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CTEM > SCEM Report > Case Studies: Advanced Micro Devices
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Advanced Micro Devices: Risk Management
Supply Base Environmental Performance Management
Other themes in this case study: For similar case studies:
- Environmental requirements at the purchasing phase Hewlett Packard
- Prequalification of suppliers  
- Inform suppliers of corporate environmental concerns  

THE CHALLENGE

Advanced Micro Devices, like every other firm, struggles with the question of how to balance its various needs and concerns. Faced with both business objectives and EHS goals, the company has sought a way to maximize the results of its efforts in a number of ways. The company�s approach to supplier relationships, in particular, was in need of a standard of measure to translate various goals into one language. That language became the parlance of risk management.

Staff in AMD�s EHS Department realized that supply-chain issues had the potential to seriously impact the company. It faced both business and environmental risks and the potential of being detrimentally affected by anything from an interruption of services to a liability claim. Recognition of these potential threats helped to bring the department�s direction in dealing with suppliers into clearer focus. The company found that limited resources make risk-based management sensible because it helps to prioritize needs. The issue for the company, therefore, was to turn the language of risk management into a policy that could enhance its supply-chain practices in the interests of all concerned.

THE SOLUTION

In dealing with its suppliers, AMD has

AMD�s Risk Management Hierarchy
adopted a risk-based methodology to balance EHS objectives with performance goals and budget requirements. Within this framework, it has prioritized types of suppliers according to potential risk and has launched a program to assess and work with suppliers in each risk class. Within each category, AMD is identifying appropriate tools to evaluate suppliers, work with them on improvements, and manage risk.
  • 1st tier - Waste management firms
  • 2nd tier - Chemical suppliers
  • 3rd tier - Construction contractors
  • 4th tier - Manufacturing subcontract support
  • 5th tier - Manufacturing equipment suppliers

The First Tier

AMD determined that its highest-risk suppliers were the companies it uses for transport and disposal of waste; so, its quest for risk management began with them. More than ten years ago, AMD began a program of on-site audits at the facilities of its waste suppliers with the intention of minimizing risk through an informed auditing process. Through these audits, AMD staff determine a recommendation status for waste suppliers. New suppliers are required to undergo a review prior to use by AMD, and existing suppliers are reviewed periodically. The frequency and intensity of the review process varies according to the potential risk to AMD, but all suppliers must be reviewed periodically to maintain approved-supplier status. Categorization of suppliers by risk within the waste bracket allows AMD to allocate its resources efficiently while minimizing liability.

Over time, the auditing process has evolved and become more refined. What began as an ambitious but resource-intensive attempt to perform frequent full audits has become a targeted analysis of those aspects of the suppliers� operations that are likely to impact AMD.

Today, the audit is a finely tuned analysis of a supplier on both environmental and financial grounds. "What we are looking for," reports Philip Trowbridge, coordinator of the auditing process, "is assurance that the firms are compliant and have the means to deal with any problems that might arise." AMD auditing staff approach the site with a previsit questionnaire filled out by the company containing basic background information. A detailed site inspection form that is specific to the type of facility being audited is used during the visit to record more detailed information on the major environmental program areas. On completion of the visit, the auditors write up the findings, outlining any significant issues. Significant issues are also addressed in a post-visit debriefing with the audited site. The results of the audits are stored and used as a reference in successive visits.

This documentation serves AMD in both practical and risk management perspectives. In addition, the company tries to do more than simply document and store the information revealed through the audit. When troublesome issues are raised, they are addressed through partnership interactions between AMD and the supplier. AMD provides feedback, discusses problems, and tries to provide insight into solutions. The goal of this process is always to resolve any problems in a manner that helps the supplier improve its operations and serve the interests of AMD.

Building strong relationships with

AMD Waste Audit Synopsis
suppliers is an obvious and positive result of the auditing process. If an audit finds problems, most suppliers react positively to AMD�s efforts to help with their resolution. For its part, AMD will go out of its way to work with suppliers that do not meet current expectations to avoid having to disrupt the supplier relationship. The company cites a particular example in which a transport company with which AMD had a long and positive relationship made a change in their operations. The change resulted in unsatisfactory performance and threatened an interruption of services. Rather than simply removing the supplier from their approved vendor list, AMD worked closely with the firm on both operations and maintenance issues to make vital changes and bring the level of service up to AMD�s expectations. 1

Program Goals:

  • Limit environmental risk
  • Limit financial risk
  • Demonstrate corporate environmental stewardship and prudence in waste management
  • Develop a comprehensive, approved primary and secondary vendor list including second- and third-tier facilities, as necessary.

