I interviewed Dr. Emre Göllü who discussed Common Approach to Supply Chain and Procurement with an Innovative Perspective.
My name is Emre Göllü. I am Turkish, working since 16 years in the pharmaceutical industry, in the field of operations management in which areas of supply chain management, production, and quality management have been included in. I was born and grew up in Istanbul here, graduated chemical engineering in Istanbul Technical University. Then also continued the Masters of Science in the same field. I studied MBA to enrich the capabilities from the commercial sense, and I also completed my PhD in business administration with the specific focus of management in the specialization on supply chain management. So, I feel directly the linkage between the professional carriers, requirements, and academia, its importance.
And today, I would like to speak about how it can be a common approach, as an innovative approach to bring procurement and supply chain together from strategic point of view, bear these both to our fields, are mostly separate to each other, if you look at any of the organizations in various sectors.
Can you talk about this common approach to supply chain and procurement?
Yeah. You know, let's start with innovation. Because it is one of the most preferred and most trendy topics in the business environment in the last couple of years, we can say. Everyone is speaking of innovation. But how would we approach innovation? It has the source of innovatus in Latin, which means to find new methods, create new methodologies for sociological, cultural, and managerial issues and, obtain new and different outcome about it. Create new ways, find new methods, especially these are called...innovation. But how to combine this synergy of procurement and supply chain through innovation. That is out key point, you know, because in the traditional business models and organizations structures, the function of procurement can be seen as very limited.
It is directly related to the inbound logistics part of supply chain, like a support function. What is expected in that sense from procurement? Can we say, okay, just take care of the inputs to the process, which means that, okay, please make it relevant to provide that all the required inputs are provided on time and in full and just talk about it. And don't think about the further steps within this chain as to how the process with be executed. What are the requirements? What will be the outcome? And how the supply chain directly would continue in order to create the value chain in that sense?
Right now, the business environment has been rapidly changing through globally, widespread competition, which we call as globalization, where various sectors, we see that many companies from different countries do not directly hinder to compete in the new markets in different countries, and which directly brings all the competitors to think of new approaches directly to get more benefits from this competition and directly to create added value for themselves and directly to bring them upfront in this ongoing competition. Because competition will be always continuing. There will be the risk, accordingly occurring in that sense.
So, in order to survive in such kind of a changing, competitive environment and where the dynamics are rapid and highly evolving, there are some organizational and structural changes and conversions, necessary, which brings strategic partnerships and strategic internal alliances into the fields. Because, if we speak of, for instance, global competition, which means that as a company, you need to think out of borders. You need to adapt yourself to the requirements of different markets. You need to adapt your processes to meet the demands that will come in different shapes.
What does this mean, to create this competitive advantage?
First, internally, as your whole company, organizational-wise, you need to create the capability of responding quickly to market demands. And secondly, you need to be very flexible against a rapidly changing environment in the markets. It is important to create cost advantage for yourself and to directly convert this into a real asset in the competition. And also, it is important to keep the cash flow very efficient, which is also crucial to serve in the rapidly changing and developing markets.
Therefore, it is important to have this synergy between procurement and the supply chain. We have our mostly distinction in various organizations, if you look at different sectors. Where this role of procurement has been really limited compared to the sub flow of supply chain processes. In that sense, the approach to the procurement process can be brought from a very strategic perspective instead of a limited operations perspective, we can say, because as I tried to point out, it has been the approach of keeping the role of procurement very limited within the organization. Even it is necessary to involve procurement into the strategic perspective to be able to compete in the rapid changing and evolving environments, where the dynamics are defined each other by themselves.
And if you won’t be able to create advantage to efficient procurement to efficient sourcing of the inputs, you won't be able to create very efficient outputs. That is the critical process.
You know, procurement is mainly focused on the relations — the vendors and suppliers, we can say. And it is important to manage your suppliers in a very competitive and efficient way, because they will always create your inputs for your processes, for the goods you will be producing or for the services you will be rendering. So, in order to be able to create competitiveness, efficiency, and profitability for your own business, so you need to get this insights from your suppliers in that process.
