Case study | DS Smith | Implementing A Procurement Transformation Programme: Lessons in Delivery

Alex Jennings

Group Chief Procurement Officer at DS Smith

Harold Hendrickx

Head of Transformation and Enablement at DS Smith

Learning Objectives

DS Smith recently ran a Procurement Transformation Programme in order to become a World Class Procurement function to support the group’s business plans. The case study will explain the approach taken and aim to be a useful guide for anyone considering a large change programme.


"If you had the clarity of ownership and a clear organization, then the right talent process is coming into place as well."

Alex Jennings

Group Chief Procurement Officer at DS Smith

Harold Hendrickx

Head of Transformation and Enablement at DS Smith

Transcript

Alex Jennings

Well, good morning everyone. My name is Alex Jennings. I’m a Group CPO at DS Smith, and I’m joined today by Harold Hendrickx. Harold.


Harold Hendrickx

Good morning, everyone. Harold Hendrickx. I am Head of Procurement Enablement and Transformation. I’m excited to be here. Thank you.


Alex Jennings

Today, we are going to talk about the transformation journey that our One Procurement team has been on over the last couple of years. Later on, we’re going to talk about what how did that affect us, and how did it enable us to get through what has been a very difficult year for everyone in Procurement. I guess before I do that, I’m just going to give a quick introduction to who is [inaudible]. You may not have heard of us, but you will have have touched one of our products certainly during the last 12 months. We are a leading provider of corrugated packaging solutions around the world, with the largest recycler of anything in Europe. We recycle 6 million tons of fiber per year, and we turn that into 4 million tons of paper. We take that paper, and we convert that into packaging solutions for our customers. Last year, we made over 18 billion packaging solutions. We have sustainability at the heart of everything we do. As I said. we are a positive net recycler. We manufacture product that is from recycled or recyclable. Every single one of our products will be made from those materials by the year 2025. Today, it’s at about 99%. There are some inserts that we use that are not recyclable, but we have plans in place to to change that. Very clear values of DS Smith are out being caring, being trusted, challenge ourselves to do everything we do better the following day than we did yesterday, being responsive, and tenacious. I think those sets out to the heart of what we do as an organization. DS Smith has grown considerably over the last 12 years. We operate in 34 countries. We have over 300 sites. We have over 6 billion in revenue at corporate headquarters. As I said, we’ve grown through 21 acquisitions over the last 12 years. Back in 2009, we had a turnover of around 1 billion. We’re now a FTSE 100 company. One of the things that we recognized as a Procurement leadership team was that the level of maturity that we saw in the Procurement function wasn’t where we’d expect to be or needed to be to take that step forward in a leading organization. We built a team to focus on our transformation, and Harold led that for us. I’m going to hand over to Harold now. He’s going to take us through what that transformation journey was, and what that led us to, and how we organized the function to get us through that, and what it looks like today. So, Harold, would you?


