product responsibility spil & the customers service and supplier management.pdf · spil &...

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34 Customer Requirement Customer Satisfaction Quality Management System Management Responsibility Product Realization Resource Management Measurement, Analysis and Improvement Product Quality Policy SPIL perseveres in its corporate philosophy of “No compromise in quality”. To this end, the Company flourishes the corporate culture of quality through education and promotion of quality and a viable training system for quality. Everyone from top to bottom of SPIL takes quality as their top priority in production. Everyone must uphold the spirit of “do the job right at first time” and “control the process and identify the root causes of problem”. This spirit was followed up by the management cycle of PDCA (P: Plan, D: Do, C: Check, and A: Action) to strive continuous improvement. SPIL’s vision is to excel as world class leading provider of assembly and test. Quality is not only the most valuable assets but also the pride of SPIL. For many years, SPIL performed superbly in quality and have earned the recognition of many international giant firms. SPIL is cautious in every stage of production, from product design, research and development, production and shipment. SPIL strictly enforces quality control in every aspect of operations in order to achieve the goal of “customer satisfaction”. For satisfying the requirements of the customers in quality, SPIL insists that all products must be conformed to applicable legal rules, tests, safety standards, and international quality requirements. With the full efforts from all members of SPIL, SPIL has assumed leadership in the industry in the accreditation of different international quality management systems. For a long time, SPIL has earned the deep trust and strong support from the customers. In the future, SPIL will carry on this heritage of outstanding quality and make upgrade of product quality for the customers as our mission of continuous improvement and refinement. SPIL will appeal to “quality is the life of an enterprise” and make this a common belief of all SPIL members. We are approaching to the quality goal by “Continuous improvement in perpetuity” in the attitudes of accountability, professionalism, innovation, and transcending to eternity and fulfilling the quality commitment to “Customer Satisfaction”. Management Responsibility Under the leadership of senior managers, SPIL has established its short/mid/long-term business plans in accordance with the corporate philosophy and mission. By integrating the most concerned issues of customers e.g. quality, cost, delivery, customer service and development of new products, SPIL mapped out its annual work plans and objectives. They are managed and reviewed by senior managers and all performance indicators will be properly tracked. With continuous planning, doing, review and improvement, SPIL can ensure that the operations of its quality system will beyond their customers’ expectations. Resource Management In human resources management, SPIL has all the personnel engaged in the duties of quality, ESH and hazardous substances management, execution and validation, internal audit personnel receive proper training and necessary qualification. Through education and training, SPIL allows all employees to be familiarized with applicable legal rules, regulations, and their roles and responsibilities in their assigned duties for quality management system and thereby perform their duties in quality assurance properly. In the areas of equipment and facility affairs management, we will develop a qualified environment suitable for production and specifically work to reduce the potential risk to expose personnel in design, development and manufacturing in order to ensure the safety of all staffs and products. Product Responsibility Product Quality Campaign Company-wide quality management toward customer satisfaction Quality is no longer just a matter of narrowly defined product quality now, but rather quality in all aspects of production activities. For example: products, services, documents and operations etc…. Only by enhancing the overall awareness of quality towards every member of staff within the company. And only by doing this we could then achieve the goals of customer satisfaction and perpetual corporate development. Do it right at the first time Prevention always sounds better than treatment. Proper planning beforehand to ensure doing things right the first time. Helps to avoid complicated procedure of reworking and creating unnecessary waste. Control in process “Quality is visible while process is critical”. Therefore, effort has to be made to ensure that every step in the process is conforming to standards through proper control and review. In case of nonconformity, trace the root cause and take corrective/preventive action. This is the only way to achieve our goal. Continuous improvement The quest for excellence is the corporate culture of SPIL. We will make continuous improvement in every aspect of our activities, and will make effort constantly towards perfection.

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6 SPIL & the CustomersNo compromise in quality and be the champion in customer satisfaction

34

Customer Requirement

Customer Satisfaction

Quality Management

System

Managem

ent

Respo

nsibili

ty

Produ

ct Re

alizati

on

Resource

Management

Measurement,

Analysis and

Improvement

● Product Quality Policy

SPIL perseveres in its corporate philosophy of “No compromise in quality”. To this end, the Company flourishes the corporate culture of quality through education and promotion of quality and a viable training system for quality. Everyone from top to bottom of SPIL takes quality as their top priority in production. Everyone must uphold the spirit of “do the job right at first time” and “control the process and identify the root causes of problem”. This spirit was followed up by the management cycle of PDCA (P: Plan, D: Do, C: Check, and A: Action) to strive continuous improvement. SPIL’s vision is to excel as world class leading provider of assembly and test.

Quality is not only the most valuable assets but also the pride of SPIL. For many years, SPIL performed superbly in quality and have earned the recognition of many international giant firms. SPIL is cautious in every stage of production, from product design, research and development, production and shipment. SPIL strictly enforces quality control in every aspect of operations in order to achieve the goal of “customer satisfaction”.

