getting from your ERPs, from your invoices and everything with savings and connecting kind of the two so you’re reporting and you’re sharing that information with the stakeholders.
Are you bringing those all together into the same place?
33:37
Yannick Caharel
Yes. And actually it was my starting point, you know. So again, I’m not sure it’s relevant for all kind of industry, but so far in the luxury industry and in the world of indirect procurement, we have kind of a ratio.
Whenever you invest into a buyer somewhere in the world, this buyer has to cover minimum 10 to €15 million of budget, okay. And deliver 5 to 10% of savings. Then we can discuss if it’s a P&L saving, cost avoidance, and so on. But okay. But that’s the ratio. And, my talk and it was my storytelling when, when I first met my CEO, and asked him for the resources, you know, to manage a few billions of euros.
I can’t give exact numbers to you, but, we have quite a few billions. Okay. And this was the ratio I gave him. Okay. And my promise to him is that whenever we invest one in purchasing, you will get out ten, in terms of, and, this is where I make the link between, spend data analytics, category management, and the group in my organization and delivering saving, but much more to the organization.
35:06
Philip Ideson
Yeah. And I have a follow up question on that. So as you’re thinking about the ROI then, that kind of ten X ROI of, you know, every time you bring somebody in the team, does that take away from your ability to focus on non savings related kind of value activities or do you not feel that? Because that’s one of the things I fear is that we build the business case for investment in strategic procurement on cost savings, and therefore, there’s the expectation that that’s all that we can deliver. And we kind of put it in that box. And so I’m just wondering kind of how you’ve managed that to make sure that you’re not just focusing on that because that’s what the ROI was built on or the business case, but you’re able to get to a lot of those are the non cost savings related value drivers.
35:51
Yannick Caharel
No, it’s an entry point because you can tell the story you want. People will always see, I don’t know until when, but we always see procurement as a saving solution provider. So the baseline has to be this entry point. Once this is understood, once the COMEX, the finance community decided to be able to invest into this organization, then you can roll out and talk about innovation, CRM, digitalization, bring efficiency to the organization from accounting to manufacturing to logistics and so on.
But it is it is what it is. But as of today, you know, saving and the budget coverage and so on is still the entry point so far in my experience.
36:44
Philip Ideson
Yeah. It opens up the door that gives you the conversation. But it’s important that you don’t just then focus on that as your only deliverable.
36:55
Yannick Caharel
Yeah. And again, just to bring some of it around the table, you know me, I’m not negotiating at all in my position. Maybe I’m the worst negotiator on earth, you know, so, every day, you know, everything that I do is very far from negotiation and saving.
I have people, in my organization doing that, but I’m doing, everything but negotiation and saving, okay.
37:24
Philip Ideson
Yeah. The further, you get more removed from that everyday negotiation and deal making done, you as you kind of take on broader responsibilities, for sure and it becomes more about influence, which is where the storytelling comes in that we’ve been talking about today.
Pierre, I’m going to come to you in a moment. I do have one more question for Yannick, so thank you for your patience. I want to just kind of transition into talking around helping stakeholders actually embrace procurement data. My question to you is I think sometimes we’ve been accused of procurement being a little bit of a black box in terms of data and information and that, we only share the information that maybe, looks, shines a positive light on the work that we do.
So I just wonder where you stand in terms of how much information and how transparent should we be in terms of the information and the data that we share with stakeholders, whether it’s related to spend, whether it’s savings, whether it’s related to any of these other initiatives that you’re able to gather data from, as opposed to kind of keeping it within our four walls.
38:30
Yannick Caharel
So far, because, you know me, I have a lot of conviction and so on, to me, working in full transparency with everyone, you know. So, and again, in this industry, we don’t like to communicate. We don’t like to share. People like to work, somehow in silos with hidden teams and so on, especially when it comes to budgets.
Me, the way I’m leading the change management and transformation program I’m bringing to this company is to open the silos. And this is where tools: spend analytics tools and so on, and Pierre is a live proof of that, you know, will help our industry, our company to really work as a network and collaboratively.
Because to me, let’s put aside some very critical, confidential stuff when it comes to, celebrity campaigns, this I can understand, but all the rest, you know me, I want my logistic buyer in Shanghai to be able to know what is a contract in Paris with FedEx, DHL and so on.
Same in Dubai. And so I don’t see the point of, hiding it, you know? So, and on top of that, I see a lot of advantage because, since we are trying to build a collaborative and homogeneous network, we all need to have the same data, the full picture and so on, so that that at the end of the day, we have the best deal, the best contract, the best relationship with our worldwide partner as simple as it is.
00;40;12;29 – 00;40;26;16
Unknown
As simple as it is to, do you, I’m lost my train of thought there for a moment. where was I going to go?
