Dill Air Controls Products, LLC. Quality Policy

Dill Air Controls Products, LLC “Quality Policy” “It is the policy of Dill Air Controls Products to meet or exceed Internal and External Customer Exp...
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Dill Air Controls Products, LLC “Quality Policy” “It is the policy of Dill Air Controls Products to meet or exceed Internal and External Customer Expectations by providing superior Products and Services. We do this by focusing on Customer-led Quality Objectives and continually improving The Quality Management System.” Air Controls Products

QM-QP June 2006

Table of Contents Contents of the Eaton ACD Subcontractor Quality Manual

REV. 1 Date: 08/01/02

Cover Page Eaton AC– Roxboro Quality Policy Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1 Section 01 Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 2 Section 02 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 3 Section 03 Purchasing Requirements . . . . . . . . . . . . . . . . . . . . . . . . . Page 4 Section 04 IDEAS Improvement Plan . . . . . . . . . . . . . . . . . . . . . . . . Page 7 Section 05 Tooling Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 10 Section 06 Quality Expectations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 13 Section 07 Production Part Approval Process . . . . . . . . . . . . . . . . . . Page 21 Section 08 Purchasing / Delivery Expectations . . . . . . . . . . . . . . . . . Page 23 Section 09 Subcontractor Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 25 Section 10 Subcontractor Rating and Report Cards . . . . . . . . . . . . . . Page 28 Forms Section . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page

SECTION 01: FOREWORD 1.0

Table of Contents

ABOUT EATON AIR CONTROLS – Roxboro

Eaton Air Controls Division (ACD) – Roxboro, NC, USA is a leading global supplier of highly engineered air and fluid control components for Automotive, Aerospace and Commercial applications. The Roxboro, North Carolina facility is part of the Eaton Automotive’s General Products Division. Our products are manufactured and sold worldwide, primarily to original equipment manufacturers (OEMs) and after market customers. 1.1

ABOUT THIS SUBCONTRACTOR QUALITY MANUAL

Eaton ACD recognized the importance of a Subcontractor Quality Manual that would clearly define and communicate our expectations to our subcontractors; this manual was developed to be a communication tool for Eaton ACD and their subcontractors to: -Review existing subcontractor related procedures & identifies Eaton ACD best practices. -Define expectations of our subcontractors relative to Quality, Delivery, & Cost. -Develop a Subcontractor Measurement, Rating, & Report Card system. -Standardize Production, Prototype, & Practices within Eaton ACD. -Improve the quality of Eaton ACD compliance with QS-9000. -Define all areas that should to be communicated and seek feedback from the supply base throughout the development phase.

REFERENCE DOCUMENTATION:

Last Revised: 08/01/02 Revision Number: 1

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SECTION 02: INTRODUCTION 2.0

Table of Contents

GOAL

The goal of this manual is to standardize, define, and communicate Eaton ACD’s expectations to our subcontractors and their subcontractors. 2.1

COMPLIANCE

Full compliance to this manual begins August 1, 2002 2.2

SCOPE

The Eaton ACD Subcontractor Quality Manual provides direction and expectations for Eaton ACD subcontractors. 2.3

PURPOSE

The process of subcontractor improvement for Eaton ACD requires that the subcontractor and the related supply chain (i.e., subcontractors) maintain a comprehensive Quality System to ensure compliance to the requirements of the contract and this document. This manual explains Eaton ACD’s expectations as well as the process Eaton ACD follows to assess the capability and performance of each subcontractor. Eaton ACD seeks subcontractors who not only have QS-9000 registered quality systems, but also demonstrate a commitment to continuous improvement. Eaton ACD will actively encourage, assist and monitor subcontractors’ compliance to the expectations defined in this manual. We look forward to developing long-term relationships and mutual success with those subcontractors who share Eaton ACD’s philosophy.

REFERENCE DOCUMENTATION:

Last Revised: 08/01/02 Revision Number: 1

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SECTION 03: PURCHASING REQUIREMENTS 3.1

Table of Contents

GENERAL 3.1.1 Eaton ACD seeks subcontractors that offer the most comprehensive design, manufacture and service support, including:         

3.2

Full compliance to this Subcontractor Quality Manual Quality support on site at Eaton ACD, as required Warranty responsibility Compatible software for electronic receipt and transmission of drawings & applicable data 'State of the Art' technology for design and manufacture of components Full design responsibility of the component A design team to review and coordinate design and test activities Design validation testing and ongoing engineering specification (ES) testing Engineering support at Eaton ACD, as required

PURCHASE PROCESS 3.2.1 Subcontractors must have a 'Subcontractor Agreement', ‘Subcontractor Quality Survey Report’ and a current 'Subcontractor Profile' on file with the Purchasing department, prior to being issued a Purchase Order. 3.2.2 Eaton ACD Purchasing Department package to subcontractors, including:    

will issue a 'Request for Quote'

Request for Quote (RFQ) Form Part Drawing(s) Engineering Test Specifications, as required (for required validation & ongoing testing) Material Engineering Specifications, as required.

