As a leading food and agri-business supplying food ingredients, feed and fibre to over 25,200 customers ranging from multi-national, world famous brands to small family run businesses, Olam is all too aware of how each and every one of its customers depends on the company to provide goods and services on time and high in quality.
Recognised as one of the fastest growing food and agri-business firms, Olam’s involvement in the commodity value chain spans from upstream to downstream and encompasses selective upstream (perennial tree crops, broad acre row crops, dairy farming, and forest concessions); supply chain (global origination and sourcing, primary and secondary processing, inland and marine logistics, merchandising, trading, value-added solutions and services, risk management and commodity financial services) and; selective midstream/ downstream (value-added manufacturing, branding and distribution in Africa, ag logistics and infrastructure). Needless to say, Olam leads a complex product portfolio and so it requires a supply chain and procurement function that can support its global network across more than 60 countries.
In 2018, Olam embarked on a massive transformation journey, one that would see the function become a more strategic unit that delivers additional value to the wider Olam group. “The goal was to move from a position of decentralised traditional buying, where each business unit and branch buys for itself,” explains Piotr Teodorczyk, VP, Head of Global Procurement at Olam. “The existing function could very much benefit from having a more solid and sharper mission and adequate strategy, as well as greater line of sight on performance metrics and deliverables.”
The initial stages of Olam’s transformation journey saw the company implement a true hybrid globalised procurement model that consists of category management practices embedded within the operating model. These practices are guided by a clear vision, strategy, and mandate to cover and influence non-agri commodity spend, set-up a hybrid procurement organisation and implement category management best practices in top categories. In the first two years, Olam also successfully launched a training academy, deployed an IT helpdesk, and launched Ariba across the board.
“We are heading now, in the next two years, into what we call our Fearlessly Expand remit,” he says. “This will see us reach out to new geographies and categories through team expansion while deepening current team knowledge, supplier relationships and internal stakeholder happiness by leveraging digital tools. The key elements of this will include the expansion of organisational alignment and remit to new geographies and categories, focusing on innovation and leveraging digitalisation as a key enabler all while establishing a P2P opportunity through shared services.”
“It’s a continuous process requiring constant commitment, focus and persistent messaging across every part of the organisation”
Olam’s reorganisation of its procurement function aligns with a global business shift that has seen procurement become integral to business strategy. Once viewed as a back office function, it is now well and truly a key driver for not only strategy, but business growth.
As a procurement professional, Teodorczyk has seen this evolution unfold firsthand. While he feels that there has already been incredible change, Olam is now witnessing the most exciting journey in procurement. “We have a unique opportunity to move from a service function to becoming truly, trusted business partners,” he says. “By building trust through delivering our core numbers of savings and cash flow, we are now going very much beyond simple material cost optimisation, moving procurement into end-to-end value creation.”
In his own words, there are two key enablers of becoming a world-class procurement organisation: technology and collaboration. “Today, many organisations are running in an extremely lean fashion, after years of self-cost optimisation. That might come at the cost of the ability to reduce spending, levelling out cost reductions and decreasing savings,” he says. “But world-class procurement organisations are able to offset that by expanding their value proposition and focusing on five areas to differentiate themselves: being trusted advisors to the business, driving suppliers innovation, providing (big) data analytics insights, and proactively managing risks exposures.”
“A procurement, sourcing or supply chain function is only as strong as its supplier base”, Teodorczyk says. “This journey is also impacting our supplier relationships for the better.”
According to Olam, the concept of collaboration within the supply management means much more than the concept of open communication. Collaboration involves the hand-in-hand development (and execution) of cross functional processes and capabilities. Procurement’s collaboration with its suppliers is a critical attribute of leading-edge sourcing programmes and helps enterprises grow and adapt, consistently drive results and enable greater influence on strategic decisions by the entire procurement team.
“We do realise the value of supplier collaboration. We very quickly established our SRM programme, with a target of enhancing, formalising and structuring relationships with our most important partners,” Teodorczyk says.
In his view, supplier relationships are assets that grow in value. For instance, suppliers can conduct needs-wants analysis to help prioritise and optimise spend as well as provide a risk assessment of their own markets and solutions to help sourcing teams mitigate various levels of risk. Olam also uses suppliers to educate sourcing teams on new products, price fluctuations and volatility as they often have a better understanding of the markets, risks, and customer needs.
“We have a strong desire to be regarded as a “customer of choice” and thereby gain access to the best offers from the highest-quality, most in-demand suppliers,” he says. “We want to be viewed as a company that’s easy to do business with and operate with buyers that are easy to work with because it helps them manage their own costs.”
With regards to the technology component, Teodorczyk recognises the growing reliance on automation and insight generation within procurement. For him, the most important (and missing) piece of technology is spend analytics and this is something he is looking to address. “Admittedly, we do not have perfect technology integration and we can struggle with data quality internally, which can lead to lower efficiencies and high transaction costs,” he says. “We want to make big data and spend analytics the crux of all sourcing programs.”
“Making sense of the data is the key issue, both driving actionable insights, and accessing them when needed. We will continue to make further investments int the right people and the right technology.”
The most critical requirement for Olam’s procurement organisation was to adapt its service delivery model to an extremely diverse set of budget owners and functional partners in the Olam value chain and create a level of agility.
