Alex & Peter (00:09) 

Welcome to the Better Batch podcast where batch process manufacturers learn from industry experts. I’m Peter Suddard. And I’m Alex Koves. We’re joined today by Chandrika Venkatraman, an expert in procurement, and we’re super excited to learn how to improve procurement at facilities. Welcome. 

  

Chandhrika Venkataraman (00:36) 

Thank you for having me, Alex and Peter. Excited to be here today. 

  

Alex & Peter (00:38) 

Yeah, thanks for being here. It’s exciting. 

  

So I guess ⁓ a good place to start would be your growing production facility. ⁓ I think we’ve spoken before, you have some thoughts on the difference between purchasing, procurement, how it’s often embodied in one person at a growing facility. Maybe that’s a good place to start is to properly define procurement. 

  

Chandhrika Venkataraman (01:06) 

Absolutely. So, you know, one of the things that you often see procurement as ⁓ a function is somewhat newer, I would say. 

  

as compared to many of the other supply chain domains. ⁓ And why I say that is because of the term, the phrasing procurement, right? So in the past, let’s say in the 1980s, I think it was synonymous with purchasing, right? So, you know, that was the phrase that was commonly used. 

  

When I started out in procurement, which was in the early 2000s, by then procurement had already had its rebranding, right? So we started calling it procurement, but there is a fundamental difference between procurement, purchasing, and strategic sourcing. A lot of us in the procurement community talk about it, but we’re not really sure how well understood the message is beyond us practitioners. So I’m happy to get the chance to really break out the 

  

difference. Procurement is this overall, think of it as this overall all-encompassing big bucket, right, into which you have strategic sourcing which is more focused on longer term, ⁓ you know, of course you do have your short term and medium term as well, but more primarily focused on all of the strategic aspects relating to procurement, right. So procurement in a sense being supply management 

  

how do you get what you need for your organization at the right time, in the right quality, ⁓ at the right price from the right partners? If you were to define it like that, strategic sourcing deals with all of the strategic longer term elements of that strategy and purchasing deals with the actual day-to-day execution of it. strategic sourcing really being the what and 

  

Alex & Peter (02:57) 

Mm-hmm. 

  

Chandhrika Venkataraman (03:09) 

Purchasing being the how, like how am I actually getting it here? So that’s fundamentally the difference between procurement, purchasing, strategic sourcing, where strategic sourcing, purchasing really live in that full big bubble of procurement. 

  

Alex & Peter (03:13) 

Mm-hmm. 

  

So to make sure I have this right an example of strategic sourcing would be to say okay ⁓ we can gain advantage by importing this item from this country but if we do so it puts us at currency risk and we should hedge that currency or you know something like this to say in the broader scheme of things it’s not just and whereas supply management I believe see that category correct ⁓ now it’s 

  

Do I have what I need in time? When do I order it? What’s the lead time? Et cetera, et cetera like this, correct? So where would I fit negotiating with the vendor into this scaffolding? 

  

Chandhrika Venkataraman (04:02) 

Exactly. Exactly. 

  

Yeah, great, great question. ⁓ To me, and I think there can be different ways this is broken up, but to me, the negotiation really falls under the strategic sourcing umbrella because it is one of the key steps in the strategic sourcing process. So that’s really something that falls under ⁓ strategic sourcing. 

  

Alex & Peter (04:27) 

Mm-hmm. 

  

Gotcha. So strategic sourcing is the one that says, OK, we found our supplier for this material, or we found multiple suppliers for this material, and here’s how to prioritize them in these different scenarios. Here you go purchasing. You’re armed with where to get it from. You go from here. 

  

Chandhrika Venkataraman (04:54) 

Exactly, 

  

So purchasing being the execution of everything that’s planned by strategic sourcing. 

  

Alex & Peter (05:03) 

And then what about that planning part itself? You so often, you know, we talked about having purchasing, you know, do everything or, you know, have a single person and then as the company grows, something we often see as well is a lot of the ⁓ material requirements planning, know, ⁓ looking at the production schedule, seeing here’s when I will need what, even looking at the sales forecast and seeing here’s when I need what often that falls on the purchasing or procurement person as well. 

  

Where do you see that and should that be yet another job or does that fit in somewhere? 

  

Chandhrika Venkataraman (05:39) 

So. 

  

Yes, what I do see, especially in smaller businesses, in mid-market businesses, a lot of this tends to be done by the same person. From my perspective though, I think that is a risk. And typically, whenever I’m involved in analyzing or doing any kind of due diligence on acquisitions, this is one of the things that I do point out as a risk. And the reason I call this a risk is because 

  

Alex & Peter (05:50) 

Sure. 

  

Chandhrika Venkataraman (06:10) 

When you have the same person wearing essentially in this case three hats, right? So you have them responsible for material planning. You have them responsible for the day-to-day purchasing, which is actually ensuring that the product gets to where it needs to get at the right time. And you have the same person also managing supplier relationships, supplier performance, ⁓ strategy for the category itself, which is also kind of like this forward-looking role. 

  

It’s very, very hard to balance the objectives of each of these three roles. 

  

by one person at the same time effectively on a day-to-day basis. So what typically ends up happening is when all these roles are melded together, it creates a very reactive culture because firefighting, and we all know this, right, when daily priorities will always take over, right? So when you’re one person doing all of this, when somebody comes and tells you you have a material shortage, you’re gonna put everything else, especially those forward-looking activities of long-term 

  

risk mitigation, long-term risk planning, you’re going to put all of that on the back burner because you need to solve this problem today. So there are too many conflicting objectives that come in here ⁓ because of which, you know, to me that’s not a good position. However, the flip side of this is I do come across a lot of very small businesses, right? So, know, small being we’re talking about less than 10 million dollars in annual revenue, ⁓ small from a procurement side. 

  

also meaning you maybe have five categories or less, right? And fairly low complexity categories, maybe commoditized stuff, right? That’s readily available in the market. In those instances, can one person really wear all of these hats? I think they can. There just needs to be a lot more discipline on how do you ensure that all of these three different objectives are… ⁓ 

  

delivered consistently, how do you plan your day, how do you plan your month, your year so that all deliverables are effectively met. 

