CNH Industrial adopts a responsible approach to the management of its supply chain, from small local companies to large multinational organizations, establishing relationships that go beyond commercial transactions, fostering longlasting and mutually satisfying collaborations with eminently qualified partners that share the Company’s principles.
For CNH Industrial, sustainability in the supply chain means looking beyond Corporate boundaries, strategically and effectively promoting a sense of shared responsibility.
Advocating socially and environmentally responsible behavior across the entire supply chain is one of the Company’s primary commitments, along with championing a culture of sustainability among the Company employees who work with suppliers every day.
This approach goes hand in hand with the other priorities at the heart of supply chain management: quality, price, and lead times.
As evidenced by the results of the materiality analysis, one of the relevant aspects for both CNH Industrial and its stakeholders is the evaluation of suppliers on environmental issues, labor practices, management of human rights, and impact on the community. Promoting and monitoring high standards of sustainability fosters long-term relationships with suppliers in the interest of both parties, as it reduces potential risks, ensures continuity of supply, and improves overall sustainability along the entire supply chain, mitigating reputational risk and any potential damage to the Company’s credibility. Another material aspect for CNH Industrial and its stakeholders is transparency in supplier relationships and engagement, since relations based on open dialogue and collaboration increase efficiency, improve quality, foster innovation, and encourage a shared commitment to reaching sustainability targets, creating undeniable mutual benefits.
As evidenced by engagement activities in EMEA, a transparent supplier relationship requires a customized interaction model for each supplier segment, to ensure broad-based, cross-functional interactions, multiple collaborative programs to capture value, and the consolidation of supplier expenditures. Stakeholders in NAFTA, LATAM, and APAC consider dialogue, engagement activities, and training for suppliers as some of the Company’s strengths.
They are considered key aspects in understanding the peculiarities of each Region where the Company operates, and in delivering efficiency and high-quality products. In Brazil, in particular, transparent supplier relationships are seen as a key Company strength because they reveal how suppliers do business and behave, which is important because the Company should be responsible for the entire value chain.
Commitments to continuous improvement are realized through targets and actions, which also give an indication of how efficiently the supply chain is being managed. Targets are set annually on a voluntary basis and included in the Sustainability Plan (see also pages 35-36); progress on meeting them is regularly monitored in order to implement any corrective actions deemed necessary. Both targets and results achieved are communicated to all stakeholders via the Sustainability Report and the Corporate website. Management effectiveness is measured through periodic benchmarking with the main competitors and leading sustainability companies, and through rating agency assessments on sustainability issues. The results of these assessments are the starting point for improvement actions.
The Sustainability Guidelines for Suppliers provide the framework for responsible supply chain management. The document, which also applies to subcontractors, is available on the Company website. In addition to compliance with local legislation, the Guidelines call for the observance of:
- human rights and labor practices
- rejecting any form of forced or child labor
- recognizing the right to freedom of association in line with applicable laws
- safeguarding employee health and safety
- guaranteeing equal opportunities, fair working conditions, and employees’ right to training
- respect for the environment
- optimizing the use of resources
- implementing responsible waste management
- eliminating potentially hazardous substances from manufacturing processes
- developing low environmental impact products
- using environmentally-sustainable logistics systems
- business ethics
- ensuring high standards of integrity, honesty, and fairness
- prohibiting corruption and money laundering.
A new Compliance Helpline was established to address questions and concerns regarding the CNH Industrial principles outlined in the Code of Conduct and other Company policies or concerning applicable laws; it is managed by a third party and is also available to entities outside the Company (for further information, see also page 57).
The highest responsibility for CNH Industrial’s supply chain management initiatives lies with the Group Executive Council (GEC). In 2014, supply chain management improvement targets were included in the Performance and Leadership Management system (see also page 83) for most managers of projects included in the Sustainability Plan.
The information relating to the Company’s sustainable supply chain management model was subjected to a highlevel assessment by SGS, an independent certification body, during the assurance audit of the Sustainability Report, which confirmed its compliance with the AA1000 assurance standard.
CNH Industrial manages purchases worth approximately $20.9 billion, with a total network of 5,850 direct material suppliers. In 2014, 19 new eligible suppliers were added to the network, while there were no significant changes to supply chain structure or additional outsourcing of activities.
