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Supplier Compliance Audit Network:
Outsourcing the AEO's Business
Partners’ Assessment Process
1
Agenda
• SCAN Program Overview
• Home Depot’s Journey
• SCAN Business Partner / Supplier Audits and Risk Based Methology
• Questions & Answers
2
SCAN Program Overview
3
Kendra Riley
Vice Chair - SCAN
-------------
Sr. Manager, Global Trade Services
The Home Depot
SCAN’s Mission
The Supplier Compliance Audit Network (SCAN) Association’s mission is to provide a systematic approach whereby mutually acceptable global compliance standards are achieved in reducing audit and operational redundancy for common supply chain stakeholders while maintaining confidentially.
4 www.scanassociation.com
The SCAN Journey
5 www.scanassociation.com
2013 2014 2015 2016
September
Interview
Program
Managers
January
1st SCAN
Program
Membership
Meeting
June
Appointed
Board of
Directors
July
Approved
Membership
Application,
Bylaws &
Anti-Trust
October
Established
as a Non-
Profit
Organization
March
Contracted
BSI as
Program
Manager
April
Finalized
Audit
Checklist,
Pre-
Assessments
& Auditor
Guidelines
May
Launched
Audit Pilot
Program
June
Finalized
Corrective &
Preventative
Action
Program
July
First SCAN
Audits
Completed
March
Completed
More Than
1,000 Audits
May
Recognized
by US
Customs as
an Industry
Best Practice
Chairman: David Blackorby, VP Global Security – Walmart
Vice Chair: Kendra Riley, Global Trade Senior Manager, The Home Depot
Secretary: Jennifer Kissner, Global Trade Compliance – The Coleman Company Inc.
Treasurer: Patricia Cerisano, Global Customs Trade Manager - Husky Injection Molding Systems
Security Audit Committee: Ken McElroy, Global Trade Risk Manager - The Home Depot
Membership Committee: Theodore Miles, Senior Director, Global Security – Walmart
Service Provider Committee: Lisa Schulte, Senior Group Manager, Target
On-Boarding Committee: Yvette Estrada, Trade Compliance, J.C. Penney
Public Relations Committee: Eric Travis, Customs Trade & Compliance Manager, Celgene
Members at Large: Tom Austin, Manager – Countermeasures Programs, The Boeing Company
Board and Committee Leaders
6 www.scanassociation.com
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Current Members Companies
• Accessory Exchange
• Boeing
• Canadian Tire Company
• Celgene Corporation
• Coleman Company
• Home Depot
• Husky Injection Moldings
• J.C. Penney
• Rawlings
• Sealock
• Target
• Walmart Stores
Companies Interested / In Application Process
• Ace Hardware
• Ann Inc.
• American Eagle
• American River Group
• Avnet
• Ball Bounce & Sport
• Barco
• Cabela's
• Carter’s
• Wolverine
• Continental Automotive
• Costco
• CVS Pharmacy
• DHL
• Dillards
• Federal Express
• Game Stop
• GAP
• Genetech
• Hasbro
• Kimberly Clark
• Kohls
• Lowes
• Macy’s
• Meijer
• Mercedes-Benz U.S.
• Microsoft
• Mylan
• Northrup Grumman
• Pure Fishing
SCAN Association Membership
• Colombia Sports
• Jarden
• Renfro
• Barnes & Noble
www.scanassociation.com
Why SCAN?