3.2.3 The Eaton ACD Purchasing department utilizes the following Subcontractor Selection Criteria for the award of new business. The subcontractor has:    

A clear understanding of all requirements, specifications, and expectations Completely filled out the RFQ Documented all proposed design changes for manufacturability An acceptable Eaton ACD Quality, Delivery, & Cost performance rating (if the subcontractor is currently on a Eaton ACD Approved Subcontractor List)

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  

3.3

Demonstrated technical / administrative capabilities & adherence to program timing requirements Submitted a competitive Total Cost quotation (Piece Price, Tooling, Delivery, Packaging, and Payment Terms) Submitted a Minority Business Sourcing Content / Plan if applicable.

MINORITY BUSINESS ENTERPRISE SOURCING PROGRAM 3.3.1 All current and potential subcontractors are required to develop a viable minority-sourcing program. This program should target 5% of purchased goods and/or services from a certified minority enterprise.

3.4

GOVERNMENT, SAFETY AND ENVIRONMENTAL REGULATIONS 3.4.1 Eaton ACD requires that all subcontractors of production material furnish the necessary documentation (i.e. Material Safety Data Sheets, etc.) for supplied product, prior to delivery, in order to satisfy current government, safety and environmental considerations.

3.5

SERVICE AND REPLACEMENT 3.5.1 Purchase Order requirements apply for a minimum period of ten (10) years of service after production or as otherwise stated in writing by Eaton ACD.

3.6

WARRANTY 3.6.1 The subcontractor must have a system in place to investigate all warranty concerns.

3.7

PURCHASE ORDER SYSTEM 3.7.1 Eaton ACD will issue purchase orders as follows: 3.7.2 CONSIGNMENT Purchase Orders - A four digit sequential number will follow the 0048 prefix. Consignment: 0048 (ex. 00485678) MATERIALS Purchase Orders - A five digit sequential number will follow the 0048 prefix Materials 0048 (ex. 004856789)

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REFERENCE DOCUMENTATION: Subcontractor Agreement Subcontractor Quality Survey Report Subcontractor Profile Request for Quote form

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SECTION 04: IDEAS IMPROVEMENT PLAN 4.1

Table of Contents

GENERAL 4.1.1 Due to the competitive nature of the automotive industry, Eaton ACD realized the need to develop a means to continually improve the value of our product. Considering purchased components represent more than half of Eaton ACD total cost, subcontractor involvement is imperative. To facilitate this activity, Eaton ACD created and implemented the IDEAS program.

4.2

IDEAS METRIC AND RATING 4.2.1 Metric: The Calculation for the Annual Idea Target is based on forecasted sales of current calendar year multiplied by .05. Subcontractors are expected to provide a 5% annual value improvement on total forecasted year sales. Rating: The Calculation for IDEAS Points is based on a 12 month rolling sum of the percentage points (see Section 09 - Subcontractor Metric of this manual for the point scale of this metric). 4.2.2 If the subcontractor achieves savings in excess of 5%, the savings will be forwarded into the next calendar year.

4.3

SUBMISSION OF IDEAS PROPOSALS 4.3.1 Subcontractors will submit IDEAS Proposal’s to Eaton ACD Purchasing department. Data, prints, specifications, or any other relevant information must accompany the proposal. 4.3.2 The Eaton IDEAS Committee will:    

Review the proposal for completeness and required payback within 2 years Enter the proposal into the IDEAS Tracking database and assign it a tracking number Issue a letter of acknowledgement to the subcontractor that includes the tracking number Forward the proposal to the Eaton ACD buyer for a feasibility review with appropriate Eaton ACD personnel.

