final report argentina factory.pdf

CONFIDENTIAL Argentina Factory 2013

2013 Argentina Factory

INTERNAL AUDIT REPORT

ADDRESSEE FOR ACTION: Sebastian Mondillo, Factory Manager Argentina

FINAL REPORT DISTRIBUTION:

Ricardo Oberlander - Americas Regional Director

Luigi Giucca - Americas Regional Head of Operations

Bernd Meyer - Global Head of Supply Chain

Marc van Herreweghe - Global Head of Manufacturing

David Christian - Group Head of EHS

John Moffat - Global Head of Operations Finance

Tony Hayward - Regional Head of Finance - Americas

Ray Venn - Global Head of Audit

Juan Lafuente - South Cone Area Operations Director

Jorge Davyt - Country Manager Argentina

Fabio Lima - South Cone Area Director,

Moises Mouta - Americas Regional Audit Controller

Geoff Parfitt - Audit Controller, Corporate Services

Americas Regional Audit & CSR Committee

PWC External Auditors

PERIOD: 17 September to 3 October 2013.

ISSUED: 11 October 2013.

ASSIGNMENT

CONTROLLER: Moises Mouta

AUDIT LEADER: Jorge Gocher


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TABLE OF CONTENT

A. Executive Summary ............................................................................................................ 3

B. Control Navigator assessment ............................................................................................ 7

C. Audit Team ......................................................................................................................... 7

D. Detailed issues .................................................................................................................... 8

E. Appendix I Process Classification .................................................................................... 19

F. Appendix II Sample Photographs .................................................................................... 20


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A. Executive Summary

A1. Overall Assessment Unsatisfactory

In 2010, a review of Argentina Operations resulted in a rightsizing exercise and the factorys

transfer from its site in San Martin ( owned ) to a rented site in the Pilar industrial Park. The factory

relocation commenced early 2011 and was completed in Q1 2013. This included site adaptations,

services and utilities installation and the relocation of 9 SMD groups from San Martin and a PMD

from BAT Turkey. The Pilar Factory has been operating in a Business As Usual (BAU) capacity from

March 2013 with approximately 290 employees.

The scope of our audit comprised a review of Product Integrity and Traceability (PI&T), Quality

Assurance, Logistics and Stock Management, Asset Management and a review of Health & Safety

(H&S) process at the Pilar Factory.

A robust risk assessment process is a prerequisite to establishing effective Health & Safety ( H&S )

practices and is a fundamental requirement of the Groups H&S Policy. Although a risk assessment

was conducted by the local team, Audit noted the absence of a systematic approach to H&S risk

assessments. Consequently, key hazards and risks had not been identified and evaluated, this being

required to establish appropriate mitigating actions (AM1). The absence of a robust H&S risk

assessment has contributed to the issues highlighted in this report.

For convenience, examples of control weaknesses noted during the Audit have been consolidated

into several discrete audit memos (Audit Memos 2 5) based on the H&S issue categories of Working

at Height, Safety of machinery & equipment, electrical installations and condition & maintenance of

Forklifts. Other observed H&S issues have been used in Audit Memo 1 as examples of unmitigated

risks resulting from an ineffective H&S risk assessment process. These Memos include examples only

and do not provide a comprehensive list of issues identified during the Audit.

For completeness and illustration, Appendix II provides photographs of H&S issues noted during the

Audit.

In 2011 the Group Head of Operations issued a Call to Arms to address H&S issues with specific

reference to Work at Height and entrapment. Local management is aware that the elimination of

risks associated with Work at Heights and entrapment is a priority for BAT, the July 2013 Risk

Assessment exercise evaluating these risks as high. However, Audit noted that work at height

controls did not comply with BAT policy. For example, no formal procedure exists for the control of

work at height equipment, including roles and responsibilities, registration, inspections, maintenance

and disposal of defective ladders, platforms and scissors lifts. Equipment was found to be in a very

poor condition at the time of the audit. The last two reported serious accidents in 2012 both related

to work at height activities. (AM2).

It was also observed that Guards on machinery and equipment were missing. Various equipment was

operating with unguarded rotating parts in all sections of the factory (PMD/SMD/FMD/Utilities).

There are no procedures in place to ensure safety devices are used, contravening BAT safety

standards. (AM3).


