Archroma-Sustainability-Report-FY2018 - Page 45



SAFE
Supply Security
Many of the required raw materials can only be manufactured using hazardous substances and methods
that pose a high risk for human and environmental health. Welcome advances in regional and local
environmental protection has increased scrutiny at some vendors, resulting in manufacturer closures and
resultant supply shortages. To avoid supply interruptions we closely monitor our vendors to give early
warnings in the case of a potential raw material shortage. To limit our resultant exposure we have created
teams of global category procurement managers to monitor and ensure supply and to work closely with
our internal product management, innovation and manufacturing teams to ensure supply and develop
alternative strategies for single sourced raw materials. Projects are in place to identify replacement
substances for raw materials that are, for example, no longer available, require a higher specification,
or to offer more economic alternatives. In addition to this, mechanisms are in place to ensure that the
products specific to our system packages can be manufactured and are aligned to the business needs.
However for some highly specific raw material substances we currently have only one approved vendor.
We source more than 50% of direct and indirect goods and material from suppliers located in the same
country as the respective Archroma manufacturing plant. This mitigates risk in the supply chain, for
example lead-times and also supports the local industry.
Due to the nature of the specialty chemicals that we manufacture, a significant part of our feed stocks are
sourced from within India and China. Due to this high regional exposure, dedicated sourcing teams have
been set up in Thane (India) and Tianjin (China) respectively. This increases the diligence in those markets
to supplement the global procurement category managers.
Vendor selection and management at Archroma is a systematic approach based upon compliance to our
suppliers code of conduct (https://www.archroma.com/compliance).
The historical and anticipated performance, the experience as a vendor and the financial stability of the
vendor are regularly assessed to determine compliance to the supplier code of conduct. In addition,
all vendors are monitored on a monthly basis using “on time/in full” metrics for supply performance
measurement. Vendor risk assessment may introduce additional measurement criteria to mitigate supply
risk, such as the vendor safety infrastructure and dangerous goods managing capabilities.
Archroma communicates to and expects its vendors to share its commitment towards ethical business
practices, human rights and labor standards, anti-corruption and not to allow modern slavery and child
labor. All suppliers have been screened qualitatively and excluded from business relation in case of
obvious non-compliance.
In addition we engaged Ecovadis at the end of FY2018 to screen and certify our suppliers on our behalf to
gather vendor data on environmental, labor, fair business and sustainable procurement practices to identify
risks in our upstream supply chain. This will be used to steer our supplier selection from 2019 onwards.
Ecovadis will initially focus on those vendors located in the strategic supply markets of India and China.
Vendors with insufficient audit results are approached for corrective action.
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