The importance of adding value beyond cost savings

Paula Davila Martinez joined the European graduate programme at Exel, the British logistics business, straight from university in 1999, and in her five years at the company – during which it was acquired by DHL – she drifted into procurement.

Interviewee: Paula Davila Martinez – Vice President and Chief Procurement Officer, UCB

Headhunted to join Anheuser-Busch InBev, the world’s largest brewer, in Belgium five years later, she took on responsibility for sourcing and has never looked back.

“I moved from a logistics business into a client business, and until then I had never thought that procurement would be a career choice for me,” she says. “I just landed in it, in the same way that lots of other people have just landed in procurement by chance. Now I’ve been doing it since 2004, and I have loved it as an industry and as a career path.”

After rising to Global Indirect Procurement Director, Martinez left Anheuser-Busch in 2009 to join The Goodyear Tire & Rubber Company as Indirect Procurement Associate Director, and she took on her current role as Vice President and Chief Procurement Officer at UCB, the global biopharmaceutical company headquartered in Brussels, in 2011.

It has been her toughest challenge yet: “The job here was to transform the whole procurement operation from a transactional, decentralised function, into a high-performing, value-adding one,” she says. She did so by focusing on three things: the people, the processes, and the tools.

While the introduction of strategic sourcing strategies, and the roll-out of supplier relationship management and e-sourcing across around 20 countries, was critical, Martinez says the people aspects were the most rewarding: “As an organisation we have undergone a major transformational change, in terms of my own procurement function, from being cost-savings focused to being value focused. Changing the mind-sets of people has been, for me, the most rewarding part of that job.”

She says: “You need to think about what motivates people, and how you measure their performance. So it has been a fascinating journey, because changing behaviours is really one of the hardest things to do.”

The next challenge, not only for Martinez but for the industry as a whole, is to demonstrate how procurement can add value beyond cost savings, she says. That means connecting the challenges of the business with solutions coming from the supplier base, and really driving strategic growth.

“When I started my career in procurement over a decade ago,” says Martinez, “it was all about cost savings, and getting benefits of scale and synergies to drive those savings. Now, everybody has reached maturity in terms of cost savings, so that’s a given, it’s just what people expect. Today, as a function, we need to keep on improving our strategic importance, which means not only demonstrating our value to the bottom line, but also to the top line, in terms of revenue growth.”

Driving Innovation is what procurement functions need to get better at, she argues. And Martinez is a big believer in changing the conversation.

“We need to be bringing innovative solutions from our supplier base that can help us to generate company growth,” she says. “That requires a different conversation with our stakeholders. The business doesn’t want to hear us talking to them about cost savings, because their goals aren’t about cost savings. Our language as a function has had to evolve into talking the same language as the business, in terms of empathising and thinking about how we, as a function, can support them.”

Not every industry is in the same boat, and in those like fast-moving consumer goods,  industrial goods or contract manufacturing where margins are lower, costs savings are still a key area of focus.

But in sectors like pharma and financial services, driving down costs is not the only focus. “That’s not the objective of the business,” says Martinez. “Here, it’s all about getting medicines to patients as quickly as possible. We have to talk about accelerating launch plans, or connecting the sales force better with the physicians, or capturing better patient insights. Then we get the attention of the business.”

Such a shift requires different skills of those working in the procurement function, and the function  has to broaden its horizons when it comes to recruitment.

“In the past, if your focus was on cost savings, you needed great analytical and negotiation skills,” she says. “If your focus is now on value creation, you need people with great relationship skills, and people that are great networkers, with problem-solving capabilities, and observational and questioning skills. We need people who can put themselves in the shoes of others.”

That means looking for people with backgrounds outside procurement, and hiring talent from sales and finance functions, or those that have previously worked in mergers and acquisitions, business development, and even law.

“If there’s a willingness, you can develop the procurement skills,” says Martinez. “It can be hard to attract those people into procurement, because it’s not something they will have thought of.”

Running open days or creating cross-functional assignments are great ways that people elsewhere in the business can see the function up close. “Once people experience it in practice, and realise it’s not just the technical stuff like sourcing and driving tenders, but also involves exploration with suppliers and with the business, they realise there’s a huge element of variety,” she says. “For people that like change, and driving change, it’s a great fit.”

Martinez manages a team of more than 60 and an external spend of €2 billion: “This function has a lot of potential because we see the whole value chain of the business,” she says. “We have end-to-end visibility to spot inefficiencies and opportunities, and a lot of variety in our roles.”

Share this insight: