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Focus: Sourcing/Procurement

Feature Article from Our Sourcing and Procurement Subject Area - See All

From SCDigest's On-Target e-Magazine

- April 24, 2013 -

 
Supply Chain News: Ford Details Approach to Supplier Engagement and Sustainability

 

"Aligned Business Framework" Pushes Tier 1 Suppliers to Own Sustainability and Ethical Sourcing Back Through Their Supply Chains

 

SDigest Editorial Staff 

 

From a sourcing perspective, perhaps no industry with the possible exception of aerospace and defense is as complex as the automotive sector. There are often as many as 8-10 layers between raw materials suppliers and the final OEM, and the auto sector is also deeply entwined with the also complex electronics industry supply chain, adding to the challenge.

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"The intent is for ABF suppliers to wholly own responsibility for sustainability expectations and performance in their own operations and their supply chain," Newton adds.

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In a recent issue of ISM's Inside Supply Management, Jonathan Newton, global lead - supply chain sustainability for Ford Motor Company, shared some insights into the way Ford is engaging suppliers generally and specifically in terms of sustainability.

Newton says Ford is tackling the challenge at three levels:

(1) Individual facilities: Ford focuses here on training and capability building at suppliers, supported by assessments of individual tier-one supplier factories.

(2) Corporate engagement: Ford has developed an innovative supplier partnership initiative, called the Aligned Business Framework (ABF). The goal is to achieve buy-in and ownership at the corporate level of its key suppliers for sustainability management and performance systems.

(3) Industry collaboration: Ford is driving collaboration and tool development for global supply chain sustainability issues through industry and cross-industry partnerships.

The ABF program was launched by Ford in 2005. As part of that process, Newton says Ford signs bilateral agreements with suppliers in the program that "comprehensively and formally spell out specific business commitments," based on 20 key principles that address specific Ford commitments, supplier commitments, and bilateral commitments.

This far, there are some 102 suppliers in the ABF program, representing more than 65% of Ford's annual total global procurement spend of $75 billion, up from 34% participation a year after the program was launched in 2006.

Historically, the automotive industry has been characterized as treating suppliers very poorly, but Newtown makes the cases this is changing. Under ABF, there are some tough requirements, as suppliers must commit to such actions as increasing financial data transparency, using more minority- and women-owned suppliers, and bringing leading-edge technology innovations to Ford.

In return for those commitments, ABF program suppliers receive long-term sourcing contracts, improved parts commonality and increased information sharing of product and manufacturing plans and forecasts.
Many of those supplier commitments are around sustainability, and Newton says there are many examples where this has paid off, including a number of examples where existing metal in parts has been converted to recycled content plastic, saving both Ford and the suppliers money.

Under the ABF program, suppliers must take control of their own supply chains. Ford's ABF suppliers must manage and assure proper working conditions, ethical treatment of workers, and responsible environmental management systems in their own operations and extended supply chains.


(Sourcing and Procurement Article Continues Below)

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To ensure those commitments are met, "suppliers are subject to external certification requirements, such as ISO 14001, and third-party verification of working conditions and sustainability performance, among other requirements," Newton says.

There's more.

Suppliers must develop standards aligned with Ford's Code of Basic Working Conditions, Human Rights and Corporate Responsibility, and then extend those policies and principles back into their own supply chains. Suppliers are asked to conduct and provide evidence of their own internal training to ensure understanding of their code of conduct and related "internationally accepted principles" within their own operations. Ford also verifies that suppliers have developed an appropriate compliance system supporting their code within their global operations.

Currently, some 80% of ABF suppliers have aligned codes in place, Newton says.

"The intent is for ABF suppliers to wholly own responsibility for sustainability expectations and performance in their own operations and their supply chain," he adds.

What are the keys to success for this type of program? Newton says Ford has learned the following are lynchpins for an effective program:

• Identification of executive decision-makers to coordinate cross-functional alignment efforts

• Support of executive management and/or the board of directors

• Facilitation by Ford of discussions and implementation support through individual or regional in-person meetings and discussions

Newton concludes by saying that the ABF program "is embedding ownership for social and environmental issues throughout its value chain, leading to the development of more robust sustainability management systems across the automotive supply chain."

 

What do you think of the Ford program? Smart move - or a bit too heavy handed? Let us know your thoughts at the Feedback button (email) or section (web form) below.




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