Archroma-Sustainability-Report-FY2018 - Page 43



SAFE
SUSTAINABLE SOURCING
For Archroma, sustainable sourcing is critical as our vendor network (suppliers) has a large influence on
our production and our resultant systems sold to our customers. Not only in terms of the raw material
conformance to specification (quality), but also for product hazardous chemical contamination that
directly affects the safety of our products and the environmental pollution in production and when in use.
Our aim is to establish mutually beneficial relationships with our third party suppliers and contractors
in order to support our services on the basis of our internal safety, health, environment and quality
standards, which incorporates Corporate Social Responsibility and Responsible Care. We require our
suppliers and service providers to adopt standards comparable to Archroma's policies. Our vendors shall
also bind their own suppliers to a similar level of compliance.
A vendor’s sustainability performance affects our own overall sustainability profile as well as our brand
image in the industry and therefore vendor management, including sustainability criteria, is essential. As
a specialty chemical manufacturer, we have extensive knowledge and experience in purchasing, handling
and inventory control for chemical raw materials.
Procurement within Archroma is a complex operation that encompasses integrated strategies to deliver
optimized value for both direct and indirect purchasing needs of the organization. Due to the nature of
specialty chemical manufacture and multiple manufacturing sites located in various global regions, raw
material vendors are very diverse in nature and location. Archroma sources >7 200 raw materials for our
direct purchasing needs from >1 600 vendors. This requires dedicated processes to ensure the on time,
and in full, delivery of quality compliant raw materials at optimized cost. In order to do this, we manage
procurement within the three pillars of cost, quality and supply security.
Ownership of procurement is by the Head of Global Procurement, who reports to the Chief Operating
Officer. The procurement operation is staffed with a team of 69 employees who are located within the
regions, half of which are located in the Asian region, a third located in EMEA and the remainder in the
Americas.
Cost
Procurement decisions are based upon the total cost of ownership principles taking into consideration not
only the direct costs but also incorporating the indirect costs such as handling, inventory management,
quality assurance, administration and payment. This is monitored using our SAP enterprise resource planning system.
Sustainable Sourcing Vendors & Spend
Our annual procurement spend in FY2018 was USD 859 m, 42% of which in EMEA, 38% in Asia and the
remainder in the Americas.
Quality
Americas
EMEA
Asia
Vendors
Vendors
Vendors
Thereof 15% Direct
Thereof 26% Direct
Thereof 26% Direct
2659
Spend
USD 173 million
2308
Spend
USD 362 million
2434
Spend
USD 323 million
Within procurement, quality is managed within four areas. Conformance to specification, the indirect
benefits from the use of our products in subsequent manufacturing, internal handling of raw materials
and finally the environmental impacts, both in terms of direct in our own manufacturing, and indirect for
our customers’ manufacturing. In chemical manufacturing, clear specifications are essential - not only to
specify the intended raw material substance, but also to ensure that hazardous chemical contaminants
are specified out of the raw material. Our extensive in-house chemical knowledge allows us to determine
these specifications, within the technical grades necessary for the industries that we serve. To monitor
compliance to specifications we administer a number of standard operating procedures, dependent upon
the vendor’s historical performance and risk profile. These measures can include pre-shipment sample
analysis, application trials and normal inbound quality control checks.
Archroma has a process in place to evaluate raw material composition and their compliance to local
regulations and the Archroma raw material eco-toxicological specifications. If the raw material is found
to be deficient to the standard, the raw material product and/or supplier will be discontinued.
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