  

Alex & Peter (08:23) 

I want to ask you, if I’m a small company, there’s small companies listening right now, if I’m a small company, how do I know each of those things? How do I know if I have a problem here or not? Because you’re right, some people can’t afford to have three different people for all three of these different roles. what should I be looking forward to be confident that everything’s being taken care of? And then after, I’m going to ask you about, companies growing and how do we start kind of splitting this up? 

  

But first, how do I know if everything’s being handled? 

  

Chandhrika Venkataraman (08:57) 

So most common red flags or misses would be you’re constantly firefighting, right? You’re constantly chasing for materials. ⁓ You ⁓ have stuff that is not showing up on time, right? That’s a very common red flag. And the reason it’s so important is that it is of course connected to your… 

  

Alex & Peter (09:06) 

Mm. 

  

Chandhrika Venkataraman (09:22) 

⁓ end product out of stock. So those two are intricately linked. You have a material delay or you have a material non-availability that will impact your finished product availability. Now you may think, again I do run across organizations which say, ⁓ we’ve figured it out because we have such unreliable incoming supply so we’ve figured out that our solution is really stocking up on the finished product. 

  

really stocking up on the incoming materials, then you do have an inventory problem. So, you know, that’s, Sorry. 

  

Alex & Peter (09:57) 

Oh dear, yeah. Yeah. 

  

Well, no, and it’s interesting you say that because, you know, when we come in and, you know, in the companies that I’ve seen, so often they have a deficiency in systems. And then that deficiency also falls on this, you know, procurement person in that. Sorry, I was getting some background noise for a second. Anyways, that deficiency falls on the procurement person as well, because. 

  

they’re having to follow up regularly with production on when will things run and follow up with R &D on like, are the bombs? And then also they can’t trust the inventory as accurate. imagine they’re physically walking out to like recount the inventory because they don’t trust, know, it’s like, is there really time? And I don’t know if you’ve seen the same thing, but for me in all those categories, ⁓ you you talked about strategic sourcing and… 

  

Chandhrika Venkataraman (10:44) 

precisely. 

  

Alex & Peter (10:53) 

than also ensuring that the materials are actually there on time and looking at the production schedule. For me, it’s usually the strategic sourcing that is the ball that gets dropped because it’s not the urgent matter, right? And then, you know, often we come in and at least save them a little time with systems so that they have the data in front of them. They get some space to do strategic planning and they get huge ROI from that. can imagine now actually splitting that into a separate role that’s just gonna… 

  

going to do so much, give so much leverage. 

  

Chandhrika Venkataraman (11:26) 

you’re spot on because one of my number one recommendations when somebody tells me, this is what I have and I don’t have the ability to really increase my team, ⁓ what do I do? One of my number one recommendations is automate what you don’t need to be doing manually. So that’s the number one thing because that… 

  

saves an enormous amount of time because now you don’t have the same person also struggling with figuring out how to reconcile master data with every PO that they issue. Like, do I adjust all these reorder points? How do I standardize all of my supplier terms? Forget all of that. That is very non-value added work, especially when you’re in this constrained environment. Absolutely, you should be using a system to take care of 

  

Alex & Peter (12:02) 

Yeah. Yeah. 

  

Yes. 

  

Chandhrika Venkataraman (12:20) 

you know, all of 

  

that non-value added. Coming back to Peter’s, yeah, absolutely, right? Like, so coming back to Peter’s question on what are the other warning signs, right? So one warning sign is you’re probably missing. ⁓ 

  

Alex & Peter (12:22) 

Exactly. 

  

Chandhrika Venkataraman (12:34) 

You know, have out of stocks on your finished product, you have out of stocks on your materials, incoming materials, that’s a big warning sign. A second warning sign would be inventory, right? Like, you know, for whatever reason you feel the need to carry way more than what you really need, that could be a sign, right? A third big sign that I often see is ⁓ this whole reactive approach to cost management, right? So a lot of companies will say, when I ask them a question on Thank 

  

So how do you know you’re paying the right price? They’ll usually say something like, our supplier really sends us a price revision letter every year, right? Or they send us this whenever the price changes. Or every time we place a PO, we actually get a letter from our supplier that tells us what the price of this next batch needs to be. To me, that’s a huge red flag because that shows that there is nobody consistently ⁓ actually paying attention to cost management of that category, right? And so category cost management as a simple principle is, do you understand what cost drivers actually influence the cost of this? 

  

Alex & Peter (13:38) 

Mm-hmm. 

  

Chandhrika Venkataraman (13:51) 

item that you’re purchasing. So you need to understand that as a strategic sourcing person. You should absolutely, like that’s probably one of the number one goals. You could call it a should cost analysis. You could call it a cost driver analysis. ⁓ Or another term is a purchase price cost analysis. So it’s got different terms, but in a sense, the simple fundamentals of it is what are the component costs that make up this finished product cost? And do you know how each of those component costs is moving at any given time? And that tends to be across any organization which is managing all of procurement with one person, that tends to be the ball that really gets dropped, this holistic understanding of cost. 

  

Alex & Peter (14:45) 

Let’s maybe dive into that a little bit further. The cost, you’re telling me I shouldn’t just trust my supplier to give me a good cost? We can do better than that? What should our procurement experts listening in to this be doing instead on these categories that drive business? 

  

Chandhrika Venkataraman (15:07) 

Yeah, so what I would say is, again, let’s say you’re a very small business and you don’t have the luxury of multiple people, you don’t have the luxury of research at a bare minimum. 

  

you should have multiple sources available for whatever it is that you’re buying. And why that is important is just having those multiple sources allows you to understand the market a little bit better. Right? So even if you, let’s say, you know, I’m talking about a situation where you simply don’t have the time, right? Like you don’t have the time to go digging into, ⁓ you know, what drives the cost of this chemical, for example, right? Okay. No problem. 