For satisfying the requirements of the customers in quality, SPIL insists that all products must be conformed to applicable legal rules, tests, safety standards, and international quality requirements. With the full efforts from all members of SPIL, SPIL has assumed leadership in the industry in the accreditation of different international quality management systems. For a long time, SPIL has earned the deep trust and strong support from the customers. In the future, SPIL will carry on this heritage of outstanding quality and make upgrade of product quality for the customers as our mission of continuous improvement and refinement. SPIL will appeal to “quality is the life of an enterprise” and make this a common belief of all SPIL members. We are approaching to the quality goal by “Continuous improvement in perpetuity” in the attitudes of accountability, professionalism, innovation, and transcending to eternity and fulfilling the quality commitment to “Customer Satisfaction”.

● Management Responsibility

Under the leadership of senior managers, SPIL has established its short/mid/long-term business plans in accordance with the corporate philosophy and mission. By integrating the most concerned issues of customers e.g. quality, cost, delivery, customer service and development of new products, SPIL mapped out its annual work plans and objectives. They are managed and reviewed by senior managers and all performance indicators will be properly tracked. With continuous planning, doing, review and improvement, SPIL can ensure that the operations of its quality system will beyond their customers’ expectations.

● Resource Management

In human resources management, SPIL has all the personnel engaged in the duties of quality, ESH and hazardous substances management, execution and validation, internal audit personnel receive proper training and necessary qualification. Through education and training, SPIL allows all employees to be familiarized with applicable legal rules, regulations, and their roles and responsibilities in their assigned duties for quality management system and thereby perform their duties in quality assurance properly. In the areas of equipment and facility affairs management, we will develop a qualified environment suitable for production and specifically work to reduce the potential risk to expose personnel in design, development and manufacturing in order to ensure the safety of all staffs and products.

Product Responsibility

● Product Quality Campaign

Company-wide quality management toward customer satisfaction

Quality is no longer just a matter of narrowly defined product quality now, but rather quality in all aspects of production activities. For example: products, services, documents and operations etc…. Only by enhancing the overall awareness of quality towards every member of staff within the company. And only by doing this we could then achieve the goals of customer satisfaction and perpetual corporate development.

Do it right at the first time Prevention always sounds better than treatment. Proper planning beforehand to ensure doing things right the first time. Helps to avoid complicated procedure of reworking and creating unnecessary waste.

Control in process“Quality is visible while process is critical”. Therefore, effort has to be made to ensure that every step in the process is conforming to standards through proper control and review. In case of nonconformity, trace the root cause and take corrective/preventive action. This is the only way to achieve our goal.

Continuous improvement The quest for excellence is the corporate culture of SPIL. We will make continuous improvement in every aspect of our activities, and will make effort constantly towards perfection.

35 S P I L & t h e C u s t o m e r s

TS 16949 ISO 9001:2008

ISO 9001 : 2008

ISO 14001 : 2004

OHSAS 18001 : 2007ISO/TS 16949 : 2009

TL 9000-HR5.0/R4.5

1999

2002

2010

2003

2004

2005

2009

2012

ISO 14401 : 1996

ISO 9001 : 2000

ISO/TS1 6949 : 2002

OHSAS 18001 : 1999

● Product Realization

In the research and development for all new products and technologies, SPIL has followed the Advance Product Quality Planning or (APQP) in 5 major steps from mapping out the plan, product design and development, production process design and development, product and production process confirmation, production feedback and corrective actions. This planning procedure allows for early identification of quality problems and to respond with preventive action, and avoids unnecessary loss from making changes in the future. This procedure also aims at incurring the lowest costs for providing quality products in a timely manner, and in ensuring the effective quality management in sampling, pilot run production and mass production. After the development of the plan, we will proceed to the short, mid, and long-term capacity planning per the forecasting of production volume, market demand, technology advancement. After all, we will take into consideration the human resources situation, inventory of materials and equipment production capacity of the company in optimizing production scheduling, and will accomplish the mission of operation with the best quality production efficiency and on time delivery based on the requirements of the customers. For ensuring consistent quality along the entire production line, we will establish different standards and guidelines in operations for personnel in different functions and duties so that each and everyone can properly engage in the division of labor in production and assure the quality of production.

● Measurement, Analysis and Improvement

SPIL deeply believes that a positive partnership relation with the customers is critical for continued business development. As such, SPIL is oriented towards the customers and backed up by professional skills. SPIL commits to provide the best products and technologies, quality service and production service for the customers. At the same time, SPIL treasures the feedback from its customers as the foundation for continuous improvement. Through routine surveys and reviews of customer satisfaction, SPIL ensures all requirements of the customers are effectively responded to. Internally, SPIL ensures a stable production process through statistical process control. Finally, SPIL also conducts internal audits to ensure that product quality is effectively realized.

● Quality System Milestones

SPIL controls its quality very strictly. For upgrading the reliability of customers on SPIL’s products and for the realization of the corporate philosophy of the company, SPIL started to apply for accreditations in different international quality systems since 1993, in 2009, SPIL was accredited under ISO 9001:2008. In 2010, SPIL was accredited TS 16949:2009 standard. In 2012, SPIL introduced the international quality management system in the telecommunications industry TL 9000-H R5.0/R4.5. With a series of quality system improvements, SPIL will move forward in quality and service.