Program Objectives:

  • Simple but complete documentation
  • Optimized AMD personnel time and cost
  • Establish a central record of audit information
  • Maintain current contracts with all waste and recycling vendors.

What were the benefits of this partnership? For AMD, "the benefits were somewhat intangible," says Trowbridge. "There is a comfort level that comes from working with a known entity and understanding that they are willing to improve their practices to help minimize our risk." For the supplier, the benefits were more clear. In addition to building a solid relationship with their customer, they improved their operations and were better able to provide high-quality service.

AMD reports a number of changes that have occurred recently regarding the waste audits, each of which represents a shift to a more finely tuned process. The first is that AMD has joined a consortium of companies that chooses suppliers to be assessed, brings in consultants, and performs third-party audits. The advantages of the consortium are numerous. By performing audits as a group, the participating companies take advantage of economies of scale, which results in greater efficiency and cost savings for AMD and the other members. The third party audit provides an external perspective on the auditing process that AMD developed. In addition, the consortium contributes significantly to the financial information that is gathered about each supplier.

Not all issues between partners end so happily. Faced with a supplier that is unresponsive to AMD�s need to receive high-quality, minimal-risk service, the company will remove them from the approved vendor list. The trade-off between maintaining close supplier relationships and practicing sound risk management can be difficult, but generally the two issues are aligned. It is the exceptions that force a decision between the two.

Following the third-party audit, AMD visits sites to confirm the work of the consultant and maintain supplier relationships. They have been pleased to find that much of their own process has been affirmed by the external involvement, a reassurance that the auditing process that they developed is relatively complete. 1

"We want to work with our suppliers to assure that they provide the level of service that we require."

�Philip Trowbridge, AMD

The aspect of the consortium that has been particularly helpful for AMD, however, has been determining the financial status of supplying firms. As noted earlier, the goal of the audit is not only to determine regulatory compliance but also to ensure the supplier�s financial stability to deal with any problems that might arise. This is a new area of emphasis for AMD, and the input of the consortium here has been particularly useful. Financial information, including Dun & Bradstreet rating and financial analysis results, are now a standard part of a supplier�s audit. This helps AMD achieve both its risk management goals and EHS objectives.

The Second Tier

Although AMD�s waste management supplier audit program has been in place for quite a while, they are actively expanding their risk management policy to other types of suppliers. The next category that they are addressing is chemical suppliers, who represent the next greatest potential risk issue. Generally, the premise of the relationship is the same. AMD gathers information that will identify and mitigate risk, strengthen supplier relationships, and meet their EHS directives. The tools for analysis, however, are different. AMD has developed and is currently implementing a general questionnaire for all suppliers and a second, more targeted questionnaire that is commodity focused�in this case, oriented to chemical suppliers.

Each questionnaire combines a request for a self-assessment of the supplier�s EHS policies and programs with questions requiring quantification. The questionnaires are a mixture of specific, multiple-choice questions and other questions requiring written answers and comments. The general questionnaire addresses the suppliers� EHS policies and procedures, reporting, staffing, documentation, and history.

The questionnaire is intended for chemical suppliers and targets concerns specific to that type of operation, honing in on such areas as emergency response and preparedness, distribution safety, pollution prevention, process safety, health and safety, and product stewardship. AMD incorporated key elements of the Chemical Manufacturers Association�s "Responsible Care tm Initiative" into the commodity-specific questionnaire. "We decided to leverage the chemical industry�s own self-assessment criteria to evaluate our chemical suppliers," said Trowbridge. 1

"Our values commit us to actions that enhance the quality of life and protect the health and safety of our employees and the environment of the communities in which we do business. To achieve this, we need the full cooperation of our suppliers in providing information on current environmental, health and safety management initiatives within your organization."

�Letter to Suppliers, AMD

What makes a good questionnaire? In addition to being thorough, asking the right questions, and giving respondents appropriate choices, ultimately the quality of a questionnaire lies in its use. Rich Weigand, EHS director at AMD, emphasizes that the use of the document is vital. "We really use our surveys," says Weigand, "We don�t just file them." When suppliers send surveys back to AMD (often by e-mail), the answers are reviewed and an assessment of the response is compiled. Staff teams identify strengths and weaknesses and communicate with suppliers about potential changes. Suppliers can be ranked numerically according to their answers. AMD�s Bangkok facilities use a strict threshold in their ranking system, and suppliers who fail to meet the cutoff are not approved as AMD suppliers. (Their survey incorporates not only EHS concerns, but elements such as quality and reliability.)

