From Cost-Cutting to Carbon Footprints: The Evolution of Procurement

Welcome to the Sustainable Supply Chain Podcast. I’m Tom Raftery, and this week, I spoke with Anders Lillevik, CEO and founder of Focal Point, a company specialising in procurement orchestration and management as a software service.

Anders discusses the evolving landscape of procurement, highlighting its shift from cost-saving to incorporating supplier risk management and sustainability. He explains the modern challenges where companies need to ensure suppliers are environmentally responsible, socially compliant, and financially stable.

Key takeaways include integrating sustainability into procurement strategy rather than treating it as a standalone project. Anders shares how Focal Point’s solutions help organisations manage complexity by setting up processes that ensure all necessary checks are in place before signing contracts.

We also explore balancing cost and sustainability, with Anders arguing that efficient operations reduce waste and pollution, benefiting the bottom line. He stresses the importance of using data for informed decisions about supplier selection and performance.

Anders shares an inspiring success story of a major hotel group in Las Vegas managing water usage, waste, single-use plastics, and carbon footprint with Focal Point’s solutions. This case illustrates how companies can lead in sustainability while achieving business goals.

Finally, we discuss the future of procurement, with trends emphasising procurement as a value-adding function focusing on collaboration, transparency, and strategic thinking. 

Check out the video version of this episode.

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Transcript

Anders Lillevik: 0:03

The more efficient companies are, the less pollution they will have and the less waste they will have. And that should also lead to bottom line impact as well. So I think just getting a hold of the numbers and figuring out if that theory is real is, is a good first step.

Tom Raftery: 0:21

Good morning, good afternoon, or good evening, wherever you are in the world. This is the Sustainable Supply Chain Podcast, the number one podcast focusing on sustainability and supply chains, and I'm your host, Tom Raftery. Hi everyone. And welcome to episode 18 of the sustainable supply chain podcast. My name is Tom Raftery, and I'm excited to be here with you today sharing the latest insights and trends in supply chain sustainability. Today, I'm talking to Anders from FocalPoint, and we'll be talking about all things, supplier management. And in upcoming episodes, I'll be talking to Nathan from Fictiv, Jarrod from iValua, Katie from Avetta and many more to come. Quick question for you all. What is the most effective step you or your organization I've taken, to become more sustainable? Click the, send me a message link. In the show notes to let me know. And I'll read out the most interesting strategies next week. Now back to today's show, joining me on the podcast today, I have Anders Anders. Welcome to the podcast. Would you like to introduce yourself?

Anders Lillevik: 1:32

hey, thanks a lot for having me, Tom. My name is Anders Lillevik. I am the CEO and founder of a company called Focal Point. And we do procurement orchestration and procurement management as a software as a service solution?

Tom Raftery: 1:44

Great, what does that mean?

Anders Lillevik: 1:48

Yeah, that's a good question. Right? So I think that's kind of flavor of the month, I think to some extent that everyone is sort of into the orchestration thing, but essentially what the company was set out to do was solve the complexity of modern procurement, right? So when I started in procurement 25 years ago, it was all about saving money. And, you know, basically take huge categories of spend, consolidate'em down, negotiate good deals, and you know, you're a champion. Later on, things started happening with suppliers. So we had supplier failures, you started getting regulation, and all of a sudden procurement needed to validate financial stability, assessment of their suppliers, do risk assessments and, and all these kinds of things. So it, it went from saving the company money to saving the company from bad actors, essentially. Right. Now, fast forward to 2024, it's, we also have to save the world. So it's about making sure that you are doing business with folks that don't pollute. Make sure that they are not hiring slaves literally, make sure that they're not using single use plastics and on and on and on. And the challenge with most procurement platforms is that it can't handle that level of complexity. And knowing that every box has been checked before signing a sit deck contract has become a management nightmare. So what we do is we basically set up processes for individual companies that can ensure that all the right things are getting done by the right people, at the right time. So that when you know, number one, you sign that contract, you have confidence, but you can also manage your teams. You can see what everyone's working on. You can track performance, you can do all sorts of great things because it, you have that visibility of what's going on in your organization.

