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Anglo American local procurement

Jon Samuel, Head of Social Performance at Anglo American, discussed how we can use local procurement to grow the economies where we operate

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Anglo American local procurement

  1. 1. Local Procurementin Anglo AmericanJon SamuelHead of Social Performance, Anglo American6 March 2012
  3. 3. DEFINITIONSLocal Procurement: relationship between location of supplier andlocation of recipient of goods/ services. Divided into 3 levels: Supplier registered or based within National the same country as the operation Supplier registered or based within Provincial the same province / region / state / territory as the operation. X Supplier registered or based within Localised the same immediate area as the operation.Plus additional criteria depending on country
  4. 4. SUPPLY CHAIN CONTEXT• Procurement budget of $10 billion+ per annum, about 75% in emerging markets.• Equivalent to about 100 x annual social investment budget• Anglo American aims to be the industry leader and global benchmark for Supply Chain value creation• Procurement seen as a key business enabler: – Cost efficiencies – Value-in-use – Strong focus on lifecycle costs and benefits of procurement decisions, including non-financial variables – Recognition of the broader developmental contribution of procurement• Strong focus on responsible procurement 4
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  8. 8. BUSINESS CASE-LED APPROACH Partner of Employer Investment of choice choice of choiceAssure our right Create supply Ensure reliable Reduce risks Attract and to mine chain efficiencies access to critical associated with develop talent supply closure Exceed local community Reduce logistical Pursue long term Minimise Contribute to expectations to costs, such as the partnerships with community developing thriving participate in local cost of transporting local suppliers critical dependency by and healthy procurement people and to operations creating communities, and equipment transferable attractive places to Strengthen Continuously business skills live and work relationships with Competitive labour improve the service which equip local communities costs in service provided by entrepreneurs to and government by contracts suppliers/ access other Be seen as employer building company contractors to Anglo markets and of choice, by making ambassadors diversifying the a real, lasting Increase the competitiveness of local economy difference to local Excel at meeting communities and government supplier markets acting with integrity objectives for localcontent, supplier dev. and GDP growth 8
  9. 9. INTEGRATED APPROACH TO LOCAL PROCUREMENT Objective Anglo American LeadSupply-side Measures Encouraging more suppliers to Localising Suppliers SC with support from locate in mining areas (e.g. near-mine supplier parks) Social and ED Build capability, capacity and Supplier Development Programmes SC with support from size of suppliers (building capacity of existing suppliers) Social & ED Creating formal Support for Small and Medium-size Business Start- Social with support businesses ups (e.g. Emerge / Zimele) from SC & ED Supporting the Social with Alternative Livelihoods and Micro-credit Programmes grass-roots ED Set framework, show SC with supportDemand-side Measures Policy: Local Procurement Strategy leadership support from Social Build Anglo American Resources: Appropriate people and budget SC and Social capacity and incentivise Operationalise SC Local Procurement Initiatives (eg SC with support commitments Ring Fencing) from Social Demonstrate Communication and Reporting: SC with support commitment Targets and KPIs from Social 9 Social = social and community development functions; ED = enterprise development; SC = supply chain (Group and BU)
  10. 10. SUPPLIER DEVELOPMENT PROGRAMMES Supply and demand side analysis Matching Monitoring of SMEs and to Supply evaluation Chain demand Business SME linkages assess- and ment and tendering improve- assistance ment plan SME Access to mentoring finance and training
  11. 11. SUPPLIER CLUSTERS• Objective is to bring existing suppliers, and the jobs they AA Business create, into our mining areas Unit• Co-locate large and small businesses. 5-10 larger suppliers• Add in Anglo American’s to AA Business Unit enterprise development expertise 20-30 SME suppliers and support the creation of to AA Business Unit and it’s partnerships between large and larger suppliers small firms Incubating business environment
  12. 12. ENTREPRENEURINTERNSHIP General Zimele PopulationPROGRAMME Entrepreneurs (Entrepreneurs Talent) Attraction andFiltration based Existing Selection Angloon criteria American Employees Entry Criteria Selection Process Training/learning programme (Internship) Matching entrepreneurs and businesses Exit out of Anglo American Supply Chain Partner Companies 12
  13. 13. MAKING OPPORTUNITIES AVAILABLE TO LOCAL ENTREPRENEURS• Simplifying tender and contract documents and processes• Embed local procurement into procurement processes and daily operational activities• “Supplier linkage” person• Guidelines for implementing preferential sourcing methodologies e.g. ring-fencing, unbundling, appropriate payment terms 13
  15. 15. CONCLUSIONS• Local procurement needs strong buy-in from Supply Chain – they make the purchases• Supply Chain should be supported by multiple functions, including social performance, enterprise development and communications• No magic “silver bullet” to boost local procurement – Optimising local procurement requires a range of initiatives – Takes time to get it right – Need a combination of supply-side and demand-side measures• There should be a strong business case driving local procurement to ensure it is sustainable over the economic cycle 15