Linking Europe and Asia, Istanbul is in a prime position for supply chains ©Anadolu Agency/Getty Images
Linking Europe and Asia, Istanbul is in a prime position for supply chains ©Anadolu Agency/Getty Images

Turkey: the CPOs creating stability in an unstable world

7 February 2020

Turkey benefits from a pivotal position for trade, but surrounded by geopolitical risk and an unresolved economic slump, businesses are leveraging procurement to gain an edge

Straddling the Bosphorus Strait, Istanbul’s 15 July Martyrs Bridge is a key link between the continents of Europe with Asia: an emblem of  the city’s global position. Istanbul is central to trade routes, a prime location for supply chains – and manufacturing forms an important part of Turkey’s economy. But over the past few years, following a failed coup in 2016, business has suffered. The government aimed to limit the damage, cutting interest rates and offering credit packages, but Turkey’s credit rating still fell, the currency devalued, and inflation – along with business costs – rose steadily. Growth slowed and the country slipped into recession. 

“The coup attempt coincided with weakening business cycles around the world and central banks draining liquidity from the markets,” says Gokhan Sen of Bloomberg. “Turkish relations weakened abroad, including with the US, and the government lost its appetite for doing business with foreign governments.” Turkish businesses were reluctant to invest and create jobs, he adds. The only boost was that exports rose, curing the currency crisis.

By late 2019, there were signs of recovery, and a country daring to think about repairing its economy. “But we are still seeing the scars on the bodies – the high inflation, high costs for businesses, and the lack of credibility and trust in investment,” Sen says.

Sen believes Turkey’s economic structure will eventually return renewed, with the private sector fuelling growth instead of the government, and looking to Europe and the US to attract capital. Assets in Turkey are cheap, the crippling inflation of 25% has fallen to below 15%, and there is foreign investment – albeit only a tenth of the capital inflow seen in 2012, he estimates. The currency boost is giving some hope to Turkish consumers, who had previously seen the price of an imported iPhone or Mercedes rise out of their reach, and there is hope that in future the government will help boost spending in the country through tax reforms.  

Turkey is already home to a broad range of manufacturing activities, from automotive and telecoms to white goods, financial and pharmaceuticals. Big textile and retail brands based in Europe and the US, such as Zara, H&M, Tommy Hilfiger, Calvin Klein and M&S, have recently moved some production from China to Turkey, says Faruk Demir, CIPS Turkey country manager. “There are signs businesses are coming back to Turkey because the distance is shorter. That adds value – and helps with sustainability.”

And now Turkish businesses are showing a real desire to develop procurement processes, turning their focus to increasing profitability through better buying, as well as better selling. Companies are investing in their procurement people, says Demir. “They are looking at category management, supplier relationship management, negotiation skills, finance for purchasers and risk management.”

Monitoring supply chains is another focus, with businesses recognising the need to track for sustainability as well as for human rights. More and more companies are seeking to introduce precautionary measures, says Demir. With an estimated four million Syrian refugees living in Turkey – about 5% of the overall population – it’s an issue that needs to be dealt with urgently, he explains.

SM spoke to five senior procurement professionals in Turkey who are supporting and driving progress in their business. 

Asuman Büyükyildirim, Bosch
German-headquartered Bosch has seven Turkish factories, producing everything from washing machines and auto drivetrains to industrial boilers and thermal technology. Productivity has dropped during the recession, particularly auto and building technologies for construction, but Asuman Büyükyildirim, vice president, finance and administration, for Bosch in Turkey and the Middle East remains upbeat. “Crisis creates an opportunity for change,” she says. “It is not the first time we’ve had a crisis, so Turkey is quite experienced in how to deal with one,” she adds.

Büyükyildirim is responsible for indirect purchasing in Turkey, with an annual spend of around €225m, and a team of 28.5 working in Turkey plus 3.5 serving from overseas. The largest category is maintenance operations and repair – almost €100m – followed by logistics services – around €40m – covering transportation, warehousing, sea and air freight. The direct purchasing teams are centralised in Stuttgart, but for the Turkish market “the people are Turkish, so they know the market, culture and supplier base. But they are creating synergies for different locations”.

Working across categories is a recent transformation, allowing processes to be standardised, she says, adding that half the spend is already managed by e-catalogue, and this will increase. That frees procurement to focus on strategic tasks, share their expertise on big value items, while buyers who know the market and follow the technologies can give advice to internal business partners.