● Quality System Milestones

36

2012 Customer Satisfaction Survey Result (top 10 customers)

Year Customer Award

2012 Lantiq Best Supplier Award

2012 Marvell For Assembly & Final Test Support on Tavor-TD in Q3FY12

2012 ST Recognition For Excellent Support For New Product introductions

2012 MTK In recognition of outstanding contribution on 6 Billion Chips Shipment

2012 Huawei Year 2012 The Core Partner

2011 AMD Pathfinder Award

2011 LSI Strategic Partner

2011 Huawei 2011 Core Partner Convention0

20

40

60

80

100 %

%

%

%

%

%

43%

53%

78%

2010 2011 2012 Year

Percentage (%)

NO.1Customer Meeting˙Monthly meeting˙Quarterly meeting˙Analysis and improvement

Top Management Meeting˙Monthly meeting˙Trend review

Quality

Delivery Cost

Service Technology

Customer Ranking NO. 1

● Customer Satisfaction

For the realization of the customer-oriented management objective, SPIL holds monthly/quarterly meetings for reviewing the rating of customers in different areas (Quality, Cost, Delivery, Service, Technology) by customer needs. SPIL has set up a designated team for tracking the trends and changes in the indicators, and has urged relevant functional units to conduct an analysis of the variance from the desired goals with the proposed corrective action plans, and to keep track of the progress of corrective action. In addition, we will review and discuss the trends of customer ratings on a routine basis to ensure that customer needs and feedback have come to the full attention of top management and as reference for the performance management indicators. From these, SPIL makes ceaseless effort in upgrading its service quality and competitiveness to the eventual goal of customer satisfaction.

In 2011~2012, SPIL applied different tools for quality improvement, including the QC 7 Tools, Pareto chart, cause and effect diagram, to trace the root causes of quality nonconformity. SPIL also uses the “Problem Analysis and Solving” (8D Report) to formulate a corrective action plan and a preventive action plan, and feedback the problem to production and design for standardization and continued improvement. The results are highly recognized and trusted by the customers. The statistics on the ranking by the top 10 customers indicated that the ratio of ranking number one has increased from 43% in 2010 to 78% in 2012. In light of the increasing sophistication of the production process technologies for advanced products, we will reinforce our CIM (Computer integrated manufacturing) and MES (Manufacturing Execution system) to make production management more attuned to the requirements of new products and new technologies for upgrading quality and service.

Customer Management

37 S P I L & t h e C u s t o m e r s

Provide Optimum Solutions

Customer Feedback or Complaints

Review and

Improve

Understand the

Needs

Assessment B2BCustomer Web Customized Reports

• Production Information• Quality Report

• Production Information • Customer Information

• Production Information • Transaction Information

● Customer Communication Platform

SPIL makes the effort to provide a variety of channels for buttressing two-way interaction and communications to the extent to which customer relations can be augmented and customer loyalty can be maintained. In light of the global development of business, SPIL has established many business management locations worldwide to make zero time difference in service. SPIL also has established a designated team assigned to deal with customer needs, complaints (chart 1), and the customer information service platform (chart 2).

● Customer Complaints Processing System and Statistics of Complaints

Customer Complaints Procedure

For the effective processing of customer complaints and for the upgrading of customer satisfaction with product quality, SPIL has established an effective customer complaints procedure and a platform for the registration of customer complaints. The designated personnel for receiving and coordinating customer complaints will respond quickly and handle all quality problems brought up by the customers. This practice helps to upgrade the product quality standard and enhance the competitiveness of SPIL, and encourages the loyalty and trust of existing customers. In all, these efforts help to win more potential customers and increase revenues for SPIL.

Immediately after receiving customer complaints, SPIL will register the complaints in the system and notify related functional units to get ready to respond within 24 hours by proposing relevant plans to stop the problem and to ensure no nonconforming products will be shipped to the customers. At the same time, an investigation will be started through the 8D procedure, quality control, and related statistical methods to verify the root cause of the problem. SPIL will reply report to the customers with solid countermeasures within 5 days after the complaints were received. An effective solution will be proposed and designated bodies in quality assurance and quality control will keep track of the effectiveness of the proposed solution. Related engineering teams will document or systematize the optimal solution for the problem for horizontal implementation. This will help to eliminate the problem from the very origin and ensure no recurrence of the same problem.

For purpose of continued improvement and refinement of the quality level, SPIL gathers various sources of useful information, including the content of customer complaints for analysis and classification into different categories, and eventually turns the voice of complaints into driving force of continued quality improvement. This makes SPIL provides better quality and services to the very needs of the customers and more competitive in market.

● Customer Proprietary Information and Privacy Rights

SPIL always values the proprietary information and privacy of the customers, and keeps all technical information, business secrets, employee personal information, and other private or sensitive information about the company, customers and business partners confidential or top secret, and restricted for viewing. Managers at all levels are responsible for supervising their staff in confidentiality and non-disclosure to ensure that all confidential information between the customers, business partners and the company is properly protected. All in SPIL are obliged to keep all such information in strict confidence.