Harold Hendrickx

Thank you, Alex, for that introduction. If we’re looking at the next slide, it’s obviously from a Procurement function perspective. We had to transform, but what do we mean by Procurement transformation? I mean, a transformation is a fundamental different way of working. It’s not an improvement or an addition, or a subtle change, it’s a fundamental different way of working, that’s what we consider to be a transformation. What does it mean for Procurement? Obviously, it affects the grid, the creation of value, impact on the effectiveness and efficiency, and it affects the way we manage risks. These things were looked at, from a Procurement functionality perspective, where we need to transform. Why is it important to have the transformation, and in this case, the Procurement transformation? We are living in a changing world. I think we can all recognize the past year, it’s been definitely a changing world, and expectations are never been greater, coming from customers, NGOs, governments, consumer shareholders, the expectations are different and are quicker. We need to we need to keep up with that. Risk is high, when it comes to changing legislation, and what we need to manage is that, obviously, Procurement owns the relationship with supplier. We make sure that we manage the risk and mitigate the risk in our supply base. We need to become flexible and agile. I think the past year with the experience of COVID, you can see that flexibility and agility is now a core value or function to be able to support the business in the best way possible. At DS Smith, we have seen Alex’s explained rapid growth. We have many acquisitions. We had multiple processes and ways of working. We have multiple different ERP systems and various views on ownership who owns that landscape. It is important for DS Smith to recognize these things before you go into that Procurement transformation. What we consider to be the benefits if you’re going through that transformation. Obviously, it goes through. It’s around value creation, but it goes beyond savings. It’s really about having a clear cost management. You know what some of the function or costs are, and how to manage that. It’s also creating the opportunity to identify and to create better working capital conditions, and to drive innovation not only within the function, but also connecting to the business and making sure that you have a strong business partnering. Together, you can drive that innovation agenda. Again, the risk management to manage that supply base is obviously key for a Procurement function of DS Smith, but any Procurement function, I would say nowadays. It has a direct impact and influence into the financial results, not only about savings, but also that innovation will drive financial results and the outcome of what we’re doing as a Procurement function, but also across the process efficiency is important. They are looking at, in this case, to procure a source to pay process and driving efficiency in that process. It needs to be aligned—it needs to be fully aligned with the finance function of a business to make sure that Procurement and finance as well as the business are going hand in hand and deliver those benefits. Obviously, you see that these are great ideas. Transformation or change programs are developed and started, but they often fail or they don’t deliver what was promised. Why is that? That’s because we often see there’s a wrong or partial scope. We often see that transformations people think around, it is around technology, it’s bringing systems into place to make sure that something is fixed or driving more efficiency. But it’s actually a combination of all. Also, we see transformation programs where we have just the reorganization. They only change the organizational bit, but everything else is considered to be okay or in line with the past, but it might not be a good setup for the future. Also, if there’s no appetite for investment, investment in resourcing, investment in time and priorities to make sure that you can actually deliver that transformation program, then you can also see that it won’t deliver what is promised. Last but not least, it’s something that we will talk about later as well. If there’s no clear ownership and leadership, then you could have the brightest and great product transformation programs, but if you don’t have the ownership to deliver that, and the leadership to put in place to support that program, obviously the change program will not work. Those are the elements that we’re ever looking at DS Smith to really drive that change and making sure it’s set up for success. What do you need, if you want to start thinking of a transformation program? It is that willingness to change. Obviously, people say change is difficult. It almost creates noise, but it is that willingness to change, the recognition that you need to change to keep up, to step up. Structuring of processes. Having the benchmarking. Being consistent in your processes is key, and obviously, you need to bring that focus as well. Again, it shows extreme ownership. You need to overstep that ownership, and that means that if you come across a process, which is going a cross functional across business, and you could also say, “It’s not my cup of tea, it’s somebody else’s,” but if you step in and take ownership, you are setting the agenda, you’re sharing the change. It’s important to drive that change by having that ownership in place, and step up in owning the issues and fixing it. Also, the investment outside BAU, Procurement function is there to support the business, to make sure we have safety and security of supply that will deliver savings and innovation. Having the investment outside BAU to make sure that you have a transformation team and a program, which whilst the shop is open, we are redecorating the shop is important. Insights is key. Ever talking about turning data not only into information or into intelligence, into actionable intelligence. That is a whole process of making sure that if you’re turning data into actionable intelligence, you know where your priorities are, you know what you need to do, and that’s what a quick wins on. That’s where the benefits come from. Making sure that you have effective contracts, not only with your suppliers, but also internally with the business and your business stakeholders is obviously essential. Then, the balance scopes and focus, what we just talked about. If transformation programs don’t work, then often that balance is not correct. You need to have the right process. It starts with the process. You need to understand what are you going to do. What is Procurement exactly? What are we responsible for? What are we not responsible for? How do we make sure that we have clarity of that ownership as well? It starts with the right process. The technology, and the organization, the ownership which lies in the organization with roles and responsibilities, and having the right governance, that’s the triangle what needs to be in balance. The technology and organization is obviously always supportive towards the process. It’s not about the meaning of technology. It’s not about the reorganization. It’s about making understanding for everyone. What is the body wants to do? What is the governance? What are we allowed to do? Who’s doing what? What’s the organization? What is the technology to support that? That’s what we capture, what we call the transformation delivery model, which is a triangle you see on the right hand side. We also call it the four sided triangle because we have processed technology and got an ownership and governance in the middle. You can see it’s a balanced mission to deliver. It starts with [unintelligible] business world grasp process definitions. You need to have a clear, concise, structured, procure to pay process. What are the elements and who’s [inaudible] them off? You need to have a strict governance in the middle with absolute alignment with finance when it comes to the responsibility and the accountability and the governance and control in the finance function. Then, if we’re looking at that ownership, it’s around having that clarity of ownership. Who’s owning exactly what’s enriched process or which process steps? If you’re looking at driving value, that obviously sits in the category management. We have Procurement operations team. We have the relationship with the business, and you have the business partnering in place. Also, the effectiveness of the Procurement enablement team is enabling the function when it comes to identification of the governance and the process and having the actionable intelligence is what we’re doing there in the Procurement enablement team. If you had the clarity of ownership and a clear organization, then the right talent process is obviously coming into place as well. You now have clarity of how to develop your talents. We have job roles. How do you train? How do you coach and mentor young talents to have a clear career path in the Procurement function? Obviously, you need to focus on those high performing teams to make sure that everybody understands who’s doing what. If you have extreme oownership, you have clarity of roles and responsibilities. That is a foundation of becoming a high performance team. Last but not least, it’s technology. It should always be supportive. I think we all recognize that we have a piece of technology who can do a lot. It might not be that it can do exactly what you want because you haven’t thought about the requirements coming out of the process, what you want to do. Again, if you’re turning data into information, entering into intelligence and actionable intelligence, that’s where you get a competitive advantage. Why is that? Because this decision cycle is becoming short. If you have that actionable intelligence in place, you can recognize where you need to act, and why you need to act it, and what exactly and who was doing that. That is turning that into a competitive advantage. If you have a system who can support all your processes, you can put the governance into that system. So, if people are our user on a system, you can guide that user account, making sure that whatever they can do in the system is the compliant way. That’s what we call a system level compliance. You can see all the elements are there to make sure that we balance this off. To deliver that mission, it is important that you recognize that you need to have a transformational ownership as well. So we’ve created a task forces who are put in place, people with the right skills, having diversity of thought and diversity of style, to make sure that we can deliver on all those elements. We have a task force for the process and the governance. We have an organizational task force, and we have a technology or a data task force. Looking at those elements, they equal to leadership on top to make sure that that balance is a safeguard, and it’s delivered in the right way. Tat’s what we, what we did at DS Smith when it comes to the Procurement saturation.


