High voltage takes center stage in this brand new season of Hitachi Energy's Power Pulse podcast. We promise to bring you great content from the brightest minds in the business. We'll discuss challenges, opportunities, and all the hot topics any high voltage enthusiast or anyone interested in sustainability for that matter, is sure to enjoy. This episode of the podcast focuses on the role of supply chain management in high voltage products.
To tell you about it, we invited Salvatore Alimentato, who is the global head of supply chain management for the High Voltage Business Unit at Hitachi Energy. He holds a degree in electrical engineering from Faculdade de Engenharia Industrial in Brazil and an MBA from Fundação Getulio Vargas, also in Brazil. Salvatore will tell you that supply management does not refer specifically to special procurement activities, or is about buying goods or services at the lowest cost.
Supply management is all about strategies that can enhance a company's competitiveness, support the sustainability goals, and ensure resilience in the face of global disruptions. Welcome to this episode of Power Pulse podcast. Thank you for coming in, Salvatore. It's great to have you here today. Thank you very much. I've looked into your professional background. It’s quite interesting. So you've been working in supply management for quite a while, about 20 years.
But you come from the automotive industry before you joined Hitachi Energy and you started your career flipping burgers. Is that right? Yeah. Go on, tell us about it. That's funny because 30 years ago. Okay. Then I started McDonalds. Okay. When I was a teenager. Was it fun? It was really, really fun because in that time, I was in Brazil. I was born in Brazil. And, you know, it was like a new opened restaurant in Brazil that McDonald's just come to my town. I say, oh, it's nice.
Then I see the opportunity to work there. Then it was so fun. But then, I say that this takes me like four years in my life. Wow. it's a kind of, you know, my first university because I worked there from 15 to 19 before I start my real university. As you mentioned in the engineer background that I have. If we can move on to your professional career within Hitachi Energy. So you work in supply management and supply chain affects all of us every day.
So it goes from the food that we eat, the clothes that we wear, the latest phones, gadgets. You have to get your materials from somewhere. So you have to look into supply where you're getting this from. It's not just something that businesses are concerned about. It's something that impacts everyone. From your perspective, if someone asks you what is supply chain? What's supply management, how do you explain this to them? How would you explain your job?
It's difficult because also my wife, sometimes she said, oh, I cannot explain what you are doing. But let's go, let's go. Let’s hope she'll tune into this episode? Yeah. She's going to listen. Let's say that we orchestrate the network complex in the company because we are responsible for the sourcing of the raw material, bring the material for the factory and the factories has to manufacture this. After that, we are responsible to deliver to the customers.
So in the end of the day, we are responsible for this end -to -end process. In Hitachi Energy, we name supply chain, in the other companies we name as a procurement. And procurement is not only to buy the sourcing at the lowest price. We need to take care about sustainability, the quality of the products, and also to be in the lead time of the product as well to deliver to the company. So we need to take care about a lot of aspects on this one.
I have another example that I think my wife is going to– Go on then. Yes, they are going to get this. I can say that the first supply manager that I met, it was my mum. Oh wow. yeah. Go on. Why? Because, you know, I'm Brazilian, but I come with some kind of Italian family. Okay. My mother is Brazilian, my father is Italian. But, you know, there is this kind of Sunday lunch. Right. Then she needs to prepare the lunch for the big family. Yeah. So she needs to prepare.
She needs to say, oh who is going to coming, when you transfer this to the business, this is the demand. Okay Business demand. Yeah. Right. Then she said, okay, I'm going to cook a lasagna. Okay. This is a requirement. Then she said, okay, the dinner or the lunch is going to be Sunday or next Sunday. This is a kind of planning. She needs to know about when is going to be planning. Yeah. Then she said, okay. She knows how many people, she knows when and what we're going to cook.
Now let's go to procurement. Let's go to sourcing. She goes in the market but she cannot find the food. Go another one, cannot find. Oh, maybe she wants a special meat. Right. That's the single source in another market. Right. So these are kind of complex. That's the sourcing. Then she goes to the cooking is manufacturing. Then go and deliver to the customers, that is the family that's going to eat.
This is more or less what we can talk about, supply chain procurement in this kind of complex world. Brilliant. That's a brilliant example. Thanks for sharing. So those are the factors you take into account when you consider your supply chain strategy. So, you know, delays, people safety, sustainability I guess. How does a plan come together Exactly, I think people come first.
We can say that because, you know, we don't have like a machinists, we don't have softwares, etc. People is the key of the supply chain because they are the decision makers. When you make the strategy, people need to deliver the strategy and the strategy comes from the top management. Let's say in the high voltage business, we understand what are the high voltage business’ strategy come from.