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Audit noted a number of sub-standard electrical installations in both the factory building and SMD

machinery, also several unsecured electrical control panels providing, in some cases, direct contact

with live parts. (AM4).

No formal forklift maintenance management process is in place, our audit noting forklifts to be in a

very poor condition. For example, safety devices such as driving mirrors, reverse alarm, seat belt and

handbrake were out of order and operator seat, rear tyres and hydraulic pipes were completely worn

out (AM5).

Regarding PI&T process, there is no non-tobacco related detection in the PMD lines. From March to

August 2013, 795 instances of non-tobacco related materials in the blends (i.e. paper, sticker, carton,

filter, cigarette, aluminum, wood, plastic and metal) were raised by SMD. It was also observed that

Open cut rag storage boxes are placed directly under the open fluorescent tubes fittings in the Cut

Rag Store. (AM6).

The first AMGP submission for factory materials took place in March 2013. At the time of our audit,

responses for 17 of 111 materials submitted have been received from AMGP. Of these 17, one was

not approved. As several materials have not been AMGP approved, we were unable to confirm that

the factory materials currently in use are compliant with BAT standards.

During the course of our audit, numerous Opportunities for Improvement (OFIs) were noted and

highlighted to management for their consideration.

A2. Management Comments

In 2010, the factory role was reviewed resulting in the cease of exports, the closure of the printing

department, the rightsizing of the operations and the movement to a new site in the Pilar industrial

Park. The new site has 27.000 square meters, 62% less than the area dedicated to operations in San

Martin Plant, unlocking several efficiencies such as energy consumption, waste and infestation

control. As mentioned before, the project implied a significant rightsizing process, with 200

employees leaving the company through a voluntary separation scheme (with no business disruption

nor union conflict).

The movement itself took place from early 2011 to Q1 2013 including site adaptations, services and

utilities installation, 9 SMD groups moved from San Martin, the cascading of a PMD from BAT Turkey

and the de-commissioning of the old site (dismantling, Environmental sanitation, etc.). It is very

important to highlight that along the project, substantial changes took place on both the internal and

external side of the business. From an internal point of view, the product portfolio experienced an

important shift from Soft Cup to Hinge lid (40% increase) and capsules went through an

unprecedented growth (700% in two years). Meanwhile, on the external side a very stringent control

of Foreign Currency took place posing a direct risk of supply over the growth before mentioned,

hence demanding the installation of unplanned local capacity to support that growth. As a result, 17

new unplanned installations took place, having an impact of management focus during the

movement given the needed to respond to the new EM requirements. This generated a GAP in

several BAU safety conditions and procedures. The call to action of BAT in 2011 raised the bar even

higher which cause this gap to be bigger by the end of the movement.


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In August 2012, when most of the factory was fully running a self assessment against the EH&S policy

produced result of 2.1 (vs a minimum of 3 required), hence our partially complies in the Control

navigator. As a result a risk assessment was issued and several activities were done to start

mitigating the existing risks (trainings, guarding and documentation).

As part of the Control Navigator action plan, a second self-assessment was conducted in May 2013 to

track progress producing a result of 2.5. One of the main gaps detected was that there was no formal

risk assessment hence a lack of visibility of all risks and no formal mitigation plan. The decision was

made to take a holistic approach by attacking three fronts, awareness, condition and processes. To

solve the issue in a holistic way a proper risk assessment was needed and was launched in June,

taking two months to go through all the Factory positions. In August the work was focused in

identifying what activities should be done to solve the risks and communicating the risk to functional

managers and the people. By the time of the audit there was still no formal plan in place with dates

and responsible as it was planned to be done in October.

Along the two months before mentioned, actions were taken based on the issues that were detected

in the previous assessment done in late 2012. Many of these issues pending from the movement

itself, including among others, issues highlighted in the Memorandums. Worthwhile to mention, as

examples, the fact that we replaced or repaired 120 guards and bought 24 new ladders.

Even though the EH&S issue was brought to the attention of the Audit team in May, it is clear that

there was a deficiency in the self-assessment process and the issue should have been raised as a not

compliant more than a partially complies.

Pilar Factory is formally running in a BAU scheme from March 2013 with close to 290 employees.

