Sourcing and Suppliers
What Do We Expect and Require from Our Suppliers?
Vaisala’s excellence in a high-mix, low volume business model depends on effective management of hundreds of suppliers and numerous strategic sub-contractors. To live up to our customer promise and stakeholder expectations, a reliable and responsible supply chain is a necessity for Vaisala. We have thorough requirements for our suppliers and we work together to enable continuous improvement in the supply chain. Vaisala’s suppliers have good quality, they are innovative and experts of their fields.
Vaisala’s mission, vision and values provide a solid base for our sourcing strategy. The fundamental sentiment in Vaisala’s existence is to ensure added value and reliability for our customers, which we can achieve by managing external resources. Our vision is to strive for competitive advantage with external resources by using key technologies, bringing and creating innovations and utilizing leading solutions. In Vaisala, we value our relationships with suppliers and therefore, we want to have a reliable and collaborative approach to our supplier relationships, which means the development of our suppliers is truly important for Vaisala. Reliability in terms of on-time delivery and quality are very important for us. Collaboration is highly appreciated especially in product development projects with our suppliers.
We also emphasize the significance of total cost of ownership (TCO) to our suppliers. It is important that our key suppliers know the requirements, are able to understand our business and products and are closely integrated to Vaisala. Our Sourcing is organized into four main categories: Mechanics, Electronics and Electro Mechanics, and Manufacturing partners and Indirect and Services. We make the most important sourcing and supplier decisions cross functionally inside Vaisala meaning that our key personnel in R&D and operations are involved in decision making.
With the purpose of communicating our sustainability expectations better and ensuring a responsible supply chain from materials sourcing all the way to our distributors, Vaisala has integrated sustainable supply chain management into its sourcing strategy. The strategy emphasizes a long-term approach for better identifying and managing risks and opportunities, aligning our supply chain partners’ sustainability efforts with our own, and encouraging continuous development and closer collaboration through a constructive dialogue. Tools and resources are part of continuous supply chain management and environmental, social and governance topics are discussed and monitored regularly with key suppliers.
Typical Product Supply Chain
Vaisala’s direct suppliers are typically located close to its manufacturing sites and R&D. The company sources components and mechanical parts primarily from Finland, Western-Europe, and the United States, and to a lesser extent from Asia Pacific (APAC). Raw materials used in Vaisala’s own sensor factory are currently sourced exclusively from Europe. The upstream supply chains resemble those of other typical global electronic manufacturing industry supply chains. In addition to the sensor factory in Helsinki, Finland, which produces sensors for all product families, Vaisala’s manufacturing involves assembly, configuration, and calibration of electronic and mechanical equipment.
Typically, our products are highly customized according to customer specifications, and therefore all products are made to order, thus keeping inventories of finished goods low. Final products are shipped directly to customers from the manufacturing sites in Helsinki and in Boulder, Colorado.
How to Become Vaisala’s Supplier?
Vaisala approves all potential suppliers before the issuance of contracts. The approval process depends on the type of the purchase. Therefore, a typical new supplier approval process starts with identifying the key sourcing requirements and analyzing the type of the purchase. In the next step, potential suppliers are identified and if there are no potential suppliers in the existing supplier base, a new supplier selection and evaluation process is undertaken to assess the suitable candidates. Vaisala Supplier Requirements document, which is verified through the Supplier environmental, social and governance Self-answer Questionnaire (SAQ) and supplier pre-assessment audit, is used in the selection and evaluation process. Lastly, the most suitable supplier is selected among potential suppliers. To evaluate the supplier, Vaisala utilizes supplier audits and scan and evaluate.
Vaisala has categorized suppliers into direct and indirect suppliers. Direct suppliers include sub-categories Mechanics, Electronics and Electro Mechanics, and Manufacturing partners. In addition, inside of both categories, suppliers are divided into four supplier groups depending on a supplier’s relationship with Vaisala. The supplier categorization model consists of potential, approved, preferred and strategic suppliers. This categorization enables continuous improvement, idea and risk sharing and aligning of strategies and long term objectives between Vaisala and the supplier.
Suppliers are very important to Vaisala, and a lot of effort is placed on Supplier Relationship Management (SRM). To support this work, a supplier scorecard is updated and reviewed annually for defined key suppliers. The performance indicators in the area of sustainability cover environmental, social and governance issues. The social indicators measure workplace safety and the environmental indicator measures waste recovery rate of the supplier. It is important both for Vaisala and many of its customers that the same supplier requirements are applied through the whole supply chain. We aim to raise sustainability standards throughout the supply chain by working with our suppliers, encouraging them to improve their management system and to implement similar processes with their own suppliers. A governance indicator measures how well the supplier manages these requirements in their own supply chain.
We have worked hard to increase transparency in our supply chain and maintain compliance with ever more rigorous legal requirements. We also rate our suppliers on the basis of environmental, social, and governance related topics. A low score indicates that a supplier's performance is not meeting our requirements and therefore a corrective action plan must be put in place at once.
Tools for managing a sustainable supply chain:
- Supplier Code of Conduct
- Supplier Sustainability Self-assessment Questionnaire (SAQ)
- Pre-assessment procedures
- Guidance for suppliers
- Audits and quarterly meetings with key suppliers, as part of supplier management
Due to the enforcement of Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Securities and Exchange Commission (SEC) now requires many of Vaisala’s key customers to report on Conflict Minerals to the SEC. As a supplier, we are therefore required to declare any conflict minerals in our products and be able to show their origin.
Suppliers to Vaisala must ensure that proper precautions are taken in order not to source any materials that have their origin in conflict areas, currently including but not limited to the tin, tungsten, tantalum, and gold mined in the Democratic Republic of Congo (DRC) or in adjoining countries.
Reporting on Conflict Minerals
Vaisala is using the Organisation for Economic Co-operation and Development (OECD) Guidance and the Conflict-Free Sourcing Initiative (CFSI) reporting template to document its compliance efforts with its customers. In turn, Vaisala requires that its suppliers (1) commit to being or becoming "conflict-free", which means that such supplier does not source conflict minerals and sourcing only from assured conflict-free smelters, and (2) provide to Vaisala completed declarations, using the CFSI reporting template, evidencing such commitment and documenting the countries of origin from which the supplier directly or indirectly sources tin, tantalum, tungsten and gold, as well as the compliance structure that the supplier has implemented.
To contact Vaisala about conflict minerals reporting please send e-mail to [email protected].