We are maintaining our relationship with our suppliers based on sustainable competition, transparency, and trust in line with the concept of business partnership. We believe that supply chain, which is financially strong, operationally environment friendly, and reliable in terms of quality and continuity. In that context, we are endeavoring to make contributions to continuous development of our suppliers which are among the key elements of our value chain. 

Supply chain processes are carried out through specialized units, including Supply Chain and Purchasing Directorate, which directly reports to the CEO, WCC (World Class Company), and Allied Industry Supplier Quality and Development. Strategic goals set and performance results achieved are reported to the company’s senior management, Committee for Early Detection of Risks and Risk Management, and the Board of Directors. Goals and strategies devised by the senior management provide guidance for our operations in the future.

We are expecting our supplier to adopt the same ethical values as Tofaş. Thus, agreements that we conclude with suppliers also encompass Tofaş Ethic Standards. We lend support to our suppliers in order to enable them to rectify any infringement of our ethic standards.

We take care to make sure that our procurement activities related to new projects lead to transfer of advanced and smart technologies to the Turkish automotive industry and contribute to Tofaş’s competitiveness on the global arena. Tofaş is working with more than 2,500 direct and indirect (service and industrial procurement) suppliers. We purchase goods from 152 direct material suppliers in 14 cities in Turkey.

Supplier Selection

Our main expectation of our suppliers is their cooperation with us in order to attain common goals. We take account of some basic criteria while selecting our suppliers.

• We work with suppliers who have technical and organizational capabilities aimed at meeting the expectations of the automotive industry;
• Are financially strong;
• Have advanced design, production, and test capabilities;
• Have the capacity to contribute to Tofaş’s competitiveness in terms of quality and cost improvements;
• Are able to constantly grow and increase their competitiveness by keeping abreast of development and best practices in the industry;
• Adapt themselves to rapidly developing technology by using their flexible and agile organizational capabilities;
• Monitor and minimize their environmental impact in line with our green procurement process;
• Have successfully passed our audits regarding process and working norms

We are handling our overseas supplier processes with FCA procurement organization. AS regards local procurement, we are keen to reduce the dependence of the Turkish automotive industry on imported goods and to increase domestic production of components. In 2019, 75% of goods, excluding motor and transmission gear, from local suppliers and continued our contribution to the growth of local suppliers. 

Localization is one of our medium- and long-term strategies. We support local suppliers in order to enable them to reach a global scale and become competitive.

Supplier Development Policies

We are pursuing policies that will contribute to the development of our suppliers in many fields, including product design, organizational/technical development, quality, cost improvement, physical and financial risks, improvement of production process, joint procurement, and sustainability.  We aim at establishing a proactive and autonomous procurement process through our supplier development efforts. We organize special training and events for the suppliers in order to share our technical knowledge with our suppliers.

One of our primary goals in our supplier development efforts is to establish a proactive and autonomous process by totally changing the reactive way of doing business focusing on resolution of problems. In this context, our strategy is basically aimed at:

• properly focusing on our current problems and adopting an approach to offer effective and lasting solutions;
• working in harmony as a strong and competent team in order to achieve common goals and objectives;
• establishing systems that will identify and prevent all potential risks in our production processes before they escalate into a problem;
• designing and commissioning products and processes that will not lead to failures in order to achieve perfect quality.

In 2019, main activities carried out for that purpose as part of continuous development of suppliers and sustainability concept are as follows:

• In 2018, more than 1,000 long-lasting improvement projects were carried out for 43 suppliers through teams made up of highly qualified experts from different fields with support provided by Tofaş experts in order to detect risks in our critical and problematic processes in a proper and timely fashion as part of our strategy “to develop proactive and autonomous processes. More than 500 long-lasting improvements were put into practice for 32 suppliers in 2019 and those operations were carried out autonomously by the majority of the suppliers. Innovative and technological solutions are put into practice in order to eliminate current problems and risks in supplier processes while accelerating digital transformation, developing efficient and error-free production processes and establishing visual and effective management systems through our “digital transformation” strategy. In addition to those solutions, we brought suppliers and providers of vanguard technology solution providers and suppliers, including start-ups together at “GoTech” event with a view to raising awareness among our suppliers and enabling them to access technology faster and to speed up the spread of best practices. After organizing the first event in 2018, we held the second one in 2019 and a total of 215 people and 54 suppliers attended and 18 best practices were shared.
• We have been making efforts to roll out WCM to the suppliers since 2009 in order to enable them to integrate World Class Manufacturing (WCM) methodology with their own business models as part of World Class Supplier (WCS) Program. We are carrying out these projects with 25 suppliers at the end of 2019 in addition to cooperation with 12 suppliers. There are 4 Turkish suppliers in the FCA global supplier list, which includes a total of 11 suppliers which have attained WCM bronze goal.
• -The Connected Supplier event attracted a large turnout and focused on devising low-cost technological solutions to quality problems. Technological solutions were devised with 19 startups and technology providers in order to develop  18 process reported by 19 suppliers in 2019.
• We share innovative methods providing improvements in terms of quality and cost with our suppliers. LCA (Low Cost Automation” project was rolled out to 50 suppliers in 2018 and projects were monitored on the spot taking advantage of Tofaş knowledge and experience in order to enable the suppliers to maintain this project autonomously also in 2019. 
• We carried out Sup.Port program which enabled us to transfer “UP” Program (Apply Your Skills, Plan Your Development), which we had carried out in the preceding reporting period in order to improve supplier capabilities in such key areas as quality, project, and logistics to the field and to put actions into practice in 2019. Teams made up of 25 participants from 5 suppliers from were set up for addressing problems with mentoring provided by Tofaş’s senior management and their capabilities were enhanced for that purpose. 
• Supplier Performance Portal (Supplier Scorecard) enabled us to monitor the course of supplier performance and growth indicators as well as internal customer satisfaction while managing deviations with our suppliers. The development portal contains quality performance, logistical performance, commercial performance, continuous improvement performance, and performance in managing stakeholder relations.

Tofaş’s Supply Chain Logistical Cost Computation software was designated as “highly recommended” in “Supply Chain Design and Engineering Award” category in 2019 European Automotive Logistics Awards.

Our goal was to improve the quality of our suppliers’ logistical processes in 2019. Logistical processes need to be designed, developed, and improved as is the case for each process. We were mainly focused on proposing solutions to problems by analyzing logistical failures that we have observed and taking account of the resources of our suppliers in order to ensure smooth processes. Giving due consideration to the supply chain, we began analyzing all failures in the flow from the supplier’s procurement of raw materials, production, storage, and shipment areas, Tofaş material delivery points, storage areas, and Tofaş production line. Failures that we monitored in 2019 as part of our projects were improved 54%. We are continuing our endeavors for setting higher goals as part of the concept of “Logistical Quality.”

Management of Sustainability Risk in the Supply Chain

We assess sustainability risks not only for our own operations, but also the entire supply chain. We employ proactive methods to predict, manage, and monitor environmental, social, and economic risks that may occur in the supply chain and to map out required action plans in advance. We provide financial and operational support for our suppliers to help them acquire information regarding the management of sustainability risks.

We monitor and assess supplier performance based on specific criteria.  We are striving to raise awareness among the suppliers in order to make them realize that reaching the targeted performance and implementation level is also a factor helping the supplier to achieve growth.

We are identifying social and environmental risks in our supply chain through efficient and comprehensive audits. We support our suppliers so that they can improve their performance through development plans devised after the audits. To identify financial risks in our supply chain, our Financial Risk Management Department, supported by a third party independent auditor, conducts audits if necessary.

“In 2019, 13 suppliers were assessed in terms of environmental criteria and financial risk assessment was conducted by 81 suppliers.”