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Supply Chain Overview
Yang Ming’s supplier management covers quality, environmental protection, information security, occupational safety and health, supply chain safety, and the regulatory requirements of port states. While transporting the cargo of customers, we also pay attention to the issues of stakeholders’ concern, thereby fulfilling corporate social responsibilities together with suppliers from different sectors.
Upstream
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Midstream
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Downstream
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Shipbuilding companies
Ship construction
Ship chartering companies
Ship chartering
Container manufacturers
Container manufacturing
Container leasing companies
Container leasing
Fuels
Used by vessels to sail
Materials
Supplies required for vessel operation, container use, or maintenance)
Alliance partners
Shipping business
Port operators
Port operation
Port agencies
Handling matters for vessels in ports
Stevedoring companies
Container stevedoring
Railway companies
Offering inland container transport services
Trailer companies
Offering inland container transport services
Feeders
Offering container transport services for branch lines
Insurers
Offering hull insurance, war insurance, and carrier liability insurance
Vessel, container, and machinery repair services
Providing vessel, container, machinery, and equipment repair services to ensure vessels’ seaworthiness and smooth operation
Technical consulting service providers
Providing consulting services related to technical specifications, navigation and transportation safety or operations
Port agencies
Handling matters for vessels in ports
Stevedoring companies
Container stevedoring
Ship Recyclers
Vessel recycling
General services
Security or cleaning services
Logistics
Offering product distribution, product planning, management, procurement, storage, distribution processing, temporary storage, and delivery services during the process of delivering goods or products from manufacturers to retailers or users
General affairs
Procurement of computer software and hardware, office supplies, equipment, consumables and construction materials required for operations
Annual Procurement Analysis
The Company analyzes the annual procurement amounts and grades/classifies suppliers. In 2022, Yang Ming conducted procurement transactions with 1,364 suppliers, which were categorized into 8 types by procured items and service nature: general affairs and services, professional services, marine fuel, vessels, safe operation of vessels, container/chassis/genset, container yard machinery, and shipping-related services. The Company set a materiality threshold for each type by the procurement amount and transaction frequency with the suppliers and identified a total of 166 Tier 1 suppliers, accounting for 82% of the total procurement amounts.
| 8 Procurement Types | Definition of Tier 1 Suppliers | Significance to Yang Ming |
|---|---|---|
| General affairs and services | Accounting for over 2% of total procurement amounts | The basic general supplies necessary for corporate operations to maintain the basic operational efficiency and work quality of the Company. |
| Professional services | Accounting for over 1% of total procurement amounts | The labor services for improving overall navigation and transportation safety, efficiency or quality or the professional services related to corporate operations to enhance operational quality and workplace safety, attaining personnel safety, vessel safety and cargo safety. |
| Marine fuel | Accounting for over 1% of total procurement amounts | The stability of fuel supply and quality is tied to the daily operation of vessels. Also, such procurement constitutes a main part of the Company’s operating costs. |
| Vessels | Accounting for over 1% of total procurement amounts | Vessels are the backbone of the Company’s international container shipping services. Their construction, chartering or other uses/deployment have direct and significant impacts on the operation of routes. |
| Safe operation of vessels | Accounting for over 1% of total procurement amounts | Yang Ming treats personnel safety, vessel safety, and cargo safety as first priorities. Thus, the installation and maintenance of vessel equipment, the supply and inspection of parts and accessories, material supply and quality requirements, and vessel docking repairs are the keys to vessel sailing safety. |
| Container/Chassis/ Genset | Accounting for over 1% of total procurement amounts | In line with the capacity of the vessels in service, maintaining a stable number of containers is a prerequisite for meeting the transport needs of customers. Also, container yard machinery are required to maintain the safety and efficiency of transport services. As such, both are important capital expenditures. |
| Container yard machinery | Accounting for over 1% of total procurement amounts | |
| Shipping-related services | Accounting for over 0.4% of total procurement amounts | Stevedoring at ports, storage at terminals, connection by feeders and inland transport via trucks and railway together constitute the global maritime transport service network. Yang Ming ensures the accurate connection of all transport links with 24/7 operation so as to offer customers global maritime transport services that are punctual, speedy, reliable and economical. |
■Proportion of 8 Types of Procurement Expenditure
■Proportion of 8 Types of Suppliers
Local Procurement and Green Procurement
Marine transportation services are all over the world. As a part of the container transport industry, the Company offers global shipping and route services as well as regional transport services (e.g., feeder, train, truck, and other inland transport services). Moreover, based in Taiwan, Yang Ming strives to ensure the procurement of general affairs and services from local (Taiwanese) suppliers, except for procurements specific to the shipping industry, with the aim of facilitating and supporting the industry in Taiwan, realizing local procurement and promoting local economic growth.
