How Indorama Ventures is Soaring with its World-Class Procurement Function

With the global economy facing unprecedented challenges and digital transformation accelerating at a rapid pace, achieving the ambitious goal of 27% digitization rate by 2025 is no easy feat. Indorama Ventures is a frontrunner in redefining procurement, aiming to create a world-class function that drives sustainable, long-term value.

To undergo this wide scale procurement transformation that promises success, the onus lies on those in the function to kickstart with standardizing their processes, assessing their effectiveness, and solidifying a collaborative culture that fosters close ties and open communication across teams.

Arindam Sengupta, Global Vice President of Procurement Transformation, offers valuable guidance on the drivers behind this transformation – the evolution of the program as they tweak their change management plans alongside changing market patterns and sudden supply chain disruptions, the critical role of talent development in achieving lasting success, the delicate balance between short-term wins and long-term vision, as well as the lessons learnt along the way.

How do you approach the task of building a world-class procurement team at Indorama Ventures?

The task starts from understanding the business needs that will require the reshape of the supply chains to drive competitiveness and profitability of the business. We have set up a Transformation Council who works with regional CPOs and the business stakeholders to understand the future needs of every segment of the organization. We also look at the external environment and disruptive changes like technology and AI that will shape the future of procurement.

To ensure process standardisation, we need to develop a blueprint on the key processes and embed it into our systems approach, including the tools that we utilize for automation and digital transformation. We establish governance and risk management processes in making sure that what has been standardized is getting implemented and if there are any deviations, we need to justify them. This is a multi-tier approach which will differ amongst many regions.

We build on a collaborative culture to connect the dots of a roadmap and integrate it with the business plan that comprises of immediate and longer-term investments. Based on where we see the market shifting, we will fine-tune our framework in which we progress. Lastly, we assess how procurement is organized and the system, process, capability of what we require in the future to be a strategic business partner.

What were some of the driving factors behind the decision to embark on a procurement transformation program, and how has the program evolved over time?

The Key driving factors for the transformation program was Ability to deliver Procurement Value that is world class. We look at cost and cash considerations to deliver savings in an evolving market with rising inflation rates to protect the margin of our business.

We look at the Return on Long term Investment that we make in procurement in terms of technology and all other resources. This is benchmarked with the best in-class function within the industry.

The best target operating model and capabilities required to deliver the above and the speed of decision-making required to compete in the future. We churn out contracts and Point-of-Sales (POS) from when the demand comes in, so Purchase Requisition (PR) to Purchase Order (PO) or PR to contract conversion cycles are very important in ensuring that the contracts and POS are ready when the business needs it.

As procurement is the protector of risk in the supply chain, we also largely look at delivering risk management resiliency plan and early warnings in predicting and understanding market dynamics, keeping abreast of actionable market intelligence at the right place and at the right time.

Lastly, we also implement an ESG agenda with an understanding of how we are embedding Scope 3 emissions, especially around the innovation that suppliers are bringing into the organization.

As the market situation and business condition are very dynamic, we undergo reprioritization year on year. For example, when there is a need for crisis building, resilience could be an important factor, and we need to take a proactive stance on this. Or when there is a need to enhance ESG or digital initiatives, the investments we want to make must be commensurate with the returns we are getting. Therefore, there is always a trade-off that we must decide.

Building a world-class procurement team requires a focus on talent development. What specific initiatives are you implementing to equip your team with the skills and mindsets necessary to thrive in this transformed procurement function?

Talent and People will deliver results and not systems and technology on their own. My focus in the role has been to create the internal branding of procurement as a function which is driven by Commercial capability, Augmentation, Supplier Relationship management and Digital prowess to drive efficiency and speed. This would help first attract the best talent internally and externally.

We are also driving internal assessment to understand what the maturity level is currently and what is the gap to world class and hence a clear idea where to invest in talent over the next 3-5 years to close that gap.

We look at this in terms of two dimensions – functional and leadership skills. On the functional side, we use CIPS (in Asia and Europe) and ISM (in North America) to benchmark against. On leadership, there is a robust framework available and created within our organization, including future potential mapping and successional planning. In essence, we are not creating anything ourselves, there may be a few tweaks that we are doing with those parameters, but we are just following these gold standards.

Another aspect is talent retention, which requires a clear Employee value proposition and career path when young talent does come into the function.

As you lead Indorama Ventures' procurement transformation, what key lessons have you learned so far that you would share with other procurement leaders embarking on similar journeys?

The list is quite big in terms of the lessons (having done multiple transformations now) and we continue to evolve and adopt the program. However, a few key generic lessons have always been very important:

1. Commitment and support from the executive team and board is most important. However, beyond a point idea don’t sell anymore, success sells better. Hence it is important to embark on any transformation as sprints rather than a long-term strategy and deliver on the sprints to create success.
2. In a consensus driven culture, stakeholder engagement and reaching out to a broad range of stakeholders is important. However, decisions need to be driven with speed and clarity. Hence a proper governance structure, decision rights and clear RACI with formalizing alignment on decisions made is important. We also need to establish regular cadence with executive teams and leadership to give them regular updates and keep them engaged.
3. Change management plan is not just a HR thing, and it is an integral part of the success and hence the accountability of that cannot be delegated. Need to work very closely with all leaders and HR on creating and communicating the change management plan carefully.
4. There are times when many transformations are being pursued together. One must be careful about the transformation fatigue that can creep into the organization and hence plan the timelines and manage expectations carefully.
5. Be ready to adopt, change and course correct as it is a continuous improvement process, and we never stop learning

How do you balance the need for short-term wins with the long-term vision of the procurement transformation program?

Balancing short-terms wins with the long-term vision is a matter of judgement and leadership rather than following a strict criterion. Creating a sustainable way to enhance strategic value in the transformation program is important. We may have developed strategies which work, executed and delivered them in the short-term, but what can we learn from them and how do you structurally embed these into the organization?

Secondly, we ask ourselves if we have the people who have the mindset to learn and apply it on a sustainable basis. So, people and talent are key in the process of creating that whole knowledge base. Value creation must be tested and judged in the short-term, so we need to ask if we are delivering what we are preaching and this needs to be clearly defined. Buy-in is a continuous process that requires leadership engagement, so procurement must align with the business wants to achieve long-term growth in terms of its competitive position and key areas of their strategy.

So, we need to ask: in the function, what new skills and capabilities will be required? How is the business planning to compete and how will we support that?