Product Manufacturing

Product Manufacturing

Risks in the product manufacturing stage include product quality conformance, human rights of workers, eco label compliance, and environmental footprint. Through the external participation in associations and internal operation process management, ASUS addresses the supply chain risk management strategies for these four risks as follows:

Management Strategies at the Product Manufacturing Stage in the ASUS Supply Chain
  • Product Quality Conformance
    To be qualified as ASUS suppliers, vendors must pass quality audits in 3 dimensions, including: Quality System Assessment (QSA), Quality Process Assessment (QPA), and GreenASUS standard (GA). With this audit and assessment system, ASUS can assure all suppliers in product manufacturing are conforming to related legal requirements in the restricted use of hazardous substances. By 2015, ASUS has assessed more than 800 qualified suppliers of parts and components and OEM in regions all over the world. In 2015, there were 175 new suppliers of parts and components and OEM, of which 16% were located in Taiwan and 80% were located in China, and 4% were located in other foreign countries.
New Suppliers and OEM Distribution by Region

For those who become ASUS qualified suppliers are required to sign a "Declaration of Compliance on ASUSTeK Code of Conduct for Suppliers and EMS". ASUS will sort out suppliers of high risk in terms of environmental risk, strategic cooperation, quality abnormality or possible existence of hazardous substances. Suppliers of high risk will be subject to continuous audit for proper management

In 2015, ASUS has conducted audits on 23 firms with higher risks that required continued audit. The audit analysis indicated that suppliers of parts and components accounted for 70% while OEM accounted for 30%. The result indicated that 100% of the suppliers and OEM received onsite audit passed.

Proportions of Suppliers of Parts and Components and OEM
  • Human Right for Labors
    Whether the manufacturing environment is in compliance with human right for labors and with occupational safety is another management issue for ASUS beyond product quality. Internally, ASUS has instituted its code of conduct and CSR standard in accordance with the Electronic Industry Citizenship Coalition (EICC) code of conduct. Regular audit is conducted annually to ensure the partnering OEM can comply with the industrial criteria in the protection of workers and requirements of occupational safety. Externally, ASUS has joined the EICC. By supporting EICC, ASUS promote the human right of labors to a higher standard, and publically commits to labor, health and safety, environment, ethics, and management system.
Five Dimensions of ASUS Code of Conduct

In 2015, 17 audits were conducted and the scope of the on-site CSR audit covered mainly on OEM. The audit result showed that 80% of the OEM passed and 20% of them passed the audit with conditions.

According to 2015 CSR audit results, after analyzing the requirements in 5 dimensions, such human rights for labor and EICC, the allocation of audit findings showed that the highest non-conformance is in health and safety with 37% and labor is the second highest with 27%. The details are described below:

Allocations of CSR Audit Findings in Five Dimensions

 

CSR Audit Findings of Non-Compliance and Respective CAR

 

Result of CSR Onsite Audit on Suppliers of Parts and Components and on OEM

According to the 2015 CSR audit analysis, the average scoring in the five dimensions sustained perpetual growth, which indicated that the suppliers and the OEM have been making improvements in CSR management.

Historical Average Scoring of CSR Onsite audits in 5 Dimensions

All findings revealed during the 17 CSR audits in 2015 were corrected, according to ASUS audit requirements.

In the dimension with higher non-compliance rates, namely Health and Safety and Labor, the ASUS audit team implemented the following changes for the 2016 audit process:

  • Labor: Increase random sampling in working hours and payroll records, and confirm the implementation of the monitoring system
  • Health and Safety: Increase sampling numbers of facilities and repair records for high-risk areas

Also, in response to requirements of TCO Certified, assembly plants of TCO product should implement CSR onsite audit once a year. The result of the 2015 audit conformed to these requirements.

  • Child Labor
    The employment of underage workers is a common issue in the electronic industry. It is illegal to employ underage people. However, in China, the demand of labor force and the family livelihood in rural families compelled many young people in school age to give up education and bare the risk of fraudulent use of another person's identity for working in factories. ASUS pays high attention to the problems derived from the erroneous employment of child labor and the risk to operation of suppliers. Therefore, ASUS conducts intensive onsite audits in order to ensure that suppliers are not hiring underage workers, and that they are taking corrective measures if it’s discovered that they have erroneously hired underage workers. ASUS pays high attention to the problems derived from the unintentional employment of child labor and the risk to operation of suppliers. Therefore, ASUS conducts strict onsite audits to ensure that suppliers do not hire or underage workers, or if happened, how they manage the erroneous employment. Measures includes the confirmation on the contractual requirements between the suppliers and the human resources intermediaries, the interview mechanism with new employees (such as: the introduction of face identification system, identity authentication system, family background information check), and sampling interviews with onsite workers. ASUS seeks to ensure reasonable measures have been taken in the supply chain to avoid the erroneous employment of underage workers.

If erroneous employment occurs, ASUS will take the following actions:

  1. Suppliers transfer the child labor to original job position.
  2. Suppliers arrange health examination for the child labor to ensure of health condition. If it is affected, suppliers will be responsible for the treatment expenses.
  3. Suppliers contact the parents and send the child back to homeland.
  4. Suppliers will track child to ensure the education status until he or she could enter the workforce.
  5. ASUS audit team will report the child labor issue to the supplier managers.
  6. ASUS requests suppliers to take corrective actions.
  7. ASUS will arrange an onsite audit afterwards to ensure the corrective actions are enforced.

According to 2015 CSR Audit Results, there were no violations for Child Labor across the supply chain and OEMs.

  • Protection of Female Employees
    When using the five dimensions of EICC for audit management of the suppliers, we also notice the inadequate protection towards female employees in the EICC management system. ASUS has consulted the Social Accountability 8000 International Standard (SA8000) in order to add protection on female employees into the audit checklist. During the actual audit, ASUS ensured that the suppliers take evaluations on risks caused by working conditions for pregnant and birthing mothers, as well as taking reasonable measures to eliminate or mitigate the risk of damage to their health and safety.

 

  • Eco Label Compliance
    ASUS conducts annual ECO audit on OEM of ecolabel products to ensure proper enforcement of the requirements set forth in ecolabel in product manufacturing. The audit covers the following 3 dimension - management system, eco-design requirements, and process control – to assure conformity to the requirements of the eco label. 8 audits were conducted in 2015, and the result of ECO audit in 2015showed that 100% of the audited OEM passed.

At the product manufacturing stage, ASUS conducts 3 major quality audits, the CSR audits, ECO audits, and TCO-CSR audits to continuously manage suppliers and monitor the risks in the supply chain to ensure compliance with applicable legislations and the requirements of the eco label. The scope of audit management by ASUS in 2015 is shown below.

2015 ASUS Scope of Audit Management by ASUS

The audit results will be forwarded to the supply chain management function (including the outsourcing management units and procurement units) and will be disclosed in the Quarterly Business Review (QBR). Current suppliers with distinguished performance will continue to be business partners with ASUS, and those that cannot perform as desired or are unsupportive of the policy will be removed from the list of suppliers. This helps ASUS to raise the quality of the supply chain.

According to 2015 audit result for QBR suppliers, there was no significant non-compliance that resulted in the elimination or termination of the suppliers.

For the implementation of the PDCA management procedure, regarding to the findings, ASUS auditing team requires suppliers to provide timeline and documentations of corrective action. The audit team will follow up on all the findings in the audits until the findings are closed.