Supply Chain Management
Daikin formulated a Purchasing Policy in 1992 that is the basis for fair dealings with suppliers.
"Respect Independence" and "Cooperation and Competition"
Daikin is working with suppliers worldwide in ensuring responsible procurement in order to fulfill its social responsibility across the entire supply chain. We consider our suppliers for raw materials and parts as important partners, with whom we are promoting relationships of trust through open, equal, and fair trade. At the same time, Daikin promotes CSR procurement with consideration for the environment, quality, occupational safety, and human rights within its supply chain including our suppliers in order to earn society's trust as a global company.
*As of April 2019
*As of April 2019
Daikin has an open door policy on choosing suppliers in which we welcome bids from any company, regardless of nationality, size, or transaction results.
In our air conditioning divisions, information on product specifications, quality and target cost, and delivery times is posted on our website in order to achieve equality of opportunity. All companies satisfying our criteria become eligible to do business with us.
In our chemicals divisions as well, we do business with any supplier meeting our criteria for specifications, quality, price, and delivery time.
Before starting business dealings in Daikin, we ensure potential partners understand our Purchasing Policy, and we assess them on consistent standards. After business dealings begin, we conduct assessments based on ISO 9001 and then review the business relationship accordingly.
In the air conditioning divisions, before we start transactions with new suppliers, we use the Supplier Assessment Standard Sheet to judge companies based on five criteria of administration, quality, price, delivery, and environmental measures. Suppliers are re-assessed every year at our business sites globally based on our Assessment System for Continuation of Business. Investigations into compliance with the Daikin's CSR Promotion Guidelines are also carried out to determine whether or not to continue business dealings.
Companies that do not meet our assessment standards or companies that pose a high risk are required to make improvement plans that we assist them in implementing.
In the chemicals divisions, we assess new and existing suppliers based on ISO 9001 from the perspective of five criteria: management control, safety control, quality control, environmental control, and production control. We also strive to ascertain the status of suppliers' CSR initiatives. In fiscal 2019, such assessments resulted in Daikin bringing on nine new suppliers. After starting business relationships, we strive to fairly assess suppliers from multiple perspectives, having numerous Daikin representatives negotiate with them and making regular visits to their companies.
Daikin formulated CSR Action Plan 2020, which is a medium-term plan taking up key CSR themes, as an initiative for the sustainable development of business together with suppliers that runs alongside 'look for good partners' pursuant to our Purchasing Policy. This plan proclaims that we will conduct socially responsible procurement as we tackle issues like the environment, human rights, and labor throughout the supply chain.
In April 2017, Daikin formulated its Supply Chain CSR Promotion Guidelines. These guidelines aim to further CSR at suppliers and other partners through stable and ongoing growth. In addition to standard requirements such as proper management and abidance with laws and regulations, the guidelines urge suppliers to strive to be better in every aspect of CSR, such as improving performance in the environment, quality, occupational safety, and human rights, and abstaining from dealing with companies in war-torn regions. Training based on these guidelines is held internally and at suppliers.
The air conditioning divisions have conducted CSR questionnaires among the top 80% suppliers by procurement cost in Japan and overseas for monitoring compliance with these guidelines and provide the results of questionnaires to suppliers as feedback. In addition, we evaluate suppliers by ranking their CSR initiatives according to our own standards and then recommend improvements or provide guidance to suppliers, in order to improve the quality of their CSR initiatives. These rankings are A, for suppliers with excellent CSR initiatives, B, for suppliers currently implementing CSR initiatives, C, for suppliers with certain challenges in terms of CSR initiative themes, and D, for suppliers who do not implement CSR initiatives and face many challenges. We have designated the percentage of suppliers between A and C ranks who have satisfied our company standards as the "CSR procurement implementation rate." In fiscal 2019, the CSR procurement implementation rate is 99%.
Moreover, we are also striving to permeate understanding of CSR procurement within the company. Training on CSR procurement was conducted in Japan among all domestic procurement buyers in fiscal 2018. For overseas locations, CSR procurement seminars were held for CSR procurement managers in 14 locations including in the US, Canada, Mexico, and China as of fiscal 2019.
As part of ongoing assessments of our suppliers conducted every April in our chemicals divisions, we have them fill out questionnaires to diagnose their own compliance and that of their external providers. These questionnaires contain items related to CSR so that we can follow their progress in this area.
Under "11. Respect for human rights and diversity, and compliance with labor-related laws" of the Supply Chain CSR Promotion Guidelines, the Daikin Group strives to identify materials from the Democratic Republic of the Congo and its surrounding countries and recommends suppliers to procure minerals from smelters with conflict-free certification. In addition, in July 2013, we established our Basic Policy Regarding Conflict Minerals.
In our air conditioning divisions, in fiscal 2016 we started an online registration system for results of conflict mineral surveys based on the latest system or tool designed by RMI*. This strengthens our system for surveying the procurement sources of conflict minerals.
To ensure that Daikin does not inadvertently provide assistance to inhuman acts of armed groups in the Democratic Republic of the Congo and surrounding countries, we are taking active measures to uphold appropriate mineral procurement by raising transparency of the supply chain in cooperation with our global business partners.
Risks in the supply chain include supply problems due to earthquakes and other natural disasters, bankruptcy due to suppliers' financial troubles, supply problems due to the breaking of laws and accidents, and stoppage of the international flow of goods due to political or economic problems in certain countries.
We regularly evaluate suppliers to identify risk and have created an in-house system for making quick decisions on suppliers affected by risk, and we update our databases as needed in order to improve our ability to deal with problems when they arise.
Moreover, suppliers acknowledged to have excellent practices according to the Daikin standards that further meet the following criteria at a certain level are designated as "Important Supplier," with whom we promote business on a global scale.
Definition of Important Supplier
In fiscal 2019, 23 companies around the world have been designated as Important Suppliers to Daikin. Through our Global Supplier Conference, we work to adjust order volume, streamline costs, and ensure stable procurement in dealings with these 23 supplier companies.
Since October 2008, Daikin Industries, Ltd. has been an official member of the UN Global Compact, an initiative of the United Nations. It is also a member of the local body Global Compact Network Japan. We take part in the subcommittee on supply chains, a subcommittee comprising representatives of member companies and organizations. Subcommittee members meet to discuss and exchange information on CSR efforts in the supply chain, and to collaborate and cooperate in order to advance these efforts and thus strengthen supply chain management.
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