Novozymes centralises procurement to free R&D funds

By Jess Halliday

- Last updated on GMT

Related tags Enzyme Procurement Dow jones industrial average

Novozymes is centralising its procurement facility in a bid to
ensure transparency and consistency, and make savings that it plans
to plough into more research and development.

The Danish enzyme expert has a strong track record in sustainability - this year, for the second year running, it appeared on the Global 100​ list of sustainable companies, and in March it was recognised for its practices by United Nations Global Compact. ​In 2006 Novozymes also took the top position in the Dow JonesSustainability Group Index's​ biotech category.​Responsible purchasing is a key part of the company's sustainability programme, and the company considers its suppliers as important business partners in its value chain. By centralizing its procurement function for products it buys in from all over the world, Novozymes says it will be able to keep better track of the processes. It will also be conducting a review of all its suppliers, taking into account factors such as social responsibility. In essence this is not a great departure from its supplier policy to date. Since 1996 it has evaluated the environmental performance of its suppliers, and since 2003 their social performance too. Eighty per cent of its suppliers carry out a self-assessment questionnaire on human rights and labour standards. "We are very aware of what we buy and from whom,"​ said VP of executive buying Ken Friis, who has played a key part in the procurement restructuring. But then she added: "We wish to show that our part of the organization, too, creates value."​ At present, procurement is conducted locally, with each of the 22 countries in which Novozymes operated having its own suppliers. However this does not always result in the most favourable deals. The new centrally-managed structure will deal with deal with everything from raw materials used in the enzyme production process, to produce for staff canteens, to office supplies. More than a third of Novozyme's revenue is spent on goods and services. In full year 2006, Total sales were DKK 6,802m (€912m) and operating profit was DKK 1,340m (€180m). Sales of food enzymes were DKK 1,603m (€215m). The company has not given an indication of the amount it expects to save, but Friis said: "We save money and by doing so we liberate capital to be used for research and development." ​ The company's R&D bill last year came to DKK 880m (€118m). Novozyme's long-term aim is to achieve sales of DKK 10bn (€1.3bn) by 2010, through organic growth and acquisition.

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