Sourcing process and supply chain

Sustainability is a vital factor in our sourcing process. For ASSA ABLOY, auditing and improving sustainability performance among our suppliers is a continuous task.

Process and organization for sustainable supply management

Group Management sets the sustainability targets and framework whereas each division is responsible for the operations and maintaining a good supplier base.

Group Supply Management leads a Sustainability Council with representatives from each division. The Council coordinates activities and follows up progress on targets. All divisions have the same guidelines, processes and IT system, which are all provided by Group Supply Management.

The sustainability audit process

It is a requirement that the Code of Conduct is followed in all supplier contracts. Sustainability audits are carried out on suppliers in risk categories. The objective is to minimize risks of non-compliance among suppliers, primarily in low-cost countries. The sustainability audit process is the main tool used to evaluate how well a potential supplier meets the requirements.

Based on a risk assessment, high-risk suppliers in low-cost countries are required to perform a supplier self–assessment in the sustainability areas that correspond with the areas covered in ASSA ABLOY’s Code of Conduct. Following the self-assessment, on-site sustainability audits may be agreed with the supplier.

Both the self-assessment and the on-site audit checklist are designed to verify whether the supplier is compliant with the ASSA ABLOY Code of Conduct, covering business ethics, labor rights and human rights, environment, health and safety.

Each division is responsible for performing audits when required, and their audit reports are submitted to the Group’s supplier database.

Calibration audits

Calibration audits play an important role in ensuring suppliers are scored in the same way by ASSA ABLOY auditors. A calibration audit involves a team of senior ASSA ABLOY employees who are responsible for auditors in various divisions, together with managers from Group Supply Management, auditing a number of suppliers during a weeklong process and then comparing their scores. The need for calibration audits will grow as both the number of audits and the number of internally trained auditors increases.

Audits and results in 2011

In 2011, the scope of the supplier sustainability audit program was expanded to cover not only China, Hong Kong, Macau and Taiwan, but also suppliers with production facilities in other low-cost Asian countries. In total, the Group has 1,300 direct material suppliers based in low-cost Asian countries.

During the year, 479 suppliers were audited. Including follow-up audits, the number of total audits increased to 493, compared to 376 in 2010. At year-end, 461 active ­suppliers had satisfied the minimum standards for ­quality and sustainability and were classed as being reliable. These supplier represent 90 percent of the Group’s spend for direct materials in low-cost Asian countries. At the end of 2011, 19 suppliers were blacklisted by the ASSA ABLOY Group – meaning they are not allowed to be given any new business by any ASSA ABLOY entity.

In 2011, 15 internal auditors received training in the ASSA ABLOY audit method and scoring principles. Part of the training process involved performing actual audits in order to harmonize the scoring of individual areas of the ASSA ABLOY standard review list.

Challenges and focus going forward

ASSA ABLOY Supply Management will continue to work with and develop suppliers in order to improve their ­ratings in the supplier assessments. This will reduce risks associated with non-compliance and, at the same time, contribute to improving the quality of our suppliers.
In 2012, the scope for suppliers to be audited will increase further to cover all low-cost countries in the Group. This will mean that suppliers in Eastern Europe, Africa, and South and Central America will be included in the program.

Furthermore, calibration audits will be performed on a regular basis and our systems will be improved to better support the processes.

The main challenge going forward is sustainable ­management and ensuring that standards are met at the growing number of suppliers, including a large number of low-­volume suppliers.
One reason for the increase of suppliers in China is acquisitions. To manage this, ASSA ABLOY is continuously identifying strategically important and preferred suppliers and phasing out the non-preferred ones.

Audit PROCESS

The audit is carried out using a sustainability audit checklist, which lists a number of criteria and questions that the auditor uses to calculate a score according to ASSA ABLOY’s Scoring Principles – The Traffic Light System. The Traffic Light System links the scores to three colors: green, yellow and red. Green means that the supplier is accepted, yellow that improvements need to be made within a certain time frame and red that the supplier has been blacklisted and will not be given any new business until the problems have been resolved and this has been verified by a follow-up audit. If the supplier fails to improve its performance, ASSA ABLOY will end the professional relationship. Some criteria in the audit checklist are of such significance that they are called “stoppers”. If a supplier fails to comply with these ASSA ABLOY standards, it is automatically rated red – regardless of its performance in other areas.