When we talk of a procurement transformation, we often focus on a shift in process or the implementation of new technologies and platforms in order to embrace a much more agile and “leaner” operation. More recently, organisations have started to realise that all the best laid plans require the right talent and the right skill sets throughout the organisation, not just the procurement function, to be able to fully realise the savings potential or the innovation and true value that procurement can bring. But take it back even further, procurement and supply chains of all sizes, scope and complexities, are built on both internal and external relationships and what’s key to any relationship? Communication. By having clear, open and constant communication across the entire organisation and across your entire supply base, only then will you truly begin to see the real value that’s hidden throughout the supply chain and procurement ecosystem.
“Relationship management, for me, is key,” explains Daniel Chua, Head of Global Sourcing at WIK Group. “I think that is one of the very important factors and by relationship management I mean not only to the suppliers but also to my internal stakeholders.”It’s also about understanding what we are going to be able to do to get support from suppliers, both financially and non-financially. By non-financial support I mean in times of crisis, like right now with Covid-19. If you have a good relationship with suppliers, they actually allocate more resources to support you. Procurement is all about relationship management that you build for a long time. You get returns when it is needed, not simply on a daily basis.”
Founded in the early 50s, WIK Group is a privately held German contract designer and manufacturer (ODM/OEM/CM) for electrical appliances and devices. Fast forward to 2020 and WIK Group is responsible for creating and developing hundreds of system solutions and producing millions of products worldwide. Perhaps most notably, WIK Group has evolved into a global, full-service development and manufacturing partner to many leading international brands. By its own admission, WIK Group believes that “corporate challenges can only be managed by leveraging synergies between capable people and financially solid partners, driven by responsible sustainable change and innovation. We focus our resources on personnel development and process excellence based on a value-creating company culture.”
As part of this corporate belief, WIK Group embarked on a procurement transformation journey that will realign the procurement function to collaborate more with wider business units in order to be able to generate greater cost savings, unlock better efficiencies and drive innovation all while continuing to deliver its products and services to the highest possible standards. This is where Chua comes into the picture. With a career that has seen him take on senior procurement roles for some of the leading multinational companies in the world, such as Vodafone and Phillips, Chua was brought in to deliver real change. Perhaps most importantly for Chua, upon entering the business back in 2019, he wanted to make it clear that the change he sought was not a change of personnel.
“I wanted people to know from the outset that I’m not here to fire anyone. I’m here to try to work with all of you, to bring in and collaborate on new ideas together with my experience from the bigger, international companies,” he says. “Let’s try to work together. I needed to instil that mindset into my new team, because there are going to be changes. At the same time, there will be a lot of coaching required towards a different way of thinking around procurement. Simply put, the only two things that are normally discussed with suppliers are either cost or quality. End of story. We need to explore the relationships further and so I want them to look at it from a different angle and in much more depth.”
In order to achieve this, Chua would accompany his team on supplier meetings and gain an understanding as to the way in which these supplier relationships are handled. Only then, he feels, can he leverage this supplier base for greater insights which will then translate directly into greater relationships and ultimately, greater savings. “I’m slowly coaching my teams that you need to bring in ideas about what the suppliers are doing for other customers and how this is also going to be valuable for WIK,” says Chua. “I want everyone to adopt a mindset of thinking outside the box and being far more vigilant and experimental in terms of bringing different things to the table.”
To highlight his point further, Chua points to a more traditional approach to the bill of materials (BOM). Previously, and much like many procurement functions, WIK Group would have a team focused entirely on BOM. Chua wants these people to input the BOM numbers but also to be able to think about those numbers, to analyze them and to understand more about the materials and parts themselves. “Then they can ask and ultimately answer the question as to why we are buying these parts at this particular cost?” he says. “Once upon a time that was a question that would be passed onto the sourcing teams and forgotten about until next time. Now, we have people asking more questions and understanding the business more.”
Changing a mindset and a culture within a business is no small feat, particularly when that business has been extremely successful operating in a specific way for a long time. This is a challenge that Chua has faced and will continue to face throughout this journey. It’s easy to say on paper that you will come in and instil this innovative cultural mindset that will guarantee success and cost savings, but being able to achieve that is a different story. Chua is a firm believer in being able to walk the talk and being able to practise what he preaches. Every step of this journey, every decision he makes and process he changes, he does so with purpose in order for both his people and his management to be able to see real value and benefit from those changes. Any feedback he receives from above he shares with each and everyone of his team members. “It’s about reinforcing the notion that; all their efforts and hard work are being recognized by senior management. Not just by me,” he says. “This is important in building up a shared mindset so that we work as a team and move away from working independently in silos. We work as a team and have shared responsibilities because ultimately, those responsibilities will impact the entire business, not just one particular function.”
“We can’t operate to an out of date mindset of; once you’ve done your bit you move onto something else. If a mistake is made in your processing or it comes from the sourcing engineers, if you spot it and fix it you’re saving two people or even more. We’re working together and for one another. This is incredibly important for what I want WIK Group to achieve.” This is also key in establishing a sense of integrity for procurement. As with many organizations the world over, procurement has changed dramatically in the eyes of senior management and in the eyes of the business. Chua and his team have witnessed this first-hand through this transformation journey. Where procurement was almost a business add-on, now Chua and his team see the other business units coming to them and wanting to become more like them. The procurement responsibility of WIK now takes on much more responsibility. Historically, tasks would be transferred away from procurement but now the tasks are coming into procurement because procurement now has the capabilities, the processes and the mindset to not only complete the tasks but to complete them in a ‘better’ way than others.
“The best way that we can see that the business now has complete confidence in our abilities is that we used to have key account managers being directly involved in almost every part of our process,” says Chua. “But now, after only six months, they don’t need to. They have confidence in our abilities and they leave us to it as much as possible.”
As Chua has already noted, relationship management is key and as he continues to build competencies and drive change internally, he must also look further at the way in which the supplier relationships are handled from the supplier’s perspective. To best approach this, Chua kept things simple. “After I looked at internal systems and I looked at improving the way we at WIK dealt with suppliers, I spent a month travelling outside the business to speak with all of our key suppliers,” he says. “I introduced myself to every single one of them and I sat down, I spoke with them and I listened to them. It was about outlining where we want WIK to be in the future and the role they can play in that.”
“Again, it’s about better understanding the relationships so that we can grow these relationships together. Now, you’ll see my team (where possible) travelling around and meeting with suppliers and sitting down with them and talking through our strategies and how we can better help each other. It’s all about rethinking what we think about our supplier relationships.”
At the time of writing, the world is currently gripped by the COVID-19 pandemic which has and will continue to define and redefine business practices indefinitely. Risk and crisis management is nothing new to procurement, but when discussed it is often theoretical risks and theoretical worst-case scenarios. As we are currently experiencing a worst-case scenario, businesses are now having to act. Chua believes that the COVID-10 crisis is actually giving credence to the changes he has made and will continue to make to WIK’s procurement practice. “This situation has actually put us into a spotlight that shines on us as individuals with regards to that changed mindset and shared responsibilities,” he says. “How we progress relies entirely on everybody’s discipline.”
This discipline is crucial in reporting a process of Resume Work Status that Chua has implemented, a process in which WIK can identify and better understand how and when its suppliers can return to limited or full operating capacity. Given governmental restrictions and a number of external factors, each supplier’s status will vary and so the responsibility rests with WIK’s procurement teams with regards to collecting the right qualitative data on these suppliers so that they can report back to key stakeholders with the right insights in order to make the right decisions for the business. “These key stakeholders are external,” explains Chua. “On a weekly basis we report back to all our external customers about the status of the current situations and what is going to impact them and the number of suppliers that are working for their products,”
“Right now as an example, we are monitoring around 400 suppliers and my team can tell you exactly how many of those suppliers are relative to just one of our customers. They can also tell you how many of those suppliers are located in areas that have different levels of lockdown restrictions and how many can still operate.”
“It goes back to what I said about confidence. The business and indeed our customers have the confidence in us to be able to deliver that information to them in the right way, so they can better understand what’s going on and how we are managing this situation in a way that works for everyone.”
On paper, it seems as though this transformation journey and indeed the measures that Chua has looked to instil have been entirely pain free. He is keen to admit that this is not the case and that it’s important for anyone enabling change to stop and look at the pain points you experience along the way a little deeper. “We still have a journey to go,” he says. “But what we are doing is fine-tuning each and every step of the way so that people can get up to speed.”
The future of this journey is very bright for WIK Group and Chua breaks that future down into a number of key elements. Firstly, he wants his procurement teams to be producing qualitative data while also bringing more valuable information into the business such as terms of technologies and new forms of supply base back into WIK Group.
Ultimately for Chua, it will always be about the people and the relationships. Over his entire career he has always valued the importance of having key relationships built by people with the right mindsets. “What has been and will always be crucial to any form of success that I and WIK experience as part of this journey is that my team trust me in what I’m trying to deliver,” he says.
“My team trusts that I’m willing to showcase their achievements and their success to our key stakeholders. What’s also key for me is that I have been blessed with management and senior stakeholders that truly support ideas and initiatives. This will only continue to enable great success for WIK Group from a procurement standpoint now and well into the future.”