Sustainable procurement
The KION Group understands sustainability as covering the entire value chain and including both suppliers and business partners. In 2016 the KION Group and its operating units’ global purchasing volume (including the two months in which Dematic was part of the Group) amounted to €3.7 billion. KION Group companies have around 45,000 suppliers in total, and source parts and components through well in excess of 200,000 part numbers.
Around half of the KION Group’s purchasing volume is attributable to direct production materials, with just under a quarter accounted for by auxiliary materials and operating supplies. The remaining quarter includes insurance policies, services and expenditure on IT, for instance.
Depending on the production plant, the KION Group procures 15 to 100 percent of its required materials and components locally from the respective domestic market. Around 80 percent of the KION Group’s purchasing volume is from suppliers in Europe, around 15 percent in North America, and 3 percent in Asia, with the remaining 2 percent sourced from other regions of the world (> Figure 14).
Figure 14 Distribution of purchasing volume (PVO) of the KION Group
For the KION Group’s Purchasing departments, steel sheets and scrap metal account for the largest types of material in terms of quantity. Around 80 percent of the Company’s net purchasing volume is sourced from 1,109 key suppliers. The key components of KION forklift truck and warehouse technology equipment in the Industrial Trucks & Services segment is manufactured by the Company itself, particularly the lift masts, axles, counterweights and chassis. As a result, customers can expect high quality, prompt supply and dependable availability of spare parts. Further components, such as electronic components, rechargeable batteries, engine components and industrial tyres, are purchased through a global procurement system.
In the Supply Chain Solutions segment, the precisely specified system components for each customer project – such as automated guided vehicles, palletisers or storage and picking equipment – are primarily manufactured in-Company but also partly by quality-audited third-party suppliers.
The KION Group’s specific specifications and regulations also set out the Company’s sustainability requirements on its suppliers. The framework for this is the KION Group’s Principles of Supplier Conduct, approved in 2015 by the Executive Board, which sets out clear environmental and ethical guidelines for KION’s supplier management activities. This also includes the expectation on all suppliers that they will respect human rights and uphold international social standards. These include the ban on child and forced labour in accordance with International Labour Organization (ILO) conventions, as well as minimum health and safety standards (see KION Group Principles of Supplier Conduct).
The KION Group was not notified of any significant violations of these principles in the reporting year. Furthermore, the Company has no evidence that its individual suppliers may have infringed human rights, in particular the right to freedom of association or collective bargaining, as well as the ban on child and forced labour. If the KION Group becomes aware of violations of these principles, such as through audits or complaints, this can lead to the barring of the supplier concerned.
The KION Group Code of Compliance contains a section with specific rules of conduct for the area of purchasing and procurement. According to this, purchasing decisions must be strictly aligned with the Company’s interests, which exclusively concern objective criteria such as quality, technology, price, production requirements or logistics. Purchasing employees are explicitly banned from seeking personal benefits in return for preferential treatment, with the acceptance of gifts and invitations also restricted to an absolute minimum.
General Purchasing Terms at Group and brand level supplement the principles and provide detailed guidelines such as on how to meet transparency requirements under the European REACh chemicals regulation as well as the EU Restriction of Hazardous Substances Directive (RoHS). Compliance with the respective regulations and laws is an integral part of supplier framework agreements.
The respective Purchasing department is responsible for monitoring compliance with guidelines. Going forward, dedicated Commodity Managers for each product group will play a key role in helping to integrate sustainability factors even more deeply, and devise specific solutions in the event of deviating standards among suppliers.
To avoid delivery bottlenecks due to raw-material shortages or economic difficulties with key suppliers, the KION Group ensures it has an adequately diversified pool of suppliers. A Group-wide categorisation is currently underway, which is also intended to provide clarity on how suppliers can comply with their obligations under the KION Group Principles of Supplier Conduct with respect to their work practices, environmental criteria and the upholding of human rights. The objective is also to evaluate existing risks, and take targeted steps to counter these through a corresponding supplier assessment. Furthermore, the Supplier Development department within KION Group Purchasing assists suppliers in improving their production processes and ensuring they have efficient and capable structures.