This raises the issue of the transferability of surveys between the United States and abroad and particularly to Asia. Operational procedures may be different abroad, but AMD has the long-term goal of strengthening their evaluation of European and Asian suppliers. An initial on-site review at AMD�s waste disposal providers in Asia is currently taking place. AMD intends to increase the frequency of these visits and the amount of follow-up with the supplier, despite the different supplier relationships in Asia. These practices may not be consistent with current trends among Asian companies, but AMD feels that the lessons concerning risk management learned in the United States can have positive application abroad.

Environmental, Health, and Safety (EHS) Performance Assessment:  Part 1

 

Date:

Supplier Name:

Supplier Address:

City, State, Country:

Prepared/Approved by (Name/Title):

Phone Number: E-mail Address:

Please complete the following questionnaire by highlighting or otherwise marking the most appropriate answer.

1.  Is your company or site certified according to EMAS, ISO 14001, or other EHS management system standard?

  1. No certification and not seeking certification.
  2. No sites certified, but short-term company plans include certification. (Please specify certification, timeline for completion, and sites pursuing.)
  3. Some sites are certified. (Please specify certification and date, as well as plans for certifying other sites.)
  4. All sites certified. (Please specify certification and dates.)

2.   Do all sites operate under a defined and documented management policy that describes a commitment to sound environment, health, and safety procedures?

  1. No documented policy incorporating EHS commitment.
  2. Management policy incorporating EHS commitments under development. (Please provide expected completion date:.)
  3. Management policy incorporating EHS commitments exists at some sites.
  4. All sites have management policy incorporating EHS commitments. (Please attach a copy with the returned survey.)

3.  Are personnel knowledgeable about the EHS management policies and procedures for their business?

  1. EHS management policies and procedures have not been communicated throughout the company.
  2. EHS management policies and procedures have been communicated to management and select personnel.
  3. EHS management policies and procedures have been communicated to all personnel throughout the company.
  4. EHS management policies and procedures are communicated on an annual basis to all personnel throughout the company.

4.  Has your company prepared a comprehensive corporate EHS report?

  1. No corporate EHS report exists.
  2. A corporate EHS report is being developed. EHS information is available on request.
  3. A comprehensive corporate EHS report is available. (Please provide a copy.)
  4. Comprehensive EHS reports are produced on an annual basis. (Please provide a copy of the most current report.)

5.  Do all manufacturing sites have dedicated, full-time EHS staff?

  1. No full-time EHS staff at any of the manufacturing sites.
  2. Staff with other responsibilities, a contractor EHS service, or some combination of the two handle EHS responsibilities.
  3. Dedicated, full-time EHS staff at some manufacturing sites.
  4. Dedicated full-time EHS personnel at all manufacturing sites with little or no corporate EHS support.
  5. Dedicated full-time EHS staff at all manufacturing sites supported by corporate EHS staff.

6.  Are routine environmental and safety inspections, audits, or assessments conducted at all manufacturing sites?

  1. No routine environmental and/or safety inspections, audits, or assessments are performed at manufacturing sites.
  2. Environmental and safety inspections, audits, or assessments are performed at manufacturing sites but with no regular frequency. (Please provide date of last audit/assessment.)
  3. Environmental and safety inspections, audits, or assessments are performed on a regular frequency (please provide frequency and date of last audit/assessment.)
  4. EHS audits or assessments are routinely performed with assigned responsibilities for corrective actions and follow-ups to resolution. (Please provide frequency and date of last audit/assessment.)

7.  Have there been any environmental or safety violations resulting in fines, penalties, compliance orders, or similar actions in the past 3 years?

  1. Violations resulting in a total amount of $1,000 or more (all sites combined) or one or more compliance orders within the past 3 years. (Please provide additional information.)
  2. Violations resulting in a total amount of less than $1,000 (all sites combined) or one compliance order within the past 3 years.
  3. No violations within the past 3 years at any company-owned or -operated site.

8.  Does the company participate in voluntary industrial, government, or community-based initiatives (Voluntary Protection Program (VPP), Responsible Care, WasteWise, ClimateWise, Green Lights, and others)?

  1. No participation in voluntary industrial, government, or community-based initiatives.
  2. Some participation in voluntary industrial, government, or community-based initiatives. (Please list.).
  3. Participating in numerous voluntary industrial, government, or community-based initiatives. (Please list.)

