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13. 09. 2018

Interview with Dr. Karsten Machholz – Professor for Strategic Purchasing and Supply Chain Management at University of Applied Sciences Würzburg- Schweinfurt

Dear friends,

Our next dear guest Dr. Karsten Machholz is Professor for Strategic Purchasing and Supply Chain Management at University of Applied Sciences Würzburg- Schweinfurt. At the same time, he is a Board member of the BME, which is in other words the Association of Procurement and Supply Chain in Germany.

Q: Mister Professor, through your career you have worked for some large corporations, later changed to consulting roles and lately also work as Professor at the University and the member of the Board of BME. Would you please briefly describe what is your main area of focus or even passion within the SCM & Procurement?

A: Within the last 20 years, I had the opportunity to driving forward some supply chain/procurement excellence programs with great teams around the world. At the end of the day, it was and it still will be a people`s business, based on trust and a mutual understanding of common goals.
Today, technology is changing very fast and we will see massive changes in the way we work, live and communicate, which go far beyond pure procurement, production or supply chain functions.
My passion is to deal with people from all different cultures and languages, and to prepare my students to be „ready for the digital future “.

Q: Could you briefly introduce BME? How is it organized, what are the goals of the association and how it helps the German buyers to grow?

A: The BME is the biggest European based Procurement Association with approx. 9.500 members. The center of activities is based in Germany. To be close to our community, it is organized in 38 local regions. The regional boards, like ours, are developing their individual annual programs (Keynotes, company visits, workshops, …) according to the individual needs of our members.
Besides this, the BME is offering a tremendous variety of education programs (BME Academy) and various procurement specific Congresses and Events. Despite many others (e.g. Pharma SC Congress, European Procurement Excellence), the biggest once are the BME Symposium (November) and the BME E-solution days (March) with approx. 2.200/1.500 visitors.

Q: You have worked for many companies as manager or consultant, however as a professor at the university I assume you look beyond procedures and best practices. How does academic or scientific work enrich your ability to help companies and how does your business experience help grow your students?

A: I try to bring my expertise from multinational companies, dynamic start-ups, consulting and science to the table. There is more than one way leading to Rome and a solution that could be perfect for one company, could be a complete mess for another one.
So, I try not to be „too boring“ for my students by referring to real life examples and foster different points of views by actively discussing with my students from 15 different countries.

Q: How would you compare current trends in Procurement with what was happening 10 years ago and where do you think it is going?

A: Customer orientation, operational efficiency, and supply chain transparency/risk management have been there 10 years ago, but due to the technological advances, they have been put to the next two levels, that have not been possible in the old days.
The I-phone was introduced 2007- just think how it has changed all our ways to commicate, work, etc..
The operational procurement will disappear and be done by bots. The procurement of the future will only be strategic, supported by artificial intelligence.

Q: So what capability or process should a procurement manager in a medium sized company start to develop now to be able to bring value to his CEO in the upcoming years? In what area should he educate himself?

A: In the near future, everything, that a robot/software can do better than a human being, will be automated.
Creativity, empathy and building mutual trust will be things that no robot or software can do.
These will be the areas, we all (not only procurement/ supply chain employees) should focus on.

Q: Can you see a difference in the role that Procurement plays and how it plays it in Germany comparing to e.g. Central Europe and on the other side the global leading companies?

A: The importance of the procurement function is basically linked to its overall value managed. In 1st world countries with high labor costs and a very high degree of outsourcing, the external value creation can be 50-95% of the COGS.
In countries with lower labor costs, e.g. Eastern Europe/ Asia, or in smaller or medium sized companies or even start-ups, the company owner or a small team of buyers are doing this in a more or less professional way.
As not every company has got the manpower or the budgets, networking- like at the Asociace Procurementu, the BME or other (online) procurement communities and exchanging best practices becomes a key to success.

Q: Can you see impact of the coming modern Procurement technologies on a procurement team of 3-10 people (both strategic and tactical buyers)? What will it look like?

A: As already mentioned, the tactical buyer will be replaced and the strategic buyer will be supported by technology.
But modern technologies are not only something for big companies. Even family owned, small enterprises can use big data, to create better forecasts (e.g. bakeries), or create individual desks, tables, etc. by using configurators or virtual reality (VR) (e.g. furniture), to avoid costly show rooms.
C-Articles or small parts can be purchased via platforms (e.g. Amazon business) to save transactional costs and time.

Q: As for the Supply Chain, what are the main challenges of today?

A: Customer orientation/users experience, sustainability topics and transparency along the entire chain of supplies (e.g. child labor, conflict minerals, CO2 footprint, anti-corruption) will be key success factors for each supply chain of the future.
The customer is more educated and demanding than ever, and those companies that can fulfill or exceed his expectations, will survive.

Q: Lately I was thinking a lot about the „balance of Supply Chain “– where strategic procurement, tactical procurement, physical logistics, warehousing etc. are aligned in their goals and execution. To avoid situations where procurement achieves procurement savings through selecting cheaper supplier, which however increases logistics costs, warehouse operations costs, claims rate, stock levels etc. How do companies deal with this nowadays or how they should?

A: This seems to be quite an „old story “, but unfortunately it is still valid today. Shooting for local optima, e.g. optimizing single functions, business units, products, … is never the best solution. There are many, many company examples e.g. of low inventories in business unit A, prohibiting sufficient market supply of business unit B or non-alignment between companies and their suppliers. The triple A- Supply Chain (by Prof. Hau Lee/ Stanford University) shows many examples of complete failures (HP, Canon, Lucent, Cisco, …) or big success (7/11, Amazon).
However, the solution is very simple but so hard to realize: common goals and shared responsibility based on trust across the relevant partners of the value chain.

Q: In case you are familiar with specifics of the public procurement according to EU rules, can you briefly describe the situation in the public procurement in Germany? What are the main challenges the public buyers and suppliers are facing due to the regulation?
What is German government as well as BME doing to deal with those challenges?

A: The public sector and the German Ministries are on their way to become more and more digital. We are not as advanced as Switzerland, Sweden or Estonia, but increased efficiency, transparency and accessibility will be key issues for all major future developments.
The German Ministry of Economics (BMWi) has asked the BME to set up a new initiative called KoInno (competence center for innovative procurement) to share and transfer best procurement practices from the industry into the public sector.
In September, we will do a kick-off workshop in Würzburg, sharing experiences and networking with our community from the public sector (e.g. hospitals, universities, administrative bodies and public authorities).
I am already looking forward to this great event, and to support joint discussions and future networking of your Czech procurement organization.

Thank you for your time!