WACKER’s procurement volume decreased in 2016, primarily due to substantially lower investment spending and more favorable raw-material prices. Volumes are broken down into raw materials and energy, and into services, materials and equipment. WACKER spent €3.33 billion (2015: €3.66 billion) on raw materials, other materials and services. This figure includes investment-project-related procurements of €428 million (2015: €834 million). Our procurement rate – raw materials, services and other materials as a percentage of sales – was 62 percent (2015: 69 percent). In 2016, we procured around 1,300 different raw materials as well as numerous technical goods and services for plant engineering and for maintenance. Our suppliers number about 11,500 (10,500 at Technical Procurement & Logistics and 1,000 at Raw Materials & Energy).

Energy and Raw-Material Procurement Volumes Slightly Below Prior-Year Level

At €1.64 billion, the amount spent by the Group to procure energy and raw materials was down 5.2 percent (2015: €1.73 billion). While the volumes procured rose by a mid-single-digit percentage over 2015, average procurement prices for raw materials and energy decreased by more than 10 percent year over year. The drop in the oil price also had the effect of reducing the prices we paid for our raw materials ethylene, acetic acid and vinyl acetate monomer in 2016. The increase in exports of silicon from Brazil to North America and Europe allowed us to source the material at lower prices. Energy prices, especially the price of natural gas, had also declined in the previous year.

In 2016, the European Commission approved the reductions of surcharges and taxes on electricity prices granted to energy-intensive companies in Germany. This has helped lessen regulatory uncertainties for WACKER as well.

Procurement Volumes (incl. Procurement for Capital Expenditures)

Technical Procurement & Logistics

The Technical Procurement & Logistics department’s invoice volume was some 12 percent below the prior-year level due to lower investment spending. Delivery times were at the prior-year level. At Technical Procurement & Logistics, 10 percent of our suppliers cover 90 percent of our procurement volume.

In 2016, we signed major multi-year master agreements in particular segments such as logistics and technical services. The initiative to reduce dependence on individual suppliers continues to show measurable results and is being expanded. Last year, our Project Procurement unit handled 15 projects at various stages of planning. The largest of these were the completion of the polysilicon expansion project in Tennessee and the new dispersions reactor in Kentucky (both USA).

Systematic review of supplier risks is an important tool used by WACKER for properly evaluating our supplier relationships. Reviews are conducted using analyses from rating agencies, our own supplier assessments and, increasingly, direct contact with our partners. Technical Procurement evaluated about 350 suppliers for 2016.

In Germany, which remains our largest procurement market, we work with some 6,500 suppliers. The average length of business relationships between Technical Procurement & Logistics and its suppliers is ten years. About 300 companies attended the 2016 Supplier and Logistics Day in Burghausen.

Shipping Volumes Up

Shipping volumes rose year over year. The Group’s largest logistics hub, Burghausen, increased its shipping volume by about 3 percent to around 825,000 metric tons (2015: 800,000 metric tons). The number of truckloads and overseas containers rose slightly, to 43,000 and 14,400, respectively.

WACKER is a member of the Together for Sustainability procurement initiative. The goal of this initiative is to establish a standardized, global program for responsible procurement of goods and services in the chemical industry and to raise the ecological and social standards of suppliers.