  

⁓ lowest low-hanging option for you is at least have multiple suppliers so that you can pulse check. So it could be through like a bidding event that you’re doing, something, some way for you to stay informed of the market. Multiple suppliers. 

  

Alex & Peter (16:00) 

Got it. 

  

Got it. So the ground floor, multiple suppliers. We 

  

could do better. I’m sure. What’s kind of the next level of this? What else could people be doing if they got a little bit more time? 

  

Chandhrika Venkataraman (16:20) 

Yeah, so if they have a little more time, I would definitely say understand your commodity, right? Understand what you’re buying. First principle of understanding what you’re buying is actually know how it’s made, right? Like know its supply chain, which honestly, again, I see companies both big and small miss this. I don’t know why. Maybe it’s a budget thing. Maybe it’s a time. Maybe it’s just the resources. Visit your suppliers. 

  

Like it’s got to be almost like this no-brainer, ⁓ you know, first 90 days of somebody in a procurement role. One of the most basic things you absolutely need to do. Visit your suppliers, understand where the material flow really is coming from. Understand how your product is actually getting made, your raw material. Understand how your raw material is actually getting made so that you can get a better handle on how each of those factors contribute 

  

to your incoming materials cost. So that’s again a second, I would probably call it, if you had the bandwidth, if you have the resources, if you have the budget, absolutely you have to do that step. 

  

Alex & Peter (17:34) 

Got it. And now, you know, there’s a hailstorm through the Midwest. How does that impact our wheat? you know, Houston’s flooded, power’s out in Houston. You know, how is that going to impact our chemical stuff? Sure. Well, it’s interesting. I mean, there’s so much complexity there, right? You know, I can imagine, depending on the amount I want to order, know, volume discount could push me to this supplier or that one. I can imagine that I might want to get that volume discount at the cost of holding the inventory longer. 

  

Chandhrika Venkataraman (17:43) 

Exactly. 

  

Exactly. 

  

Alex & Peter (18:04) 

but compare that to how much it cost me for the storage space where I’m holding it. There’s the freight costs, there’s delivery timeline, so I have now a shorter or longer turnaround, there’s the quality. How do you like, and I’m sure we could brainstorm and come up with more things, right? Like that’s just off the top of my head. How do you take all of that and create a framework where now I can make a decision when there’s all of these different dimensions to look at, which is the better? 

  

supplier for this material. 

  

Chandhrika Venkataraman (18:36) 

And that you just described in a sense, strategic sourcing. That is strategic sourcing. How do you make those decisions? 

  

Alex & Peter (18:39) 

Right, right, okay. Yeah, that’s the job. Congratulations. 

  

Okay, you’re hired. Yeah, yeah. We figured it out. Yeah. I mean, maybe we could do a deep dive on a couple of those particular elements. I’m interested in both freight and quality because those ones come up a lot. Maybe starting with freight, like, how do you think about finding, you know, do I just let the vendor, you know, charge me for freight? When should I get third party freight? You know, 

  

Chandhrika Venkataraman (18:48) 

Yeah. 

  

Alex & Peter (19:09) 

Do I try to get the truck full? Just maybe the basics of getting the product into our facility and the additional costs and ways of thinking about that. 

  

Chandhrika Venkataraman (19:22) 

Absolutely. So I think the most fundamental thing on freight is actually understanding the component of that cost in your total cost, right? Which again, the reason I say something so basic is because it is again something that I often find is missed out. So what typically happens is you have your, and I’ve seen this again, I’m not singling out any size of business. I’ve seen even a very large corporation do this where 

  

you know, they’re bringing their materials in. 

  

but the freight really sits as a separate charge somewhere else, right? So it’s really not attributed back to the cost of that material, but it really should be, right? Because otherwise it goes, sits as a miscellaneous charge somewhere. Nobody has any idea if, you know, that charge is attributable to your raw material. Is it attributable to your finished product? Even if it sits as a freight line item somewhere, how do you tell the difference? Like, how do you know? Is this incoming inbound freight 

  

is this outbound freight where like which product actually contributed to that freight and when you lose that level of visibility you can’t really optimize what you don’t know you must optimize right so you really should have that visibility so that’s my number one thing right which is understand your landed cost right and again comes back to that whole cost conversation right so if you have somebody in strategic sourcing that 

  

Alex & Peter (20:44) 

Mm-hmm. 

  

Chandhrika Venkataraman (20:55) 

It is that person’s responsibility to understand every cost component and freight is a very key component that they must understand in that total breakdown. So a simple way to do that again for starters is ask the suppliers. Ask your supplier. They are the expert. They ship product all the time. So they will, if you don’t have a handle on this, if you don’t understand, ask. 

  

Alex & Peter (21:05) 

Mm-hmm. 

  

Sure. 

  

Exactly. 

  

Chandhrika Venkataraman (21:21) 

Right? Find out. 

  

Find out from them. Talk to freight brokers. Right? Like talk to people in that freight industry. And again, nine times out of ten though, your supplier will be able to help you. Right? Because they are. And typically I go back again over the course of you know 20 years in procurement, I have come across so many situations where I was just dropped in. Right? Like hey, this is what you’re managing effective tomorrow or effective today or sometimes effective three days ago. 

  

Alex & Peter (21:51) 

Yeah, congratulations. ⁓ 

  

Chandhrika Venkataraman (21:51) 

this is what you’re managing. 

  

How do you get your arms around that? You go to whoever is the expert. Who’s the expert? Your supplier is the expert. So you go to them. The only caveat here is don’t put all your eggs in one basket because again just bear in mind always that the supplier also has a narrative, the supplier also has goals, they also have agendas. So make sure that again the diversification, this is where it plays an important role. 

  

Alex & Peter (22:00) 

Mm-hmm. 

  

Chandhrika Venkataraman (22:21) 

Right, so have multiple sources triangulate and try to understand ask all the all the questions ⁓ Gather insights from the experts and make your own analysis, right? So to your to your question on you know, the freight. Yeah, you you asked a specific question How do you decide do you pay for it? Do you let somebody else pay for it simple rule of thumb? Who has better leverage in negotiating that that freight contract who has better ability to manage that freight contract? 