40:37
Philip Ideson
Are there types of information that you feel more relevant than others to your stakeholders when you know, when you’re looking to be transparent with the information that you provide.
40:46
Yannick Caharel
Well, I have a lot of questions and request, because I’m actually working on defining our KPIs. But so far, even if I try to reduce our KPI at the maximum, I still have at least 30. First is on savings. Okay, then we are measuring our CSR, sustainability KPI as Pierre mentioned. Then we also measuring the efficiency of our process and tools.
00;41;19;18 – 00;41;41;26
Unknown
Okay. It goes down to, the number of POs we have with our Accounting, the time it takes to create a PO, invoice and so on. Okay, and we have somebody to find we have something to improve into that field. Then, slowly, we will move into our impact from the business.
00;41;41;29 – 00;42;26;03
Unknown
Business growth, cost profitability, our innovation program, our relationship with our vendors. So, the business is really, really, demanding into that field. And one of the key, but I guess you see, the same thing for other industries is really the CSR [Corporate Social Responsibility] strategy. We just appointed as well a new director in terms of the CSR at Christian Dior Couture. I’,m working closely with him, because when you are Dior Couture you need really, really to take care about where you source your end to end, overseeing all the certifications, is it sustainable or not?
And, this is one of my key topics for next 20 years, right?
42:43
Philip Ideson
So Pierre, thank you for your patience. I want to bring it back to the questions that we got from the audience, what we talked about marrying together spend data and performance data, because that’s really the heart of what you do. And it’s the heart of what you’ve been doing for, you know, at least the, what, ten years plus now that, that we’ve known each other.
So any best practices or tips that you can share to our audience today on how you kind of marry those two together so you can tell a story with, you know, ultimately, the output of bringing those together.
43:19
Pierre Laprée
So, that’s a great question. Thank you. There are actually two, two steps. I would say, the first one is how do you start from the spend data to identify opportunities and basically build your pipeline?
And that’s one of the questions we’ve had there. And we can elaborate a bit later on that. But, marrying the spend data with performance data is a good way to feed your pipeline. There is an age old debate around whether you should try to reconcile the savings you negotiate with, the spend you actually incur in the next 6 to 12.
43:55
Philip Ideson
Yeah. Forward looking spend projections versus past spend history.
44:00
And this one is really hard because it’s not only a procurement question, it’s a pure business question. What is our sales forecast? What is the impact on manufacturing and production nd as a result on cost, and how accurate or trustworthy are those projections?
So this one is really hard. So again, come back to the value for your business. And you might have a different picture in direct and indirect. In indirect when you renegotiate, I don’t know, a stationary or whatever indirect stuff,c do you really want to have a dollar for dollar reconciliation between negotiated savings and actual spend?
Probably not. Your time is put to better use discussing with suppliers.
44:49
Philip Ideson
Yeah, you could do, but it’s going to take you an awful lot of resources to do it.
44:52
Pierre Laprée
Yeah, and you might lose a few buyers who say, “Hey, I’m not here to do financial control. I’m here to do procurement. So some aspects, it’s not really useful. On the direct material side, for example, it might be a bit more useful. But again you need to have the partnership with finance there. Because procurement is being given a mandate to negotiate a certain scope but then the business would be on different timelines, might have ups and downs. So how do you reconcile that?
There has to be a partnership with finance. It should not be, in my view, the burden of procurement alone. So again, try to think in terms of, cost benefit ratio. What more will I learn if I marry up my savings numbers with the actual spend number? Will it help bring the company forward? Will it make the board faster? That’s a conversation.
45:48
Philip Ideson
So Yannick, let me pose this in terms of how are you thinking about this on a day to day basis within your business. I absolutely agree with what Pierre said about how it’s really, really difficult and time consuming to track 100% of savings, especially in indirect procurement, in direct services products and I’ve had the joy of having to do that in my past lives as well, and, you know, trying to track real life savings. And we’ve needed an army of people to try and do it.
What it does bring is trust. So there’s often a distrust with procurement math and the numbers that we report, especially when it’s a little bit harder to track on the indirect services, indirect product side. Generally it’s something that’s not tied to a bill of material, for example. If we’re not going to have kind of the full trust of finance to say these are 100% real life savings, how do you bridge that gap so that finance still has trust in the numbers that you’re reporting?
46:50
Yannick Caharel
I have a simple answer to that. In fact, in Christian Dior Couture we are using PPM [Procurement Performance Management]. Okay. So, same thing, I don’t know in English, but, people really trust what they see. And, I must say that it’s not because Pierre is there, but PPM [Procurement Performance Management] allows me you know, to have an online platform where we report all the projects, all the budget, all the saving, with all the documentation and so on.
