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:
PERIOD:
17 September to 3 October 2013.
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
ISSUED:
11 October 2013.
ASSIGNMENT
CONTROLLER:
Moises Mouta
AUDIT LEADER:
Jorge Gocher
CONFIDENTIAL
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
CONFIDENTIAL
A. Executive Summary
Unsatisfactory
A1. Overall Assessment
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).
CONFIDENTIAL
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.
CONFIDENTIAL
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

Product Integrity &
Traceability
TaO Process name
Additional Comments
Product Quality Management

Manufacturing Conversion
Product Quality Management
Quality Assurance
Create Tactical Logistics Plan
Manage Warehouse (Primary & Secondary)
Manage Transport (Primary & Secondary)
Asset management
Strategic Asset Management
Health & Safety
EHS Compliance Management
Quality Assurance
Logistics & Stocks
CONFIDENTIAL
A4. Summary of Issues and Action Plans

#
1.
2.
3.
4.
Business process
Memo Summary
Summary of Action Plan
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.
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.
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.
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)
EHS Compliance
Management
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.
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.
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.
Develop and implement

detailed plan to address
the electrical safety issues
Reinforce to all personnel
safety procedures related
to Electrical risk.
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.
Date /
Accountability
August 2014 /
Sebastian Mondillo
Factory Manager
April 2014 /
Sebastian Mondillo
Factory Manager
April 2014 /
Sebastian Mondillo
Factory Manager
March 2014 /
Sebastian Mondillo
Factory Manager
March 2014 /
Sebastian Mondillo
Factory Manager
CONFIDENTIAL
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
S01 An EHS Policy and

arrangements are in
place in compliance with
the Group EHS Policy
Manual and Best
Practices
Management
Assessment
Audit
Assessment
Comments
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.
Partially
Complies
C. Audit Team
The table below identifies the team used to perform the Audit
Name
Role
Moises Mouta
Jorge Gocher
Natalia Tufani
Mauricio Rizo
Stephen Muli
Assignment Controller
Audit Leader
Audit Team Member
Audit Team Member
EHS Practitioner
CONFIDENTIAL
D. Detailed issues
BUSINESS
PROCESS:
EHS Compliance
Management
ISSUE:
Weakness in risk assessment

process
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.
CONFIDENTIAL
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:
ACTION DATES:
1.Conduct risk assessment in the areas not covered in the initial risk
assessment
31/12/13
2.Formalize action plan timing, responsibilities and follow up with each

functional manager
31/10/13
3.Complete execution of full EH&S plan to achieve level 3 of EH&S roadmap

(BAT standards)
30/08/14
OVERALL COMPLETION DATE FOR CORRECTIVE ACTION:
30/08/14
AUDITOR/s:
Stephen Muli
ACCOUNTABILITY:
Sebastian Mondillo Factory Manager
CONFIDENTIAL
BUSINESS
PROCESS:
EHS Compliance
Management
ISSUE:
Non-compliance with the EHS

Group Policy on Work at Height
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.
10
CONFIDENTIAL
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:
ACTION DATES:
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.
30/11/13
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
31/12/13
3. Build and install required platforms in PMD according to BAT safety

standards
30/04/14

AUDITOR/s: Stephen Muli
ACCOUNTABILITY:
Sebastian Mondillo / Factory Manager
11
30/04/14
CONFIDENTIAL
BUSINESS
PROCESS:
EHS Compliance
Management
ISSUE:
Non-compliance with the EHS

Group Policy on Machinery and
Work Equipment
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.
12
CONFIDENTIAL
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:
ACTION DATES:
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
31/10/13
- SMD/FMD/ Utilities done
31/01/14
- PMD
30/04/14
2. Complete adequacy of rotary airlocks
30/11/13
3. Conduct an inventory of guarding on machinery which have no

interlocks. Include review of each guard in daily cleaning routines.
30/11/13
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
30/11/13