  

Alex & Peter (22:47) 

Mm-hmm. 

  

Chandhrika Venkataraman (22:51) 

because you know one part of me can often say ⁓ like you know I think between me and my supplier I would be more invested in ensuring that I get the best rate because for my supplier it’s really just a pass through right so they’re just going to pass it through to me so one part of me would say ⁓ I think I should control it but 

  

Alex & Peter (23:09) 

Mm-hmm. 

  

Mm-hmm. 

  

Chandhrika Venkataraman (23:14) 

The other part of this is do you actually have the bandwidth to do it? Don’t take on managing things that you don’t have the bandwidth to because what will happen then is you have taken responsibility for managing a freight contract but you don’t have the time to do it. So in a sense, over the longer run, what happens is you have your freight vendor just giving you, telling you exactly what it costs each time. You have no ability to check, to cross verify, you’re just pushing a number, you’re just passing it on, right? 

  

Alex & Peter (23:43) 

Mm-hmm. 

  

Chandhrika Venkataraman (23:44) 

inefficiencies build in the long run. So I think it’s important to often 

  

pause and check and say, this was a decision. We decided that we’re going to have the supplier pass through freight. This is what we decided in 2020. In 2024, is that still a valid decision? Do I have any data points that I can use to check that I am in, for instance, freight, how has freight cost actually changed over the last four years for your business? 

  

Alex & Peter (24:18) 

Mm-hmm. 

  

Chandhrika Venkataraman (24:20) 

Do you have any data points on your own outbound that you can compare with? Do you have data points that you can compare with from some of these standard freight databases? So how does that at least understand the trend lines? So for instance, if the overall industry took a 2 % increase and you were taking a 20 % increase, that’s a huge red flag right there. So somebody is not managing it. You told your supplier to manage it, clearly they’re 

  

not managing it. Come back to the table. Let’s understand again. Do we need to restructure this? I think that’s the approach that I would recommend. 

  

Alex & Peter (25:00) 

And then kind of very related to that is around delivery times. So if I can have it cheaper, but it comes from further and it takes longer, I guess that means one or maybe both of these is I will have to stock more so that I have more of a buffer because, you know, if it takes longer to get here, maybe even the variance in that time would be longer and I have to plan further ahead. How do you… 

  

kind of like assign a cost to that longer delivery time and understand the trade off there. 

  

Chandhrika Venkataraman (25:36) 

Yeah, so that would be what you call a total cost of ownership analysis, right? So we talked a lot about understanding your… 

  

commodity component costs and all of that. The next step to that, so if you’re, if we’re thinking of, you know, that pyramid or whatever we’re building, right, where we said, okay, the ground floor is this, the second floor is, ⁓ or the first floor, what are we doing? Are we doing Canadian? Are we doing ⁓ Indian? Are we doing American? I don’t know, I don’t know how it is. ⁓ 

  

Alex & Peter (25:47) 

Mm. 

  

Hehehehehe 

  

Yeah. 

  

Chandhrika Venkataraman (26:07) 

I’m so used to calling this, you know, in India we say ground floor, first floor, right? But in the US, of course, it’s first floor, second floor. ⁓ 

  

Alex & Peter (26:13) 

1. no. Interesting.

  

Chandhrika Venkataraman (26:16) 

Yeah, so the next floor, the next floor above that was your basic should cost analysis. And I think the third floor on top of that is your total cost of ownership. And that’s where this bucket of inventory carry cost really comes in. And it could be as simple as you want it to be. So you could say that this is typically my carry cost. So if I have to carry, because this supplier is further away from my location, 

  

Alex & Peter (26:18) 

Yeah. 

  

Mm-hmm. 

  

Chandhrika Venkataraman (26:46) 

I am going to assume that I have to carry two weeks worth of inventory. What’s the cost of that two weeks worth of inventory? Right and that gets factored into your total cost of ownership and you do a TCO comparison between your suppliers Right and then and that gives you that and the TCO is a fantastic analysis because that’s going to tell you in the long run to write like what does that well, how does that really compare so it’s not just a 

  

price factor. ⁓ Alex, you mentioned quality, right? So quality can have that too, right? So for instance, simple way to build a TCO with quality, for example, would be, okay, I have the supplier. 

  

their acceptance rate for me, like when I get their product, the acceptance rate is 98%, right? And for another supplier, my acceptance rate is 80%, right? And there is that cost associated with poor quality. It could be the cost of either inspections, increased inspections, rejections, the cost of rework with the absolute worst, right? Like in your line, you have to rework, right? So you could do the… 

  

right way to do this is to actually measure this every time, right? So that you have, you actually have that data recorded. But in the event that you’re not so systematic, you can still take some representative samples, right? So, you know, start measuring for a couple of batches, right? So you understand, okay, the two out of 10 batches that I measured, this is what I saw, right? Now, can I use that, can I use that to extrapolate the rest of the pattern? And then you assign 

  

Alex & Peter (28:08) 

Mm-hmm. 

  

Mm-hmm. 

  

Chandhrika Venkataraman (28:31) 

a cost of poor quality. So that goes into your total cost of ownership. 

  

Alex & Peter (28:32) 

Mm-hmm. 

  

Very cool. 

  

And what about the cost of broken promises from the supplier in terms of delivery time? What if we see a pattern of like one in four times, they’re a week late? How do you start to bake that in? 

  

Chandhrika Venkataraman (28:46) 

absolutely okay. 

  

Yeah, 

  

so great question. And how do you bake that in is by translating it into a business impact for you. So when those broken promises, how does that actually affect your… 

  

bottom line, right? So does it affect your bottom line because of ⁓ you having to now overstock, right? If that does, then it’s a straightforward inventory cost that you actually have to add, right? So to those delivery delays, right? Or if there is a cost of lost sales, right? So it actually translated, you you didn’t keep any inventory and it actually translates to lost revenue, then that sits there. 

