Sustainability 2011/12

Supply Chain

Materials Management

We are working with our suppliers to increase their use of sustainable materials and eliminate undesirable materials. While Ford has already made great strides in using more sustainable materials in our products (as discussed in the Sustainable Materials section), we can expand these efforts by systematically working with our suppliers on these issues. Toward that end, we are developing Commodity Business Plans and other materials purchasing strategies that require the use of sustainable materials. For example, we developed a purchasing strategy for recycled plastic resins and Commodity Business Plans for relevant parts that require the use of post-consumer recycled plastics.

More and more countries are adopting regulations governing the use of materials, including chemicals and substances of concern. In 2007, for example, the European Union adopted REACH (Registration, Evaluation, Authorisation and Restriction of CHemical substances). The goal of the REACH legislation is to improve the protection of human health and the environment through better and earlier identification of the intrinsic properties of chemical substances. All manufacturers operating in Europe must provide information on the properties and safe handling of their chemical substances to a central database in Helsinki. In addition, the legislation calls for the progressive substitution of the most dangerous chemicals, once suitable alternatives have been identified. REACH provisions will be phased in over 11 years.

Turkey and Romania adopted their own versions of REACH in 2009; China adopted its own version in October 2010. South Korea and Japan will also soon adopt REACH-like regulations to manage their chemicals. In the U.S., the Senate and House both proposed bills in 2010 to overhaul the Toxic Substances Control Act, which was first enacted in 1976. The state of California is in the process of drafting a “green chemistry” law, scheduled to be finalized in 2012, which will require manufacturers of selected products sold in California to identify safer alternatives to a potential range of 3,000 chemicals known to be harmful to public health and the environment. The California law will also phase in a requirement that manufacturers whose products contain listed chemicals must replace them with safer alternatives or explain to state regulators why the chemicals of concern are needed and warn consumers or undertake steps to mitigate the public’s exposure to those substances. Ford’s Global Materials Management Program will provide an effective and efficient way for Ford to be a leader among auto companies in managing materials and meeting these types of global chemical and environmental regulations.

The recent focus on conflict minerals and critical raw materials issues has injected an additional concern into materials management: Not only is it important to consider the properties of the materials we use, but also their origin and the conditions under which they were extracted and processed. These issues are discussed in the section on sustainable raw materials.

Materials Management Processes and Tools

Even before REACH-type regulations were adopted, Ford was managing materials across the vehicle lifecycle as part of our Global Materials Management Program. We use a set of processes and tools to assist us in communicating materials- and substance-related requirements to suppliers, and in tracking the materials and substances that they use in the parts they manufacture. These tools include the Global Material Approval Process (GMAP), which handles all materials processed in Ford’s plants; Global Material Integration and Reporting (GMIR), a materials tracking tool for our engineers and suppliers; and the International Material Data System (IMDS), a reporting system used by multiple automakers.

The IMDS was developed by seven auto manufacturers (including Ford) in 1997 to handle the tracking, review and reporting of all vehicle components and service parts from all suppliers. Thirty-two companies globally are now official members. The IMDS is a web-based system used internationally by suppliers to report on the substances and materials contained in parts for our vehicles. Ford has cooperated with other automakers to align reporting requirements for restricted substances and to analyze the data provided. This helps us to identify substances and materials of concern and target them for elimination. It is also a tool Ford is beginning to leverage to identify risks associated with conflict minerals and other raw materials.

To further help our suppliers manage their materials and substance data, Ford developed and launched GMIR. Through the GMIR Supplier Portal, Ford lists all the parts that require reporting by suppliers; we also list suppliers’ reporting and certification status. Thus the system allows every supplier to monitor its reporting status and understand which parts are required to be reported. This two-way communication helps clarify a very complex materials management task and saves time and money for Ford and our suppliers.

Ford vehicle programs use the IMDS to report 100 percent of materials and all the required substance data to fulfill or comply with all governmental regulations and requirements, including end-of-life vehicle directives in the EU, South Korea and Japan, and REACH in the EU.

For nondimensional materials (such as paint and adhesive) that are shipped directly to Ford plants, Ford uses GMAP – an electronic tool aimed at simplifying the global materials approval process. The GMAP process allows suppliers to use electronic transactions to submit their Material Safety Data Sheets and composition data. Internally, Ford approvers communicate their decisions of approval or rejection electronically. This new process saves time and ensures better-quality data for complying with government regulations and Ford policies.

In response to the REACH legislation, Ford has developed additional systems to track and manage the use of chemicals. And, Ford has taken a leadership position in implementing REACH. For example, Ford has been a key member of the Global REACH Automotive Task Force and was the first chair of this task force. Ford is also the chair of the North American Automotive Industry Action Group’s REACH Advisory Committee.

Ford has made great progress in complying with REACH. For example, we created a REACH manager position and formed a REACH task force to manage relevant activities, including conducting REACH inventory studies and generating all required reports for customers and consumers. In addition, we have worked extensively with our suppliers to ensure their compliance with REACH thus far. Ford’s existing Global Materials Management Program has made it much easier for Ford and our suppliers to comply with these new requirements. Using these systems, for example, Ford conducted all of the “Substances of Very High Concern” inventory studies required by REACH and generated all required reports for consumers and governmental agencies. In addition, we have added all of the “Substances of Very High Concern” to our own Restricted Substances Management Standard; this ensures that we will get the necessary reporting from our suppliers and ensures Ford will comply with REACH.