Building a COVID-resilient supply chain episode one: procurement
11 May 2020
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The COVID-19 outbreak has created health, operational and logistical challenges on an unprecedented scale. BHP relies on more than 10,000 businesses from 60 countries for goods and services needed to extract and deliver commodities to our customers around the globe.
In this first episode of our resilient supply chain series, Group Procurement Officer Sundeep Singh analyses the steps BHP is taking to support our local supply and procurement partners.
The COVID-19 pandemic has disrupted global supply chains and unleashed a unique mix of challenges across the business community.
BHP’s global supply chain adapted quickly to the outbreak, filling critical gaps in health and hygiene supplies, tackling logistical challenges around work travel and collectively enforcing strict social distancing across industries.
Throughout the acute period of the crisis and now as we shift to the next phase, the priority for us and our suppliers remains keeping our people and host communities safe and healthy. And we are continuing to do everything possible to keep our business safely operational by building resilience across our supply chain.
Last year, we paid a total of US$20 billion to our supply partners around the world for the essential materials, equipment and services we require to operate safely 24 hours a day. Since the outbreak escalated in early March, they have worked tirelessly to provide us the hygiene products and additional transport services we have needed to keep our doors open.
It’s crucial to our business that our supply partners also remain operational through the outbreak, which is why we’ve implemented several measures to help reduce their economic burden. We’ve paid all outstanding invoices and reduced payment terms to seven days form 30 days, set up a $6 million labour hire fund in Australia, started recruiting for 1,500 new local roles, and in Chile, introduced a $25 million find to support our labour hire partners.
Our suppliers have supported us when we needed them most, and now it’s our responsibility to support them
Keeping our people safe and our operations running
When governments around the world began implementing emergency measures to stop the spread of the outbreak, we knew that we had to enact our plans swiftly.
Globally, we enforced strict social distancing measures and hygiene protocols across our sites to minimise the risk of an outbreak that might force us to close our doors. Outlining the protocols was one thing, but putting them into practice was a challenge we couldn’t have done alone.
Working with our supply partners, we were able to source critical hygiene products such as hand sanitiser, facemasks and cleaning equipment that we needed to protect our workforce across our assets and within our offices. Our team in China also opened up new supply lines for these products so they did not disrupt the supplies that hospitals and health providers urgently required.
Getting our people to and from sites safely around the world was also a logistical challenge that our supply partners helped us to overcome. For example, they provided the people and equipment to conduct temperature screenings at airports and bus depots to ensure no one with a fever travelled to site. And, they expanded our bus fleets, increased the number of charter flights and supported new procedures in camps so we could maintain social distancing.
We also worked with our site-based suppliers to implement social distancing measures into their onsite procedures to keep all of us safe and operations running.
Looking forward, we are using data analytics to assess the health of our supply chain at multiple levels. This allows us to pre-empt further disruptions by building contingency plans for a number of scenarios that will help us respond quickly should one occur.
Shorter payment terms have given our suppliers the flexibility and cash flow to remain in business despite the economic toll inflicted by the COVID-19 pandemic.
Building resilience among our supply partners
Our suppliers have supported us when we needed them most, and now it’s our responsibility to support them.
Many industries have not been able to operate due to COVID-19 restrictions and this has had a big impact on businesses, particularly small businesses.
The disruption to the cash flow of our smaller Australian partners prompted us to immediately pay all outstanding invoices and reduce our payment terms from 30 days down to seven for an immediate period of six months.
The business owners that I’ve spoken with have welcomed these new commercial measures. Doug Hawkes, the managing director of Structural Integrity Engineering, a small risk management firm that has supported our Australian operations for over 20 years told us that the cash injection gave them extra stability and flexibility when dealing with his own suppliers, and has helped keep his staff employed.
In Australia, the initial invoice payment put a total of A$100 million back into the pockets 1,400 of our small, local and Indigenous suppliers, and the shortened payment terms have added an extra A$21 million. This is expected to contribute A$70 million toward regional economies in the coming six months. We’ve also introduced similar initiatives across our Minerals Americas and Petroleum businesses to help the cash flows of their respective supply partners.
Building social value
We’ve collaborated with our labour hire partners across Australia to create a A$6 million fund to support labour hire companies and their employees on the ground to relieve pressure for them and their families. The fund supports one-off payments for people quarantined after entering Australia and pay employees not entitled to sick leave but affected by COVID-19.
After 30 years of service as a Qantas flight attendant, Caroline, like many other Aussies, unexpectedly found herself out of work.
In Australia, we also worked with our service providers to recruit an additional 1,500 people who have found themselves out of work to support our operations. Caroline, a Qantas flight attendant with 30 years of service, was stood down following the slowdown in international and domestic air travel. Now, with the help of labour hire partner Programmed, she is supporting the health screening process of our fly in fly out workforce at Perth Airport. Caroline plays an integral role in ensuring the resources sector continues to operate, and she told me she was ‘loving the opportunity to learn skills in a completely new environment’.
In Chile, we established a US$25 million fund to absorb the costs of our contract suppliers by paying up to 90 per cent of the salaries and social security contributions for their displaced workers.
I’ve seen countless other examples of positive outcomes when we collectively work with our partners to solve supply shortfalls in our host communities. When a school in Moranbah, Queensland was running low on hygiene products our local teams and supply partners ensured they had a delivery the very next day. And, when the Andamooka branch of the Royal Flying Doctor Service (South Australia) was running low on facemasks, our local procurement team quickly sourced 150 of them to keep their staff safe while carrying out their essential work.
These examples show that procedure is nothing without passion. The only thing that distinguishes our people from our supply partners and community organisations are the logos on our shirts. For years our kids have attended the same schools, we’ve walked our dogs around the same parks and we’ve shopped in the same supermarkets. We all want what’s best for the community, which is why we’re so much stronger when we work together.
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