Even though it is still in a stabilization period, Pilar has shown significant improvements in OEE,

waste, productivity, energy consumption, quality and with no accidents in the last 18 months.

This being said there is a clear need to accelerate the solution to solve all detected high risks.

A3. Audit scope

The audit reviewed compliance with the following Groups Factory management systems applied at

BAT Argentina.

Old Process name TaO Process name Additional Comments

Product Integrity &

Traceability

Product Quality Management

Manufacturing Conversion -

Quality Assurance Product Quality Management

Quality Assurance -

Logistics & Stocks

Create Tactical Logistics Plan

Manage Warehouse (Primary & Secondary)

Manage Transport (Primary & Secondary)

-

Asset management Strategic Asset Management -

Health & Safety EHS Compliance Management -


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A4. Summary of Issues and Action Plans

# Business process Memo Summary Summary of Action Plan Date /

Accountability

1. EHS Compliance

Management

Absence of a systematic approach to

perform risk assessments;

consequently, key hazards are not

being identified and evaluated with

mitigating actions in place.

Conduct risk assessment in

the areas not covered by

the initial risk assessment

and ensure complete

execution of full EH&S

plan to achieve level 3 of

EH&S roadmap.

August 2014 /

Sebastian Mondillo

Factory Manager

2. EHS Compliance

Management

Work at height controls are not yet

at the expected level required by

BAT policy. No formal procedure

exists for the control of work at

height equipment including roles and

responsibilities, registration,

inspections, maintenance and

disposal of defective ladders,

platforms and scissors lifts.

Implement procedures to

ensure the sustainability

of work at height

management process,

including clear roles and

responsibilities.

Execute detailed plan to

effectively manage the use

of all equipment for work

at heights activities.

April 2014 /

Sebastian Mondillo

Factory Manager

3. EHS Compliance

Management

Guards on machinery and equipment

were missing. Various equipment

was running with unguarded rotating

parts in all sections of the factory

(PMD/SMD/FMD/Utilities).

Execute detailed plan to

address control

weaknesses relating to

machinery guarding

(PMD/SMD/FMD/ Utilities)

April 2014 /

Sebastian Mondillo

Factory Manager

4. EHS Compliance

Management

Holistic electrical safety survey or

inspection has not been conducted

even though there are specific

working maintenance instructions

for the various installations.

Electrical installations were not

compliant to electrical standards

required to meet basic safety

conditions.

Develop and implement

detailed plan to address

the electrical safety issues

Reinforce to all personnel

safety procedures related

to Electrical risk.

March 2014 /

Sebastian Mondillo

Factory Manager

5. EHS Compliance

Management

No formal forklift maintenance

management process is in place; very

poor conditions of forklifts onsite

were observed. Such conditions

compromise the safety of personnel.

Review the current status

of the Fork Lift Truck (FLT)

fleet and establish action

plans to ensure

compliance with BAT

standards.

Reestablish an effective

preventive maintenance

schedule.

March 2014 /

Sebastian Mondillo

Factory Manager


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6. Product Integrity &

Traceability

Absence of non-tobacco related

material detection in PMD lines.

Open cut rag storage boxes are

placed directly under the open

fluorescent tubes fittings in Cut Rag

Store.

1. Formalize root cause

analysis for foreign matter

identified in SMD.

2. Replace existing

fluorescent tubes with

appropriate lighting

devices and Reinforce pest

management control

procedures in all San

Martin WH

October 2013 /

Hernn Gallo,

Production Manager

April 2014 /

Eleonora Bolivio,

Quality & Product

Manager

A5. Summary of Immediately Reportable Incident (IRIs)

There were no IRIs raised in relation to Operations with outstanding action plans prior to or during

the audit.

B. Control Navigator assessment

Ref CN Description Management

Assessment

Audit

Assessment Comments

S01 An EHS Policy and

arrangements are in

place in compliance with

the Group EHS Policy

Manual and Best

Practices

Partially

Complies

Not Compliant AM1.- Weakness in risk assessment

process

AM2.- Non-compliance with the EHS

Group Policy on Work at Heights

AM3.- Non-compliance with the EHS

Group Policy on Machinery and Work

Equipment

AM4.- Unsafe electrical installations

and conditions

AM5.- Poor condition and inadequate

maintenance of Forklifts on site.

