How Avery Dennison’s innovative procurement keeps it ahead of the label manufacturing competition
A Fortune 500 giant in the pressure-sensitive adhesive labelling, tags, and inlays industry, Avery Dennison has grown exponentially from its humble beginnings. Founded in 1935 in Los Angeles, California, the business now operates in over 50 countries and employs around 25,000 talented staff.
One might assume that a business of this size could find procurement challenging, or be laden with outdated legacy processes; for Avery Dennison, the opposite is true, thanks to a strong sense of continuous improvement, innovation, and people power. An integral part of driving these advantages is VP Global Procurement Materials Group & Corporate Sustainability, Roland Simon.
Notably, Simon spent 23 years with Goodyear, honing his management skills. While he entered the business with a degree in physics, he was looking for an opportunity to work in a factory environment, and went on to spend over two decades as an expat in Europe and Thailand.
Along the way, Simon was able to get more of a taste of procurement and manufacturing, and repatriated to the USA in 2003 in a procurement role. During a four-year stint as Chief Procurement Officer at Ferro Corporation, Simon’s future Avery Dennison boss, who was particularly skilled at networking, began communicating with Simon about what he was doing at Avery Dennison. Similarly to Ferro, the company was trying to build a centralised system on top of an old procurement organisation, and worked across a similar footprint.
This led to Simon forming a close relationship with him, and becoming fascinated in the vision that he had for Avery Dennison. It happened to align with what Simon was interested in and capable of.
Soon after, Simon was offered a job by the same man, and was initially placed in charge of global raw material procurement. Once his boss moved on two years later, Simon stepped into his role and took over the Procurement Materials Group, including responsibility of corporate sustainability.
So, over 80 years since its inception, how exactly has Avery Dennison impacted and contributed to the industry?
“Avery Dennison is the creator of the industry that we’re in,” says Simon. “R. Stanton Avery was the founder of the company, and he invented the self-adhesive label products that were used to build the company. He had a vision that the best way he could serve his community was through building a business, creating jobs, and building an economy.
Avery Dennison has evolved in every direction since, and Avery Dennison is widely considered to have a continuing large influence on the industry. Since Simon became an integral part of the business, the strategy has been to continue leading the existing market, to grow into higher value segments, and expand applications of functional materials to which adhesives can be applied.
Its work in creating specialised adhesives is one example of the company’s high levels of innovation.
“In the automotive industry there is a big push for improved fuel economy,” Simon explains. “Automobile companies are interested in reducing the weight of the vehicle, so they’re beginning to substitute mechanical fasteners – which are made of metal – with structural adhesives.
“At Avery Dennison, we are experts at developing specialised adhesives that can be coated in what we would call a substrate, that you can peel and stick.”
The power of procurement
Simon’s procurement role has been a vital component to these ongoing changes, because Avery Dennison integrates all functions into the business. There are two fundamentals which the procurement division tries to fulfil as a function, and these are to be a strategic partner to the business, and to be a valuable thought partner.
“Integration is about the way we are structured; the way we perform our roles,” Simon explains. “We want to be close to our internal stakeholders. We also want to be as valuable to our suppliers as we can be, and to fulfil the biggest promises possible to those suppliers. We can offer more and more value to them through growth in our channels, our footprint, and access to our newer technologies, meaning they are able to participate in our vision and growth.”
It's a refreshing position, because procurement is all too often considered an afterthought. For Avery Dennison, it is a valuable part of its success. In Simon's words, “the root of integrating with the business is the foundation of how we developed the powers within our function”.
A huge focus for Simon in this area is recruitment of skilled employees. To him, the quality of his people directly correlates with the group's success; he personally oversees around 70 people across the world, and leans towards those with a broad range of professional experience.
“A large proportion of them have former marketing experience, finance experience, manufacturing experience, and we have some procurement specialists mixed in,” he says. “So we have a function of people with different backgrounds and the capability to be business thought partners as opposed to simply one half of a functional transaction. We do a lot more than just place purchase orders.”
Indeed, Simon and his team translate the realities of the company's materials markets and supply chain capabilities to marketing and R&D, and together, the information is translated to added value solutions for its customers – global converters and brand owners. Simon's goal is for his team to be influencers; in fact, employees even undergo influence training.