The top 150 suppliers, generating more than 60% of the total value of purchases, are considered by CNH Industrial as strategic suppliers, partly owing to the length of the relationships, production capacity, and the management of spare parts.
|Direct and indirect material purchasesa (% of the total volume of CNH Industrial purchases)||85%|
|Direct material suppliers (no.)||5,850|
|Value of purchases from direct material suppliersb ($billion)||14.7|
|Value of purchases from indirect material suppliersc($billion)||3.1|
|Local suppliers (%)||95%|
(a) Refers to the value of direct material purchases.
(b) Direct materials are preassembled components and systems used in assembly. The value of raw material purchases is considered marginal.
(c) Indirect materials are services, machinery, equipment, etc.
The objectives that CNH Industrial sets for itself include the development of local skills, by transferring its technical and managerial expertise and strengthening local entrepreneurship. The creation of ongoing relationships with local suppliers also has a positive impact in terms of lower risks associated with operational activities and cost optimization.
Significant amounts are spent on local suppliers1: in 2014, the contracts signed by CNH Industrial with local suppliers accounted for 95% of procurement costs; specifically, 97% in EMEA and 91% in NAFTA, which are CNH Industrial’s most significant areas of operations2.
Additionally, CNH Industrial promotes the World Class Manufacturing program (see also page 164) at local supplier plants, to share best practices and methodologies.
PURCHASESa BY PRODUCT TYPE
(a) Refers to the value of direct material purchases.
Although CNH Industrial does not always purchase raw materials directly (with the exception of steel used for direct processing), their overall consumption and general price trends are constantly monitored.
The main raw materials used in the semi-finished goods purchased by CNH Industrial are steel and cast iron (approximately 2.8 million tons including scrap), plastics and resins (approximately 170 thousand tons), and other miscellaneous materials (approximately 90 thousand tons).
SUSTAINABILITY IN SUPPLIER MANAGEMENT
Environmental and social sustainability standards are fully integrated into CNH Industrial’s supplier management.
Supplier selection is an operational phase of the procurement process and is regulated by specific procedures.
It is based not only on the quality and competitiveness of the suppliers’ products and services, but also on their compliance with CNH Industrial’s social, ethical, and environmental principles. The assessment process is built on objective criteria and tools aimed at ensuring fairness and equal opportunities for all parties involved.
The Potential Suppliers Assessment (PSA) process identifies the strengths and weaknesses of a company and its ability to manufacture according to the highest quality standards, thus assessing its potential of becoming a high performing CNH Industrial supplier. The PSA tool is used to assess companies that do not currently provide materials or services, and suppliers that have undergone reorganization, or whose plants were relocated, or that have introduced new technologies and processes. The PSA must be carried out prior to the procurement phase, to allow potential new suppliers to participate in tenders. This tool is a means to evaluate a potential supplier’s ability to manufacture quality products using best practices.
The PSA process consists in the evaluation of company systems and processes directly at supplier plants.
PSA evaluation criteria involve some of the most important sustainability aspects, with explicit reference to a certified employee health and safety management system, a certified environmental management system, and compliance with the provisions regarding the restrictions on the use of hazardous substances through the IMDS system (see also page 161).
CNH Industrial’s policy is to promote, encourage, and increase the participation of diversity-owned enterprises (e.g., businesses that are small, disadvantaged, owned by women or veterans (including service-disabled), or par t of the Hubzone program) in the procurement of its products and services.
CNH Industrial actively seeks, identifies, and assists these companies to qualify as competitive suppliers, affording them the opportunity to increase their sales and expand their markets. It provides these potential suppliers with adequate information during bidding processes and reasonable delivery lead times, so as to support and increase, where possible, their participation in Corporate procurement activities.
The Company’s purchasing personnel regularly reviews material requirements, identifying areas of potential participation by diversity-owned enterprises. The methods and procedures for executing these activities are a standard part of buyer training seminars.
These management systems reflect the suppliers’ efforts to monitor and manage environmental aspects, labor practices, human rights, and impacts on the community. All new potential suppliers (19 in 2014) are evaluated according to the above criteria. Supplier sustainability is also assessed through indicators included in a selfassessment questionnaire, and subsequently verified via audit for a certain number of suppliers determined year by year (see also page 156).
