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At Cepsa we manage our suppliers based on a standardised procedure that enables us to apply uniform procurement criteria and requirements to achieve the highest levels of quality, transparency and ethics in our value chain, while minimising the related risks.

To reinforce our risk control, in 2017 we created our Supplier Risk map. The map provides us with a picture of our supply chain that identifies the risks surrounding each supplier. In turn, this enables us to report on risks to the Corporate Risk Unit and the entire Company. Our methodol- ogy assigns different risk levels to suppli- ers on the basis of a range of factors, such as location, operational criticality, health and safety, corporate responsibility and sustainability positioning, and economic risk, among other matters. This year we analysed close to 3,000 suppliers using this methodology. No supplier was de-

tected as involving a high or very high risk for Cepsa.

Having analysed supplier risk, we then segment our suppliers in accordance with criteria of economic risk and criticality of their supplies and services. Segmenta- tion is intended to classify the various types of suppliers who work with us so that we can take specific improvement and development actions in each seg- ment. Suppliers in Segment v are outside the scope of purchasing management insofar as their annual contract value is less than 5,000.

In 2018, we shall start up a project to streamline and speed up purchasing management for this type of supplier by optimising our tail-end spend and imple- menting a marketplace with purchasing guides to make the process easier for all departments involved.

OUR SUPPLy CHAIN

Segment No. of suppliers % Suppliers % Expense

Segment I 108 2.25 57.56

Segment II 216 4.51 22.97

Segment III 380 7.93 11.28

Segment Iv 2,267 47.32 7.95

Segment v 1,820 37.99 0.25

The reported information refers to purchases made by the Purchasing and Contracting unit, excluding purcha- ses of crude oil and other raw materials.

CHAPTER 5 Cepsa in 2017