Sustainable Supply Chain
Efficient integrated supply chain management is one of IRPC’s key strategies for sustainable business operation. IRPC makes great effort to manage our integrated supply chain efficiently, with consideration given to the environment, society, and principles of good corporate governance. IRPC aims to meet all expectations of our stakeholders in all processes throughout the supply chain, from raw material and crude procurement, general procurement, to logistic management. IRPC applies the use of technology to build a stable and effective foundation which further develops the potential of partners and customers to grow sustainably side-by-side.
Raw Material and Crude Procurement
Raw material procurement is a crucial process to IRPC’s operations. An efficient management system can ensure no impacts are made from any circumstances which may affect the crude and raw material procurement and cause business interruptions. IRPC has planned long-term and spot procurement of crude and raw materials to meet requirements, as well as risk management regarding price and cost of raw materials, logistics of crude and raw materials, and maintaining inventory.
For more information on supply chain management, please visit [LINK]
General Procurement Management
IRPC prioritizes and focuses on the development of a sustainable procurement management system, which is one of the major strategies of the Procurement Department. Therefore, the system has been continuously developed by incorporating digital technology to support operational processes for efficient performance of users and suppliers. Suppliers can modify their own information in the system and update their products and services for more transactions between IRPC and suppliers. This also creates a channel for suppliers to communicate and comply with IRPC’s sustainable procurement guidelines. Furthermore, an ESG risk assessment was conducted on all tier 1 suppliers to jointly improve the potential of sustainable business operations. IRPC conducted a supplier satisfaction survey to analyze and enhance efficient operational processes.
IRPC has adapted the following digital technology to support operations under the Project PRO4.0:
- Demand Planning Platform, collecting demands for products from all departments with better accuracy, speed and sufficiently detailed for procurement planning.
- Spend Cube Analysis, enhancing the efficiency of procurement and lowering the cost of products.
- Process Workflow Redesign, improving the purchasing process to be faster and more efficient.
- Supplier Relationship Management (SRM) managing suppliers’ information including products or services available to IRPC and that from evaluation of potential suppliers.
IRPC’s logistic management includes a docking process with various measures for safe crude material loading. The tankers must be inspected and assessed before docking to ensure the compatibility and safety of the wharf. Introduced by Oil Companies International Marine Forum (OCIMF), Ship Inspection Report Program (SIRE) is a tanker risk assessment tool to specifically address concerns of safety for human and environmental protection by applying best practices. To acknowledge safety and pollution issues, the tanker owners are required to fill in the SIRE Vessel Inspection Questionnaire (VIQ) to address safety and emissions issues. Certifications and other important documents need to be inspected. The crew members also need to be inspected to ensure that they have adequate communication skills and experience, and have received the necessary training. Moreover, safety management measures must be in place for the tanker. For example, lifesaving and fire extinguishing equipment must be ready to use in case of an emergency, continual system inspections are required to reduce errors and ensure functionality in areas which might cause long-term effects.
Apart from maritime logistics, IRPC has efficient land logistics management in terms of quantity and quality. With a GPS tracking system, IRPC delivers our products in a timely manner, while ensuring safety and eco-friendly measures are implemented. Furthermore, we collaborate with PTT Group and GLM Group (Group Logistics Management) to reduce fuel usage during transportation and implements a safety driving campaign for our drivers to provide assurance to our customers. As a result, our customers consists more than 90% of plastic consumers. At present, IRPC transports around 90,000 tons of plastics per month.
Supply Chain Management
Regarding IRPC’s objective to promote Sustainable Procurement Excellence, IRPC is committed to carry out its procurement activities under five 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 large amounts of data in a more systematic manner allowing IRPC to be more agile.
3. Supplier Relationship Management (SRM) is to focus on reducing costs and building better relationships, which allows IRPC to build mutual trust with suppliers.
4. Sustainable Management is to integrate ESG factors into SCM objectives
5. Synergy and Collaboration (internal to IRPC, external, and within PTT group) is to strengthen all operations in the supply chain.
