Conflict ensure that ASML does not use conflict materials

Conflict materials in products is one of the majorchallenges for ASML, as most suppliers do not have direct relationship withmines or smelters. To ensure that ASML does not use conflict materials in itssupply chain, ASML conducts regular audits on its tier-1 suppliers , alsoinvestigates tier 2 and sometimes 3 & 4. ASML also become a member of EICC 1in 2010.

To deploy sustainable value chain for all ASML products, product relatedsuppliers are expected to be EICC complainant. ASML’s risk management is inline with EICC risk assessment model. Sustainability is also a vital part ofQLTCS audits which are conducted at the suppliers every three years, and forcritical suppliers, QLTCS audits are conducted every year. (textadapted from ASML ,sustainable relationship with suppliers, n.d, sustainablepolicy for ASML supply chain, 2016).

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ASML has a target to ensure that all itssuppliers are EICC code compliant, currently only 88% are EICC code compliant.ASML does not set targets on  footprint, also does not collect sustainableperformance data on this metric. Despite a significant gap closure activitiesx% of suppliers no longer meet QLTCS criteria’s. Indirect supplier managementis not adequate, as these indirect suppliers are not well known because no direct relationship exists with ASML.Complex modules which are sourced from black- box suppliers1only provide limited visibility for N-tier spending. Current supplier riskprofile does not contain important parameters like calamities, financialdistress. (text adapted from ASML, supplierprofile, 2018, unpublished internal document)A survey was conducted to understandareas where suppliers expect ASML to improve and areas where suppliersacknowledge ASML as world leader, summarized results of the supplier survey isgiven below in table 1.

Strengths Weakness/ Areas for improvement Suppliers value the relationship they have with ASML and acknowledge that ASML has helped them become a better organization Suppliers want ASML to become more “supplier centric”. They want ASML to become more transparent and share forecasting information early in development phase. ASML is identified as a leader in industry and has knowledgeable resources Suppliers ask for regular meetings to encourage strategic discussions. Responses indicate that this will help them to align short and long-term goals Procurement account managers are doing a good job with suppliers Suppliers are looking for greater clarity around ASML’s roadmap, strategy and processes to create a more strategic partnership.  Suppliers feel that ASML is trustworthy, professional and committed to future growth With regards to QLTCS management system, suppliers feel that frequent changes to the system are not communicated, changes to scoring system creates confusion Suppliers look forward for continuous improvement journey with ASML. Procurement account managers need to take interactions with suppliers to a more strategic level, to establish a strategic relationship                                                                                                                       Table 1 Special “theme” audits are also conductedwithin ASML to determine gaps in specific areas such as sustainability. Someexamples of “theme” audits are, 3TG supplier audit which is meant for supplierswho supply 3TG materials, namely Coltan (columbite- tantalite) this is themetal ore from which tantalum is extracted, Cassiterite main ore from which tinis extracted, Wolframite, a source of element for tungsten and Gold (text adapted from ASML, conflict mineralpolicy, 2013, unpublished internal document) .

1.      Performance measures that cantrack identified improvementsMeasures that have been taken to improveP function within ASML are given below:v A new dashboard has beencreated with KPI’s2along QLTCS which also contains MQP3,CLIP4and price performancev An easy to understand rankingmechanism has been rolled out which will be fully operational in first quarterof 2018v A five-point maturity has beenintroduced which will grade suppliers on QLTCS where 4 is the required levelfor critical suppliers.v Calamities, financial distress,EOL5,information security and EICC compliance will also be assess in new riskprofile, also new risk profile will cover 100% product related suppliersv For 2018 more focus will be placedon QLTCS gap closure, the new performance dashboard will balance between shortterm performance and long term continuous improvementKPI’s that havebeen developed to track impact of improvement actions (numbers have been changed to hide confidential information)v  Number of supplier audits executed ASML world-wide compared to thenumber of audits as confirmed by procurement staff at beginning of reportingperiod- Target for 2018 is 97%v  Number of pending improvement actions from QLTCS audit non-conformitiesfor which the implementation date has not passed yet. Target for 2018- 80%v  EICC compliance for critical suppliers. Target for 2018- 100%v  Reducing DOA 6tobelow 7000ppm for 2018 and carry on a 10% reduction on yearly basisv  Supplier material quality performance improvement in 2018 from 86%to 97%2.

      ConclusionASML P function is advanced and haswell developed global sourcing strategies (Trent and Monczka,2005). Accordingto the checklist (given below) as suggested by (Trent and Monczka,2005, pp 30),ASML has most of the characteristics of outstanding global sourcing. v ASML has executive commitmentto global sourcing where managers from cross-sector participate in a globalsourcing steering committee, strategic sourcing lead has the authority totranslate ASML’s global sourcing vision into reality, strategic sourcingexecutives work together with other sectors top gain support , strategicsourcing lead makes strategy presentations to ASML executive committee.Strategic sourcing department hire qualified professionals to join strategic sourcingand procurement teams.v ASML has rigorous and welldefined processes, where well defined processes are in place that requirestrategic sourcing and procurement professionals to establish goals, meetmilestones and these KPI’s are reported to executives, lessons learnt sessionsare conducted at the end of each project and results are shared and distributedwith ASML.

v ASML has availability ofrequired resources, budget and qualified staff for strategic sourcing andprocurement, relevant information is available to project teams.v ASML has SAP ERP system whichprovides access to required data and information on real-time basis, allinformation regarding BOM7,prices is stored in SAP8,also analysis is done regularly to identify part usage, supplier performance isregularly measured via audits .v ASML has a supportiveorganizational design where formal executive committee oversees the globalsourcing process, procurement is a part of product team, strategic sourcing andprocurement are separated where strategic sourcing is responsible for globalsourcing and operational activities are taken care by procurement function.

Sourcing is always a part in product team as well as aligned with marketingduring new product introduction.v Product teams meet regularly todiscuss progress, project team regularly report progress to higher management,project information is posted on ASML intranet.v There is structured methodologyto validate savings form global sourcing, proper category management and spendanalysis helps identify areas where savings can be made and can be validated.ASML does need to use more automation to make category management and spendanalysis efficient, currently most of the analysis is done on excel sheet amore automated software could help analysis more efficient. Although ASML’s P&SM function is quitemature, major challenges always exist as the organization is heavily dependenton suppliers. ASML works closely with its product related suppliers to developfurther competencies in QLTCS.

ASML has a lot of focus on sustainability,however more can be done in sustainability. ASML is making continuous effortsto improve in the area of sustainable sourcing, these efforts will upliftsustainability in ASML’s supply chain.1 Intellectual property is owned by the supplier, alsodesign and manufacturing is done by supplier, supplier does not deliver histechnical    performance document to ASML2 Key performance indicators3 Material quality performance4Confirmed Line Item Performance (confirmed delivery date)5End of life6 Dead On Arrival7 Bill of Materials8Systems applications and products in data processing; an enterprise resourcemanagement software1 Electronic Industry Citizenship Coalition