Alex Jennings

Thank you, Harold. I can’t understate the importance of high performing teams as we build this. That has to be a bedrock first of all. You have to create trust. You have to create a space where people feel comfortable, innovating, and challenging. You have to do something what we call passionate, unfiltered debate. When you’ve created that environment, it’s an important starting point for you to be able to challenge what you do and how you do it, and how you need to improve. On the diversity of thought, it’s important you understand who you are, and who are the different members of your team. What are their styles, their skills, their capabilities, and create some some ying and yang. Harold is totally opposite of myself. He’s not a Procurement person, he’s ex NATO, but he brings the skills and passion and structure that is needed to bring that whole triangle together. Now, we launched our One Procurement to the business after 18 months of preparation on the 17th of February last year—not the best time. I had plans to visit every one of our 150 Procurement people around the world to talk to about the new structure, talk to the business, talk about how you’re going to challenge and change just before there was a global lockdown. I haven’t been with my team now for over 460 days, but we have got through this process. I want to talk a little bit now about what were the challenges that we faced during last year. As a function, as a business, we’ve had to continue. I mean, our product doesn’t sound like much, but without our product, you don’t get food, you don’t get PPE, you don’t get medicine, you don’t get your box that’s delivered to the door from one of the commerce companies. We’ve had to keep our production sites going in a safe way, keeping our people safe and keeping the Supply Chain running throughout that period. We’ve had to manage unprecedented, inaccurate forecasts. We’ve had part of our business—if you think about automotive, aerospace, heavy industrial equipment, during April, May, June last year—fell off a cliff. Other parts of our business FMCG, ecommerce, parts of pharma exploded in their demand. So, we had to adjust and pivot our our business to cope with that. We’re to manage Supply Chain risks. How did we support our suppliers through this process? We were given a status in most countries that enabled us to continue working, but we needed to make sure that our suppliers were able to perform in that same way. We had to keep our employees safe, both in the Manufacturing facilities, but also those working from home, making sure that their mental capacity was supported, and they felt comfortable in this strange working environment. Leadership. It was absolutely key on this in driving effective teamwork through the team. You don’t manage through something like this, you lead through it. Communication up and down the chain with our customers, with manufacturing, with our suppliers, with various stakeholders to make sure that we understand every day, what were the things that we need to deal with, and adjust our ways of working. Let’s talk about teamwork. We had to, at the very beginning of this, establish an effective team, and understand what each person is going to be responsible for, how are you going to manage this effect crisis situation, agree the frequency the data, that the KPIs, understand the environment that you’re working in, and how are you going to ensure that you keep every one of your manufacturing facilities running through this period. How are you going to communicate? What’s the frequency of communication? With whom are you going to communicate? What data do we need to be effective through this? Then, the important thing through this though, is to think about well, how do you lead this? Not manage it, but how do you lead through this process? I’m just going to hand over to Harold. He is going to talk a little bit about what does that mean through our function, and how did we drive that through that period.