The management system governs confidentiality in two ways. Externally, SPIL enters into agreements on confidentiality and non-disclosure with customers, expressing the commitment of SPIL to the security of secretive information. Internally, SPIL has established a Document Control Center whereby all documents are subject to classification and released for viewing only on a need-to-know basis. The document system does not allow for file access to avoid the possible leaking of customer secretive information. Under the strict control system, there has been no violation of customer privacy or missing data of the customers and related complaints at SPIL in 2012.

Chart 1 The Professional Team Responds to Customer Needs and Complaints Chart 2 Customer Information Service Platform

38

● Number of Customer Complaints in 2010~2012

In general, all customer complaints over the last few quarters tended to concentrate on the problems of “Machine setup for manufacturing different product”, “New device phase-in” and “Production management”. To cope with these 3 problems, SPIL has instituted the “Standardization Project for Machine Setup”, “Introduction of Electronic Process to New Device Phase-In”, and “Computer Integration with Production Management” projects, respectively. The introduction of these improvement projects helped to address the problems from their root causes.

For example, the establishment of the standardized process of “Machine Setup Standardization” helps to narrow the discrepancy of work performance by different operators, which in turn resulted in quality nonconformity. The “Introduction of Electronic Process to New Device Phase-In” project echoed with the effort in environmental protection by creating a paperless environment. It also helped to introduce a complete risk control process to all newly introduced devices. The process itself can make all the data meet the requirements and allows the system to control the progress of the process. This will minimize the possibility of problems arising from the inadequacy of data due to the introduction of new devices into the production system. The “Computer Integration with Production Management” project allows for computerization of management and helps to save time need in tracing nonconformities thereby making the investigation of nonconformity more efficient.

With the never ending effort of all, SPIL ensures each customer complaint is settled efficiently and effectively with full satisfaction. SPIL has been making great effort to the best in the industry. In 2013, SPIL set the goal of reducing customer complaints by 30% as compared with 2012.

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2010 2011 2012

13 13 15

2523

2119

15

10

17 16

9

30

25

20

15

10

5

0

Number of custom

er complaints

Registration of Complaints

Propose for Remedial Action

Preliminary Response to the Customers

Investigation for the Root Cause

Reply with a Corrective Action Report

Confirmation of Action

Case Closed

Designated window for hearing and processing customer complaints

The complaints are registered in the customer complaint system

Propose remedial action within 24 hours and execute the action to prevent deterioration of the situation

SPIL must give preliminary reply to the customer within a stipulated span of time

Investigate the root cause of the problem with related QC tools (causal analysis, cause and effect diagram, DOE, why-why analysis, and so forth).

Select the best and permanent corrective action plan for the elimination of the root cause of the problem

Confirm and validate the results within 10 days after the introduction of the corrective action plan and the preventive action plan, and standardize all effective measures into relevant systems.

Case closed

Customer Complaints

Customer Complaints Procedure Notes: Number of customer complaints is calculated in case founded month.

SPIL & the Supply Chain

7Sustainable growth for win-win situation

40

● Vendor Management Committee

Vendors are important partners for business operation. In order to ensure the supply of materials from vendors can satisfy the needs of the company, SPIL has established the Vendor Management Committee. This committee supports the pursuit of corporate strategy and the annual business plan of the company and convenes monthly to discuss the quality, price, technological and other performance of the vendors.

The organization of SPIL Vendor Management Committee

● Vendor Distribution

SPIL treats its vendors as business partners and keeps long-term business cooperation relations with its counterparts at home and abroad for developing a perpetual and stable supply chain. Further in its concern for the quality, delivery and price of the vendors, SPIL also prompts its vendors to be concerned with environmental protection, improve safety and health, observe human rights, perform corporate social responsibility to its entirety, and practice the best in risk management and business continuity planning.

In recent years, SPIL started to make positive efforts in the localization of product and values in the economic development of vendors in Taiwan. The purpose is to cut down the cost of transportation, reduce carbon emission, diversify risks and provide support for better employment opportunities for the domestic industries. In 2012, SPIL increased its purchase of raw materials locally to 30.5% from 26% of the previous year. In the future, SPIL will continue its effort in supporting the flourishing of Taiwan enterprises and encouraging foreign firms to make direct investments in Taiwan for setting up facilities. These help to reduce the cost of production and risk on both sides, which in turn reinforce competitive advantages.

Besides improving the localization of production and upgrading quality, SPIL will work closely with vendors in 2013, and import other alternative materials from different manufacturing location to reduce single-source materials that may be interrupted by natural disasters or other forms of force majeure.

Areas of raw material supplier proportion

Sustainable Supply Chain Management

Support the pursuit of corporate strategy and the annual business plans

Present a list of competent vendors (Q.T.C.D.S) and make the rating system viable

Review of the quality system capability and performance of the vendors.

Review of the progress of projects jointly executed with the vendors and the attainment of goals.

The mission of the Vendor Management Committee

Chairman of Operation Supporting Div.