  

Alex & Peter (29:23) 

Mm-hmm. Mm-hmm. 

  

Chandhrika Venkataraman (29:35) 

too great as a cost of lost revenue. 

  

Alex & Peter (29:36) 

Mm-hmm. 

  

Mm-hmm. Gotcha. Makes total sense. Okay. This is excellent. I have a last one in this category. my goodness. One last one ⁓ before we move on from the strategic sourcing side of it and that’s around negotiation, right? So I guess, you know, whoever’s in charge of strategic sourcing as we discussed is, you know, in charge of negotiation. Do you have any negotiating tips, you know, in procurement? I’m curious your top negotiating tips. 

  

Chandhrika Venkataraman (30:06) 

my number one negotiation tip is always prepare. 

  

Don’t try to wing a negotiation. Always prepare. And preparation is key because it tells you a lot of things. ⁓ Number one, knowing your numbers, ⁓ knowing your volume, knowing your spend, knowing what the overall market is like. That can tell you, ⁓ that can give you lot of insight. Sometimes I run into businesses that often think they don’t have much leverage in a situation, but actually they do because 

  

Alex & Peter (30:16) 

you 

  

Chandhrika Venkataraman (30:43) 

they probably form a much larger percentage of their suppliers revenue than they give themselves credit for, than they think. So just understanding that, that falls under the bucket of preparation. So first of all, knowing your numbers, I think that’s hugely important. The second consequence of preparing is, especially if you have a broader team that you can prepare with, I think that will give you insight into what is actually important. 

  

for your business. So a lot of times people just assume that a negotiation is mainly for cost. Maybe, maybe 90 % of the time it is for cost. But what are those other important business requirements that you must be tackling in that negotiation? And why that is important to prepare, especially with a broader team, is so that it’s not just the procurement persons. 

  

deliverable. It’s not just what they think the business needs, it’s actually validated by the business. And that way you’re… And the other big important thing of preparing like this is to ensure that you don’t give away some other important business metric. You don’t just agree to something else, but just because you didn’t know it was important to your business. ⁓ I would also say that ⁓ to me, like every 

  

that I’ve ever been involved in. To me, my suppliers are my partners, right? Like, it’s not adversarial. I think that, and again, different people have different approaches. I know the adversarial approach also brings results to some people. I think it’s important to match your style to who you are, right? So, you know, if adversarial is what you’re comfortable with, if confrontational is what you’re comfortable with, you know, by all means, you know, try it out again. 

  

Alex & Peter (32:31) 

Mm-hmm. 

  

Chandhrika Venkataraman (32:40) 

preparation is key, understanding what your business wants from that ⁓ supply arrangement is key. But after that the style matters. To me, what always works, like I’ve always mentioned, suppliers are experts. They will always know more about that category than I do. And it’s not a matter of me just handing it over and saying, you’re the expert, but it’s acknowledging the fact as it is. 

  

because they live that day and night but any procurement person is really split across multiple categories right and I’m not producing that item right I’m it does not my job to know it as in-depth as the supplier so instead I identify how to leverage that knowledge right how do I leverage that knowledge I do it by asking 

  

a lot of questions, tons of questions. Ask questions, learn, listen, and over the course of that relationship, suppliers have always been extremely open with me. I’ve learned a boatload from visiting my suppliers, from understanding how those markets move, how something is made, and all of that really builds into your negotiation strategy because now the better handle you have, so for instance, 

  

Alex & Peter (33:35) 

Mm-hmm. 

  

Mm-hmm. 

  

Chandhrika Venkataraman (34:03) 

⁓ You know once when I was visiting a supplier. I learned that they had Recently automated, know a sorting operation right like they had recently operate Automated it they used to have like eight people on the line. It’s now they have an optical eye Fantastic, right just goes into my notes Okay, I come back later and I say hey, what about the what about the benefit of that automation? 

  

Alex & Peter (34:22) 

Mm-hmm. 

  

Sure. 

  

Chandhrika Venkataraman (34:30) 

Like, does that sit in my cost somewhere? And it’s not to challenge, but it’s to more, it’s a genuine question, right? Like, so did I get the benefit, right? Like you automated, so now you have higher efficiency. And yes, I didn’t tell you to automate, but you did automate and it’s become an efficiency. How does that efficiency translate, right, here, right? ⁓ Because again, I think the other part of it is these discussions, these partnerships, they are partnerships, right? 

  

When you grow, they grow. When they grow, you grow. So how do you kind of get all of those benefits in? So yeah, I would say listen a lot, ask a ton of questions. Never, the other important thing, especially for smaller and medium sized businesses to keep in mind is never assume that you don’t have leverage. ⁓ Just because, and a lot of people tend to do that because they just equate volume and spend. 

  

Alex & Peter (35:23) 

Right. 

  

Chandhrika Venkataraman (35:30) 

with leverage and they say I don’t really have much volume so you know so I can’t I don’t really have much leverage. However the important thing is understanding what does what is actually relevant to your supplier like are they are they like you know super transactional is this a super transactional category where you know everything in the market is really driven by spend or could it be a category where innovation is king right so for instance a lot of suppliers want to innovate. 

  

right and they want to test their products in a low risk way. Could you be that customer who actually allows them to test because you’re nimble, you’re agile, you’re small. Is that partnership worth it? Is that worth something to your supplier? Can you get some benefit out of being that channel, that conduit for their innovation? 

  

Alex & Peter (36:13) 

Mm-hmm. 

  

Mm-hmm. Well… 

  

Chandhrika Venkataraman (36:23) 

So 

  

there are lots of ways in which you can explore your own leverage. So I would say, don’t assume you don’t have leverage just because you don’t have scale. 

  

Alex & Peter (36:36) 

Love it. And there’s so much you said that I want to comment on, particularly I love your approach of deeply understanding your supplier and asking a lot of questions because I think that mitigates, I think there’s a real risk in negotiations that you push too hard on price and your supplier says, okay, yes, but there’s a real risk there that there is a hidden compromise that’s being made to say yes to you. 