Since 2013, the Company has supported the National Green Life Movement initiated by the Environmental Protection Administration, Executive Yuan by prioritizing the use of Green Marklabelled products. Yang Ming was recognized as an “Excellent Private Enterprise for Green Procurement” by the Keelung City Government for 2 consecutive years. The Company’s green procurement amount in 2022 grew 156.10% compared to 2021, accounting for 23.45% of the procurement amount for general affairs and services. This year, to further support the Environmental Protection Administration’s Green Office measures, Yang Ming has become a partner of the movement to put energy saving, carbon reduction, and eco-friendly philosophies into practice in offices and incorporate them into daily office activities in an effort to contribute to ecological protection and continuously attain the Company’s sustainable development goals. The Company’s procurement expenditure in Taiwan in 2022 accounted for 2.40% of the total procurement expenditure, and green procurement accounted for 0.04% of the total procurement expenditure.
Green Procurement
Aligned with the government policies, Yang Ming uses products with green marks, introduces green procurement and green concepts in order to fulfill the purposes of energy saving, emissions reduction and reduction in operating costs. The Company raises the amount of green procurement year on year to play its part in environmental protection.
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2021
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Management Policy
Yang Ming adopted the “ISO 9002 International Quality Management System Certification” in 1996 to progressively develop operating procedures, including selection and procurement procedures for vessels, accessories, materials, fuels, container machines, terminals, railways/highways. We also receive a third-party audit annually. In 2022, to ensure sound supply chain management policies, the Company reviewed the existing procurement management system and identified documents whose amendment must be prioritized in the future based on the“ ISO 20400 Sustainable Procurement”framework to reinforce the Company’s management of procurement governance, procurement principles and supplier selection. We expect to amend the following management guidelines in 2023 for the purpose of attaining sustainability.
| Management Aspect | Management Document |
|---|---|
| Procurement governance | Supply Chain Management Policy |
| Procurement Sustainability Issue Assessment Form and Procurement Policy | |
| Procurement Principles | Supplier’s Code of Conduct |
| Supplier selection | Supplier Evaluation Process/Pre-qualification/Capability Assessment Practices |
| Tender Management Process and Practices | |
| Supplier Confidentiality Agreement | |
| Suppliers’ Letter of Commitment to CSR | |
| Supplier Ethical Corporate Management Best Practice Principles |
Supplier’s Code of Conduct
In 2021, the Company formulated the Supply Chain Management Policy requesting supplier partners to jointly support Yang Ming’s existing ISO management systems. To build a sustainably developed operating environment, the Company undertakes to communicate with different supply chain partners about environmental protection, human rights and labor management, ethics and integrity, public welfare, and other issues, create comprehensive management mechanisms, and continue improvement and optimization efforts.
On the basis of the Company’s management philosophies of “Teamwork, Innovation, Integrity, Pragmatism,” Yang Ming’s vision is to be an excellent transportation group in the hope of working with supplier partners to promote sustainable development and ensure business, financial, environmental and social sustainability. According to the regulations and acknowledged standards of the UN Global Compact, Ethical Trading Initiative, OECD, ISO 45001, ISO 27001, ISO 14001, Universal Declaration of Human Rights, International Labour Organization (ILO) and other international organizations, the Company regularly reviews and amends Yang Ming’s Supplier’s Code of Conduct and such amendment covers 3 parts: human rights and workers, environment, business ethics, and ethical management to reflect that the Company has acknowledged global issues and undertaken to comply with related standards. We also hope that our suppliers comply with these standards and encourage them to actively cooperate and make continuous improvements.
Supply Chain
With the aim of creating a sound and sustainability-based supply chain management system, Yang Ming aims at 4 key outcomes: a sound procurement system with sustainability factors; effective control of suppliers’ sustainable management maturity, performance and on-going tracking; enhanced sustainability awareness through internal education and training; and sustainable engagement with suppliers. The following table shows the action plan for each key outcome and short-term and medium-term/long-term targets:
| Key Outcome | Action Plan | Target by 2023 | Target by 2024-2030 |
|---|---|---|---|
| A sound procurement system with sustainability factors | Amend the Supplier’s Code of Conduct. | Release and implement the amendment. | Continuously make amendments according to sustainability issues and risks. |
| Amend and add procurement-related documents. | Release and implement the amendment. | Continuously amend and add procurement-related documents. | |
| Effective control of suppliers’ sustainable management maturity, performance and on-going tracking |
Written and on-site reviews for suppliers. | Carry out written reviews for over 50 suppliers and onsite reviews for 5 suppliers. |
Increase the number of suppliers reviewed year by year and achieve a supplier review rate of 100%. |
| Supplier risk evaluation. | Initiate risk evaluation. | Increase the number of suppliers evaluated year by year. | |
| Enhanced sustainability awareness through internal education and training |
Organize internal education and training to enhance departments’ sustainability awareness and improve communication with departments and units participating in projects. | Organize 1 internal education and training session. | Design relevant education and training based on sustainability issues to continuously enhance internal sustainability awareness. |
| Sustainable engagement with suppliers | High-risk suppliers’ improvement and follow-ups. | Request high-risk suppliers identified annually for improvement and follow-ups. | |
| Precise management of suppliers with special business types. | Identify 3 types of suppliers with special business types and design questions specifically for them. | Enhance the management of suppliers with special business types and create a supplier performance tracking mechanism. | |
Labor Standards
Suppliers ought to uphold the human rights and fair treatment of workers, including all workers (temporary worker, casual worker, contract employee and other forms of labor). Use of child labor or any is crimination is prohibited. Suppliers are to comply with all the employment laws and regulations at where they operate.
