Julieta Varsano
Julieta Varsano

Procurement in agriculture: KWS and Lhotse combine powers to drive success

Procurement in agriculture: KWS and Lhotse combine powers to drive success

As part of our series of expert interviews with procurement leaders, we sat down with Peter Hagenow, Head of Strategic Group Procurement at KWS Saat. Peter brings with him 17 years of international experience in procurement and strategic sourcing from multiple industries - from automotive to real estate to now agriculture. So, it’s safe to say: Peter is the expert and we couldn’t wait to hear more about his procurement insights and learnings.

Peter Hagenow KWSPeter’s professional journey led him to KWS Saat, a German-based company focused on plant breeding, with activities in 70 countries worldwide. His favorite part about working at KWS? The fact that a company with 6,000 employees and more than 1.3Bn EUR revenue can feel so much like a family! This is no surprise, as the company, which was founded in 1856, is still family-owned. This family business approach brings a lot of stability for their employees, who feel enabled to focus on the long-term goals and not just short-term quarterly planning.

Agricultural procurement: digitalization as a competitive advantage

There are many examples of procurement in agriculture being years ahead compared to other industries, but nothing stands out as much as digitalization. 

Digitalization and agriculture go hand in hand. Peter illustrates this with one simple example: when a farmer is operating a tractor in the field, this tractor serves as a computer that is actively generating and collecting important data for analysis and planning purposes. Another example is using technology to measure the CO2 footprint of their supply chain.

Digitalization has also been implemented when it comes to indirect purchasing. Whereas previously ordering indirect materials was done via the phone or using catalogs (practices still common in many companies today), KWS has now centralized and digitized its indirect procurement. Peter backs this up with data: a few years back, only 50% of indirect purchases were processed via a central system, a number which has increased significantly today leading to more control over not only how much is being spent, but also where, why, and how.

Sourcing indirect materials is now a strategic topic for the company so that the process is simple, fast, and streamlined.

Building a resilient supply chain during challenging times

With inflation rising and disturbances in the supply chain operations becoming almost a daily occurrence, many companies are preparing for the upcoming difficult times. Nevertheless, procurement in agriculture is facing challenges that are unique to the industry. For example, agriculture is heavily dependent on commodity markets - recent fluctuations in wheat prices are hugely impacting the stability of agricultural supply chains.

Peter’s experience in building a successful procurement function from the ground up means that he is well-equipped to share advice on building a resilient supply chain. His main takeaway is two-fold:

  1. Build the right team - having experienced procurement experts beside you is a clear-cut way to have the knowledge and skillset needed to adapt quickly to market fluctuations. 
  2. Involve procurement early on - Maverick buying (i.e. purchasing without going through the proper procurement channels) can be a huge drain on resources. By involving procurement experts at the beginning of the purchasing process, you can collect more competitive supplier offers, diversify your supplier base and avoid leaving cost savings on the table. 

KWS x Lhotse: solving procurement challenges together

Working together with Lhotse has enabled KWS to successfully address some of its existing procurement challenges. Peter highlights three crucial topics:

  1. Additional offers - getting multiple supplier offers can now be done with a few clicks on the Lhotse app.
  2. More visibility - in many cases, the procurement team is not aware that their existing suppliers can fulfill specific orders, which leads to a lot of one-time purchases and hours spend onboarding new suppliers. With Lhotse, Peter and his team are able to discover matching suppliers or already existing catalog items, which streamlines their whole procurement workflow.
  3. More competitive offers - gathering offers from new suppliers brings more competition and cost savings without the need for increased team capacity.

In addition, Peter’s main learning from working with Lhotse is that they don’t need to limit themselves to what the traditional Enterprise Resource Planning (ERP) providers offer. The Lhotse app sits on top of their existing ERP system, fulfilling gaps in indirect procurement and optimizing their workflow. Peter also notes that integrating Lhotse has been a quick and low-effort process, while the payback and results have been immediate.

Future of procurement: from technology to sustainability

Peter is optimistic about the future of procurement - he expects a lot more up-and-coming technological advancements which will drive progress. This is already in motion in KWS, where software tools will free up capacity, so that procurement experts can focus on more strategic topics instead of manual work or admin.

Technology in procurement will also allow for instant price findings - for example, by collecting data on how a product is built, from what materials, and via what production process, you should be able to immediately determine the price. This will not only add value, but it will remove many repetitive tasks.

Moving into 2023, the number 1 priority on top of Peter’s agenda remains securing and diversifying the company's supply chain, thus making it more resilient to sudden market fluctuations.  

Last but not least is the topic of sustainability in procurement. Improving ESG (environmental, social, and governance) footprint is crucial - KWS is already in the process of partnering up with suppliers and implementing measures to consider all costs (not just price, but also environmental and societal costs) in their procurement workflow.

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