Supplier Training on:
CVS Factory Audit
Program
May 22, 2012
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AGENDA
Welcome & Introduction to CVS Management Team
Steve Genereux, CVS Director of Imports
Why the Factory Audit Program
Greg Froton, Vice President of General Merchandise
Topics
Presentation of Factory Audit Program:
• Quality Program: Good Manufacturing Practices Program (GMP)
• Quality Program: Supplier Qualification Program (SQP)
• Social Program: Workplace Conditions Assessment (WCA)
• Security Program: Global Security Verification (GSV)
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CVS Representatives
Name
Job Title
Greg Froton
Vice President of General Merchandise
Steve Genereux
Director of Imports
Celeste Lester
Director of Quality Assurance
Jack Anderson
Store Brands QA Audit Manager
Susan Albatal
Manager of Factory Compliance
Denyse Hemond
Factory Compliance Specialist
Leslie Wiesman
Onsite Social & Security Audit Manager, Intertek
Vince Cucinella
Onsite Quality Audit Manager, Intertek
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Who We Are
• Greg Froton
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CVS Values
At CVS, our set of Values defines our company and serve as a guide for
how we conduct business everyday.
•
Innovation: Demonstrate openness, curiosity and creativity in the pursuit of
delivering excellence
•
Collaboration: Sharing and partnering with people to explore and create
things that we could not do on our own
•
Caring: Treating people with respect and compassion so that they feel
valued and appreciated
•
•
Integrity: Delivering on our promises: doing what we say and what is right
Accountability: Taking personal ownership for our actions and their results
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CVS Integrity and Business
Practices
•
CVS Pharmacy believes complying with the law and promoting high
ethical standards are the responsibility shared by everyone in the
organization
•
The Company is committed to creating a work environment that
promotes integrity, ethics and compliance with applicable international,
federal and state laws and regulations at all levels of interactions with
vendors, customers, and clients
•
We have processes in place to help prevent, detect and resolve
instances of potential unethical behavior and compliance
•
Key components in place include a Code of Conduct as well as training
regarding the Foreign Corrupt Practices Act (FCPA)
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Supplier Ethics Policy
•
We seek suppliers that share our values, our promise to deliver
outstanding service and our commitment to uphold the highest standard
and level of integrity
•
CVS suppliers are required to adhere to our company’s standards,
supplier requirements, and business processes which are published on
www.cvssuppliers.com and communicated in our Supplier Ethics Policy
•
We believe that our social accountability standards are consistent with
standards set by the International Labor Organization and our security
standards reflect guidelines based on the Customs-Trade Partnership
Against Terrorism (C-TPAT) program
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Working with Our Suppliers
CVS launched an enhanced factory audit program January 2012 to help
ensure our import suppliers and global supply chain partners are in
compliance with CVS Caremark Supplier Ethics Policy
Suppliers are subject to audits that encompass good manufacturing
processes, social, environmental, and security audits to help ensure:
•
We provide our customers with safe, quality products that are
produced in a socially responsible manner
•
We uphold our commitment to protecting our brand and helping
people on their path to better health
•
Suppliers comply and improve processes to adhere to social, legal,
and ethical standards, including maintaining our commitment to
Human Rights.
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Intertek Profile
World’s largest provider for Social Compliance Audits monitoring the well being of
100+ million workers annually in over 40,000 factories
Worldwide expertise with 500+ Corporate Social Responsibility (CSR) Auditors
servicing brands in 45 countries
Countries
Laboratories
Offices
Employees
Floated in London
Stock Exchange
May 2002
110
440
630
26.000+
2002
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What type of audit does
my factory need?