C. Audit Team

The table below identifies the team used to perform the Audit

Name Role

Moises Mouta Assignment Controller

Jorge Gocher Audit Leader

Natalia Tufani Audit Team Member

Mauricio Rizo Audit Team Member

Stephen Muli EHS Practitioner


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D. Detailed issues

BUSINESS

PROCESS:

EHS Compliance

Management

ISSUE: Weakness in risk assessment

process

1

OBSERVATION:

A robust risk assessment process is a prerequisite to establishing effective Health & Safety practices and

is a fundamental requirement of the Groups H&S Policy. The risk assessment process was introduced at

the Pilar factory in March 2013 with initial risk assessments completed in July 2013. After that the

company prioritized as a first step the control and elimination of high risks with a plan expected to be

completed by Q2 2014 .

Audit noted the absence of a systematic approach to perform risk assessments; consequently, key

hazards are not being identified and evaluated with mitigating actions in place. This has substantially

contributed to the issues described in other Audit memos raised during the audit.

From the review of the above mentioned risk assessment Audit noted that it was not conducted for all

key installations with the boiler and compressor house ,cooling towers, electrical High tension rooms, gas

metering room, bulk gasoil tanks, AHU units, offices and canteen being excluded.

It was also observed that Contractors involved in running key operations on site have not been involved

in the risk assessment process. There is no formal process to review the actions emanating from the risk

assessments and line managers do not formally track the progress of the risk assessments within their

respective departments. Therefore, of all the actions established to address the High Risks, none has

been completed and there is no specific plan in place with timelines and responsibilities to monitor their

completion.

In relation to high risk tasks that are managed via a permit to work system, it was noted that they are

not issued to the specific individuals performing the activity but to the contracting supervisor . Several

instances of non-compliance with BAT policies were noted in the current work permit procedure; for

example, hot work procedure does not identify the requirement for a fire watch issued for more than

8hrs and there is no evidence of close out of permits. In addition, permits do not record the approvers

name and date.

As a consequence of this incomplete risk assessment, the following risks were not identified and actions

not defined:

a. There are no smoke, heat detection or sprinkler units in the laboratory, where all the flammables

are being stored and the operation of the heating ovens takes place.

b. No fire detection or suppression system was seen in the High Tension Room-33kV, gas metering

room. In addition, Audit noted fire detectors deactivated and no portable fire equipment where

all AHU units have been installed.

c. Dosimeters for staff handling radiation sources are not being used although the company

performs radiation monitoring once a year. There is currently a capex approved for 2014 to

eliminate radiation sources.


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d. With respect to the management of hazardous substances on site, there is no specific storage

area defined for flammables and chemicals.

e. Not all records regarding mandatory personnel medical tests were available in their personal files

in the Factory site.

F. Unhitched trucks within the shipping yard were not choked.

CAUSE:

Risk assessment is a recently introduced process which is still being implemented.

Risk assessment ownership not shared by functional managers

IMPACT:

Risk of personnel injury resulting from inappropriate control measures following from risk

assessments.

Financial losses to BAT and negative impact on corporate reputation.

ACTION PLAN:

1.Conduct risk assessment in the areas not covered in the initial risk

assessment

2.Formalize action plan timing, responsibilities and follow up with each

functional manager

3.Complete execution of full EH&S plan to achieve level 3 of EH&S roadmap

(BAT standards)

ACTION DATES:

31/12/13

31/10/13

30/08/14

OVERALL COMPLETION DATE FOR CORRECTIVE ACTION: 30/08/14

AUDITOR/s:

Stephen Muli

ACCOUNTABILITY:

Sebastian Mondillo Factory Manager


10

BUSINESS

PROCESS:

EHS Compliance

Management

ISSUE: Non-compliance with the EHS

Group Policy on Work at Height

2

OBSERVATION:

BAT Group EHS Policy Manual (revision 8.0, Oct 2012 section C5.3.5) states that All equipment used for

working at height must be structurally sound, safe for the intended purpose of the equipment,

regularly maintained and certified to local codes and standards. Equipment must also be ergonomically

constructed. All equipment must be registered and coded for ease of identification. Equipment must

be regularly inspected. Inspections must ensure that:

Responsibilities for inspection and control are established and confirmed in writing.

