Feature by Jeff Collier
Submitted by SAP
Recognizing the importance of strategic procurement, Dutch chemical company Royal DSM – a global, purpose-led leader in health and nutrition, applying bioscience to improve the health of people, animals, and the planet – embarked on a global procurement transformation.
Royal DSM utilized SAP Business Network and SAP Ariba solutions to enhance the sustainability of its global indirect procurement. As a result, the company learned several valuable lessons that can be applied by other organizations looking to transform their procurement practices in a sustainable manner.
DSM has set ambitious sustainability goals, which include making a positive impact on people, the planet, and communities through its “purpose-led, performance-driven” strategy. This includes transitioning to a net-zero economy, fair supplier arrangements, and ensuring adequate access to healthy food for all.
To support these goals, DSM implemented a transformation of its global, indirect sourcing and buying operations. This was essential for the company to create truly sustainable end products. It is not possible to be a sustainable business without having sustainable partners.
DSM’s buy.SMART program aimed to not only achieve cost savings but also digitize and automate procurement transactions to align its spending on indirect goods and services with its sustainability and supplier diversity policies. Through this process, the company learned several valuable lessons.
1. Leverage a Business Network
To achieve the buy.SMART vision, DSM integrated SAP Business Network with an upstream, indirect source-to-contract process. The company did this using SAP Ariba Sourcing, SAP Ariba Contracts, SAP Ariba Supplier Lifecycle and Performance, and SAP Ariba Supplier Risk. For the downstream, indirect procure-to-pay process, DSM chose the SAP Ariba Buying solution.
This setup offers multiple advantages, including faster identification of suitable trading partners in your supply chain, such as suppliers, logistics service providers, asset operators, and maintenance contractors. Thanks to automation, you can perform many tasks more efficiently or even automate them completely. Automation enables more efficient and even fully automated processes as well as increased visibility into all supply chain processes.
The integration of automation and sustainability in procurement can bring several benefits. For example, automation can facilitate the collection and analysis of supplier sustainability data, which can help in making more informed decisions when selecting suppliers. Additionally, automation can help in monitoring and tracking the sustainability performance of suppliers over time, which can help in identifying and addressing sustainability issues more quickly. Automation can also help in reducing the environmental impact of procurement activities, such as by decreasing paper usage and transportation emissions.
“Thanks to SAP Ariba solutions, DSM has strengthened collaboration with suppliers, improved the user experience of all participants, automated the transaction flow, and significantly reduced errors,” says Andries Feikema, global director of Procurement Digitalization & Transformation at DSM.
2. Leverage Independent Sustainability Ratings
Using criteria from external vendors is crucial for enhancing procurement processes with environmental, social, and governance (ESG) considerations. Having transparency into the sustainability performance of your supply chain is crucial for modern business. DSM utilizes EcoVadis, which is integrated with SAP Ariba solutions, to provide the necessary sustainability solutions to enhance procurement processes with ESG. This allows DSM to obtain reliable ESG ratings on its trading partners and efficiently evaluate suppliers based on specific sustainability criteria. Additionally, DSM continues to expand its sustainability assessments to provide procurement professionals with greater insight into their business partners.
“Sustainability is in DSM’s DNA. It therefore plays a major role for our procurement organization. It is an important element in the selection of our suppliers, and we test that directly in SAP Ariba solutions. It is important that we select the right suppliers to do business with. This is directly embedded in our process design,” says Feikema.
3. Do the Pilot in the Most Challenging Market
It may be tempting to test a procurement solution in an easy market, but it’s not always the best approach. DSM adopted a different strategy: it started with the most challenging market. By doing so, it was able to identify and address potential issues early on. The company piloted the new procurement system in Brazil, which has a complex tax system. This approach helped it learn a lot about the solution and processes, making the global rollout much smoother.
Brazil has a complex tax system with multiple federal, state, and local taxes. The country has implemented several tax incentives to promote sustainability and environmental protection, making it an interesting pilot case.
4. Standardize Where Possible
Standardizing the pilot process design across all countries led to immediate efficiency gains for DSM. The design was only modified to comply with local tax or regulations. This standardization streamlined procurement processes globally, accelerating rollouts and increasing transparency and efficiency.
Procurement processes that include sustainability focus on buying products and services with positive environmental and social impact. This includes using sustainable materials, choosing suppliers with a strong sustainability record, and considering the entire lifecycle of a product or service. Standardization enables easy replication of processes and, by incorporating sustainability and standardizing their procurement processes, organizations like DSM can scale their sustainability impact.
5. Don’t Forget Change Management
Digitization relies on the implementation of new technologies and processes, and success in this endeavor is contingent on the participation of all employees. Without their buy-in, return on investment will be negatively impacted. Therefore, change management must be a key component of any transformation program.
To that end, DSM dedicated significant attention to change management by establishing an expert desk to support suppliers and assist with contract implementation, as well as a global team of 270 “champions” to help with adoption and guide users through new procurement processes. These champions were able to communicate in the local language and provide training to end users. Many young employees and the new generation of workers desire to be a part of sustainable business practices and goals, which has also contributed to the success of the adoption of these new technologies and processes.
“We made communication, training, and change management part of program management. We approached our program not as the implementation of a tool, but as a real business transformation. Users are central to the success of our transformation program,” concludes Feikema.
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