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Supply Chain Management

Management Approach

I. Policy
Regarding IRPC’s objective to promote Sustainable Procurement Excellence, IRPC is committed to carry out its procurement activities under five procurement strategic initiatives: Smart Buyer, Data Management, Supplier Relationship Management (SRM), Sustainable Management, and Synergy and Collaboration.
  1. Smart Buyer strategy is to focus more on strategic sourcing
  2. Data Management strategy is to manage overwhelming data in a more systematic manner allowing IRPC to achieve better agility
  3. Supplier Relationship Management (SRM) is to focus on reducing costs and better relationship allows IRPC to build mutual trust with suppliers
  4. Sustainable Management is to integrate ESG factors into SCM objectives
  5. Synergy and Collaboration, internal, external, and within PTT group, is to strengthen all operations in supply chain.
IRPC adheres to procurement regulations with clear procedures and practice and devises the policy of procurement excellence under the EVEREST Project, which focusing on:
  • raising efficiency for the management of parts, equipment, and inventory items;
  • procurement of raw materials and feedstock, chemicals, and various equipment;
  • strategic service hiring; and
  • capacity-building for procurement officers.
II. Management System/Process

IRPC is highly committed on strategizing for procurement strategy that focuses on product and service quality, setting risk management process that covers environmental, social, and governance (ESG) aspects in order to align management with risk level with consideration of quality, quantity, delivery of products and services as well as minimum compliance to labor law, environmental law, and other quality management systems to protect and mitigate risks that may impact quality, quantity, delivery of products and services, and trust of stakeholders to the company’s operations.
For more information on the Sustainability Procurement Manual, please click (Thai Version) and click (English Version)
Supplier Sustainable Code of Conduct
IRPC is committed to conducting its businesses with fairness, legality and good corporate governance, coupled with social and environmental supports in order to create balance in all aspect and live together sustainably. IRPC also publically disclose the policy and encourage suppliers to implement such principles to extend to the broader boundary. Therefore, in order to have the same understanding, IRPC prepared this manual to be referred to as a guideline for suppliers and require suppliers to conduct same sustainable practice and should have Sustainable Procurement Policy in place as IRPC. However, should suppliers choose not to comply with the manual, IRPC reserves the rights to take any actions to those suppliers as seen appropriate. Such actions will be considered based on possible impact and damages.

IRPC’s “Supplier Code of Conduct” cover all aspects of business such as business ethics, human rights, and safety health and environment. IRPC requires the code of conduct to be signed and complied, moreover, it applies to enforce suppliers of supplers to promote sustainable business value. The following requirements are covered in IRPC Supplier Code of Conduct:
  • Environmental standards for the suppliers’ process, product or services;
  • Child labor;
  • Other fundamental human rights (e.g. labor, freedom of association, ILO conventions);
  • Working conditions (e.g. working hours, lay-off practices, remuneration);
  • Occupational health and safety;
  • Business ethics (e.g. corruption, anti-competitive practices); and
  • Our supplier should have a sustainable procurement policy in place for their own suppliers.
Morover, IRPC requires our suppliers to adopt these requirements in order to enforce their suppliers (IRPC’s non-tier one suppliers) to follow these requirements as well.

IRPC has continually dedicated our effort to improve the procurement system in order to enhance the international competitiveness. IRPC have developed a procurement web portal to be used as a communication channel to suppliers regarding IRPC’s procurement requirements. The system provides suppliers with a convenient and fast tool to do business with the Company and also allows a transparent procurement with end-to-end audit process and the use of e-Auction system from third-party provider. Suppliers can freely compete with each other to offer their best price, resulting in a fair and transparent procurement process for every party.
For more information on the Supplier Sustainable Code of Conduct, click
Supply Chain Awareness
Managing risk in the supply Chain involves supplier selection process and supplier risk management which cover risks such as the quality of product and service, environment, social and corporate governance. In order to conduct business with IRPC, suppliers are required to register and pass the pre-approval process and answer the self-assessment questionnaire.

