Avon uses both company-owned manufacturing facilities and third-party manufacturers (TPMs) to produce its products around the world. Avon's beauty products comprise 73 percent of its business, including cosmetics, fragrances and toiletries (CFT). In any year, on average, 85 percent of the company's beauty products are manufactured in Avon-owned facilities, and the company works closely with TPMs to supply the remaining 15 percent.
The same universal standard of quality and safety applies to all Avon beauty products regardless of where they are manufactured or marketed, ensuring consumers worldwide receive the same product quality, safety and efficacy.
Avon's non-beauty products, including jewelry, accessories, home, gift, toys, fitness and decorative products, represent approximately 27 percent of the company's total sales. These products are sourced through TPMs in 39 countries across five continents. The company has established a robust global safety and quality assurance policy and process specifically for these products, including stringent standards for raw materials.
"Non-beauty" products must also comply with all local regulations and all internal safety requirements prior to production approval. Avon has also established an additional layer of guidelines for products that are intended for, or may be attractive to, children.
Avon's manufacturing processes are guided by a global Supplier Code of Conduct, that applies to both Avon facilities and TPMs, helping the company ensure compliance with applicable local and federal laws and regulations, as well as alignment with the company's internal standards, regarding product safety and quality, environmental performance and human rights. Avon uses the Code of Conduct to promote best practices and improvement throughout facilities where Avon merchandise is manufactured.
Avon is progressing along its journey to raise awareness and educate Avon Associates within the company about the Code. Through 2012 approximately 50 percent of Avon Supply Chain Associates have participated in formal training on the Code, with priority for those most directly responsible for relevant activities. Externally, Avon has conducted training sessions and seminars on the Code with 60 percent of factories, with a focus on the most critical partners.
Auditing suppliers is a key element of managing the Supply Chain and working towards adherence to our standards. Avon collaborates with external compliance and auditing firms hired to provide expertise to the supplier auditing process, including communication with suppliers and the scheduling of audits and re-audits.
If an audit reveals an instance of noncompliance, Avon works with the supplier to develop a corrective action plan, with key action points and deadlines.
Suppliers are responsible for reviewing their corrective action reports and managing the improvement process under the guidance of Avon. In the event of noncompliance, re-audits are required to verify that corrective actions have been implemented accordingly. Avon prefers remediation rather than termination, which delivers improved conditions that offer a longer-term benefit to the supplier and the community. Avon will, however, discontinue a relationship with any supplier who fails to address critical issues or make the necessary corrections requested within a specified, reasonable time period.
In 2008, Avon committed to ensuring every supplier is audited. The company has made progress in this area and continues to build internal capacity to manage this program. To start, Avon identified and prioritized its "significant suppliers," based on a risk assessment associated with geography, production volume or product categories of the specific facility.
In 2012, Avon conducted 1,164 audits on TPMs in 41 countries, representing 60 percent of TPMs, working towards a 2015 target of 95 percent. Health and Safety, Wages and Benefits, and Hours of Work remain the top three finding categories. High risk issues continue to diminish from initial audits through second follow up audits, dropping from 53 percent to 29 percent respectively, with ongoing remediation for remaining issues. In 2012 there were 16 “Denied Access” audits, of which nine suppliers were inactive, three were ultimately audited and approved, and four are still in process.
*Cycle and Requalifying Audits Included In Initial and Follow Ups
*The majority of the findings in this category are due to the factory not having proper documentation supporting legal young workers. Other issues in this category include factories not allowing workers to leave the facility during established free time.
Avon continues to make progress towards achieving its audit goals, in particular its goal of conducting audits for 95 percent of TPMs by 2015, but the company has not yet reached the target of completing cycle audits for all significant suppliers. Avon's broad product portfolio encompasses beauty and "non-beauty" products, supported by thousands of vendors and suppliers in over 40 countries. The complexity and scope of the supplier base, and the array of TPMs, makes supply chain management both a top priority and a challenge.
As the company continues to rely more on TPMs, Avon recognizes a need to evolve the supplier identification and selection process, as well as implement ongoing and consistent monitoring systems. Moving forward, the company aims to conduct audits for all priority supplier facilities by year end 2015.