Purchas Team( Rating on vendors) Vendor Audit Team

Business Units and Product Engineering

Business Units and Product Engineering

Business Units and Product Engineering Procurement Division

Vendor Evaluation Vendor AuditVendor Quality Management

Introduction of new vendorsIntroduction of new materials Vendor Process Capability Upgrade

Introduction of substitute materials

Development TeamSubstitute Material

Evaluation Team

0

0.2% 0.1%

7.7% 8.5% 6.8%

10

11.5%20

26.0%

30

30.5%

2011

2012

40

50

54.5% 54.2%60

Japan Taiwan Korea China Other%

41 SPIL&the Supply Chain

● Supply Chain Risk Management

In order to reduce the interruption risk of supply-chain, SPIL require vendors to establish a business continuity plan and communicate to get the most appropriate preventive action. SPIL can take the most appropriate measures in its supply chain to avoid damage the operations and in turn protect the rights and privileges of the stakeholders.

SPIL has also designed relevant plans to reduce risk through the establishment of a database on the geographic locations of the places or origin so that it can make quick response to future possible natural disasters in those regions that may affect the supply of materials. Key materials consumed by SPIL included substrate, lead frame, compound, solder ball and Au/Alloy wire. Each has at least 2 subsitute manufacturers or manufacturing places to diversify the risk of materials shortage in the supply chain.

● Vendor Management Requirement

SPIL requires all vendors to duly abide by the laws, social norms and environmental schemes applicable in their respective home countries. The conditions of the vendors are subject to review at different levels contained in the procedure for the appointment of vendors at SPIL, including their basic company information, product information, key customers, financial position, responsibilities and obligations in purchasing, and related contracts, the investigation in green control procedures and commitment to green products, and the corporate social responsibility and environment, safety and health conditions. SPIL is an international packaging company with about one thousand vendors all over the world. SPIL is obliged to create a supply chain with environmental protection, human rights, safety, health and perpetual development jointly with the vendors.

Dimension Measures of vendor management

Economic Aspects

SPIL conducts routine evaluation and audit on the vendors for upgrading the overall competitiveness of the supply chain. Further to the inclusion of quality, price, service level, delivery and technology as items for evaluation, SPIL also provide necessary supervision of the vendors to ensure compliance with SPIL requirements so that it can maintain competitive power of the supply chain at the best condition.

EnvironmentalAspects

SPIL specifically complies with the international standards in the control of hazardous substances (e.g.: RoHS, REACH, etc.) in setting up its own standards for the control of hazardous substances. This standard is released to all vendors with the pronouncement of green purchase policy appealing to environmental protection. SPIL requires the vendors of materials supply to issue the “Letter of Guarantee of No Use of Hazardous Substances” in the materials and the presentation of test reports issued by a third party institution. These materials will be accepted as conforming materials only when passing the review of SPIL. In addition, SPIL reminds the vendors to provide an updated test report every year through its electronic platform in order to realize the control of green products. The purpose is to achieve the goal of 100% no use of banned substances. Vendors that have been accredited with the ISO-14001 system/the QC80000 system for the control of hazardous substances or the requirement of Hazardous Substance Free will be in the priority for acceptance as qualified vendors. SPIL encourages vendors that have not yet accredited with the aforementioned standards.

Social AspectsSPIL requires all vendors to duly observe the EICC code of conduct. With effect from 2011, SPIL required all vendors to issue the statements of undertaking of the EICC code of conduct and no use of conflict materials. Only those who have issued the undertaking in writing can be qualified as vendors. In addition, all vendors are required to sign the “Statement of Commitment to Business Integrity” as the guarantee for positive cooperative relation and fair competition between SPIL and the Vendors.

SingaporeMalaysia TaiwanMainland China Korea Japan

Lead Frame、Compound Lead Frame Substrate、Lead Frame、Compound、bonding Wire

Substrate、Lead Frame、Compound、solder Ball、Bonding Wire

Substrate、Lead Frame、Compound、Solder Ball、Bonding Wire

Substrate、Lead Frame、Compound、Solder Ball、Bonding Wire

Substrate Lead Frame Compound Solder Ball Au/Alloy wire

Taiwan、Japan、Korea、Mainland China、Malaysia

Taiwan、Japan、Korea、Mainland China、Singapore、Malaysia

Taiwan、Japan、Korea、Mainland China

Taiwan、Japan、Korea、Mainland China

Taiwan、Japan、Korea

Economic aspect Quality、price、delivery、technology、serviceISO 9001TS 16949

Environmental aspect Prohibited substances、hazardous substances

SONYSS00259RoHS/REACH

Social aspect Labor、health and safety、ethic code EICCNo use of conflict materials

Sustainable Vendor Management

42

● Audit on the Vendors

SPIL conducts annual audits on key vendors through questionnaire, on-site audit and supervision of specific issues on their quality system, environmental protection system, safety and health management, basic human rights and social norm and ethic code, and demands for immediate corrective action on any shortcomings detected within a reasonable time frame to meet the requirements of SPIL. In 2012, SPIL has audited 30 key vendors for supply of materials and the audit findings indicated compliance with the requirements of SPIL.

