Video Transcript: Strategy with conviction: optimise cost, build resilience and create value

Transcript

Patrick Marter: Hi my name is Patrick Marter and I lead PwC’s procurement practice.

Now, recent events mean that there are now three pressing challenges for most organisations.

Mitigating the impact of inflation in the short-term ensuring supply chain resilience and refocusing on strategic priorities such as effectively transitioning to digital and net zero.

These challenges can be seen most acutely in the supply chain which has been the source of significant disruption recently and is also responsible for more than 70% of an organisation’s cost base and emissions.

I’m joined by my colleagues Lisa Callinan and Chris Smith to discuss how organisations can create supply chains that support an organisation’s broader transformation and cost objectives whilst also delivering on the sustainability and resilience agenda.

So, Lisa, question - inflation, cost management, resilience and the transition to net zero and digital - are these really competing priorities or is there a way that organisations can manage these in concert.

Lisa Callinan: Absolutely Patrick, I mean they are competing priorities of course but companies really don’t have the choice, except to manage them in a holistic way and manage them as trade-offs.

And companies, leading companies especially, are doing this very very well. And there’s precedent for this.

If we go back to the financial crisis of 2007 for example, we saw that happened there, we saw it during COVID as well. And we saw those leading companies manage these competing priorities really really well, so well in fact, that it became a differentiator for them and allowed them to outperform the competition and continue to optimise their cost base which allowed them to continue to invest.

And that’s how they were really able to grow.

Chris Smith: And I think it’s about then how organisations enabled themselves to do this. What were the successful changes that they managed to put in place. I think that’s what we should talk about as well.

Lisa: I saw a few things. I saw a few things that were really consistent across these companies.

The first thing I saw them do was they didn’t fall into that trap, you know that trap of focussing on siloed cost-out initiatives. They looked at the total cost of ownership. And so they were able to manage trade-offs from different areas of the value chain.

Another thing that I saw them do was really understand their customers. They understood those differentiating capabilities that they had.

Capabilities, services, products that really drove value for their customers and they doubled down on those during those periods of disruption.

Another area that I saw them focus on was innovation. They didn’t stand still.

What they did was they continued to innovate and use some of the cost optimisation measures that they found in driving more innovation, investing in innovation.

Innovation such as technology accelerators, people, working with suppliers in new and different ways. And one of the most important things that they did was that they never lost sight of the beating heart of their organisation - the people, the people that made it happen.

Chris: And it's the people aspect that I specialise in. The people aspect of cost and productivity.

So from a, you talked about an end-to-end value chain, well when you’re looking enterprise-wide in response to cost and productivity challenges this means looking across those functional silos.

Following those processes and the way that people are organised around those processes really can unlock additional value in an organisation.

Equally important from a people perspective that we have seen in this context is the focus on engagement and what organisations are doing around engagement whether it be from flexible working, different working habits and routines that are now being offered to employees to increase engagement and therefore productivity.

Similarly, from a skills agenda perspective, new skills and the focus on upskilling workforces in areas such as automation but also more broadly in digital.

And finally, around ways of working so from the top of the organisation operating model all the way down to individual teams and how they work together we’re seeing a lot of opportunity to increase workforce productivity.

Lisa: I find that point really interesting Chris. I don’t know if you’ve also observed different types of behaviours around rapid response teams and devolved and delegated responsibility to address some of the disruptions?

Chris: Yes certainly, so from a leadership and governance perspective in terms of navigating these challenges, setting up delegated authorities, delegated governance teams to take decisions on a more rapid basis has certainly been very effective through both the pandemic and in response to this broader cost context.

Patrick: That’s interesting Lisa because I go back to your point then about managing the end-to-end supply chain and Chris you’ve talked about your focus on people and productivity and the changes to operating model and behaviours that that requires, I would say that you’ve got to go beyond the four walls of the organisation and from customer through the organisation and into your supply base as well.

So my background is, I’m an ex-chief procurement officer from industry, and you see now that 50% of most organisations’ supply chains are actually outsourced to third parties and that trend is only increasing with the move to asset-light business models and so we need to extend those same changes to operating model behaviours from your internal orgainsation out into your supply chain and procurement organisations need to make sure that they’re adapting their approach to the market, how they set sourcing strategies, supplier selections, supplier management programmes to accommodate those changes and to ensure, again Lisa to your point, that it’s technology-enabled and fuelled by the right data that allows them to make balanced decisions around cost, resilience and the transition to net zero.

Thank you to my colleagues Chris and Lisa for their insights.

To close, organisations are wrestling with how to manage the challenges of cost, resilience and sustainability. We’ve heard that these don’t need to be competing priorities and that in fact successful organisations have managed them in harmony.