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Supply Chain Management

Working Together with Suppliers

Working Together with Suppliers

Initiatives

By implementing the PDCA improvement management cycle together with suppliers, OMRON is committed to enhancing sustainability performance in its supply chain.
OMRON also asks critical suppliers to join OMRON in efforts to conform to the RBA Code of Conduct. (RBA: Responsible Business Alliance)

Main activities Details of activities Control standards
Self-assessment OMRON and a supplier together check the supplier's compliance with CSR Procurement Guidelines, having the supplier make improvements if necessary Survey once every 3 years minimum targeting all suppliers
Assessment based on third-party standards Third-party organization's audit of a supplier's compliance with RBA*1 Code of Conduct, having the supplier make improvements if necessary Conduct RBA Corporate Level SAQ*2 surveys for critical suppliers once per year
Procurement BCP Thorough management of the latest information on sources of all parts Survey newly procured parts from all suppliers and renew data once every year
Minimizing procurement risk for individual parts toward the goal of restoring procurement of all parts within a month in case of an emergency.
Green procurement To help reduce negative environmental impact across the supply chain by avoiding the use of hazardous substances, OMRON assesses a supplier's implementation of environmental management and regulated chemicals management and certifies as a green supplier based on its criteria Renew certification once every 3 years, targeting all suppliers
Responsible minerals procurement Survey of materials containing 3TG (tantalum, tin, tungsten and gold) and identifying smelters. Should the use of conflict minerals, financial sources of armed militant groups be found, corrective action will be taken immediately

Survey of materials containing cobalt to promote procurement in a manner not to drive environmental destruction and human rights violation.
Survey once a year
Financial evaluation Evaluating a supplier's financial standing to ensure continuous and stable transactions with the supplier. Mutual deliberation and implementation of improvement measures as necessary At least once per year
  • *1RBA: Responsible Business Alliance
  • *2RBA Corporate Level SAQ: RBA Corporate Level Self-Assessment Questionnaire

Communication with Suppliers

The OMRON Group annually holds a Global Partner Conference targeting representatives of its main global suppliers, to brief suppliers on OMRON's purchasing policies. The conference is intended to share and align OMRON's management policies, business strategies, purchasing policies, and sustainable procurement policies, which include environmental policies, with suppliers. The conference also provides an opportunity to reflect their views in OMRON purchasing measures to enhance their effectiveness.
In fiscal 2020, we had one-on-one online meetings to prevent the spread of COVID-19.


Fiscal 2019 Purchasing Policy Conference

Implementing Sustainable Procurement Guidelines

Self-assessment

In addition to requesting that suppliers conform to OMRON Group Sustainable Procurement Guidelines, the OMRON Group also conducts questionnaire surveys, distributing self-assessment sheets to all suppliers and asking them to check their implementation and compliance regarding the guidelines on their own initiative at least once every three years, so as to improve their practices. Our target is to have all suppliers to conduct the assessment.

Initiatives

In fiscal 2020, we asked 19 suppliers in Asia/Pacific to conduct self-checks, with all of them providing responses.

Suppliers Subject to Survey

Unit : Number of companies
Region FY2016 FY2017 FY2018 FY2019 FY2020
Plan 784 599 1,154 1,376 19
Results 675 425 606 1,268 19
(Details) Japan 185 0 0 735 0
Greater China 490 425 462 472 0
Asia Pacific 0 0 0 61 19
Americas 0 0 103 0 0
Europe 0 0 41 0 0
Implemented rate 86% 71% 53% 92% 100%

Assessment based on Third-party Standards

OMRON asks critical suppliers to conduct annual self-assessments and self-improvement by using RBA Corporate Level SAQ (Responsible Business Alliance Self-Assessment Questionnaire), a RBA evaluation tool.

Initiatives

In fiscal 2020, 50 critical suppliers conducted the self-check assessment.

Corrective Actions

For suppliers deemed to have sustainability risks as a result of our surveys/audits, we requested drafts of improvement plans and implementation of corrective actions.

Initiatives

During fiscal 2020, we received submissions of corrective actions from 69 suppliers deemed sustainability risks. These suppliers are making improvements based on corrective action plans.