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The Challenge:
• Our Supplier’s are claiming
‘Audit Fatigue’
• There is no industry accepted
Supply Chain Security standard
• Varying Degrees of Security
Compliance Requirements and
inconsistent Corrective Action
Plans
• Lack of collaboration and sharing
of Best Practices
• Strained Company Resources for
both the supplier and importer
“We compete on the shelves in our stores, but collectively as SCAN Members,
we have a common goal to secure the global supply chain”
Current Audit Model
SCAN Network
SCAN Audit Model
Many to One Approach One to Many Approach
Program Management and Oversight
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SCAN Board of Directors
and Management
Committees Audit Providers
SCAN
Member
A
SCAN
Member
B
SCAN
Member
C
Audit
& CAPA
Approved Audit
Provider
Approved Audit
Provider Approved Audit
Provider
Approved Audit
Provider
SCAN Audit Repository
Unique Audit
Report
Unique Audit
Report
Unique Audit
Report
Supplier A Supplier B Supplier C
5-Step Risk Modeling and Indexing Intelligence Infused
Audit Volumes and Projections • Audits Ordered to Date: 2,417 • Audits assigned in 46 countries • Suppliers in SCAN Audit Repository: 5,924 • 2016 Audit Projections: 5,000-6,000
SCAN Ordered Audits
Audit Results and 2016 Projections
2016 Q1 & Q2 Audit Projections
Act
ual
www.scanassociation.com
73
162
64
174
283
205
111
203 249
503
390
145 143
270
550
482 475
203
249
503
390
Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16
Forecast
Actual
Distribution for Audits Assigned - 46 countries
Country Distribution for
Audits Assigned
Country Audits % of Grand Total China 1691 69.56%
India 178 7.32%
Bangladesh 71 2.92%
Mexico 59 2.43%
Vietnam 39 1.60%
Indonesia 36 1.48%
Taiwan 32 1.32%
Pakistan 31 1.28%
United States of America 27 1.11% Cambodia 26 1.07%
Chile 23 0.95%
Sri Lanka 19 0.78%
Egypt 17 0.70%
Israel 16 0.66%
Philippines 14 0.58%
Malaysia 13 0.53%
Turkey 13 0.53%
Brazil 11 0.45%
Thailand 11 0.45% Jordan 10 0.41%
Italy 9 0.37%
Peru 9 0.37%
Guatemala 8 0.33%
France 7 0.29%
Spain 7 0.29%
Morocco 6 0.25%
Romania 6 0.25%
Argentina 4 0.16%
Haiti 4 0.16%
South Africa 4 0.16% Costa Rica 3 0.12%
Portugal 3 0.12%
South Korea 3 0.12%
United Kingdom 3 0.12%
Belgium 2 0.08%
Canada 2 0.08%
Colombia 2 0.08%
Germany 2 0.08%
Lesotho 2 0.08%
Norway 2 0.08%
Denmark 1 0.04%
GHANA 1 0.04%
Hungary 1 0.04%
IVORY COAST 1 0.04%
Lithuania 1 0.04%
Uruguay 1 0.04%
China, 70%
India, 7%
Bangladesh, 3%
Mexico, 2%
Vietnam, 2%
The Home Depot
A Journey with SCAN
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Kendra Riley
Vice Chair - SCAN
-------------
Sr. Manager, Global Trade Services
The Home Depot
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World’s Largest Home Improvement Specialty Retailer
$ 88B USD in Sales
2300 Stores in US Canada and Mexico
385K Orange Apron Employee’s
118K Forty Foot Equivalent Ocean Imports in 2015
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July 2014 Led Audit
Questionnaire
Standardization
Sept 2015 Socialized SCAN
to
THD suppliers
and factories with
an enthusiastic
response
Late June
2014 Signed on for “1”
year and joined
Board of
Directors
2014 2015
May 2015 Launched 25
Audits in SCAN
Pilot
July 2015 Internal
socialization with
Merchants and
Global
Operations
Teams
June 2014 Internal THD
Discussions
‘Low Risk
Potential for
High Reward”
Oct 2015 Began
scheduling
“re-audits” in
SCAN
2016
Jan 2016 Added
517 active
factories into
SCAN
April 2016 30 THD
factories
identified as
shared with
another
SCAN
member
May 2016 100%
of “re-audits”
to be
performed in
SCAN
THD’s Journey
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The Home Depot Story
3600 Factories Active and Seasonal
600-800 Annual audits = full time management
Supply Chain Security = “Doing the Right” Thing” is a core value
Frequent Internal and External Pressure to accept shared audits
Audit costs are a direct impact to costs of goods sold
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Why has SCAN Succeeded?