Tom Raftery: 3:30

Okay, cool. That sounds really good. Why, as in, why, why, why did you go and set this up? What was your kind of light bulb moment that, you know, you woke up one morning and said, I know I should start this company You know? and do what we're doing.

Anders Lillevik: 3:48

Yeah, that's a great question. Right. So I've been in procurement, like I said, for, for a few years, right? And I bought and implemented a, you know, a lot of solutions out there. And I kind of just accepted the fact that we needed to work in Excel and email.'cause it was just like there were no solutions out there to do that kind of stuff. And it wasn't until I was consulting for a very large manufacturing company and I helped them select the source to pay suite. We spent four months going through the RFP process, a typical procurement stuff. Right. And I was having a cold beverage with the head of procurement as I was rolling off the project. He said, look, I'm so happy that you came. I can't wait to get this solution up and running. It's gonna be great. Everything's gonna be on system. And I said, well, maybe not so much. Well, he goes, what do you mean? I said, well, here are all the things you still need to manage, you know, manually, poorly, and in Excel. And he was none too pleased with that. He goes, how can this be? How I'm gonna spend all this money and still manage all my explicit word in Excel? I'm like, yeah. And that's, that's. That's, that's really truth. And that that's a penny drop moment for me. Like, you know, I'd been suffering through it for so many years and I, you know, this person's just about to start suffering through it as well. And there has to be a better way. And, you know, the rest of this say is history, right? My first real investor is my wife. So I went to her and said, I got this idea. And, you know, I'm gonna give up my lucrative career in procurement and, and, you know, make nothing for a number of years. And hopefully I'll make it, but I probably won't. But, you know, and you know, she said if you don't do it now, you never will go off and do it. So, you know, it's been great.

Tom Raftery: 5:31

And how long have you been in business and how's it going?

Anders Lillevik: 5:36

So we've been in business now for almost four years, so I incorporated in March of 2020. And you know, the interesting part is,

Tom Raftery: 5:45

An interesting time for incorporating a company.

Anders Lillevik: 5:47

Yeah, you know, the, the world was not shut down when I filed the paperwork, but by the time I got my incorporation letter, the world has shut down entirely. But you know, it was not a bad time actually.'cause you know, you kind of heads down doing the work you need to do and you know, development people like to sit in the basement anyway. So for them, they didn't really change much. But the good thing for us is that we didn't have to travel to sell. And we were able to get customers even before product was available. So, you know, once I started talking to people, it resonated with them to say, yeah, I have this problem too. And I got two letters of intent signed, you know, six months before the product was made available. And once they tried the product, they converted immediately. So that that was good. And you know what I will say about our customer base is that our customers are large and complex. The solutions that we are selling resonates with large organizations that have complex problems and a lot of legacy software that doesn't talk to each other. So we're, we have three real Fortune 500 customers, two that are Fortune 100, and then we have two international customers who would be in the Fortune 500 had they been in the United States. So we're, you know, we're running and gunning as we say. So we, we raised, we've raised a bunch of capital. We have 42 employees globally. So we're off to the races. The 2024 has been a really good year so far. We've closed several deals and we, I think right now we're implementing eight customers at the same time.

Tom Raftery: 7:21

Oh, phenomenal. Phenomenal. Congrats on that. I assume, obviously those customers who have legacy systems that you're referred to, 'cause all of your customers, if they are that size, will have many legacy systems often. So I assume you play nicely with them.

Anders Lillevik: 7:38

We do indeed. As a matter of fact, we lean very heavily into the acquisition of data and also kicking processes off upstream and downstream from our system. So, we will integrate with a supplier master data system, with the spend management solution, with their contract management repository, any risk supplier risk function they have, collect that data and, and basically consolidate it and, and use it as part of our processes so we can, for example, kick off a sourcing process over here by collecting requirements, making sure that you have the right team members, making sure that you have the right suppliers in, in the process and then shove that data wholesale into their sourcing tool. Let's say four suppliers goes in, one supplier comes back, and then we can keep on going down their process of right assessing risk, managing contracts and so on. So we, we are basically Switzerland as it comes to these things.'cause we want to make the systems you have work better. And quite honestly, some of these large legacy systems are very hard to take out and replace with something else. So playing nicely really comes, adds to our benefit.

Tom Raftery: 8:47

And how important is the data in making those decisions? I, I assume it's critical, but you know, what, what kind of data are we talking and where's it coming from?

Anders Lillevik: 9:00

So, you know, we, we kind of tend to look at data in a bunch of different lenses, right? So the from procurement perspective, like the holy grail is a categories map of, of, of information, right? So who are the suppliers in the category? How much money are we spending with them? What percent of them have contracts? How quickly are you paying them? Is that on you know, is that according to term? Is it not according to term? Is according to best practice? So for example, should you be paying your suppliers in 45 days instead of 30 days? I don't know. Right. Like, so it's, it's a matter of, of getting a hold of that information. That data typically sits a, either in an ERP or a source of pay solution or a plethora of point solutions, right? So you could have, for example, a best of breed solution for contract management to sourcing while, you know, doing a legacy ERP procure to pay process. We don't much care. For us, you know, we, we play nicely with all of the systems and we basically integrate through APIs mostly. Sometimes we have to do flat file integration and we kind of hold our nose and do it, but it's, it's, okay.

Tom Raftery: 10:04

Sure, and this is the Sustainable Supply Chain Podcast, as I mentioned at the start. So where does sustainability come into all this?

Anders Lillevik: 10:13

So there are a couple of things that we're doing with some interesting customers now, is they care about things like water and waste usage. They care a single use plastics and also carbon emissions, right? So what we are essentially doing for this customer is we are taking their spend data, using the spend method to create that carbon footprint initially, and then we can drill down deeper by saying, all right, so we think the spend method carbon emission is this, but now let's look at the actual usage and, and the contracts and get the supplier to, you know, refine that number and then they can use that, that baseline as they are going either to renegotiation or taking something to market or when they're managing that supplier. So the way that we kind of look at it, having that baseline is awesome. It's good for reporting purposes, but we also enable folks to manage that carbon footprint or their single use plastics, whatever the case may be in their supplier management initiatives, as well as their sourcing initiatives, so that every time you touch the supplier, this is an opportunity for you to manage that kind of sustainability metrics or whatever it is that you're tracking.

Tom Raftery: 11:26

Okay, so. Can you use, just putting it in simple terms for, for me, can you use it, for example, to select suppliers? Say I want to buy a hundred thousand widgets, I have a carbon budget of x and a plastic budget of Y. Can I now look across my suppliers and go. Of all these widget suppliers, which are the ones that can get me those widgets at a reasonable price and in my carbon and plastic budget.

Anders Lillevik: 12:00

That's exactly right. So what we're, what we're doing now is we are using the sourcing process to evaluate suppliers or products against all the things that we need to do. Like we talked about the complexity of procurement these days. So yeah, pricing is one thing, delivery is another thing. Where the thing is sourced is another thing. And then it comes down to, you know, diversity and inclusion and sustainability and also governance, right? So it's about having that ability to, to manage all the complexity of, of a sourcing process or a supplier management process right at, right at your fingertips without having to jump between systems and so on. That's exactly right Tom.

Tom Raftery: 12:38

Okay, and we, we didn't mention forced labor, obviously that's in there as well.

Anders Lillevik: 12:43

Of course. Yes, of course. Yeah. I mean, ESG is such of a fungible topic, right?'cause it means different things to different people. Yeah. But we we're developing and, and are in the process of, of having a full ESG suite, as we would call it.

Tom Raftery: 12:57

Okay. And obviously as well, supply chains are, as we know, complex and multi-tiered. How do you handle multiple tiers of suppliers?

