Q&A: Frank de Reij, Air France-KLM
Frank de Reij is Group CPO, Air France-KLM. In advance of his presentation at the forthcoming CPO Exchange, to be held February 22-24 in Munich, Germany, we spoke with Frank about the procurement transformation journey he and the Group have been on, the importance of structure and standardisation – and why the biggest challenge today and tomorrow is still fighting the war for talent…
Outsource: Thanks for joining us today, Frank. At the forthcoming COP Exchange you’re going to be talking about, among other things, efficiently mapping procurement spend: can you tell us about some of the work you’re currently doing in that area?
Frank de Reij: One of my key focus areas as Group CPO is currently, of course, combining the spend of two different airlines with some cultural differences. We procure everything from paperclips to aircraft engines, so of course complexity is one of the key issues – and therefore we’ve organised the procurement function in some very strict, specific ways on top of two airlines’ organisational structures.
For the last three-and-a-half, four years I’ve been implementing an organisation where we’ve divided the world into ten domains, from IT to marketing to handling to corporate to engineering and maintenance, etc – and then under those domains we have defined 30 categories, and all of those categories we have to manage as Air France KLM – and bear in mind this also includes eight subsidiaries. So this is the complexity we are faced with and which we have to manage on a daily basis.
O: How does your chosen structure make that complexity more easily handled?
FdR: Basically, by defining them. The IT domain for example may have four categories – software, hardware, telecommunications and services – and that enables me to have one specific manager responsible for overseeing and managing a whole domain or a whole category. This individual is responsible for issues like standardisation, dealing with different specifications of different companies, how reliant are those specs, communication with the business etc. So we have one tone of voice towards the supplier, but also towards the business; so I’ve got my customer and my customer is the business owner and again we try to be the voice between the business and the supplier where standardisation and simplification are the key words.
O: The time you’ve spent implementing this structure has almost coincided with the global financial crisis and subsequent economic difficulties: have you noticed that during that time the ways in which you’ve had to work with suppliers have changed as a result of the change in financial landscape? Are you finding a different balance of power between buyer and supplier now?
FdR: Yes – not that I like it, but I think that our position has strengthened. We’ve had to further professionalise – and the result has been the introduction of better-skilled professionals in recent years and a levelling-up of the human factor in the function, which is very important.
O: Do you feel suppliers in general are being as flexible as procurement would like them to be – and are you able to exhibit the same degree of flexibility that your suppliers are requiring?
FdR: Since we oversee the whole spectrum, it’s a bit difficult to give one answer that covers the entirety of that situation. Generally speaking, however, you’re looking for a more flexible approach linked to the current economic situation and, yes, suppliers have been reacting with flexibility and in a way that helps us to move forward.
O: What do you think have been – during your time at the job – the key drivers for change and how have they impacted upon the way you do business at the moment?
FdR: CSR is playing a key role in choices we make with suppliers. It was a side effect three, four, five years ago but today it’s a number-one issue, and very important. Number two, from a more practical perspective we’ve moved a little bit away from price negotiations and towards total cost of ownership negotiations; and that changes perspective, of course, because sometimes you might decide upon a more expensive alternative which over a lifetime of five years, or 20 years, will result in lower costs. How you register, manage, monitor the state of performance of your procurement organisation becomes much more complex with this approach.
O: Finally, Frank, what do you think are going to be – alongside the issues that you’ve been talking about already – your key challenges over the next couple of years, as we hopefully move to a more optimistic economic outlook?
FdR: Well, the main challenges remain basically unchanged: it is the hunt for talent. For me, the quality of the people I can place in the organisation is particularly important for success – more so than ever. I think that because of the crisis of 2008 we were able to amend costs down quite seriously by focussing on price in many locations, but we are already seeing, probably, the bottom of those negotiations. So today and also for the coming years the focus is more on processes and efficiencies and challenging the specification much more than in the past to reach cost-reduction targets. You cannot just stick to price: you have to get into the processes and create efficiencies. So that’s going to be a challenge – interesting, but a challenge.
For more information on the CPO Exchange, see the event website.