Valmet: proactive supply chain management and procurement principles
Spanning more than 130,000 miles of impenetrable coniferous forest, rugged coastal fjords and over 160,000 lakes, the country of Finland is among the most northerly nations in the world. The entire country lies within the boreal zone, characterised by its brief, warm, balmy summers and its dark, snow-blanketed winters. Its capital, Helsinki, is the second most northerly capital city on Earth, and 78% of its land is blanketed in forest. It is no surprise then that the nation’s economy is intrinsically linked with the production of lumber, pulp and paper.
In the 1970s, pulp and paper production accounted for over half of Finland’s total exports. Although the industry’s share has decreased over the past 50 years, as the nation’s economy has diversified and high-skill industrial, chemical and engineering jobs have gained prominence in the workforce, the manufacture of pulp and paper still accounts for over 22,000 jobs in the country, according to a Statista report.
With industrial roots reaching back as far as the 1750s, Valmet is synonymous with sectors like manufacturing, energy and the production of paper and pulp. Its offerings include pulp mills, tissue, board and paper production lines, as well as power plants for bioenergy production. In 2017, the company reported net sales of US$3.5bn and employs over 12,000 people across more than 30 countries and 150 locations. The company has a significant presence across the Asia Pacific region, with operations in India, South East Asia, Korea, Japan, Australia and New Zealand. We sat down with Director of Supply Chain, Asia Pacific Area, Manish Sharma, to explore the expanse of supply chain operations and the ways in which these operations ensure high standards of sustainability in the area. . “We are always looking at ways to design our operations to be cost competitive,” says Sharma, “as well as working to improve our suppliers’ operational excellence, while ensuring that health, safety, environment & quality occupy the top spot on our agenda.” Sharma has been in the procurement space for over 23 years, and has spent a large portion of that time in the paper production supply chain. He joined Valmet four years ago and works to ensure that Valmet’s Asia Pacific business interests operate in accordance with the company’s industry-leading practices. “My core responsiblity is to ensure the implementation of Valmet’s core principles and practices throughout the company’s value chain,” he explains.
One of the company’s main focuses, Sharma explains, is ensuring that, across all its operating regions, its products and methodology adhere to global standards. “Whatever we do, we do it to the degree of quality that Valmet is known for, which is accepted globally. We ensure that our best practices are in-line with global quality standards and are followed in spirit,” he reiterates. For a global industrial firm, Valmet places great importance on agility in an ever-changing marketplace. Sharma’s role is also focused around the goal of keeping Valmet’s Asia Pacific operations proactive. “We are a very proactive organization and a lot of good work is being done from the view of strategic, operational and tactical procurement. ,” he says. Valmet’s forward-looking approach focuses on identifying upcoming changes in the market: “What are the mega-trends? What are the upcoming environmental regulations that will require us to make changes to the way we run production? That’s one of the reasons the company is investing so heavily in R&D.” Currently, Sharma notes, the trends Valmet is working on, to address range from the increasing digitisation of media to the growth of e-commerce. “Printing is disappearing, but e-commerce companies, which use large amounts of boards for packaging, are on the rise,” Sharma says. “Also, in Asia there’s a lot of urbanization, so more people are going to college, which creates demand for things like textbooks. Furthermore, the growing population in the Asian sub-continent provides demographic dividends for such industries to thrive. Nonetheless, there are always prevailing market dynamics or needs that we must be privy to, to strategize our supply chain operations.
The need to adapt, while maintaining a global standard of product and sustainability practice is also “embedded in our supplier selection, evaluation and management process,” says Sharma. Over the course of his role at Valmet, Sharma has worked with “basically three types of supplier: suppliers who manufacture standard commercial items, suppliers who manufacture their own designs, and those that produce Valmet-designed products and technology. That’s the supplier segmentation that we’re looking at. However, the top spot goes to suppliers who manufacture according to our designs and work as per our practices,” he says, due to the fact Valmet’s products are manufactured to that global standard and can therefore be sourced globally.
“When we select a supplier, we evaluate their social, economic and environmental strength. Where do they stand on social best practice? Do they have quality management systems? How about safe working environments that keep their workforce intact? Basically, do they adhere to their principals?” Sharma continues, noting that “there are mature countries, there are medium-risk countries and there are high risk countries”. A supplier from a mature country, like Finland or Sweden, Sharma says, can be evaluated for compliance via a self-assessment questionnaire. “It’s an exhaustive questionnaire that covers every aspect of our sustainability guidelines. As for a medium or high-risk country, we do a physical audit through a third party who inspects the supplier based on our sustainability guidelines. If we’re buying something from Thailand or Vietnam for example, we make sure that we do a physical audit.” Potential suppliers who do not meet Valmet’s standards are provided with feedback to improve workplace practices, safety and efficiency. “We help our suppliers improve their operations, which they very much appreciate. We often receive very positive comments from suppliers, who say something we’ve put in place has improved their productivity and performance,” Sharma says. “They realise that sustainability is not merely an exercise in compliance.”
The cultural diversity between the different Asian regions presents a unique challenge for Valmet’s supply chain. Offering standardized global services can become challenging when dealing with a disparate roster of clients and suppliers. “You have Japan, which is very conscious about on-time delivery, and we need to match their expectations and can’t be successful in that region if we’re not meeting their expectations. So, when we approach things like delivery at Valmet, we need global acceptance.” He maintains that the key to meeting these challenges is having good communication within the Valmet team to ensure standardisation. He continues, “you definitely have to have to respect one another and understand one another’s cultural role to be successful when working across borders”. Given the diversity across Asia Pacific markets, Sharma is confident that things have progressed very well. “Definitely with every supplier you’re going to find gaps, and the number of non-compliances is higher in Asia, but with fewer “serious” violations. Things are improving a lot and one of the reasons for that is that we are continuously educating and engaging in a dialogue with our suppliers.”
Valmet’s procurement journey in the Asia Pacific region is one of constant adjustment and improvement. “We are always looking at the mega trends of the market,” says Sharma. “We constantly renew our products and technology, while putting emphasis on operational excellence and the people we work with and serve. Those pillars allow us to constantly improve.” On the future of his role and that of Valmet in the region, Sharma says: “I see a great future for Valmet. Since we are one of the leading companies in the world, we have a lot of responsibilities when it comes to maintaining a level of excellence. That’s why we have high standards and the need to constantly improve. That’s the key to success.”