In addition, through clauses that are progressively incorporated into new contracts, suppliers are requested to comply with CNH Industrial’s Code of Conduct and Sustainability Guidelines for Suppliers. Specific contractual clauses require them to provide references and demonstrate their competence in relation to: fighting corruption, protecting and safeguarding the environment, promoting health and safety at work, ensuring non-discrimination, prohibiting forced and/or child labor, and safeguarding freedom of association.
All contracts contain a clause (hereinafter referred to as the Clause) by which suppliers undertake to comply with Legislative Decree No. 231 of June 8, 2001 applicable to Italian suppliers (or, for non-Italian suppliers, with the specific regulations in force regarding the administrative liability of legal persons), the Code of Conduct, and the Sustainability Guidelines for Suppliers. It should be noted that all orders issued (for both direct/indirect material purchases and service contracts) are subject to the General Purchasing Conditions that contain the aforementioned Clause. For direct materials, the unified CNH Industrial General Purchasing Conditions including the sustainability Clause are currently being finalized. If a supplier fails to adhere to these principles, CNH Industrial reserves the right to terminate the commercial relationship or instruct the supplier to implement a corrective action plan, subsequently verified via audit.
In addition, a detailed spend analysis is carried out to improve supply performance and maximize operational efficiency. Using a data instrument, known as the Financial Suppliers Sensitivity System (FS3), supply chain managers have access to their financial assessment. This tool is continually updated based on confidential information provided by the suppliers themselves and contained in financial reports. The assessment, automatically calculated and checked by an analyst, allows suppliers to be identified according to categories of financial risk. Suppliers in particular difficulty are monitored weekly to prevent any interruptions to the supply chain. The continuous monitoring of economic factors is essential to good supply chain management.
Suppliers play a crucial role in supply continuity and can influence the way public opinion perceives CNH Industrial’s social and environmental responsibility. To prevent or minimize any environmental or social impact, CNH Industrial has developed a process to assess suppliers on sustainability issues.
Supplier assessments are the responsibility of the Supplier Quality function and, at operational level, of Supplier Quality Engineers (SQEs). The process is overseen by the Suppliers Sustainability Compliance Committee, consisting of the managers of Quality Global Business Process and Reference Commodity, and one representative each from the Purchasing Legal Department and Sustainability Unit.
The assessment process unfolds in three consecutive steps over a one-year period.
The process began with the sending of self-assessment questionnaires in the second half of 2014.
The first step in the evaluation process consists of a sustainability self-assessment questionnaire provided by the suppliers involved in the analysis. As of 2014, CNH Industrial uses the questionnaire developed by the Automotive Industry Action Group (AIAG). Suppliers are requested to provide information on: human rights, environment, compliance and ethics, diversity, health and safety. The process is carried out via a dedicated IT platform and managed by a third party to ensure the highest levels of transparency and neutrality.
The questionnaires are then analyzed and used to perform a risk assessment, which allows identifying critical suppliers whose compliance with sustainability criteria requires assessment. The four key drivers used to create the risk map are:
- supplier turnover
- risk associated with the supplier’s country of operation (focusing on countries with poor human rights records3)
- supplier financial risk
- participation in the assessment process
- risk associated with the manufacturing process.
Based on risk assessment results, suppliers are classified according to three levels of risk (high, medium, and low) and selected for audit accordingly.
Sustainability audits are performed at suppliers’ plants by either Company SQEs or independent external auditors. Audits, which are organized in agreement with the suppliers, aim at verifying the information submitted via the self-assessment questionnaires and at defining possible improvement plans where necessary. The suppliers select representatives within their organizations (usually from HR, Environment, and Quality), and a representative manager, to involve in audit activities. Should audit findings reveal critical issues, joint action plans are drawn up with suppliers to define improvement areas, responsibilities, corrective measures, and implementation schedules.
These plans are defined with the contribution of Suppliers Sustainability Compliance Committee representatives.
Action plans are monitored via follow-ups between supplier and auditor. Any supplier non-compliance is brought to the attention of the Suppliers Sustainability Compliance Committee, which determines the actions to be taken against the defaulting supplier. A specific operational procedure is in place to monitor supplier compliance with Sustainability Guidelines.