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Audit Matrix
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CVS GMP/SQP
Audit Program
• Jack Anderson
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Overview of Program
• Why Audit & Background
• Program Intent
• Applicability
• Process (New & Existing Suppliers)
Overview of Program
• Results and Expectations
• Audit Flowchart
• Cost
• Role of Intertek
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Why Audit & Background
•
FDA Registration
– Required by Section 510(b) of Food Drug and Cosmetic Act
(FD&CA)
•
Audit Program History
– Dates back to the mid 90’s
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Program Intent
• Primarily designed to mitigate risk to CVS
– Ensure supplier compliance where the products being supplied
are regulated by the FDA
– In the long run it force suppliers to develop robust quality systems
which improve product quality
– Reduces the opportunity for public scrutiny in regards to issues
and concerns voiced by customers/consumers
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Applicability
–
Suppliers of any Store Brand item carried regularly as POG items
•
•
•
•
•
–
CVS
Gold Emblem
Just the Basics
Essence of Beauty
Caliber
Suppliers of Import items that are regulated by the FDA
•
•
•
•
•
Foods (Halloween, Christmas, Valentines)
Drugs
Dietary supplements
Medical devices
Cosmetics
–
Suppliers of non-FDA regulated, strategic seasonal buys (as identified by CVS
buyer)
–
Seasonal , non-FDA regulated, non-strategic - NO audit required
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Audit Categories and Acronyms
• GMP-Good Manufacturing Practices
• SQP- Supplier Qualification Program
• RCP/RQP-Retail Certification/Qualification Program
• SQF-Safe Quality Foods
• BRC-British Retail Consortium
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Process
• New Suppliers/Items
– Recognizable 3rd party audit report from within last 6 months (if involved
in a certification program, from within last year)
– Food Supplier –must be SQF Level 3 or BRC certified
– Once approved, move into audit program
• Existing Suppliers
– In most cases audited annually by CVS audit partner (Intertek) until audit
performance history has been established
– Frequency of audits is dependant on:
• Category of product
• History of Audit Performance
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Results, Expectations and Follow-up
• Audit ratings
– High Performer (85-100)
– Medium/Moderate Performer (71-84)
– Low Performer (51-70)
– Very Low Performer (0-50)
• Corrective and Preventive Actions/Continual Improvement Plan (CAPA
or CIP)
– Plans sent to Intertek for review
– May result in desk or on-site audit to verify implementation
• Successive Low or Very Low audit ratings will necessitate alternative
sourcing of items
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Typical Audit Flow
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Audit Costs
•Borne by Supplier
– On-site auditor time
– Report writing
– Follow-up activities
– Travel Expenditures
•Existing Suppliers
– CVS deducts audit costs from open invoices
•New Suppliers
– Intertek invoices supplier directly – no CVS involvement
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Why Intertek
• Common evaluation tool to assess all suppliers
• Ability to analyze results
(same questions housed in common
platform)
• Lower audit costs vs. historical rates
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CVS WCA/GSV
Audit Program
• Susan Albatal
• Leslie Wiesman
• Denyse Hemond
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Workplace
Conditions
Assessment
A solution for improving
workplace conditions in
global supply chains
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Why CVS Chose
The WCA
Aligned with industry leading standards and best practices
Single methodology, widely adopted & recognized
•
•
•
Consistency
Less business disruptions
Reduced Costs (shared audits = saved $)
From Policemen to Partner Approach
ƒ
ƒ
ƒ
Not a Pass/Fail: Measurable Results
Performance benchmarks increase supplier motivation and drive continuous
improvement
Better data analysis capabilities = improves communication with stakeholders
helps prioritize corrective action and supports supplier partner selection
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Industry Benchmarking
“How competitive are you as a supplier?”
BENCHMARKING:
• Workplace Performance
Index (Score and Grade)
• Global supplier average
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• Country and Industry
average
• 4500 plus participating
facility (as of Dec 2011)
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What are your
Strengths & Risks?
Country Strengths & Risk
•Strengths
Top 20% performance in China
suppliers
•Risks
Bottom 20% performance in
China suppliers
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WCA Clients
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Toys “R” us, Braiform, Dollar
General, Tommy Hilfiger, Fruit of
the Loom, AstraZeneca Haggar,
Tractor Supply, WC Bradley,
ALDO, BASF, Shopper Drug
Mart, Chanel, Saint Gobain,
Sportscraft, Shangri-La, Aritzia,
Siemens, CVS
tĐĐĞƉƚĞĚ LJ͗
Arcadia, Sainsbury’,
Cadbury (UK), Diageo,
Tesco, Hasbro, JC Penney,
Disney, Loblaw,
MeadWestvaco, Escada, Deutsche
Telekom
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Assessment Criteria
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What to Prepare in
Advance of the Social
Audit (WCA)
•
Refer to handout for a list of items
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Assessment Day
Opening Meeting
Document
Review
Site Tour
Audit
Preparation
Employee Interviews
Closing Meeting
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Audit Process
Timeline
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Audit Process Timeline
PO is
cut
(90 days
prior to
FDD)
EDI PO
data sent to
Intertek
(89 days prior to
FDD)
If 3rd party audit is
not acceptable,
then audit is to be
scheduled
Factory
makes
payment
(At 85 days prior to FDD
(At 75 days
prior to FDD)
If 3rd party
audit is
acceptable,
then…
(At 85 days prior to
FDD)
Factory
Receives
Supplier
Letter for
booking
© Intertek 2011, All Rights Reserved.
Factory registers with
Intertek on Intertek’s
website within 5 days
of PO cut date
Submit in any 3rd party
audit reports – Intertek
will review reports
for acceptance
(85 days prior to FDD)
(At 85 days prior to FDD)
Audit
is
performed
(At 60 days
prior to FDD)
Results Issued If factory
passes with
51% or higher
then
(At 50 days prior to
FDD)
Results Issued - If factory receives
less than 51%, the factory must
correct failures, be re-audited,
receive 51% or higher to receive a
Supplier Letter
(At 50 days prior to FDD to re-audit –
Possible slip of FDD)
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Online Factory Registration
Important! – You must enter in all CVS Item numbers produced at the factory at the time
of registration (including display contents).
Pre-PO Audits – In the event that the CVS Item number is not known at the time of
booking, please enter “Pre-PO” into the CVS Item # field.
