Procurement in action

6-step sourcing process

 

A unified process ensures that we can establish a common mindset between Arla Foods and its global suppliers. Our 6-step sourcing process supports us in finding the right balance between quality, service and price while also ensuring that we fulfil our environmental, social and ethical responsibilities.

We believe that this process is key to conducting successful tender projects together with our suppliers that add value to Arla Foods as well as the communities in which we act.

The first step -

Getting started

We initiate the process by setting the stage for the upcoming sourcing project. It requires that we are open for innovative solutions without losing sight of the purpose. We are attentive to the purpose by being clear on the scope and objective of the sourcing project. Part of this process is also to find and set the right team of Arla employees for chasing the desired outcome of the sourcing project.

The second step -

Stating the facts

The next step is to take a closer look at the details and uncover the situation as it is. Through a fact-based working process, we aim for creating transparency within the sourcing category and identify cost saving opportunities for the entire life cycle of products and services. We send out Requests for Information to supplier candidates, which reveal the level of competency that can be expected from a potential supplier. This step allows us to set the spend baseline which is a key element for sending out Requests for Proposals later in the process.

The third step -

Setting a strategy

To minimise the risk of untapped opportunities in the market, we analyse external forces that are influencing the sourcing category. We gather information about the market as well as important market players in order to determine the right sourcing strategy for the category and for Arla as a corporation. We constantly question ourselves and the way we act in order to improve and ensure profits to our farmers.

The fourth step -

Developing the idea

Once we have a strategy, we look for new opportunities and possibilities such as pioneering solutions, best practices and solid business cases – all to improve our current business practice. Suppliers are key figures in this process as they hold information that is vital for Arla being able to move forward. We value the input from our suppliers and work continuously on reaping the benefits of close collaboration.

The fifth step -

Negotiating the contract

Sending out Requests for Proposals, analysing, evaluating and negotiating are all key aspects of strategic sourcing. We evaluate supplier candidates on multiple factors that cover everything from CSR to pricing, quality, service and supply capacities. Part of our evaluation criteria is also the supplier's ability to support the continual progress of Arla through business optimisation. Suppliers that deliver on these parametres will be part of contract negotiations. Once the contract is signed, the supplier will become a preferred supplier to Arla.

The sixth step -

Implementing the contract

Once the contract is signed, we expect that our suppliers support us in making the implementation phase run as smoothly as possible. Pilot testing might be needed in order to optimise and ease this phase. Furthermore, implementing the contract gives us the opportunity to build on the supplier relationship and let it grow. Likewise, we maintain a solid relationship with existing stakeholders by carefully informing about how a newly signed contract might affect their daily work and what we in Procurement can do in order to ease the transition.

Be noticed as a supplier

As we use SAP Ariba for all our sourcing activities, we encourage suppliers to join the Ariba Network to improve their chance of becoming a supplier to Arla Foods.

By joining Ariba Network, suppliers become visible on Ariba Discover which we use for scouting new suppliers to our sourcing projects. We choose suppliers based on a variety of factors, but most importantly is that the supplier can match Arla Foods' high quality and ethical standards.

Become a preferred supplier

We prefer suppliers that have signed a contract with Arla Foods in cooperation with our procurement department. These suppliers are preferred because they have contractually bound themselves to our Terms & Conditions and to comply with the requirements set out in our Code of Conduct for Supplier.

Arla Foods will always choose preferred suppliers over suppliers that have local contracts or no contracts with Arla Foods as the contractual relationship allows us to follow up on commitments settled in the negotiation phase.