  

Whereas if you get deeply involved and understand and like, how can we get to this lower price that we need and understand how they’re saying yes and what the compromise they’re making, you you have to opportunity. Okay, no, no, no, I’d rather stay right without the compromise. You know, in this case, it’s not worth it for me. So ⁓ anyways, that’s that’s always been a challenge for me in negotiations is to like to think about that, like, because you don’t realize you’re you’re you’re you’re actually, you know, hurting yourself by pushing for that price. 

  

Chandhrika Venkataraman (37:24) 

Exactly, because… 

  

Exactly, and I think that’s where having a really thorough understanding of cost will actually also tell you how reasonable you’re being in your ask, right? And again, it’s not about just… 

  

Alex & Peter (37:41) 

Mm-hmm. Right. 

  

Chandhrika Venkataraman (37:47) 

stopping yourself from asking. It’s not about that, but it’s about knowing fallback. It’s about knowing your fallback position because you also don’t want to be in a position where you go about demanding, yeah, you need to drop your price 20 % because I increased my volume 20%, but you don’t understand how that costing component actually works. And here you’ve blocked yourself into a position with no fallback. But it’s about understanding what’s your… And I think also, especially as you’re 

  

Alex & Peter (38:09) 

Mm-hmm. 

  

Chandhrika Venkataraman (38:17) 

organization becomes larger, there’s also a lot of internal management that you have to do. It’s not about, you know, I’m gonna march into this negotiation, I’m gonna get you a 20 % discount, and then you have to come back and say, yeah, well, that 20 % really didn’t work. So what is a realistic number? How do you get at what is realistic? And to do all of that, you have to know your cost base. 

  

Alex & Peter (38:44) 

Okay, so we have, this is all excellent. We’ve built an exciting house of costing, managing our costs, and I think you’ve given a lot of people listening a bunch of new interesting tasks that their purchaser, if it’s just one person, can start to handle. And with automation and systemization, you get more data and you’re saving time from them doing stupid stuff. 

  

that they don’t need to waste their time on and they can do these more high value things. At some point, this organization’s gonna continue to grow and we need to break this one purchaser out into multiple people and break out material requirements planning and the strategic sourcing. What advice do you for companies like that that are going from kind of medium to medium that need to have, know, one person just can’t do it anymore? 

  

Chandhrika Venkataraman (39:37) 

Yeah, I would say a good rule of thumb is once your annual spend actually crosses the 10 or 20 million dollar mark, you may want to seriously start thinking about splitting these roles. Now, that’s a spend-based rule, right? So there’s research that’s published and reviewed and renewed. 

  

that often says, this is the manageable or this is the addressable spend per person that you should have. I don’t know, it kind of varies because there is another layer to this other than just the spend number and that is complexity, right? That’s category complexity. ⁓ So for instance, category complexity is you have multiple facets to the complexity. One simple way that I could talk about the complexity is internal to your own organization. ⁓ Once you have 

  

more than 50 suppliers that you have to manage, right? How effectively can you do it, especially if you do some quick math on, okay, I need to be touching base with every supplier or at least every critical supplier at least once a month, right? Like, you know, I have some strategic spends here, I need to be. And why you need to keep in touch with your suppliers so that you can have a pulse on the market and all of that. So if you try to really schedule all of that and you find you don’t have time 

  

do that especially when you have 50 suppliers or more then I think that’s another sign that you really need to start thinking about splitting out these roles. ⁓ I think an easier way especially from a business, an impact standpoint is if you’re spending enough that a 1 to 2 percent savings actually can fund a full-time employee 

  

There you go. So just adding that resource would typically get you somewhere between one to 5%, right? Just from the low-hanging fruit. And we see that all the time, right? An organization without any fundamental strategic sourcing processes in place versus an organization that actually does some level of cost management, that does some level of planning, understanding. I think that difference tends to be anywhere between one and 5 % 

  

Alex & Peter (41:27) 

There you go. 

  

Chandhrika Venkataraman (41:57) 

better costs. So yeah, there you go. Your person is funded now. 

  

Alex & Peter (42:02) 

Perfect. Okay, I want to switch gears. That was a good combined perfect. Yeah, we didn’t even practice it. Okay, I think a lot of people right now are worried about risk and managing, know, tariffs have changed once again. And by the time this gets released, maybe they’re all gone or maybe they’re three times the size. knows? Risk management on the purchasing side is top of mind. 

  

How should companies out and purchasing help with risk management? How should people be addressing finding new suppliers right now with tariffs? Walk us through that. 

  

Chandhrika Venkataraman (42:38) 

Yeah, and you know, risk. 

  

is again a fundamental deliverable of that procurement team, right? And who delivers it to me again, that’s the strategic sourcing part of it, right? So risk management is a key deliverable of your strategic sourcing team. ⁓ They are responsible for that. So when this whole conversation around tariffs, my take on that is it is yet another risk factor that shouldn’t require 

  

full appending of your strategies but it’s something that you know is one more factor that should that should have been considered already right if you’re if you’re thinking of doing something today it’s probably already too late that’s not to say don’t do it you still should do it right better better late than never and all of that but ⁓ that risk management has to be built in ⁓ 

  

And I think a good way to do it, again, for organizations that are starting out building that is to really tackle that top spend categories. So go after your 80%, your most impactful, go after the categories that actually have the biggest. 

  

impact on your profitability. Go after those categories that are really, for whatever reason, they are single sourced today. Why are they single sourced? Because, and I can tell you, just going after these large impact categories will actually open up the door for further discussions because sometimes you often find that you’re stuck in a relationship. 

  

because you actually don’t have any other alternate options that can readily be pulled. And so you may find that, ⁓ if I need to start risk mitigating, this is actually going to be a two-year project for me. 

  

And if you find that, great, start it. Start it right now, because what’s the point of waiting? Start it, action it, so that a good strategic sourcing risk mitigation plan would actually have multiple levers that there should be a scenario analysis and there should be an if this, then that, and you should have multiple levers that you can pull at the right time as needed. 

