Volvo Cars: a new approach to strategic partnerships
Starting his career in the procurement industry in the early 90s, Michael Perkins has roughly 30 years experience in the sector. Currently, Perkins is a Director at Volvo Cars in charge of the EMEA region, as well as setting the structure globally for the company’s digital and IT services, marketing and sales, and professional services in procurement. “In 2016, following a 26 year career in procurement I was looking for new opportunities. Whilst looking, I was contacted by a recruiter on behalf of Volvo Cars, who were looking to establish the company in South Carolina. I’d never worked in the automotive industry and saw this as an incredible opportunity - the thought of bringing a Swedish automaker owned by a Chinese holding company to the US intrigued me,” says Perkins.
“Volvo Cars is an amazing company,” comments Perkins. “We are a very progressive automotive manufacturer; we are agile, creative and extremely people-driven. We also have the ability to adjust our paths faster than other premium automotive manufacturers due to our size, however we are still big enough that people are taking notice of what we are doing and wanting to be a part of it. Ultimately at Volvo Cars we strive to provide people with the tools to move in a sustainable and responsible way.” Further discussing sustainability, Perkins emphasises that this is something which to this day is at the core of Volvo Cars’ operations dating back to its founders. In order to drive sustainability within its operations, Volvo Cars has set what Perkins believes to be one of the most ambitious climate plans in the automotive industry. “We aim to reduce our CO2 emissions by 25% per car by 2025, with a long-term goal of becoming climate neutral by 2040 across the full value chain.”
When it comes to sourcing and procurement trends within the automotive industry, Perkins has seen the expectation of greater margins emerging as a challenge. “With this in mind it is critical for us to create strong partnerships with our suppliers, when we work together it’s not just about cutting costs, it’s also about improving our cross collaboration between internal stakeholders and procurement,” comments Perkins. “It all starts with collaboration. For our sourcing and procurement strategy we need to establish trust between each other and determine what is needed, in order to ensure we source the right partners to fulfil the requirements. We also have to be comfortable with the realisation that we don’t know everything, and look to our suppliers to help improve cost optimisation and operational efficiency.”
When searching for a strategic partner, Volvo Cars looks for companies that not only have a proven track record within the industry, but companies that also align with Volvo Cars’ beliefs and values. “I think when we are looking for strategic partners - firstly they’re critical to our success - but let me be clear what I am talking about is strategic, not favoured, sometimes this can get blurred. I am talking about someone that has our interest in mind, but they will also challenge us and the status quo. We work jointly with our partners not only in the successes but in the failures too,” comments Perkins. When it comes to Volvo Cars’ approach to partnerships, Perkins describes it as holistic, “similar to what I have previously discussed, when we look to source our suppliers we have a common target, something which we are looking to achieve. Taking a holistic approach creates a group of suppliers that we can rely on and innovate with in the hopes to deliver ‘best-in-class’ plans, processes and products.”
With this approach in mind, Volvo Cars established a cross functional team. “I would say this was the first time in the organisation where we approached mega sourcing in the proper way by establishing a cross functional team of decision-makers, project leaders and subject matter experts. This allows us to be flexible and adjustable to meet desired results,” comments Perkins. Reflecting on this new approach, Perkins has seen Volvo Cars’ landscape supplier landscape change. “When we started this project we had hundreds and hundreds of suppliers covering our 11 areas that we were dependent on, creating dependency issues, lack of efficiencies, governance and supplier management tools. With this change of approach we were able to reduce the majority of our supplier base to four main suppliers, which are helping us to remove dependency, improve efficiency, and implement governance and performance management tools. This was a huge transformation for us.”
Volvo Cars’ four strategic partners include Capgemini, HCL, Cognizant and Infosys. “As a whole, any one of them could have taken on the entire transformation project. However, like I previously mentioned, we believe that taking a holistic approach and collaborating with our partners will drive ‘best-in-class’ outcomes if we utilise each of them to their strengths. Capgemini was selected for our manufacturing, logistics, finance, hosting, HR, facility, legal and security, while HCL is our partner for product creation, research development, IP assets, end user and collaboration environments, Cognizant is our partner for data management, analytics, monetisation and automation, and finally Infosys to support the delivery and transformation in our commercial operations.”
In addition to transforming its strategic partnership strategy, Volvo Cars has been digitally transforming its business functions and operations to become more agile. “Currently within the automotive industry, I would say there is a huge focus on electrification, autonomous driving, customer relationships and vehicle communication. With these fast growing trends it is crucial for us to develop strategic partners with the expertise to develop and utilise innovative technologies such as artificial intelligence, machine learning, big data and analytics in order to stay ahead of these evolving trends.”
Reflecting on the company, Perkins has seen Volvo Cars since 2018 evolve from manufacturing cars in Europe and China, into an auto manufacturer with systems and governance in global positions. Perkins believes that Volvo Cars’ biggest strengths are its line-up of vehicles which have been completely redesigned to remain competitive and lead the premium car market, as well as its commitments to sustainability with its electrification lineup and its leadership team that isn’t afraid to cause a disruption in the industry. “I would also say our biggest success is our strong presence within the industry maintaining our ability to sell over 700,00 cars in 2019 in a declining market, which I think is pretty incredible,” concludes Perkins.