4.3.3 Subcontractors may submit a proposal at any phase of a program.

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4.3.4 Approved 'Bookshelved' IDEAS proposals will be credited with up to 25% of the calculated savings. Proposals that may be submitted as IDEAS include:               

4.4

Design Change New Technology Heat Treat Process Change FOB Change Packaging and Reusable Containers Inventory Reduction New Material Volume Discounts Payment Terms Piece Price Reduction Cycle Time Reduction Reliability Recyclability Communication

IDEAS APPROVAL PROCESS 4.4.1 Eaton ACD will determine if the IDEAS proposal is, approved, book shelved, or rejected. The Purchasing department will:  Acknowledge receipt of proposal.  Provide a quarterly Status Report indicating whether the IDEAS proposal is under investigation, approved, bookshelved, or rejected. 4.4.2 Eaton ACD Purchasing will facilitate between the subcontractor and the appropriate Eaton ACD personnel any dispute stemming from the rejection of an IDEAS proposal.

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4.4

IDEAS SAMPLE

Begin compliance to the 5 % IDEAS

JAN 2000 FEB

$1,000 proposal is approved. This represents 1% of the metric. A total of 2 points are credited to the Supplier Metric.

Calculation for the Annual IDEAS Target based on the calendar year forecasted sales. Example: 100,000 forecasted sales X .05 = $5000 IDEAS target for

MAR APRIL MAY

$3,000 proposal is approved. This represents 3% of the metric. A total of points 8 are now credited to the Supplier Metric.

JUNE JULY

$4,000 idea is Bookshelved and 25% or $1,000 of the proposal is credited. This represents 1% of the metric. A total of 10 points are now credited to the Supplier Metric.

AUG SEPT OCT

Monthly points on Report Card based on 12 month rolling sum.

METRIC SCALE > 5.0% 10 points 4.5 % to 4.9 % 09 points 4.0 % to 4.4 % 08 points 3.5 % to 3.9% 07 points 3.0 % to 3.4 % 06 points 2.5 % to 2.9 % 05 points 2.0 % to 2.4 % 04 points 1.5 % to 1.9 % 03 points 1.0 % to 1.4 % 02 points 0.1 % to 0.9% 01 points 0% 00 points

NOV DEC

Begin issue of Supplier Report Card with IDEAS

Based on a 12 month rolling sum and no proposals approved since March of 2000. A total of 8 points are now credited to the Supplier Metric.

Based on a 12 month rolling sum and no proposals approved since June of 2000. A total of 2 points are now credited to the Supplier Metric.

Based on a 12 month rolling sum and no proposals approved since August of 2000. A total of 0 points are now credited to the Supplier Metric. Based on Jan. 2001 forecast & the 12 month rolling sum - a $5000 proposal is approved. This represents 2.5 % of the metric. A total of 5 points are now credited to the Supplier Metric.

10

JAN 2001

10

FEB

8

MAR

8

APRIL

8

MAY

2

JUNE

2

JULY

2

AUG

0

SEPT

0

OCT

5

NOV

5

DEC

5

JAN 2002

Calculation for the Annual IDEAS Target based on the calendar year forecasted sales.

Example: 200,000 forecasted sales X .05 = $10,000 IDEAS target for

Calculation for the Annual IDEAS Target based on the calendar year forecasted sales.

REFERENCE DOCUMENTATION:

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SECTION 05: TOOLING POLICY 5.1

Table of Contents

GENERAL 5.1.1 Eaton ACD issues purchase orders for Eaton owned tooling, including: dies, molds, etc. which are purchased or specially constructed for use by subcontractors in the manufacture of parts for specific models, assemblies, or products, and which usually have a limited life cycle. 5.1.2 Eaton ACD reserves the right to move tools to an alternate facility at our discretion. 5.1.3 Subcontractors must request written authorization from Eaton ACD before:    

5.2

Moving or destroying tooling Altering tooling capacity Selling products made from Eaton ACD tooling to any other customer Disposing of service parts tooling

DEFINITION OF SPECIAL TOOLS 5.2.1 Eaton ACD follows the US. Internal Revenue Services guidelines for classifying special tooling assets. The following guidelines define what Eaton ACD considers as tooling:    



Specially designed. Life is limited to the production and service lives of the parts, which they produce. Tools that touch the part that they produce (including stamping dies, fixtures, gear cutters, broaches, molds and jigs). Tools that can be re-located (molds and dies). Tools found between the 'bolster plates' of a machine and piece of equipment (including stamping dies, welding fixtures, subplots, or automation handling devices). Non-U.S. Eaton ACD affiliates may have a modified version of this definition to comply with local government requirements.

