BHP pivots to a supply chain of shared value

BHP has an extensive supply chain supporting its iron ore operations.

BHP is continuing to change and improve the way it works with the mining supply chain.

But there is a catch ­­– suppliers will need to do more than enhance the safety or productivity of BHP’s operations with their products and services.

BHP also expects suppliers to join the company on its journey to deliver shared value in the areas of diversity and inclusion, responsible sourcing and climate change.

Speaking to Australian Mining about the supplier strategy, BHP group procurement officer Sundeep Singh praised the company’s supply chain partners for accepting the challenge to provide shared value in these areas.

“They are very willing to do this because naturally they want to help us with safety and productivity, but these issues of inclusion and diversity or climate change are their issues as well,” Singh said on the sidelines of the International Mining and Resources Conference (IMARC) in Melbourne this week.

“They have the same issues in transportation, they have the same issues in terms of their own production and manufacturing environments. Working and collaborating on this is not deviation for their standard business anyway.”

BHP’s supply chain spans 60 countries and 10,000 partners, with an annual spend of $US20 billion ($29 billion) across its operational expenditure and capital expenditure in the 2019 financial year.

The company sources 215,000 different types of material and equipment for its Australian operations alone.

Singh concedes that the supplier experience of working with BHP “in some spaces” across its network has been varied in the past.

But he believes BHP’s pivot towards collaboration and partnerships with suppliers has improved the company’s interface with them and changed the way they work together.

“I think we are seeing an absolute desire to come together on partnering and engaging on safety and productivity,” Singh said.

“But it is an ‘and’ conversation that paves the way for the next pivot which is around some of those social values.”

Sundeep Singh

The success of BHP’s move to become a more inclusive and diverse workforce supports the importance of these social values, according to Singh.

BHP data shows that more inclusive and diverse teams are better than other teams on safety (up to 67 per cent lower injury rate), better on productivity (up 11 per cent better adherence to schedule), and better on culture (up to 21 per cent more pride in work).

The female representation across its workforce has risen to 24.5 per cent in 2019, an increase of 7 per cent in the three years since the company announced aspirations for a gender balanced employee base by 2025.

This gender parity target has flowed to the company’s supply chain, with BHP including greater diversity as a condition in its contracts with suppliers.

“Bringing a more inclusive and diverse team to a BHP site is as good for them in terms of their own performance as it is for us in terms of our own culture and environment,” Singh said.

“The response from suppliers has been really positive. We spend a lot of money (with our supply chain) ­– we spend $20 billion a year as of FY19.

“That’s a lot of scope to positively influence engagement and behaviours so when we incentivise it in contracts our suppliers have been really working hard to bring that to the table.”

Singh is convinced BHP’s modern method to engage with its supply chain will lead to more success stories of shared value.

BHP’s conversations with its partners include ways the company can improve Indigenous engagement, the potential to cut carbon emissions through energy projects and a commitment to ensure that its products are ethically sourced.

“We are on a journey, for sure. For me part of it is really calling on our supplier base – 10,000 suppliers ­– we can’t do it alone,” Singh said.

“It is really about saying we want to be different and we want to change the way we work with you, but you have to come and work on it with us.”

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