Despite losing a few smaller businesses, the supplier base has remained stable and Büyükyildirim is continuing with her project to optimise the quantity of indirect suppliers, having so far reduced them from 50,000 to 30,000. “Bosch has a very rigorous supplier-selection process and risk management. It’s not an easy process, but it usually results in a long-term relationship.” Bosch checks a supplier’s financial stability, its customer base, its domestic and export share. It has strict rules limiting its activities to no more than 50% of a supplier’s turnover, and no more than a 30% share in any Bosch business sector. For the smaller suppliers and innovations, Bosch procurement adopts ‘consolidators’ to purchase one-off items outside the core business.

Büyükyildirim’s background is mechanical engineering, which she credits for her ability to analyse and understand problems. Involvement in mergers and process changes have aided her understanding of the business, “from accounting to purchasing to logistics into production, sales, activities, quality”. It has also helped her grasp the needs of personnel and ensuring business continuity. One particular business integration involved a very small production plant, in a small village, with three generations working in the factory. “To move them 70 kilometres away was emotional, and I had to manage people’s emotions and fears,” she says. But having moved her own family to Germany and back again for work, she could empathise with them. “I listened and tried to reduce their fears. In the end we only lost 10 people.”

In Istanbul, Büyükyildirim is among peers who are successful female business leaders, but she says: “If you go to Turkey’s east side, you have a different picture. Many women are not in a good position, they don’t have the same rights, even within the family.” Istanbul is competitive regardless of gender, she adds, because so many people move there for opportunities. Her advice to anyone keen to progress is to hone soft skills, communication and stakeholder management. “Find a common ground. Collaborate and cooperate – nobody works alone.” 

In Turkey, Büyükyildirim says Bosch is looking towards Industry 4.0 in its own factories – it already has robots picking products to deliver to the production line in its diesel injection engines factory – and is working with the government and NGOs to create awareness across the country. “If our customers and suppliers are not ready for the future, then we’ll lose our own competitiveness. Bosch and other multinationals are investing in Turkey because it has young and motivated people, a growing market and a very good supplier base.”

Alper Molla, Tekfen Construction
Chelsea Football Club’s Europa League win last year was played out in a stadium built by Tekfen Construction. The Baku Stadium in Azerbaijan is part of a long list of major construction projects built by the Turkish firm, which includes the Crystal Hall where Azerbaijan hosted the Eurovision Song Contest in 2012, and the Ataturk Stadium in Istanbul, where Liverpool beat Milan in the 2005 UEFA Champions League Final. Tekfen also builds and maintains roads and major oil and gas pipelines, including large portions of BP’s 1,768km-long Baku-Tbilisi-Ceyhan Pipeline that delivers oil from Azerbaijan through Georgia, to the west coast of Turkey.

Procurement coordinator Alper Molla joined the company in Qatar as an electronics engineering graduate, and was offered the role of procurement engineer thanks to good English language and other useful skills, he believes. “I was negotiating million-dollar packages in my 20s. I saw there was a big playground, where you can take lots of responsibilities and initiatives, so procurement became my choice,” he says. He spent time in various procurement roles in the Middle East, receiving procurement training in Azerbaijan through CIPS, and when he returned to Turkey he was keen to bring good working practices with him.

Tekfen Construction is part of a much larger conglomerate – Tekfen, which is listed on the Turkish Borsa stock exchange – delivering infrastructure such as roads, refineries, petrochemical plants, real estate, pipelines and electrical works. Over 80% of its work is overseas, serving major clients in the oil and gas sector such as Saudi Aramco in Saudi Arabia and SOCAR in Azerbaijan, mainly offering engineering, procurement and construction (EPC). His team has been involved in projects from an oil and gas processing facility operating at minus 40 degrees in Kazhakstan, to one in Saudi Arabia at plus 40 degrees. Tekfen hires a local workforce, but most of the senior people are Turkish, says Molla, living as expats for six months at a time or longer – a challenging career choice that’s not for everyone – but Molla says his team have embraced it. “Turkish people are fighters and adaptors,” he says.  

The global economic slowdown means that for Tekfen, the project portfolio is getting thinner and competition tougher. Molla is all too aware of geopolitical concerns – with neighbours such as Syria, Iraq and Iran – and trade and tariff wars between the US and China. But he is optimistic about improvement in the EPC sector globally, and is looking to the Americas and Africa for new projects. But with energy prices driving the EPC market and profits falling, good procurement is vital, he says.

