Supply chain management
- GRI 3-3: Management of material topic
Edwards’ approach to managing our supply chain focuses on product lifecycle, design, innovation, stewardship and supporting our Aspiration of transforming patient lives with breakthrough medical technologies.
At Edwards, supply chain management includes efforts to monitor and assess the quality and safety of products, track the social and environmental performance of Edwards’ suppliers, fortify the availability of our life-saving products through supply chain resiliency, and maintain responsible procurement practices.
We rely on close partnerships with our suppliers to create innovative therapies for patients. Since the performance of our suppliers directly impacts both our ability to innovate and the quality of our products, we maintain a robust supplier engagement program. Our Global Supply Chain and Product Quality organizations collaborate with our key suppliers to manage risk, develop improvement action plans and ensure product quality. The Global Supply Chain organization identified Edwards’ top 15 strategic direct materials suppliers with whom we engage on a more regular basis. We host an annual Partner Forum with key suppliers to examine performance from the previous year, present areas for improvement, review the Edwards Third Party Code of Conduct and provide updates on our business.
Due to the nature of our products and how they are used, it is imperative that we closely monitor the quality of the components we receive from our suppliers. We have developed trusted partnerships with our suppliers over many years and to limit risk exposure, we avoid adding new direct material suppliers unless necessary. In the limited cases where we add direct suppliers, we follow a rigorous onboarding process that includes extensive due diligence. We evaluate new suppliers by collecting information through in-person audits, publicly available information and supplier questionnaires. We use the same approach with our existing suppliers if quality, performance, cost or business risk changes over time and we need to reassess the business relationship.
We continue to communicate and gather input on our Supplier Code through our Quarterly Business Reviews (QBR) to clearly establish expectations for suppliers working with Edwards. We share the Supplier Code with all new direct and indirect suppliers, who must acknowledge the requirements as a prerequisite for establishing a business relationship with Edwards. Existing direct and indirect suppliers receive the Supplier Code during contract renegotiations and as part of the ongoing Quality Agreement engagement. The Supplier Code incorporates the components of our Credo, emphasizes our commitment to business integrity and includes the following topics:
- Labor and employment, including fair working conditions and the prohibition of child labor and human trafficking;
- Data privacy and confidentiality; and
- Environment, including energy use, emissions, water and waste.
In addition to the Supplier Code, we engage with our suppliers through multiple other channels. For example, through the global Part Qualification Process, we collaborate with suppliers to design for manufacturability, as well as improve product quality and reduce cost. Also, we leverage our global Supplier Capacity Framework to help suppliers plan their capacity for growth. We conduct QBRs with our strategic and key suppliers to review performance, work on business continuity planning and align key initiatives. These touchpoints keep our suppliers engaged and informed of our goals and expectations.
Direct suppliers by region
- JAPAC (Japan, Asia-Pacific)
- EMEA (Europe, Middle East, Africa)
- Latin Americas
Assessing and monitoring supply chain risk
Before partnering with any new suppliers, Edwards conducts a comprehensive evaluation of the business and leads a thorough onboarding process. For new direct materials suppliers, the Global Supply Chain team conducts an on-site assessment covering facilities, quality control systems and Quality System audits. Our assessment of quality control systems includes technical, quality and business strategy assessments that we conduct before initiating a partnership with a supplier. Our Quality System audits are designed and administered through our Quality Management System and management controls to support our ISO certifications and notified body registrations. Once a supplier is approved, we periodically conduct follow-up audits and performance reviews to monitor risk and promote continual adherence to our standards.
When onboarding a new supplier, we gather qualitative and quantitative data through our Due Diligence Questionnaire (DDQ). Due to the nature of the relationship, we require all regulated suppliers and high-spend non-regulated suppliers to complete both the DDQ and an additional evaluation before they can work with Edwards. The DDQ is composed of questions in four main topic areas: environmental considerations, public disclosures, employee health and safety and other areas of interest based on the supplier type. We accept or deny suppliers based on their DDQ responses.
There are four questions in the DDQ that must be answered favorably for the respondent to be considered an Edwards supplier. A negative response on these criteria will result in an automatic removal of the company from consideration. These criteria include:
- Environment: The supplier must comply with all product-related hazardous materials and trade regulations, such as WEEE, RoHS, REACH, TSCA, BPA, DEHP, ODS and others.
- Employment and safety: The supplier must comply with all employment laws and regulations and industry employment practices as applicable to the countries in which they operate.
- Human rights:Per our Supplier Code, Edwards respects the human rights of all workers and does not tolerate any form of human rights or labor abuses in our supply chain. The supplier must comply with the U.K. Modern Day Slavery regulations, U.S. Human Trafficking regulations, and the California Transparency in Supply Chains Act.
- Child labor: The supplier must not employ children under 16 years of age in job tasks that may have higher safety and health risks than for adults.