● Vendor Supervison

In the last few years, consumers worldwide have been increasingly aware that all enterprises are obliged to monitor and supervise their vendors. For this reason, SPIL makes great effort to intensify its supervision of its vendors in technical instruction, quality improvement and upgrade of productivity.

In the 1st and 2nd halves of 2013, SPIL continues the survey through questionnaires to require all vendors sign the statement of EICC code of conduct and no use of conflict metals, and has conducted on-site audit in 26 major vendors. If material nonconformity or significant change in production process is detected, SPIL will conduct special on-site audits at any time as needed to ensure that all products conform to SPIL requirements.

From 2012 onwards, SPIL responded to the international trend of a safe supply chain thereby making positive effort in supervising its vendors to be accredited as enterprises in good standing. In 2012, SPIL has successfully supervised and reviewed 328 firms as enterprises in good standing. In the future, SPIL will continue its effort in supervising new vendors towards the concept of a safe supply chain by self-assessment as enterprises in good standing before referring to SPIL for qualifying as a business partners in good standing.

● Conflict Materials Purchase Policy The Democratic Republic of Congo and her neighboring countries are rich in the deposits of gold (Au), tantalum (Ta), tungsten (W) and Tin (Sn). The abundance if these minerals triggered off the armed conflicts between the governments of these countries and the non-government armed groups in the struggle for the mastery of these minerals. Insurgencies and belligerencies were the order of the day. Furthermore, the armed groups there tended to coerce the people to work as miners and kidnapped the children to train as mercenaries to fight against the government forces. As such, minerals from these regions are called “conflict minerals”.

SPIL strongly supports the policy of the control of the international community in the control of the conflict minerals, and demands all vendors not to be involved in any of such conflict materials directly or indirectly in the materials supplied to SPIL. This requirement has been explicitly stated in the “Principles of Social and Environmental Responsibility Management of SPIL”, and incorporated as a condition in its procurement policy for sorting out qualified vendors in the purchase process. In addition, SPIL positively responds to the request of the customers to trace the origins of the metallic substances used in the products to ensure no conflict materials were supplied by the vendors and hence used in the products.

In 2012, SPIL has conducted a survey on all vendors supplying materials for production, including their production process, packing or products containing tin, gold, tungsten, and tantalum. There were 60 firms falling in this category. The findings from the survey indicated that they all declared no use of conflict minerals directly or indirectly. In the future, SPIL will require all existing and new vendors to duly observe the principle of no use of conflict materials. Materials of SPIL containing tin, gold, tantalum, and tungsten (100% conflict materials free)

Material Sn(Tin) Gold(Au) Ta(Tantalum) W(Tungsten)

Substrate ★ ★

Solder Ball ★

Solder Paste ★

Lead Frame ★

Au Wire ★

Alloy Wire ★

Target

Passive Components ★ ★

Electroplating Fluid ★ ★ ★

Grade Measures 2010 2011 2012

OutstandingConsider the presentation of Excellent Vendor Award and increase the volume of purchase orders

4 5 2

Above Average Consider to increase the volume of purchase orders 15 12 11

Satisfactory Maintaining normal transactions in business 25 22 17

Improvement Needed Demand for corrective action within stipulated period 1 0 0

Significant Deficiency Consider to stop placing purchase orders 0 0 0

Total 45 39 30

Supervision item Method of supervision Supervisor 2012

Technical instruction

1.Holds technical review conferences with specific vendors quarterly or semi-annually.2.Provide or share the blue prints of SPIL new products and newly developed technologies.

Engineering units 5

Quality improvement

1.Conduct special audits on vendors to ensure standardization in production and the control of the entire production process.

2.Feedback on IQC results and the status of use of the itemsQA and Engineering units 30

Upgrade of productivity

1.Provide SPIL annual requirement plan as reference for capacity planning of the vendors.2.Encourage to introduce automation in production

Procurement and QA units 5

43 SPIL&the Supply Chain

Photograph of the citation of excellent Vendor in 2011: the winner is verigy

● Vendor Performance Control SPIL conducts evaluation on the vendors monthly and quarterly on service, delivery, price, technical support, and quality. With the quarterly review of key indicators, SPIL demands all vendors to make continued improvement in conformity to the requirements of SPIL. In addition, SPIL schedules for visiting key vendors annually with reference to its procurement strategy, evaluation result of the vendors, and rating and conducts on-site audit. Vendors rated outstanding in the annual audits will be awarded with increased volume of purchase orders and citation. From 2013, SPIL will add ESH and human right management into vendor rating items, to make sustainable supply-chain management becoming better and approaching perfection.

Evaluation and Rating of Vendors:

◆ Targets of evaluation: Vendors supplying key materials (substrate, lead

frame, wiring materials, solder ball, cooling plates, silver glue, compound)

◆ Administered by: Vendor Management Committee

◆ Procedure:

◇ Collect the performance results of the vendors from related functional

units monthly and quarterly (QA of vendors, procurement, material management, and engineering).

