Procurement and supply chain
A sustainable supply chain creates innovation and drives the development of new management and production methods, improves reputation and competitiveness, strengthens and maintains customer relationships, and attracts investors. Furthermore, a sustainable supply chain makes it possible to control and optimise costs and resources, which can lead to efficiency and savings in the long term.
The topic of procurement and supply chain at Arbonia comprises on the one hand the procurement management for the most commonly used materials and semi-finished goods – in other words, wood, steel, glass, and aluminium. On the other hand, the assessment of suppliers according to ecological and social criteria is also a part of this. In this context, respect for human rights in the supply chain is of vital importance. Arbonia also ensures maximum sustainability with its suppliers. Since more than 96% of used materials are sourced from suppliers in Europe, a high standard is already enshrined in law.
The group is raising awareness ecological and social factors in purchasing and is working on a company-wide standard for supplier assessment according to ESG criteria (environmental, social, governance). Starting in 2022, this assessment is to be mapped on the new e-procurement platform of the Group. For evaluation of the suppliers, external key figures (e. g. creditworthiness, risk indicators, ESG ratings) are also to be collected and combined with the internally generated data for a holistic assessment in the future. For this purpose, Arbonia decided in the reporting year to procure external ESG ratings via EcoVadis starting on 1 January 2022. The aim is to check how many suppliers and what portion of the purchasing volume is covered by an ESG assessment. Suppliers already have to guarantee that human rights are respected and, in particular, that child labour and forced labour are prevented.
In Germany, the Bundestag passed the Supply Chain Due Diligence Act in June 2021, which provides a legal framework for the responsibility of companies along the entire supply chain. The law is graduated according to own business operations, direct suppliers, and indirect suppliers. Further graduations take into account the type and scope of the business activity, the company's ability to influence the originator of a violation, the typically expected severity of the violation, and the nature of the company's contribution to the cause. The new Supply Chain Due Diligence Act is relevant for all Arbonia companies active in Germany. In the second half of the reporting year, these companies started to evaluate the concrete effects of the new legislation and initiated corresponding measures for compliance. The companies operating in Switzerland also started a comparable process to determine the implications of the counter-proposal to the Corporate Responsibility Initiative, the provisions of which went into force on 1 January 2022 and will apply for the first time in the 2023 financial year.
In addition, Arbonia prepared a Supplier Code of Conduct in the reporting year that is to be successively extended to as many suppliers as possible. In order to promote the local economy and minimise delivery routes, Arbonia prefers to procure the required materials, semi-finished goods, and products from local suppliers. In the past year, the purchasing volume of Arbonia has been around 800 million Swiss francs. Almost 65% of this was obtained from local suppliers – in other words, from companies located in the same country as the purchasing company.
Heating, Ventilation and Air Conditioning Division
Holistic view of the supply chain
In the past two years, the COVID-19 pandemic has made it clear that the topic of procurement and supply chain has numerous direct and indirect effects on Arbonia's business. The year 2021, for example, was a challenging year for procurement for the HVAC Division – with price and supply problems in all purchasing categories. The division has therefore taken the widest possible approach: The context of procurement and supply chain not only includes all direct material (all materials that enter the inventory through purchasing and procurement) but also indirect material such as tools and equipment, consultancy, and rents. The companies of the HVAC Division take care of this overall demand in the supply chain and consider it part of the value-added chain.
Increased requirements – new measures
An intensified procurement of sustainable products is a matter of course for the entire HVAC Division. A good example of this is, among other things, the pilot project for procuring decarbonised steel (with green steel certificate) for the production of steel panel radiators at the site in Platting (D). Sabiana also undertook initiatives together with its suppliers to guarantee the sustainability of the supply chain. For example, 80% of the direct expenditures are covered by supply agreements with the most important suppliers. These include ecological aspects (e. g. environmental protection, prohibited substances) and social issues (e. g. respect for human rights, prohibition of child, forced, and compulsory labour). The division checks the suppliers' positions on the regulations concerning prohibited materials annually. In addition, Sabiana has initiated a data survey to check the positions of the suppliers on the topic of conflict minerals (3TG). In regard to waste management, the company has concluded a formal agreement with the suppliers to formalise all aspects (disposal licenses, information on the type, volume, and costs of the waste etc.). At Vasco in Dilsen (BE), it was possible to reduce the number of trucks used through a consistent optimisation of the logistics and the logistic partners. In the packaging area, Sabiana launched programmes for different products in which packaging has a great effect on the costs and disposal. For example, the company is involving suppliers in an attempt to introduce multi-use containers, replace conventional wooden pallets with corrugated cardboard pallets, and redesign component packages to avoid waste.
