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Procurement—Programs & Actions
Procurement Operations
Regional procurement operations teams aligned with our businesses focus on the day-to-day interaction with the businesses and execution of work at site locations. The procurement and business operations teams work together to manage local working conditions and needs in accordance with the communities in which the businesses operate.
The teams focus on managing local supply and contractor relationships, looking for opportunities to promote local and diverse suppliers. They also work to implement sustainable programs with suppliers at the location level, and they manage local contractors to help ensure appropriate contractor safety and performance at the location level.
We also focus on appropriate management of the environment by our supply base. Although it is difficult to control all aspects of the business model of our supply base, we work with our suppliers across all our business lines to eliminate or reduce packaging waste, reuse containers and packages where feasible, and recycle all materials where reuse is not an option.
We also work with our supply base to minimize the use of energy across the supply chain by developing tools to baseline their current processes; determining if there are specific steps available to eliminate waste, such as consolidating shipments; and modifying order cycles to drive efficiency. Finally, we ensure that waste materials are always handled appropriately and in full compliance with the laws, and that our supply base adheres to our intent to manage all resources and materials with a cradle-to-cradle philosophy.
Procurement Center of Excellence
Our Procurement Center of Excellence (COE) focuses on cross-region opportunities to drive synergies and value to the entire organization. The key sustainability role within Procurement, the director of supplier quality and sustainability, is within the COE.
The COE team supports the overall sustainability program, which includes compliance and performance, people management, supplier management, global competitive sourcing processes, online bidding tools, tracking and reporting for the minority supplier program, and key initiatives like strategies and plans for Asian bird flu procurement and location response. The center’s staff works collaboratively with the operations, commodity, and other Alcoa business functions to define and establish methods to enhance procurement sustainability practices.
Commodity Management & Councils
We have an established commodity management organization consisting of four global commodity councils for direct materials, one global indirect materials and services team, and three regionally focused indirect materials and services teams.
These councils have executive business sponsors and steering teams comprised of business leadership to drive socially and environmentally responsible supply market strategies that support Alcoa values and sustainability programs. For example, the global indirect materials and services team, which covers services and commodities that are facility-based, has a specific team dedicated and focused on environment, health, and safety supply market relationships. The Energy Council, which covers natural gas and non-smelting energy requirements, works to leverage the relationships and deep sustainability programs of its suppliers in the energy space to benefit Alcoa and the communities in which it operates.
We have defined commodity strategies that incorporate our business requirements to ensure we are making socially and environmentally responsible supply decisions. Also embedded in our commodity management approach is our specific strategic sourcing process for going to market for goods and services. The process consists of the following steps:
- Assess opportunity and form the team;
- Collect and analyze internal data;
- Converge internal and supplier market data;
- Develop strategy;
- Develop request for proposal and select supplier;
- Negotiate and implement; and
- Manage supplier relationship.
This sourcing process has critical activities to evaluate the use of key Alcoa procurement strategies—supplier diversity, global competitive sourcing, online bidding, and more—that support our overall sustainability requirements and programs. This process helps ensure that our businesses are making supplier selection decisions that are in accordance with Alcoa Business Guidelines and work practices.
One component of our sourcing strategy is to build sustainability in the supply chain by setting extremely high safety expectations for suppliers utilizing our internal safety standards as a guideline. We also use established safety protocols, such as the Occupational Health and Safety Administration (OSHA) reporting requirements in the United States, during the supplier safety pre-qualification process. Our insistence that our suppliers meet our very rigorous safety requirements has substantially impacted the safety performance of many of our suppliers and has contributed significantly to general workplace safety in many of the communities where we operate (see Iceland case study).
Procurement Sustainability
We are an active participant in the Institute for Supply Management’s Committee for Social Responsibility, establishing and implementing principles for community, diversity, environment, ethics, financial responsibility, human rights, and safety into the supply management function.
We have built a robust review process to ensure new suppliers adhere to our human rights policy. The process includes survey questions that address human rights and an onsite audit to ensure the supplier’s employees are there willingly and are not underage. Our procurement organization also helps ensure our safety value is driven into the organization and extends to our suppliers, and we are working to encourage diverse companies to develop relationships with us.
Global Competitive Sourcing
Designed to help lower our cost structure, this strategy involves sourcing products and services from countries and suppliers that meet our quality levels but at lower total costs. We believe this is critical to keep our facilities viable and operating in those communities. The jobs we generate, taxes we pay, and community investments we make remain because of our cost competitiveness.
Regional commodity sourcing teams in Asia, Brazil, Eastern Europe, and Mexico are responsible for helping our procurement specialists in Australia, North America, and Western Europe identify competitive suppliers. This involves first obtaining high-level information on individual suppliers followed by a more detailed survey and onsite audit for those having high potential and interest.
Supplier Diversity Program
Our supplier diversity program encourages diverse companies to develop relationships with Alcoa, creating wealth within the minority community and throughout Alcoa’s value chain. We have classified our suppliers by diversity status, developed a supplier diversity scorecard, and implemented a system to research opportunities for new relationships with diverse suppliers. We are also an active member of the National Minority Supplier Development Council in the United States.
Beginning in 2006, supplier diversity was made part of our seven-step strategic sourcing process. To help our global commodity councils identify diverse suppliers, we are beginning to conduct one-day onsite matchmaking events for potential suppliers to meet with commodity council members. We are also working with diverse suppliers to help them meet our requirements and grow so they can address more of our procurement needs.
Online Sourcing
Through the use of online sourcing to purchase goods and services, we have reduced procurement costs, leveraged our global purchasing power, and created a means for suppliers to broaden their visibility within Alcoa.
More than 860 Alcoa buyers worldwide have been trained to use the tool, where bidders compete online for business by submitting offers with immediate feedback on their position in the event. Suppliers have indicated the tool has made the sourcing process more transparent and allowed some vendors previously not considered to routinely compete for Alcoa business.
Online sourcing is not always the best go-to-market strategy, however. We use the tool to facilitate negotiations only when it can be effective, and we do not use it with our strategic suppliers.
Case Studies
Management Course Helps Brazilian Suppliers Keep Pace with Development
Alcoa Supplier Helps Employees Help Themselves
Global Sourcing Project Identifies Low-Cost Mold Supplier
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