We divide suppliers into different categories to ensure their continued compliance with our requirements. Every year, we audit suppliers, which combined represent 90% of our procurement spending, and assign them one of three priority
levels: high, medium, and low. On this basis, a list of suppliers which require particular attention is drawn up. The factors considered during the audits are: supplier location; product/material category; potentially high-risk manufacturing processes; business volume and relationships; sustainability performance; environmental risks; and risk management systems.
Routine audits are a key part of our approach to supplier sustainability management. Through audits, we discuss with suppliers' management teams about their buy-in and ownership concerning sustainability, find out where problems exist, and then seek to solve those problems and prevent the occurrence of future issues. Huawei performs onsite audits on medium- and high-priority suppliers every year.
If we discover a problem during an audit, we help the supplier analyze root causes, identify ways to mitigate, and take targeted actions using Huawei's Check, Root Cause, Correct, Prevent, and Evaluate (CRCPE) methodology. All problems are logged in Huawei's Supplier Corrective Action Requirement (SCAR) system for follow-up until closure. We are always ready to help our suppliers improve.
Deepening Cooperation with Customers
Sustainability is a key component of customer requirements. To boost transparency across the supply chain, we take multiple initiatives, such as joint audits on suppliers, employee surveys, joint workshops, and supplier capability improvement projects. In 2016, Huawei and three customers ran onsite audits on ten suppliers.
Joint Audit Cooperation
The Joint Audit Cooperation (JAC) is the primary supply chain CSR joint auditing organization established by leading European and US telecom carriers. The 13 carriers that participate in JAC have unified standards, and delegate a third-party auditing firm to carry out supplier audits, share audit results, and collaboratively encourage suppliers to make improvements. This helps to reduce repeat auditing and accelerates improvements along the supply chain.
In 2016, Huawei designated eight suppliers to participate in JAC joint auditing, with expert groups from a third-party auditing firm carrying out onsite audits. The auditing experts and customers expressed satisfaction with the results of the audits on the eight suppliers. In particular, the suppliers were found to have incorporated customer CSR requirements into their internal operations. By making improvements related to social responsibility, the suppliers enhanced internal operating efficiency, customer satisfaction, and employee satisfaction.
Using Improved Mobile Technology to Strengthen the Link Between Employers and Workers within the Supply Chain
Using innovative technology and methods to drive supply chain sustainability has become a trend of development in recent years. As mobile phones have become more prevalent, using mobile technology to conduct surveys of employees has facilitated a better link between workers and employers. This has resulted in more transparency within the supply chain.
In 2016, in collaboration with two customers, we invited a third-party organization to promote the use of a mobile phone-based communication platform at ten suppliers as a way to better connect workers and employers through employee surveys. The brief training gave employees the knowledge they needed to use the platform wherever and whenever they wished to provide anonymous responses to questions about overtime hours, working conditions, and living conditions. Survey results collected in this confidential manner have provided a more objective reflection of actual factory conditions and sentiments of employees. The approach has improved the transparency of the supply chain, and made it easier for customers and suppliers to assess the strengths and weaknesses of factory management, allowing for the formulation of targeted improvement measures.