◇ Based on vendor evaluation results to intend annual audit frequency and

plan. ˙Shipment Quality

˙Quality and process control

˙Vendor audit results and continous improvement

Price

Quality

˙Product cost and price competitiveness

˙Phase in new models

˙Capacity expansion planning

Technical support

˙Development of new technologies

˙Assistance in project development

˙Technology and market information Collection

Service/delivery

˙Lead-time and delivery on time

˙Production capacity flexibility

SPIL award excellent supplier honor metal every 2 years. 2011 awarded to 13 vendors, the 3rd quarter of 2013 expected to award to 11 vendors.

44

Science Park Route A

Science Park Route BScience Park Route B

During transportationBefore transportation After transportation

Conduct proper preliminary planning aimed at optimizing the dispatch of vehicles, minimizing travelling trips and the number of personnel involved in the transport to reduce cost and upgrade operation efficiency.

Introduce the best arrangement in the priority of shipment, and choose the shortest route with the lowest consumption of fuel to accomplish the mission of transport.

Audit idling vehicles, reducing carbon emissions to compliance with the Air Pollution Control Act.

GPS

● Proper Planning of the Optimal Routes for TransportAiming at green transportation, SPIL proceeds with the planning before, during, and after the transportation via the GPS for destination location and dispatch the vehicles for transportation.

● The Vision of Green LogisticsThe most prominent influence of logistics on the environment is the emission of exhaust from transportation vehicles and the use of resources. Conceived with its corporate social responsibility and mission, SPIL pro-actively makes an effort in environmental protection and green operation, recycle and reuse of materials, and the no frills packing in the supply chain in order to reduce the burden and impact on the environment.

Green Logistics

˙Shipment Quality

˙Quality and process control

˙Vendor audit results and continous improvement

Price

Quality

˙Product cost and price competitiveness

˙Phase in new models

˙Capacity expansion planning

Technical support

˙Development of new technologies

˙Assistance in project development

˙Technology and market information Collection

Service/delivery

˙Lead-time and delivery on time

˙Production capacity flexibility

45 SPIL&the Supply Chain

Note

●Optimize the Routes for Receiving / Delivery of GoodsIn early 2011, SPIL established the transit centers in northern Taiwan and map out the most reasonable networks and routes for delivery in enhancing the efficiency of cargo delivery and make delivery/receiving of goods standardized. These would help to reduce the cost of transportation and effectively eliminate traffic problems, which in turn contribute to environmental protection and social benefit. In addition, SPIL is engaged in joint effort with third party logistics service providers in the delivery of goods to all parts of Taiwan. This helps to reduce the repetitions of the dispatch of transport vehicles. As of the end of 2012, SPIL reduced the emission of CO2 by 3.6%, which is a contribution to the reduction of greenhouse gas emissions.

199.0192.0

Fuel consumption (KI) CO2 emission volume (Metric ton)

0

250

50

100

150

200

300

0

100

200

300

400

500

600

2011 2012

543.3524.2

emission volum

e (Metric ton)

Fuel consumption (KI)

1.Calculation

SPIL company truck

Northern Taiwan(Taipei/Taoyuan/Chungli)

Southern Taiwan(Tainan/Kaohsiung)

Third party logistics service providerSPIL Chang hua Facility

SPIL Hsinchu transit center

Hsinchu Science Park Hsinchu/Hukou

SPIL Taichung Facility

SPIL Taichung Facility

Before the change

After the change

SPIL company truck

Centralized logistics to transit center for receiving / delivery of goods in Hsinchu territory.

Joint venture with third party logistics service provider in the delivery of goods to all parts of Taiwan

Company trucks CO2 emission volume trend

1.2 CO2 emission volume = Fuel consumption x CO2 emission of diesel fuel (per liter)

(Source: Bureau of Energy, MOEA-Energy Industry Greenhouse Gas Information Center Web)2. CO2 emission of diesel fuel (per liter) is 2.73 kilogram.

1.1 Fuel consumption = Company trucks fuel consumption

46

● Green PackingIn the course of transportation, the packing materials for the goods are also essential in cost saving. Green packing, as compared with regular packing, can protect the goods from damage and also meets the requirement of the green standard. The design requirements of green packing for transportation: safe, reliable, environmental friendly and low cost. It also has to meet related requirements, which causes no damage to the environment and human health, can be recycled and reused, can be used repetitively and reduce pollution to the environment, thereby help the enterprise to save corporate resources.

● The Introduction of Conductive Black Box

The conductive black box was introduced in 2003 to replace carton boxes. At the initial stage, 3,645 boxes were introduced. In 2012, a budget for the introduction of 33,188 boxes was approved, which could help to reduce the use of 1,108,227 carton boxes.

Original packing (carton box) New packing (conductive black box)w

aste output volume (m

etric ton)

CO2 em

ission volume (m

etric ton)

0

50

100

150

200

250

300

0

10

20

30

40

50

60

Reduce the amount of waste cartons (metric ton) Reduce the CO2 emission volume (metric ton)

45.5

187.9

2010 2011 2012

187.1

212.8

45.351.5

The Introduction of Conductive Black Boxes: Reduction of CO2 Emission.

