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    Balancing Cost, Resiliency, and Sustainability in Procurement: Insights from Georg Roesch

    Balancing Cost, Resiliency, and Sustainability in Procurement: Insights from Georg Roesch

    Balancing Cost, Resiliency, and Sustainability in Procurement: Insights from Georg Roesch

    Procurement professionals across industries and markets are struggling to keep their supply chains agile in a world of constant disruptions. In the latest episode of the Supply Chain Management Review Podcast, featuring JAGGAER’s own Georg Roesch, Vice President of Direct Procurement Strategy Development, explores how to navigate supply chain instability while mastering the balance between cost management, resiliency, and sustainability.

    Key Takeaways:

    • Learn how to leverage technology and market intelligence to navigate supply chain disruptions and capitalize on opportunities. 
    • Understand why focusing solely on price is short-sighted and discover how to calculate your total costs for better decision-making. 
    • Get expert advice on optimizing the right formula of cost management, resilience, and sustainability for your organization. 

    “The key of everything is finding the right balance for your industry, your market, and the category that you’re buying.”

    ~ Georg Roesch – Vice President Direct Procurement Strategy | JAGGAER

    Ready to elevate your strategy? Don’t miss these actionable insights from a top industry leader. Listen Now!



    Michael
    Hello and welcome to today’s supply Chain Management Review podcast. My name is Michael Levins, and of course, I’m group editorial director for Peerless Media supply Chain Group, which includes supply chain Management, Review magazine. And I’ll be your moderator for today’s episode where we’re going to help supply chain professionals overseeing procurement operations and help them how to master the balance of costs resilience and sustainability and supply chains. Now, I don’t think I have to remind anyone joining us today supply chain and procurement has been thrust into the spotlight since the pandemic and we continue to face unprecedented challenges from geopolitical upheavals and, of course, climate crises. And it seems like we have disruptions day in and day out.
    Indeed, navigating these turbulent waters demands a delicate balance between controlling costs, ensuring resilience and meeting rigorous ESG regulations that complicate data collecting and reporting. Now, today, we’re going to explore the intricate dance of managing these three critical elements, and we’re going to offer some insights, strategies and technologies that are reshaping the landscape of supply chain management, ensuring that organizations can thrive amid constant change. Now to walk us through this journey to achieve achieve this perfect balance of those three elements, we’re joined By Georg Rosche and Georg is Vice President Direct Procurement Strategy at JAGGAER, a software company that specializes in procurement and spend management solutions. Georg, welcome and thank you so much for joining us today.
    Georg
    Well, thank you for having me.
    Michael
    Now, Georg, let’s let’s start by setting the table here, right. We like to start by giving that big 30,000 foot view. Let me take a snapshot of today’s current environment. Let’s let’s see if we can put this all in perspective. Now. I made a quick mention of the you know geopolitical issues. We’re seeing the impact climate is having on shipping lanes in some areas and now labor negotiation talks have stalled on the East and Gulf Coast ports here in the States and it feels as if supply chain managers you know, really can’t catch a break. From your unique position of working with some of these professionals in the front line kind of supply chain and procurement, you know, how would you define the current supply chain environment here in the middle of a 2024?Georg
    Well, I would say realities have changed and we can all see this now, right. So I believe it’s very different in our field than it was like five years ago. I mean, it’s what some people call like a Poly crisis. So it’s basically one crisis after another. We don’t seem to to catch a break, and this has a profound impact on professionals in our industry, how we work and how we run our businesses. So when I look at it I believe it’s fair to say that procurement was even incentivized in the past to focus on cost savings. I believe that’s fair. And and I see a change in that as people now see that only focusing on cost is very short sighted. And we ran our supply chainsGeorg
    on a couple of premises that are not true any longer, and therefore we also need to change how we run those business and how we think about these processes. So and this hasGeorg
    a profound impact, I would say on especially like coming from the procurement angle here on procurement teams as they don’t want to be the order takers anymore that that take the orders run with it and negotiate prices and so on. There is a lot of extended responsibilities that came across these

    Georg
    Supply chain and procurement teams. And I’m sure we’re going to dive into more details about like the East Geo related stuff and how to build a resilient

    Michael
    Absolutely.

    Georg
    or anti fragile or where you want to call it supply chain. But that’s really what I’m seeing is a shift in how you must run your business and look beyond cost from a procurement prospective.

    Michael
    Right. Right. OK. Now let’s take that in perspective a little bit here in terms of challenges, right, you know we have there’s a profound shift which you just mentioned, you know all the disruptions where we’re seeing it’s now part of our day-to-day environment. You know, with this new reality that you just defined and now that we better understand, you know, what would you say inside this environment, now this new reality, what are what would you say are a few of the biggest challenges facing procurement professionals today due to this?

    Georg
    So what I’m seeing is there is a lot of new requirements that teams need to fulfill. OK, so as I said before, cost, yes, it’s still there. It’s still important. We need to focus on it, but it’s also how can I become more resilient or how can I be more apt to to managing risk and also how can I look at sustainability right? I’m seeing this as more and more requirements that come to these teams but I don’t see those teams getting any bigger.

    Michael
    Right, right, exactly.

    Georg
    OK so how do you do this? So how can you actually do more with less?Aand this is where I believe technology comes into play and help you do this. So the work isn’t done by itself or there’s no computer out there doing the work for you. Sorry if that’s the expectation, that’s not it, but.

    Michael
    Right, exactly.

    Georg
    You will need a lot of technology support to run these processes efficiently, and I believe that’s that’s really what’s happening right now on the shift.

    Michael
    Absolutely. So great. So let’s dive into this. You know, a solution or a way of approaching a solution for procurement professionals, you know, to meet the challenges you just neatly defined there and that was terrific. And you’ve mentioned achieving a delicate balance, mastering the balance of cost resilience, you know, sustainability regulations, right. So let’s dive into some of that to break these down in terms of cost management, then what is the most important element that needs to be achieved on the way to successfully controlling costs, you know, and then maybe we can talk about and then we can get into the software as well. That’s that’s making that happen. But what are some of the most important elements that need to be achieved now?

    Georg
    So when you think about cost management, this is not like a very simple buyers market at the moment. It’s pretty much a sellers market and there is a lot of, there is a lot of like.

    Georg
    Cost that comes upon the organization that you haven’t that you haven’t thought before

    Michael
    Right, right.

    Georg
    thought of just think about like inflation. Think about interest rates. All of this has a very negative impact on on the buying organizations right now. Not just the stuff that you or the decisions that you make right now are impacted by this, but also the decisions that you made like a year ago are impacted by this. Negative.

    Georg
    Right. So you need to be well aware of what’s happening and you need to act fast. So what I believe is one of the key drivers right now is to have a very good overview of what I call the market intelligence. So you need to be on top of your markets. You need to know your indices and everything. When you see an angle of attack, if I can use that reference.

    Georg
    Is you need to act fast, so you need to plan for this and you need to act fast, so you need to be able to capitalize on every single opportunity as soon as it arises.

    Michael
    Right, right, right. So again, you know, procurement software is always, you know prioritized that cost efficiency, right? But but has this focus intensified in today’s volatile market? And if so why and and how is it different from the past, you know how is how is software has role changed?

    Georg
    I believe this has to do with the other topics that we would like to talk about later on is

    Georg
    I think it needs to shift away a little bit from this, procurement is just like the tough negotiator and and gives you like the lower prices

    Georg
    this price alone or let’s call it the the purchase price of the product that you’re buying actually, a pretty small percentage of your total cost that you have, so having a better understanding of your total cost or how we call it, even like the total value of what you’re buying, it’s not everything what just cost related, you need to have a very good understanding of these of these items to really make the best value

    Georg
    decision. I believe that’s really what procurement teams should be doing these days.

    Michael
    And we did mention, you know, resiliency that at second, that second element here that we were talking about now during, during and in the years following the pandemic, you know there been, there’s been a lot of chatter around resiliency and agility among you know, Chief supply chain officers and procurement professionals. Now what? What role do you see technology playing and building robust supply chains that that can withstand the ongoing disruptions?

    Georg
    Let me first define the that the market that we’re in and how it’s separated and then and then it will be clear.

    Michael
    Absolutely. Yup

    Georg
    So you can usually divide what what we are doing into two different pieces within procurement, right. You have source to contract then you have source to pay. The one that is the more the the strategy of strategic nature of who are my sources, what information do I need? What who do I want to contract with, and so on? And then you have the procured to pay, which is more the execution piece of everything. Both are super important, but when it comes to building up a resilient supply chain, the execution is too late.

    Georg
    So you need to do this beforehand. I can monitor what’s going on and hopefully I have plans in place what to do if something goes wrong, but in order to build up a resilient supply chain, you must start at the strategic the strategic end with just a source to contract process and think about it from a manufacturers perspective.

    Georg
    We are very big advocates here at JAGGAER of bringing procurement in very early in the new product introduction cycle.

    Georg
    Because then you have the longest lever basically of influencing everything that’s needed from cost to resilience to sustainability.

    From a resilience perspective, you will need a lot of data. OK, coming back to this market intelligence, we were talking about before. There was a ton of data you will need.

    Georg
    There is supply chain, risk information and financial risk information. There is weather information, whatnot like all of these different things you need to have in consideration. Our job is as a procurement software vendor is surface this information every time the buyer makes makes a decision. This can be an awarding decision. This can be selecting who are my approved or preferred suppliers in a certain category to going forward for

    Georg
    bundling to come back to Mike like being cost effective and so that’s really where I’m seeing a lot of of the effort going and let’s not forget what I like to call those intelligent agents as most of you will call it like AI under

    Georg
    air quotes here. There is a lot of use of new technology of recommending things, of finding patterns and so on to really help the buyer in that regard.

    Michael
    Yeah, yeah, absolutely, absolutely. And let’s roll into that final element here. That sustainability element that we that we mentioned in the intro here. Now, sustainability is another important area that comes in and out of supply chain discussion over the years, right. We’ve been in the market a long time. We we’ve seen it come in and out and the concept the sustainability has become somewhat of a it’s sort of a catch all term, right. So from your perspective, what does it truly encompass? In the context of supply chain and procurement, and how can organizations effectively address these demands of sustainability?

    Georg
    So. I mean, personally, I really like the the when we define it as ESG, I believe that’s the best term to use here and not use like just sustainability, which is like term as you just mentioned. But it’s like environmental, social and governance I believe these are the things

    Georg
    to be very fair, many organizations are very afraid of these things. And. Just think about, let’s start with our environmental. If something is green, it’s supposed to be more expensive immediately because it’s green, right? So that’s kind of like the market approach to it. Well, in reality, it’s exactly the opposite. That should be true when you think about it being environmentally friendly. Means using less resources, usually using less of something means costs less. The thing is it’s it’s sold as an value add and therefore it’s more expensive.

    Georg And don’t get me wrong, there is usually an upfront investment that needs to be made, but in the end it’s using less resources right? I found like a study from 2015 where it was already mentioned the positive impact this has on organizations on the company value, right. So focusing on ESG is 63% positive for your organization. Only 8% negative, so there’s really like from an NPS perspective, Net Promoter score. If you sum this up, it’s 55% positive or 55 NPS score, which is amazing from a positivity here. Yeah. So but how do you actually work with this?

    Georg
    There is the lowest level is simply compliance, right? You need to fulfill this in order to comply with laws, rules, regulations, regulations that you have throughout the world. Think about UFLPA in the CSDDD in Europe or something. And then on the environmental side.

    Georg
    You have more, more carbon taxes out there so soon? There will be not a discussion of, oh, it does so and so many CO2 emissions or greenhouse gas emissions. But what does this cost me? Because there is a taxing involved with it, which honestly makes it even easier for procurement because then we can talk about dollar values again and

    Georg
    not something abstract as CO2 image.

    Michael
    Exactly. Yeah, yeah. Yeah. Absolutely. Now, again, let’s let’s draw these three elements up now. What would you say are the ultimate benefits, a supply chain and procurement operation will realize once once you’ve mastered the balance of these three elements, right. What does it look like? What does it act like when the balance is achieved and mastered when you have, you know, the cost management, resiliency and sustainability? Sort of in balance that we’ve kind of set up here, what what does it feel like look like, what’s the ultimate benefit there?

    Georg
    I would like to turn this around though, if you if you don’t mind, I believe.

    Michael
    Sure, no problem.

    Georg
    You must bring this into balance for your organizations, because otherwise, if something falls off the table, there will be a problem for you as an organization. OK, so I believe it’s absolutely important that you do this, but you need to optimize for what’s the right

    Georg
    formula for you and that’s different on the type of industry that you’re in. It’s different even for the type of category that you’re buying in, because if you buy in a a standard product and so on, it’s probably more more cost focused in some other areas where it’s highly about innovation cost is probably less of a thing. But you just need those products for your product to function or for your product to work. So that’s really the key of everything is finding the right balance for your industry, your market, your category that you’re buying and that’s I believe the winning formula of being aware of where and how this needs to be done.

    Michael
    I gotcha. That makes sense. So that’s that’s kind of that kind of rolls into our wrap up here. We are up against the clock Georg. So I just wanted to kind of go out on a limb here and to say there are a number of procurement professionals, SCMR readers, who are listening today that are feeling the pressure and want to step up right towards achieving this balance. So it sounds like that’s a great sort of bit of advice you may want to let them, you know, leave them with today. You know, what’s that one piece of advice you have for them to start this journey? It’s is it would it be you know understanding your specific situation and which one of these elements would match up best with that is that? Is that where you start or?

    Georg
    Know know your products, know your market, know your customers, and find the right balance for you. So. We should all be realistic here and not just be like, yeah, everything needs to be green and everything needs to be super sustainable. This all needs to be in

    Michael
    Yep.

    Georg
    in line with the whole business context and the same. The same is true for resilience. Maybe you’re OK with some outage here and there in one area, but not in another. These are the pieces you need to be cognizant of.

    Michael
    Yeah, absolutely. Absolutely. Well, we are up against the clock, a George Rosch, Vice president, direct procurement strategy at at JAGGAER, a software company that specializes in procurement and spend management solutions. Georg, a terrific job. I’m going to thank you so much for joining us today. Wonderful to have you.

    Georg
    Yeah. Thanks for having me.

    Michael
    Great. Thanks again. And I want to thank everybody for listening and everybody have a terrific day. Thank you so much.

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