COVID-19 Safe Supplier Operating Standard - Part Two

In part two we present The Safe Supplier Operating Standard, designed to gauge your supplier's health and viability, and facilitate the discussion and application of safe working practices.

COVID-19 Safe Supplier Operating Standard PART TWO: THE SAFE SUPPLIER OPERATING STANDARD

WHITE PAPER AND OPERATING STANDARD BY JOHN NEWTON AND ALAN DAY

STATE OF FLUX

Contents

Foreword by the International Trade Centre

Introduction

The Safe Supplier Operating Standard

1. Health and availability of supplier workforce

2. Financial viability of the supplier

3. Organisational preparedness

4. Social distancing requirements

5. Port and airport closures (operating at skeleton operational levels)

6. Risk of spreading coronavirus via physical products

7. Demand shocks

Summary

COVID-19 SAFE SUPPLIER OPERATING STANDARD PART TWO

STATE OF FLUX

Foreword By the International Trade Centre

Introducing the COVID-19 Safe Supplier Operating Standard ITC and its global partners are working in more than 120 countries to help enterprises recover from COVID-19, build in resilience to new shocks and re-imagine their businesses. This standard, compiled by State of Flux from broad industry inputs, is designed to help enterprises enable a resilience consciousness along international supply chains. It will guide producers, exporters, trade-related financing providers, and buyers through enacting COVID-safe operations to re-build trade. The standard outlines a common set of best practices that are relevant for trade in any product or services sectors. When followed, enterprises will reduce their risks of non- performance associated with transmissible diseases, instilling greater confidence in their trading and financing partners. The standard accompanies a white paper that reviews seven usually unanticipated risks emanating from COVID-19. The white paper explains how resilient responses can be built into a business to provide a platform for keeping existing trade partners or for pivoting to new products and markets. Both the white paper and this standard will be equally useful for enterprises, financing providers, trade, business support, and business development services everywhere.

International Trade Centre The International Trade Centre (ITC) is the joint agency of the World Trade Organisation and the United Nations for sustainable trade and enterprise development. ITC assists micro, small, and medium-sized enterprises in developing and transitioning economies to become competitive in global markets and contribute to sustainable economic development within the frameworks of the Aid-for-Trade agenda and the United Nations’ Sustainable Development Goals. www.intracen.org

COVID-19 SAFE SUPPLIER OPERATING STANDARD PART TWO

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Introduction

I n part one of this publication we examined how the COVID-19 pandemic highlighted major gaps in risk planning. The sudden, sustained, and broad impact of the pandemic had (and continues to have) a far- reaching effect on supply chains, businesses, jobs and people. The response from procurement has to be two-fold. First, from a risk management perspective, protecting supply chains with effective controls that are proven to be effective. Second, building on risk management, to rethink how we manage our suppliers and help them operate safe and resilient supply chains. We must not miss the opportunity to work collaboratively with our suppliers to create transparency, build stronger supply chains, and facilitate better working relationships. According to our research, over 50% of companies reported that problems occurred further down the supply chain than their first tier suppliers. And it wasn’t just logistics and distribution that was the problem – this accounted for

just under half of the reported issues. Technology was also revealed as a significant weakness; accuracy of data, and access to timely information to allow supplier collaboration as a response to the crisis was a major issue. The fact that the much needed management information was fragmented (due to distribution across several systems) further aggravated the situation. Our research findings and supporting data is published in our 2020 Global Research Report “Supplier Management at Speed”. In our opinion if the global economy is to recover and move forward, procurement and supply chain need to reinvent supplier relationships to be more collaborative at all levels. The Safe Supplier Operating Standard presented in this paper is intended to provide a catalyst – to provide a valuable and practical focal point for collaboration, and for procurement and supply chain to work with their suppliers to investigate and address the major risk areas identified in Part One – “Seven Unanticipated Risks and Supplier Management at Speed”.

Over 50% of companies report that problems occur further down the supply chain than their first tier suppliers.”

