Supplier Relations

Performance and Reviews
Xerox’s Global Purchasing organization routinely tracks and reports on current and potential suppliers for adherence to our requirements. Business reviews are held regularly with our key suppliers. This provides a forum to discuss our business relationships and to define and refine the metrics for Xerox and the supplier performance evaluations.

Xerox requires all production suppliers to submit an evaluation of their quality management system prior to being added to the Approved Vendors List (AVL), which includes about 1,500 active suppliers. Our vendors use the Xerox Multinational Supplier Assessment, which is equivalent to the ISO 9000, but was implemented 10 years earlier.

Before potential primary suppliers are permitted to do business with us, we make on-site visits. Once they are added to our AVL, we conduct on-site reviews every one to three years, depending on the scope of our relationship with them. About 90% of our spending for the manufacturing of Xerox products comes from 50 global suppliers. These suppliers are assessed regularly to measure compliance with Xerox standards. As of 2009, more than 90% of these suppliers have been assessed for compliance to Xerox standards.

As with any relationship-based engagement, face-to-face communication is critical to building trust, respect and credibility. We continue to have a strong purchasing presence in Asia to facilitate more direct interaction between Xerox buyers and the Asian production suppliers. Xerox Global Purchasing has representatives in Hong Kong, China, Malaysia, Singapore, Korea, Japan and India. These purchasing professionals conduct frequent on-site reviews to assess the quality, cost and delivery of a vendor’s products and ensure the business is run with the highest ethical standards. Through the website, www.xerox.com/suppliers, vendors and potential vendors can learn about the latest procurement initiatives and find information on supplier diversity, procurement policies, supplier quality assurance and supplier ethics.

Consistent with our comprehensive environmental sustainability initiatives, Xerox has specific guidelines for our paper suppliers and for the use of chemicals in our equipment and supplies. These practices are outlined in the A Greener World section of this report.

Chartered Institute of Purchasing and Supply Certification
In 2009, Xerox became the first organization to successfully achieve professional global certification from the Chartered Institute of Purchasing and Supply (CIPS). This benchmark of excellence distinguishes an organization and ensures that it maintains the highest standards in procurement and competence. The program is endorsed by the Institute of Quality Assurance. An organization that meets certification standards for excellence in purchasing policies and procedures also meets purchasing requirements of international quality standard ISO 9001:2000.

EICC Supplier Code of Conduct
As a coalition member since October 2006, Xerox has continued its rollout of the Electronic Industry Citizenship Coalition’s (EICC’s) Code of Conduct, a standards-based approach for monitoring suppliers’ compliance across several areas of social responsibility, including labor, health, safety and environmental activity. Xerox has validated its compliance with EICC guidelines and is working to ensure the same from our key vendors that contribute to the manufacturing of Xerox products and systems. We actively participate in EICC quarterly conferences, where members share industry best practices for managing and monitoring the supply chain. More information on the EICC Code of Conduct can be found online at www.eicc.info/EICC CODE.htm.

Xerox requires product vendors to commit to complying with the principles of the EICC standards. All new supplier contracts include social responsibility language that reinforces this commitment. By the end of 2010, we will have conducted more than 130 first-time and follow-up EICC audits to measure suppliers’ compliance with our Supplier Code of Conduct. Areas of nonconformance are evaluated as Priority, Major, Minor or Observation and are addressed through a rigorous corrective action process. The improvement across all areas of nonconformance, from the initial audit to the most recent, was 13% on average. Supplier performance is monitored regularly through management reviews.

Supply Chain Security
Xerox is committed to implementing security controls within its supply chain to enable the uninterrupted flow of products from the point of manufacture to the customer. Xerox is a certified participant of the U.S. Customs and Border Protection Customs-Trade Partnership Against Terrorism (C-TPAT) and the E.U. Authorized Economic Operator (AEO) program in the Netherlands and Ireland. Both require Xerox to have specific security criteria present throughout its supply chain. C-TPAT, AEO and other specific Xerox criteria are contained in the Xerox Supplier Security Requirements for external Xerox Suppliers and in the Xerox Security Policies and Standards for internal Xerox locations. Xerox has an ongoing assessment program to monitor compliance with the security criteria throughout its supply chain. Xerox is a member of the High Tech Supply Chain Security Coalition (HTSC²) and the Transported Asset Protection Association (TAPA).

Ethical Business Environment
Annually, Xerox communicates the Supplier Code of Conduct to its supplier base. This process includes provision of an Ethics Hotline and P.O. Box address to report concerns that suppliers feel may jeopardize otherwise constructive business relationships. We promptly investigate all concerns.

Supplier Diversity
Xerox has established partnerships with minority- and women-owned business enterprises (MWBE), veterans/service-disabled veterans, and HUBZones. Due to the combination of the economic downturn and in-sourcing, Xerox experienced a decline in overall spending in 2009, which had an impact on spending with our diverse suppliers. The supplier diversity program at Xerox is receiving renewed focus in 2010 at which time we will provide additional disclosure on our spending with MWBE suppliers and our overall supplier diversity initiatives. A key objective since the acquisition of Affiliated Computer Services (ACS) in 2010 is to integrate all supplier diversity efforts into a unified Xerox program.

More information about our supplier diversity is available at www.xerox.com/supplierdiversity.