Joint Venture, Joint Value: Driving impact through procurement alliances

Joint Venture, Joint Value

Procurement alliances are becoming an increasingly viable tool to impact the bottom line

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Excerpts from Dr. Volker Pyrtek & Christian Rast:

In a scale business, size matters

Dr. Volker Pyrtek:  At Deutsche Telekom and Orange, former France Telecom, now Orange, have built a procurement joint venture, because they realize that we are in a scale business, and with a tremendous pressure on our margins, and with a tremendous effort, we have to put into the build of our networks, that we believe in the scale business, that size matters.Dr. Pyrtek addresses the complexities and risks inherent when bringing two shareholders together in a joint venture, as well as the intensifying importance of creating simplicities within the organization.

Procurement can be a challenger and a strategic weapon within the company

I think we have established the joint venture at the peak, at the high level of problems, so there was a strong desire of [PH] bull sharers to do something disruptive, and certainly this joint venture’s part of the transformation of both Deutsche Telekom and France Telecom Group, and in that regard, also the way we are working is becoming more strategic, so we are part of the transformation, and some of our stakeholders say Volker, you should drive transformation a little bit more, because as I say, we are not any more only part of the system, you are already now a little kind of challenger of the system, which is a very interesting role of procurement, so if, from a CFO perspective, from a certain perspective, it is very attractive to use procurement as a challenger in your own company, and that is, I think, right now the driving force behind most of my activities, is just to help Deutsche Telekom and France Telecom to transform, and in that regard, it’s certainly kind of strategic rapport.

To be successful, joint ventures must focus on driving simplicity

Complexity is certainly something you have to pay a lot of attention to, because if you have two shareholders, you easily combine the complexity of two shareholders if you don’t do it right, so there’s an underlying risk that shareholders just want to kind of inherit, to a certain degree, the complexity of your shareholders, and my shareholders are large operators with many, many, many affiliates, so we’re just inheriting the complexity of them, I would multiply the complexity.  So you have to find your own way and create simplicity, and by doing this, helping also shareholders to create a little bit more simplicity in their world, but that is a challenge, not easy.  So complexity, you should not underestimate, or raise the complexity which is inherent by the shareholders, although we are a small company with 20 nationalities, but only 250 employees, so our lives should be easy and simple, it’s not, unfortunately.

Joint ventures are not simple to achieve, but can have a strategic impact

I would immediately do it again.  I would immediately create the joint venture again.  The joint venture turned out to be more successful than we expected in some areas.  It turned out to be more complex than we expected in some other areas.  Honestly, I don’t know how we could have avoided the complexity.  We underestimated just the time which is required to, two different cultures, to different organizations, glued together to something better, that it takes some time, so besides the fact that we underestimated the timing, I think the procurement joint venture is running pretty successfully, so we get a lot of attention in the marketplace.  We have applicants of companies who would like to join us, so I think we are on a good track, and I would, I think it’s the right move, and it turned out to be the right strategic move for both companies.

Procurement alliances are becoming an essential part of procurement strategy across industries

Christian Rast:  We see that not only in the telecommunication industry, we do see that also in FMCG, so if you look and see an example of AB InBev and British American Tobacco, they also have established one procurement joint venture, Agrega is the name of that, and we know, out of our current projects that procurement alliance is an essential part of all procurement strategy projects, which are running all over the globe.

About Detlef Schultz, Vodafone

Detlef joined Vodafone in March 2003 to lead the Global Supply Chain team. His responsibilities include strategic and operational leadership of Vodafone’s Supply Chain Management across the globe in the areas of Technology and commercial Services. Detlef also leads the Luxembourg-based Vodafone Procurement Company, which is the strategic purchasing centre for the Group and now serves third parties.

Prior to Vodafone, Detlef spent more than 6 years in California with the world’s largest semi-conductor equipment manufacturer, Applied Materials where he held various Supply Chain, Planning and Operations Management responsibilities. Before moving to the US, Detlef was a Member of the Board of Management for Babcock-BSH AG in Germany where he led the area of Supply Chain Management and financial controlling. Detlef also worked for Siemens for ten years, more latterly as Purchasing Director based in Bocholt and Kamp-Lintfort, Germany.

He started his Supply Chain career with Siemens in 1985 in the area of Materials Management in Germany, Korea and Singapore.

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