Engagement with Major Business Partners
Cooperative Initiatives to Improve QCD
In addition to the annual QCD (quality, cost, and delivery) assessment, Fuji Xerox enhanced its assessment methods by introducing a mutual consensus assessment in fiscal 2006; by adding CSR/green procurement in fiscal 2007 and adding the cooperation of the supplier management team with FX's procurement activities to the assessment items in fiscal 2011. The mutual consensus assessment is a system whereby our business partners conduct their own self-evaluation of their operations alongside assessments by Fuji Xerox. The system seeks to achieve mutual consensus assessments - that is, to resolve discrepancies between the two perspectives through discussion, with the goal of reaching an agreement on assessment scores. Based on this system, we strengthen ties to premier partners selected from suppliers with high assessment scores. Each April, we explain our management policies to our business partners and certify premier partners.
In addition to giving premier partners priority for orders of parts for new products, we ask premier partners to work with us to improve quality, cost, and delivery times, along with joint efforts in CSR/green procurement. This is intended to achieve mutual growth, as a group of true partners. Suppliers not certified as premier partners can strive to achieve such certification by undertaking improvement activities as partners. Through such efforts, we seek to achieve continuous improvements in supplier QCD (quality, cost, and delivery) and strengthen CSR/green procurement.
Both in logistics and in purchases, including purchases of paper, production materials and indirect materials, Fuji Xerox and its partners are committed to ethical procurement that accounts for all the societal implications posed by the supply chain, including the environment, human rights, and the labor environment.
To promote ethical procurement, we first held briefing sessions to share information on the objectives of these activities, then ask suppliers to perform self-assessments on ethical procurement issues. Based on analyses of the results, we draw up improvement action plans alongside our business partners and provide support for improvement efforts. This approach helps ensure that ethical procurement practices take firm root and continue to improve at all our business partners.
Based on the Electronic Industry Citizenship Coalition (EICC) Code of Conduct Note 1, the Self-Checklist consists of 263 items covering three areas: the environment (74 items), human rights and labor (147 items), and business ethics (42 items).
The items are classified into four levels to clearly indicate their relative importance and priority rankings to our respondents.
As part of efforts to achieve ethical procurement better suited to each business area, we have also prepared separate CSR Self-Checklists for materials supply and product logistics.
- Items related to laws and ordinances (highest importance):
Areas in which noncompliance would likely threaten the Company's business or survival or result in an order to suspend operations from regulators or government authorities
- Items related to laws and ordinances (high importance):
Areas in which noncompliance would likely result in strong warnings or notices from regulators or government authorities or social sanctions, such as consumer boycotts
- Items related to laws and ordinances (medium importance):
Areas in which noncompliance may result in warnings or notices from regulators or government authorities and pose the risk of damage or other impacts to Company management, even if resolved
- Other items:
Items not enshrined in laws or ordinances but are required by society
- Note 1 Electronic Industry Citizenship Coalition (EICC) Code of Conduct: a code of conduct drawn up by Dell, Hewlett-Packard, and IBM in 2004 to promote appropriate business management in areas such as labor, health and safety, the environment, ethics, and management systems.
Ethical Procurement in Production Materials
Fuji Xerox sets a target that all of its suppliers achieve a compliance rate of 90% or higher for the highest-priority requirements as specified in the CSR Self-Checklist. From fiscal 2009 to 2013, suppliers that have participated in this self-check for two years or longer continued to achieve this target consistently. Although they participated in ethical procurement activities, compliance rates were low in the initial self-check performed in fiscal 2013, when the plants of new parts suppliers in Vietnam, other ASEAN countries and other regions started production of parts for Fuji Xerox. Focused improvement activities will be needed by these suppliers. In China, we will continue and strengthen supplier assessment visits by teams of experts from Fuji Xerox (comprised of staff members from the Human Resources, Legal, CSR, and Procurement departments) and we will expand this activity to suppliers in the ASEAN and other regions.
