introduction to sinopec procurement (material supply) management to sinopec... · advantages...

Sinopec Procurement Division

Introduction to Sinopec Procurement (Material Supply)

Management


Introduction of Material Supply Management

I. Brief Introduction to Sinopec

II. Procurement Management System

III. Procurement Operation Mode

IV. Core Concept of Material Supply

V. Supplier Relations Management

VI. E-Commerce

VII. Project and Business Opportunities


Sinopec is a vertically integrated energy and chemical companywith upstream, midstream and downstream operations. Itsprincipal business includes exploring, developing, producing andtrading of crude oil and natural gas; and, manufacturing andmarketing of petroleum products and petrochemical products. In2018, Sinopec ranked 3rd among the world's Fortune Global Top500 companies.

In 2018, Sinopec produced 250 million barrels of crude oil and1000 billion cubic feet of natural gas; processed 244 million tonsof crude oil; produced 11.51 million tons of ethylene; and sold 198million tons of oil products.

I. BRIEF INTRODUCTION


One Unit

Two Levels

Three Platforms

Seven Unifications

“One Unit, Two Levels, Three Platforms, Seven Unifications”

• Sinopec Procurement Division

• Corporate

• Subsidiary

• For domestic trade

• For global trade

• Supply Management

• Operation Mode

• Management Rules

• Procurement Process

• Supplier Management

• E-Commerce

• E-Bidding

• E-Commerce

I. BRIEF INTRODUCTION


Integrated Management

Consolidated Settlement

Centralized Procurement

Unified Reserves

II. MANAGEMENT SYSTEM OF MATERIAL SUPPLY


Integrated Management by Specified Departments One enterprise leader is in charge of the procurement and material

supply.

One procurement department is responsible for the specializedmanagement of materials for production and construction.

Includes: Regulation Construction, Supplier Relations Management,Price Control, Inventory Management, Performance Evaluation, etc.

Centralized Procurement One procurement department is responsible for the centralized

procurement of materials for production and construction.

Construction Principle of Material Supply Management System



Unified Reserves One procurement department is responsible for the unified reserves

and delivery of materials for the production and construction.

Consolidated Settlement Procurement funds are allocated by one material supply management

department.

Construction Principle of the Material Supply Management System




Procurement Division of both

-Sinopec Group and Corp.--Sinopec International Co., Ltd.-

13 Oilfields 37 Refineries, petrochemicals

10 Specialized Co. and PD

9 Joint ventures

12 Service companies

8 Engineering companies

8 Research Institutions

Structure at Subsidiary Level

A total 97 entities set up procurement departments.

A total of 97 entities make up the procurement departments.

The procurement departments are set up by a total of 97 entities.


Sinopec Procurement Division (Sinopec International Co., Ltd. )


Procurement Division of Sinopec Group

Procurement Division of Sinopec Corp.

Sinopec International Co., Ltd.

One Organization

with

Three Name Plates




Rules regulation, procurement organization, subsidiaries management and appraisal.

Direct centralized procurement for bulk material, standardized equipment and for

supply of key projects.

Import and export of refinery by-products, catalysts, lube oil, equipment and materials

other than crude oil, oil and chemical products.

Procurement Management

Centralized Procurement

International Trade

Functions at Headquarter Level


Procurement ManagementResponsible for the integrated management of Sinopec’s materialsupply, including regulation construction, structural reform andmechanism optimization; procurement strategies establishment;guidance, coordination and supervision of subsidiaries’ materialsupply.

Centralized ProcurementResponsible for the centralized procurement of commodity, generaland key materials for the production and construction of SinopecGroup, such as coal, chemical agents, steel, compressors, reactors,etc.

International Trading BusinessResponsible for the unified management of the import and exportbusiness and the third-country trade of Sinopec Group, in addition tocrude oil, oil products and chemical raw materials.



Functions of the Procurement Departments (Material Supply) inSubsidiary Companies

Procurement Management of Subsidiaries

Regulations establishment, guidance, coordination and supervision of theexecution.

Integrated management of the implementation of purchase plan, along withother specialized work such as management of suppliers, commodity priceand quality, inventory, etc.

Collection and compilation of the internal demand for centralizedprocurement materials, which is to be submitted to the headquarters.