We also have a Global Supply Risk Management and Governance program, led by our SVP of Quality Systems Engineering, which includes a global risk assessment to evaluate potential obstacles we may face in accessing key components for our products. The obstacles we consider include risks due to location, material content, country regulations and sole source risks. We prefer doing business in countries with higher ethical standards and protections for information technology and intellectual property, reducing the likelihood that sustainability violations will impact our business and stakeholders. Approximately 80% of Edwards’ annual spending comes from lower-risk locations, which we define based on the supplier improvements implemented, costs, localization and complexity of supply.
The Edwards Quality team assigns each of our suppliers – direct regulated and indirect regulated – a risk level of 1, 2 or 3. Risk level 1 represents the highest risk and is used to flag the type of suppliers providing components that could impact patient safety or product performance. Every risk level 1 supplier must undergo a specific review and receive approval through our Quality System before Edwards conducts any business with them.
We audit our existing suppliers in accordance with the requirements of our internal Quality System. We prioritize the assessment of our highest-risk suppliers to support our focus on patient safety and ensure Edwards’ compliance with applicable regulations for medical device production. Suppliers may receive approval upon the successful completion of an audit, full compliance with a corrective action plan, or as a result of a part qualification process. We use a decision tree to help guide decision-making based on the potential impact of supplied materials on patient safety and product performance, assigning the risk level per part number sourced. We have similar decision trees for determining which service suppliers require qualification and monitoring based on the requirements of our Quality Management System.
We consider the environmental and social impacts of our suppliers. For existing products, we are prioritizing sustainability initiatives in the areas of packaging, labeling, and chemicals. We include the following criteria in our processes for selecting suppliers and managing ongoing relationships:
- Manufacturing efficiency: Across all sites, we continue to focus on improved process capability, yield improvement and scrap reduction, allowing for a smaller amount of product disposal on an annualized basis.
- Patient safety and impact: We upgraded our new product development process and simplified our Quality System, allowing for continued focus on product improvement and building quality at the source during product development and launch.
- Lean manufacturing efforts: We identify manufacturing lines each year for reconfiguration to determine where and how we can eliminate waste and increase outputs with the same number of people, reducing environmental impact.
- Product design and innovation: We build collaborative, long-term relationships with strategic and key suppliers who support our vision for patient-focused innovation. We engage with these close partners during the early stages of product development.
- Measuring and managing Scope 3 emissions We are beginning to work with our existing and potential suppliers to encourage the collection of and active reduction of their own Scope 1 emissions.
We aim to build long-term relationships with our suppliers, and we encourage the alignment of supplier efforts with Edwards’ ESG priorities. We require all suppliers to operate in alignment with ethical and responsible business practices. We adhere to the California Transparency in Supply Chains Act of 2010 by working to prevent human trafficking and slavery in our own operations and throughout our supply chain. Our Responsible Supply Chain Policy outlines our expectations for suppliers, which span the following topics:
- Fair labor practices, including the U.S. Uyghur Forced Labor Prevention Act (UFLPA)
- Environmental responsibility
- Workplace health and safety
- Ethical practices
- Protection of human rights
- Socially responsible behavior
- Legal compliance
The Global Supply Chain and Product Quality teams use several standard key performance indicators (KPIs) to measure the performance of each of our preferred suppliers. The KPIs we track include:
- ISO13485:2016 certification (where applicable)
- Completion of comprehensive Quality audit with no critical findings
- Lot acceptance rates – the number of products received in a "lot" of material that is considered to meet our incoming quality requirements divided by the total number of lots received over a period of time.
- Scar-free rates – the number of "lots" received from a supplier that do not require a direct written follow-up requiring a supplier’s response.
- Good delivery and service levels
To read more about Edwards’ approach to supplier assessments, please refer to the Environment, Health and Safety section of this report.
Supplier partnerships for innovation
We engage our suppliers through our Value Engineering capability to incorporate their insights into the design and manufacturing of new Edwards products. In this way, we enable our research and development teams to collaborate with suppliers throughout the product development process.
Edwards recently began working with the Healthcare Industry Resiliency Collaborative (HIRC), a non-profit healthcare supply chain trade association focused on addressing the topic of supply chain continuity. Through this group, we can share our approach to supply chain management and have the opportunity to impact industry standards for operational efficiency and effectiveness.
At Edwards, the corporate Product Stewardship Group works to achieve and sustain compliance with material requirements so patients may continue to benefit from our products around the world. The Product Stewardship Group is part of the Global Supply Chain and Quality function, and includes representatives dedicated to each part of Edwards’ business. During the product development and change control processes, members of the Product Stewardship Group assess the materials used in our products to identify and ensure compliance with existing environmental and human health regulations. In addition, the group monitors updates related to new or revised material compliance topics relevant to Edwards. We extend this focus on material compliance upstream in our supply chain, where we require supplier compliance with all applicable materials regulations.
Edwards seeks to reduce environmental and human health impacts from our use of materials in products, including in connection with the sourcing of 3TG (tantalum, tin/tungsten and gold). We have a Conflict Minerals Policy Statement and accompanying program to identify the use of 3TGs in our value chain and to obtain information from our direct and indirect suppliers to assess the source of these materials. We publish an annual Conflict Minerals Report to disclose our findings. Each year, we work with a third-party consultant to analyze the data provided by suppliers and identify strategies to improve our conflict minerals program. Please see our Responsible Supply Chain page for Edwards’ supply chain policy statements and most recent Conflict Minerals Report.