With that information, then we go to the market, understand the market situation, geopolitical disasters, etc. that we have the Covid. So there is a lot of influence. Apart from that, also, we listen the suppliers. Right. With that in place, we try to set up the strategy; what should be the strategy for diverse pillars that we have? As I mentioned, sustainability is one pillar. Another one is a quality. Right. Another one is a technology - digitalization. There is a lot of to do in this area.
Another one is transportation. We have also innovation. So in each of these box we need to deliver some kind of strategy. Then makes this a little bit complex to put everything together Right., and you've got different regions with different compliance regulations. So I guess your strategy has to be quite flexible and quite adaptive to all of these and very in tune with what's happening in each region. Exactly. Because, no, we are not a single company or a single factory.
We have like multiple factories all over the world, in the globe. So we have for North America to China, to India. So we need to lead this because we move the material from one side to another one. The same suppliers that is based on China, they deliver to Europe, to North America, South America and vice versa as well. So we need to optimize this and we need to be complying with the regulations. Right. And you mentioned people, number one priority, the decision makers.
So supplier relationships, you must be a pro at stakeholder management. Right. Your team must be very skilled in managing all stakeholders all around the world. Can you tell me a little bit more about how you manage that supplier relationship, how you make sure that you are matching all the requirements of suppliers request, and that they match those criteria that you've just outlined for us?
Yes, because a supplier relationship the people mismatch with the place the POs So maybe only to have agreement. Right. Some of the people said I have agreement. Agreement is one point. But supplier relationship is really, really to build up the relation, the connection with the suppliers.
What we are doing this, it's a in the simple way, let's say that simple, you know, it's a little bit complex, but in the simple way that we develop a strategy and based on the strategy, we know that we are going to move. We are going to move in this direction, in that direction, this region, in that region. Then we need to understand what are the supplier base that we can find that are. Based on that, we can select the suppliers - what are the criticals, what are the strategic ones.
And with that in the range, we start to develop our framework because we have one framework. How we can make this strategy with the supplier relationship. The first one is to engage the top management, because it's not only the supply chain is responsible to make this relation, also the top management. Right. With that one we need to create a trust. I think the first – mutual respect with the suppliers. The supplier is not anymore only a vendor. They are our business partner. Of course.
We need to create this kind of environment that they can trust, yes, and we trust them. We align the strategy. We align the communication. And this build up the relation. This, I think the aim of the supply relationship strategy. And you mentioned quality is one of the main pillars in supply management. So these suppliers, how are they vetted for the quality? I guess they pass stringent tests? I don't know what you would call it.
So as a big company we have all the certification etc. and also we have our own way to qualify the suppliers. So we qualify the supplier company but also the parts. Right. So we name a PPAP, so process etc. and also we have some kind of supplier evaluation. Every quarter, we have meetings with the suppliers to see how we can– Do you do it face-to-face? Sometimes face-to-face, sometimes virtually.
So depends of the levels of suppliers, depends on the region, etc.. So then we have several ways of engagement. I can tell you that today we have hundreds, thousands of suppliers. Then we manage the different level. Right Then we talk about the special ones, the specific ones inside of the supplier relationship management. This one, we treat a little bit special; that we can bring the suppliers, we have a face-to-face.
We engage on a high management level etc.. So it's a little bit different once. But for all the suppliers we have established
that we assess the suppliers, we evaluate the suppliers and we give feedback and we make some kind of improvement plan. Right, okay. And you were telling me just earlier just before we started recording, that you get together with these suppliers in different regions and you have sort of, I think you were calling them, was it Supplier Day? Yes. So you make a big deal out of these business partners that are, you know, in this industry with us, right?
I mean, really happy on this one because after six years, last year because of the Covid times etc., so we could not make this happen. But this is one really, really nice event that we promote that is a kind of Supplier Conference Day. That's right. That was the name. Yes, the Supplier Day internally, but Supplier Conference Day that we bring, for example, in China. 300 people attended the event.
Oh wow. 300. So it was amazing because we dedicate one day, full day, to explain the suppliers; what our strategy that we have; what are your innovations based on the sustainability, technology, quality, all other pillars that I mentioned to you before. So we just passed the message to the supplier, share with them what's going on. And I think it is really great because I see a lot of motivation of the suppliers to be engaged on this one.
And they also for sure we have like a lunch with them, so we engage more. Also, the supply chain people is there so we can get more connections. We did similar in India this year, beginning of the year with more than 200 people there. Oh wow. These are quite big days. It was nice. Oh good. Good. No sounds great. So we've talked about supplier relationship. If we can move a little bit further along. Risk management, so there's a lot of risk in what you do, isn't there?
What if you can't source the material that you're looking for, what happens then? What are the biggest risks that you face? Yes, I think after the Covid. So everybody now is looking more at the risk management because before we always have the risks. But now is moreover the people wants to understand what are the risks, what we are going to do. So I attend some several also customer meetings.
