Supply Chain Management

In 2018, the group worked with 555 suppliers of which, in terms of turnover, the manufacturers make up 71% of the volumes purchased while the distributors accounted for the other 29%.

CAREL promotes the use of local suppliers. Specifically, roughly 69% of its suppliers are located in Europe, about 29% in Asia and 2% in America, the Middle East and Africa, based on its total purchases made in 2018. This allocation is due to the fact that the European and Chinese suppliers work with both EU and non-EU sites. The Carel Suzhou site centralises its purchases of materials from Chinese and Asian suppliers to then distribute them to all the group’s production sites.

CAREL selects its supplies based on principles of impartiality, competence, competitiveness and price, as well as transparency and excellence in accordance with the highest quality standards. The supply transactions comply with the law and regulations about labour, human rights, health and safety, the environment and anti-corruption ruling in the different countries and the principles set out in the Code of Ethics.

Each supplier is required to ensure compliance with fundamental human rights, the principles of equal treatment and
non-discrimination and prevention of child and forced labour.

CAREL screens its suppliers considering their technical skills, the quality of their goods/services, delivery times, prices and payment conditions and the purchase conditions in general. It requires high performance standards in terms of costs, quality, service and sustainability and, specifically, its suppliers’ quality management systems must be ISO 9001:2015 certified.

CAREL deems it fundamental to have ongoing dialogue with its suppliers and the exchange of good practices and skills as this is essential to obtain quality products and services within the requested timeframes.
This interaction takes different forms: visits by technical staff and quality control specialists and IT platforms (e.g., IUNGO, etc.) used to share information, including the management and update of orders.

A complex supply chain like that of CAREL’s, comprising national and international suppliers, requires constant supervision and updates given the significant intrinsic risks and the fact that CAREL relies heavily on its suppliers for components necessary for its production. In order to ensure availability of the materials for its production phases, to diversify risks and guarantee the necessary time to market, CAREL schedules its production carefully and provides that a growing part of its components are supplied by at least two suppliers.

Other risks relate to the protection of the environment, human rights and occupational health and safety.
Specifically, the group is exposed to the risk that its suppliers may not comply with its quality standards or the regulations about employment and healthcare, occupational health and safety or that they may deliver raw materials or components that are defective or do not comply with the established standards. Another risk is that the suppliers are unable to delivery the raw materials or components within the agreed time-frame for whatsoever reason (for example, but not limited to, the scarcity of the raw materials, financial difficulties, issues related to the quality of the raw materials, strikes) which could adversely affect CAREL’s production cycle and cause delays in deliveries to customers, with a negative effect on the group’s reputation.

The group’s current tools to manage these risks include supplier screening and initial checks of their structure by visits to check they meet the group’s standards. These checks include a technical inspection of the equipment and plant and a review of the work environment.