Supply Chain Management
Our basic policy centers on the three principles of open and fair, partnership, and relationship with society. In line with this, the NGK Group has established a Basic Purchasing Policy to promote fair and honest business transactions and help ensure prosperous relationships with the procurement partners in our supply chain.
In 2021 we submitted a Declaration of Partnership Building as advanced by the Cabinet Office Small and Medium Enterprise Agency. We continue to promote partnership with our suppliers as well as fair and honest dealing.
Supply Chain Management System
At NGK, the Purchasing Department is responsible for managing tier 1 suppliers. It also manages suppliers in tier 2 and beyond who provide critical items such as raw materials. All supplier management is done in line with NGK’s Supplier Management Regulations.
Familiarization of the Purchasing Handbook
Purchasing operations are directly related to various important aspects of corporate management, such as assets, production, development, and business performance, and also intimately related to compliance in activities with external and financial connections. In light of this, we created the Purchasing Handbook to summarize internal rules for purchasing engagement and issued the first edition of it in FY2007. The Handbook has since been reviewed every year, and efforts have been made to better familiarize personnel with the tool.
It has been made available on the company intranet, and its significant objectives are discussed in company training programs, particularly for new managers.
Introduction of General Indirect Materials Purchasing System
Typically, each division has performed general indirect materials purchasing, using an offline, piecemeal approach. However, in June 2021 we introduced a global transaction network system to centrally integrate indirect materials spending and make it more transparent.
In addition to an expenditure check conducted by the Purchasing Department, we review the supplier, specification, and other details for large-scale expenses based on the available data. In FY2021, we were able to save 160 million yen through cost reductions.
In FY2022, we expanded the scope of this review to the outsourcing of highly specialized work, and are working to further strengthen management and purchasing.
Promoting CSR Procurement
The NGK Group promotes CSR procurement as a response to rising social expectations for CSR-oriented supply chain management. We preferentially select CSR-conscious companies and purchase CSR-sensitive raw-materials and services.
Supply-Chain CSR Guideline
The NGK Group created the NGK Group’s Supply-Chain CSR Guideline in FY2010 as a guide to promote CSR procurement across the Group.
The Guideline speciﬁcally describes our obligations as a socially responsible buyer as well as our requirements for socially responsible suppliers, such as specifying environmental obligations like greenhouse gas emissions reductions.
In 2013, the Guideline was expanded by being integrated with the previous Green Procurement Guideline, which sets forth rules for preferential purchase of environmentally friendly products and services. Thereafter, they were revised based on changes in social conditions and new global challenges. New points of compliance are being added as well.
Every year we ask all suppliers to submit a written agreement to comply with this guideline, and when we start working with a new supplier, we ask them to comply with the guideline.
The Supply-Chain CSR Guideline is publicly available on our website in multiple languages (Japanese, English, and Chinese).
Supply Chain Evaluation
Within NGK, raw materials and molding molds for main production items* are considered critical items, and of the suppliers who supply these items to NGK, 38 companies (22 Tier 1 companies, 16 Tier 2 companies) are considered critical suppliers from the standpoint of transaction volume (accounting for 80% or more of raw materials and molds supply for main production items), and BCP (single company supply ratio of 70% or more).
In order to identify sustainability-related risks in the supply chain, which includes these suppliers, we perform partner maintenance and selection based on the Supply-Chain CSR Guideline, as well as visit suppliers to identify who are our high-risk procurement partners.
Main production items: Ceramics for purifying automobile exhaust, insulators and related devices for electric power, ceramics for electronic and electrical devices and ceramics for semiconductor manufacturing equipment
Expanding CSR Procurement
At the NGK Group, we engage in activities which deepen understanding to promote CSR procurement, such as visiting individual suppliers and conducting on-site inspections. Not only do we ask both new and existing suppliers to sign an agreement to comply with our existing Supply-Chain CSR Guideline, but in 2021 we conducted a fact-finding survey consisting of 114 questions on nine topics, including human rights, labor, and the environment. This allows us to perform a detailed CSR assessment of each company and assess risk according to transaction details. In FY2022, we will offer support for improvement according to the importance and business conditions of each supplier. In addition, our Group companies will conduct SAQ (Self Assessment Questionnaires) in stages for their primary suppliers in Japan and overseas.
Ongoing Promotion of CSR Procurement
Procuring Resources and Raw Materials Responsibly
The NGK Group conducts procurement activities that consider impacts on regional communities stemming from the use of raw materials (e.g. conflict minerals*) with the potential to cause social issues such as human rights violations and poverty, and takes steps to avoid using such materials.
Additionally, in response to requests from customers, we investigate suppliers regarding their responsible procurement of resources and raw materials.
Minerals including tin, tantalum, tungsten, and gold produced in the Democratic Republic of the Congo and surrounding countries, and used as a source of funding for armed conflict in the area.
Enhancement of Group-Wide Cooperation and Procurement Capabilities
Within the NGK Group, we work to strengthen the procurement capabilities and ensure good governance for the Group as a whole through a number of approaches, including sharing information among Group companies and undertaking joint initiatives aimed at various procurement matters. Based on each company’s purchasing system and transaction situation, we clarify issues and provide support and reinforcement, such as collective purchasing of common materials, sharing cost and supplier information, and introducing domestic supplier management methods to Group companies.
We will continue expanding the use of collective purchasing, standardizing supplier management methods, and developing other approaches that will contribute to improved procurement functions Group-wide, both in terms of cost and governance.
Communication Activities with Procurement Partners
Explanation of Earnings to Suppliers
Because of the risks posed by the COVID-19 pandemic, NGK’s annual earnings presentation for suppliers was conducted online, just as it was last year. We explained our earnings and materials procurement policy to 175 supplier companies. We also asked for their continued compliance with CSR procurement, and shared information and goals meant to facilitate the continuation and expansion of business throughout our entire supply chain.
Ongoing Operation of the Supplier Helpline
In 2008, NGK established the supplier helpline system. Upon receiving consultation via e-mail, fax, and telephone, we make an effort to respond with solutions quickly.
Visiting Individual Suppliers in Japan and Overseas
In order to ensure procurement from the most appropriate suppliers, NGK visits individual suppliers in Japan and overseas to conduct on-site audits and evaluate their QCD (quality, cost, and delivery) performance in a fair and equitable manner. In FY2021, we visited 27 existing suppliers, with some visits being carried out online due to the COVID-19 pandemic. We also conducted audits at 15 of these suppliers.
Not only did we provide feedback and assessments during these audits, but we also used visits for other objectives such as surveying plants and adjusting delivery times as opportunities to listen to a wide variety of feedback concerning suppliers’ QCD management frameworks, CSR approach, and the state of their organization. In addition to this kind of direct communication with suppliers, we communicate through the web as well to build and strengthen better relationships of mutual trust.
Supplier Training-Driven Support Efforts
The NGK Safety Cooperation Conference hosts meetings for facilities and equipment construction-related supplier members. These meetings are used as opportunities to share accident and disaster case studies, as well as to provide safety-related lectures.
The FY2021 meeting was attended by around 20 people from NGK and 69 people from 53 conference member companies. The keynote address was on the topic of communication focused on on-site accident prevention.
Monitoring Activities Aimed at Suppliers Outside Japan
We systematically undertake quality audits of our suppliers outside Japan.