To mitigate any adverse impact from procurement process and to create a sustainable procurement system, IRPC conducts supplier/contractor risk assessment by identifying Economic, Environmental, Social and Governance (ESG) risks.

Integration of ESG factors into supplier selection
In order for suppliers to be included into IRPC’s approved vendor lists, both new and exsiting suppliers must undergo supplier evaluation, which consists of 5 criteria, ESG factors included. ESG factors has a total weight of 25% in the overall supplier evaluation score, where suppliers have to score at least 70% of total score. Criticality Analysis
IRPC prepares spend analysis separately for feed stocks of petroleum and petrochemical business as well as general procurement (chemical and components). Currently, there are two departments separately responsible for monitoring their own spending.
  • First, A procurement function is responsible for tracking the spending on chemicals, spare parts, etc.
  • Second, A feedstock function responsible for tracking spending on all type of refinery and petrochemical feedstock.
IRPC used spend analysis for analyzing expenditure data with the purpose to reducing procurement cost, improving efficiency, and monitoring compliance. A critical analysis helps IRPC to determine which suppliers are critical to IRPC business. IRPC analyzes the criticality of its suppliers using the following criteria:
  • High expenditure;
  • Covered critical parts/components;
  • Non-substitutable; and
  • Strategic relationship.
Results of spend analysis in 2017 are summarized as follow: Remark: Spend analysis is analyzed based on the total amount of spending and number of suppliers.

Environmental, Social and Governance (ESG) Risk Assessment
ESG Risk Assessment focuses on identifying sustainability risks in the procurement process, for example, child and forced labor, purchase of chemical that contains prohibited substances, etc. Risk assessment is done considering the likelihood of each issue and its impacts, both in qualitative and quantitative, to the company and stakeholders.

Definition of Sustainability High-Risk Supplier Supply Chain Risk Assessment and Corrective Action Plans
IRPC has, in place, a policy to promote and encourage suppliers to perform in line with IRPC’s sustainability development principles, for example, human rights, occupational health and safety, business ethics and conducts, as well as anti-corruption in order to mitigate risks and potential impacts from any wrong doings of suppliers to IRPC. Therefore, to ensure that suppliers, includes contractors, also have and strictly adhere to such policy, IRPC has regulated supplier assessment as one of necessary measures in the procurement process to allow suppliers to assess their potential and answer a questionnaire related to aspects mentioned above.
In 2017, 17 critical suppliers and 223 high risk suppliers including contractors have been audited by both IRPC’s certified auditors and external certified body (Management System Certification Institute (Thailand); MASCI) to follow up on whether IRPC’s sustainability development principles and Code of Conduct has been applied and complied, IRPC, together with non-conformed suppliers, would prepare and agree upon a corrective action plan. The non-conformity results were found in safety issues among contractors, therefore, IRPC has immediately noticed and provided the corrective action plans in order to prevent from the reoccurance and future improvement, as a result, all of non-conformed auditees have prepared the corrective action plans that have been resolved improved their ESG performance.

In 2018, IRPC is continuously planning to work collectively with companies in PTT’s group to assess more suppliers in order to strengthen business alliance and tighten business relationship for a sustainable future.

Risk Management Measures
IRPC conducts root cause analysis and prepare risk treatment plans for sustainability high-risk suppliers. Procurement Department closely monitors the progress of the risk treatment plan to ensure appropriate deployment to reduce likelihood and/or impact to the level of risk appetite and regularly have independent assessment carried out by the Internal Audit Office. The results of monitoring and control plans will be reported to the executives in quarterly basis.

Supply Chain Management Sustainability Key Performance Indicators (KPIs) and Targets
IRPC measures sustainability performance in the supply chain management using the following KPIs
  1. Accident related to logistics (case per million kilometers) with 2017 target of 0.175
  2. Percentage of critical supplier and contractor who have undergone sustainability assessment with 100% target in 2017
  3. Number of audited suppliers and contractors, where target for 2017 is 6 suppliers and contractors