We maintain our relationship with our suppliers in line with the concept of business partnership, ensuring sustainable competition, transparency, and trust. We believe that a supply chain that is financially strong, operationally environment friendly, and reliable in terms of production quality and continuity will reinforce our success. In that context, we are doing our best to contribute to continuous development of our suppliers that 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, and Supplier Quality and Development Unit. Special strategic goals and performance results 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 guide us in our future operations.

We expect our suppliers to adopt the same ethical values as Tofaş. Thus, agreements that we conclude with suppliers also encompass Tofaş Ethic Standards. We support our suppliers in rectifying any infringement of our ethical standards.

We make sure that our procurement activities for our new projects lead to transfer of advanced and smart technologies to the Turkish automotive industry and contribute to Tofaş’s competitiveness in the global arena. Tofaş works with more than 3,000 direct and indirect (service and industrial procurement) suppliers. We purchase goods from 148 direct material suppliers from 14 cities in Turkey.

Supplier Selection

Our main expectation from our suppliers is their cooperation with us 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 to meet 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 keeping abreast of the developments and good practices in the industry;
• Adapt themselves to rapidly developing technology 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 to 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 2020, we purchased 75% of goods, excluding motor and transmission gear, from local suppliers, and continued to contribute to the growth of local suppliers.

Localization is one of our medium- and long-term strategies. Our work with local suppliers helps them reach a global scale and become more competitive.

In December, we hosted an online Supplier Meeting and Award Ceremony to award successful suppliers of the year. Competing under eight categories, a total of 18 prominent suppliers were granted awards for their successful works. Furthermore, in Supplier Performance category, Egea Cross model vehicles were given as a gift to two suppliers, who created the greatest profit with their valuable technical recommendations.

Supplier Development Practices

We pursue 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. Our aim is to establish a proactive and autonomous procurement process through our supplier development efforts. We organize special training sessions and events for our suppliers to share our technical knowledge with them.

 

One of our primary goals in our supplier development efforts is to establish a predictive and autonomous process, totally changing the reactive and problem solving-centered business method. In this context, our basic strategy is to:

• properly focus on our current problems, and adopt an approach that offers effective and permanent solutions;
• work in harmony as a strong and competent team to achieve common goals and objectives;
• establish systems that will identify and prevent all potential risks in our production processes before they escalate into a problem;
• design products and processes that will not lead to failures, put them into practice, and finally achieve perfect quality.
• The main activities carried out in 2020 as part of continuous development of suppliers and sustainability concept are as follows:
• In 2020, in line with our strategy to “create proactive and autonomous processes”, we conducted an Early Involvement process with our suppliers to renovate Egea model vehicles, and we made proactive changes to make sure that the renovated designs are error-free and that they will bring us competitiveness in terms of the costs. Once again we worked with our suppliers to create error-free production processes. Within this scope, we gathered together the lessons learned in the previous years, improved production processes, and used the final error-free processes to ensure sustainability in production and quality.
• Our “digital transformation” strategy involves putting into use innovative and technological solutions to solve current problems and permanently eliminate risks in our suppliers’ processes while also accelerating digital transformation, developing efficient and error-free production processes, and creating visual and effective management systems. In addition to those solutions, we brought together our suppliers and leading technology solution providers, including “start-ups”, at an online “GoTech” event with the aim of raising awareness among our suppliers, enabling them to access technology faster, and speeding up the spread of good practices. The event was initiated in 2018, and the third one was organized in 2020 to share 14 best practices with a total of 325 people and 78 suppliers, who attended the event.
• As part of the World Class Supplier (WCS) Program, we have been doing our best to popularize WCM among the suppliers since 2009, in order for them to integrate World Class Manufacturing (WCM) methodology into their own business models. As of the end of 2020, we are carrying out these projects with 26 suppliers, and cooperate with 16 others. There are four Turkish suppliers in the FCA global supplier list, which includes a total of 14 suppliers that have attained WCM Bronze goal.
• Attracted a large turnout, Connected Supplier event focused on devising low-cost technological solutions to quality problems. Between 2017 and 2020, technological solutions were devised with 83 start-ups and technology providers to address 31 processes.
• Thanks to Supplier Performance Management (Supplier Scorecard) we are able to monitor supplier performance and growth indicators as well as internal customer satisfaction, and manage deviations with our suppliers. Performance management covers quality, logistics, and commercial performance, as well as the performance in continuous improvement activities and in management of stakeholder relations.
• We began using Supplier Quality Library platform, which allow us to conduct online supplier audits, archive the results, and monitor their improvement, while also increasing the efficiency of the workforce to a great extent, and ensuring continuity of know-how. By using this platform and advanced internet systems together, we effectively carried out remote supplier audits, and ensured business continuity despite the pandemic.
• Candidate Supplier Application Portal was put into use, and companies who wished to be a Tofaş supplier were given a chance to send their applications digitally. Accordingly, candidate companies are able to send their applications through the portal, which can be accessed via Tofaş’s official website. Keeping a digital record of the applications allows both suppliers and Tofaş to see new business opportunities.
• In line with our Digital Transformation strategy, we assessed our business processes, and designed and put into use RPA (Robotic Process Automation) projects in certain areas, which reduced human error risk, and lowered the workload associated with manual procedures. Our goal is to spread the use of RPA projects to all of our processes.
• Our E-signature Project allows relevant parties and our suppliers to digitally sign and archive documents and agreements. The objective is to avoid wasting time while waiting for the documents to be signed and archived, and refrain from all kinds of incorrect/incomplete procedures.

“In 2020, 12 suppliers were assessed in terms of environmental criteria, and financial risk assessment was conducted in 119 suppliers.”

8% Less Co2 Emission in Eskişehir Line

“Reduction of CO2 Emissions” project, one of the Green Logistics projects falling under the scope of Local Material Transport operations of our Directorate of Supply Chain, was commissioned. Thanks to the project we conducted with Ekol Logistics, one of our business partners, we installed dual system to the vehicles working on the Eskişehir line to use CNG fuel, as a result of which we reduced our CO2 emissions (9 tons/year) by 8% on Eskişehir line, and contributed to a sustainable environment. In time, the project will also be implemented in other regions we operate.

EUROPEAN MILKRUN PROJECT TO REDUCE NUMBER OF TRIPS AND EMISSION VALUES

The materials we directly import from Europe are collected from 20 suppliers located in seven different countries with Milkrun trucks, and transferred to Tofaş on a weekly basis. Accordingly, we initiated our Europe Milkrun project in early 2020 with the aim of increasing truck occupancy rate and reducing costs, and at the end of the project’s sixth month, i.e. in June 2020, it was put into practice. In order to plan Milkrun trips on a “minimum distance, maximum truck occupancy rate” basis, an optimization algorithm was developed on Python considering the time those imported materials are needed. And the algorithm was then integrated into Tofaş’s systems. Supply Chain Development, Material Planning, Transport Planning, International Trade, and IT Teams worked together in this project. Thanks to the project, we have managed to reduce our transportation by trucks by 5% in Milkrun operations. Furthermore, the project also reduced the total distance travelled per truck, lowering our emission values in Milkrun operations by approximately 7%. Total outcome associated with the project is as follows:

•  Autonomous Planning

•  Transport Mode decision mechanism (Ship-Truck- Minivan)

•  Homogeneous distribution of orders by weekdays

•  Merging countries

•  Collecting goods from multiple points in a country

•  Systematic checks on tonnage limitations

•  Infrastructure for contracted management instead of spot management

•  Management infrastructure for DAP contracts

FLOW IMPROVEMENT WORKS

We worked with four of our international suppliers to improve their flows. As per our agreement with three of our suppliers, we were importing goods through a dispatch center; however, within the scope of our improvement operations, we eliminated the dispatch center, and began transferring goods directly from the suppliers to Tofaş.

These projects helped us save on costs, while also reducing the distance travelled annually by 58,250 nautical miles and 136,550 km, and lowering CO2 emission by approximately 150 tones.

Management of Sustainability Risks in the Supply Chain 

We assess sustainability risks not only for our own operations, but also for 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 our suppliers with financial and operational support to help them acquire information regarding the management of sustainability risks.

We monitor and assess supplier performance based on specific criteria. We raise awareness among the suppliers in order for them to realize that reaching the targeted performance and implementation level is a factor that helps them grow.

We identify social and environmental risks in our supply chain through efficient and comprehensive audits. Through the development plans devised after the audits, we support our suppliers so that they can improve their performance. To identify the financial risks in our supply chain, our Financial Risk Management Department conducts audits, and gets help from a third party independent auditing company, when required.

“In 2020, 12 suppliers were assessed in terms of environmental criteria, and financial risk assessment was conducted in 119 suppliers.”