Molla has more than $250m (€225m) annual procurement spend across the procurement team in Istanbul, and individual project teams. “Maybe 40-60% is distributed between headquarters and the project, depending on the project specification, location and market.” His team purchases everything from piping, steel structures for building factories, electrical cables, earth moving machinery – which they often have to ship around the world to different projects.

Molla is working through a procurement structure transformation from tactical execution to strategic sourcing, and as a result, for the past two years the team has been involved at the planning stage of each project. He has introduced a material code tree to itemise and code all products – around 200,000 are already coded in the system – and upgraded the ERP system with a performance dashboard to check progress and performance of project and personnel. E-sourcing and e-auctions are planned, along with a new supply chain management system to provide greater transparency – and meet the growing requests from clients to track sustainability.

Mehmet Apak, Zer
Koç is one of the most well-known companies in Turkey, and the country’s largest industrial and services group, working across most sectors, including energy, automotive, consumer durables (Arçelik and Beko household appliances), finance, as well as food, tourism, marinas and IT. It has joint ventures in Turkey with companies such as Ford, Fiat, LG Electronics, Avis and Kingfisher, and is a major exporter from the country. And despite being a Fortune 500 company worth TRY143.2 billion (€21.8bn), Koç is still very much a family-run operation, says Mehmet Apak (pictured below), who moved from Koç a year ago to run its shared service procurement company, Zer, with a remit to expand the business, grow international activities from 3% to 10%, and to expand its non-Koç Holding work from 20% to 50%. 

Zer offers indirect services, such as business process outsourcing, IT solutions and media services. As Koç Group automotive and durable goods manufacturing volumes decreased across Turkey in 2019, exports increased, balancing the books a bit, says Apak. Now Zer will look at establishing smaller structures outside Turkey, starting in Romania, following in the footsteps of the Beko and Arçelik factories. 

Business procurement outsourcing is not prevalent in Turkey, says Apak, but Zer hopes to change that, and to provide its services to European partners too. “I know our sourcing in Turkey is much cheaper than in some places in Europe,” he adds.

And trading at scale is a Zer speciality. One example is  its ‘business Uber’ service, the Call-Car, available to any new customer. “There are around 3,000 minibuses running around Turkey, between Istanbul, Ankara and factories for Koç businesses,” explains Alp Ressamoğlu, assistant general manager, supply chain management and procurement. “We put devices into the vehicles and collect data on speed, routes, who is travelling, and optimise routes and procurement needs for our factories.” 

Users book journeys using apps on their phones. The Call-Car can cut costs by 20%  – the benefit of scale. “In all categories, economies of scale is the point,” adds Apak.

 Technology is key to the growth plan. “Our IT guys are looking at shortening RPA processes, replying more frequently to customers and suppliers, and reducing errors.” Zer has its own electronic-sourcing software programme, Promena, with an e-auction system, which can be offered to non-Koç companies through simply sharing the platform, or as part of a service. 

Apak believes in education. “We trained 70 people through CIPS in procurement, and 24 of them went out of Koç Group. Wherever they go they were raised in Zer, so it’s an advertisement for attracting staff,” he says. “And we have mentor-mentee programmes. I get some of my most important feedback from my mentees – the Y generation.” 

Tuğrul Günal, Siemens
As procurement director, Tuğrul Günal manages a purchasing spend of approximately €320m on behalf of Siemens in Turkey, focusing on key categories of general electrical installation, logistics, fleet leasing and transformers. The German-headquartered engineering firm runs some global category spends from Munich and London, but Günal purchases many commodities locally. And he recognises the importance of the procurement function in the company’s reputation. 

Power cables is a category where his team provides full knowledge of the players in Turkey, their finances and company culture, he says. “If you purchase power cables for a big energy-management project, and the cables aren’t good enough to support the energy system, you’ll have failures, breakdowns. So we have to be very careful which companies we purchase from.”

When Günal, who has a background in HR, moved into procurement and found limited localised training opportunities, he welcomed the launch of CIPS training in Turkey. He also set up a national supply chain management association, Tedar, for Turkey. “Whatever we do, we do with people. They’re our biggest asset,” he says. He put the eight staff members through a 360-degree evaluation, looking at processes, guidelines, applications and more. He introduced an annual supplier day, inviting in the main suppliers and all employees working in supply chain management, including top management and regional management. 

