WACKER’s procurement volumes increased substantially in 2010, primarily due to robust product demand. Volumes are broken down into raw materials, other services, and investments. WACKER spent €2.80 billion on raw materials, other materials, and services (2009: €2.34 billion), even surpassing 2008’s level. 2010’s figure includes investment-related procurements of €575 million (2009: €652 million). Our procurement rate – the volumes purchased for raw materials, services and other materials in relation to sales revenue – was 59 percent (2009: 63 percent). In 2010, we procured some 1,300 different raw materials, and numerous technical goods and services for plant-engineering and maintenance-related purposes.
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Procurement Volumes (including Procurement for Capital Expenditures) |
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Higher Quantities and Prices Raise Energy and Raw-Material
Procurement Volumes
Procurement volumes for energy and raw materials rose in 2010. About two-thirds of the increase stemmed from higher quantities and about one-third from higher prices. We registered the sharpest price rises for petrochemicals – for methanol, ethylene and vinyl acetate monomer (VAM). Overall, the increase in energy and raw-material prices amounted to €105 million.
In 2010, we concluded new supply contracts for key raw materials, thus securing our future needs. In the case of silicon, WACKER negotiated and signed one three-year and one high-volume four-year contract. For methanol, we have one new three-year and two two-year contracts in place. We concluded a multiyear contract with a supplier for the delivery of vinyl acetate monomer (VAM). The contract covers a large part of our externally-sourced VAM. To better counter supply-market volatility, we negotiated even more flexible price and quantity conditions. As for natural gas, we improved purchasing terms and promoted competition by putting out partial quantities to tender and reviewing prices with our main supplier. Through this approach, we achieved a price reduction of about 10 percent.
As the example of gas shows, our Raw Materials Procurement department stimulated greater competition among suppliers. It also played a pivotal role in the backward-integration project for silicon metal and the acquisition of the silicon-metal plant at Holla. Assuring raw-material supplies is one this corporate department’s key tasks.
Technical Procurement & Logistics
Volumes also rose at WACKER’s Technical Procurement & Logistics department. Here, too, strong demand lifted prices. The increases introduced by service providers and suppliers were particularly high in the areas of logistics and packaging.
During 2010, WACKER concluded major framework contracts for piping construction and with temporary-employment agencies. On the logistics front, we put out to tender and negotiated overseas shipments to China, South Korea and the USA.
We expanded strategic-procurement management in 2010. Now, our Project Procurement unit provides assistance for large-scale investment projects worldwide. To reduce our dependence on individual suppliers, we launched 20 projects to increase supplier competition. We now systematically review supplier risks on a worldwide scale. Amid high demand for goods and services, 2010’s market environment favored suppliers. As a result, WACKER’s total procurement success declined to 11.7 percent, compared with 16.9 percent in 2009. After Siltronic expanded its procurement activities in China, South Korea and Taiwan, it has been working closely with new suppliers since 2009.
Sharp Rise in Number of Electronic Procurement Transactions
The number of electronic procurement transactions rose markedly. Out of a total of over 570,000 orders, some 410,000 (over 70 percent) were processed electronically, compared with 340,000 in 2009. Because large-scale, individual orders increased in size, though, the total share of electronic orders remained at the prior-year level. Procurement via e-catalogs rose further, with the number of suppliers using them climbing from 71 to 104. There are over 1.4 million e-catalog articles and, in 2010, over 160,000 orders were placed using this system.
At our 15th Supplier Day, which was held in Nünchritz and attracted over 220 suppliers, three of our partners were presented with special commendations – GfE (in the Engineering Services category), Köhler (Technical Services) and TS Bau (as Best Local Service Provider). At our 12th Shipping Day in Burghausen, Leo Prünster won the Safest Shipper award and Hinterberger (tankers and silos) was commended as Best Shipper. Supplier evaluations are a further, useful tool. In 2010, WACKER evaluated about 400 suppliers.
Burghausen’s Shipping Volume almost Matches 2008’s Record
In 2010, the number and volume of shipments from Burghausen approached the record levels of 2008. Our logistics hub shipped some 700,000 metric tons of finished products to customers (2009: 600,000 metric tons). In September 2010, it set a new all-time monthly record by dispatching 39,000 pallets. Up 15 percent, the annual number of shipments almost reached 43,000 (involving over 38,000 truck loads and 10,500 overseas containers). Thanks to our container center at the plant, we could dispatch products reliably to customers despite the soaring number of shipments.
Given our high transport volumes, we had to revise the logistics structures of many sites. At Nünchritz, for example, we successfully implemented our logistics strategy for the Poly 9 building site. At Burghausen, we started planning a new freight gate. Its purpose is to greatly facilitate incoming and outgoing freight and speed up throughput times at the plant. In addition, WACKER POLYMERS adopted a new strategy for raw-material supplies from ports in northwest Europe.