Toward a Basic Policy of Procurement through Open and Fair Business Dealings

In 1994, Mazda set the following basic purchasing policy: "Mazda will, in the fullest sense of coexistence and mutual prosperity, engage in research and production and seek to raise competitiveness. We will build open and fair business relationships to ensure sustainable growth and raise our level of contribution toward social and economic development." Based on this policy, we take every measure to ensure fair and even-handed dealings with our suppliers around the world.

We base our assessments of business dealings with our suppliers on a comprehensive evaluation which covers not only quality, technical strength, pricing, delivery time observance and management approach, but also our corporate compliance structure and initiatives to preserve the environment.

Automotive parts	410
Materials, etc.	186
Equipment and tools	416
Total	1,012

Note: Includes overseas suppliers

Parts manufacturers	Kanto Yokokai (Located in the Kanto region—around Tokyo)	64
	Kansai Yokokai (Located in the Kansai and Tokai regions—central Japan)	51
	Nishi Nihon Yokokai (Located in the Chugoku, Shikoku and Kyushu regions—southwest Japan)	63
Providers of materials (raw materials, equipment, molds, etc.)	Yoshinkai	80

Communicating With Our Suppliers

To enable Mazda to build better cars, we believe in the importance of building long-term, stable relationships with suppliers and growing with them. To this end, Mazda arranges a wide range of opportunities to establish contact and takes steps to brief suppliers promptly on medium- to long-term business strategy and marketing and production matters, as well as to actively exchange information with them.

We organize roundtable conferences with supplier executives once a year to explain our purchasing approach, annual liaison meetings with representatives of front-line business divisions and departments, and a monthly Supplier Communication Meeting. Through these meetings, we explain our priority measures and make requests relating to environmental protection and compliance matters. At the Supplier Communication Meetings, we also distribute special forms on which suppliers express their opinions, which we use to improve the way liaison meetings are managed.

Evaluating and Recognizing Suppliers

Every year, surveys from various perspectives are conducted to clarify Mazda's business status with each of our suppliers. These studies assess whether we can continue the business relationship as is or if remedial guidance is needed. Results of these evaluations are passed on to the suppliers.

Based on these evaluations, we give awards to suppliers showing comprehensive excellence in areas such as quality, technological prowess and performance in business dealings. During FY2006, we gave awards to 65 parts suppliers and 11 materials suppliers. Two of these companies were recommended for the World Excellence Award, bestowed on Ford Motor Company's top business partners.

Expanding the Scope of Supply Chain Management

Total supply chain management is necessary not only in terms of stable procurement with high quality levels. In recent years, compliance and respect for human rights have also become important elements.

Mazda strongly urges its suppliers to prioritize compliance and corporate ethics in their supply chain activities, and distributes its "Request for Total Compliance with Labor Related Laws."

We also value environmental performance in supply chain management and take measures to encourage green procurement activities. We have drafted guidelines for green procurement activities and urge our suppliers to create environmental management systems. For further details on green procurement activities, please see "Production: Promoting Green Procurement".

Supporting Business and Quality Enhancement Activities

To ensure mutual prosperity with its suppliers, Mazda believes it is important not only to make requests, but also to offer support.

An example of what we mean by giving guidance on business and quality enhancement is our J-ABC activity set (J (jiba) refers to local community, A to "achieve," B to "best" and C to "cost") for suppliers that handle particularly large volumes. Mazda employees visit supplier factories to pinpoint waste and problems in their manufacturing processes and discuss remedial measures.

We also carry out the following support measures aimed at helping suppliers outside the Hiroshima area.

Through its quality assurance and improvement guidance for local suppliers, Mazda supports human resource development at suppliers by organizing "Mazda Quality School" for their younger and mid-career employees who head quality and manufacturing divisions and departments.

The school were held 9 times during FY2006, attended by 95 employees from 52 supplier companies. Through examination of quality request documents and study of actual cases of defects, as well as exchange of opinions with attendees, Mazda was able to deepen their understanding of its approaches to quality and hone their perceptiveness in overall quality management. Responses in questionnaires filled in by participants indicated a generally positive evaluation of the school, which enabled exchanges of opinion with staff from other companies and actual defect case studies. Mazda plans to hold similar classes in FY2007 with approximately the same number of participants, but with improved course content and an increase in the number of classes to 11.