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Bayer CPO: We are ultimately accountable to optimize spend and pursue value beyond savings

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by Sakthi Prasad , Director - Content
6 September 2018


(Pic Courtesy: Bayer)

Life sciences company Bayer had won the Gold medal as part of the annual Best-in-Class rankings published by Beroe. In this interview, Bayer CPO Thomas Udesen explains the tenets of a Best-in-class procurement organization.

1. What are the procurement enablers you have instituted in your organization in terms of technology, tools, training and market research?

At Bayer, we implement enablers according to the specific needs of the organization at any given moment in time. We try to be agile and hence focus on deploying the right amount of initiatives that will boost our performance. Dedicated business partners, smart processes, state-of-the-art IT solutions and a strong drive towards innovation have been our focus in the past year.

Above all else the foundation of our success is our people. Procurement is a people-centric business and our team’s profound business understanding, market knowledge and strong dedication to Bayer’s purpose “Science for a Better Life” is the differentiator that unleashes our potential. We therefore continue to invest heavily in knowledge management, personal development, and cultural enhancement.

2. How important is cost benchmarking v/s competition for your company? What key steps do you undertake in order to remain cost competitive?

Like every value-driven company we regularly benchmark our practices and overall performance. I think this is particularly important for us as we are ultimately accountable to optimize spend and pursue value beyond savings. “Maximize value delivered” is an integral part of Procurement’s value proposition in Bayer.

Our category strategies match future needs with future market opportunities. One element here is cost competitiveness but we have so much more to offer. Most categories are being disrupted by innovation, technology and new business models so this is where we see the biggest potential to win in the markets where we compete.

3. Inventory is one of the important factors that affect a company’s profitability. As a procurement organization, how do you help your business in optimizing the inventory level?

Inventory management is indeed seen as critical across Bayer. We leverage the benefits of multiple concepts such as vendor managed inventories, planning parameter optimization, lead-time reduction as well as order size optimization. Our suppliers work closely with Bayer colleagues from manufacturing, supply chain, IT, and treasury in order to balance the need for supply security with optimal working capital. We are convinced that this is an area that is highly relevant for new collaboration and digital concepts.

4. How do you determine an optimal payables cycle that would be beneficial for both your company and your suppliers? Are you flexible in your payment terms? How does it impact your supplier relationships?

We have implemented a combination of simple and flexible payables cycles and this is appreciated by our suppliers as it ultimately leads to a higher payment on time performance. To simplify operations we apply clear standard payment terms in our business relations with suppliers worldwide which reduce complexity for both sides.

To improve the payables cycles we also use Supply Chain Financing (SCF). SCF is truly an advantage for both parties: our suppliers get paid faster and we can optimize our working capital. And this is still true despite the generally low levels of financing costs.

5. From a strategic viewpoint, what were the plans you had implemented over the past 3 or 4 years that had innately propelled your company to become a Best-in-Class procurement organization?

Our transformation at Procurement gained momentum back in 2016 when Bayer became a Life Science company. We used this strategic change to review our Procurement strategy, our organizational set-up, as well as our process and technology roadmap. Today, Procurement is an integrated corporate function, reporting directly to the CFO.  And we believe that this set-up and empowerment matches our strategic importance.

Colleagues across all Bayer units rely on the market knowledge of Procurement as we connect the dots between Bayer and the global supply markets. To live up to our value proposition we implemented an operating model where the interplay across different Procurement units is efficient and effective. Such a transition requires clear delegation of responsibilities, diverse competencies, and streamlined processes that are digitally enabled. Our goal is nothing less but excellence in everything we do as Procurement in Bayer.

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