Anders Lillevik: 13:12

So like you said, it is a complex problem, right? So at the end of the day, right, most of our customers are in indirect procurement, but for the most part, some are indirect. And what we do for the most part is we track which suppliers are critical to our suppliers. So we kind of drill one level down. And number one, we, we don't, we try to look for concentration risk to say, all right, you're getting, you know, you have three tier one suppliers, but they all use the same tier two suppliers. So you have some concentration risk that you don't even know about. Secondarily, what are, how are the suppliers managing their critical suppliers? That's kind of how we focus on our supplier management methodologies in terms of sustainability. And by and large, for indirect procurement organizations, that's probably more than they need or more than most are thinking about. But as we get into direct, it's a bit more complicated what we have to think about things like bill of lading, bill of materials, what goes into the widget and so on and so forth as well. So we're not quite there yet, but it is something that we aspire to do once once the indirect procurement organization and solution has been fully, fully baked, so to speak.

Tom Raftery: 14:21

Okay. And I, I didn't ask initially, and I, I, I should have, you know, are you specific to an industry or are you cross industry? And how are you on global reach? You know, are you in the Americas? Are you America and EMEA? Where, whereabouts are you reaching?

Anders Lillevik: 14:37

So we are industry agnostic. So we have financial services customers, insurance customers, we have pharma customers, we have hotel entertainment customers. So from an industry perspective like we are agnostic. Although I will say there's not much I could probably tell people about how these, how to source it direct materials because they do that pretty well already. But they probably have an indirect or indirect spend. Its fairly chunky as well, but it's certainly not industry specific. Right now, our largest concentration is in the United States, but we always have Asian customers and European customers, and a Canadian also. So it's yeah, so it, it's you know, we're a 4-year-old company essentially, right? We're a solution with three years in market. So we just haven't made a trip to Europe aggressively yet. And that and that's probably by design.

Tom Raftery: 15:28

Okay. Well, you know, we're over here. So when you do come over, gimme a shout.

Anders Lillevik: 15:35

Yeah, of course.

Tom Raftery: 15:36

What about, I mean. We've, we've referred obliquely to regulations and standards and how those are kind of a moving target. How can companies not just stay compliant with those, but also be, be leaders in the field?

Anders Lillevik: 15:55

You know, I think that's interesting, right? Because I think a lot of companies, certainly in this side of the Atlantic are waiting for regulation to come down before they react to it. Whereas I think our European counterparts are being much more, let's call it religiously aligned with the environment of sustainability. So I think what folks here typically tend to do is maybe look across the pond and look over there and see what's coming our way and try to react to it. Then you have some that full throatedly endorse sustainability and ESG and try to get ahead of the curve. The challenge that I think we have over here is we don't know to what metrics or standards we are going to be measured quite yet. And you know, it's, it costs a lot of money to do, to move these kind of things, but I think a lot of companies are just trying to do what the right thing is. And I think that's a, that goes a long way on meeting whatever standards are coming down the pike. Doing nothing is certainly not a sustainable point of view.

Tom Raftery: 17:27

Yeah. Sure, sure, sure. And looking ahead, what, what kind of trends do you foresee in sustainable procurement, and how should companies kind of embrace these?

Anders Lillevik: 17:38

Well, I think, I think companies tend to look at things on a project by project basis, and I think that's it's, you know, not a recipe for success. I think ESG and sustainability needs to be part of how we manage procurement every single solitary day. It needs to be managed on a program level 'cause it's the right thing to do. Rather than saying, okay, now we're gonna go out and execute a project to take X percent of carbon out, for example. Like, I think that's valuable, but it's not a repeatable process. So I think companies need to look at this at a much bigger frame than they are today. I see sometimes, again, certainly on this side of the Atlantic, that sustainability gets buried in with for example, the supplier diversity and inclusion program. Well, that's great to have a home, but it's probably not the most influential part of the organization. So it's about finding the champion for it and and staffing it adequately, and then tooling it adequately.

Tom Raftery: 18:36

Sure, sure, sure. Sure. What about things like balancing cost and sustainability?'cause cost often drives procurement, as you alluded to earlier. So how do you advise companies to balance cost with sustainability goals without compromising either?

