Expert Insight: The relationships that money can‘t buy
Samskip’s drive to strengthen its procurement activities group-wide is achieving efficiencies that will benefit its logistics partners and customers alike, according to Procurement Director Matthijs Creutzberg.
Creutzberg, who joined Samskip as Procurement Director in September 2018 and, in January 2019, has been leading a complete review of procurement management and processes across the pan-European transport group‘s shortsea, rail, barge, trucking and terminal operations.
Having developed and implemented procurement strategies and policies for organisations of varying sizes in a career taking in some well-known names in finance, insurance, IT and telecoms, Creutzberg has come to Samskip as part of its initiative to bring in new talent to reshape key areas of business. Describing procurement as a “fact-based activity where cooperation with stakeholders should be based on facts“, he says his initial impressions were of a procurement function “partially fragmented over the regions”.
“In logistics, it is easy to see why there can be a lot of people who ‘do’ procurement, because responsibilities can be regional and tasks have not been fully defined. At Samskip, there have been two central procurement staff but, especially as the company grew, that was not enough: procurement was happening everywhere.” Convinced that cost savings, increased margins, reductions in risk and new value-adds were available, Creutzberg‘s says that efficient procurement involves a clear communication channel to stakeholders that include internal clients. “We are a facilitator to the business and help it to achieve its budgetary goals, rather than being the procurement police,” he says.
His new strategy is built around areas of business rather than location, with activities defined under four categories : Haulage; Rail & Barge; Terminals & Vessels; and Equipment. Each of these four areas is the responsibility of an individual manager, working within a centralized team numbering six in total. Providing procurement services on behalf of internal ‘customers’ generates scale economies and reduces risks, but Creutzberg also highlights how lack of a unified approach can limit relationships with individual contractors to their most basic transactional terms. ”There is so much more to gain when parties really partner up,” he says.
Logistics professionals are fully aware that buying cheap from subcontractors can often cost them dear in the long run, but the sharper point he is making is that purely transactional relationships act as a more or less permanent temptation to race to the bottom. This can limit the potential to develop as a business, he observes, citing a Japanese proverb as saying “If you focus on cost you get low quality; if you focus on quality you get low cost”. Standardising procurement processes and systems means that the logistics provider can benchmark performance in different locations and within different suppliers to ensure best practice in contract management “so that every Euro being spent actually relates to the contract”, he says. “Centralised processes are more predictable and allow contractors the opportunity and time to optimise their own business strategies and build services to meet our needs. Having a centralised function also means that procurement category managers are authorized to challenge existing contracts to identify where relationships can be optimized.”
Costs and KPIs
Creutzberg’s assessment of Samskip’s procurement function uses key performance indicators that score personnel and management, processes and systems, contract management, customer satisfaction and results on a scale of 1-5. The approach creates the methodology to measure total cost of ownership as a business principle, rather than cost alone, and aspires to drive scores towards perfect ‘fives’ - where procurement would be perceived as an extension of product development.
Creutzberg also sees the centralized approach as driving optimized performance among suppliers themselves for other reasons, which should be felt by Samskip customers in greater efficiency. “Suppliers are selected in a uniform way, and those planning for a future with Samskip will be part of the quality discussion,” he says. Individual initiatives include plans to shift the proportion of trucks remotely tracked for pick-up and delivery time performance from just under half to above 85% within 12 months.
Based on experience, he says ‘preferred suppliers’ should make up around 75% of the mix. Even so, he stresses that the aspiration does not mean that Samskip stops looking for alternatives when its finds a good supplier. “Procurement is also pragmatic and relationships need to be built on mutual respect: suppliers should also be aware that one of the other benefits of uniformity is that it creates a healthy competitive environment in which managing multiple vendors is easier, should the need arise,” says Creutzberg. “Again, standardisation provides a template for processes so that they can be tested against targets for efficiency, but there must also be enough flexibility to prevent the template from obstructing business, especially when it comes to aligning with local circumstances.“