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5.3

QUOTATION AND TOOLING ORDER PROCESS 5.3.1 Subcontractors must establish methods to control capacity fluctuations from schedule releases and production requirements. If additional tooling must be purchased, the subcontractor must inform the Eaton ACD Purchasing department immediately. 5.3.2 Subcontractor tooling quotations should be based upon the volumes indicated on the RFQ form. Capacity for these volumes should be calculated based on a workweek that does not exceed five days of 3 shifts each, unless otherwise agreed upon in writing by the Eaton ACD Purchasing department. The quotation must also include:  

 

Tooling life (total quantity tool can produce) Subcontractor must document minimum set-up quantities; commodities may require various numbers of parts and run-off iterations to ensure Eaton ACD a smooth production launch. Tooling expense breakdown, including fixtures, dies, gauging and other costs. Subcontractors are expected to maintain and repair tooling at their expense.

5.3.3 Purchase Orders will describe capacity and capability (tooling run-off) specifications that may be necessary above and beyond PPAP requirements. 5.4

INVOICING 5.4.1 Subcontractor invoices should document expenditures for Eaton ACD owned tooling. In addition, invoices must show the exact physical location of where the tools will be used, including:   

city, township or village state or province country

5.4.2 Subcontractor invoices for tooling should reflect the tooling order amount or the actual costs incurred whichever is less. Any discrepancies should be brought to the attention of the Eaton ACD purchasing department. 5.4.3 Eaton ACD Purchasing department will approve tooling payment when PPAP and Pre-Production parts are approved, or as otherwise agreed upon with Eaton ACD. Also the Eaton ACD Purchasing department will approve Gage and Measurement Equipment payment when Eaton ACD Quality department approves the required statistical studies.

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5.5

TOOLING IDENTIFICATION 5.5.1 The subcontractor will mark or label tooling, as appropriate, with an identification tag. The tag number will be entered into the Eaton ACD Capital Database. This database will identify ownership of the tool (Eaton ACD or Eaton ACD's OEM Customer) and the part number that the tool is intended to produce.

REFERENCE DOCUMENTATION:

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SECTION 06: QUALITY EXPECTATIONS 6.1

Table of Contents

GENERAL 6.1.1 Subcontractors are expected to be either: A) QS-9000 Registered or B) ISO 9000 Registered and in the process of obtaining QS-9000 Registration or C) ISO 9000 Registered “Must comply with” the QS-9000 quality assurance requirements and all AIAG reference documents, including:     

6.2

Production Part Approval Process Failure Mode and Effects Analysis Advanced Product Quality Planning Measurement Systems Analysis Statistical Process Control

SUBCONTRACTOR ASSESSMENTS 6.2.1 The completed Eaton ACD Subcontractor Profile and Subcontractor Quality Survey will be the basis for the assessment. The Subcontractor Quality Engineer and Purchasing will decide if a subcontractor is added to the Approved Subcontractors List. 6.2.2 Eaton ACD will conduct full or partial - ongoing subcontractor assessments by an individual or by a cross-functional team annually.

6.3

APPROVED SUBCONTRACTORS LIST (ASL) 6.3.1 Subcontractors may be added to the ASL if they: A)

B)

Receive an acceptable score from the Subcontractor Quality Survey (information can be gathered during an on-site visit of their facility or by completing a Eaton ACD Subcontractor Quality Survey) or Are currently on another Eaton Automotive Group ASL with an acceptable status that allows new business.

6.3.2 The subcontractor will be given a specified period of time to submit an action plan detailing corrective actions for all survey scores less than 5 points. The Eaton ACD Quality department is responsible for conducting the assessment and will review the action plan. Once all of the corrective actions are approved, the assessment is considered completed.

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6.3.3 If the corrective action plan is not submitted and approved within the specified time frame, this information may be submitted for review by the Purchasing/Quality team. The team can elect not to add the subcontractor to the ASL or they can elect to extend the period of time allowed to complete the corrective actions. 6.3.4 Subcontractor removal from the ASL is addressed in Section 09: Subcontractor Metrics of this manual. 6.4

ADVANCED PRODUCT QUALITY PLANNING 6.4.1 Using the AIAG Advanced Product Quality Manual, latest edition (APQP), Eaton ACD seeks to involve subcontractors early in the product development cycle to optimize the design of components and processes. 6.4.1.1

Eaton ACD reserves the right to perform a 'PPAP Run Review' with the subcontractor, prior to the PPAP run.

