Supply Chain Management
The suppliers have always been important partners in Innolux’s operations. Our CSR promotion also considers the participation of the overall supply chain. In addition to the quality and delivery, we strongly urge our suppliers to value human rights, environmental protection, as well as health and safety, improving the suppliers’ environmental, social, and governance (ESG) management to mutually establish a sustainable supply chain.

Supply Chain Quality Management

Innolux sees suppliers as important partners to business growth and is devoted to long-term collaborations with them in the pursuit of enhanced sustainable competitiveness and supply chain sustainability.
Innolux performs an annual audit to understand the suppliers’ product manufacturing process. This facilitates quality enhancement in both the Company and its suppliers by the reducing product defects and improving manufacturing process control. It ensures the suppliers’ manufacturing capability, provides prompt feedback of audit nonconformity & product defects through the Supplier Corrective Action Request (SCAR) system, helping suppliers discover abnormalities early on, stay on top of product quality issues, and take any corrective actions that are needed.
Innolux has long introduced new automation and inspection technologies such as automated optical inspection (AOI) through the Continuous Improvement Program (CIP) in order to ensure supplier quality and enhance production efficiency.


Supplier CSR Risk Management

Innolux hopes to develop mutually beneficial relationships with its suppliers. In addition to greatly valuing the quality, delivery, and price of our suppliers’ products, Innolux has also established the Administrative Procedural Rules for the Corporate Social Responsibility of Suppliers in accordance with the RBA Code of Conduct to facilitate good management. Innolux expects its suppliers to fulfill their corporate social responsibilities and implement risk management with regards to upholding decent business ethics, protecting labor rights, preserving the environment, ensuring health & safety, and establishing a management system.

Since the first supplier risk assessment in 2010, risk assessments have been performed on 925 suppliers as of 2018. As of present, no supplier has been flagged for restricted or prohibited use due to CSR reasons.

Procurement Risk Management

• Disaster Risk
To prevent supply chain disruption caused by natural disasters or circumstances of Force Majeure, Innolux prioritizes procurement from suppliers that meet the following requirements:
1. Ownership of at least two manufacturing sites, preferably in different counties/cities.
2. At least two sources of raw materials, all of which are required to have at least two sources of supply.
3. Suppliers who are not able to meet the preceding requirements are required to increase inventory so as to not disrupt customer demand.

In the wake of a disaster, Innolux actively provides assistance to suppliers in need and commences investigations into the suppliers’ manufacturing facilities, personnel safety, upstream material supply, product shipping/transportation, and other information related to damage caused. The information is provided to the relevant Innolux departments as reference for the direction of future countermeasures. Innolux also requests that suppliers establish emergency reporting systems to provide updates on recovery progress and supply status.
• Shortage Risk
To ensure the smooth operation of the supply chain, Innolux engages in the coordination of material preparation systems with its suppliers and set safety stocks based on the lead time of material preparation.
To prevent shortage risk or single sourcing, Innolux selects at least two qualified suppliers based on a product development and material assessment mechanism. Should single sourcing occur, Innolux shall seek new suppliers in accordance with product demands and select new qualified suppliers through the relevant evaluations to ensure steady supply.

Active Boosting of Domestic Supply Chain

Innolux’s manufacturing bases are mainly distributed in Taiwan and mainland China. Innolux has promoted local procurement for many years and has adopted the use of environmentally compliant materials. The Company actively promotes the establishment of industry clusters and implements localized material production. The local procurement of stage-1 front-end materials was prioritized in 2018, with approximately 96.98% sourced from Taiwanese vendors, followed by vendors in mainland China (2.51%), Japan (0.41%), and South Korea (0.02%). This has enhanced the development of new products and accelerated the material preparation process, greatly improving the flexibility to changing customer demand.
A localized supply chain shortens the material preparation process, facilitates new product development, provides greater supply flexibility to customers, and decreases transportation costs. In addition to this, it also reduces carbon emissions contributing to Innolux’s commitment to environmental responsibility, creates local job opportunities, and promotes local economic development; creating a three-way win for Innolux, its suppliers, and the local economy. We strongly believe that increasing market competitiveness through stable relationships with our suppliers is the right step towards improving the industry’s sustainability.
Persistent Promotion of the Low Carbon Supply Chain
Innolux implemented supplier greenhouse gas inventories in 2009. In 2012, Innolux consulted the questionnaire released by the Carbon Disclosure Project (CDP) and selected target suppliers based on transaction amount. The primary target suppliers are key suppliers that have an accumulated transaction amount in the top 89%.
The inventory conducted in 2018 compiles the suppliers’ emissions in 2017. The result shows a carbon reduction contribution of 136,513 tCO2e, achieving the set goal of 135,000 tCO2e. The inventory to be conducted in 2019 shall target the top 90% suppliers in transaction amount and shall aim for a carbon reduction contribution of 138,000 tCO2e.