Sustainability report 2020 FINAL - Flipbook - Page 88
For Archroma, sustainable sourcing is critical as our vendor network has a significant 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 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 objectives of 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.
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
our specialty chemical manufacture and multiple manufacturing sites located across multiple regions and
continents, raw material vendors are very diverse in nature and location. Archroma sources over 7 000 raw
materials for our direct purchasing needs from more than 1 300 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 & sustainability.
Ownership of procurement is by the Chief Procurement Officer and by the supply chain organizations of the
business clusters of Archroma. The procurement operation is staffed with a team of 70 employees who are
located within the regions, half of which are located in the Asian region, a third in EMEA and the remainder
in the Americas. Targets for sustainable sourcing are broken down to individual targets of procurement
team members for FY2021.
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 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
Sustainable sourcing Vendors & spend
Our annual procurement spend in FY2020 was USD 714 m, 43% of which was in EMEA, 30% in Asia and the
remainder in the Americas.
USD 196 million
USD 304 million
USD 215 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 impact on our own manufacturing, and
indirect for our customers’ manufacturing. In chemical manufacturing, clear specifications are essential not only to specify the intended raw material required, 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 requirements 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.