Anders Lillevik: 18:55

Well, I think it, I think it's a misnomer, right? Because I think the more efficient companies are, the less pollution they will have and the less waste they will have. And that should also lead to bottom line impact as well. So I think just getting a hold of the numbers and figuring out if that theory is real is, is a good first step. And what we're finding is really that as folks get into it, they're not mutually exclusive and they're not always competing as well. Now if you talk about things like shipping from a closer port, yeah, that's gonna bring labor and cost, you know, closer to home, which may actually increase pricing. But you don't have to wait as long, you don't have to pay as much for shipping. So it becomes a balancing act, but knowing what's going on in your supply chain, knowing where the costs are, knowing where the pollution is, and so on and so forth, is valuable.'cause then you can actually make those decisions rather than guessing that it's gonna be a problem, if that makes sense.

Tom Raftery: 19:51

Yeah, yeah, no, absolutely. We're seeing increasingly global disruptions. I mean, Houthi rebels in the Red Sea, holdups in the Panama Canal due to drought, et cetera, et cetera. How should companies build resilience into their procurement to maintain sustainability standards, for example, in those times.

Anders Lillevik: 20:18

That's a, that's a known risk if you actually know it. And then figuring out what is the alternative path to get your stuff if the Panama Canal is closed. And as we all know that, that's a long journey around and, you know, either you accept that risk or you don't. But you at least you need to be aware of it in order to be able to manage it. And this is why we're seeing quite a few companies now are moving closer to, you know, their own ports so that there's less risk in shipping stuff around the world, and especially around pain points like the, the Panama Canal and and so on.

Tom Raftery: 20:53

I'm, I'm curious on that front, just maybe this is something you've seen, maybe you haven't, just kind of a left field question, but as we're talking about the Panama Canal, I gotta think. That's probably impacted US East coast ports. They're probably seeing an increase in business. I could imagine companies that might have been shipping from West Coast suddenly switching to East Coast to get stuff across the Atlantic. Would that be, would that be a fair comment or am I dreaming.

Anders Lillevik: 21:21

I, I don't know if, I don't know myself personally, but I think that makes a lot of sense. I mean, why, why not? Right? You know, we, we have some pretty good ports here on the East Coast, so I, I don't see, I, I, I think that's a good theory.

Tom Raftery: 21:32

Okay. We'll have to, we'll have to dig into that one. I know you are a, as you mentioned, 4-year-old company with a product in the market three years. Can you share any customer success stories particularly, particularly as it pertains to sustainability?

Anders Lillevik: 21:52

Yeah, Tom. So we're currently working with a, a very large hotel group headquartered in Las Vegas, Nevada. And they're building sustainability and ESG program around managing the water usage, waste, single use plastics, and carbon footprint. And number one, being able to, like I said earlier, calculate what is your carbon footprint in, in specific, categories. Now, their biggest producer of carbon, for example, is beef as it tends to be'cause they have a lot of restaurants as part of their, their chain. They're also sourcing sustainable eggs from from free range chickens. So they're following the standards of California, for example, where all the, all the eggs have to come from free range at some point in time, and they're getting ahead of that curve. So being part of that journey about setting up the program, setting up the metrics that they're using to track and then executing on the goals, you know, using our solution has been, it's been really nice to see, and it's something that has helped us progress our products significantly in terms of how they think about real problems and how they're managing the organization.

Tom Raftery: 22:58

Interesting. Just on that, I'm curious, maybe you have an insight into this, maybe you don't. Why are they doing it? Is it something that their customers have asked for? Is it something that their employees have asked for? Is it something that their shareholders are asked for? Their banks, their insurance companies? Are they just really, really nice people?

Anders Lillevik: 23:20

No, I think this is a, this is something that the, the board of this company has, has made a priority. They recognize the impact they're having on, on the environment and they're, they're going out there and getting ahead of the curve.' cause it's the right thing to do. And it's really inspirational to be working with folks like that because, because they want to do the thing because it's the right thing to do. They're actually able to attract good talent that feel passionate about these things together with business people that can make, you know, cost effective decisions at the same time. So for me. It's been a great, it's been great to be part of their journey.

Tom Raftery: 23:56

And what's their biggest challenge in doing that?'cause if they're kind of leading the space there, they've gotta be hitting barriers that others haven't come across yet.

