That sounds like a profound partnership…
Beatrix Praeceptor: Exactly. For innovation, you need relationships with long-term focus. Which, by the way, is also important for risk assessment.
How does risk management play into procurement?
Beatrix Praeceptor: If we want satisfied customers, we have to produce good products. To produce good products, we need good raw materials and services from our suppliers. We also need to be sure that they treat people and the environment well – in a nutshell, we have to make sure that their values fit ours.
For risk management and responsible procurement you have to be very clear what kind of relationships you want and with which suppliers. If we changed our suppliers all the time, then we would have to re-do all our audits, re-checking whether they fulfil our requirements in terms of CSR, environmental sustainability, etcetera. That’s an effort.
The frequency and speed of disruptions is increasing. Major suppliers go bankrupt. From one day to another China changes its environmental legislation and suppliers don’t get the feed stock they need anymore. Qatar closes its ports, and suddenly products are floating around somewhere and cannot go further. We have to have a different approach to risk management and we cannot do that alone. We need to give part of that responsibility to our suppliers and tell them exactly what we expect from them.
How does Mondi choose its suppliers?
Beatrix Praeceptor: You get what you ask for. If you cannot properly specify what you expect from suppliers, then you should not be surprised if what you expect and what they deliver doesn’t match. We’ve gotten better at saying, “That’s the product; that’s the range of the specification; that’s the service; and that’s how we work together,” because then you can measure what your supplier delivers against your specific requirements. Of course, what we ask of our suppliers is based on what our customers expect from us.
My goal is to embed a supply chain-oriented mind-set of our total value chain throughout the business. Sustainability needs to be part of everything you do. It cannot be something on the side, like one day a week you tackle sustainability and the rest of the week you don’t care. No, sustainability must be part of how you manage your supply chain – as are quality, safety, commercial aspects, the services you expect, and innovation.
How do you tell if a supplier has sufficient innovation capability?
Beatrix Praeceptor: We do business review meetings every year with our major suppliers in each spend category. It’s a strategic meeting about the trends on the market, and there’s always a discussion of innovation. If we see that a supplier shares our interests, we try to work together. We are always looking at suppliers to see who has the best fit for Mondi.
We classify all our suppliers by category: strategic, captive, commercial or collaborative. Each of these labels means a different thing. Our strategic suppliers need to have innovation capabilities.
To support innovation, ensure that Procurement is involved in the very early stages of new product design. Second – especially on the converting side – purchasing people should aim to be really well networked with application managers, with R&D and also salespeople, so they know what’s going on. That’s a starting point.
Standard supply relationship and performance management (SRM/SPM) processes support a well-managed and developed supply base. Suppliers to Mondi have to meet specific requirements, including supply chain need, competitive costs, quality, sustainability and innovation.
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