Our businesses rely on complex and multi-layer global supply chains. For example, our direct suppliers often have many suppliers of their own who in turn rely on a large number of suppliers and this dependency continues through several tiers. Intermediaries such as distributors and wholesalers are also involved at various points in our chains.
We work to ensure integrity in our supply chains by managing many different legal, social, ethical and environmental risks. We also encourage those who work with us, directly or indirectly, to adopt sustainable business practices.
A typical electronics supply chain for Vodafone
Our direct suppliers have a very large number of their own suppliers, each of which can have their own complex supply chain. This diagram gives a simplified example of a multi-tiered electronics supply chain.
Suppliers help to provide us with network infrastructure and related services, and account for most of our external procurement spending. These are purchased from a small number of large suppliers with the investment, capability and scale required to invent, build, install and maintain network infrastructure equipment for us and our industry. The products we sell to customers (for example, mobile devices such as phones and tablets) account for the next most significant proportion of our external procurement spend. As a large multinational, we are also a significant purchaser of goods and services to support our general business and administrative functions such as marketing, travel, professional advisory services and catering.
Tier 1: direct suppliers
Vodafone buys products and services from approximately 10,800 suppliers. The majority of our spend is with large multinational companies supplying finished products. We have a direct contractual relationship and work closely with our Tier 1 suppliers to develop innovative new products and services, engage their leadership and assess how they assure compliance across their operations.
Tier 2: such as electronics manufacturers and sub-assemblers
Vodafone buys products and services from approximately 10,800 suppliers. The Electronics manufacturers and suppliers of electronic equipment have many suppliers of their own. We work with our Tier 1 suppliers to gain insights into their suppliers – Tier 2 companies – particularly where we believe a supplier is high risk.
Tier 3: such as component suppliers
Components are sourced from a significant number of suppliers to form parts of the products being manufactured.
Tier 4 +
These products are made from materials sourced from many different commodity and raw material suppliers who can be found many layers further down the supply chain.
Our supplier base is dynamic: the network of suppliers and sub-suppliers is changing continually. We work through industry initiatives to enhance transparency throughout the supply chain. Where we have influence on the design or manufacture of products, we seek to ensure that those products do not contain metals that fund conflict in the Democratic Republic of Congo. We provide further details of our approach to this issue in our statutory Conflict Minerals Report and Artisanal Cobalt Statement.
Levels of influence
The Vodafone Procurement Company (VPC) lead purchasing and supplier management. The VPC manages most of our spending with suppliers worldwide and supports the needs of our operating companies and group functions. This approach is designed to ensure objective and consistent supplier management across Vodafone’s businesses, and makes it easier to monitor and improve supplier performance.
We also have relationships with local suppliers that work on behalf of our local country businesses, particularly those involved in service-related procurement, such as merchandising or field operations. Our support for these local businesses has a positive impact on communities, providing employment in our local operating countries.
Monitoring our suppliers’ compliance with our rules can be challenging because of the complexity of our supply chain with many businesses in different locations at different tiers or levels within our supply chain. Therefore, the level of influence we can exert over businesses in our supply chain varies significantly. We usually have the greatest level of influence over our Tier 1 suppliers where we have direct contractual agreements. Many of these are substantial brands and businesses with proven processes in place to ensure high standards and sustainable business practices. Where, suppliers are dominant in the marketplace with a particular product or service, or where Vodafone is not a significant purchaser, we have less influence.
Our Code of Ethical Purchasing requires all our Tier 1 suppliers to ensure that their suppliers also have equivalent policies, processes and verification systems in place to manage risks and ensure compliance in their own supply chains. We collaborate with some of our Tier 1 suppliers to monitor their supplier bases directly and help them to improve standards. We also work with our peers and suppliers to share best practice and to strengthen compliance at the top tier of our supply chain.
We also have influence over the infrastructure suppliers who supply, install and maintain our networks, as well as over suppliers that provide branded products and services. We have less influence over Tier 2 and other sub-suppliers operating further down our supply chains where the risks of non-compliance are higher. We work with our direct suppliers to monitor and manage the risks at this level.