Germano Colombo serves as Chief Procurement Officer at MSC Cruises, the World’s fastest growing cruise line. During a career of almost 25 years, he has lived and worked in 6 countries and 3 continents, and operated in both the quoted multinational and family-owned corporate environments. He is also a lecturer-in-residence at Bocconi SDA school of management.
Generous with his thoughts and time, we grabbed a few moments to discuss what procurement means to him, what procurement needs to do better, and the opportunities that exist for the function.
Germano what do you love about Procurement?
The strategic relevance of the function (if properly established, supported, and designed for success). Its key seat at the leadership table, bringing the outside in (exposing the company to what the industry can do) and the inside out (exposing business partners to the company strategies and unmet needs). The combination of commercial, technical, and leadership skills that a career in procurement allows to develop.
How did you get into Procurement?
I was offered a role as purchasing manager having just finished my master’s degrees. I had no idea what this was about, but I was looking for opportunities to develop as an international business leader and it felt like the right one. My first role was based in the UK, with spend responsibilities of over $40m serving the P&G health and beauty care factories across Europe in their rigid packaging category. I managed the relationships with the largest plastic bottle maker in the world, the redesign of Pantene shampoo packaging, and also redesign of the Olay plastic jar. The scope and depth of responsibilities I was given from day one was incredible, and the stretch on my personal and business skills has proved a priceless input to my career.
How has procurement and the expectations placed upon it changed over time?
There have been, and continue to be, a lot of dynamics in the thinking around procurement. Centralised vs dispersed; targeting scale vs flexibility; local sourcing vs outsourcing; serving direct or indirect spend; the role of digital. In a time of economic crisis, procurement has the golden opportunity to rescue a company’s fate. In good times, the opportunity to fuel growth and open access to innovation. Never a dull moment, and a constantly changing environment of KPIs and expectations.
How do you feel procurement is perceived in general? Why is this?
There is still a mainstream perception of procurement as transactional, tactical function. Cutting POs, chasing deliveries, negotiating payment terms; in the more sophisticated cases, bidding for lowest price (‘three bids – a buy’ being a common idea of what a robust sourcing strategy should be). Main reasons are history: procurement has been traditionally an operational/transactional function; and cultural: most business owners feel spending money is core to their enterprise and are reluctant to delegate such a critical piece of work. When the misconceptions are addressed, procurement is seen as a valuable player.
What can procurement do better?
Raise to the task when a seat at the table is granted. Meet the short-term business needs (these may require biting the bullet and operating tactically every now and then; or fixing some transactional challenges, like ensuring vendors are paid on time); and look for low-hanging fruit to show strategic value. Procurement needs to be as good at managing internal clients relationships, as they are at managing vendor relationships. At negotiating internally as well as externally.
The pandemic appears to have raised people’s awareness of procurement. There is a significant opportunity for procurement to move away from the back-office support function label and move towards the role of commercial facilitator. Does procurement need to rebrand or reinvigorate its processes and culture to make the most of this opportunity?
I believe all functions and disciplines need branding. I once used the trick of Einstein’s famous equation, E=mc2, saying ‘Equity is marketing times contributions square’. So, the equity of procurement surely depends on its contributions, but some marketing efforts are to be considered too. My response to this challenge is investing in people’s capabilities. I hire top talents, not necessarily just from a procurement background. I put people before processes, and processes before systems. I want my team to be excellent at ‘more than procurement’, so that we keep sight on corporate strategies, can speak the language of internal clients, and gain credibility as business partners.
Procurement is evolving at pace. The pace of change often calls for new skill sets and disciplines within a team. What value can Procurement source from adding non procurement skilled staff to their teams?
I am a big fan of this approach. I take resources with backgrounds in, finance, operations, brand management. Digital is a trendy buzzword, and true digital skills (ie ability to code for machine learning; fluency in big data and small data analysis; applications of artificial intelligence) are seldom found in resources with pure procurement as career path. The opposite is true. I moved from Procurement to General Management and gained a lot of experience with P/L responsibilities. I am a better procurement leader now thanks to that time as CEO.
The ecosystem of service, solution, and tool providers is rapidly growing. The need to automate processes, ascertain risk, drive sustainability, and work collaboratively with both internal stakeholder and suppliers are just a few of the areas that the ecosystem can assist. For procurement to truly take the next step and move beyond the seat at the table it needs to embrace this community of providers.
What are the benefits of this growing ecosystem? What are the shortcomings? How do you compare and select in an efficient time frame? What do you feel vendors could do better?In general, I consider the ecosystem of digital service providers a great value to the procurement community (and to other functional communities too). However I put people and processes before systems, and I often see the need to invest disproportionately in these two elements of the equation before the value of systems can be fully deployed. 20 years ago, it was about using internet technologies in their infancy, and to be proficient in basic data handling tools (eg Microsoft excel). Today, the available tools have exponentially increased in numbers, technology power, areas of applications. However, the ultimate core deliverables of procurement remain analogic and human in nature: sourcing strategy definition (and the exquisite human ingenuity); vendor relationships management (and the analogic reality of relationships, where a dinner and an authentic conversation are worth a thousand vendor collaboration suites); and internal stakeholder management. Everything else can and should be automated, simplified, and managed for efficiency.
Will there be a need for a Procurement Technology Officer in the future to handle the dynamic and complexities new solutions can offer?
I staffed a Director of Procurement on Digital Innovation. However, I expect every team member to be fluent with basic data science concepts, and to be on the lookout for possible solutions to unmet needs, in procurement or across other functions in the company.
Procurement vs Sales
In general terms it appears that these two functions do not always seem to work hand in hand. Why? What is the solution?
Yin and Yang. I once trained a Sales Leadership team on negotiation skills, and on relationships management skills, simply changing a couple of terms from the decks I had prepared for procurement. The reason for distance in operations is functional, however the skill profiles, and the necessary competencies, are often similar, and when different, very complementary (a sales-person can benefit from training in a safe environment with a procurement counterpart, and vice-versa). A possible solution is cultural (holding common training) and organisational (the CPO building strong links with the Sales Officer).