Clear responsibilities in regard to procurement and supply chain
Products are to be developed that can be manufactured sustainably, in close cooperation with the customers and the marketing and sales departments. The main goal of Sabiana in 2022 is certification in accordance with ISO standard 14000, which evaluates the effects of the supply chain on the environment. The company intends to achieve this goal through the definition of clear competences and responsibilities, regular exchanges of information, as well as status reports and communication of the key performance indicators (KPI). In the reporting year, Sabiana monitored the progress, results, and achievements of smaller projects (supply agreements, RoHS, REACH, 3TG, etc.) monthly and properly registered them with status reports. In this context, the head of logistics has the goal of monitoring transport costs monthly and optimising them in relation to the value of the transported goods.
The companies in the Doors Division work according to the specifications, values, and goals of the Group along the entire value-added chain. Suppliers from the EU or the EEA are preferred; ideally they are businesses from the same country as the producing company. This not only shortens transport routes and minimises environmental pollution but also makes it easier to control the production modalities than in a partnership with suppliers from far-away regions. In the context of the supply chain, the companies of the division pay attention to a consistent control of the wood origin as well as a continuous monitoring of the chemicals used, among other things. This allows the division to avoid toxic substances and replace them with less problematic materials. In addition, the company aims to gradually transition to ecological packaging materials such as cardboard and paper instead of plastic and polystyrene, in addition to avoiding or recycling packaging waste, in order to make the sold products as environmentally friendly as possible along the entire supply chain. In Germany, for example, this is ensured by the consistent participation of all companies and customers in the dual system (the Green Point). This system helps ensure that consumers separate waste, while companies pay a fee for the volume of packaging materials (e.g. vinyl, paper) of their products. This is to ensure that valuable raw materials are returned to circulation and the cost of this is already borne in advance.
Targeted measures for success
Observing criteria in the area of procurement and supply chain is decisive, since audits are also increasingly being carried out by customers. The customers of Invado, for example, regularly check what materials the company uses to manufacture doors and frames and from where raw materials come. To meet the high demands of customers, the division prefers to work with suppliers who have proven themselves for many years.
By avoiding or selling production waste instead of disposing of it, the division wants to reconcile its goals of securing earnings and increasing profit with environmental protection and resource conservation. The effectiveness of the approach taken is checked through continuous tracking of the target indicators. To ensure that the criteria regarding procurement and supply chain are observed, all companies of the division carry out internal as well as external audits in the areas of quality, social issues, and energy efficiency. For this reason, a strategic category management was further expanded in the division during the reporting year. This continuously collects and evaluates market information to react to potential risks in the supply chain early on.
In 2021, Kermi and Bekon-Koralle were able to install a completely new packaging concept with a highly automated plant to optimise resources further. This reduced packaging materials by the desired amount (shrink film by 90%, polystyrene by 40%, and wood by 67%). By the end of 2022, the Glass Solutions Business Unit will also have achieved the goal of completely film-free packaging. With the selection of new suppliers, it was also possible to minimise the transport routes and thus the CO2 emission.
In logistics, the material supply in cooperation with local carriers is an important building block for operating efficiently and at optimal cost. The so-called milk run concept is a concept of procurement, production, and distribution logistics for providing material as needed within companies and between companies. When a carrier supplies material to the division, it will also often take goods for delivery to customers. Analogously, the division carries materials from suppliers to the production plant after customer deliveries. This prevents empty trips.
Increasing vertical integration
With the acquisition of Glasverarbeitungsgesellschaft Deggendorf GmbH (GVG), a subsidiary of the Saint-Gobain Group and one of the leading glass processing companies in the segments of single-pane safety glass and laminated safety glass in Germany, the Glass Solutions Business Unit integrated the processing of its most important raw material, glass, into its own production processes, thereby increasing its vertical integration. This makes it possible to flexibly optimise the procurement times for glass and considerably reduce process costs in handling. The division is also reducing its dependency on external partners, also in respect to the issue of sustainability: The division now has the scope to directly influence the parameters for its economic success as well as for the sustainability of one of its most important raw materials – glass.
Challenges in the supply chain
As a result of the COVID-19 pandemic, material procurement was also a challenge at RWD Schlatter. Thanks to the outstanding efforts of the procurement team, the company was always able to supply its customers in time. The desired digitisation and modernisation of the procurement and supply chain area are still the focus of RWD Schlatter's efforts, although the resources available for this are sometimes a challenge. In a similar way, the use of a warehouse management system at the Glass Solutions Business Unit was able to contribute to an efficient processing of deliveries.
At Invado, it was possible to maintain the standards specified by the customers in the reporting year. The consistent maintenance of raw material deliveries allowed maximum continuity in production – and thus a punctual delivery of the orders. Here too, problems with the availability of materials and raw materials as well as the related high prices proved to be the greatest challenges.