DeLaval is a major supplier to the global Dairy Industry with manufacturing operations in the USA, Europe and Asia. In the early 2000's DeLaval set-up a manufacturing operation in Shanghai and later also started a global sourcing office at the same location. The global sourcing office inillay used many suppliers from their local manufacturing operation. New suppliers were added gradually and the sourcing volume grew by 50% per year while the sourcing office grew from one to fifteen people.

Their supplier pool had a very mixed level of suppliers and some of the early ones had not showed much improvement during previous years. Suppliers were regularly audited, but the sourcing staff did not have specific experience regarding environmental, safety and labour regulations.

DeLaval's head office has a very strict ethical code and it was decided to start a program to pay more attention to having the right supplier pool for the future. A new supplier code of conduct policy was issued from the head office in Sweden. Delaval Global Sourcing office in China contacted Scandic Sourcing to find a solution to the mixed level of suppliers and to find a systemtic way to bring them up to the new standards.

Solution

The Scandic Sourcing team had many years experience of working with suppliers in China. After intial an anlaysis Scandic Sourcing developed a program that could be adapted to DeLaval's specific requirements. A key point in Scandic's approach was to engage the factory management on the issues of code of conduct and to step-by-step build understanding and improvements.

Many typical supplier evaluation systems consist of yes and no answers or are based on questionaores. However, Scandic' Sourcing's system grades the supplier on a 4 grade scale for each issue. This makes it possible to measure the result, compare suppliers and measure improvement over time. 

Scandic Sourcing adapted the audit structure to DeLaval's corporate value system by conducting training and seminars with DeLavals local and global sourcing management in order to set-priorities and goals. All personnel were trained on the system. Scandic also began auditing the suppliers with reports provided for both DeLavals internal use and also for the factories with a list of urgent and long term improvement items. The suppliers were given a Red, Yellow, Green classification.

Result

The program has received very positive feedback from most suppliers who have seen it as a way to receive better understanding and acceptance by foreign companies. These suppliers responded very well and substantial improvements could be seen from audit to audit. Interest in these issues was also increased and many suppliers started to drive the process by themselves driven by their rating on different issues and a desire to get a green classification.  

The interaction with the supplier by a third party also made suppliers open up more to discuss code of conduct issues and solutions,  instead of tying them to price and the commercial relationship.

About 50 suppliers have now gone through audits during a 5 year period.

DeLaval now feels they have a very clear picture of their supplier pool. The internal organisation has also been engaged leading to better reltionships and understanding by internal customers. Question mark suppliers have been followed carefully, several suppliers who have not responded well to the program have been pruned from the supplier list. DeLaval have substantially lowered its overall supplier risk and can prove it has driven improvements in its supply chain.