Occupational Health and Safety Standards
Suppliers are to continuously provide safe and heathy work environment and occupational safety education and trainings, while working to minimize occupational injuries.
Environmental Standards
Suppliers are to comply with relevant environmental regulatory requirements in the region and mitigate impacts to the environment.
Standards of Ethics
Suppliers and their downstream suppliers ought to adhere to the principles of ethics and integrity and are forbidden to offer, promise, give or accept bribes or other forms of ill-gotten gains.
Management System Standards
Suppliers are to enforce management systems to promote compliance with relevant laws and continuously make improvement on the requirements of standards.
Supply Chain Management Process
Implementation Performance in 2022
In 2022, the Company sent the sustainability self-assessment questionnaires to the 144 Tier 1 suppliers identified in the previous year. There were 3 topics and 27 indicators. We conducted written reviews for 30 suppliers answering the questionnaires, including 4 for general affairs and services, 4 for professional services, 4 for marine fuel, 3 for vessels, 6 for safe operation of vessels, 1 for container/chassis/genset, 4 for shipping-related services, and 4 for container yard machinery. Among them, 2 suppliers for shipping-related services received on-site reviews.
Supplier Evaluation and Selection
the procurement and disposal procedures. For supplier selection, aside from the basic information of suppliers, the Company Sustainability Statement Survey and a Statement of Integrity in Business Operation are required, where sustainability topics such as labor rights practices, occupational health and safety, environmental protection, and corporate code of ethics are included.
Once becoming the Company’s official partners, our supplier partners must promise to observe all laws and regulations that should be complied with when executing their business activities, including but not limited to international or domestic regulations or conventions on labor, environmental protection, health and safety, and obtain licenses or special permits required to perform their business activities, including but not limited to having their employees meet regulatory qualification requirements and acquiring business licenses for businesses requiring special approval. Our supplier partners should completely understand the Company’s requirements for the health, safety, hygiene and employment of employees as well as environmental protection, confirm that they have been informed of them, and undertake to take corresponding safety measures. In case of any staff injury/death or disaster during the contract period, our supplier partners should take necessary response measures and make a report to the Company immediately after the incident occurs. In conclusion, in the event of any violation of the statement or contract provisions, Yang Ming may terminate the contract without notice and will not collaborate with suppliers that fail to make improvements afterwards and are not compliant with the requirements. The Company did not cause negative social or environmental impacts on the supply chain in 2022.
Supplier ESG Sustainability Review
The Company conducted a written supplier sustainability review for the first time in 2022, where the total average score of all suppliers was 49. There were 7 suppliers with a score of higher than 60, accounting for 23%. The percentage of suppliers with scores falling within the lowest score range was 3 % and those with a score of over 50 was 43%.
According to the comparison among governance, social and environmental issues, environmental and social questions had similar scores, and governance questions got the lowest scores. The issues with the top 3 highest scores were related to“ legal compliance,”“ integrity management,” and “sustainable governance,” indicating that the suppliers were stronger in terms of the management of legal compliance, integrity management, and sustainable governance. Suppliers with lower scores were weaker when it came to the management of“ supplier management,”“ business continuity management,” and“ energy/resource use” issues and will be provided with guidance and improvement advice in the evaluation in 2023.
Supplier Risk Evaluation
To reinforce supply chain management, the Company plans to create a supplier risk evaluation system that is scheduled to be implemented in 2023 and provide different management methods based on the risk level of suppliers in the hope of effectively reducing the Company’s supplier and supply chain risks. In the first phase, sustainability self-assessment questionnaires will be sent to 166 Tier 1 suppliers. The data answered by the suppliers will be converted into risk values for calculation. They are then compared with the sustainability issues identified by the Company to set materiality thresholds, classify the suppliers by risk level, and develop different management methods.
Supplier Engagement
By enhancing the engagement with suppliers, the Company improves its sustainability capabilities while continuously boosting the Company’s supply chain resilience. In 2022, written supplier sustainability self-assessments using questionnaires and on-site audits were carried out for the first time. Yang Ming distributed sustainability self-assessment questionnaires to 30 suppliers in 8 different categories and selected 2 suppliers for on-site audits to understand their sustainability maturity as the foundation for promoting the Company’s supply chain management system and building the sustainability awareness of the suppliers. Relevant measures include e.g. performing on-site inspections or providing assistance to help suppliers with poor performance in written reviews develop necessary systems. In the future, we will increase the number of suppliers reviewed year by year so as to drive the compliance of the overall supply chain with ESG indicators.