Further down the supply chain

58%

Logistics and distribution

48%

Further down the supply chain

36%

Other

10%

Where in the supply chain did the most problems occur? Source: State of Flux research

COVID-19 SAFE SUPPLIER OPERATING STANDARD PART TWO

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The Safe Supplier Operating Standard

State of Flux has developed The Safe Supplier Operating Standard for organisations to use, collaboratively, with their suppliers. By using the standard and working together to apply it, you will be helping your suppliers to apply measures to mitigate a range of risks that have resulted from the global pandemic.

Suppliers should meet each of the criteria within the standard and provide adequate evidence where necessary. Once the standard has been completed, we’re advocating that customers and suppliers should jointly review the document and draft an action plan for areas where suppliers are unable to meet the standard. In line with the insights explained in part one, the standard has been developed for the seven most commonly overlooked risk areas that have arisen due to the pandemic. These are:

Although this standard is designed to gauge your supplier’s health and viability, it is recommended that your suppliers, in turn, apply those same items and standards to their own suppliers. The nature of the COVID-19 pandemic is unprecedented, which is producing a rapidly evolving response from governments, medical research establishments, and agencies around the world. You should therefore use the standard for preliminary guidance purposes and to facilitate the discussion and application of safe working practices with your suppliers. Above all, and in all circumstances, you should continuously monitor and follow local government standards. The standard on the following pages is divided into three main sections, as shown in the graphic on page 6.

1. Health and availability of supplier workforce 2. Financial viability of the supplier

3. Organisational preparedness 4. Social distancing requirements 5. Port and airport closures (operating at skeleton operational levels) 6. Risk of spreading coronavirus via physical products 7. Demand shocks

COVID-19 SAFE SUPPLIER OPERATING STANDARD PART TWO

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The three main sections are:

1. A numbered operating statement which should be used as a description of good practice – the purpose of each operating statement is to guide a collaborative activity (between customer and supplier) to establish if measures are in place to deliver the statement, and where appropriate, work together to build and strengthen capability. 2. Observations – three columns where it can be recorded if evidence has been identified that demonstrates the operating statement is satisfied. The observations are a guide to establishing the level of capability and so

what collaborative capability development should take place. The levels of capability cover: i) Process: That a satisfactory documented process in place. ii) Enactment: That evidence exists that the process is being implemented. iii) Continuous Improvement: Where appropriate, that the process (and its enactment) is being effectively managed or kept up-to-date with evolving best practices. 3. Gap analysis and improvement opportunities – providing a focus for joint action planning and implementation.

As stated earlier, you should continuously monitor and apply local government standards and scientific advice when interpreting and working with each list because guidance and safe working practices are continually under review as the nature of the virus, its transmission, and how to manage it is better understood.

Operating Statement

Observations

Gap analysis and improvement opportunities

Ensuring the health and safety of your suppliers’ workforce

1.1 Screening for COVID-19 of employees and visitors takes place in accordance with current practices (e.g. rapid testing regime etc.).

Numbered operating statements provide the context

Opportunities to build capability (framed collaboratively)

Observations > Documented (i.e. process exists) > Implemented (i.e. enactment of the process) > Managed (i.e. continuous improvement)

