Assessing Suppliers

Since 2003, we have conducted more than 900 third-party audits of existing and prospective Tier 1 suppliers in 21 countries on issues relating to ethics, human rights and working conditions. The audits provide feedback to Ford and suppliers about how well suppliers are meeting legal requirements and Ford’s expectations. The audits also provide insight into the effectiveness of our training programs. The audits consist of a detailed questionnaire, a document review, factory visits, and management and employee interviews, and are conducted by external, qualified social auditors. We have set a goal to expand audits to at least 25 percent of our production suppliers for high-priority countries in each of our major operating regions.

In 2013, we conducted audits focusing on our 21 target countries. The findings from the 2013 audits were generally consistent with those we had previously conducted. We have analyzed the data from our audits and identified the following most prevalent audit issues in all regions:

• Emergency preparedness and response
• Working hours
• Occupational safety

Identification of these issues will allow us to expand and tailor our efforts to address the issues that are most prevalent in our supply base.

The findings from Ford’s 2013 supplier audits included:

• No evidence of forced labor or physical disciplinary abuse
• In some cases, a lack of appropriate timekeeping systems, and thus a failure to pay correct overtime wages
• In some cases, a failure to pay the correct local minimum wage or overtime
• Working hours violations related to overtime and, in some instances, lack of a required day off. In some cases, this overtime is a chronic issue resulting from poor capacity planning, but more often it occurs periodically during peak production periods.
• Some health and safety issues including inadequate emergency systems
• Various emergency preparedness issues including inadequate emergency systems and failure to conduct required fire drills
• Some occupational safety issues including inconsistent use of personal protective equipment and inadequate lighting
• A general need to clearly and define policy on harassment and discrimination
• A general need to clearly define policies on gift giving and accepting kickbacks, bribes, commissions etc. in some locations
• Limited cases of restricted workers doing hazardous work
• In some cases, limited or restricted access to appropriate documentation regarding subcontracted labor and privacy policies

Freedom of association has been difficult to verify. While all assessed suppliers have either union representatives or a grievance process, there may be issues we have not been able to identify through our assessment process.

Another common finding is that suppliers often lack fully developed management systems – including continual improvement processes – to support compliance over time. This finding has validated our training approach, which continues to emphasize management systems at both the corporate and factory levels.

If any issues are identified during an audit, suppliers are required to complete corrective action plans, which Ford reviews and approves. The corrective action plans outline how a supplier will resolve the issues and include clear responsibility and timelines for completion. Assessments cannot be considered “closed” until any violations of local laws and regulations are resolved and until the supplier has responded in writing with an action plan for improving management systems and policies to avoid future issues. We return to the facility within 12 to 24 months as required to confirm resolution of the issues. Suppliers who continue to be out of compliance with Ford expectations and/or local laws are at risk of being removed from Ford’s supply base.

The audit tool that Ford uses with Tier 1 suppliers has been an important means for furthering our understanding of both the issues and the root causes for noncompliance. If issues are identified or allegations made of a sub-tier supplier, Ford makes our assessment tool and guidance available to our responsible Tier 1 supplier. In this way, we hope to affect positive change more broadly and enable our suppliers to effectively manage their supply base.

In 2014, we will expand our audits to non-production suppliers. We are initially piloting the audit process with non-production suppliers to understand if we need to modify the process for the unique needs of non-production companies.

We constantly monitor approaches developed by other organizations and industries in order to incorporate what they have learned into our approach. We will continue to work with direct suppliers to help create ownership of human rights and working conditions within those supplier organizations. Clear, consistent communication and further business integration of processes that support responsible working conditions throughout the supply chain will be a key component of our continued work.