  

Alex & Peter (45:06) 

you know, thinking about risk and this maybe borders on an accounting question for a second, but ⁓ something I’ve seen some companies do is actually take risk and try to quantify that risk as a cost for the raw material and have different layers of risk from different sources. know, tariffs could be one of them, currency exchange could be one, you know, whatever those resources are and actually consider that a landed cost component. 

  

to say there is a cost to that risk and I will bear that cost whether or not that bad event comes true and now I’ve basically hedged and absorbed some of that cost in advance and if that thing comes to fruition, I have a cushion. What do you think about that approach? 

  

Chandhrika Venkataraman (45:55) 

So I would say again, risk is a part of that total cost of ownership analysis as well. So you can actually and you should actually quantify that risk. It is very, very hard to do though because there is obviously that subjective element to it. ⁓ There are some weightages that you’re probably assigning ⁓ based off of the… 

  

Alex & Peter (46:00) 

Mm-hmm. Mm-hmm. Mm-hmm. 

  

Mm-hmm. 

  

Mm-hmm. 

  

Hmm. 

  

You have to guess how likely an event 

  

is, right? Yeah, yeah. 

  

Chandhrika Venkataraman (46:19) 

Exactly, exactly. 

  

So it’s a little bit hard to do, but it’s a good approach because it allows you to quantify and see what the impact would be. 

  

Alex & Peter (46:24) 

Mm-hmm. 

  

Mm-hmm and something you know and maybe estimating that risk would ⁓ Require some experience in the category and knowledge of like, okay Well, I know that the weather and patterns and you know, South America, you know foretell a higher risk crop yield whatever but ⁓ segueing to this question then if you were advising or perhaps the hiring manager at a company that had decided we’re ready to 

  

have a dedicated strategic sourcing professional. How important is prior experience in the category in that person that you’re hiring? 

  

Chandhrika Venkataraman (47:11) 

Yeah, I have some strong views on this that may or may not align with everybody in the procurement field. to me, I’m someone from my own experience, I’ve migrated a lot across categories. And to me, the biggest advantage of that migration has been the ability to take learnings from one industry or the ability to ask 

  

Alex & Peter (47:15) 

We’re ready for them. want them. 

  

Chandhrika Venkataraman (47:41) 

questions that 

  

somebody who’s just spent time in one vertical, who spent time in one category, may not think to ask because they have that expert viewpoint, right? So they’re not really looking at it with a fresh set of eyes. They’re not really asking some of those. So to me, I’m always an advocate for people to move around a lot, right? And so by that logic, I would also argue that 

  

Alex & Peter (48:06) 

Mm-hmm. 

  

Chandhrika Venkataraman (48:12) 

Yeah, mean, ideal. So the biggest advantage of somebody, of hiring somebody who has prior experience in that same category is that they can hit the ground running on day one, right? And why we say that is because, well, they probably already have those industry relationships. They probably understand the category. probably, you know, they have some grounding already, right? 

  

Alex & Peter (48:36) 

Mm-hmm. 

  

Chandhrika Venkataraman (48:38) 

But on the other hand, this is still a different organization, right, from where they’ve worked before. It’s a new person, it’s a new ⁓ company. 

  

One of the key aspects of strategic sourcing is not just understanding the market as such, but also understanding how whatever factors you have in the market really translate to your own internal business requirements. So no matter what, this person has to understand what the business needs are, and that’s gonna take some time anyway. So there is a learning curve anyway. So to me, the argument that I would make, exactly. 

  

Alex & Peter (49:17) 

even if they’re a category expert, they still have to learn what’s going on in this particular business. 

  

Yeah, interesting. 

  

Chandhrika Venkataraman (49:22) 

Exactly. 

  

So to me, it’s like, yeah, sure. mean, there are are advantages, especially when you when you get into very tricky categories where you need to have some technical expertise. Sure. But I would always advocate for don’t don’t let that hinder your hiring process, because some categories, some some expertise is so specialized that you’re really limiting your own selection pool. 

  

Alex & Peter (49:49) 

Well, absolutely. And we’ve worked with a few different industries as well. We work a lot with cosmetics and pharma and also dietary supplements and food and beverage and paints and chemicals. And it is interesting. We’ve had some opportunities to take best practices and share them across. I’m curious, does any particular example come to mind from you, from your experience, where you were able to take 

  

something you learned in one category and they like have that be a new idea in another category. 

  

Chandhrika Venkataraman (50:21) 

Yeah, I would say one of my biggest aha moments was in taking over my experience from direct categories. So direct spend, which is materials that are directly going into your finished component. 

  

moving over into indirect spend management. One of my first moments was to notice that the indirect spend space is very subjective. So there are really no great supplier performance management measures in place because there’s so much variability. And so if you take a category like staffing services, for example, there’s so much variability based on the geography. 

  

so much variability based on the skill levels that you’re really staffing for that it’s kind of a hot mess if you are really trying to compare supplier performance. So how do you really compare that? I would say for me, as somebody who had migrated from direct procurement to indirect procurement, that always bothered me very much. I’m like, how do I? So you’re telling me that if I have a supplier in ⁓ 

  

Alex & Peter (51:23) 

Mm-hmm. 

  

Chandhrika Venkataraman (51:39) 

you know, in… 

  

Oregon and I have a supplier in California and if you know they are they’re both providing staffing services but then they are providing like you know different different grades they’re providing different you know skill levels I actually have no way to compare and say somebody is doing better than the other and that just bothered me so what I did is migrate or put in place ⁓ performance measurements right like measurements that would be applicable like so for instance American 

  

criteria that would be applicable no matter what you were doing is your… 

  

time to fill a role, for example. So why don’t you build that kind of ⁓ performance metrics? So I would say that was definitely an example where I totally borrowed it from my direct procurement experience and said, okay, I’m gonna build scorecards. I’m gonna build scorecards and I’m gonna roll out scorecards. It was so difficult because people were like, can’t measure us like that. The suppliers were like, you can’t measure us like that. 