Supply chain management
In 2022, we continued to focus on strengthening our procurement practices. We prioritized engagement with our top strategic and key suppliers, who account for a significant percentage of our direct material spend. We completed technical assessments to help identify gaps in the capabilities and maturity of our suppliers. We used the results of these technical assessments to develop improvement plans focused on bolstering supply chain resilience and partnership. In 2022, we expanded our supplier management training to include our top 40 suppliers. As a component of our Supplier Excellence Program, the training aims to help improve quality, and included activities such as the development of performance improvement and implementation plans.
In 2021, we completed the integration of MedAccred – a medical device industry-managed supply chain oversight program that identifies and verifies compliance to critical manufacturing process requirements – into our Quality System. Through this program, we aim to enhance patient safety, improve device quality and reduce product recalls. Edwards is actively participating in MedAccred industry working groups for Sterilization and Supplier Resilience, and we have three sterilization partners participating in an FDA-sponsored MedAccred pilot in 2023. We will begin leveraging MedAccred audits for sterilization based on the results of the pilot. In addition, Edwards is a member of the MedAccred Management Council, and we are active in supporting the adoption of this oversight program more broadly in the medical technology industry.
The Edwards Supplier Diversity program is sponsored by our ELT and led by the VP of Indirect Sourcing. Edwards is committed to incorporating more diversity in our supply chain by actively seeking out and engaging with diverse suppliers. The Supplier Diversity team regularly evaluates supplier classification and spend data to accurately assess growth opportunities with Black-owned, women-owned, minority-owned, veteran-owned, LGBTQ-owned, and other diverse businesses. In 2022, we continued tracking our U.S. spend with diverse suppliers through an internal dashboard. We look to further our collaboration with diverse businesses and empower all communities.
Supply chain resilience
We understand that to continue delivering lifesaving products, we must build our capacity for supply chain resilience and business continuity. To mitigate risks related to accessing critical components for our products, we work to enhance our supplier network systems, communicate regularly with our strategic and key suppliers through quarterly business reviews, and, offer formal recognition during our annual supplier forum for suppliers that exhibit outstanding responsiveness, even during times of uncertainty.
In 2022, we began actively creating business continuity plans for several of our suppliers. The purpose of these plans is to ensure the resilience of our supply chain and fortify our ability to access key inputs in the case of various disruptive events. We will continue with the deployment and implementation stages of these plans into 2023.
In early 2023, we began implementing a software solution to provide our teams with more information about potential and emerging disruptions in our supply chain. By identifying our suppliers through the tool, we can access real-time information about potential vulnerabilities down to the site and part level. The tool uses AI-based monitoring to review news and social feeds and filter for information relevant to our suppliers’ ability to continue delivering components. This will provide our team with access to information ranging from weather events to labor issues to localized accidents. We are continuing the implementation and rollout of this platform into 2023.
Distribution network optimization
During 2022, we continued efforts to leverage our global product distribution strategy as one aspect of our program to address climate-related risks. While the products we offer have low energy demand, we generate greenhouse gas emissions by shipping components and finished goods to customers around the world. To address this impact, we had a target to reduce product distribution air miles traveled by an additional 1.5 million miles by 2023. We achieved this target early, reaching a total of 1.8 million miles reduced in 2022.
We achieved this goal by focusing on long-term changes in the way we distribute products globally. Our product distribution strategy aims to improve normal business shipments by shifting away from air shipments when possible or sourcing closer to the point of demand. This includes utilizing more localized ground transportation and ocean liners with temperature-controlled containers. For example, Hong Kong is now an Edwards Distribution Center supported by our Singapore facility, and we further localized supply to Latin America from our U.S. facilities versus Europe. We continue to actively review global air freight to both move point of distribution closer to demand and also shift to lower carbon impact modes of transportation.
For the 2022 reporting period, Edwards conducted two stages of reasonable country of origin inquiry (“RCOI”), supplier and smelter, in accordance with the Conflict Minerals Rule and the Organization for Economic Cooperation and Development (OECD) Due Diligence Guidance. We designed our supplier RCOI process to identify the smelters in our supply chain and to determine whether the 3TG in our in-scope products originated in a covered country.
During the 2022 reporting period, Edwards’ suppliers that provided Conflict Minerals Reporting Template responses that we determined were product level responses identified 27 smelters. The 27 smelters and refiners identified by our suppliers at the product level for the 2022 reporting period included 9 gold refiners, 1 tantalum smelter, and 17 tin smelters. Approximately 93% of the foregoing smelters and refiners identified by our suppliers for the 2022 reporting period have been audited and recognized as conformant by the Responsible Minerals Initiative’s Responsible Minerals Assurance Process. Please see our Conflict Minerals Report for the 2022 fiscal year, as filed with the Securities and Exchange Commission on May 31, 2023.