Eaton ACD requires conformance to the following: 



 

6.5

All equipment and processes used in the manufacture of Eaton ACD production components must have their capacity rates verified and documented. Subcontractor must be ready to run production at the quoted capacity and conduct an in-house process validation (PV) prior to production. Operators and support personnel must be trained in the requirements of the current or updated Control Plan, equipment, and gages. Process capability and gage R & R studies must be completed and documented, including: bias, stability and linearity. Material handling systems, packaging, and routings must be in place.

PROCESS CAPABILITY AND MONITORING 6.5.1 Eaton ACD Quality and subcontractor representatives should develop a list of Customer and Process Special Characteristics (SC’s), as required. The list must be reviewed and approved by Eaton ACD Quality department. 6.5.2 Subcontractors must possess a Statistical Process Control (SPC) system with minimum acceptable values of 1.67 Ppk for PPAP submission and 1.33 Cpk for monitoring ongoing production capability. Subcontractors shall utilize the APQP process to list and submit all Special Characteristics for Eaton ACD Quality department approval, during the APQP process.

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6.5.3 Subcontractors will submit quarterly Cp and Cpk statistical data for all customer designated and process special characteristics to the Eaton ACD Quality department personnel. 6.5.4 If the process does not meet the 1.33 Cpk capability target, the subcontractor must obtain approval from Eaton ACD Quality department and submit the following: 



6.6

The containment plan and 100% inspection results or a sampling method that prevents out of specification parts from being shipped to Eaton ACD. The Corrective Action Plan for capability improvement.

ENGINEERING DEVIATION 6.6.1 The following steps must be taken when an Eaton ACD subcontractor seeks permission to ship product that does not meet specification: 1st 2nd 3rd 4th-

6.7

The subcontractor must submit to Eaton ACD a request for an Engineering Deviation for approval. Once approved by Eaton ACD Product Engineering, the Engineering Deviation will list the expiration date and applicable quantity of product affected. The subcontractor must ship product, including a completed Delivery Notice of Product/Process Change form indicating changes within the guidelines of the signed Engineering Deviation. The subcontractor must obtain written authorization for additional shipments beyond the expiration period.

ENGINEERING CHANGE REQUESTS 6.7.1 Subcontractors must submit an Engineer Change Request form, to Eaton ACD’s Purchasing department, in writing, any proposed changes to Eaton ACD product drawings.

6.8

PROCESS CHANGES 6.8.1 Subcontractors must re-submit and comply with the AIAG PPAP (current revision) process for all process changes. Examples of process changes requiring PPAP approval may include, but may not be limited to, the following:  

Changes in Manufacturing or Assembly location Movement of or modifications to Equipment, Fixtures, or Tools

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  

6.9

Changes or alterations in Material Processing Changes to Inspection Methods Changes in Sub-contractors used

CONTROL OF NONCONFORMING PRODUCT 6.9.1 Subcontractors will be responsible for the quality and reliability of their parts. Product must meet all Eaton ACD drawing and Engineering specifications. Subcontractor’s responsibility is inclusive of costs incurred for containment, sorting, rework, repair, and replacement of defective material.

6.10

NON-CONFORMING MATERIAL NOTICES (NMN)

6.10.1 When Eaton ACD identifies non-conforming product, a NMN will be issued to the subcontractor's Quality department. Each NMN requires an 8-D Response, unless otherwise agreed upon. The NMN will remain open until an acceptable response is received, and the subcontractor has demonstrated that the corrective actions are implemented and proven effective. 6.10.1.1 Eaton ACD will issue a NMN to the subcontractor regardless of the disposition and or use of the nonconforming material. Eaton ACD will apply only the number of nonconforming parts to the PPM factor. 6.10.1.2 Eaton ACD will not issue a NMN and defective parts will not be counted toward the subcontractor's PPM number, if the subcontractor: 1. 2.

Requests and gets approval through an Engineering Deviation to allow use of the supplied product. Notifies Eaton ACD of a potential quality concern prior to being received by Eaton ACD and removes or sorts the suspect material and replaces it with "certified" material.

6.10.2 Eaton ACD requires that the subcontractor perform the following to close a NMN: 1. Conduct failure analysis of parts returned from Eaton ACD or from Eaton ACD customers. 2. Submit a preliminary written 8-D Response with containment action and sort results, within 24 hours of notification. Closure includes objective evidence that the corrective actions are implemented and proven effective. 3. Submit the Final 8-D Written Closure no later than 30 days from the NMN issuance date. The subcontractor may request approval from Eaton ACD for an extension of the 30-day time limit.