Enter in Factory
Information
Enter in CVS
Items #
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Previous Audit Reports
Audit reports submitted to Intertek must meet the following criteria:
1.) The report/certificate must be valid (not expired) at the time of the
Factory Delivery Date (FDD)
2.) Report must be one of the following types selected by CVS:
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Scheduling a New Audit
Facilities that do not have a previous audit report to submit, must proceed
with scheduling a new WCA assessment with Intertek. Please note that
pre-payment needs be obtained by Intertek before the assessment date
Scheduling Delays – Note that any supplier scheduling delays may affect
shipment as the audit must occur well before the shipment date (FDD).
No Passing Audit = No Shipment
No Exceptions
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Zero Tolerance
Certain compliance issues are considered ‘Zero Tolerance’ issues by CVS and will display as
a red flag on the report.
CVS is notified within 24 hrs. Upon review of circumstances surrounding the ZT CVS decides
how to proceed regarding the business relationship with the factory
Zero Tolerance items for WCA
!
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FORCED/
PRISON LABOR
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•
Blocked or locked emergency exits /doors/stairways
•
There is not evidence of the factory bribing the auditing team in any manner
© Intertek 2011, All Rights Reserved.
ABUSE AND
HARRASSMENT
LIFE
THREATENING
CONDITIONS
BRIBERY
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Zero Tolerance
and WCA Grades 50 or below
IMPORTANT!
•. If there are zero tolerance findings or a WCA score of 50 or below, CVS will
communicate directly with the supplier following the assessment regarding next
steps
• In the event that CVS decides to continue with the Purchase Order, a follow-up
assessment must be performed before goods are shipped to CVS.
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Audit Results and
Next Steps…
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After the Audit
(CIR, Audit Report and Supplier Letter)
•Auditors issue the Continuous Improvement Report (CIR) with audit findings to facility on
site at closing meeting.
Upon assessment completion, the supplier and factory will receive the following documents
from Intertek 5 days after the audit.
1.) Assessment Report
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2.) Facility Laws Report
3.) Supplier Letter
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Supplier Letter
• Facilities that score above 50%
on their WCA report are eligible to
ship goods to CVS.
• The Supplier letter contains the
following pieces of important
information for Yusen Booking:
•
•
1.) The Assessment #
2.) Facility ID
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Follow-Up Matrix
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Follow-up Matrix
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© Intertek 2011, All Rights Reserved.
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Audit Payment
Four Important Notes Regarding Audit Payment:
1. Payment should be received by Intertek BEFORE the assessment occurs
2. Payment should be received from billed party within 5 DAYS of receiving the
Payment Advice slip (Proforma Invoice)
3. NEW! If Payment is not received by the END of the audit day, CVS will be
charged by Intertek for the audit price
4. Starting July 1st, any audit fees charged to CVS will be charged back to the
supplier with a $1000 penalty fee on top of the cost of the audit.
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Global
Security
Verification
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GSV is based on C-TPAT Foreign
Manufacturer’s Security Criteria
Minimum Requirements
Government Recognition
• GSV was reviewed and recognized by US Customs Border Protection
(CBP) as an approved 3rd party service provider under the China validation
pilot
•
•
Program is calibrated annually with CBP senior officials
Participation in GSV can also be used to demonstrate your performance
for other importers under PIP (Canada) and AEO (European) requirements.
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List of Requirements for Facilities,
And Their Contractors and Business
Partners
Assessment takes one day and covers:
•
•
•
•
•
•
Business Partner Requirements
Container and Trailer Security Requirements
Physical Access Controls
Personnel, Procedural, and Physical Security Requirements
Information Technology Security Requirements
Security Training and Threat Awareness Requirements
100% of foreign facilities - outside of China will be required to go through the GSV
GSV Record of Participation - issued for facilities performing 76% and above, valid for
one year
CVS accepts valid and current GSV Record of Participation – facility will be exempt
from new GSV audit for life of the certificate (1 yr) or until the next renewal cycle
Below 76% - requires the facility to be re-audit within 6 months of the initial GSV
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WCA & GSV
Results YTD 2012
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WCA Results
WCA – 234 Total Initial Assessments (New and Accepted Reports)
(CSR – 55 Additional Non-WCA Assessment Reports
were accepted - not included in chart)
Must
improve
10 %
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WCA Results
China: Benchmarking Comparison (222 Assessments)
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GSV Results
GSV – 35 Total Initial Assessments (New and Accepted Reports)
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CVSSuppliers.com
1.
CVS has established Factory Audit Programs in three areas:
Quality, Social, and Security
2.
These programs are designed to ascertain supply chain risk and
benchmark supplier performance
3.
The goal of these programs is to reduce risk to CVS and establish
a partnership with suppliers that demonstrate a commitment to
meeting CVS Values
4.
For more information, please refer to our CVS Import Supplier
Guide at the web address above. This comprehensive manual
will provide you with overviews of all CVS import programs.
© Intertek 2011, All Rights Reserved.
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