DS SMITH

DS SMITH

Getting relationships all wrapped up 

SRM is a key part of the procurement transformation strategy at the global sustainable packaging company.
 
If you live in Europe it’s likely a DS Smith package has been dropped through your letterbox or been delivered to your doorstep.  The company, which traces its roots back to a box-making business started by the Smith family in the 1940s, is now headquartered in London and a member of the FTSE 100. 
 
With its own paper-making and recycling operations, it is a leading provider of corrugated packaging and supplies every type of industry. It has bases in 34 countries and employs around 30,000 people, all of whom interact with the supply base in some way. Operations have continued throughout the Covid-19 pandemic as the business has been deemed critical to food and pharmaceutical supply chains. “Medicine, food and PPE are packed, stored and transported using our fully recyclable  packaging and boxes. Our plants kept running and our suppliers have supported us throughout,” says Alex Jennings, Group Chief Procurement Officer at DS Smith. “One in five boxes in Europe or close to it, is connected with us. We’re a leading provider of e-commerce packaging in Europe and this is something we’ve had to manage during this period because it’s seen significant growth.”
 
While some customer orders doubled, others halved and the company had to demonstrate agility and flexibility as it dealt with daily changes and additional challenges such as the logistics of border crossings. “It wasn’t always smooth but we had no supply failures, which shows the strength of relationships that exist.”Suppliers have been supported in turn with improved forecasting and communication.
It wasn’t always smooth but we had no supply failures, which shows the strength of relationships that exist.

Transformation station

The resilience of supplier relationships is testament to work done over the past two years as part of a broader transformation of procurement. “SRM is a key element of our strategy but it can’t be taken in isolation,” says Jennings. “We first had to build the fundamentals to run it - standardisation of processes, technology and data to enable that activity. We had to create an organisational design and functional capability that had the right mindset to drive this area. And senior leadership is fully behind what we’re trying to do, supporting the fast pace of transformation.”
 
DS Smith has now formed one function of 150 people comprising category management, procurement operations and enablement, which includes data scientists to provide visibility of the supply chain and lead to informed decisions. “We have multilayered business partnering within our organisation, which keeps us connected. That means when we’re building our category strategies we have to do it with an SRM mindset.”
 
Jennings says a lot of SRM in the past had been based around trying to drive quality and cost reduction but it is now about so much more. “We have to be working towards best practice, supply improvement, driving total cost of ownership, quality of supply, process and product innovation. You can only do all that if you pivot the relationship from transactional to strategic, and ensure it’s built around partnership.” This approach, he adds, doesn’t remove commercial tension between the two, it simply means they have the same objectives - growth and development.
 
The company has segmented its supply base into groups that are partners; those who are strategically important; those who are preferred; and those with whom it has a straightforward commercial relationship. In the first 18 months it has been focusing on its top 100 suppliers, who cover around 40% of spend. It plans to progress to its strategic and preferred suppliers in the future. “I expect to see elements of SRM in everybody’s category strategies, whether buying HR business services or a raw material that goes into the production of our products.”
 
At the top tier, says Jennings, they need suppliers to understand the company’s strategies for growth, innovation, process improvement and potential acquisitions “because we want them to follow us”.  The level below, also needs to focus on quality, product, process, innovation and be having those discussions.  And while the bottom tier may well be transactional from a product and price perspective, there is still a need for process innovation to remove waste. 
 
“For example, I don’t want 500,000 invoices coming in, so we have to look at how we manage that, how we embrace catalogues and technology that can make the connectivity with those suppliers as smooth and efficient as possible.  “The fundamentals of SRM don’t stop at the strategic level, they should filter through every business relationship that you have.”

2020 SRM report | Supplier management at speed  

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Increasing momentum

Despite being early days, the company has already seen a number of improvements in output, quality and total running cost of machinery as a result of closer ties.

Jennings says he wants suppliers to suggest improvements and be unafraid to challenge procurement. “I want them to come forward and say, for example, ‘we have an ink that’s going to cost €1m more but it is fast-drying, so we can turn the ovens off and save €5m in energy’. That’s the kind of tension in the relationship that I want.”

To drive that behaviour, suppliers are set targets that support DS Smith’s externally published sustainability goals, environmental objectives, as well as targets on cost reduction, quality improvement and innovation. “We want them to help us take waste out of our process and with every interaction I expect them to help us improve, I don’t want them just accepting our requests.” And Jennings says Covid-19 has highlighted even further, the importance of efficiency. “I did 99 flights last year, but I’ve now done more than 130 days working from home and I’ve never felt more connected. We’re no longer waiting to get people together in person, instead we say, ‘let’s jump on a video call’. “Covid has brought some inefficiencies but they have been far outweighed by the tools we have to increase connectedness and speed of decision making.

“We’ve had 1,000 things to deal with at once and changes to manage on an hourly basis during this crisis, but we’ve shown agility and the ability to pivot and move direction. We will not let go of these learnings. “If an organisation comes out of this not having evolved and learnt how to do things better, an opportunity has been lost.”

 

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