Suppliers with Identified Sustainability Risks
Risk Category Contents Number of companies Number of companies
that implemented improvement
Economic Risk Suppliers assessed a grade of 4 or 5 (1-5 scale) as a result of initial financial evaluation (secondary evaluation (local audit) deemed necessary) 47 47
(100%)
Environmental
/Quality Risk
Suppliers given failing result according to CMS audit 16 16
(100%)
Suppliers given a failing result according to PRIMP (line quality audit) 6 6
(100%)
Social Risk None 0 0

Initiatives to Reduce Environmental Impact

Engagement Approach

In accordance with the OMRON Principles, the OMRON Group strives to help create a sustainable society throughout the world by taking dual approaches. One is to supply products and services that contribute positively to the global environment, and the other is to maximize effective use of all management resources. Moreover, OMRON pursues “Green Procurement” of materials and reduced resin molding material waste to contribute to lower environmental impact. Here, we proactively adopt materials that do not contain hazardous chemical substances, pursuing procurement that contributes to reducing environmental impact as well as reducing the amount of resin molding material waste.

Green Procurement

In green procurement, OMRON specified ecology (reduction of environmental impact) and compliance (observance of laws, regulations, and social norms) as key programs that should be promoted across its supply chain. As such, OMRON certifies green suppliers from dual perspectives—establishment of an EMS for environmental management and a CMS for management of chemical substances contained in products.

Initiatives

At present, OMRON awards or renews certification to suppliers who meet the criteria for green supplier certification revised in 2014. During fiscal 2020, we certified 92 more companies, reaching a cumulative 3,026. In fiscal 2021, we plan to complete evaluations for 398 suppliers who do not have updated results.

Suppliers Certified as Green Suppliers

Unit : Number of companies (cumulative)

Green Procurement (Criteria and Documents/Forms)

Reducing Resin Molding Waste

We are working with suppliers to reduce the use of fossil fuel-derived resins and eliminate related waste through recycling, looking toward decarbonization and materials conservation.
This fiscal year, we are targeting a 15% reduction in the amount of reusable resin molding materials we dispose (compared to fiscal 2019). We intend to accomplish this target by optimizing mold specifications to reduce materials and by adopting processes to reuse waste materials.

Responsible Mineral Procurement Activities

Policy to Address Conflict Minerals

Since 2013, the OMRON Group has been engaged in conflict mineral surveys to contribute to a better society. We have established a policy to refuse mineral resources (3TG) mined in the Democratic Republic of the Congo and nine surrounding countries that have continued to violate human rights and damage the environment.

Policy to address conflict minerals

  1. The OMRON Group declares the non-use of such conflict minerals.
  2. The OMRON Group procures minerals from conflict-free smelters, such as those participating in the Responsible Material Initiative (RMI).
  3. Should the use of any conflict minerals in OMRON Group products be discovered, OMRON will take corrective action as quickly as possible.

Framework to address conflict minerals

Since fiscal 2013, the issue of conflict minerals has been specified as one of main themes to be deliberated upon and addressed by the Corporate Ethics and Risk Management Committee, which is in charge of devising and promoting counteraction against the OMRON Group's significant risks. As such, the Committee reports the status of conflict mineral use to the Board of Directors and Executive Council every half year. In fiscal 2013, ORMON set up the Anti-Conflict Minerals Project to formulate an annual action plan based on the review of results of the previous year's activities, managing the progress of plan implementations for each supplier and each parts/material category on a monthly basis.

Framework to address conflict minerals

Survey of Conflict Mineral Use

OMRON has been conducting surveys by using CMRT (Conflict Minerals Reporting Template), the industry standard developed by RMI (Responsible Minerals Initiatives), tracking upstream supply chain.
This survey is based on OECD guidelines for due diligence in risk survey processes. More specifically, we conducted the following steps:

Step 1:Build a Management System
Based on the OMRON Responsible Minerals Procurement policy, we organize group-wide projects to share and implement necessary surveys. We build and use information systems to track and manage survey results, supporting the creation of responses to our customers.
Step 2:Identify and Evaluate Supply Chain Risks
Every year, we identify parts purchased at our plants requiring a survey, conducting a conflict materials survey with our suppliers using CMRT. Through these surveys, we conduct due diligence on the presence of 3TG, country of origin, smelters, and suppliers. In addition, we identify non-certified smelters based on the latest RMI-certified smelter list.
Step 3:Develop and Implement Strategies to Address the Risks Identified
We seek require suppliers to take corrective action for any non-certified smelters identified in our risk evaluation process. If a customer raises concerns, we confirm the basis of the concern, communicate the customer concern to our supplier, and seek an appropriate response, including a re-examination of the smelter in question by our supplier. At the same time, we educate our suppliers for a better understanding of conflict mineral regulations.
Step 4:Annual Activity Report
We publish an annual report on our website concerning our conflict mineral survey and other OMRON initiatives related to conflict minerals.