He also defined national strategies for performance, sustainability, ethics and value-add throughout the supply chain. Günal is confident that the company knows its market, its sector and players. The annual reports from each category manager provide the information to ensure that Siemens can manage the suppliers and knows which ones to invite to tender.  

Günal’s procurement function now controls a high proportion of spend – more than 90% – achieved largely because any maverick spend above the low €200 threshold is immediately escalated to company management. “We established this process in the regional company, because you have to know about the purchase, from which company we purchase and why we purchase, since it impacts the whole company.”

Keen to futureproof the procurement function, Günal is underpinning the many digitisation activities on the horizon for Siemens. One is electronic supplier integration, a project based in Turkey. He has already introduced proprietary robot software programme Bilgin – cutting repetitive logistic order time from 1,750 hours to 25 – and reducing manual errors. “I have to get my people to live it. I have to be ready first, as well, and my management is in charge of that. It is the Bible or the Quran of all the digitisation activities. If you work at the C-level you have to invoke each and every employee, to assess their expertise and experience, and take care that they participate in training. Or how can they support all digitisation activities? Each one has to be ready.”

Ersan Meric, SunExpress
Ersan Meric, CPO of SunExpress, a division of Turkish Airlines, sees value in developing his team’s skills to a global standard in areas such as negotiation, contract management, financial analysis and strategic thinking. Procurement is not a well-developed practice in Turkish business, he says. “Anybody who has come out of university believes that he or she can do procurement activity – but that’s just not true,” he says. 

Too often businesses take care of their own interest rather than the suppliers’, and the procurement function comes in too late, and is merely reactive, he says. “The shift towards adding value, being part of the business, understanding the real needs and being prepared for any potential requirements is not there – only a few companies are doing good.”

Under Meric, SunExpress is undergoing a procurement transformation. He is responsible for €600 million of spend, which will increase by another €200m once the transformation programme is complete, and aircraft leasing falls under his remit. 

In his first year with the airline, a joint venture between Turkish Airlines and Lufthansa, he has built the procurement function from scratch. While major items, such as fuel for the aircraft, were being outsourced via Lufthansa, along with ground services and maintenance, purchase of smaller items was not managed well, he explains. There was a lack of skilled staff and an old-fashioned, conventional method of procurement. “Most of the business was conducting its own procurement activities, with very little recorded on the system,” he says.

The Turkish economy has been volatile since Meric joined SunExpress, but the company operates in Euros and US dollars. “We sell our tickets in Euros, our supply base is largely in Euros, or US dollars, and fuel is in US dollars. Cash flow isn’t a problem because we collect the tickets in advance, which is good for our suppliers. We pay on time.” But he’s been checking his domestic suppliers, such as IT support and uniform suppliers, in case they struggle due to late payment from other clients, and has widened his supply base. Meric has paid particular attention to the 500 key local suppliers, “because interest rates go up and some of their other customers don’t pay on time, so they have pressures”.

Meric’s next focus is to explain to internal stakeholders how procurement can help. “When other business units approach the supply market, they can be easily convinced without understanding the cost drivers and total cost of ownership. They go ahead and give all the early buying signals and indications – this is what we need to avoid. Now we have our own category managers who are really knowledgeable and we do negotiations for the first time.” But it’s not all about cost, he says, because negotiating down prices simply means the supplier builds in a cost to later remove. “It becomes a kind of theatre between you and the supplier.” 

Meric reports into the CEO, a former procurement professional, who wanted a proactive procurement style with strategic goals. “He invites me to executive meetings, appreciates the value we’re bringing and supports us.” But Meric has struggled to build an experienced team around him, despite being based in the sunny south of Turkey in Antalya – he is talking from a café terrace under blue skies, with palm trees and sandy pavements in the background. He wants experienced procurement professionals “who know the difference between strategic sourcing and operational procurement, with some kind of category know-how”, and is keen to encourage qualified professionals who may want some international experience to consider joining the team. Turkish language skills are not necessary, stresses Meric, it’s the procurement expertise he’s seeking. 

Earlier this year CIPS published its Global Standard document, translated into Turkish

This year’s CIPS Turkey conference takes place in Istanbul on 7 April 2020.

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