Okay. So, it allows me to make the link with finance, top management and so on. So I’m not anymore doing 60 pages of presentation and PowerPoint presentation and so on. You know, the moment I go to New York, Shanghai, or Dubai, I just log into PPM, my module so that we have a full business review based on true project, true realization, whether it’s identified, ongoing, completed, and so on.
Okay. And this is where finance then it’s their job to decide if this is the saving P&L that they want to keep on their PNL, or is it just the cost avoidance and performance that will be realized for the business to do more events, to do more packaging, more boutique stuff and so on okay? So where I am at my level of maturity of Dior Couture, this is how I make the link today.
48:18
Philip Ideson
PPM being Procurement Performance Management.
48:20
Yannick Caharel
Sorry. Yeah.
Philip Ideson
No problem with that. So Pierre, we talked with Yannick about being as transparent as possible. How do you manage or do you have any advice for procurement leaders listening in if they actually face pushback on some of that data from the business when they’re sharing it with the business?
48:43
Pierre Laprée
So, again, I, yeah, everybody in that room probably has had at least one, one issue. So and that’s clearly with SpendHQ and Procurement Performance Management, that’s what we help support. Because you hinted at that earlier about this black box effect. It’s largely a self-inflicted wound and very often one of the reasons for that is we’re not sure ourself of the value we bring.
And, when I was a practitioner, my litmus test was, “Can I look my CFO in the eye and tell my story about my saving?” If not, it’s probably that the story was not strong enough. But when you think of that, it’s just about having clear guidelines on what is value or not.
Because not all projects, not all value is created equal. There are things that we expect to hit the P&L and some not and that’s okay. But you need to be clear about that. So you need proper policies, and you need alignment with finance and the business. Do we agree on the way we bucket our performance? That’s the key.
And once you build that understanding, and that the book of rules, I would say, then you need to put the proper governance in place. And, hey, the main problem I’ve seen discussing with finance on my savings in my life was because we did not agree on the baseline in the first place. So whenever you have a project in your pipeline, put some governance with finance.
Do we agree on the baseline. Do we agree on the type of benefits we expect? Do we agree on the ambition as a whole. Check. Then you can work, and then reporting the savings is just a consequence of that.
50:27
Philip Ideson
That’s easy. That’s just a calculation of the baseline that you agreed at the beginning of a project.
50:31
Well instead of fighting on the savings, align upfront with your business. Create the conversation. Have that conversation because you might learn a few things or two besides fixing the baseline. So that’s really what we stand for is getting procurement to have this pipeline and to build the alignment and the governance throughout so that it’s not a question. The problem of trust immediately disappear.
I remember in the early days, one of our clients said, “We used to spend three hours a month with our financial controller to discuss savings. Because of the governance we put in place, we no longer do that because the financial controller, we report savings, as they have reported, without asking me. And so now we can use that time to discuss the topics that will actually add value.”
So basically it’s how do you cut the noise? How do you stop being a beans counter. Because you have rules in place, you have governance in place, you have transparency in place, so that you can discuss about the things that would actually make a difference for your business. So that would be the one advice: be in alignment and put governance in place.
And that’s what Yannick did before with us. And he’s doing again with us now. We’re on the same boat.
51:51
Philip Ideson
Now, one of the questions that came in, I’m just kind of scrolling backwards through the chat here, was from Aaron earlier. And Yannick, it was a question posed to you. We’re talking about stakeholder relationships and engagement and optimizing those.
And that question was, if you could just share kind of the relationship that you have with R&D or design teams and, and how you’ve been able to optimize that using, you know, some of the tools, some of the techniques that we’ve talked about today.
52:15
Yannick Caharel
Okay. That’s not an easy relationship, to be honest, especially in the fashion industry, because again, we have quite a centralized way of doing things. We have a studio, the Classroom, based in Paris, and the other one deciding for all the fashion shows, all the design from the packaging, boutique, and so on. So, the way I’m trying to engage with them is, to bring a process of, development, packaging, and procurement to them.
We do not have this in Dior Couture as I used to have in my other, in previous experience. I’m not here to challenge the creation, innovation and so on. I’m just here to, somehow in this end to end process, to have the proper brief, the proper specification, and somehow, someday, we will have a provider, a service, supplier manufacturing the goods, doing the events and so on.
So my priority is really to engage, to be upstream with them after the creative part and so on, to have a proper brief and the time to do my job so that we can do properly our sourcing activities and deliver the goods, the event at the end of the day.
53:37
Philip Ideson
Now we have just a few more minutes left till the top of the hour and I do see a couple more questions that came in. Yannick, I’ll ask this to you first, but Pierre, I think it’s building off something that you said, in the last point as well. How do you establish governance with finance around value that cannot be measured on the financial statements? That’s from Jake. And that’s a great question.
