Transparency, reliability, and relationships are all important in procurement – not to mention price

Chemigate approaches downstream customers as a seller, but upstream partners as purchasers of raw materials and services. Now, let’s put on our procurement thinking caps and ask Kimmo Mäntysalo and Harri Heikkinen: how do we get down to brass tacks in procurement?

Text: Jenga

Chemigate’s competitive advantage has always been our ability to deliver products to customers professionally and on time. But ensuring this requires just as reliable partners on the supplier side. The role of procurement is even more critical in a turbulent and uncertain global environment, and it’s increasingly important to keep raw material supplies and sales rolling along at the same pace.

“Procurement plays a central and influential role in our operations. Material flows and unit volumes are large, meaning even small fluctuations in procurement and sales prices can make or break the whole business,” says Harri Heikkinen , Production Director and responsible party for starch raw material procurement at Chemigate.

“We try to keep starch procurement predictable by aligning it with the sales side. For many customers, prices and deliveries are defined by contract for the whole year. By making similar contracts regarding procurement where possible, we can predict costs and overall profitability without getting any big surprises.”

Chemicals around the world

For starch modification, Chemigate needs around 20-30 different types of chemicals. These are procured by Kimmo Mäntysalo , our Procurement and Logistics Manager. He’s responsible for transport contracts.

“Quite few of the chemicals are of Finnish origin. Around half of the chemicals we use are produced within the EU, and the rest outside it. Procurement, then, is an international operation –but the world is pretty small, and Teams meetings are standard fare. It’s great that we can look for and find wide-ranging suppliers from around the world,” says Mäntysalo.

Chemigate has several long-term chemical suppliers – but supply is monitored, and new relationships are established when necessary. Broadening the scope of procurement increases flexibility and certainty. The recent pandemic served as a reminder of the risks of having too few suppliers, with delivery times of a couple of months stretching to six. And it’s not just the number of suppliers that’s important, Mäntysalo points out – but also the quality of their service

“We value the proactivity of our suppliers – their ability to make our lives easier by taking care of certain things on our behalf and keeping us informed. Generally speaking, the cooperation between our procurement and supply sector is going well. We have very good suppliers who have upheld their responsibilities even in these uncertain times.”

New openings pave the way for more transparent cooperation

According to Heikkinen, the last couple of years have seen increasingly close relationships with suppliers in starch procurement. One example is a contract signed in 2021, which resulted in all of Anora’s barley starch being supplied to the paper and board industry through Chemigate.

“We work with Anora on a one-stopshop basis. Customers get the same ser- vice whether they buy barley starch or Chemigate’s modified starch. At the same time, this enables even more open and close cooperation, where we regularly discuss quality and supply issues, as well as relevant news from both sides.”

“Our role was also influenced by the transfer of a majority stake in Finnamyl Oy to Chemigate and Berner Group. Now we have a much better handle on the flow of materials. We can make our own decisions and think more about the industry’s supply chain as a whole. For potato starch, our partners also include other Nordic suppliers,” says Heikkinen.

The wheat starch used in production at Lapua and Kaipiainen is mainly sourced from abroad on the basis of long-term supplier relationships. This cooperation is more clearly purchasing-focused, but since the starch busi- ness is a relatively small one in Europe, close and broader partnerships can also develop.

Heikkinen also maintains contact with the Finnish players in the industry through the Association for the Starch Industry. It meets a couple of times per year for informal discussions on general cultivation and legislative issues.

Personal relationships help tamp down the turbulence

Procurement is a business in which the basic principles are product performance, punctuality of delivery and a reasonable price. But in a restless market situation, flexibility on both sides may be needed – and negotiations are increasingly influenced by personal relationships.

“I’ve always kept in mind that it’s people doing these jobs, so I want to get to know our suppliers as people. It’s always said that in a sale, you need to know whether your negotiating partner is a golfer or a yachtsman – but it’s also good to take things to a more personal level in a procurement relationship,” mulls Mäntysalo.

“The work of maintaining a relationship is never finished – it’s an ongoing development. At the moment, there’s a lot of turbulence in quite a few of our raw materials, which is why it’s important to be able to trust your supplier and long-term operations, where you’re not so focused on quick profits,” Mäntysalo says.

Heikkinen, a 27-year veteran of the industry, feels that procurement has developed slowly in terms of raw materials, products and formulations – but there have been changes and convergence on the business front.

“There are relatively few players, and nowadays our teamwork is perhaps more focused than in the past. Together with Berner, we’ve explored various possibilities for cooperation and have implemented projects and procurement models to optimise our supply chain.” reliably, as our order service is staffed with true professionals,” Mäntysalo beams.

But there are always two sides to a deal – so what kind of buyer does Chemigate want to be in its procurement?

“Our goal is to be a trustworthy and steady customer that’s easy to work with. Any kind of hemming and hawing or rash decision-making undermines the common basis of trust. The most important thing is that commitments are handled properly on both sides,” Mäntysalo concludes.

“We want to be a partner that sticks to our agreements, but at the same time is open and trustworthy – so that any issues that come up don’t necessarily need to be solved through contracts. We prefer to look for fair and sensible solutions together,” says Heikkinen.

Partnership is a two-way street

The value of cooperation is never clearer than in uncertain times, and Mäntysalo emphasises securing the entire supply chain in procurement.

“It’s my hope that suppliers will actively communicate and cooperate with us, so we can sail through the turbulence of the market together into calmer waters. But we haven’t had any major problems with suppliers. Logistics also works

“The same principle also applies to the procurement of maintenance or cleaning services. A good example is Caverion, previously YIT, who we started a maintenance agreement with at the Lapua factory in 1998. This has continued for 25 years. When things continue to work and develop, we can just keep pulling on the same thread.”