Centralized Procurement at Subsidiary Company Level Centralized procurement and unified reserves of materials for production

and construction. Inspection, storage, delivery and on-site service for purchased materials.



III. PROCUREMENT OPERATION MODE

Direct Centralized Procurement by Sinopec HQ

• Variety: Coal, petroleum

geology special pipes,

compressor units, reactors and

other important materials.

• Operation: The Procurement

Division (International

Company) signs contracts and

implements procurement.

Centralized Procurement Organized by Sinopec HQ

• Variety: Chemical agents,

seamless steel pipes, heat

exchangers, valves, cable and

other bulk commodities.

• Operation: The Procurement

Division (International

Company) organizes the

negotiation between

enterprises and suppliers,

determines the purchase price,

signs the framework purchase

agreement, and implements the

purchase according to the

agreement.

Procurement by Subsidiary Companies

• Variety: Materials besides

those included in the catalogue

of centralized procurement by

Sinopec HQ.

• Operation: Procurement shall

be carried out by enterprises in

accordance with the unified

requirements, procedures, on

the unified platform and within

the unified supplier network.

Three Types of Procurement


Process of Direct Centralized Procurement by Sinopec HQ

② Sign purchase contract

Sinopec Finance Company

⑦ Capital allocation

⑥Settlement request

④ Acceptance and quality confirmation

⑤ Payment

ProcurementDepartment

⑧ Capital allocation

Procurement Entity:

Procurement Division

(International Company)

Supplier

① Submit purchase request

③ Delivery


Capital flowInformation flow Logistics flow


Process of Centralized Procurement Organized by Sinopec HQ

② Submit purchase request

③ Place purchase orderafter balance inventory

供应商

Procurement Entity:

Procurement Department

at Subsidiary levelSubsidiary’sFinance Department

⑥ Settlement request

⑦ Payment

Supplier

Material Required-Subsidiary-

Procurement Division

(International Company)

① Procurement agreement

④ Delivery, acceptance and storage

⑤ Delivery




② Sign purchase contract

供应商

Procurement Entity:

Procurement Department

at Subsidiary level

⑤Settlement request

⑥ Payment

③ Delivery, acceptance and storage

① Submit purchase request

④ Delivery

Process of Procurement by Subsidiary Companies


Material Required-Subsidiary-

Subsidiary’sFinance Department

Supplier



Advantages

Enhanced bargaining power against coal mines, steel works

and manufacturers.

Cultivated group of strategic suppliers, domestically and

aboard.

Strengthened capability of securing resources, price

negotiation and risk controlling.



Safe Supply

IV. CORE IDEOLOGY OF MATERIAL SUPPLY

Sinopec Procurement’s Value Orientation:Safety First; Timely Second; Economic Third

• Safety First

Guarantee the operational and environmental safety of the plant

• Timely Second

Ensure uninterrupted construction and production

• Economic Third

Control the operational costs of the plant


-- Fundamental Principle of Procurement Cost Control

Best Price/Performance Ratio, Lowest Overall Supply Cost


• Best Price/Performance Ratio

Prevent material quality and function surplus, prioritize on material quality

and avoid pursuing excessively low purchase price unilaterally.

• Lowest Overall Supply Cost

Pursue the lowest total cost of the whole life cycle of materials, paying

attention to the service life, maintenance cost, reserve capital occupation,

logistics transportation, energy consumption, technological progress,

environmental protection, safety and other costs and factors, besides the

purchase price.


-- Fundamental Principle of Procurement Operation Mechanism Construction


Specialized Division of Labor, Process-oriented Operation

• Tripartite System of Procurement Operation: the powers of supplier

selection, price determination and payment request are separated.

• Business operation mechanism established with division of execution,

supervision, and management.

• Shift the focus to demand analysis, market research, supplier

management and process control, strengthen the professional

management function of material supply.


• The supplier is the source of security, quality and risk of resource, to a

certain extent, determines the cost competitiveness of the enterprise and

is an important external resource for the survival and development of an

enterprise.

• The establishment of relatively stable cooperative relations with

competitive suppliers to form a benefit chain of risk and benefit sharing

and common development, fundamental for assuring the reliable and

stable resource for enterprises, thus, ensuring safe, timely and economic

supply.

Win-win Cooperation-- Basic Principle of Supplier Relations Management

V. SUPPLIER RELATIONS MANAGEMENT


Entry Qualification Management of Suppliers

Open to all -- supply services are open to all, suppliers can apply to participate

in Sinopec’s procurement activities.

Qualification review – a qualification check and supply and service capacity

review will be implemented for suppliers looking to participate in procurement.

Quantitative evaluation – integrated evaluation of suppliers on credit

certification, quality evaluation, dynamic performance and market performance

according to Epec Standard.

Resource sharing – the unified resource management platform has been built

for Sinope’s material purchase and supply, thus, guaranteeing the sharing of

resources within Sinopec group.

Win-win cooperation -- as an important external resource, the partnership and

cooperative relation with suppliers are highly valued to achieve mutual benefits.



Supplier Search

Registration

Basic Information Review

Qualification Review

Qualification Approved

Registration on Epec (https://www.epec.com)

Qualification verification includes certification review and on-site inspection, organized by the Procurement Department.

Assigns the relevant material categories in the System’s products catalogue for approved suppliers.

Supplier’s Entry Qualification Management



Directory Management

Based on the supplier’s core products

assign the supplier the product catalogue

Procurement according to the supplier’s product catalogue

Periodically inspect documents related to the assignment of supplier’s product

catalogue



Evaluation Management of Suppliers

Credits Certification, in cooperation with 3rd party credit rating agencies,

grants comprehensive rating, based on the assessment of basic qualifications,

business performance, financial situation and credit record.

Quality Evaluation, in cooperation with 3rd party quality evaluation agencies,

assesses product quality regarding qualification, capacity, quality assurance,

and performance test.

Dynamic Performance, evaluates product quality, service, and delivery, the

results reflect the suppliers’ transactions and compliance to contracts, which

are updated and shown in real time.

Market Performance, with big data technologies, the evaluation results

showing the recognition, procurement strategies and innovation of the suppliers,

will be updated and showcased in real time.



Punishment of Faulty Suppliers

Risks Alarm

Warning Internal Notice Suspension

Disqualification

Cheating, fake products,bid-rigging, bribing, serious

late delivery or qualitydefects causing severe

economic loss.Correctiveaction bysuppliers.

Substantial loss ornegative effect.



Sinopec E-Commerce System Structure

`

Plan

ERP

Settlement

Standardized Coding（MDM） Contract Management System(CMIS)Supply Resource Management System

EPEC

Data Warehousing

BWBusiness Publicity System

Collaborative Workbench

Procurement

E-Commerce Systems

EC5.0

Electronic Bidding and

Tendering System

VI. E-COMMERCE

ERP


The largest B2B procurement e-commerce platform in China

Online Users: over 81,000

Online Transaction Products: over 3,22 million varieties

Online Total Transaction Volume: over 2.3 trillion CNY

Sinopec Procurement E-Commerce Platform

VI. E-COMMERCE

Online purchase order submission, inquiry, supplier quotation,procurement plan formulation and approval, contract elementformation and supplier evaluation are executed online.


Procurement

6

4

2 7

1 Demand Confirmation

Acceptance and Inventory

Management

8 Payment

3 Supplier Selection

10 20 30

采购订单

10 20 30 Order Operation

供应商

5 Order Monitoring

采购订单

10 20 30

?

Invoice Verification

采购申请

Resource Confirmation

MRO Module in ERP

VI. E-COMMERCE


Supplier Management System

Sinopec Material Supply and Resources Management Regulations

Supplier Search: Supplier self-registration and global supplier search.

Qualification Verification: includes certification review and site inspection, prevents

and controls supply risk from source.

Dynamic Evaluation: supplier performance summary and dynamic quantitative

assessment.

Hierarchical Management: according to the evaluation of suppliers.

Resource Sharing: Sinopec's unified supply resources ensure the accuracy and

completeness of supplier information.

Basis for purchasing decision: results of supplier transaction, evaluation and classification.

VI. E-COMMERCE


Supplier Sourcing

Supplier

Registration

Grading and Assessing

Management

Dynamic Evaluation of Supplier

Performance

Integrated Query

Archives Query

Supply Amount Query

Supplier Management Report Query

Supplier Classification

Query

Business Process Query

Supplier Historical Data

Query

Qualification Examination and Catalogue Review

Application for Catalogue Review

Modifications in the Categories

System Management

User Management

User Group Management

User Limit Management

Performance Query

Updated Product Categories

Application for Examination

Approval of Examination

Supplier Sourcing

Supply Resource Hierarchical

Management

Notification of Defaulting Suppliers

EpecRegistration


VI. E-COMMERCE


① Online Member Registration

② Select Member Identity

③ Submit Basic Information

Company Information

Procurement Manager Information

Contact

④ Verification

Registration


VI. E-COMMERCE


Product Code Management

Centralized management of product codes used within the System,synchronized to each material supply management information systemthrough the interface between systems.

VI. E-COMMERCE


BW System

Integrating of e-commerce systems,ERP, Epec and othersystems.

Real-time monitoringof procurement andinventory.

Cross-enterprisessharing of purchaseprice and inventoryinformation.

VI. E-COMMERCE


Upstream Projects:

Southwest shale gas project construction

North China natural gas and Northwest crude oil productioncapacity construction

Tianjin LNG

Wen 23 gas storage construction

New Guangdong-Zhejiang Pipeline Phase I

Erdos-Anping-Zhangzhou Pipeline Phase I

Construction of overseas oil and gas project

Project Investment

In 2018, Sinopec arranged a project investment of *** CNY.

VII. PROJECT STATUS AND BUSINESS OPPORTUNITIES


Downstream Projects:

Zhongke refining and chemical project construction

Zhenhai, Maoming, Tianjin and other refinery structureadjustment

Gasoline and diesel national VI quality upgrade alkylationproject group

Gulei integration project

…

Project Investment


In 2018, Sinopec arranged a project investment of *** CNY.


Projects in 2019:

2 oil and gas field surface engineering projects

19 refining and chemical projects

14 storage and transportation projects

2 research support facilities projects

In 2019, Sinopec plans to carry out 37 key construction projects(including project groups), and the project investment will increase to ****billion yuan


Project Investment


Erdos-Anping-Zhangzhou Pipeline Phase I

Wen 23 Gas Storage

Zhong'an Coal Chemical

Hainan Aromatics Project

Zhenhai refinery structure adjustment

gasoline and diesel national VI quality upgrade alkylationproject

…

Projects that are scheduled to be delivered in mid-2019:


Project Investment


Zhongke refining and chemical project

Gulei integration project

Zhongsha polycarbonate project

Yangzi EVA

Sino-Korean ethylene transformation

Refinery structure adjustment of Maoming, Tianjin, Luoyangand Jingmen

…

Projects that are continuing to be implemented in 2019 :


Project Investment


Southwest Weirong shale gas project construction

Project group of Zhenhai Refinery

1 million tons/year ethylene of Hainan Refinery

Guizhou coal chemical project

Yangzi Wuhan Refinery structure adjustment

…

New projects started in 2019:


Project Investment


Business Opportunities

Sinopec's daily production and operation and project construction require alarge number of large-scale key technical equipment, spare parts, materials,chemicals and other materials, and it is necessary to collect resourcesthrough the international market.

Upstream Projects:

Seismic exploration equipment, oilfield drilling and production equipment.

Downhole tools for offshore and high pressure land drilling rigs.

Metering skid, pressure skid and valves for oil and gas transportation.

High pressure pumps and low temperature valves for LNG project.

Analytical Software for oil and gas exploration.



Downstream projects:

Compressor unit, reaction unit, heat exchanger and other high pressurevessels, pipeline and instruments for EVA plant.

Hydrogenation feed pump and high pressure pump for LNG plant, axial flowpump, etc.

Temperature control valve, orbit ball valve, cracking gas valve, plungervalves, etc.

DCS, analytical and testing instruments.

Environmental protection technologies, such as waste water control, airquality control, etc.


Business Opportunities


Sinopec will open supply services and procurement projects to all.

All transaction rules will be disclosed.


We sincerely look forward to

cooperating with suppliers

around the world.


Thank you!

introduction to sinopec procurement (material supply) management to sinopec... · advantages...

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