Anglo American Annual Report 2012

SUPPLY CHAINSupplier partnershipsOur relationships with suppliers havebeen strengthened considerably inrecent years. These relationships haveresulted in minimised lead times formajor equipment delivery and havemitigated inflationary pressure andsupply risk to our operations. SupplyChain is working with key suppliersin each region as part of our ‘Top 40’initiative to identify additional savings,waste elimination opportunities and tominimise cost inflation through 2013.Proactive reviews of equipmentand services on our operations haveled to the identification of savingsopportunities and are delivering totalcost of ownership (TCO) benefitsacross the business units.Framework agreements are nowin place with 33 key suppliers,representing a formal alignment inour commercial relationships. Theseagreements are critical in the currentmarket as they provide the platformfor value creation and greatertransparency of cost, demandand capacity.Regional gross expenditure 2012% of total expenditureSouth Africa 45%Australia 18%Chile 20%Brazil 15%Other 2%Sustainable and responsiblesupply chainLocal procurementAnglo American’s procurement spendon goods and services represents asignificant development opportunity.Expenditure on suppliers based inthe host communities close to ouroperations was $1.5 billion.We proactively design localprocurement initiatives to optimiseopportunities to integrate localbusinesses into our global supplychain. In doing so, we believe we canmake a significant socioeconomiccontribution to our host communities,as well as efficiencies in our supplychain by lowering logistics costs andsecuring access to critical goodsand services.Anglo American’s Group-wide localprocurement policy, launched in 2010,is now embedded in all our operations.During the year, all operations madeprogress in developing their localprocurement strategies and are nowmeasuring and reporting local spend.In making sourcing decisions, however,we also need to ensure that we remaincompetitive. Sourcing from countrieswhere we do not operate is sometimesessential if the products are notavailable locally. China is a keycustomer and strategic businesspartner and we have a sourcingstrategy to build long term, valuablerelationships with Chinese suppliers.This includes identifying Chinesesuppliers from whom local businessescan source and provide maintenanceand support services locally.Local procurement is a particularpriority in our South Africanoperations, forming an importantpart of our contribution to thecountry’s drive to promote blackeconomic empowerment. In 2012,managed businesses spentZAR 25.8 billion ($3.1 billion), 54%of South African discretionaryexpenditure, with historicallydisadvantaged South Africanbusinesses (not including goodsand services procured from parastatalcompanies and municipalities).TOTAL COSTOF OWNERSHIPIMPROVEMENTSAT PLATINUMThe Anglo Converting Process(ACP) uses a rubber hose in itsmatte feed transfer into thefurnace via a submerged steellance. The value of the producttransported through the mattetransfer system and hose is$12.5 million per day. Anyunplanned downtime, therefore,incurs significant cost to the plantthrough reduced production,maintenance and overtime costs.The ACP previously made useof standard specialised rubberhoses. These hoses, however,had a lifespan to transportapproximately 1,500 tonnes,meaning they had to be replaced11 times a month on average.Aside from the replacementcosts, this had a significantimpact on production.A focus team from ACPcritically evaluated the hoses,developed alternatives, thenapproached Dunlop IndustrialProducts for the supply of thealternative hoses. The ACPfocus team, together withDunlop, were able to developa fit-for-purpose ceramic tiledrubber hose.The new hoses are able totransport on average 25,000tonnes and only need to bereplaced once a month, resultingin realised value that has, to date,exceeded expectations.ImagePlatinum’s ACP plant in Rustenburg,South Africa.Operating and financial reviewFor more information, visitwww.angloamerican.comAnglo American plc Annual Report 2012 21