COVID-19 SAFE SUPPLIER OPERATING STANDARD PART TWO

01. Health and availability of supplier workforce

STATE OF FLUX

Operating Statement

Observations

Gap analysis and improvement opportunities

Ensuring the health and safety of your suppliers’ workforce

1.1 Screening for COVID-19 of employees and visitors takes place in accordance with current practices (e.g. rapid testing regime etc.). 1.2 Employee health records are stored and managed properly. 1.3 Contingency plans are in place in the event that an employee contracts COVID-19. 1.4 Process for reporting symptoms or confirmed contraction of COVID-19 to a line manager. 1.5 Process for employees to report when a relative or other close contact contracts COVID-19 or has symptoms. 1.6 Employees are supplied with Personal Protective Equipment (PPE). 1.7 Before and after employees come to work, they are required to follow required precautionary procedures to reduce contamination. 1.8 There is a process for assigning extra sick days or COVID-19 days to employees. 1.9 Cleaning protocols are in place to assure that facilities provide a clean and safe environment. 1.10 Visitors to all of your sites and places of business are tracked. 1.11 There has been communication between your suppliers and their customers to establish new COVID-19 expectations for your relationship. 1.12 Updates and changes to procedures have been performed in a timely manner based on the state of the pandemic. 1.12.1 You have a protocol for communicating and enforcing these changes with your employees. 1.13 All interactions with customers are tracked for contact tracing purposes. 1.14 Additional Key Performance Indicators (KPIs) have been implemented in response to business operations as a result of COVID-19. 1.14.1 KPIs have been reviewed to ensure that they follow the guidelines outlined by the United Nations Human Rights Office of the High Commissioner. 1.14.2 The Service Level Agreements (SLAs) specified within your contracts have been reviewed and revised if appropriate since COVID-19. 1.15 Data relating to employee turnover and newly appointed roles are shared with customers.

COVID-19 SAFE SUPPLIER OPERATING STANDARD PART TWO

02. Financial viability of the supplier

STATE OF FLUX

Operating Statement

Observations

Gap analysis and improvement opportunities

Ensuring the health and safety of your suppliers’ workforce

2.1 As local laws and regulations change, based on the state of the pandemic, your records are updated to reflect these changes. 2.1.1 Operating procedures are adjusted in accordance with changing laws and regulations. 2.2 The long term effects of the pandemic, which have or will impact your organisation financially, have been evaluated (for example, loss of present or potential customers). 2.3 The amount of time that your organisation can sustain short-term, financial impacts due to the pandemic have been identified (for example, current customers have outstanding invoices). 2.4 Initiatives to reduce costs have been implemented to mitigate the effects of short-term and long-term financial impacts to your organisation. 2.5 Financial and customer contracts are stored digitally (for example, a computer database or online). 2.5.1 Documents are updated on a regular basis based on the state of the pandemic. 2.6 More lenient payment terms have been agreed upon between you and your customers. 2.7 More sustainable processes have been implemented where applicable. 2.8 Temporary payment agreements have been negotiated between you and your customers.

COVID-19 SAFE SUPPLIER OPERATING STANDARD PART TWO

03. Organisational preparedness

STATE OF FLUX

Operating Statement

Observations

Gap analysis and improvement opportunities

Ensuring the health and safety of your suppliers’ workforce

3.1 Revisions to your Code of Conduct and Responsibility Standards have been made to reflect the effects of the pandemic. 3.2 Contingency plans are frequently updated and reviewed. 3.2.1 Contingency plans include risk planning. 3.2.2 Separate plans have been made for the best and worst case scenarios for the pandemic. 3.2.3 Timelines for contingency plans are flexible and can be easily adjusted.

3.2.4 There are customised plans for each of your suppliers. 3.2.5 A digital platform is used to track contingency plans. 3.2.6 Contingency plans have been tested and are proven to be affective.

3.3 Employees have access to contingency plans and trained for the event that they are implemented. 3.4 You are using technology to manage customer relationships, performance, contracts, and risks.

COVID-19 SAFE SUPPLIER OPERATING STANDARD PART TWO

04. Social distancing requirements

STATE OF FLUX

Operating Statement

Observations

Gap analysis and improvement opportunities

Ensuring the health and safety of your suppliers’ workforce

4.1 There is a process in place which allows all organisational problems to be addressed from an acceptable distance/or virtually. 4.2 Onsite work hours for your employees are staggered. 4.3 Audits are carried out on a regular basis. 4.3.1 There is a questionnaire to capture necessary information before the audit is performed. 4.3.2 Virtual audits can be performed successfully. 4.3.3 There is a set list of documents required to perform the audit. 4.3.4 Documents are accessible to both parties. 4.4 Data and information on changes in supply and regulations affecting your facilities is updated based on the state of the pandemic.

COVID-19 SAFE SUPPLIER OPERATING STANDARD PART TWO

05. Port and airport closures

STATE OF FLUX

Operating Statement

Observations

Gap analysis and improvement opportunities

Ensuring the health and safety of your suppliers’ workforce

5.1 Points of disruption within your supply chain have been mapped out and the impact of each disruption has been identified. 5.2 Key points within your supply chain (for example, transportation, road haulage or ports) follows the local laws imposed on them, as those laws change with the state of the pandemic. 5.2.1 Laws imposed on key points of your supply chain are on file and stored somewhere that is readily accessible to individuals overseeing these areas. 5.3 Someone from your organisation has been assigned to locating transportation and logistics alternatives where the supply chain has been disrupted. 5.4 Treatment strategies are in place for key supply chain, logistics, and transport suppliers. 5.5 Each touchpoint in your supply chain has been examined in the past 2 months.

COVID-19 SAFE SUPPLIER OPERATING STANDARD PART TWO

06. Risk of spreading coronavirus via physical products

STATE OF FLUX

Operating Statement

Observations

Gap analysis and improvement opportunities

Ensuring the health and safety of your suppliers’ workforce

6.1 Procedures for the event of product contamination have been tested and implemented. 6.1.1 Procedures are reviewed and revised based on the state of the pandemic. 6.1.2 Procedures follow the ILO in “Pillar 3: Protecting workers in the workplace”. 6.1.3 Employees have access to contamination procedures and are trained for the event that they are implemented. 6.2 Procedures for the event of a product recall due to spreading the virus via product have been created and tested. 6.2.1 In the event of product recall, there are processes in place for your organisation and associated supply chains to safely handle and store contaminated product. 6.3 The SLAs specified within your contracts have been updated to include risk exposure since COVID-19. 6.4 Risk assessments addressing the effects of the pandemic on your organisation have been performed since COVID-19. 6.5 Employees have been briefed on the risks that your organisation is facing due to the pandemic. 6.6 The most critical risks to your organisation have been identified and have associated prevention plans. 6.7 The documentation of risks resulting from the pandemic are tracked and stored digitally.

COVID-19 SAFE SUPPLIER OPERATING STANDARD PART TWO

07. Demand shocks

STATE OF FLUX

Operating Statement

Observations

Gap analysis and improvement opportunities

Ensuring the health and safety of your suppliers’ workforce

7.1 The products or services which have limited availability that may impact your supply chain have been identified. 7.1.1 Supply chain policy and processes have been adjusted to accommodate limited availability of these products or services. 7.1.2 You have identified predictive trends or patterns that will identify products and services that are likely to have limited availability. 7.1.3 Alternative sources to acquire products and services have been identified. 7.2 Inventory/materials/resource levels have been revaluated to accommodate demand changes and shocks. 7.3 You have worked with your own suppliers to revise the amount of inventory/materials/resource that you require to continue operations. 7.3.1 Joint account plans for strategic suppliers have been created and implemented.

COVID-19 SAFE SUPPLIER OPERATING STANDARD PART TWO

STATE OF FLUX

Summary

A t State of Flux we believe that it is relationships, not contracts, that deliver customer of choice benefits. And, if ever there was a time when this belief was going to be tested it would be now – during the COVID-19 pandemic. With wide-scale disruption it was clear delays and shortages would occur and suppliers would need to prioritise customers. In addition to identifying the seven unanticipated risks, our research also identified problems were likely

to be further down the supply chain than the first tier supplier. Our standard, structured around the seven risks, has been developed to facilitate supply chain transparency through difficult times. By working together with your suppliers, and your suppliers’ suppliers, you will be able to guide and support the adoption of good practice to mitigate a range of risks that have resulted from the pandemic, and build stronger relationships in your supply chain.

About the authors

Alan Day is the Chairman and founder of State of Flux, and has led the company from strength to strength since 2004. He has over 20 years’ experience in driving thought leadership in procurement and supply chain best practice.

John Newton is Product Management Director and Head of Learning at State of Flux, and has over 20 years’ experience in major account management, professional services, and supply chain functions.

COVID-19 SAFE SUPPLIER OPERATING STANDARD PART TWO

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