9.  Does your company monitor the EHS performance of its suppliers/contractors?

  1. No performance criteria are placed on suppliers/contractors.
  2. EHS performance criteria are being developed and documented.
  3. EHS performance criteria have been developed and selectively implemented.
  4. Criteria have been effectively implemented and enforced for all suppliers/contractors.

10.  Are EHS considerations a component of product/service design?

  1. No EHS considerations are incorporated into product or service design.
  2. EHS considerations are selectively incorporated into product/service design.
  3. EHS considerations are consistently incorporated into product/service design.
  4. Design for EHS concepts are fully integrated into product/service design.

11.  Has your company adopted and implemented global standards for EHS performance that are applicable to all manufacturing operations worldwide?

  1. No global EHS performance standards have been developed.
  2. Informal EHS performance standards have been developed and implemented worldwide.
  3. Global EHS performance standards have been adopted by the corporation, which is in the process of implementing them.
  4. Global EHS performance standards have been adopted and implemented.

12. On a scale from 1 to 10, with 10 being excellent, how would you rate your company�s EHS program?

13.  Describe here any components of your company�s EHS program that were not covered or adequately addressed by the above questions.

Comments:

 

 

Part of a Company-wide Effort

The specific programs highlighted above are just part of a company-wide effort that AMD is making to strengthen its supply chain management. Through its World Class Suppliers (WCS) Program, the company strives to build partnerships with participating suppliers that provide high-quality services.

AMD has defined expectations of suppliers and formed procurement teams to evaluate and work with suppliers. EHS staff are part of the teams, and EHS criteria form some of the considerations on which suppliers are judged. Not surprisingly, risk is a key component of the teams� assessments. Although the program is most applicable to the procurement of goods, it represents another effort toward supply chain and risk management. 1

WCS teams benchmark suppliers, conduct risk assessments, and recommend potential strategic relationships with suppliers for current and future needs.

�AMD Information on WCS Program

THE RESULTS

AMD�s work with both audits and questionnaires is ongoing, as are the company�s efforts to refine its risk management program. Ten years into the waste audit program, AMD notes that the attempt to monitor and work with waste suppliers in the interest of risk management has minimized the number of haulers and sites used. The auditing program has been successful in identifying waste service providers that pose unacceptably high risks to the company and has served the company�s interests in strengthening company-supplier relationships. In addition, by approaching the waste audits from a risk management perspective, the EHS department has been able to address both environmental and business concerns effectively.

The chemical supplier questionnaire is an expanding area of emphasis for AMD, and it does not yet have enough results from the program to report on specific successes. Its EHS department hopes, however, that the questionnaire will assist them in influencing the procurement process regarding decisions on chemical suppliers. The questionnaire has the potential to help identify important areas of concern, which, EHS hopes, will lead to higher standards. The second tier of the risk management program has the important benefit of being able to capitalize on the lessons learned from the first tier, which will ideally help speed refinement of the questionnaire.

Ultimately, the success of a risk management program is measured by a lack of problems. If AMD does not face liability issues or claims or interruption of services from its suppliers, the program has succeeded. Viewing success as the absence of certain events could prove frustrating, because most people like to work toward tangible results. AMD reports, however, that positive results do accompany the lack of problems. In the process of preventing mishaps, the company has achieved the peace of mind that comes from working proactively to prevent problems, being reassured that its supplier partnerships are contributing to a stronger and more stable business relationship, and, in the process, meeting the goals of EHS.

COMPANY INFORMATION

AMD supplies integrated circuits for the global, personal, and networked computer and communications markets. Founded in 1969, AMD reported revenues of $2.4 billion in 1997 and employs approximately 13,000 people worldwide. AMD has manufacturing facilities in the United States and Asia, and soon in Europe. Asian facilities include test and assembly facilities in Penang, Malaysia, Bangkok, Thailand, Singapore, and Suzhou, China.

CONTACT INFORMATION

The company�s web site can be accessed at http://www.amd.com.

Corporate headquarters are located at: Contacts:
Advanced Micro Devices, Inc. Rich Weigand
One AMD Place (Rich.Weigand@amd.com)
P.O. Box 3453 5204 E. Ben White M/S 582
Sunnyvale, CA 94088 USA Austin, TX 78741 USA
v
Philip Trowbridge
(Philip.Trowbridge@amd.com)
5204 E. Ben White M/S 582
Austin, TX 78741 USA
 

 

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