ThaiBev uses a Centralized Procurement approach, which specifies frameworks and control of procurement from a central department, in order to gain more bargaining power and enhance competitive advantage in cost management. And most important to this strategy is the control of quality and transparency in the procurement process, with suppliers categorized in two groups according to the merchandise they are supplying as follows:

> 2,500
Suppliers

1. Direct Materials
are merchandise that are product components or used directly in the production process. They are not diverse but their procurement spend is high. They are categorized into packaging, commodities and chemicals.

> 40,000
Million Baht
Procurement Spend in 2018

2. Indirect Materials
are other merchandise not under Direct Materials which ensure business continuity. Procurement spend is not high, but covers a wide range of merchandise such as machinery, spare parts and consumables, etc.

Procurement Spend for Direct Materials

Packaging	59%
Commodities	36%
Chemicals	5%

Procurement Spend for Indirect Materials

Construction	27%
Machinery	26%
Materials handling	21%
POP/POS/Premium	15%
Services, IT & office automation	6%
Consumables	5%

 

ThaiBev has announced the enforcement of the Supplier Code of Practice in order to establish a standard for suppliers’ business operations besides financial aspects. The Code covers environmental and social aspects and corporate governance, and encourages suppliers to apply the Code in their business operations, and communicate it to their own suppliers. A target has also been set, specifying that 100 percent of suppliers doing business with the company must accept and comply with the Code by 2020, to be part of disseminating a sustainable procurement practice and create a sustainable supply chain at the national level. This supply chain is also intended to be consistent with the UN Sustainable Development Goal 12 (UN SDG 12), which promotes the development of public procurement practices that are sustainable and in accordance with national policies and priorities.

ThaiBev has specified responsibility in enforcing the Supplier Code of Practice from management at the highest levels of the organization, to operational levels, to communicating with suppliers regularly through online channels. This includes sharing the vision of executives at our annual Business Partner Conference to ensure that every stage of the procurement processes is consistent with the company’s strategies, policies and operating targets.

Chief Supply Chain Management		Formulate supply chain strategy and sustainability objectives
Managing Director of Procurement Unit		Establish procurement policy in alignment with the strategy and objectives
Procurement Manager		Oversee procurement operation and ensure compliance with the policy, strategy and objectives
Procurement Officer		Procure goods and services in compliance with the policy, strategy and objectives

Identifying Critical Materials and Suppliers

26 Critical Tier 1 suppliers

ThaiBev identifies critical materials and suppliers according to their procurement spend and level of risks to prioritize and mitigate risk efficiently by considering high spend merchandise items (materials) and suppliers, risk levels, and the impact on the company’s revenues.

 

In ThaiBev’s sustainable procurement process, the company considers risk factors covering corporate governance, the environment and society. This includes the selection of new suppliers, the screening of suppliers before trading (pre-qualification), the evaluation of supplier performance, the monitoring of results and the continuous development of suppliers to improve efficiency in the supply chain to support the growth of the business.

 

Registration of New Suppliers New suppliers must accept and adhere to the Supplier Code of Practice.	100% of suppliers acknowledge and adhere to ThaiBev’s Supplier Code of Practice
Screening of Suppliers Prior to Purchase ThaiBev has a sustainability risk assessment process for suppliers, classifying them into groups according to their risk level and capabilities.	100% of new suppliers undergo sustainability risk assessments before doing business
Supplier Selection ThaiBev includes a sustainability clause in every contract awarded to a supplier, to prevent violations or malpractice of the principles of good governance, the environment or human rights.	100% of contract spending contains a sustainability clause
Supplier Performance Evaluation ThaiBev has an on-site auditing process for suppliers after purchase, and classifies suppliers into groups according to their performance evaluation results.	100% of critical suppliers undergo performance assessments after purchase at sites of operation as scheduled
On going Monitoring and Supplier Development ThaiBev identifies issues based on supplier performance evaluation results, and determines measures for suppliers to submit corrective action plans within the predefined period.	100% of suppliers receiving complaints submit corrective action plans to address the complaints, following ThaiBev’s requirements

The Supplier Award Program is intended to promote supplier capacity-building, stimulate business competition, and spur innovation in the industry. The Supplier Award Committee and awarding criteria have been established to ensure that the awardees have excellent working standards and are models of sustainable business operations for other suppliers.

 

INSIGHT

Saroj Chayavivatkul President, Thai Beverage Can Limited

ThaiBev’s Supplier Award Program drives us to constantly develop ourselves so that we can compete with other suppliers in terms of costs, quality and standards. It also helps us to be aware of doing business on the basis of sustainability, with responsibility to our stakeholders. In the near future we will also introduce sustainable business practices to our own suppliers to create a sustainable beverage can supply chain locally.

Non-tier 1 suppliers are suppliers that do not directly supply goods and services to the company. However, ThaiBev is aware of their impacts on procurement processes. ThaiBev has established criteria for risk assessment, which identify critical non-tier 1 suppliers based on both business impact and sustainability factors; for example, dependency and market influence, their contribution to a sustainable supply chain, and the frequency of sustainability risks detected.