Management of the supply chain Pekka T Pyy

Management of the supply chain Pekka T. Pyy IAEA NENP p. t. pyy@iaea. org

Current Supply Chain and Procurement Trends and Challenges 1 • Nuclear industry situation – What used to be: strong supply chain with steady flow of orders – Procurement and supply by original equipment manufacturers (OEMs) used to play a key role in nuclear reliability, sustainability and safety – Now this basis is eroding in some countries – e. g. obsolescence, spare part availability problems, unidentified changes in products -> Re-engineering, design information and use commercial/replacement items (? ) • Globalization – Longer supply chains with increased amount of players -> difficult to oversee – Supply of piece parts may come even from other continents – Strict nuclear quality assurance requirements and risk of neglecting them to cut costs -> Justification to use commercial/repl. items in risk-informed manner (? ) • Localization – Local supply chain is easier to oversight (e. g. manufacturing) and is a priority for Member States – However, may also increase risks (ability to supply) especially at the beginning with inexperienced suppliers -> Early involvement of industry in talks & realistic planning (? ) 2

Current Supply Chain and Procurement Trends and Challenges 2 • Technical challenges – New materials & additive manufacturing technologies – Undeclared design changes, obsolescence – How to detect CFSIs (counterfeit, fraudulent and suspect items), including service-related fraud (e. g. test certificates)? – Digitalization, e. g. digital I & C, product information systems, … -> Trustworthy “Produce-from-design printing” centres with design information, use of SIL (safety integrity level) etc. • Challenges with people – New generation in old/new companies (nuclear knowledge preservation) – “Oldtimers” faced with new technologies / practices – Challenges with people – nurturing nuclear quality culture in the “extended enterprise” supply chain -> On-the-job learning – competent human resources are a long lead item 3

Current Supply Chain and Procurement Trends and Challenges 3 • Supply of services on-site/off-site is important – TSOs, Testing and inspection as an example of service supply – it is equally important as equipment – Management of on-site contractors -> Induction training and working own management system • Differing regulatory requirements & standards between the Member States – Comprehensive procurement and supply chain oversight processes not an easy task ->Vendors and equipment suppliers must face this in every new country and analyse the gap – unfortunately there is no other way (future harmonization? ) -> Operators need to understand the related risks and apply graded approach 4

Why is it so difficult to achieve quality in supply? 1) Inadequate understanding of the concepts of quality, quality assurance and quality product – what did you ask in the first place? 2) Interfaces – each interface increases “broken telephone” uncertainty – Deming said: “Understand the whole system” 3) Obsessive and inadequate goals by customers and suppliers – you cannot have more, better, faster at the same time all the time and you are in this together 4) Human performance – are the prerequisites of success there (e. g. IT systems may do something but can people follow)? Inadequate knowledge of the product, programs, processes. Inadequate understanding of the reasons for the quality programs or even the need to comply. Inadequate adherence to the processes and quality programs. Etc. Edited from Richard Barnes presentation at the MSQL conference 2018 5

Fundamental Safety Principles: SF-1 • Principle 1: Responsibility for safety • Principle 2: Role of government • Principle 3: Leadership and management for safety • Principle 4: Justification of facilities and activities • Principle 5: Optimization of protection • Principle 6: Limitation of risks to individuals • Principle 7: Protection of present and future generations • Principle 8: Prevention of accidents • Principle 9: Emergency preparedness and response • Principle 10: Protective actions to reduce existing or unregulated radiation risks

Safety & Performance IAEA Approach to Quality, Leadership and Management IAEA requirements developed to follow the SF-1 ! Leadership and Management for Safety Organizational requirement level Detailed quality requirement level Quality Control (Integrated) Management Systems GS-R-3 GS-G-3. 1 GS-G-3. 5 20062009 Quality Management Quality Assurance GSR Part 2 2016 50 -C/SG-Q 1996 50 -C-QA 1985 -88 Time Observe that e. g. ISO has experienced very similar development cycle 7

Management of processes and activities & Supply chain: GSR Part 2 Requirements 10 and 11 Requirement 10 Management of Processes and Activities -Processes and activities shall be developed and shall be effectively managed to achieve the organization’s goals without compromising safety. Requirement 11 - Management of the Supply Chain -The organization shall put in place arrangements with vendors, contractors and suppliers to specify, monitor and control the supply of items, products and services that may influence safety. • • Documentation Internal and external interfaces Testing inspection, verification/validation Procedures Retention of responsibility Clear knowledge of product or service Oversight Safe conduct of delivery. It is not the intention that this publication should be directly applicable to vendors, contractors and (OEM) suppliers BUT customers will need to have arrangements to ensure procurement takes account of the vendors, contractors 8 and suppliers capabilities to ensure safety on their site or project

Safety Standards Related to Procurement and Supply Chain – GSR Part 2 Req’t 11: “Management of the supply chain”. – GS-G-3. 1 5. 50 & 51 “Purchasing”. – GS-G-3. 5 5. 33 to 5. 37 “Purchasing” SSR-2/2 (Rev. 1), Safety of Nuclear Power Plants: Commissioning and Operation: “ 8. 15. The operating organization shall establish suitable arrangements to procure, receive, control, store and issue materials (including supplies), spare parts and components. 8. 16. The operating organization shall be responsible for using these arrangements for the procurement of materials (including supplies), spare parts and components and for ensuring that their characteristics are consistent with applicable safety standards and with the plant design. 9