The assessment visits by the expert team will take extensive time and labor until visits to all suppliers are completed. Therefore, procurement personnel in China who completed basic CSR training performed on-site status checks at the sites of all suppliers in China. Through these on-site checks, the importance of CSR activities was recognized not only by suppliers in China but also by the local Fuji Xerox staff in charge of procurement. Consequently, they now conduct CSR activities in conjunction with the QCD optimization activities.
As for the BCP activities (see note below) in the procurement area in fiscal 2013, we were affected by a labor dispute at an overseas supplier. However, we managed to cope with this problem through the unified efforts of the network of procurement sites and suppliers that we had established through past activities. Moreover, incidents of production line stoppage attributable to suppliers decreased as a result of supplier assessments linked with the CSR procurement activities and proactive risk management.
- Note "BCP" stands for Business Continuity Planning, a plan to make preparations to continue business in the event of a natural disaster or any other accident that might impede the continuance of the business, with the intent (1) to ensure the uninterrupted continuity of important operations and (2) if the business is interrupted, to resume the operation of interrupted important functions and operations as soon as possible and to minimize the damage caused by the interruption.
CSR Activities in Logistics
In the area of logistics, Fuji Xerox has been working together with Fujifilm Logistics Co., Ltd., to which Fuji Xerox subcontracts some of its operations, to promote CSR activities at the companies that handle our logistics.
To achieve a compliance rate of 90% or higher on the 100 highest-priority requirements, all logistics companies subject to our CSR procurement conducted self-checks. As a result of follow-up visits to specific sites and the sharing of best practices, they achieved the target again in fiscal 2013 (all companies achieved the target both in fiscal 2012 and 2013). We also visited the sites of partner companies to check their compliance status. In these visits, we talked with the top executives and managers and confirmed their attitude toward improvement activities and obtained useful tips for improvement that can be shared with other partner companies. In fiscal 2014, we will strive to maintain a compliance rate of 90% or higher on the 100 highest-priority requirements and expand the self-check activity to the second-tier partners through the first-tier partners.
We had first-tier logistics partners overseas that are responsible for handling hub logistics in the Asia-Pacific region (at the China-Singapore hub and China-Australia hub) start serious CSR activities. They conducted self-checks to identify and improve problems. In these self-checks, 64% of partners achieved a 90% or higher compliance rate on the 100 highest-priority requirements. We will further promote this activity so that more partners achieve the targeted compliance rate in fiscal 2014.
To expand the scope of the activity, we will also make preparations to introduce CSR activities in logistics partners that handle the distribution of goods from overseas production sites to loading ports and overseas OEM customers.
Responsible Paper Procurement
For more details, please see "Reducing Environmental Burden in Customers and Society."
In Response to the Conflict Minerals Issue
Our policy is to avoid business activities that support conflicts or human rights abuses, whether directly or indirectly. In response to the issue of conflict minerals Note1, the mining of which represents a leading cause of conflict and human rights abuses, we conducted research and confirmed that there were no conflict mineral issues in our supply chain. This result was reported to our OEM customers in December 2013 to make it possible to respond to requests from customers, as required under the final rules adopted by the U.S. Securities and Exchange Commission pursuant to Article 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
In fiscal 2014, we will strive to improve the document collection rate and data accuracy in order to further respond to customer requests.
- Note 1 Minerals considered problematic due to human rights violations at mining sites or unethical actions supported by funds earned from mining.
Procurement Aimed at Local Development
At Fuji Xerox, we aim not only to promote fair, impartial procurement with our partners, but to contribute to the local economy in China in areas where our production bases are located and to pursue optimal quality and prices. Our procurement plans include increasing the local procurement rate of raw materials and parts. At the same time, however, we have been careful not to hastily transfer overseas some of our technologies and the production of certain parts. Instead, these parts are produced at and procured from the Japanese production sites of our business partners.
We will deploy appropriate local procurement activities while seeking to increase local content rates, thereby contributing to economic growth in China and ASEAN countries where we have production sites.