And in that context, it is also the crucial point for procurement that it can be included into the supply chain process as a strategic partner where the negotiation part with the supplies to have the efficiency in the relations management and a colleague to create the continuity and the sustainability with them, to create cost saving through this cooperation. Also to determine alternatives suppliers, especially in the critical procurements, which can be directly classified as the bottlenecks, especially for production processes, we can say, for the components or for the specific goods, which cannot be tolerated in case of any interruption. That is important, as well as it is also a very crucial matter to have the capability to measure the performance of the supplier. Otherwise, it won't be possible to evaluate the relation with the supplier, rather, it's directly creating added value for the organization or not.
There, where the competency of the procurement department is high, it can create added value through the synergy or the supply chain. I can bring that certain example for this from my organization where we have succeeded to have this corporation between procurement and supply chain departments, where, through only simple negotiation rounds with the key suppliers, we can say, and through some revisions and amendments in the supply conditions, we have been able to achieve a 3% yearly cost savings.
And a second benefit has been the improvements in the payment term conditions, which directly has shown a positive impact on the cash flow of the company, where we have increased the payment term plus 30 days. And as well as we have been able to establish certain scorecards, directly to trace the performances of suppliers continuously and use this performance measurement as a real feedback during the negotiation rounds carried out with them. This has been, also, an important process, because in the past, only directly based on the carrying out of negotiation based on census, feelings, and feedbacks exchanges through only relations and verbal communications cannot create a certain and precise value. But if it speaks of facts and figures, based on the performances, this directly brings up certain evidences and shows that how the supplier should approach the business, to improve itself or to keep its position. This is always important.
And the procurement department has the key strategic partner, it is solid background and expertise on this can directly bring very added value. And this synergy has also brought other benefits as well, like positioning of the procurement department within the organization. If you look at the traditional and classical organizations, we see that the role of the procurement is limited, as I tried to point out during my speech, we can say. It was only to create the input for the process, to take care of from the supply chain point of view, we can say, "Okay, handle the inbound logistics and the procurement also." We can say to purchase and leave it.
But for the moment, in order to achieve this synergy twist, strategic advantage, we can say, "Okay, just do not hesitate to extend it by using the procurement function." Purchase or make it purchased for the organization. Think beyond the processes on the strategic way.
Observe the benefits and observe the performance of, and accordingly, measure it and then try to keep the continuity of this benefit within the organization. And if there will be an interruption or dissatisfaction to the process, it will be possible to, again, to get back to the starting point. Start with the suppliers, and it will be easy to define the root cause, where the bottleneck is coming from, where these inefficiencies are caused by.
And it also increases the teamwork and coordination between the, inside the organization, between the different departments and functions, we can say, which is also desired, especially if we speak of flexibility and agility in this rapid, competitive environment of today. Everyone is speaking of creating a team spirit to achieve rapid, competitive and profitable results. But in order to realize this, it should be a background, directly consistent, where different people from different departments with different responsibilities, experiences, and expertise should be aware of how to create added value as to how to bring in with their personal capabilities, and convert this into real common benefits.
And this synergy, also, I can tell you it definitely increases the efficiency of decision making within the organization, because our different department starts and learns how to think from different perspectives in that sense, especially in the technical department. We see that the strategic perspective might be really limited, where people focus on only the processes.But if it would be the possibility to make everyone think of end to end processes, its flow, and the positioning of the departments in that flow, how it may be important to keep the continuity for everyone and knowing each other as a combination, supporting to each other in the flow like a real chain, it would be possible to come to a real value chain.
And what can be done to achieve competitive advantage through this synergy? It is easily, we can say, first, to intent, plan, and initiate the process to create a strategic procurement model, and as well as be directly encouraging to create common projects within the organization, where various departments are coming together and cooperate each other. And, as a result, it will be possible for the organization to receive the required responsiveness, flexibility, and agility as well as the profitability as a real outcome and the efficiency in the utilization of the time, manpower, and resources.
Thank you, Emre, for sharing today.
Thanks a lot. My pleasure.
About Dr. Emre Göllü
Dr. Emre Göllü, PhD
Senior Supply Chain Manager, Turkey & MENA Region at UCB Pharma A.Ş