For procurement chiefs, the search for new avenues of growth is a constant demand on their time. But as a function matures and the faster a business grows, procurement professionals have to look harder and think more broadly to find these opportunities.
In relatively young functions, there are numerous levers a CPO can pull to help deliver growth. They can streamline supplier numbers, introduce category management and find efficiencies in logistics networks. These levers, however, are subject to the law of diminishing returns – although they will deliver results, the value they deliver gradually decreases. As such, a CPO has to constantly search for new and different ways to drive growth.
Thankfully, procurement’s efforts at these early stages can open the doors to new opportunities.
Mark Dady, SVP, CPO & Global Supply Chain Strategy at Mondelēz International, found himself in such a situation. His team had pulled all the usual levers and delivered significant results. But with Dirk Van de Put in place as the company’s new CEO, as well as a new and well-publicised strategy of transitioning the snack food giant to a growth-orientated business, Dady knew his team could do more to support this.
The strategy he deployed to achieve this was to plug the expertise of the function into some of the company’s new initiatives, as well as invest in new tools, talent and projects that would deliver growth and efficiencies.
But to get to a point where the function could do this, a lot of hard work had had to be done over the previous few years to prove the value it could contribute.
“We streamlined our supply chain from 100,000 suppliers to less than 30,000, we had harmonised our process, we had looked at recipes and we had looked at our packaging,” Dady tells Procurement Leaders.
“We had got to the point where everyone was happy with where we were, but we were also at the point where if we did anything else – especially around recipes – then we risked consumer preference.
“Essentially, we had picked all the low-hanging fruit, but I knew we could go much further and support the business in different ways, we just needed to build on that trust we had developed.”
As part of the company’s strategy to transition into a growth-orientated business, it wants to build a more holistic view of consumer snacking behaviours, transform its digital capabilities to improve return on investment, leverage partnerships and accelerate its innovation capabilities.
In each of these areas, Dady knew procurement could play a pivotal role in driving success, but there was one area in particular that he knew his team could deliver – innovation.
Here the company has established SnackFutures, a hub dedicated to unlocking opportunities around emerging snack trends, to help the company better capitalise on these, as well as mobilise entrepreneurial talent and technologies to build and grow small brands with large-scale potential.
As part of this, SnackFutures is looking to build an ecosystem that draws on the expertise that exists within both Mondelēz International and its supply base. The hub focuses on three specific areas:
- invention, to develop new brands and businesses in key strategic areas;
- reinvention, to incubate smaller Mondelēz International brands; and
- venture, to invest in startups.
What is SnackFutures?
Procurement’s role here is to identify the right suppliers to bring into this ecosystem and help onboard them. The team are also heavily involved with the ‘venture’ part of this in terms of providing support on the commercial details of these investment deals.
This strategy has seen the team support in the delivery of the company’s sixth annual STAR (Sustainable, Transformational, Advantaged, Relationships) event (pictured above). Here, Mondelēz International CEO Van de Put and four of his team met 13 suppliers to discuss the company’s growth and collaboration plans. This event, held at The Hatchery – a Chicago-based not-for-profit incubator for food industry startups, enabled suppliers and the Mondelēz International team to work together in an agile fashion and experiment with new product ideas.
They have also held an innovation day in China, which focused on biscuits. Here specific briefs were given to two ecosystems of suppliers, both of which included organisations throughout the entire biscuit value chain. Dady says these two ecosystems competed against each other and of 28 submissions, nine are currently going through the company’s commercialisation process.
“This event had a big hit rate – far more than we would usually expect,” he says.
Investing for the future
Outside of any direct involvement with SnackFutures, Dady’s team have also been given access to a multimillion-dollar investment fund. The team will use this to invest in new initiatives, new technologies and new talent to enable the function to find further growth and better support projects such as SnackFutures, he says.
When it comes to technology, Dady adds the team plans are to implement solutions that will help automate some of the function’s operations. He wants to be able to give his people back some time to allow them to focus on more value-adding initiatives and sees automation as a way of achieving that.
In addition, Dady wants to hire data scientists and innovation managers who can help the function identify trends and quickly bring new solutions to market.
In terms of the new initiatives, Dady explains the team is looking at the potential of consortia purchasing and building closer, one-to-one relationships with strategic suppliers.
Foundations of trust
While this all sounds exciting, it has taken Dady and his team a lot of work to reach the point at which they are trusted with a large investment fund and are considered integral to new initiatives.
This trust, Dady says, has come from the team’s track record – which has caught the attention of stakeholders throughout the business.
“It all comes from what we have done and what we have delivered over the last few years,” he says.
“We now have the ear of the CEO.”
Procurement chiefs often talk about their desire to have the ear of their CEO, but when Dady says his function does, he really means it.
During a normal week, he usually has around “10 to 15 interactions with the C-suite” and his function’s projects are being highlighted to shareholders including, notably, at a recent investor day.
“Our CEO was talking to investors about the company’s strategy around growth and he wanted one page from us on how procurement was supporting that,” he says.
“He spoke about my team, our capabilities and how much more there is to come from Mondelēz International because of what we are doing.”
Dady also says Van de Put also highlighted the procurement team during a Mondelēz International management conference. This was the CEO’s first such conference and he spoke about 10 of the best practices that are driving the organisation’s growth agenda. Van de Put picked out how procurement was contributing outside of the normal and how they had built an engaged and fun team.
This, Dady says, is contributing to a “snowball effect” for procurement, which is opening up new doors for the function to help find growth through.
The journey to this point though began by procurement getting the basics right and delivering on its promises. This opened up the opportunities for the function to more easily find those new avenues of growth. Dady and his team have grabbed that opportunity with both hands.