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Supply chain management

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Suppliers play a significant role in our delivery process. We aim to have close and excellent relationships with our key suppliers in order to ensure that both parties understand and comply with our strict process and product requirements.

Apart from financial benefits, close relationships stimulate knowledge sharing, create an environment of innovation, and integrate more strongly strategic suppliers into Wärtsilä's value chain. Wärtsilä has an extensive supply base with around 27,000 active suppliers, most of whom are located in Europe, where we have our main production units. We are also continuously investing in developing a strong supply chain network in Asia.

Wärtsilä supplier requirements

Wärtsilä has defined processes for selecting suppliers, determining their compliance with Wärtsilä requirements, and developing the supply relationship. We offer our suppliers a partnership that strengthens the competitiveness of both parties. A precondition of this partnership is an open and continuous dialogue. The partnership approach is also applied in Wärtsilä's research and development activities, in which we often collaborate with universities, research institutes, and key suppliers.

In addition to requirements relating to general features and product-specific issues, Wärtsilä has clear expectations towards its suppliers in terms of compliance with relevant legislation, environmental, quality, and occupational health and safety management, and social performance. Suppliers must demonstrate their compliance with these requirements in order to receive approved supplier status. These requirements are also included in standard supply contracts. Wärtsilä monitors that suppliers comply with these requirements by using performance indicators and conducting various types of audits.

Supplier assessment and selection

Wärtsilä assesses and manages its suppliers through its Supplier Management System. Wärtsilä assesses potential new suppliers before the supplier relationship begins, in a pre-assessment phase. For suppliers of higher criticality and risk, in terms of management system, offered scope and geographical location, this phase is more advanced, including audits for the most critical ones. Audits are also conducted for existing suppliers whose performance does not meet Wärtsilä's requirements. In addition, performance reviews are carried out to identify and solve issue-specific deviations from the Wärtsilä’s supplier requirements.

As part of the supplier evaluation, Wärtsilä conducts a rating based upon Wärtsilä's supplier requirements. This rating is a result of an assessment of various information sources, such as pre-assessment questionnaires, dialogue with suppliers, and conducted audits. Based on this rating, the suppliers receive a status: approved, approved with remarks, or banned. The rating is reviewed regularly, as are the results of conducted audits.

Wärtsilä reached its supplier rating coverage targets for 2018

By the end of 2018, we rated 763 out of our 1,199 direct global suppliers, which covers 97% of the related spend (target for the year was 96%). The rating coverage of local supplier spend was 82% (target 80%), and of indirect supplier spend 77% (target 70%). In 2018, 32 suppliers were banned because of non-compliance with Wärtsilä’s requirements, including 17 for sustainability reasons.

Wärtsilä develops its supply management system on a regular basis. In 2018, Wärtsilä launched a risk-based supplier assessment and management system for new suppliers. The tool will be applied in 2019 also to existing suppliers. All existing suppliers are required to submit the self-assessment by the end of 2020.

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