Results of all inspections are summarized and recorded in a register.

Registers and checklists must be used for regular inspection and recording of site equipment as well as

that brought on site by sub-contractors. Any equipment found unsafe must be labeled, immediately

withdrawn from service and either destroyed or repaired. Authorized persons using ladders, step

ladders and other types of mobile height work apparatus must be suitably attired and must be trained;

training is to be recorded

In 2011 the Group Head of Operations issued a Call to Arms to address H&S issues with specific

reference to Work at Height and entrapment. During 2011 2012 BAT Argentina relocated

manufacturing from an owned site in San Martin to a rented site in Pilar.

Local management is aware that to eliminate the risk of Work at Heights is priority for BAT and within the

Risk Assessment performed in July 2013, this risk was evaluated as high. At this moment, they have put

in place safety communication campaigns, training programs and safety instructions. However, from the

review of Pilar factory, Audit noted that work at height controls were not yet at the level required by

BAT policy.

It was also noticed that no formal procedures exist to effectively manage work at height equipment

including roles and responsibilities, registration, inspections, maintenance and disposal of defective

ladders, platforms and scissors lifts.

Audit also observed the presence of unsafe ladders(>10) in the SMD/PMD and Utilities sections, mobile

lifting equipment left with the ignitions keys in SMD and raised platforms (more than 3 mtrs high) in PMD

without adequate fall protection-guarding and toe boards.

Two scissor lifts equipment in use on site were in very poor/unsafe condition: worn out tyres, exposed

electrical controls and no maintenance plan or any inspection checks.

CAUSE:

Completion of risk assessments in July 2013, plans to address the identified risks still in progress.

Control procedure relating to work at height standards including roles and responsibilities not yet

in place.


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IMPACT:

High risk of fall from height exists which could result in injuries, permanent disabilities and fatalities

to persons involved in these tasks.

Potential liabilities to the company that may arise from ligation in event of the above.

Impact on corporate reputation as a result of potential enforcement activity.

ACTION PLAN:

1. Conduct an inventory of ladders, platforms and all equipment used for

working at height to ensure appropriate inspection and maintenance.

Implement procedures to ensure the sustainability of work at height

management process, including clear roles and responsibilities.

2. Execute detailed plan to effectively manage the use of all equipment

for work at height activities (ladders, lifting equipment, etc.)

- Plan in place + weekly tracking progress control

3. Build and install required platforms in PMD according to BAT safety

standards

ACTION DATES:

30/11/13

31/12/13

30/04/14


AUDITOR/s: Stephen Muli

ACCOUNTABILITY:

Sebastian Mondillo / Factory Manager


12

BUSINESS

PROCESS:

EHS Compliance

Management

ISSUE: Non-compliance with the EHS

Group Policy on Machinery and

Work Equipment

3

OBSERVATION:

BAT group EHS Policy Manual states that All machinery and work equipment must be fitted with

safeguards and safety devices as required by national/international regulations and as deemed

necessary through risk assessment. Fixed physical guards must have the following characteristics:

Prevent access or exposure to hazardous areas of machinery and work equipment, be of sufficient

robust construction in terms of strength, stiffness and durability, not be easy to bypass or render

inoperative and cause minimum obstruction of view.

Local management is aware that the elimination of the risk of entrapment is a priority for BAT, July 2013

Risk Assessment exercise rating this risk as High. At the time of our audit, management have put in place

safety communication campaigns, training programs and safety instructions. However, we noted that

that machinery and equipment safety controls were not yet at the BAT Standards level.

During fieldwork, audit noted the following :

a. Procedure for interlock inspection is in place however for machinery which has no interlocks there is

no formal procedure for checking and inspection of guarding.

b. Various equipment running with unguarded rotating parts in all the sections of the factory

(PMD/SMD/FMD/Utilities).

c. Guarding for the doffers in the stem silos with no interlock switches and locked with padlocks. In

addition there is no formal procedure for maintenance work in the silos.

d. Airlock units in the dust plants have no interlocks and can be accessed while equipment is operating.

