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dm Drogeriemarkt – A sustainable procurement approach

“Sustainability as a key to commercial success”
The holistic approach to improvement – fair procurement and partnership-based supplier relations

When, in 1973, Prof. Götz W. Werner opened the first dm-drogerie markt pharmacy in Karlsruhe, Germany, he set about building his company around holistic commercial and social principles. The organic growth of dm-drogerie markt was based on respect for the individual and for the regional environment of markets.

With sales of over five billion euros in financial year 2008/2009 and more than 2,000 branches throughout Europe, the company is one of Germany’s leading pharmacy chains. The company’s commercial success and a whole string of awards and prizes underline the holistic approach that is so deeply rooted in the business.

“What really matters is the attitude behind everything we do at the company,” says Erich Harsch, chairman of the board of management at dm-drogerie markt. “At dm, we believe a company can only be successful in the long term if it can strike a balance between commercial concerns and ecological and social factors. We don’t see sustainability as a concrete state but as an intrinsic approach on which all entrepreneurial activities must be based. That is the only way we can ensure we have the necessary foresight to stay fit for the future. Sustainability does not preclude commercial success, it is an essential requirement of it.”

In the following interview with INVERTO, Erich Harsch and Markus Trojansky from dm-drogerie markt explain how dm has succeeded in implementing this maxim in procurement and in its dealings with suppliers, despite the major pricing pressures in the market.

To what extent are your dealings with suppliers sustainable and how do you manage to achieve typical market prices at the same time?

“To a large extent, our supplier relationships are built on long-term partnerships based around fairness and transparency, and that’s why we choose our suppliers very carefully. For example, in developing our dm quality brands, we only work with suppliers who are committed to meeting international quality standards and complying with all legal regulations. In our experience, a collaborative relationship and good value prices are always achievable when both parties benefit from the partnership. We hold talks with our suppliers on an annual basis and issue numerous invitations to tender so that we can assess typical market prices. We also work with several suppliers, not just one or two, although long-term partners have priority. This strategy helps us maintain a good balance between both.”

How do you ensure that procurement at dm is sustainable?

“Sustainability is fundamental to everything our company does, so dm’s procurement function also has to play its part in supporting sustainable commercial operations. Our success shows we are right. For example, our alverde range of natural cosmetics has been voted one of the three most sustainable brands in Germany. The judging panel said that sustainability was a consistent theme throughout the brand’s strategy and essence. Clearly, that represents a huge success for our procurement function. In general, we believe we have a responsibility to offer our customers an informed shopping experience. That also means using information or quality seals to ensure they are aware of a product’s ecological pros and cons.

What’s more, we are constantly working to optimise our logistics operations, because we feel it is crucial to achieve long-term reductions in CO2 emissions if we are to operate on a sustainable and responsible footing. Our procurement function has to take all of these factors into account when making decisions.”

Could you give us a concrete example of procurement that is based specifically on the principle of sustainability?

“Some time ago, we launched a procurement project because we wanted to switch over to recycled tear-off bags. Our procurement function was tasked with finding a supplier that could manufacture large volumes of carrier bags made from biodegradable materials. At first, the procurement function issued an invitation to tender to find a manufacturer of strong, durable and environmentally friendly carrier bags. It was a tricky process, as very few manufacturers are working with these materials. In the end, our buyers in Spain and Germany each tracked down suitable companies and initiated negotiations with two suppliers. Both offered the same quality at the same price.

In the end, we decided to work with the German supplier, since this kept transport costs down and the shorter transport routes were more environmentally friendly. This example shows quite clearly that our procurement initiatives are not one dimensional. In fact, in this case, not only was our team searching for a biodegradable material, it also took into account how CO2 emissions could be reduced, thereby ensuring the project was sustainable in the most holistic sense of the word.”

Are dm customers aware of the company’s commitment to sustainability and do you think it wins you more business?

“Our product range leaves customers in no doubt that sustainability is a subject very close to our hearts. More and more items in our range have the dm sustainability clover emblazoned on their packaging to highlight the environmentally friendly credentials of the product. The organic products from Alnatura carry the Bio-Siegel – Germany’s national eco label – while the baby clothing in dm’s Alana quality brand and our Fascíno branded socks display the GOTS logo. The “Global Organic Textile Standard” sets out binding global requirements for each individual phase of the manufacturing process for natural textiles.

Our alverde natural cosmetics carry the BDIH logo for certified natural products issued by the German Association of Industries and Trading Firms for pharmaceuticals, health care products, food supplements and personal hygiene products. This range also boasts the Vegan-Blume flower symbol, which indicates that it is free from animal products and products that have been tested on animals.

We also print our brochures and alverde customer magazine on paper that has been certified by the FSC (Forest Stewardship Council) and PEFC (Programme for Endorsement of Forest Certification Schemes). We know that many of our customers are very informed shoppers and take care to note whether a product is environmentally friendly, whether it has been tested on animals, whether the packaging can be recycled and whether the people who have made it enjoy good working conditions. All our logos and quality seals are a helpful source of this information.

As well as being committed to environmental sustainability, we also believe that social sustainability is vital. For example, our company treats its workers fairly because dm has a genuine interest in developing their skills and personal qualities. We also value sound and unbroken relationships with our suppliers.

Indeed, our long-term partnerships enable us to develop and manufacture our products on a collaborative and sustainable basis. All our products are manufactured in Germany, which helps to boost our home country’s status as an attractive business location, safeguard jobs and reduce transport distances. Our customers appreciate all of that, as can be seen on a regular basis in the top marks we get during consumer surveys including the annual Kundenmonitor Germany.”

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