“For a long time, for procurement people it was all about how to influence stakeholders,” he says. “In my team, I feel we're beyond that, in the sense that my message to my team is that, to reach the maximum amount of growth, they need to allow themselves to be influenced.”
Simon believes it shows particular maturity to be confident enough to be influenced by someone else's thought process.
“If I allow my supplier to influence me with a good idea they have had with regard to what our customers need or what solutions might resonate in the market, or we influence each other and come up with an innovative material or process – and we marry those things – that's the golden chalice.”
Of course, this is an ongoing desire with no finishing line, because collaborative relationships are what Avery Dennison strives for as a company. High levels of communication mean that procurement aligns neatly with innovation, and so Simon's department ends up working on leading edge technologies in a collaborative way.
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One component of this is implementing technology to work out aggregated costs of materials that go into a product.
“For example, we have people in our business who sell labels,” Simon explains. “The label might have three components: a film face, an acrylic adhesive, and a release liner. It doesn't do me much good, when I'm talking to the product manager, to tell him 'your base off price is going down two cents'; the release liners might be going up five cents, but he thinks his costs are going down. So when I talk to a product manager, I actually want to be able to talk to him about the aggregated cost of this product and about his overall costs compete in the market.”
This is the communication which leads to increased innovation. The product manager might come back to Simon and tell him that the cost of a product is no longer something that will drive growth, so a different solution is required, and they might ask for help to develop something that performs better.
“We will go back to wherever we're getting the adhesives from, and we'll work on an innovation. It could be a cost-weight reduction; it could be a different formulation – whatever it takes to perform better in the market.”
The procurement process is, after all, dictated by what is happening in the market. The marketing team tracks how Avery Dennison needs to compete, and that is communicated across the chain until a solution is created. Simon and his group try to be specific in the procurement strategy, and focusses on solutions where real-time aggregated cost can be seen. While this is a challenge, Avery Dennison is continuing to work on the technology that will enable this process to be as simple and accessible as possible.
This is by no means the only new use for data that the company has embraced. Over the past 18 months, Simon and his team have been working on a set of metrics and a data platform with the supply base.
“We have maybe 180 of our suppliers on there, which represents well over 80% of our supply base from a spend perspective,” Simon explains. “On this system, we’ve begun to measure them across a platform of sustainability metrics.
“We communicated it right from the start that we weren’t implementing this tool for the purposes of side-by-side comparison or even purchase decisions,” he continues. “We were trying to create a baseline on which we could continually improve.”
Avery Dennison has been working on the continuous improvement of its own sustainability for many years, and considers this approach with its partners a way to work more collaboratively on the same issues.
“We’re becoming more aggressive and we want sustainable products to be a larger component of our own development,” Simon explains.
Every sustainable initiative that has been implemented has proved positive for the business, and for Simon, sustainability begins at the source.
“A lot of the perceptions of sustainability has a lot to do with being responsible, in terms of socially and in the environment,” he says. “I see a third component to this, which is being responsible to your business and your stakeholders. Your people.
“And so, when we look at the concept of sustainability, we're always looking at the innovations that are going to be the long-term drivers in the business. The innovative process we have with the supply base is, more and more, also about different sustainable solutions. Things that are recyclable, renewable, that reduce our carbon footprint – and it's for the purpose of being socially responsible, but also for the purpose of being a sound business.”
Simon considers this a unifying quality for the business, both internally and with suppliers. It is appealing to any business for a partner to be green; everybody wants to be associated with a company that embraces its sense of responsibility.
And Avery Dennison’s position on this is paying off. With waste reduction and improved efficiency considered cornerstones of the business, employees have the freedom to become involved with sustainability projects, and what’s more, they are excited by the prospect.
The sense of unification has had a ripple effect through the entire company. Avery Dennison is also a very strong operations organisation, and boasts a world-class Recordable Incident Rate on its safety. As a standard part of its DNA, the company continues to do more with less in its innovation, and considers quality of leadership to be a vital component of its success.
“I’m not talking about myself, but all of my colleagues, all of my peers,” says Simon. “We have an exceptional group of people.”
He concludes: “What we do here between our people and with our people can be something very difficult, and not too many industries could replicate it. One of the convictions we have at Avery Dennison is that we believe the quality of our internal collaboration and cooperation across functions and boundaries, is a competitive strategy.”