A mesh guard has been provided though the sizing can allow fingers in.

e. Lock Out Tag Out Try Out (LOTOTO) System not working in the utilities area, ie pump sets in

compressor house and fire pump room under repairs while the energy sources(electrical) not

isolated as per system.

f. No safe work procedures exist for maintenance of utilities ie compressors, cooling towers, boiler

house.

CAUSE:

Assessment of guarding status recently completed in July 2013.

No formal procedure for tracking guards not interlocked.

No clear ownership on guarding maintenance for areas (ie utilities) outside main factory

operations.


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IMPACT:

Potential high risk exists despite the contingency action that may result into injuries, illnesses,

permanent disabilities and fatalities to persons involved in these tasks.



ACTION PLAN:

1. Execute detailed plan to adequate the guarding situation in all areas

(PMD/SMD/FMD/Utilities) assigning responsible for each activity

- Plan in place + weekly tracking progress control

- SMD/FMD/ Utilities done

- PMD

2. Complete adequacy of rotary airlocks

3. Conduct an inventory of guarding on machinery which have no

interlocks. Include review of each guard in daily cleaning routines.

4. Reinforce to all contractor personnel in utilities area the process and

procedure related to LOTO. Redefine safe work procedures for

maintenance in utilities and train current contractors

ACTION DATES:

31/10/13

31/01/14

30/04/14

30/11/13

30/11/13

30/11/13



ACCOUNTABILITY:



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BUSINESS

PROCESS:

EHS Compliance

Management

ISSUE: Unsafe electrical installations and

conditions

4

OBSERVATION:

According to BAT policy a structured approach on electrical safety, including the utilization of local,

regional and global regulations and standards, should be adopted to ensure all significant risks and

hazards are identified and addressed with appropriate controls implemented in order to achieve a safe

work place.

During the review of the risk assessments and procedures pertaining to electrical safety of the site, Audit

noted that a holistic electrical safety survey or inspection has not been conducted even though there are

specific working maintenance instructions for the various installations.

Various electrical installations did not comply with electrical standards required to meet basic safety

conditions. Conditions noted included :

a. Electrical panels with 380V were not locked.

b. Lack of cable standards across the site e.g. naked live cables and connectors, cables with missing

conduits, open junction boxes, missing cable glands and damaged cable coatings.

c. High Tension 33Kv switch gear and medium tension 380v switch gear panels with no insulation

carpets.

d. No inventory register of all the portable electrical equipment on site and formal

maintenance/inspection schedule.

e. Electrical plugs and sockets not meeting water proof standards requirements installed in a wet

environment such as the cooling towers.

CAUSE: Lack of clear ownership and responsibility with regards to electrical maintenance.

Equipment installations during the relocation from San Martin to Pilar were not conducted

according to BAT standards.

IMPACT:

Risk of electrocution that may result in injuries, permanent disabilities and fatalities to persons

involved in maintenance or operations tasks.



Risk of fire.


15

ACTION PLAN:

1. Execute detailed plan to adequate the electrical safety situation in all

areas

2. Establish monthly report based on an EH&S checklist that includes

electrical safety (unlocked panels, etc)

3. Reinforce with all personnel required safety procedures, including roles

and responsibilities, related to Electrical risk.

ACTION DATES:

31/03/14

30/11/13

30/11/13



ACCOUNTABILITY:



16

BUSINESS

PROCESS:

EHS Compliance Management ISSUE: Poor condition and inadequate

maintenance of Forklifts on site.

5

OBSERVATION:

The EHS policy manual C6.3.1 states that all vehicles must be inspected and maintained in accordance

with formally documented schedule, including manufacturer's recommendations. Inspections and

maintenance must be documented. In addition, all company vehicles must be fitted where practicable

with the best international safety equipment including seat belt and equipped with a fire extinguisher.

Reversing alarms and/or lights must be fitted to all company vehicles where the vision of the driver

could be impaired by the vehicle's load.

There are 18 mobile units comprising of 13 Forklifts (FLTs) and 5 rider operated units for handling

finished goods and leaf in the various departments. However, there is no formal inventory of the FLT

units. During the review, Audit noted the following:

a. Inadequate conditions of FLTs onsite for example : missing driving mirrors and reverse alarm,

indicator lamps not working, no flasher or headlights, no seat belt fitted, ignition key left on the

truck, handbrake out of order, operator seat, rear tyres and hydraulic pipes completely worn out,

electrical elements exposed to the open, oil leaks on the hoses spilling oil to the floor.

b. No maintenance log books or records are in place for use by the operators to check FLT

conditions and confirm such conditions as adequate.

c. Repairs are done on an ad hoc basis and based on breakdown of the units. No formal

maintenance procedure is in place and no periodic maintenance records could be found.

