Interview: Berthold Kraus about procurement transformation

In this interview, Berthold Kraus, Chief Procurement Officer at Syntegon, talks about the factors needed for successful procurement transformation.

As Chief Procurement Officer at Syntegon, Berthold Kraus first supervised the carve-out at Bosch, then faced the challenge of redesigning the procurement processes of a process and packaging technology supplier with around 6,100 employees to make it more efficient and effective. In this interview he explains how the transformation worked in his department, how he got the new Board’s support and how he now sees Syntegon’s procurement.

Mr. Kraus, Syntegon, still trading as Bosch Packaging, was facing a carve-out when it was launched at the end of 2018. Investors expected the company to significantly improve its performance straight after that. How was this time for you as CPO?

We basically had to work on two independent, very dynamic projects. For the carve-out, the goal was to be able to survive as an independent company and to build up solutions, which were previously centralized from Bosch, within the framework of a smaller company. Indirect procurement and an SRM (Supplier Relationship Management) solution are good examples of this. In parallel, we had to develop and implement a concept to increase performance for liquidity and procurement results in the short term. This was quite difficult within the company’s previously decentralized structure, with varying maturity levels and priorities. That’s why we also ended up working on a very extensive transformation. Personally, I found the time challenging as we also had to completely change the way we communicated with each other straight after the launch, because of the pandemic.

What was your approach after the carve-out?

The first step was to use a new data analysis tool to create cost transparency and analyze the potential in each material area. Cross-location bundling and material field strategy, procurement professionalization and involving procurement in the award process from the early stages were all significant levers. This meant we could clearly show our Board and investors the goals that should lead to significant change in procurement.

As the results were quite different from previous levels, and there were some doubts within the company, we used external support to set up the new organization and achieved results from the outset, confirming that our concept was right.

Your investors wanted the procurement department to contribute significantly (in double figures, in percentage rates) towards value creation. What did that mean in practice for you?

At first, of course, it was a really big challenge and an honor to lead a top priority project. Especially as our procurement was very diverse, with a focus on supply. So when we were measuring results, we kept the spotlight very firmly on a positive EBITDA effect so we could establish targets for each location in relation to P&L in procurement. In hindsight, that was really effective. We also set up a very tight timeline for our project management, kept the procurement teams focused on cash and savings and made sure we communicated the results. Involving the site managers as a sounding board and the site procurement managers in the project steering committee ensured that everyone worked together really closely. We more than succeeded with this task: procurement is now a crucial driver in Syntegon’s value creation program.

How, in concrete terms, did you get it done?

Clear goals and responsibilities for the procurement teams, as well as external support, were important. In concrete terms, we contributed by increasing value in each individual product group by bundling and standardizing products, and by adapting specifications. We also developed a structured approach to supplier management. In the end, positive competition between the procurement teams also helped to deliver top performance. Ignoring any discussions about organization until there were really robust results from most of our locations also helped to focus more on the outcome and not just on varying opinions about organigrams.

What role did management support play?

The Board was fully behind us from the moment we were able to convincingly show them what great leverage we have in procurement, in terms of EBITDA improvement. Measuring hard results was certainly an important element here too. We could also always count on their support with important strategic decisions, as well as when it came to project resources. When we developed the new organizational model, we worked very closely with our management team. And if we couldn’t reach a decision ourselves with each location, management took over at very short notice to lead the discussions.

And were you recognized for the work you did?

Absolutely, both internally and externally. We received the 2021 Innovation Award from the German Association of Materials Management, Purchasing and Logistics (BME) for our transformation. It was great recognition of the whole team’s work, including our colleagues from INVERTO.  We were also presented with an award for the procurement team’s performance by our CEO, Michael Grosse, at Syntegon’s Fall 21 management meeting. I feel that in procurement, we’re now fulfilling an important management function within Syntegon, and helping all our locations.

 

Isn’t there a risk in leaving out the organization issue until later?

Of course, the employees want clarity very early on about where the company is going in terms of an organizational model. But you have to keep firm under the pressure and clearly communicate when the issue will be discussed. That being said, key employees should be approached early on about potential jobs, to prevent them from leaving.

First the carve-out, then improving performance: how did you manage to keep your team on side through all this?  

It was only possible with very close coordination and transparency about what we wanted to achieve together. Week after week, we kept going through how far we’d got with achieving our goals, we shared in our successes and, despite the pandemic, we also celebrated results virtually and in person when possible. I also tried to keep talking to all the team members and to help them if needed, by explaining decisions or lifting their morale. I was probably also able to pass on my enthusiasm to my team that in procurement we can have a real influence on Syntegon’s future.

How do you see Syntegon’s procurement department structure now?

We still haven’t finished our transformation. I’d say we’ve fulfilled 85% of our goals. We’re now in a much better position when it comes to bundling our requirements, and in relation to competition.  Syntegon has implemented powerful IT tools to increase efficiency and guarantee data transparency. We can basically mark our indirect procurement as done. When it comes to project procurement, on the other hand, we’re only at maybe 70% of what I have in mind.

And strategically we still have some more work to do to ensure our procurement is futureproof. Up to now, we’ve mainly been concerned with increasing value, but now we have to focus more on issues such as risk management and sustainability factors.

Although the crises of the last 24 months have certainly been very challenging, I can proudly say that our team has proven itself and is making a very significant contribution to Syntegon’s success in terms of parts availability, as well as price stability and transparency with the different locations.

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