Fairness and Efficiency

FY15 Performance Against Commitments

 = Achieved   = Not Achieved  = Underway

Commitment Status FY15Achievements
Establish a supply chain management framework through
  • Engaging the Group's direct suppliers to adhere to benchmark practices
  • Identifying supply chain risks and opportunities for shared value across the supply chain
Enhancing existing supplier monitoring and engagement where required
Established a supply chain management framework which:
  • Independently benchmarks to align with best practice
  • Centralises procurement functions for property operations
  • Implements standardised contracts across property operations, capital works and developments
  • Engages with direct suppliers to identify risks and opportunities
Increase awareness of sustainable procurement principles by offering training programs for employees and service providers Increased awareness of the new supply chain framework through
  • Engaging with relevant employees and facility management partners
  • Hosting educational events for operational teams
  • Partnering with suppliers to deliver advanced building analytics
Conduct tenders in accordance with the Group's Business Procedures for Procurement and Code of Conduct with a focus on recently acquired properties Conducted tenders in accordance with Dexus's Procurement Procedures and Code of Conduct Continued to rationalise the number of suppliers and align with those that best meet Dexus's business needs, including newly acquired properties resulting in operational efficiencies

Refer to the Delivering FY15 Commitments section of the 2015 Dexus Annual Review.


Supply Chain Management

Dexus adopts a long term approach to managing and maintaining supplier relationships through a robust set of business procedures which guide supplier screening, selection and engagement. A suite of policies, principles and performance standards underpin the ethical and supply chain approach. For further information refer to Dexus's Supply Chain Disclosure of Management Approach.


Procurement

Dexus applies a Sustainable Procurement Framework to minimise any potential impacts from its upstream supply chain. Sustainable procurement is built into all supplier engagements through supplier adherence to Dexus's Sustainable Procurement Policy and Supplier Code of Conduct as well as other Dexus policies including Dexus's Environment Statement, Human Rights and Work Health, Safety & Liability Policies.

Dexus has created preferred panels of providers and rationalised its sub-contractor base across key disciplines to ensure market leading delivery and enhance compliance levels. The preferred builder panel that was initially launched in November 2013 was reviewed in FY15 via a detailed RFI process with adjustments made to reflect the changing requirements of the business. Additionally a preferred panel of key consultant services, both major and specialist was established.

Dexus has established a long term partnership with a facility management partner and in FY15 undertook a major review of the partnership model to improve process and productivity, enhance compliance and governance and ensure Dexus continues to receive best-in-class procurement services.

In FY15 procurement achievements included:

  • Transitioning the Dexus Office Partnership portfolio onto the Dexus platform of preferred suppliers. Key service areas were the appointment of established HVAC/Mechanical partners to deliver sustainability goals, and the tendering of cleaning services which realised a $457,000 annual cost reduction across the Sydney partnership properties, representing a 15.3% saving against budget
  • Completing a comprehensive tender process for cleaning services across the Queensland office portfolio of five sites. This included both the new Dexus Office Partnership and the existing portfolio sites across more than 118,000 square metres of space. The process consolidated the number of suppliers from four to one, with additional benefits of consistent scope, measurable KPI's and the adoption of Dexus standard service contracts. The tender also results in significant costs saving of $665,000 per annum equivalent to 18.8% against the FY14/15 budget
  • Reviewing HVAC/Mechanical, Lift and Fire Services at the newly acquired Lakes Business Park in Botany, resulting in a combined saving of over $35,000 against the FY15/16 budget (for lifts this represented a 40% saving), and preferred providers were appointed under standard Dexus terms and conditions to further mitigate risk
  • Completing competitive tenders for the Premium grade development at 5 Martin Place, Sydney. Preferred suppliers were appointed across key categories of Security and Cleaning and resulted in Dexus reducing future operating costs against forward budget by $48,500 and $170,000 respectively
  • Undertaking a formal tender process to renegotiate major energy contracts across 70 Dexus managed properties, resulting in a switch to a new provider and achieving savings of approximately $575,000 in FY15. It is anticipated energy cost savings of approximately $1.33 million will be realised in FY16 across the balance of 90 sites through ongoing implementation
  • Renegotiating the natural gas contract for 240 St Georges Terrace in Perth, resulting in $30,000 annual savings within FY15

Supplier Screening

Dexus screens suppliers on their sustainability track record and management systems during the procurement process. Dexus informally collects data from external sources to assist with validating suppliers' credentials with regard to impact on the environment, society and how it manages its staff. At present Dexus does not apply formal criteria or screening tool to assist with this process.

In FY15 all new suppliers underwent informal screening as part of the standard procurement process.


Supplier Relationships

Dexus interacts with a large number of suppliers across its operations and these suppliers play a key role in contributing to Dexus's successful delivery of services to its tenants. Dexus sets its CR&S expectations during the tendering and contracting process in line with its Sustainable Procurement Policy and Supplier Code of Conduct.

As a signatory to the United Nations Principles of Responsible Investment, Dexus is committed to managing its supply chain in a responsible way which takes into consideration human rights, as well as environmental, social and economic factors in its purchasing decisions.

A key step in this process involves engaging with suppliers to understand their approaches to the issues in order to evaluate the effectiveness of our sustainable procurement policies and supplier relationship management practices.

In FY15, Dexus surveyed a sample of 39 key suppliers to gain a comprehensive insight into their relationship with Dexus through 360 degree feedback, their key risks and mitigation measures, how they manage their most significant suppliers, and potential new opportunities of collaboration.

From the survey responses, 47% of suppliers indicated a relationship with Dexus of five years or more with a further 39% maintaining a relationship of between one and four years. With regards to the relationship 87% of suppliers were at least 'satisfied' with their relationship with Dexus with 50% indicating that they were 'very satisfied'.

Suppliers also indicated the financial criticality of their relationship with Dexus, with 37% stating that their services to Dexus contributed less than 5% of total revenue. In 83% of cases, suppliers relied on Dexus for less than 20% of their revenue.


Supply Chain Risk Profiling

In 2015 Dexus engaged with suppliers to gain insight into the nature of current economic, social and environmental risks they perceive. This exercise built on prior engagement work conducted in 2014.

Both exercises provided Dexus with information to assist it to:

  • Understand upstream risks that may affect the continuity or quality of services provided to Dexus
  • Analyse and evaluate the inherent risk to Dexus and identify potential risk mitigation strategies
  • Include the assessment of key risks into procurement and supply chain monitoring
  • Gain insight into the risk management capabilities of the Group's diverse range of suppliers

The chart below maps the top risks identified by key suppliers in terms of risk severity and likelihood. The size of the bubble indicates the number of times that the risk is mentioned (i.e. the larger bubbles represent more commonly mentioned risks).

Suppliers identified a diverse range of risks. Economic and market risks including market competitiveness and uncertainty were most reported by suppliers and deemed to have the highest risk rating. Employee health and safety was the most significant social risk scoring a low to medium level of likelihood. Environmental risks are less of a priority for suppliers, with energy management and air pollution rating minor mentions.

Read more information on the Group's Sustainability Approach, Strong Communities and Disclosures on Management Approach. More information is also available in the 2015 Dexus Annual Review.