Harold Hendrickx

Thank you, Alex. We’re talking about leadership and not management. What we consider to be management is really about, you’re looking at the numbers a little bit for a static number eight perspective. Leadership is about inspiring, motivating people, making sure that we have that ownership. It’s written on the slide here. We really embrace that extreme ownership. It’s making sure that we understand, we step in, when they say, “Yeah, that is my responsibility,” but also, if you make a mistake. If you make a mistake, and you admit it, and you ask for help to solve it, that’s what we mean with ownership. That is leading by example. If you’re doing that as an executive or senior management. If you do that, and be vulnerable, and making sure that people understand that, “Hey, we’re all human,” but if you step up, you have that ownership and you demonstrate that you need help and support, people are willing to do that. That is creating that level of trust, which is key to become that high performing team. Clarity on your who’s owning what exactly and leadership is key to go through this, especially in the past year, if you’re looking at the crisis or managing the crisis. Because then you are closing the ranks, you’re one team, and you have that agility and flexibility to take on because if a problem arises, you can react. As a matter of fact, you can even be proactive and get to the proactive states, rather than the reactive states if you’re doing that with your team. I think clear objectives is key that everybody understands what is what I’m doing is contributing towards the benefits of my team of my function as Procurement and of the business. If you’re looking at a corporate plan structure, it is important that people recognize my objectives, the tasks that I’m doing, and the allocated thoughts that I’m doing is contributing towards what we want to achieve in a year or even three years time. If you have that structure coming all the way down to the individual employee, then they feel motivated, they understand what is their added value, and you can see that things will flourish. They will be motivated, enthusiastic to contribute to the bank deliver benefits and added value of not only the Procurement function, but for the entire business. The allocation of task is obviously clear, and KPIs are part of that. Making sure that you have a clear key performance indicators, and that you have performance hubs, and making sure that you understand, as a dashboard, where are we when it comes to delivery, what is our targets, and where we are on that journey or delivery of the targetwhere are we and that is for everybody understands. If they see that we’re behind, we can, as a team, make sure that we improve on that on that area. So, KPIs is obviously very key. It’s based on facts. If you have those facts, you can add a fact based decision making and priority [inaudible]. Communication with the business is essential. Having that relationship, making sure that you have clarity and objectives to have the business partner. As a Procurement function, you’re here to support the business. You need to understand what is the requirements, what is the operational need for the fulfillment, etc. To be able to have a best for business decision making process, you need to understand what’s going on. Bring them in into the development of your category strategies to make sure that you get that support, and also they feel involved and having that piece of ownership as well. A need to follow up. If you create a strategy, if you create a project, or whatever it is you do, you need to make sure that you continuously following up with your stakeholders as well as with your suppliers to make sure everything is connected. That’s what we mean with ownership and creating that sensibility, and that people feel that they own the whole process to make sure that you have an effective delivery of what needs to be delivered. Thank you very much.


