Procurement and Logistics

In 2009, WACKER’s procurement volumes did not reach the prior year’s figure due to the sales downturn. Volumes are broken down into raw materials, other services and investments. On the raw materials and services front, volumes amounted to €1.64 billion (2008: €1.89 billion). Volumes procured for investment purposes reached €652 million (2008: €767 million). Our procurement rate – the volumes purchased for raw materials, other services and investment purposes in relation to sales revenue – was 63% (2008: 61.8%). In 2009, we procured some 1,300 different raw materials and numerous technical goods and services for plant-engineering and maintenance-related purposes.

WACKER’s reorganization of procurement activities in 2008 has paid off. By creating a Raw Materials Procurement department, we have been able to improve purchasing terms, procurement reliability and supplier relations. One of Raw Materials Procurement’s key tasks in 2009 was to renegotiate the terms of fixed-quantity supplier agreements (given our lower sales volumes) and, thus, reduce the committed volumes. This task was particularly dominant in the first half of 2009.

Lower Energy and Raw-Material Costs Positively Influence Earnings

The most positive effect for WACKER came, however, from the lower prices for our key raw materials. In some cases, market prices declined substantially. Plus, Raw Materials Procurement expanded its list of competing suppliers. In 2009, only silicon and electricity prices increased slightly against the previous year – because certain quantities were still subject to a higher price level agreed in 2008. Overall, 2009’s price-adjusted procurement volumes for key raw materials and energy decreased by €136 million.

Other key issues for Raw Materials Procurement included: value-added strategies; securing quantities and prices in good time for select raw materials; and ensuring that additional raw materials suppliers meet WACKER quality requirements, thereby enabling us to influence pricing via increased competition and to boost supply security. In 2009, we also optimized contract management.

Our Technical Procurement & Logistics department (responsible for buying technical goods and services) renegotiated many of its framework agreements in response to the changed economic environment. Together with suppliers, we sought ways to find a mutually satisfactory solution despite lower order volumes. As a result of the economic crisis, WACKER profited from price reductions, especially for steel products, packaging and logistics.

In 2009, we increased our efforts in strategic procurement. This enabled us to expand the bidder pool per tender, generate more competition and boost our procurement success. In 2009, our technical goods and services purchasing team sent 12% more inquiries to suppliers. Our procurement success rose from 8.7% in 2008 to 16.9% in 2009.

At the same time, we further optimized our purchasing processes. Starting 2009, suppliers have been able to self-register on WACKER’s website. We also improved procedures for small orders, order approval, surety management, and complaints processing. To better guard against supplier defaults, we introduced a risk monitoring system, whose results will be depicted in SAP.

WACKER attaches great importance to collaborating with suppliers, especially when streamlining cooperative efforts, ensuring supply security, and exchanging information about future needs and new developments within the procurement process. At our 11th “Supplier Day” in Burghausen, we welcomed about 240 technical goods and services suppliers. Our “Supplier of the Year” award went to two companies: Bilfinger + Berger for outstanding project processing, and Elektro Kreuzpointer for top product quality and innovation. We also perform supplier evaluations – a further tool to assess and optimize our supplier relationships. In 2009, WACKER evaluated some 380 suppliers.

380 Suppliers Evaluated in 2009

Although the number of orders decreased in 2009, the percentage of electronically processed ones rose. Overall, around 340,000 orders were processed electronically (2008: 380,000), accounting for some 76% of all orders. Electronic processing accounted for around 35% of procurement transactions at Technical Procurement & Logistics. Our team employs channels such as ELEMICA (the chemical industry’s e-commerce platform) and SAP’S Supplier Self-Services feature, as well as over 80 different e-catalogs. We have our own “e-auctionhouse” platform to handle online auctions and requests for bids, and we use external platforms for purchasing logistics services. Standardized and automated data exchange has many advantages. It saves costs, enhances data quality and thus reduces errors. Plus, transactions are more accurate, faster and more reliable.

The economic crisis posed particular challenges for logistics in 2009. We realigned our logistics processes with the altered demand situation. For example, many of our customers were ordering smaller quantities than normal, which made order processing more complex, necessitating greater flexibility. We not only managed to streamline organizational structures in line with demand, but also optimized equipment usage, realigned shift work, and introduced temporary short-time work in some areas. In 2009, our logistics hub in Burghausen shipped out finished products totaling some 600,000 metric tons – equating to some 35,000 truck loads and 9,900 overseas containers.

To enhance the efficiency of transport management, we continuously analyze our logistics processes. In 2009, we pressed on with improvement projects – in part due to the economic downturn. For example, we introduced innovative work-time models, which will enable us to mitigate shipping fluctuations better in the future. Furthermore, we integrated our operational supply logistics (such as engineering warehouses and incoming goods centers) into our overall logistics structure.

As part of our dispersion and polymer-powder production ramp-up in Nanjing, we opened a new finished-product warehouse and implemented an integrated logistics strategy. In selecting our logistics partners, we have access to a portfolio of globally active companies and strong local partners, so that we can utilize each of their strengths in our various distribution regions.

Integrated Logistics Strategy Launched with Production Ramp-Up at Nanjing Site