Anders Lillevik: 24:07

Well, I think that it, it is about number one, figuring out what to prioritize first. So I think they're starting, I wouldn't say small, but they're starting what makes sense. They're starting in, in the protein beef category, for example, and they know that that's their biggest carbon footprint you know, producer. So that's where they're starting and they're, they're sort of dipping their toe in the water and seeing what they can learn from managing that particular category as it pertains to the metrics I just described. So it, it's been, it is been an interesting journey to see how they prioritize what they go after and how they go after it. And getting the results from that. So I think that's what they're doing. They're trying a bunch of stuff, seeing what works, and they're doubling down on what does and what doesn't work well. They retool and try again sort of thing.

Tom Raftery: 24:57

Okay. And how are their suppliers taking to this shift in direction?

Anders Lillevik: 25:02

You know, it's, it is an interesting thing because in addition to, you know, getting out there and, and trying to reduce and measure carbon footprint, they're also helping their suppliers understand what needs to go into the management of carbon. So they are making available consultants to help them, the suppliers, I mean, measure and manage their carbon footprint, single use plastics, and so on and so forth. So I feel that the suppliers know that this is coming across the board and having the resources and, and information available to actually improve their own business operations is, is, is welcome. Now obviously some organizations aren't progressive and they don't really care about it yet. But by and large I would say it's been very well received by the suppliers.

Tom Raftery: 25:54

Interesting. Fascinating. Okay, and where to next for you guys? You're four years old now. Where do you see yourselves in four years time? You know, what do you see coming down the line? What kind of directions are you gonna head? What are your goals?

Anders Lillevik: 26:09

So we're passionate about making sure that procurement and supply chain is an interesting place to work that adds value to the organization. So we're gonna continue to double down on making solutions and, and, and things available that is gonna deal with the complexity of procurement, add value, and really elevate the view of procurement in the organizations. Right? I, I've really enjoyed working in procurement. You get to see all the things that are moving in an organization, but for most, most people don't. Third party costs are typical the second largest expense of a company, second only to hr, sometimes more than HR costs. So, maximizing the value of the money that you spend is very, very important, and we are passionate about that. So stay tuned to this channel for more because there's a lot of exciting products and features and functionalities coming.

Tom Raftery: 27:05

Nice. Okay, cool. We're coming towards the end of the podcast now, Anders, is there any question I haven't asked that you wish I had or any aspect of this we haven't touched on that you think it's important for people to think about? I.

Anders Lillevik: 27:20

Well, I think from a procurement perspective and sustainability perspective, what I would say is, is, you know, results are important, but also is how procurement interacts with the business and, and suppliers. Right. And I think if procurement wouldn't exist without the business stakeholders or the suppliers, and it's important that that not necessarily what we do, but also how we do it. And that is, is making sure that we are being collaborative, we're being open and communicative. And really showing what we're doing and, and making sure that people understand the journey that we're on. So it doesn't become, you know, this black box of procurement that people know. Right? Because the more things we add to the box, the bigger it gets and the, the less likely it's that people understand what the, what the hell is going on.

Tom Raftery: 28:07

Sure, sure, sure. Sure. If people would like to know more Anders about yourself or any of the things we discussed in the podcast today, where would you have me direct them?

Anders Lillevik: 28:18

So you can go to our website, getfocalpoint.com, or you can look me up on LinkedIn. I'm sure the credentials will be in the podcast.

Tom Raftery: 28:25

Yeah, I'll put them in the show notes. Fantastic. Great. Anders, that's been really interesting. Thanks a million for coming on the podcast today.

Anders Lillevik: 28:31

Thank you, Tom. Nice to be here.

Tom Raftery: 28:34

Okay. Thank you all for tuning into this episode of the Sustainable Supply Chain Podcast with me, Tom Raftery. Each week, thousands of supply chain professionals listen to this show. If you or your organization want to connect with this dedicated audience, consider becoming a sponsor. You can opt for exclusive episode branding where you choose the guests or a personalized 30 second ad roll. It's a unique opportunity to reach industry experts and influencers. For more details, hit me up on Twitter or LinkedIn, or drop me an email to tomraftery at outlook. com. Together, let's shape the future of sustainable supply chains. Thanks. Catch you all next time.