The levels of supplier compliance and respective action plans are documented in the IT platform and results are available to all employees engaged in supplier management. Every month, the SQP system develops a supplier Bid List, containing qualitative information including the scores from sustainability assessments. This information, along with each supplier’s financial, technical, and logistics data, make up the Summary by Plan document used for assigning new business.
CNH Industrial recognizes the value in working with peers to address global challenges across its supply chain. In particular, the Company is implementing measures designed to address disclosure obligations under the Dodd-Frank Act and regulations adopted by the US Securities and Exchange Commission regarding the source of certain materials that may originate from the Democratic Republic of Congo and surrounding countries (conflict minerals). Such measures include: extensive communication with the supply chain regarding their role in ensuring that the Company satisfies conflict minerals disclosure obligations; deployment of a web-based data management tool through which suppliers can provide necessary data related to supply sources and potential conflict minerals; necessary due diligence and further communication with suppliers regarding information provided; conflict minerals training for employees; and adoption of a Conflict Minerals Policy.
CNH Industrial’s Conflict Minerals Policy was adopted in 2013 and is posted on the Corporate website. The policy is intended to promote sourcing from responsible resources in the Democratic Republic of Congo and surrounding region. The Company performs its supply chain due diligence consistent with the Organization for Economic Cooperation and Development (OECD) guidelines. CNH Industrial is committed to making reasonable efforts to establish, and to require each supplier to disclose, whether tin, tantalum, tungsten or gold are used or contained in products purchased by the Company. If such minerals are contained in the products purchased from suppliers, suppliers must identify their sources and eliminate procurement, as soon as commercially practicable, of products containing tin, tungsten, tantalum, or gold obtained from sources that fund or support inhumane treatment in the Democratic Republic of Congo or the surrounding region.
CNH Industrial expects its suppliers to meet their commitments under its Conflict Minerals Policy. In particular, the Company expects its suppliers to perform a reasonable inquiry into the existence and origins of tin, tantalum, tungsten or gold in their supply chains, and to provide written evidence of the due diligence documentation. CNH Industrial reserves the right to assess future business with suppliers who fail to comply with this policy.
SUSTAINABILITY ASSESSMENT CRITERIA
|Link to GRI-G4||Link to GRI-G4||Self-assessment||Audit|
|Human Rights||Company Code of Conduct||HR|
|Supplier Code of Conduct||SO|
|Supplier Working Conditions and Practices||LA|
|Environment||Environmental Management System||EN|
|Greenhouse Gases (GHG)||EN|
|Land and Water Conservation||EN|
|Compliance and Ethics||Corruption||SO|
|Conflict of Interest||SO|
|Intellectual Property Protection Program||SO|
|Intellectual Property Violations||SO|
|Corporate Diversity Strategy||LA|
|Supplier Diversity Metrics||LA|
|Health and Safety||System||LA|
|Substances of Concern||LA|
In 2014, the self-assessment questionnaire was sent out to approximately 1,100 suppliers, representing 20% of the network of direct material suppliers; 115 completed the questionnaire (approximately 8% of direct material purchases) and were duly evaluated, with outcomes confirming that social and environmental issues were being properly addressed. The analysis of the results essentially confirmed the previous year’s findings, i.e., the widespread implementation of sustainability initiatives, with a significant number of suppliers adopting their own social and environmental systems, setting specific targets, and drafting periodic reports. Specifically, in 2014, no issues were recorded regarding collective bargaining or child or forced labor.
ANALYSIS OF SUPPLIER SELF-ASSESSMENT QUESTIONNAIRES
|Number of suppliers identified as having significant actual and|
potential negative impacts
|Areas associated with significant actual and potential|
|Labor practices (LA)||-|
|Human rights (HR)||3||
|Impacts on society (SO)||7||
In 2014, 62 audits were conducted at an equal number of supplier plants worldwide (45 by SQEs and 17 by independent external auditors). Audits carried out in 2014 refer to the self-assessment questionnaire used by CNH Industrial up until 2013.
AUDITS BY REGION
|Number of audits|
The total number of audits worldwide covered approximately 6% of the total purchase value. In 2014, following the audits, 29 suppliers were involved in the formulation of 137 corrective action plans for areas in need of improvement.
