ThaiBev Sustainability 2021

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Supply Chain Risk Management

Supply Chain
Policies & Strategies

Supply Chain
Risk Management

ThaiBev integrates sustainability in all aspects of its procurement process from supplier registration, supplier qualification, bidding, and supplier performance evaluation. Additionally, ThaiBev has formalized process to identify and review its critical suppliers annually in order to develop supplier relationship management and supplier engagement plan to collaboratively manage risks in the supply chain.

Procurement

billon baht

Procurement Spend

Active Suppliers

	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.
	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.
	Active Suppliers are suppliers with more than one business transactions in 2021 with minimum spend over 100,000 baht. This excludes one-time suppliers and inter-related company which ThaiBev holds more than 50% of share.

ThaiBev analyses its procurement spend and suppliers to effectively prioritize commodities and suppliers as well as defining sourcing strategy for each item.

Most of ThaiBev procurement activities are based on online platform meaning that all of the data are maintained and updated systematically on real-time basis, ensuring that any procurement decisions made are based on accurate and up-to-dated information.

SPEND DISTRIBUTION

Direct Materials

Indirect Materials

Packaging
53.4%

Commodity
25.3%

Machinery & Spare Parts
5.3%

Construction
4.8%

Chemical
3.8%

Marketing Materials
3.1%

Consumables
2.4%

Material Handling
0.7%

IT & OA Equipment
0.7%

Services
0.5%

ThaiBev believes that a stable national economy begins with comprehensive income distribution to local communities so that they achieve self-reliance. Therefore the Company consequently privileges suppliers operating in the vicinity of its factories.

Not only does this practice contribute to local job creation and add value to raw materials in each locale, it also minimizes transportation-related pollution.

Critical suppliers are suppliers indispensable to ThaiBev’s supply chain and business continuity. ThaiBev treats critical suppliers as strategic business partners with whom ThaiBev works closely to ensure that all aspects of supply chain risks are being monitored and mitigated. Critical suppliers also play significant role in improving overall supply chain transparency by co-identifying risks beyond ThaiBev’s tier 1 suppliers.

ThaiBev defines its critical suppliers considering both commercial and sustainability factors. The most significant factors which are supplier’s sustainability maturity level and business goal alignment with ThaiBev Group’s vision are given the highest weightage. Suppliers are deemed critical when their total criticality score are equal to or higher than 65.

Sustainability Maturity

Business Goal Alignment

Critical Material Supplier

Substitutability

Dependency

Critical tier 1 suppliers are small in number but contribute to high amount of annual procurement spend. All of them supply direct materials which are component of the products that contribute largely to the company’s revenue.

NUMBER OF CRITICAL TIER 1 SUPPLIERS

Number of Critical Supplier

Contribution to Total Spend

42%

Critical Tier 1 Suppliers

Procurement Spend Contribution

CRITICAL SUPPLIERS & CONTRIBUTION TO TOTAL PROCUREMENT SPEND IN 2021

Number of Suppliers

Spend Proportion

GEOGRAPHIC DISTRIBUTION OF CRITICAL SUPPLIERS

Distribution of Critical Non-tier 1 Suppliers by Product Category

Non-tier 1 suppliers who supply goods and services to ThaiBev’s tier 1 suppliers are also rated in order to identify Critical Non-tier 1 Suppliers. ThaiBev works closely with its tier 1 suppliers to identify Critical Non-tier 1 Suppliers and assess their sustainability risks to improve the assessment quality and gain more insights to risks in the supply chain.

ESG INTEGRATION INTO

ThaiBev assesses all aspects of risks in its supply chain including both commercial and sustainability risks. Sustainability is taken in to considerations and embedded in every step in the procurement process starting from new supplier registration, supplier qualification, tendering and awarding, supplier performance evaluation, and on-going monitoring. Additionally, for effective long-term risk management, ThaiBev is committed to develop supplier capability continuously and looks for collaboration opportunities with its critical suppliers to manage ESG impacts in the supply chain.

NEW SUPPLIERS		EXISTING SUPPLIERS
1 Registration Supplier Code of Practice Sustainability risk assessment survey	2 Pre-qualification Comprehensive sustainability assessment Third-party certification requirement On-site audit	3 Bidding & Award Bidding condition with ESG requirements Contract clause with ESG requirements	4 Evaluation Annual supplier performance review Document audit Onsite audit	5 Capacity Building Corrective action request Business Partner Award	6 Collaboration Non-tier 1 supplier management Business continuity risk management ESG impact management

HOW THAIBEV ASSESSES

ThaiBev assesses 100% of its active suppliers to determine the risk exposure in its supply chain, using three approaches: third-party risk database, online assessment, and on-site audit. The degree of comprehensiveness of the assessment depends on supplier’s criticality, spending, and product category.

Third-party Risk Database
ThaiBev uses CROSS Supplier Risk Management (SRM) with integrated third-party risk database to assess supplier risks which include sustainability risks and other aspects such as financial risks, operational risks, and regulatory risks.

Online Assessment
ThaiBev assesses supplier’s sustainability risk on its online supplier portal, Supplier Life Cycle Management. The assessment comprises governance, environmental, social, and supplier management.

On-site Audit
ThaiBev audits its critical suppliers and suppliers with high risk exposure on site. It uses both internal auditor and requests third-party audit evidence from the suppliers, for instance, SMETA.

Since 2020, ThaiBev has included the requirement for ThaiBev Business Partner Award Program participants to identify their own critical suppliers and to implement their supplier code of conduct to these suppliers as well as to have formalized processes to evaluate these critical suppliers.

SUPPLIER'S SUSTAINABILITY

Spending

Number of Supplier

SUPPLIER'S SUSTAINABILITY RISK DISTRIBUTION

TYPES OF AUDIT

	Document Audit / Online Assessment	On-site / Remote Audit	*Proxy On-site Audit
ACTIVE SUPPLIERS
CRITICAL TIER 1 SUPPLIERS
CRITICAL NON-TIER 1 SUPPLIERS
SUPPLIERS OF CRITICAL MATERIALS
SUPPLIERS OF FOOD CONTACT ITEMS
SUPPLIERS EXPOSED TO HIGH ESG RISKS

*PROXY ON-SITE AUDIT
refers to an on-site audit conducted by any personnel outside ThaiBev Group e.g. customers of suppliers, third-party organization, etc.

Post-Audit Review

Following the audit, ThaiBev identifies non-compliance issues founded and sets out mandatory requirements for the audited suppliers to submit corrective action plan within designated period if it detects any non-compliances and monitors closely how actions are taken to resolve the issues. ThaiBev shall suspend any suppliers who fail to resolve major non-compliances within the agreed window of time from having any business transaction until further actions are properly taken and satisfy ThaiBev’s requirements

MAJOR NON-COMPLIANCES

Unethical Business Practice

Illegal Activities

Negligence to Health and Safety

Human Right Violation

Deviation from Product Specification