10.2 Operations

PROCUREMENT

SUPPLY CHAIN (GRI 102-9)

Corporate Purchasing is responsible for procurement in all production plants worldwide (except the USA) and manages the procurement organisation through a team of lead buyers who are strategically responsible for various material groups.

Geberit’s production processes entail a high in-house production depth, i.e. it largely purchases raw materials and semi-finished products with a high share of raw materials. As such, material costs constitute a relatively low share of Geberit’s sales.

The raw materials and semi-finished products primarily come from suppliers in Western Europe (79.1% of procurement value). The share of the procurement volume from Eastern Europe amounts to 10.3%, that from Asia 8.5%, from America 1.8% and from Africa 0.3%. Owing to the upstream purchasing in the supply chain and high level of in-house production as well as the very high share of Western European suppliers, the general risk profile of the supply chain is relatively low. The active pursuit of a dual source strategy – i.e. the procurement of a resource from two providers – serves additionally to reduce dependencies.

In 2018, Geberit procured raw materials (28.5%), semi-finished products (42.6%) and finished products (28.9%) with a procurement value of CHF 920 million (previous year CHF 847 million) from some 1,830 suppliers around the globe.

MANAGEMENT APPROACH PROCUREMENT

Geberit’s suppliers are obligated to maintain comprehensive standards. The basis for the cooperation is the Code of Conduct for Suppliers, that was amended in 2016 and translated into a further 13 languages. The Code is aligned with the principles of the UN Global Compact and is binding for every new supplier. It comprises specific guidelines on quality and meeting environmental, labour law and social requirements and sets out compliance with human rights. Upon request by Geberit, the supplier must prepare corresponding records in order to demonstrate compliance with the standards of the Code and make these available at any time. Should the supplier fail to comply with the regulations set out in this Code, then corrective measures are taken wherever possible. Failure to comply on the part of the supplier is regarded as a serious obstacle to the continuation of the business relationship. If the supplier does not correct this non-compliance, Geberit can terminate the cooperation.

When evaluating suppliers, Geberit strives to achieve the greatest possible degree of transparency. All new and existing partners are thus assessed by means of standardised processes and according to the same criteria: company as a whole, quality, sustainability, price, procurement chain, delivery reliability, production and technology. As a rule, the selection of suppliers is required to include a quality audit covering clarification on environmental and occupational safety issues. Where an audit reveals inconsistencies in these criteria, an additional, in-depth audit is conducted.

Supplier management has integrated a risk management approach on environmental and occupational safety that is based on the division of suppliers into risk classes – depending on the production location (country) and type of production process. In 2017, material groups that had been added due to the acquisition of Sanitec were subjected to systematic auditing and included in risk management. In addition, the classification of existing material groups into certain risk categories was reviewed. In the reporting year, 179 existing suppliers were identified in the highest risk category which corresponds to around 8% of the procurement value of Geberit. A systematic planning and performance of audits is conducted for these suppliers. To ensure neutrality and the expertise required for the audits, Geberit also works with an external partner. This procedure has been carried out for years and has proven effective, and makes an important contribution towards enhancing credibility in supplier management. Any shortcomings exposed by audits give rise to sanctions. As a rule, a deadline is imposed for remedying the situation.

For further information, see Business Report > Business and financial review > Financial Year 2018 > Logistics and procurement.

ASSESSMENT OF NEW SUPPLIERS BASED ON SUSTAINABILITY CRITERIA (GRI 308-1 / GRI 414-1)

All new suppliers undertake to comply with the Code of Conduct for Suppliers and hence also to international standards governing environmental protection, labour practices and human rights. Since 2017, an Integrity Line has also been available to suppliers for anonymously reporting irregularities in the procurement process. No cases were reported in the reporting year.

SUSTAINABILITY-RELATED IMPACTS IN THE SUPPLY CHAIN (GRI 308-2 / GRI 414-2)

By the end of 2018, a total of 1,470 suppliers (previous year 1,379) had signed the Code of Conduct for Suppliers. This equates to over 90% of the total procurement value. Among the top 200 suppliers, the share of companies that have signed is 98%.

In 2018, five third-party audits were carried out at suppliers in China and Ukraine. The results showed that the majority of occupational safety and environmental standards are complied with. Appropriate corrective measures are agreed in cases of non-compliance.

Only in a few justified exceptional cases are there plans to impose complete regulations on the second tier and third tier in the supply chain by getting them to sign a Code of Conduct, as this would result in a disproportionately high level of additional administration with little added benefit. Geberit pursues a pragmatic yet effective approach. When auditing suppliers, an analysis of the most important second tier suppliers is included in the risk analysis and the audit investigations on site. At the end of the day, Geberit’s goal is modern supplier management, where the relationship with the supplier is actively managed and sustainability risks in the supply chain are jointly analysed.

PRODUCTION

LOGISTICS

MANAGEMENT APPROACH LOGISTICS

Group logistics is being further standardised and harmonised. The logistics centre in Pfullendorf is the hub for almost all Geberit sanitary technology products. With a view to future growth and the continued optimisation of existing logistics processes, the decision was made in 2014 to further expand the capacities of this centre. The commissioning of the new buildings and infrastructures, which also include a storage area for long goods (pipes of up to six metres in length), was carried out as planned in the first quarter of 2017. The distribution of the Mapress pipe range, which had been operated separately at the production site in Langenfeld (DE), was subsequently relocated to Pfullendorf in the second quarter of 2017. As a result, the distribution of Geberit’s sanitary technology is now coordinated globally in Pfullendorf and handled there for all markets. Man and technology work hand in hand in the new logistics centre. Touchscreens, glove scanners, integrated voice control systems and built-in lift tables as well as lifting devices make the work efficient, safe and ergonomic. The new building brought about a further optimisation of logistics processes.

The logistics infrastructure of the ceramic business comprises 13 distribution sites of varying sizes across Europe. The integration of the ceramics business into Group logistics continued in 2018. The Geberit Logistics Operation System (GLOS) was successfully introduced. GLOS is the standard system for logistics and is used to continuously improve business processes.

Geberit does not have its own transport fleet, having outsourced this to external transport service providers. Intercompany and distribution logistics play a major part in Geberit’s environmental impact, amounting to a significant proportion of the total figure. Cooperation with the transport service providers is therefore of key importance. Partners agree to actively support Geberit in its efforts to use energy and packaging material efficiently and to reduce emissions. Furthermore, the partners support Geberit by providing the data needed for the environmental reporting. Developed in 2010 and continuously expanded since then, the logistics calculator facilitates the annual capture of data on the vehicle fleet composition, transportation performance and fuel consumption of all transport service providers, as well as the preparation of the eco-balance.

For further information, see Business Report > Business and financial review > Financial Year 2018 > Logistics and procurement.

For information on the eco-balance of logistics, see GRI 302-2.

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