  

Alex & Peter (52:31) 

Mm-hmm. 

  

Mm-hmm. 

  

Chandhrika Venkataraman (52:47) 

I’m like, no, I can’t. No, I can’t. We can do this. Yeah. 

  

Alex & Peter (52:48) 

Mm-hmm. 

  

It’s 

  

just so fascinating to me and it’s making me wonder, so for those of our customers and that is to say, of our listeners who are primarily in a direct procurement style industry, They’re manufacturers, they’re buying raw materials and so on. Should part of the procurement person’s scope of view be the indirect? 

  

procurement parts, the insurance, the building rental, the staffing, all of those elements, like, you know, because, you know, I just wonder if that’s often considered as part of that procurement job or not, you know, at a manufacturing facility. 

  

Chandhrika Venkataraman (53:36) 

Yeah, a good question. I’ve seen it done different ways. Sometimes it just sits with the facility team. Ideal, like what I would say, my ideal take is the procurement team has to be responsible no matter. 

  

Alex & Peter (53:42) 

Mm-hmm. 

  

you 

  

Chandhrika Venkataraman (53:54) 

how big or small your company is, they should be responsible for every dollar spent by the company, whether it’s direct, whether it’s indirect. ⁓ However, reality also dictates, again, as we talk about this one person doing materials planning, doing strategic sourcing, doing purchasing, now you’re going to make them do indirect as well. So that’s the flip side to that. But yeah, as a procurement professional practitioner, 

  

Alex & Peter (54:16) 

Right. Right. 

  

Chandhrika Venkataraman (54:22) 

I would say one person should, or not one person, but I would say one team has to manage all of that, any spend, any dollars that are going out of the company. It all has to flow through one body. 

  

Alex & Peter (54:37) 

Fantastic. Okay, we’re almost out of time and I have ten more questions. I’m sure you have ten more questions with Alex What is the what is the last question you’d like to ask? I have I have two that I’d like to flag is super important to ask you’ll it. Go ahead Yeah, okay. One is and and I know you know, you’ve spoken before about Procurements role 

  

I think you may have like procurement seven main jobs. Maybe you could just briefly tell us your procurement seven main jobs and what they are. 

  

Chandhrika Venkataraman (55:12) 

Yeah, so, you know, I will talk about. 

  

So procurement, the strategic sourcing part of it, right? Like cost management. So let’s call it cost management. And that includes the whole bucket of everything that we talked about, right? Then there is risk management, right? So that’s, again, I think we covered that in quite some detail as well. ⁓ I will talk about supplier performance management, right? So, you and you can call it supplier performance slash relationship management, right? Call it what you will, but ⁓ it’s a 

  

Alex & Peter (55:22) 

Mm-hmm. Yeah. 

  

Mm-hmm. 

  

Chandhrika Venkataraman (55:44) 

essentially 

  

managing all of your suppliers, ensuring that you’re getting what you should be getting from them. ⁓ 

  

Alex & Peter (55:50) 

Mm-hmm. 

  

Chandhrika Venkataraman (55:52) 

And then you have, if you want to split out negotiation into a separate bucket from cost management, typically it rolls up because negotiation is really one of the tools, but it’s a pretty important chunk, so let’s call it out, let’s call it out separately. ⁓ And then you have your ⁓ actual purchasing, right? So actually getting product in. ⁓ 

  

Alex & Peter (55:57) 

Mm-hmm. 

  

to end the work. 

  

Chandhrika Venkataraman (56:15) 

Yeah, the actual impact, right? The actual impact of all of this strategizing. Yeah, so I would say those five. 

  

Alex & Peter (56:24) 

That’s five. 

  

Okay, are great. ⁓ The other one and this is something you know that I’ve asked each each of our guests, you know, in their in their category. And it’s do you have, you know what you consider the best way to measure the performance of the procurement team? Or ⁓ if you’d like your favorite three KPIs, how would you say are the good ways to evaluate the performance of the team? 

  

Chandhrika Venkataraman (56:53) 

I would say if I had to just choose three KPIs, I would say cost savings, like number one. ⁓ 

  

supplier performance if there is like you know and again this is kind of like a slight cop-out because I’m rolling like I’m rolling multiple KPIs under supplier performance but you know maybe maybe you can say percentage of suppliers meeting and delivering your targets right and your targets could be on time on time and full it could be quality like you know or maybe it’s a it’s a full full host of all of those ⁓ so that’s that’s my that’s my second one and then I would say my my third 

  

Alex & Peter (57:11) 

Totally. Sure. 

  

Right. 

  

Chandhrika Venkataraman (57:32) 

would be probably your PO cycle time. So the average time from requisition to PO creation. now, again, varies the PO cycle time probably is a bigger concern, especially as your organization becomes much, much larger. Because maybe in your smaller organizations, the requisitioner and the issuer are probably one and the same, maybe, I don’t know. ⁓ But yeah, so I would say if I had to pick three KPIs, cost, 

  

Alex & Peter (57:39) 

Mm. 

  

Mm-hmm. 

  

That was very deftly 

  

Chandhrika Venkataraman (58:01) 

meanings. 

  

Alex & Peter (58:02) 

handled. Yeah. You really packed a lot of like I was very sneaky. Yes. Supplier performances was particularly great. Well done. That is excellent. So good. And I had a lot of fun today. I don’t know you. Absolutely. Yeah. We had a lot of fun. Yeah. Thank you so much for joining us. 

  

Chandhrika Venkataraman (58:18) 

I too. Yeah, 

  

I love talking about procurement. 

  

Alex & Peter (58:21) 

I 

  

do too now. That’s great. 

  

Chandhrika Venkataraman (58:24) 

And you guys asked some great questions. Fantastic questions. Love it. 

  

Alex & Peter (58:28) 

Wonderful. Okay. Thanks for joining us and we will see everybody next time. 

  

Chandhrika Venkataraman (58:34) 

Thank you.