They ask me directly what we are doing, what Hitachi Energy is doing to prevent some kind of risky disruption, etc. And the risks are there so geopolitical risk, the regulations, the transportation. Also you can see a lot of new cases that happens. Based on that, as I said before, we need to have a strong strategy behind this. Yeah. Part of the strategy is one that the supply relationship. I think they are interconnected, each other.
The other one is to work more closely with the hubs, that is the factories to see the demand, the planning, etc. but then we have to have a diversifying supplier base, not 1 in 1 continent, but multiple continents. So we need to proactively looking for solutions and always have some kind of mitigation plan in hand. This is really important. Okay. All right. So cost efficiency and supply management; we all want to get the best quality for the least amount that we can pay for it.
I assume in your job, you'll also be facing that challenge. How do you balance cost efficiency and mitigating risk? Yeah this is a delicate question. Let's say like that because every day everybody asks for how they calibrate these, how they balance the cost and the quality, the cost and the risk, etc.. So I think our normal life is like that. When we go to the shopping, we can see like a high-cost, high-quality, low-cost, low-quality.
But that's the reason of the Hitachi Energy, because in Hitachi Energy we say that we have the license to operate. Yeah. Safety, quality, integrity comes first. We cannot compromise on this. Then we can take this as a standard, as a license to operate. Then we can move to the others. So then, how we can apply this? I think technology, today data analytics is really important for us. One example that I can give you, we have a team for the should cost. What should cost means?
Imagine one part of our product. We send this part to our should cost team. They have some kind of tools, softwares. They can analyze the drawings and see how should this piece could cost. Let's say that their supplier ask us for 100, but they can put in the tool, etc. and we can see the real price could be like seventh. With that we have a real information that we can go to the supplier and share this with the suppliers.
And they ask you to make some kind of balance because we want that quality, that specification, but we need to fight for the best competitive price. In the beginning was really hard to make this, but now the acceptance of the suppliers is really great because the supplier understand that we are not going to commit with their profit, but we need to balance on this, say that, oh maybe we have more scrap, maybe your setup of the machine.
These also engage in the supplier relationship management because as much as the supplier trust you, they understand what the final way that you are going to achieve. This is your own way. You've gone quite proactively about it and you're trying to become resilient. So you’re looking into future disruptions and you're saying, okay, we've looked into what this should cost, what this should look like, and you've presented it to suppliers. Do you find that you've been quite successful in that?
How long has that process been? How long have you been trying to educate our business partners that this is a good way forward, that it’s in everyone's best interest? More than five years I think so, or more than six years. And it's hitting home now? Yes, now more and more. So I can see engagement because this we did more behind of the scenes, let's say the people did this kind of exercise and just signed.
But for the three years ago, we start to bring these people, these analysts that we have and put together with the category managers, that the people that go to negotiate with the suppliers hand-in-hand. They go together, they explain the suppliers, what are the content of this kind of new should cost? And the supplier understand that they need to change something in their production to be more efficient.
So it sounds very much like supplier relationships, risk management, it's all quite deeply intertwined. How do you integrate these two? If we look back into your first answer in terms of overall supply chain strategy, how do you bring it all together? I think totally, they integrate because one is a connection with the other. When you have a risk management team, one big actions is a supplier relationship management.
When you have a supplier relationship management, you need to have a risk management inside. So one each other is interconnected. So if you do one you have to do the other one. Your job sounds tough. And I think we've got time for one last question. I've been asking it to our guests. If you wanted our audience to have one takeaway, what would that be? I think you mentioned it is a little bit complex, and today we just talk more about supply relationship and risk management.
But in the supply chain we have, as I mentioned before, sustainability, technology, quality, a lot of things. But I think the main point that we could end up with some kind of takeaway, I think I'm going to come back with the McDonald's. McDonald’s, they have a basics of the three Cs. Okay. Cooperation, coordination and communication. All right. I think these are simple and efficient. If you can apply this for everything, that it's going to be fun and you can deliver what you promise.
Well it's been very interesting to learn about supply management and high voltage and all the risks and challenges that come with it. Thank you very much for coming in today, Salvatore. Thank you very much. And I hope you'll come back soon to tell us a little bit more about all these other aspects of your very interesting job. Oh, it will be a pleasure for me. Thank you. Thank you. And that's it for today. We'll be back soon with some more great content.
But before you go, remember to give us a follow so you don't miss an episode. Thanks for tuning in. See you soon. This episode was brought to you by Hitachi Energy. Created, written and hosted by Bárbara Freitas-Daniels. Content and script writing by Cassandra Inay. Guest speaker Salvatore Alimentato. Produced and edited by Creative Chimps.