Initiatives

In fiscal 2020, OMRON examined materials purchased by the OMRON Group over the past two years.

  • Survey targets: 219 suppliers
  • Respondents: 219 suppliers (response rate: 100%)
  • Identified smelters: 249, all minerals (of which 245 certified as RMI conflict free smelters)

Through monthly management of survey responses, OMRON checked with suppliers who hadn't responded yet, asking for their progress in order to help raise the response rate. The responses were examined thoroughly, and in any case of missing or inadequate answers, OMRON communicated with such suppliers to improve the reliability of responses.

To date, there has been no discovery of usage of conflict minerals for which any association with armed rebel groups is suspected. Should the use of any conflict minerals in OMRON Group products be discovered, OMRON will take corrective action as quickly as possible.

Cobalt Procurement

Cobalt is used in lithium-ion batteries that are indispensable for electronic vehicles, mobile phones among other products. The Democratic Republic of Congo is the largest cobalt producer in the world, and there is a concern pointed out about manual mining in the country with poor working conditions and child labor.
OMRON has a basic policy in its Sustainable Procurement Guidelines that bans any forms of forced and child labor, and promotes cobalt procurement in a manner not to drive environment destruction and human rights violation.
During fiscal 2020, we used the RMI (Responsible Minerals Initiative) Cobalt Reporting Template as a trial survey for lithium ion secondary batteries, which have come under scrutiny around the world.

Initiatives

  • Surveyed Suppliers: 7 companies
  • Responding Suppliers: 7 companies (100% response)

Briefing surveys on conflict minerals use to suppliers

Since fiscal 2015, OMRON has provided one-on-one briefings for suppliers whom OMRON asks for cooperation in the survey for the first time.

Partnerships with industry organizations

In April 2011, OMRON joined the Responsible Minerals Trade Working Group organized by the Japan Electronics and Information Technology Industries Association (JEITA), actively collecting information and promoting partnerships with industry organizations. Since fiscal 2015, OMRON participates in the planning and management of conflict mineral investigation conference meeting hosted by the Working Group to promote dissemination of conflict minerals efforts across supply chains of the industry as a whole.


Conference hosted by Responsible Minerals Trade Working Group (held on June 13, 2019 in Osaka)

Procurement BCP

Developing fine-quality products to contribute to society through business is one of the most important social responsibilities of a manufacturer. At the OMRON Group, we believe that it is equally important to provide a stable supply of products, even in the case of a contingency. Based on the awareness that a disaster can happen at any moment, OMRON has been promoting procurement BCP* since fiscal 2011.

Initiatives

OMRON established a system to confirm the impact on our business within 24 hours of a contingency, striving to improve management in these cases. In addition, OMRON manages potential procurement risks for parts and materials by classifying them into three ranks. Efforts are now focused on minimizing procurement risks by taking measures such as keeping certain parts/materials in stock. The goal is to build a system to resume procurement of all parts within a month in the event of a disaster. In fiscal 2017, OMRON designed and introduced a central inventory control system to manage the stock of highest-risk parts in a unified manner at OMRON. Starting fiscal 2018, OMRON has been working on early-stage, stable procurement by forecasting demand-supply gap to select parts and materials and to ensure inventory.
Although the recent spread of COVID-19, natural disasters such as earthquakes and floods, and accidents such as fires have affected many of our suppliers, we have quickly identified risks based on local production area information for components we manage, promptly holding meetings participated by procurement staff from across our company. We also held discussions about, and implemented measures with, our suppliers. In this way, we have prevented significant supply problems to date.

  • * BCP refers to Business Continuity Plan. It is a proactive planning process to ensure that business operations will continue without interruption even in the case of natural disasters or other contingencies. BCP also covers strategic preparation in normal times, with the ability to restore important functions within a target time period even in the event of an interruption so as to minimize interruption-associated risks.
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