Dedicated & Engaged Board of Directors and Membership
Shared Factory Anonymity
Each Member Determines Pass/ Fail Criteria
Affordable - Membership is based on Audits conducted or utilized
Centralized Program administration and CAPA follow up
Easy access to audit results with a search function
17
SCAN Benefits
8,000+ factories in SCAN SCM Database 517 THD factories
$100K +/- USD in savings upon complete implementation
30 Shared Factories Identified
9 shared audits = $9K +/- USD audit costs avoided 2016
$31K +/- USD in potential audit cost avoidance
More shared factories = More benefits
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“SCAN provides access to a cost effective supply chain security program to even the smallest of importers”
Identified SCAN membership as a “best practice” for CTPAT partners
Program Agnostic Approach
With SCAN, Home Depot has one business partner audit program across the entire WCO Safe Framework
Audit Criteria, C-TPAT
5 Step Risk Assessment &
Holistic Program Risk Modelling
Dan Purtell
SVP, GRC Solutions
BSI
19
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• SCAN Audit Criteria is program-agnostic approach
and incorporates Minimum Security Criteria from
AEO, C-TPAT, PIP and other Safe Framework
programs
• SCAN Security Requirements are prescriptive in
nature and are mainly established or evolving Best
Practice countermeasures
• Ensures audit consistency and level sets
suppliers on security requirements
• SCAN has expanded the security focus of an audit:
• C-TPAT Importer Criteria contains ~ 79 areas of
compliance
• SCAN Criteria contains 148 assessed areas of
compliance in 82 questions
• Auditors must capture key 16 components ‘evidence
of implementation’ during the audit:
• Multiple mandatory photographs of Building,
Access Controls, Shipping/Receiving, Seals,
Security Systems
• Copies of C-TPAT Procedure for C-TPAT
security categories
SCAN Security Criteria
10
54
18
Critical Must Should
Question Weighting
• SCAN has created Corrective Action Criteria for every
Critical and Must questions
• CAPA’s are assigned on average within 1.5 days from
Audit Completion
– BSI has Supply Chain Security experts assigning,
reviewing and closing every CAPA
• Supplier has 60 days to complete CAPA and provide
strong evidence of implementation
– Note: Many CAPA’s kicked back for incompleteness or
noncompliance of SCAN criteria
• If supplier is non-responsive, CAPA’s are elevated to
the SCAN audit sponsor
• Every Audit, Photograph, Supporting Document, CAPA,
Evidence of Implementation is maintained on the
supplier for life
Corrective and Preventative
Action
Quick SCAN CAPA Statstics: • Average of 5.15 CAPA’s per audit
• To date, over 6,293 CAPA’s closed
• 18.5% + of CAPA’s rejected as insufficient
• Less than 9% of suppliers have no CAPA’s
X X
X
Geographical Risk Weighting
SCAN Risk Builder
SCAN’s
10+2 Risk
Variables
Weighting post
Assessment
40%
Country Risk Variables
60%
SCAN Compliance
Score
Certification
Risk Dilutor
Scan Risk
Index
SCAN Risk Weighting of Supplier Audits
• Anti-Western
Terrorism (50%)
• Un-manifested
Cargo
Introduction
(25%)
• Cargo Disruption
(25%)
What are the
geographical Risk(s)? How did the Supplier
Score? Are they Certified? Assign their Risk Index
Entity: • Supplier
• By Audit Company
Assessment Content • Compliance Category
• Question
• Audits in CAPA
• Audits Scheduled
• Audits Complete
• C-TPAT Certified
Suppliers
Geographical • By Country
• By SCREEN Risk
SCAN Dashboard Drill Down Capabilities and Analytics
Questions and Answers
25
Contact Details
26
Dan Purtell
Senior Vice President
BSI Supply Chain Solutions
(480) 612 5503
Email: [email protected]
Kendra Riley
Vice Chair - SCAN Association
Sr. Manager, Global Trade Services
The Home Depot
(770) 384 2007
Email: [email protected]
