Sembcorp Marine is committed to manage the environmental, social and economic impacts across its value-supply chain.
Sembcorp Marine‘s value chain is critical to its competitiveness, business growth and customer satisfaction. The Group carefully manages value inputs through the life cycle phases of its projects – from design, engineering and procurement to construction and commissioning – in order to achieve on-schedule and on-budget completion, while delivering high standards of quality, safety, reliability, as well as health and environmental standards required by customers.
Supply Chain Management
Sembcorp Marine has a track record of delivering our projects on time, within budget and according to specifications. We achieve these outcomes by identifying areas in each project’s life-cycle where we can apply innovation and standardisation to optimise resources and cost-savings, and improve quality and execution efficiency. Our projects in turn are supported by a supply chain management framework comprising:
- Strategic sourcing and responsible procurement;
- Due diligence and compliance;
- Engagement and collaboration;
- Harnessing technologies; and
- Inventory optimisation.
Sembcorp Marine’s supply chain management plays a vital role in ensuring that our products comply with the required specifications and performance delivery.
To enhance our competitiveness, our procurement strategies aim to deliver cost savings, economies of scale and operational synergies that are aligned with our customers’ needs. Our procurement team sources equipment, materials, parts and other items from a global network to reduce our transportation costs and carbon footprint while catering for projects executed at our worldwide locations.
We expect our suppliers to operate ethically and responsibly and to declare their compliance with environmental, social and governance requirements set out in the Sembcorp Marine Supplier Code of Conduct and Code of Business Conduct. To assess their credentials and reliability, our due diligence processes include pre-qualification checks and regular audits. We also collaborate with these partners to establish best practices in production, delivery and sustainability.
We innovate our supply chain processes by integrating Industry 4.0 technologies such as digitalisation to improve lead-times and efficiency. To optimise our inventory levels and reduce wastage, we actively match the supply of raw materials and consumables at our shipyards against production requirements and establish advance delivery plans with our strategic bulk suppliers.
To ensure business integrity, our Supply Chain and Procurement function went through an independent third-party audit in 2019 as part of our ISO 37001:2016 Anti-bribery Management System certification in 2019.
Sustainable Supply Chain and Ethical Sourcing
Sembcorp Marine’s sustainability focus in its value chain processes is aimed at managing its environmental, social, governance and economic impacts.
As part of our commitment to responsible sourcing, we ensure that the items we procure fulfil environmental regulations and public health requirements, meet our compliance and sustainability standards and do not originate from conflict-affected areas.
To mitigate supply chain risks and ensure timely project delivery and compliance with quality, security, occupational health, safety and environment requirements, various supply chain and material management systems are in place. Key vendors of essential materials, equipment, components and services are proactively managed, closely monitored and regularly assessed for their ability to deliver and to prevent lapses that may potentially affect production deliverables.
Within our value chain, Sembcorp Marine has established due diligence processes and pre-qualification checks that verify the credentials, reliability and social responsibility of our suppliers.
All our suppliers are expected to operate ethically and responsibly, in alignment with Sembcorp Marine’s Human Rights Policy and ethical codes of conduct.
Sembcorp Marine’s Supplier Code of Conduct, launched in 2018, complements the Group’s Code of Business Conduct. The former provides guidance to suppliers, subcontractors and business partners on the Group’s requirements relating to business integrity, including non-tolerance of bribery and corruption, conflicts of interest, human rights, fair employment, decent labour practices, ethical sourcing, conflict minerals, health, safety and environmental responsibility, data protection and privacy as well as compliance with rules and regulations.
As part of its efforts to mitigate the potential impacts of climate change, the Group sources sustainably produced equipment and parts to provide customers with greener alternatives. Products and solutions that do not harm the environment and have lower carbon footprint are preferred. These include environmentally-friendly paints, coatings and materials as well as energy-efficient products for customers’ projects and for the Group’s business operations.
To conserve resources, materials such as steel and blasting grit are recycled or repurposed for internal use. Scrap materials are consolidated and recycled using approved and licensed service providers. Waste material is disposed of responsibly using service providers with nationally accredited permits.
In compliance with environmental and public health requirements by the International Maritime Organization, Montreal Protocol provisions and Singapore’s National Environment Agency, Sembcorp Marine does not procure materials, parts, equipment or products containing harmful substances, including asbestos and ozone-depleting compounds such as halon, chlorofluorocarbons (CFCs) and hydrochlorofluorocarbons (HCFCs).
The Group avoids the entry of conflict minerals into its supply chain by not procuring tin, tantalum, tungsten, gold and other raw materials originating from conflict-affected or high-risk areas. The process of extracting and producing these minerals often involves forced labour, violence and human rights abuses propagated by divisive groups for unethical causes. Vendors are also expected to ensure that their supplied products do not include any conflict minerals.
Supply Chain Due Diligence
Recognising suppliers as important partners in value creation, the Group has in place due diligence measures and internal controls to ensure on-time delivery while meeting standards of quality, safety and reliability.
The Group’s due diligence process includes pre-qualifications, audits and surveillance on key suppliers against our ESG requirements.
A reliable system of due diligence and internal control processes helps Sembcorp Marine ensure that suppliers comply with its Code of Business Conduct and Supplier Code of Conduct.
To be selected into the Group’s approved vendors list, suppliers undergo a strict qualification process, including a declaration that their business practices and their supply chain partners operate responsibly and ethically, consistent with Sembcorp Marine’s Code of Business Conduct and Supplier Code of Conduct.
As at end 2019, 100% of active suppliers in the Group’s approved vendors list declared compliance with Sembcorp Marine’s ethical codes of conduct and sustainability standards.
Tender bids are reviewed based on merit through a fair and objective process, with suppliers expected to observe fair competition regulations and conduct during the tendering process. Sustainability requirements are also incorporated into the terms and conditions of contracts.
Sembcorp Marine regularly reviews its existing suppliers through a cross-functional committee, ensuring that these suppliers continue to meet high standards of quality, reliability and performance as well as comply with the Group’s sustainability and corporate governance requirements.
The evaluation process includes documentation reviews, verification checks, company status updates and onsite audits where necessary; particularly for key suppliers with large spend value, purchase volumes or impact on production schedules.
If a contracted supplier fails to perform or is unable to comply with Sembcorp Marine’s standards and requirements, the Group will request the vendor to implement corrective measures to rectify the relevant issues. If the supplier is still unable to fulfil the requirements, it will be removed from Sembcorp Marine’s approved vendors list.
Contractors supplying manpower to Sembcorp Marine’s yards must declare that their operations and human resource practices are in compliance with the Group’s Human Rights Policy, Supplier Code of Conduct and applicable employment legislation. In Singapore, the Group’s resident contractors are required to attain bizSAFE Level 4 certification, which ensures that an externally-audited workplace safety and health management system is in place.
Regular assessments and periodic audits on contractors’ dormitory and workshop facilities are done to ensure that the Group’s safety, performance, quality, human rights and sustainability requirements are met.
Within various internal platforms, strategies are deployed to enhance cost savings as well as harness operational synergies and economies of scale that are not only mutually beneficial but also aligned with customers’ needs.
At the various stages of production, opportunities are identified for technical and engineering enhancements that deliver material usage efficiencies for parts and components. As much as practicable, lightness, compactness and efficiency are built into the product design to optimise the quantity of raw materials used in the delivered product.
Sembcorp Marine collaborates closely with customers to identify how product or service inputs can be enhanced in terms of quantity, standardisation or deployment, so as to reduce production costs and the total cost of ownership. The Group also works with its strategic and key suppliers to improve the quality, safety and cost-competitiveness of products and services provided.
Where relevant, the Group leverages its technical knowledge, engineering competencies and innovation capabilities to propose alternative parts and components that can meet cost-saving and sustainability objectives while keeping to customers’ specification requirements.
Sembcorp Marine further aims to reduce overall transport costs and carbon footprint by sourcing locally or regionally near a project’s location and subsequent point of delivery.
Leveraging Operational Synergies and Economies
Sembcorp Marine utilises a strategic approach in procuring categories of materials, components, consumables and services to achieve economies of scale and secure better value from key suppliers. The Group works closely with these suppliers to standardise products and services used in its shipyards and to better align yard operations with evolving technical standards, industry requirements and best practices. This has enabled the Group to continuously improve its cost savings, supply chain economies, competitiveness and sustainability efforts.
Moreover, Sembcorp Marine aggregates the use of transportation and logistics equipment across its yards and affiliates for better resource efficiency. This synergistic approach has further enhanced its supply chain sustainability performance while boosting the Group’s access to a wider set of qualified suppliers with stronger capabilities.
The Group also actively manages raw material stocks across its shipyards via a central shared database. Inventory levels are monitored to match production needs and minimise inventory storage costs. The database helps improve inventory forecasting and enables better planning with strategic suppliers to realise production economies.
Active Supplier Engagement
Sembcorp Marine actively engages its suppliers through briefings, workshops, industry sharing and trade events. This strengthens relationships and promotes win-win outcomes and continuous improvement in business excellence, sustainability, corporate governance, innovation and occupational safety and health.
Technical visits and factory acceptance tests are carried out at suppliers’ manufacturing facilities to enhance the Group’s understanding of production and delivery processes for improved operational planning, quality coordination and product execution.
Another important aspect of engagement is aligning suppliers with the Group’s core values, operating principles and corporate polices. This is done by communicating and disseminating Sembcorp Marine’s corporate governance policies, Code of Business Conduct and Supplier Code of Conduct to supply chain partners. In doing so, the Group ensures that its vendors and contractors are aware and have declared their adherence to the required standards.
Sembcorp Marine actively promotes technology advancement and knowledge exchange among its customers and suppliers. The Group organises and participates with key equipment vendors, material suppliers and embassy delegates in several sharing sessions on innovative technologies, technical updates and product and service upgrades.
Such collaborations ensure that Sembcorp Marine’s engineering, procurement and operational functions are kept abreast of new, innovative and sustainable technologies that can be deployed in the manufacturing processes of the Group’s products and services. The knowledge sharing also contributed to improved welding methods, development of alternative and innovative production techniques, and the enhanced sustainability of material and components procured.
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