The one supplier identified in 2013 as having potential negative impacts on freedom of association was duly audited in 2014 by an independent third party; no critical issues emerged with regard to the matter.
ANALYSIS OF CORRECTIVE ACTION PLANS
|Percentage of suppliers identified as having significant actual and potential negative impacts, with which action plans were agreed upona||Number of action plans identified||Main action plan topics|
|Environment (EN)||4.8 %||5||
|Labor practices (LA)||35.5 %||57||
|Human rightsb (HR)||33.9 %||53||
|Impacts on society (SO)||21.0 %||22||
(a) The percentage is calculated based on the number of suppliers audited (62 in 2014).
(b) The audits performed in 2014 identified two suppliers with three instances of non-compliance with overtime regulations. The subsequent action plans will be closely monitored, in collaboration with the Suppliers Sustainability Compliance Committee. No suppliers were considered at risk regarding child labor, forced or compulsory labor, or violation of freedom of association and collective bargaining. There were only eight cases of references to such issues being omitted from the Code of Conduct (five for child labor and three for freedom of association), and only two cases of no responsible representative being identified for freedom of association. Specific action plans were agreed with suppliers to resolve these shortcomings.
PROMOTING THE CONTINUOUS IMPROVEMENT OF ENVIRONMENTAL ASPECTS
CNH Industrial’s commitment to curtail the environmental impact of its activities and to tackle climate change cannot exclude the involvement of its suppliers. In fact, to limit the impact of manufacturing processes and products on the environment, suppliers must, on the one hand, optimize the use of resources and minimize polluting emissions and greenhouse gases; on the other, they must properly manage waste treatment and disposal and adopt logistics management processes to minimize environmental impact. For these reasons, an environmental management system certified according to international standards is always strongly advised.
In 2014, following the experience of the previous year, the Company asked the AIAG to incorporate specific questions in the supplier self-assessment questionnaire, to monitor the risks associated with water consumption and discharges along the entire supply chain and with the suppliers’ logistics processes. The questionnaire’s new section on water management specifically focuses on:
- policies, strategies or strategic plans regarding water management and improvements to the quality of wastewater management
- specific improvement targets
- bodies of water, wetlands or natural habitats affected by the water withdrawals or discharges of plants
- operations located in water-stressed areas.
Believing that the scarcity of water sources could affect production continuity, CNH Industrial deems their protection increasingly important. For this reason, a pilot project was launched to define specific water management principles to be shared across the supply chain. The Company also started a second pilot project in 2014, aiming at collaborating with a local supplier to develop a strategy for water management in water-stressed areas. The project will be carried out at the Noida plant (India), selected among the CNH Industrial sites located in waterstressed areas (see also page 175). This collaboration was established to minimize the risks associated with water quality and quantity, as well as those related to conflicts with stakeholders.
Another important supplier engagement activity carried out in 2014 revolving around the mitigation of environmental impacts was the CDP Supply Chain initiative. In keeping with the previous year, more than one hundred suppliers were selected to fill out the CDP questionnaire, in order to get a clear picture of their strategies to tackle climate change and of their current, or still to be implemented, initiatives to reduce CO2 emissions. The analysis of the results gave rise to many ideas that will come into play when establishing future collaborations with suppliers. The companies involved in the CDP Supply Chain generated approximately 1.4 million tons of CO2 4 emissions in supplying CNH Industrial. The activity will continue in 2015, involving a greater number of suppliers.
CDP SUPPLY CHAIN
MAIN ANALYSIS RESULTS (2014)
IMDS: AN ENVIRONMENTAL MANAGEMENT TOOL
To support the management of the environmental aspects linked to the production of vehicles and components, CNH Industrial extended the International Material Data System (IMDS), an online interactive platform with detailed information on the materials and substances contained in purchased components, to include its heavy vehicles, whose datasheets have tripled compared to 2013. The system also enables the entry of data on the use of recycled materials. In 2014, the data uploaded to the IMDS by all CNH Industrial suppliers allowed the monitoring of compliance with the REACH regulation and, in particular, the implementation of a specific activity regarding the new substances on the candidate list for authorization with a sunset date of February 2015, which has significantly involved suppliers in all three segments concerned. In 2014, suppliers filled out approximately nine thousand datasheets.