IRPC adheres to procurement regulations with clear procedures and practice, and devises the policy of procurement excellence under the EVEREST Project, which focuses 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.
2. Management System/Process
IRPC is highly committed to developing procurement strategy that focuses on product and service quality. Risk management processes are established to cover environmental, social, and governance (ESG) aspects in order to align management with risk level, while considering quality, quantity, and delivery of products and services. Other considerations include minimum compliance to labour laws, environmental laws, and other quality management systems to protect and mitigate risks that may impact quality, quantity, delivery of products and services, and trust of stakeholders in the company’s operations.
Supplier Sustainable Code of Conduct
IRPC is committed to conducting its business with fairness, legality and good corporate governance, coupled with social and environmental supports, in order to create balance in all aspects and live together sustainably. IRPC also publicly discloses our policies and encourages suppliers to implement policies along similar principles to extend IRPC’s commitment and vision to externally related operations. Therefore, to achieve mutual understanding, IRPC prepared a manual as a guideline for suppliers. It also require suppliers to operate under sustainable practices and have a Sustainable Procurement Policy in place. However, where suppliers choose not to comply with the manual, IRPC reserves the rights to take action against those suppliers as seen appropriate. Such actions will be determined based on possible impact and damages.
IRPC’s “Supplier Code of Conduct” covers 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 with. Moreover, it also applies to enforce suppliers of suppliers to promote sustainable business values. The following requirements are covered in IRPC’s Supplier Code of Conduct:
- Environmental standards for the suppliers’ processes, products or services;
- Child labour prohibition;
- Other fundamental human rights (e.g. labour, 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 suppliers should have a sustainable procurement policy in place for their own suppliers.
Furthermore, IRPC requires 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 efforts to improve the procurement system in order to enhance our international competitiveness. IRPC 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 IRPC and also allows for an end-to-end audit process of each procurement. The use of the e-Auction system from a third-party provider allows suppliers to freely compete with each other to offer their best price.
For more information download the Sustainability Procurement Manual
Supply Chain Awareness
IRPC prepares a spend analysis separately for feedstock of petroleum and petrochemical business, as well as general procurement for chemicals and components. Currently, there are two departments separately responsible for monitoring their own spending. The first department is a procurement function responsible for tracking the spending on chemicals, spare parts, and other related components. The second department is a feedstock function responsible for tracking spending on all types of refinery and petrochemical feedstock.
IRPC used a spend analysis to examine expenditure data with the purpose of reducing procurement costs, improving efficiency, and monitoring compliance. A critical analysis helps IRPC determine which suppliers are vital to IRPC’s business. IRPC analyses the importance of its suppliers and classifies them as Critical Suppliers if they meet the following criteria:
- High expenditure
- Covered critical parts/components
- Strategic relationship.
Moreover, managing risk in the supply chain involves a supplier selection process and supplier risk management, which covers risks such as the quality of product and service, environmental, 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.
Environmental, Social and Governance (ESG) Risk Assessment
To mitigate any adverse impacts from the procurement process and to create a sustainable procurement system, IRPC conducts supplier/contractor risk assessments by identifying Economic, and Environmental, Social and Governance (ESG) risks. An ESG Risk Assessment focuses on identifying sustainability risks in the procurement process. For example, child and forced labor, and purchase of chemicals that contain prohibited substances. The risk assessment considers the likelihood of each issue and its impacts, using both qualitative and quantitative data, to the company and stakeholders.
Risk Management Measures
IRPC conducts root cause analyses and prepares risk treatment plans for sustainability high-risk suppliers. The Procurement Department closely monitors the progress of the risk treatment plans, to ensure appropriate deployment for reduced likelihood and/or impact to the level of risk appetite, and regularly requests an independent assessment to be carried out by the Internal Audit Office. The results of monitoring and control plans will be reported to the executives on a quarterly basis.