“Delivering this level of agility required us to take a lot of time to understand the business culture and context of each business unit and country, the scope, requirements and the needs and wants of our various stakeholders across multiple business units.” he explains. “That helped us to define the most efficient way to implement the change and sustain it.”
For this, Teodorczyk looked closely at the business, particularly around understanding the business culture and context of each business unit and country. This process looked at the scope, the requirements and the needs and wants of its various stakeholders across multiple business units. This helped Teodorczyk be able to define the most efficient way to implement the change and sustain it.
Olam is a truly global business, or as Teodorczyk describes it, it had been a “coalition of very independent business units”.
In response, the procurement team took on the mission of working across the business units and became a lighthouse of making the change in ways of working, embracing ‘ONE Olam’ as a new approach. “There’s still a long way to go for it to become a part of company culture,” he admits. “But it’s a continuous process requiring constant commitment, focus and persistent messaging across every part of the organisation.”
The concept of ONE Olam covers four strategic principles that the company uses to operate within an enterprise wide, holistic procurement function. These are:
1) Aligning the organisation to create bridges between different business and synergise where possible by benchmarking and building spend cube/ spend analysis.
2) Providing best practices and processes to develop and deliver standardised, scalable tools; map needed capabilities and ensure strategic sourcing process are scalable, repeatable, and effective across enterprise.
3) Developing holistic sourcing strategies to support Olam’s growth and savings plan; collaboration is key and it is important to build relationships and influence without authority across all business units.
4) Building a strong network, procurement identity and a feeling of belonging to a single procurement organisation measured by unleashment survey; develop measures to track overall performance.
In order to break the siloed approach, a common goal for many procurement organisations across the world, Teodorczyk sought to deliver quick wins and use them as user (business) cases to help people understand the benefits and how they can apply this new norm. As for the end-to-end transformation of the procurement function, Olam took a holistic view of establishing key building blocks in 2018. These building blocks saw Olam look at its operating model, spend management, supplier management and collaboration, and the concept of procurement value.
“We looked at how our procurement team is organised to serve internal and external stakeholders and how it aligns and underpins the procurement functions and wider organisational objectives,” says Teodorczyk. “When looking at procurement value we asked the question: How does our procurement function engage key stakeholders in the development of procurement strategy, and how aligned is it to the wider organisational strategy?”
To that end, Teodorczyk looks to obtain an executive mandate to engage all business units and leverage team members to develop the procurement organisation and continue to measure stakeholder happiness through a number of means.
“From a procurement staffing perspective, my goal is to have people that feel comfortable being uncomfortable, understanding and embracing that real world-class performance begins where one’s comfort zone ends”
“We established 360-degree feedback for the procurement function to measure success against set objectives and scored 4/5 in the first assessment. We call this our MeasureSatisfaction,” he says.
“Through the use of steering committees, we established cross-functional, cross-business-unit steering committees to drive individual projects. As for our executive mandate we were supported by our Group CEO and Group COO to include all non-agri third party spend to procurement.”
The final building block was centered around organisational alignment, which saw the support of individual business unit CEOs and presidents to implement the procurement strategy.
Teodorczyk truly believes that procurement can be the change lighthouse that steers the transformational agenda across the wider organisation. He feels that procurement can in fact, break the ‘status quo’. But what does he mean?
“From a procurement staffing perspective, my goal is to have people that feel comfortable being uncomfortable, understanding and embracing that real world-class performance begins where one’s comfort zone ends,” he says. “We have been extremely lucky and blessed to have teams like this in procurement and that’s the most critical element of breaking the status quo. The other typical characteristic of procurement, enabling the change, is taking a customer centric approach and truly understanding how you can make their lives better, simpler and easier so we can all rest easy at night.”
One of the key objectives for Teodorczyk and Olam when breaking down the traditional siloed approach, was to embrace a culture of innovation and a truly global cross pollination of ideas from across the business. In setting out the key procurement building blocks, working in unison to the ‘ONE Olam’ vision and obtaining buy-in from CEOs and COOs across the world, Teodorczyk can look back on a successful journey so far. He does recognise, however, that there is still a long way to go and that the journey is far from over. Still, he can reflect on what were the key moments to get to this point.
“We are living in an age of constant change, innovation and collaboration, where the speed and complexity of business will only continue to accelerate,” he says. “The truly winning businesses will be agile organisations that can tap into expertise and find value wherever it exists in the market. Connecting the people, process, and technology ‘dots’ will be mission critical to achieving both a sustainable advantage and overall enterprise success.”
Teodorczyk is keen to highlight that regardless of the increasing complexity, the real secret to success can be broken down into three key areas: connecting the “sourcing dots” to ensure that strategic sourcing processes are effective and repeatable across the greater enterprise, making spend analysis the crux of the strategic sourcing program (or as Teodorczyk describes it “the gold that runs through the walls of an enterprise”) and understanding that collaboration is the key to the future.
“We focused so much on getting the small wins chalked up, getting people on-board and winning their trust. To be successful in this game, it’s about making sure that differences we make continue to be visible and noticed”
One thing that can be said of Olam’s procurement journey is that in order to get to its current position where it is ready for any future challenges, Teodorczyk had to take those small steps early on to make the giant gains it has achieved to date. “Small wins lead to large gains,” he says. “We focused so much on getting the small wins chalked up, getting people on-board and winning their trust. To be successful in this game, it’s about making sure that differences we make continue to be visible and noticed.”