Alex Jennings

Thanks, Harold. Let’s talk about how it affected our supply chains. We had customers with significant increase in demand and those that had significant reductions as we went through this period. We had to adjust at short notice, both internally and with our suppliers to meet that. Historically, there are two plans. There is an inaccurate forecast and there is a lucky forecast. Over the last 12 months, we have really had to struggle with challenging ourselves, and how the hell do we cope with the huge fluctuations in demand that we’ve been seeing? We had to make sure that we thought about what were the risks, and reassessing our supply issues. There’s no point in having three suppliers blue pigment if all of those three suppliers from the same region in India, and then that area of India gets gets locked down. You have to think ahead of what are the things that could be happening. Now, we had to monitor local legislation, the impact on our suppliers, their ability to supply us at monitor the security of supply. We went two or three levels down our Supply Chain to understand what were the fundamental raw materials that were making up the products that we were buying. What the pinch points? How do we plan ahead? How do we ensure that every one of our plants keeps running? Supply liquidity during this process, there was clearly a rush for cash at the beginning of this activity, but we had to do what we needed to do to keep our suppliers able to continue to operate during during this very difficult time. We did it. We have kept every one of our manufacturing locations working record outputs throughout this period. We have not stopped for a beat throughout that. That’s something that we are really proud of, considering that we only launched our new organization and our new ways of working in February of last year. A small piece of of technology that we use, because I think it’s an interesting one, we make one and a half million shipments a year across Europe. We had a piece of technology that every 30 minutes updated us of where were the logistical pinch points. Because if you think about it at the peak of the problems daily, the situation was changing from okay to go to a red zone—drivers can’t go, drivers won’t go, drivers need extra paperwork. 73 kilometer tailbacks between Germany and Poland, how do you get around that? How do you communicate with the customer so they can understand and keep running? Every day, we were reviewing the position and performance of both supply in and supply out, and working around the issues that we faced. It was really a war room mentality to focus on that and really proud of what we’ve done. What have we learned during this process? Well, I think the first thing is that agility and flexibility comes in many forms. If you’d have asked me at the start of last year, would we have been able to cope with what was thrown at us? I’d have said no, but we have, and we’ve done that. One of the ways we’ve done that, as we said, is through teamwork.


Harold Hendrickx

Yeah, absolutely. Again, that leadership and management is key to start creating those high performing teams to be agile, to be flexible, to get to that proactive side. Having clarity of ownership not only from a role, the responsibility from a job description perspective, but also if there is an initiative, if there’s something that needs to be fixed, or a need to be figured out your ownership is key. Making sure that you have the right KPIs in place to look at the dashboard, and making sure that you can manage that situation is, like Alex said, we are in the War Room, from a transformation perspective, but those KPIs are key to make sure that you have fact based decision making.


Alex Jennings

One more thing that’s key, both with your team and your suppliers and with the business, is to communicate. I cannot overestimate the the importance of that. We did it through video channels. We did it through WhatsApp. We did it through daily reports. Every potential opportunity that we had to communicate with the teams to keep them involved and supported was key. Supply resilience. You have all the work that we had already done as businesses, not just DS Smith, but as businesses around business continuity planning. None of those plans were were at this level. We had everything thrown at us, and we’ve been able to get through that. But what you need is teamwork and close connection and communication to get yourself through that. An important factor, both through our transformation, but through this process and going forward, is the next item [inaudible]. Harold, talk to us a little bit about that.


Harold Hendrickx

The use of technology and becoming digital is obviously important. Like we explained in the transformation delivery model, it’s essential that you put that in position with the right mindset. What is it what you want the technology or a data to do? Who’s owning that process? What is the governance on that? So, making sure that that flying or keeps in balance if you start thinking about using are expanding on technology. It stated that data is a new oil—it is—and you need to mine for it. You need to go into your ERP landscape into the informational systems, and not only informational system like IT, but also operational technology. What are the volumes? How the machines are running? The future will be that you need to connect those two together. We already learned in this process that if you have that information, again, based on facts, you can make decisions. If you had the right ownership or leadership in place, then you’ll be able to be in a far better position to make the right decisions, and to manage this this crisis and transformation.


Alex Jennings

Thank you. I’ve always been anti working from home. I don’t know why. I’ve never experienced it. But we’ve challenged ourselves a lot during this period about what benefits has this period brought us. I made 99 flights in 2019. I’m seeing my team perform in 62 days. Now, I will never go back to what it was like before, but I do look forward to the day where we can get back into a room, stand in front of a whiteboard, throw post-its all over the wall, and ideate on what we have gone through, and how do we challenge. I think there’s a balance between what it was like before, and what will be working like in the future. Certainly, I think many offices are going to be more collaboration spaces rather than just somewhere where you go each day to do the job. Finally, I think, as Procurement professionals, we should be extremely proud of what we have achieved over the last year and a half. Our industry of Procurement has done a great job. If you think about what has been thrown at Procurement and Supply Chain professionals and how we have stood up to keep business running, it’s been quite remarkable. I think we should remember we are more capable than we can imagine. That’s it for us. I’d like to thank Harold for joining me today. We hope you enjoyed this short presentation. Thank you.


Harold Hendrickx

Thank you all.


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