Supply Chain Risk Assessment and Corrective Action Plans
In addition to the risk management measures mentioned above, IRPC has, in place, a policy to promote and encourage suppliers to operate in line with IRPC’s sustainability development principles to mitigate risks and potential impacts from any wrong doings of suppliers to IRPC. Examples of the principles include: human rights, occupational health and safety, business ethics and conducts, as well as anti-corruption1. Therefore, to ensure that suppliers, including contractors, have and strictly adhere to such a policy, IRPC has regulated a supplier assessment as one of the necessary measures in the procurement process, allowing suppliers to assess their potential and answer a questionnaire related to aspects mentioned above.
Remark: IRPC did not experience any cases of corruption or bribery in 2020. IRPC is accredited as a member of a private sector collective action called Coalition Against Corruption (CAC) from the Anti-Corruption Organization Thailand, in which IRPC is required to report any cases of corruption. IRPC did not experience any cases of anti-competitive behaviors in 2020. For reporting of anti-competitive practices, IRPC provides 1) whistleblower system; 2) submission of feedback to website and 3) Annual Reputation Survey. From these channels IRPC was not alerted to any cases of anti-competitive behavior in 2020 and IRPC is not involved in any ongoing anti-competitive cases.
In 2020, 16 suppliers (1% of suppliers) have been assessed to be at risk of corruption. 16 critical suppliers (27% of critical suppliers) and 16 high-risk suppliers (27% of high risk suppliers) have been audited by both IRPC’s certified auditors and an external certified body (Management System Certification Institute (Thailand); MASCI) to follow up on whether IRPC’s sustainability development principles and Code of Conduct have been applied and complied with. Audit topics include:
- Policy and Standards
- Business Integrity
- Business Ethics and Transparency
- Quality Standards
- Business Continuity/Interruption
- Human Rights
- Labour Relations
- Social Responsibility
- Occupational Health and Safety
- Security and Emergency Preparedness
- Pollution Prevention and Resource Reduction
Together with non-conforming suppliers, Corrective action plans were provided to all supplier with high sustainability risk who have been through comprehensive assessment and found the non-conformity issues. IRPC prepares and agrees upon a corrective action plan. The non-conformity results were found in safety issues among contractors. Therefore, IRPC has immediately notified and provided the corrective action plans in order to prevent re-occurrence and to enable future improvement. As a result, all non-conformed auditees have finalized the corrective action plans to resolve issues and improve their ESG performance. IRPC also provided suggestions to those who passed the audit in order to improve their ESG performance.
In 2020, IRPC is planning to carry out more audits for critical suppliers and ESG audits for high risk suppliers in order to strengthen sustainability throughout our supply chain.
Integration of ESG factors into supplier selection
In order for suppliers to be included into IRPC’s approved vendor list, both new and existing suppliers must undergo a supplier evaluation. The ESG portion of the evaluation, based on key ESG objectives, consists of the following five criteria:
- To build awareness and an understanding of IRPC’s Sustainability Policy (Supplier Code of Conduct)
- To ensure that supplier and contractors comply with IRPC’s Way of Conduct
- To develop and encourage Sustainability Management for suppliers and contractors
- To build and strengthen mutual business relationships with transparency
- To lower risks and increase supplier and contractor performance
In the overall supplier evaluation score, ESG factors have a total weight of 25%, where suppliers have to score at least 70% of total score.
Results of spend analysis in 2020 are summarized as follows
Amount of Total Spending
Type of Spending in FY 2020
Spending on Local Suppliers for General Procurement
Spending by Regional Scale of Geographic in 2020
Total Number of General Procurement and Critical Suppliers
Remark: Spend analysis is analyzed based on the total amount of spending and number of suppliers
Supply Chain Management KPIs and targets
Rate of Transportation Accident (Time per 1 million kilometers)
Critical Suppliers and Contractor who have undergone Sustainability Assessment (Percentage)
Spending on Local (Rayong Province) Suppliers for General Procurement (Percentage)