Managing our supply chain 1/3

ArcelorMittal South Africa

Sustainability Report for 2008

Managing our supply chain

Material issues

• Engagement

• Supply chain management

skills shortage

• Preferential procurement

(B-BBEE issue)

Managing costs in the current economic

climate

The current climate of economic and financial

turmoil, the volatility of steel prices and the decline in

demand for steel have presented our company with

unprecedented challenges. In response we have cut

back production to align with demand and adjusted

our short-term capital expenditure programme.

material issues listed above. While the Manager,

Preferential Procurement, reports into the GM,

Procurement & Logistics, and is responsible for

implementing preferential procurement initiatives,

ultimate responsibility for this particular issue lies

with the Group Transformation Manager as part

of the overall transformation portfolio. Similarly,

building a robust supply chain management pipeline

is a shared responsibility with the Human Resources

Training department.

We are confident that this cost containment

approach will secure the long-term sustainability of

our company, but at the same time we are aware

of how such a drop in production will affect many

small - to medium-sized suppliers with whom we do

business. Like us, many of these firms will have to

adjust to operating in these difficult times – this is

part of doing business. We are, however, committed

to the ongoing development and support of smaller,

black-owned suppliers by devising strategies that

will assist them in these difficult times and ensure

their sustainability as viable enterprises.

Engagement with suppliers

We strive to build a mutually beneficial relationship

between the company and its suppliers. Doing

so starts with open engagement and the

encouragement of dialogue on the issues that affect

these important stakeholders.

In 2007 we embarked on a process of holding

vendor days at which local and SMME suppliers

could showcase their goods and also raise aspects

of our procurement process that make it difficult for

them to win tenders. The issues highlighted included

difficulty meeting the high international standards

set by the company, a lack of understanding of

ArcelorMittal South Africa’s production, procurement

and tender processes.

As such, our most material supplier issues include

engagement, preferential procurement through the

ongoing implementation of B-BBEE practices, and

the supply chain management skills shortage.

Relationship with suppliers

The Procurement & Logistics department manages

all issues relating to our suppliers, including the three

During 2008, we implemented a number of

initiatives to address supplier concerns raised in