It should be noted that, in this context, CNH Industrial was included in the CDP Supplier Climate Performance Leadership Index (SCPLI) 2014, which presents 121 worldwide supplier companies recognized for their outstanding progress in climate change mitigation.
SPREADING AN INTERNAL CULTURE OF SUSTAINABILITY
Initiatives targeting the employees responsible for supplier relationships have been consolidated over the years, aiming at ensuring satisfactory awareness of sustainability and good governance among suppliers through open and ongoing dialogue.
Every year, in fact, Buyers and Supplier Quality Engineers (SQEs) take part in training activities to explore some of the key issues of environmental and social responsibility. Moreover, security personnel are trained on the principles and values of good Corporate Governance established in the Code of Conduct, through periodic training activities and/or other information channels. In 2014, approximately twenty Buyers and SQEs operating in EMEA, NAFTA, and APAC were involved in sustainability training activities aimed at illustrating, on the one hand, the objectives, main aspects, and tools of a sustainable enterprise, and, on the other, their individual role and contribution to CNH Industrial’s sustainability.
Moreover, the 2014 variable compensation system for SQE Managers and their team members continued to incorporate sustainability criteria for the assessment of their performances.
Supporting Suppliers in Difficulty
The global financial meltdown and the continued economic crisis in Europe have demanded the close monitoring and management of critical situations arising along the supply chain.
CNH Industrial has strengthened the structures and mechanisms in place to manage suppliers in financial difficulty, focusing on promptly identifying high-risk situations and stabilizing them through appropriate measures to ensure supply continuity. These mechanisms are implemented (also in partnership with other manufacturers, when possible) to support restructuring projects and offer temporary financial aid, while also seeking to safeguard jobs.
A SUSTAINABILITY AWARD
As in the previous year, CNH Industrial’s 2014 Sustainability Supplier of the Year award was assigned to a supplier in EMEA, in recognition of the excellent results achieved in support of sustainability. With this initiative, CNH Industrial is aiming at encouraging good stewardship practices within its supply chain.
The award was presented to the winning company at the Supplier Advisory Council held in Turin (Italy) in November 2014. The supplier was selected for its high level of commitment to environmental protection, particularly in cutting CO2 emissions, and for its strong support for the development of its region of operation. The initiative will also continue in 2015, rewarding a supplier in a Region other than EMEA.
ONGOING DIALOGUE WITH SUPPLIERS
Strongly convinced that suppliers are key partners for its growth, CNH Industrial is committed to keeping them engaged and informed at all times. Promoting a continuous dialogue and exchange with suppliers builds strong supplier relationships, in which goals and strategies can be shared, and collaborations and joint projects can thrive.
The Company continued to strengthen its relationships with suppliers in 2014, as evidenced by the many existing long-standing and mutually beneficial alliances and by the minimal number of disputes.
Many events and activities are in place to encourage continuous dialogue with the supply chain.
The primary tool used to share information with suppliers is CNH Industrial’s website and Supplier Portal (currently being updated), which gives access to information on technical requirements and supply scheduling and quality.
Additionally, two dedicated email addresses were created as further communication channels: the first to request information or report non-compliances within the supply chain, and the second to foster exchanges on sustainability.
An important opportunity for dialogue is provided by the Supplier Advisory Council (SAC) meetings, organized for some of CNH Industrial’s suppliers selected for their economic importance and for their ability to represent market trends and establish a benchmarking network with competitors. In 2014, three meetings were held in each Region, providing an arena to exchange information and opinions with leading suppliers, share objectives and results, and illustrate particularly significant projects. The meetings were also an opportunity for suppliers to suggest improvements and share particularly praiseworthy examples. At the SAC meetings held in November, attended by more than 80 suppliers across the four Regions, the focus was on CNH Industrial’s concept of sustainability and its main results in this area, and on the stakeholder engagement project (see also page 19) requiring all participants to actively contribute to the updating of the materiality matrix.
