Some suppliers have much more to offer than the right product at the right price.
A global leader in agricultural products, Cargill, explains how it can support
customers’ growth strategies – if the relationship is right.
Procurement departments find good reason to control relationships with suppliers. In
doing so, they try to manage risk, control costs and measure performance. But
procurement should also work with suppliers to look beyond these measures, towards greater business value, says Jenny Verner, commercial leader of Cargill’s centre of excellence for its
food ingredients and bioindustrial enterprise.
Suppliers don’t get much bigger than Cargill. With $109.7 billion in revenue, it would make the top 20 of the Fortune 500 if it were a public company. With size comes a depth of expertise in ingredients, processes and global food supply chains that its customers can leverage by adding some key functional interactions to the mix, Verner says.
“Among the things that can interfere with that is procurement being the gatekeeper to every contact. If it says, ‘Everything has to go through us’ and we cannot talk to marketing, supply chain or R&D teams about their plans, then it slows things down. We understand procurement is driven by different motives to R&D and marketing, but being too strong a gatekeeper can really inhibit the partnership. Our intent is never to exclude procurement but to enhance the relationship,” she says.
Verner says Cargill still expects its customers’ procurement teams to have oversight of the relationship, but she argues direct contact between functional experts on both sides of the partnership is vital to understanding and meeting its customers’ needs and objectives. “We know we get the contract through procurement and we want them to be successful. But if we understand the end-product marketing, supply chain or operational goals from an ingredients
perspective, we can focus our efforts more effectively for both the customer and Cargill.”

Help in navigaing complexiy 

Working on the relationship can also help customers navigate a company the size and complexity of Cargill, Verner says: “If the customer and Cargill are not well co-ordinated, then we can be complex to work with. The customer who buys multiple ingredients from us might experience different invoice systems, ordering systems and management to supply chains. By approaching the partnership in the way most effective for our customers, we can work to make it more efficient.”
Those buyers who want to become more coordinated with Cargill can gain an advantage, not just through working more efficiently, but also through leveraging Cargill’s broad capabilities, whether the customer need is for risk management, supply chain effectiveness or innovation and product development, she says. For example, if a customer is trying to develop a new product, and Cargill understands the marketing strategy, then it can advise not just on ingredients, but on how ingredients combine to achieve specific objectives in terms of taste, texture, value proposition and price. If buyers do not have this knowledge or the time to acquire it, working with Cargill can help them develop products more rapidly than if buyers simply specified a product and negotiated over price, she says.
Verner says Cargill can help clients with other objectives. It can help them take out costs, without affecting their margin, by suggesting ingredients in which it has greater economies of scale, or are better sourced locally or seasonally. If the buyer has problems with product shelf-life, Cargill can suggest ingredients to help betterwithstand heat, for example. Cargill can also
help businesses with their CSR objectives, through ethical sourcing programmes developed by its own procurement team
Cargill makes no secret of its self-interest in wanting a deeper relationship with the right customers. “We are very transparent. We are not a non-profit organisation; we are doing this so we can grow with our customers. Sometimes that involves a new product or a new geography. Sometimes we have an innovation we want to introduce, and we would like them to be a foundation customer. But when there is not the right fit with the customer, we don’t force it. The goal is to end up with two equally engaged and committed partners.”

Not all custmers will benefit from a deeper relationship 

Cargill takes care deciding who it will work with more strategically. It has to know
the customer has selected it as the right supplier to work with and is willing to invest in the relationship, she says. “It starts with genuine readiness by both companies to want to partner and needs to be based on a foundation of trust. When we first agree to work in partnership, the senior leaders may be ready and trusting but the operating people in both companies may be sceptical. So the initial customer scorecard metrics are often performance based – on time, spec, competitive price, for example.
“From our perspective as a supplier, we think about whether the customer is paying
on time; whether they are honouring their terms and performing on the contract. We
may measure whether they are needlessly rejecting and returning products and whether
they create demurrage when we send deliveries. At some point, the partnership evolves to a level where you have confidence that things that are supposed to happen, happen. Then we can start to focus on joint growth goals,” she says.
Verner says Cargill works with the customers to put some form of governance in place. They have to agree on objectives, measures and how they are tracked. They usually have a steering committee made up of leaders from both companies. “Both companies need to be honest about what works and does not work and work together to achieve joint success,” she says.
In procurement, there is increasing discussion about how to move beyond price towards greater business value. With the right relationship with suppliers like Cargill, there’s a way to find out.

Cargil procurement team helps sell CSR up the supply chain 

Interest in food provenance is growing among consumers. But for food manufacturers, especially smaller firms, providing accurate information about complex, global supply chains can be near impossible. Using its size and resources, Cargill realised this was a service it could provide.
Cargill’s Jenny Verner says: “Often customers need to meet government regulation or have specific goals around CSR. That’s something our procurement team has been able to help with.”
To this end, procurement helped develop the Cargill Cocoa Promise, which aims to help farming communities in Côte d’Ivoire, Cameroon, Indonesia, Ghana and Brazil. For customers, the initiative supports value chain transparency and makes it easier to measure the return on
investment in CSR.“Our customers have a certified sustainable supply source which they can communicate to consumers. Our procurement team has been part of that initiative from the start”, Verner says.