54:04
Okay. well, it’s very relevant because I’m middle of discussions with them. So here there are few steps. So it’s how we are integrated in the budget process of the company. Okay. So very often it’s the budget is done between, let’s say July and October. Then you have revised one or revised two.
So how can I be part of this process at the macro level? And then when it comes to operational project and so on here, it’s a matter of having the right metrics, the right KPIs, on a monthly basis, quarterly basis, so that we can track our performance here in terms of economics and savings.
But the dashboard is not limited to that. As I mentioned earlier, we have a lot of KPIs linked to our process efficiency of the procurement today, tomorrow, how we manage our supplier database. We have more than 50,000 vendors all around the world in Dior Couture, probably it should be more like 10 to 15. But how do you go from 50,000 down to 10 to 15?
So we have big, big programs, super rationalization contracts to deliver and finance is asked to support it.
55:34
Philip Ideson
This is more around having a balanced scorecard. Savings is one of those areas that has governance with finance built around it. But as you’re reporting to, you know, other executives around the business, you’re looking at more of a balance, these are all the different initiatives and how we’re reporting on it.
Pierre, any thoughts or anything to add, to that from your perspective?
55:55
A few things. The first one, that’s one of the things we’ve been releasing recently: how do you track non-financial performance on projects? And so, you should not be tracking everything, but there are a few usual suspects. I will say carbon is one. Which we have clients who track their energy or water consumption or the amount of waste they produce. So how can procurement showcase their contribution there?
So now, the ability to say, “Hey, on this project, we’ve contributed to reducing the cost by 10%. but we also selected a supplier that will actually help reduce the water consumption by 20%.”
So when you do that across a pipeline of many hundreds, if not many thousands of project, you’re starting to paint a picture that is a bit more holistic of your contribution to say “Yes, we’ve delivered a hundred million worth of savings, but we’ve also contributed to reducing the energy consumption by X% and the carbon footprint by Y%.”
That’s a bit more interesting, and so that’s the first part is define the non-financial metrics that are good and track them together with your project. But coming back to the initial question on the state of data, it’s really call. Getting data, understanding the data, figuring out the scope. That’s where you help. I will tell you one secret.
This [data] will be wrong 100% of the time. Align with finance and make sure that you look at the problem with the same pair of eyes and agree to disagree and accept the fact that data will not be completely accurate or granular. But if you build the common understanding on how to look at the problem, that’s okay. And then you can put yourself on a continuous improvement loop.
Hey, it’s very coarse? Fine. Let’s make sure that we see where the biggest pockets of value is, and then we’ll iterate on that. Prove the basic value. That will not be perfect, but that’s fine.
58:01
Philip Ideson
Yeah. And the procurement value proposition and the perception of procurement is driven not just by the data.
The data is helping us tell the story. Having as good and as accurate data as possible helps build trust in the story that you’re trying to tell. But, I always have taken the perspective in my career that if you can meet all of your savings goals, and this is just through experience of seeing this happen time and time again, you can hit all of your of your savings goals, and the business has a bad perception of procurement. You can miss your savings goals, and help the business align with its true objectives, and actually have a really strong perception of what procurement is and the value that procurement drives.
That’s not to say, okay, it’s time to just rip up all those savings targets. and don’t worry about them. What it is to say that at the end of the day, it’s connected with something we said right at the very beginning is around alignment and that the savings piece and the reporting around that is just one part of that puzzle.
58:56
Pierre Laprée
And, and when you, what I think is really key is you need to build that alignment, because when we are in turbulent times like today, being in lockstep with your business, you can weather any storm if you’re align.
59:11
As Yannick said, there’s a greater pull for collaboration from the business in these turbulent times. So then it’s around how do we show up and support that?
59:20
Yannick Caharel
No. And again, I used to say that nobody will come to congratulate me because we deliver a €10 million, €50 million saving action plan. Everybody will be coming or will be blaming me if we fail to deliver a quality show, we don’t have our package in boutique to sell our product, and so on.
Okay. So, and here it goes to business continuity plan, supplier relationship management and securing our source. All of this, you know.
59:53
Philip Ideson
Yeah. Well, it’s time to, to wrap up. So first of all, everybody who is, has watched us today is, shared some comments or questions. Want to thank you, of course, for participating in the AOP life.
Yannick, Pierre, there’s probably so much more that can be said from, and shared from your experiences. We’ve only touched the surface, but I really want to, thank you for joining us today and sharing some of your, experiences with our community. It’s, it’s been a pleasure. Thank you. Thank you. All right, well, thank you very much, everybody, again for joining us.