CAUSE:

Inadequate risk assessment.

H&S standards not yet fully established.

IMPACT:

Risk of accidents that may result in injuries, permanent disabilities and fatalities to persons

involved in maintenance or operations tasks.



Potential product contamination with oil from leakages.

ACTION PLAN:

1. Review the current status of the Fork Lift Truck (FLT) fleet and establish

action plans to ensure compliance with BAT standards

2. Redefine spare parts stock policy (considering the current foreign trade

situation of Argentina) to ensure availability of spare parts for

maintenance.

3. Formalize a Hand-over Checklist of FLT between users and engineering

ACTION DATES:

31/01/14

31/01/14

31/12/13


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after each maintenance routine.

4. Reestablish a preventive maintenance schedule for each FLT. Define the

KPI to measure the maintenance plan effectiveness & efficiency.

5. Incorporate the FLT maintenance plan in SAP-PM

31/12/13

31/03/14


AUDITOR/s:

Stephen Muli

ACCOUNTABILITY:



18

BUSINESS

PROCESS :

Product Integrity &

Traceability ISSUE : Risk of Product Contamination 6

Observation:

According to the Introduction to PI&T Assessment, v.2, issued on November 2011, Product Integrity is

defined as encompassing: the presence of all components at process batch level defined in the product

specific bill of materials; freedom from the presence of any component or sub-component not defined in

the product specific bill of materials; freedom from the presence of Non-Tobacco Related Material, taint

or odour.

Upon reviewing PI&T process, Audit noticed that the absence of non-tobacco related detection in PMD

lines. From March to August 2013, 795 instances of non-tobacco related materials in the blends (i.e.

paper, sticker, carton, filter, cigarette, aluminium, wood, plastic and metal) have been raised by SMD.

According to management, some actions have already been taken. However, we could find no evidence

of root cause analysis or corrective action plans designed

Furthermore, during the walkthroughs, Audit noted the following:

Open cut rag storage boxes placed directly under the open fluorescent tubes fittings in Cut Rag

Store.

At San Martin Warehouse, a cat and birds, including their nesting, were inside the warehouse that

stores Leaf, Wrapping Material and Casing and Flavours.

CAUSE :

No structured process to investigate presence of non-tobacco related materials in the blends

Inadequate pest control and hygiene management at San Martin Warehouse

IMPACT :

Significant risk of contaminated products being delivered to Local Market

Loss of integrity of the finished product

Damage to Company reputation

ACTION PLAN:

1. Formalize and maintain record of root cause analysis in existing follow up

file for foreign matter in SMD.

2. Replace existing fluorescent tubes with appropriate lighting devices

3. Reinforce pest management control procedures with all San Martin

warehouse personnel

ACTION DATES:

31/10/13

30/04/14

31/10/13

PLANNED COMPLETION DATE FOR CORRECTIVE ACTION :

30/04/14

AUDITOR : Natalia Tufani Accountable : Eleonora Bolivio, Quality & Product

Manager

Hernn Gallo, Production Manager


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E. Appendix I Process Classification

The table below provides a full list of audit findings per audited process.

This process classification is related to but independent of the overall audit opinion.

This table also includes the related TaO process (note: unless indicated, our audit did not cover the

full TaO process, only those elements related to the audited process). Audit memos will be provided

to the relevant TaO process Owner and Standards Council, as necessary.

Old Process name TaO Process name No action

required

Action

required

Prompt action

required

Product Integrity &

Traceability

Product Quality

Management x

Quality Assurance Quality Assurance x

Logistics & Stocks Create Tactical Logistics

Plan x

Logistics & Stocks Manage Warehouse

(Primary & Secondary) x

Logistics & Stocks Manage Transport

(Primary & Secondary) x

Asset management Strategic Asset

Management x

Health & Safety EHS Compliance

Management x


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F. Appendix II Sample Photographs


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final report argentina factory.pdf

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