In keeping with previous years, several initiatives promoting the exchange of ideas and information continued to be pursued in 2014, including the Technology Days: ten events took place, attended by approximately one thousand people. During these meetings, suppliers showcased their cutting-edge products in terms of innovation, technology, and quality while addressing specific topics and sharing information on recent technological developments. The World Class Manufacturing activities carried out at suppliers’ plants were expanded in 2014, with 130 plants included in the WCM program as at December 31. Activities were implemented in two distinct yet equally important phases, providing suppliers with the necessary knowledge to apply the intrinsic concepts of Lean Production. Firstly, various training sessions led by CNH Industrial’s WCM program specialists took place at suppliers’ premises. Secondly, supplier WCM teams were given the opportunity to visit selected CNH Industrial plants, to learn about the Company’s best practices. This dual activity allowed some of the most active suppliers to achieve good results during the year, especially in the so-called model areas (i.e., the first areas of a plant where WCM methodologies and tools are applied rigorously).
These suppliers were also audited by certified auditors, achieving good ratings.
The analysis of the KPIs monitored at supplier plants revealed some significant improvements. The best plant in the mechanical sector, for example, reported zero accidents, and, in terms of engaging people on the issue of quality, an average of ten improvement proposals were collected per operator. The overall mechanical sector saw an 11% increase in training activities, with approximately 170 sessions addressing various topics, including safety and the work environment. The ongoing activities carried out to enhance Overall Equipment Effectiveness5 resulted in an improvement of approximately +40% at the best plant.
The best plant in the metal sector continues to work towards reducing set-up time through specific projects (Single Minute Exchange of Die5), and to completely eliminating mechanical failure caused by the lack of basic conditions. In terms of environmental protection, the plants that have been applying the WCM program for the longest recorded a +30% improvement in paper recycling. These results demonstrate how plants are making better use of resources and equipment, in favor of increased long-term competitiveness.
Furthermore, in 2014, CNH Industrial launched a pilot project involving a sample of WCM suppliers (approximately ten suppliers in EMEA) to monitor specific sustainability indicators in plant model areas: namely, the frequency rate of accidents and the energy consumption per production unit. Monitoring these indicators will allow quantifying the actual environmental and social improvement achieved via the application of WCM methodologies. The trend for both indicators will be reported next year when monitoring is completed.
CNH Industrial also continues to promote numerous initiatives to encourage innovation among suppliers.
Specifically, the Supplier Performance (Su.Per) program advocates a proactive attitude to business, and allows sharing the economic benefits arising from the innovative methods and technologies introduced based on supplier suggestions. In 2014, four suppliers benefited from the program and eight proposals were actually realized, with over $53 thousand in estimated economic benefits generated for suppliers, particularly relating to engines.
As regards supplier training activities, a course was organized in October for small and medium-sized suppliers in the EMEA Region, to explain sustainability issues and their implications within the supply chain, with a view to shared responsibility. The course was attended by 31 highly enthusiastic suppliers, who learnt how their activities could contribute to the sustainability of CNH Industrial. It was also an opportunity to collect ideas and suggestions on future supplier engagement activities regarding sustainability.
Lastly, among the activities developed in 2014, the Purchasing and Risk Management functions launched a collaboration with a number of selected suppliers to collect information on the management of risks associated with supply to CNH Industrial (see also page 67).
SUPPLIER PARTNERSHIP PROGRAM
It is strategic for CNH Industrial to establish long-term relationships with key suppliers of important components and technologies.
Suppliers’ potential has been reviewed based on their capacity for innovation and co-design, through the Supplier Partnership Program started in 2013.
Indeed, the opportunity to share expertise on key technologies and components through a privileged supplier partnership speeds up the design process and ensures its success.
Strategic partnerships are selected according to the following criteria: development lead time technical know-how, and value added through co-design with a supplier complexity of development technological boost, i.e., the gap between an existing part versus those of competitors/best-in-class.
The first supplier partnership based on the above criteria started in 2014, and the Company is now evaluating the eligibility of other suppliers and components for the extension of the partnership initiative.
(1) Local suppliers are those operating in the same country as the CNH Industrial plant.
(2) The significant areas of operations are defined by total direct material purchases, which are 67% of the total value of purchases in EMEA, and 20% in NAFTA.
(3) For countries with poor human rights records, refer to the list published by EIRIS (EIRIS Human Rights Countries of Concern, October 2010).
(4) Including scope 1, 2, and 3 emissions.