1.Calculation

(Source: SimaPro v7.2.4 database)2. CO2 emission of carton (per kilogram) is 0.274 kilogram.

1.1 Waste carton volume = consuming conductive black boxes x carton weights

1.2 CO2 emission volume = waste output x CO2 emission of carton (per kilogram)

Note

47 SPIL&the Supply Chain

● Increase the Recycling and Reuse Rate of Packing Materials

From 2010 onward, SPIL recycled all carton boxes and EPE foam pads for wafer packing and reused the materials, and has successfully recycled 161,037 sets of packing.

From 2010 onward, wafer cassette were recycled and reused. The total of 498,557 cassettes have been recycled and reused until 2012.

The launch of green logistics by SPIL in 2013:

1)Pro-actively launched the campaign of joint venture in delivery with the sharing

of transport vehicles in delivery to reduce the trips taken by the trucks and hence the emission of exhaust in the course of transportation.

2)Increase the recycling and reuse rate of packing materials. In 2012, the

recycling and reuse rate was approximately 80%. The target for 2013 will be 85%.

3)Purchase new types of environmental friendly vehicles for realizing the policy

of carbon emission reduction.

Recycling and reuse of packing materials Recycling and reuse of wafer cassettes

The introduction of conductive black boxes: reduction of CO2

emission.The recycling and reuse of wafer cassette, reduction of CO2 emission.

0

50

100

150

200

250

300

20

40

60

80

120

100

140

020112010 2012

117.9 120.1122.2

260.8 265.7 270.4

Reduce the amount of waste cartons (metric ton) Reduce the CO2 emission volume (metric ton)

emission volum

e (metric ton)

waste output volum

e (metric ton)

0 0

200

400

600

800

1200

1600

1400

1000

1600

200

400

600

800

1200

1400

1000

1,443.6 1,501.3 1,510.2

reduction of solid waste from wafer cassette output

20112010 2012

reduction of CO2 emission volume (metric ton)

732.8762.1

766.2

Year

emission volum

e (metric ton)

waste output volum

e (metric ton)

1.Calculation

2.Packing material = carton, foam board…etc

(Source: SimaPro v7.2.4 database)

3.CO2 emission of carton (per kilogram) is 0.242 kilogram ; CO2 emission of foam board (per kilogram) is 1.97 kilogram

1.1 Waste packing material volume = recycled packing material quantity x packing material weights

1.2 CO2 emission volume = waste output x CO2 emission of packing material (per kilogram)

Note

1.Calculation

2.2. CO2 emission of wafer cassette (per kilogram) is 1.97 kilogram.

(Source: SimaPro v7.2.4 database)

1.1 Waste wafer cassette volume = recycled quantity of wafer cassette x wafer cassette weights

1.2 CO2 emission volume = waste output x CO2 emission of wafer cassette (per kilogram)

Note

48

● Supply Chain Security Management Policy

Since the terror attack on the Twin Towers of the World Trade Center in New York City in the USA on September 11 2001, the US Department of Homeland Security has established the C-TPAT (Customs-Trade Partnership Against Terrorism). Likewise, most countries in the world followed the WCO SAFE (World Customs Organization SAFE framework) in setting up various security systems standardized by ISO which eventually set forth the ISO 28000 supply chain safety accreditation system.

SPIL started its safe supply chain management from customer demands to pro-active action in supporting the policy of the government. In 2012, SPIL introduced the AEO (Authorized Economic Operator) system orchestrated by the Directorate-General Customs of the Ministry of Finance of the ROC. The Company expected to be accredited under the ISO 28000 system. In SPIL, the supply chain security is now administered by its ESH function. Further to the making of related policies and systems, this function also administers supply chain security affairs, education and training, and the realization of the supply chain security system.

Supply Chain Security Management

● Supply Chain Security MeasuresThe scope of supply chain security: from the incoming of materials to facilities, production, packing and delivery to designated locations of customers including the security management of information on transactions with the customers, and the physical security of the facilities. SPIL has enforced strict control over all processes regarding the supply chain security management, and has introduced the AEO system on June 9, 2012 where by management items are subject to a division of labor in control with the establishment of a complete system. The ISO 28000 system was established in the period of December 2012 to January 2013 for establishing an even more viable management system. With the operation under the PDCA cycle, the supply chain security management is realized.

The scope of supply chain security

Adherence to Legal Regulations: Comply with the relevant local and foreign laws and regulations; implement the program control, to meet the supply chain’s security demand.

Establish Security System: Implementation of risk assessment, construction of internal operations and external supply chain security management system, to reduce potential risks.

Implementation of Security Management:Through the security training and advocacy to enhance staff awareness of self-management, to review and improve safety measures, and to encourage full participation, to show the corporate security culture.

Continuous Security Improvements: Through the risk audit and periodic review to improve continu-ously. Ensure the applicability and effectiveness of the management system to enhance the security performance of supply chain.

Facility Security Maintenance

Customer information maintenance

Incoming materials Production

Packing and

delivery

The scope of supply chain security: