Procurement and Logistics

WACKER’s procurement volumes continued to increase in 2012, due to gains in both quantities and prices. Volumes are broken down into raw materials and energy, and into services, materials and equipment, with a high proportion for investments. WACKER spent €3.49 billion (2011: €3.42 billion) on raw materials, other materials and services. The 2012 figure includes investment-project-related procurements of €907 million (2011: €870 million). Our procurement rate – the volumes purchased for raw materials, services and other materials in relation to sales revenue – was 75.4 percent (2011: 69.6 percent). In 2012, we procured some 1,300 different raw materials, and numerous technical goods and services for plant-engineering and maintenance-related purposes. Our suppliers number 9,900 (8,800 in the Technical Procurement & Logistics department and 1,100 in Raw Materials Procurement).

Energy and Raw-Material Procurement Volumes at Prior-Year Level

At €1.64 billion, the Group’s energy and raw-material procurement volumes remained at the prior-year level. We purchased less silicon metal at lower prices. Similarly, our demand for vinyl acetate monomer (VAM) dropped, and VAM prices were down. The prices of ethylene and methanol, in contrast, were higher than a year earlier. Gas prices in 2012 were also up year on year. Unlike in 2011, we were not weighed down by increased raw-material and energy prices. Instead, we registered a slightly positive price effect of about €5 million.

Because the markets for the raw materials we need are so liquid, new procurement contracts are often short-term in order to achieve greater price flexibility.

We signed a new three-year (2013–2015) contract for methanol. Our supply of vinyl acetate monomer (VAM) was secured with a new contract in China and multiyear contracts in the USA and South Korea. Existing contracts in China, South Korea and the USA have been extended. We had already secured our medium and long-term supply of ethylene in 2011. Having phased out our own acetic acid production, our procurement needs for this raw material have risen and are covered by multiple contracts. For silicon, we entered into a number of new and highly flexible contracts at attractive terms. The supply of the silicon we need for our future polysilicon production in Tennessee is secure. The contract is linked to the start-up of production and has a three-year term.

The supply of gas for the Burghausen site has been contractually secured for the coming years by means of a new contract concluded at attractive market terms.

Technical Procurement & Logistics

The order volume at the Technical Procurement & Logistics department remained at the prior-year level. Reduced demand for technical materials and services meant that there were no further price increases. Delivery times are much faster. WACKER – including Siltronic – issued a total of 400,000 orders worldwide. At Technical Procurement & Logistics, 10 percent of our suppliers cover 90 percent of our procurement volume.

In 2012, we concluded major framework agreements in IT, logistics and engineering, as well as for security services. Invitations for bids are mandatory at WACKER for procurement volumes of €25,000 or more. Our Project Procurement unit handled 20 projects at various stages of planning in 2012. The four largest were the polysilicon expansion projects in Nünchritz (Germany) and Tennessee (USA), as well as the polysilicon purification facility and the new lab building at Burghausen (Germany).

During investment projects in the USA, Asia and Europe, we worked with a large number of qualified local suppliers. We shall continue this kind of collaboration because it will deliver the benefits of a global procurement market for WACKER and enhance competition with our long-standing suppliers. Our aim here is to optimize our procurement costs even further.

Systematic review of supplier risks is an important tool at WACKER for correctly evaluating our supplier relationships. Reviews are conducted using analyses from rating agencies, our own supplier assessments and, increasingly, direct contact with our partners. In 2012, we ourselves conducted 374 supplier assessments. We also approved, and entered into contracts with, new suppliers in the areas of assembly and logistics. For example, we collaborate with 48 partners in the field of intra-Europe transport.

Electronic Procurement Transactions Continue Rising

Electronic procurement is becoming increasingly important for WACKER. Once again, the share of electronic procurement transactions has risen. The reasons for the increase include the expansion of automated processes to more WACKER sites, process landscape changes in IT and in purchasing, the outsourcing of inventory warehousing to service providers, and the introduction of new e-catalogs. Out of a total of around 636,000 orders, some 500,000 were processed electronically, compared with 450,000 in 2011. Broken down, these figures account for some 80 percent of all purchasing transactions in Germany, over 45 percent in the USA, and 15 percent in China. Procurement via e-catalogs also rose, with the number of suppliers using them climbing by 40 to 190. There are over 1.7 million e-catalog articles, and about 205,000 orders were placed using this system (2011: 180,000).

Electronic Procurement Orders

Direct Contact with Our Suppliers

At WACKER, we have always valued direct contact with our suppliers. More than 200 companies participated in our 17th Supplier Day in Nünchritz. Anton Paar (an Ostfildern-based firm) was recognized for innovative products and services, and for its flexible, customer-oriented service. Max Streicher (a company based in Deggendorf) received an award for superior service quality at numerous WACKER sites. At WACKER’s Logistics Day in Burghausen, the honors for 2011 went to the following companies: Hohenlinden-based Leo Prünster as best shipping specialist, Schütz (based in Seiters) as best packaging supplier, and DB Schenker as best logistics partner. WACKER values its long-term collaboration with suppliers, and at the same time, focuses on reducing its dependency on individual ones. In Germany, which remains our  argest procurement market, we cooperate with some 6,900 suppliers. The average length of business relationships between Technical Procurement & Logistics and its suppliers is 10 years.

Shipping Volume Rises

Shipping volume increased slightly year on year, by approximately 4 percent. Our Burghausen logistics hub shipped some 740,000 metric tons (2011: 715,000 metric tons) of finished products to customers. That volume involved about 38,000 truck loads and 11,200 overseas containers.

Transport Volumes

New Freight Gate at Burghausen Plant to Facilitate Shipping

We are responsible for all of the project logistics entailed in the construction of the new polysilicon facility at Charleston (Tennessee, USA). The infrastructure that was put in place will be used during plant start-up, and for subsequent supply and waste-disposal operations. Logistics plans for the Nünchritz and Zhangjiagang sites have been implemented in accordance with the respective local requirements. Planning for a direct connection between the Burghausen plant and the new public freight terminal (combined road/rail) is concurrent with terminal construction, which commenced in December 2012. The medium-term plan is to upgrade this connection into a new freight gate, which will facilitate incoming and outgoing traffic and speed up throughput times at the plant.