ACCOUNTABILITY:
13
30/04/14
CONFIDENTIAL
BUSINESS
PROCESS:
EHS Compliance
Management
ISSUE:
Unsafe electrical installations and

conditions
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.
14
CONFIDENTIAL
ACTION PLAN:
ACTION DATES:
1. Execute detailed plan to adequate the electrical safety situation in all
31/03/14
areas
2. Establish monthly report based on an EH&S checklist that includes
30/11/13
electrical safety (unlocked panels, etc)
3. Reinforce with all personnel required safety procedures, including roles
30/11/13
and responsibilities, related to Electrical risk.
ACCOUNTABILITY:
15
31/03/14
CONFIDENTIAL
BUSINESS
PROCESS:
EHS Compliance Management
ISSUE:
Poor condition and inadequate

maintenance of Forklifts on site.
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
16
ACTION DATES:
31/01/14
31/01/14
31/12/13
CONFIDENTIAL
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
AUDITOR/s:
Stephen Muli
ACCOUNTABILITY:
17
31/12/13
31/03/14
31/03/14
CONFIDENTIAL
BUSINESS
PROCESS :
Observation:
Product Integrity &

Traceability
ISSUE :
Risk of Product Contamination
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:
ACTION DATES:
1. Formalize and maintain record of root cause analysis in existing follow up
31/10/13
file for foreign matter in SMD.
2. Replace existing fluorescent tubes with appropriate lighting devices
30/04/14
3. Reinforce pest management control procedures with all San Martin
warehouse personnel
31/10/13
PLANNED COMPLETION DATE FOR CORRECTIVE ACTION :
AUDITOR :
Natalia Tufani
Accountable :
18
30/04/14
Eleonora Bolivio, Quality & Product
Manager
Hernn Gallo, Production Manager
CONFIDENTIAL
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
Product Integrity &

Traceability
Quality Assurance
Product Quality
Management
Quality Assurance
Logistics & Stocks
Create Tactical Logistics

Plan
Manage Warehouse
(Primary & Secondary)
Logistics & Stocks
Logistics & Stocks

Asset management
Health & Safety
No action
required
Action
required
Prompt action
required
x
x
Manage Transport
(Primary & Secondary)
Strategic Asset
Management
EHS Compliance
Management
19
x
x
x
x
x
CONFIDENTIAL
F. Appendix II Sample Photographs
20
CONFIDENTIAL
21
CONFIDENTIAL
22
CONFIDENTIAL
23
CONFIDENTIAL
24
CONFIDENTIAL
25

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CONFIDENTIAL

Argentina Factory 2013

2013 Argentina Factory

INTERNAL AUDIT REPORT

ADDRESSEE FOR ACTION:

Sebastian Mondillo, Factory Manager Argentina

FINAL REPORT DISTRIBUTION:

17 September to 3 October 2013.

Ricardo Oberlander - Americas Regional Director

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

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

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

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

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

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

A1. Overall Assessment

Old Process name

TaO Process name

Product Quality Management

Strategic Asset Management

Health & Safety

EHS Compliance Management

A4. Summary of Issues and Action Plans

Summary of Action Plan

Work at height controls are not yet

Conduct risk assessment in

Guards on machinery and equipment

Execute detailed plan to

Absence of a systematic approach to

Holistic electrical safety survey or

No formal forklift maintenance

Develop and implement

Review the current status

Product Integrity &

Absence of non-tobacco related

1. Formalize root cause

A5. Summary of Immediately Reportable Incident (IRIs)

B. Control Navigator assessment

S01 An EHS Policy and

Not Compliant AM1.- Weakness in risk assessment

Weakness in risk assessment

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

Risk assessment ownership not shared by functional managers

Financial losses to BAT and negative impact on corporate reputation.

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

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

OVERALL COMPLETION DATE FOR CORRECTIVE ACTION:

Non-compliance with the EHS

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

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

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

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

OVERALL COMPLETION DATE FOR CORRECTIVE ACTION:

Non-compliance with the EHS

No formal procedure for tracking guards not interlocked.

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

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

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

OVERALL COMPLETION DATE FOR CORRECTIVE ACTION:

Unsafe electrical installations and

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

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