Procurement & supply process from GS-G-3. 1 Would this really work? 10

Supply quality management Supply Chain Government Supply Chain Supply chain related guidance is found in many standards according to the phase and type of supply and the regulation Supply Chain Legal and statutory requirements e. g. national laws (can include GSR Part 2) Nuclear Regulatory Body Reg. req. compliance (by e. g. GSR Part 2, 10 CFR 50, ISO 9001/19443, etc) Supply Chain “You Cannot Inspect Quality into Product or Service” “Trust but verify” Supplier Contractual requirements (can include GSR Part 2, ASME NQA-1, CSA, ISO 9001/19443, etc) Nuclear Facility or Activity Requirement Compliance or satisfaction 11

Some IAEA NE Series Publications • Development & Implementation of a Process Based Management System (NG-T-1. 3, 2015) • Procurement Engineering and Supply Chain Guidelines in Support of Operation & Maintenance of Nuclear Facilities (NG-T-3. 21, 2016; contains procurement guidance, including proactive actions for new NPP contracts) • Industrial Involvement to Support a National Nuclear Power Programme, NG-T-3. 4 (2016) • Managing Counterfeit and Fraudulent Items in the Nuclear Industry (NP-T-3. 26, March 2019) • Developing a publication on asset management • Developing a draft IAEA Technical Document on inventory control of spare parts and obsolescence management for operating nuclear power plants • Management of supply chain? (first a web toolkit) …

TOOLS TO ADDRESS COUNTERFEIT AND FRAUDULENT ITEMS IN NUCLEAR FACILITIES (from new NP-T-3. 26) Tools to address CFIs Engineering involvement in procurement and product acceptance Detailed knowledge of suppliers, including reducing use of independent distributers and parts brokers, and effective supplier audits Questions regarding CFSI identification methods and programmes within supplier audit checklists Identification of ‘at-risk’ procurement Clear and complete procurement requirements Procurement clauses and standard contract language addressing CFIs Bid evaluation processes accounting for CFSI concerns Zero tolerance policies for vendor counterfeiting Safeguarding of protection of intellectual property Use of difficult to counterfeit, positive ID tools Sensitive scrap and disposal policies Design rules and practices that emphasize diversity of supply Thorough receipt inspections Contractual arrangements for independent testing Training programmes on recognizing counterfeit parts Procedures for addressing suspected CFSI incidents, which include engagement of OEMs Industry databases of incident data Human performance tools Participation in industry peer groups Mandatory reporting to regulators of discovered items Whistle-blower protection and rewards 13

Near Future IAEA NE Work Related to Nuclear Supply Chain Supply chain is also GC 63 Development of the Web based Operators’ Forum Topic! supply chain management toolkit, including collection of (management & quality) regulations and standards, through series of meetings Pilot training course on nuclear supply chain management (including engineering challenges), 30 September – 4 October, Vienna, Austria Technical Meeting on Supply Chain Management and Oversight of Service Suppliers, 3 -6 December 2019, Paris, France 14

Supply chain toolkit website profile UNDER CONSTRUCTION! https: //nucleus. iaea. org/sites/connectmembers/cbh/Leadership. Tool/Supply%20 Chain%20 Toolkit/Main. html 15

Regulations and standards toolkit UNDER CONSTRUCTION! https: //nucleus. iaea. org/sites/connectmembers/cbh/Leadership. Tool/QUALITY_AND_MANAGEMENT_STANDARDS_AND_REGULATIONSTOOL/Main. html 16

Supply chain is part of your whole system and you need to care for it Informed customer(s) need to operate to anticipate things before they happen, and (in an ideal world they would): • Agree on a common regulation, management system and quality requirements for operating organizations and suppliers; • Agree on a common set of NPP requirements (specs) that was easy for experienced/newcomer countries to adopt and suppliers to bid to • Share supplier audit/assessment results among operating/supplier organizations within a country, a region, or globally • Share freely information on discovered counterfeit and fraudulent etc. items of risk • Share freely event lessons learned within and outside of the industry, etc. 17

HOW CAN WE GET TOWARDS THE IDEAL WORLD? • There are different regulations and owners – this is not going to change in short term – understand plan accurately early on how to handle things in practice ( and ask those who are more experienced) • Customer role and oversight responsibility (pre-qualifying, assessing, auditing, contracting, witnessing, controlling, approving, …) – no standard or third party takes that role away “Trust but verify” • Getting assurance through evaluation of suppliers (face-to-face and in their premises if necessary) is the key thing • Traceability of in the design and supply chain becoming more and more important – suppliers role to pass the requirements on and exercise oversight of sub-suppliers • The only way to make the amount of oversight work reasonable in supply chain is the use of graded approach • It is not just about the management system or quality (management or assurance) standards – also the engineering standards may have relevant requirements • Industry cooperation, commercial item justification and any cooperation sound all good ideas – keep on going! 18

Thank you! @IAEANE www. iaea. org/nuclearenergy Interested in becoming an MSN member? You also gain the CBH Hub membership. Please follow the links below for registration information and website access - Registration process: https: //nucleus. iaea. org/sites/connect/MSNpublic/Pages/Registration. aspx MSN site: https: //nucleus. iaea. org/sites/connect/MSNpublic/Pages/default. aspx If you have any questions regarding the MSN network, please feel free to contact. D. Jeon@iaea. org or A. R. Cartas@iaea. org or P. T. Pyy@iaea. org