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6.11 SUBCONTRACTOR CHARGEBACK SYSTEM FOR NON-CONFORMING MATERIAL 6.11.1 Eaton ACD’s subcontractors will be charged back for costs associated with each verified NMN issued for non-conforming material. Eaton ACD will handle non-conforming material issues by selecting one of the following options, depending on production requirements: Preferred Option – Non-conforming Material is returned to the subcontractor Situation: Eaton ACD’s production schedule and/or inventory levels allow enough time to send the non-conforming material back to the subcontractor. The subcontractor issues a Return Material Authorization Number (RMA #) to Eaton ACD to document and track material being returned for sorting, rework or scrap at the subcontractor’s facility. Charges: 1) The subcontractor will be charged a default rate of $100.00 per NMN upon verification of root cause of non-conforming material. Default Rate is broken down as follows:   

"Investigation" time, including: review, layout, identification, and quarantine of the suspect parts. "Labor" time, including time spent on layout inspection, material control, and product engineering. "Administrative" time, including issuing NMN, filling out Subcontractor Charge Back Worksheet, obtaining RMA #, generating Shipping Documentation, notifying the subcontractor (faxes and phone calls), and moving suspect material from "available" status to “non-conforming” status.

2) The subcontractor is expected to accept responsibility for freight costs related to returning (freight invoices) or disposing (scrap charges) of any non-conforming material. Secondary Option – Subcontractor Must Sort Material @ Eaton ACD Facility Situation: The subcontractor’s employees sort material at the Eaton ACD facility because our existing production schedules and/or component part inventory levels do not allow time to return the material to the subcontractor’s facility. Charges: 1) The subcontractor will be charged a default rate of $100.00 per NMN upon verification of root cause of non-conforming material. Default Rate is broken down as follows:

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  

"Investigation" time, including: review, layout, identification, quarantine of the suspect parts, and support of the subcontractor's sorting crew. "Labor" time, including time spent on layout inspection, material control, and product engineering. "Administrative" time, including: issuing NMN, filling out Subcontractor Charge Back Worksheet, generating Shipping Documentation, notifying the subcontractor (faxes and phone calls), and moving suspect material from "available" status to “non-conforming” status, moving material from “nonconforming status to “available” status once sort has been completed and material is considered certified.

2) Subcontractor is expected to accept responsibility for costs related to returning (freight invoices) or disposing (scrap charges) of any non-conforming material. Third Option – Subcontractor Must Sort Material @ Eaton ACD Facility Using a Contract Sorting Service Situation: Eaton ACD requires the non-conforming material to be sorted on-site because our existing production schedules and or component part inventory levels do not allow time to return the material to the subcontractor’s facility. The subcontractor is unable to send it’s own employees to sort material and must make arrangements for an outside source to perform the sort. Eaton ACD can arrange this at the contractor’s expense. Charges: 1) The subcontractor will be charged a default rate of $100.00 per NMN upon verification of root cause of non-conforming material. Default Rate is broken down as follows:   

"Investigation" time, including: review, layout, identification, quarantine of the suspect parts, and support of the subcontractor's sorting crew. "Labor" time, including time spent on layout inspection, material control, and product engineering. "Administrative" time, including: issuing NMN, filling out Subcontractor Charge Back Worksheet, generating Shipping Documentation, notifying the subcontractor (faxes and phone calls), and moving suspect material from "available" status to “non-conforming” status, moving material from “nonconforming status to “available” status once sort has been completed and material is considered certified.

2) Subcontractor is expected to pay for any expenses associated with the contract sorting service hired to perform the sort. 3) Subcontractor is expected to accept responsibility for costs related to returning (freight invoices) or disposing (scrap charges) of any non-conforming material.

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Final Option – Eaton ACD Personnel Must Sort Material Situation: Eaton ACD requires the non-conforming material to be sorted on-site because of one or more of the following:   

Existing production schedules and/or component part inventory levels do not allow time to exercise any of the options listed above. Subcontractor refuses to send his or her own employees to sort material. Subcontractor refuses to make arrangements for an outside source to perform the sort.

Eaton ACD has no choice but to perform the sort in order to protect our customer and meet production schedules. Subcontractor’s performance rating will be impacted by this option. Charges: 1) The subcontractor will be charged a default rate of $100.00 per NMN upon verification of root cause of non-conforming material. Default Rate is broken down as follows:   

"Investigation" time, including: review, layout, identification, quarantine of the suspect parts, and support of Eaton ACD sorting crew. "Labor" time, including time spent on layout inspection, material control, and product engineering. "Administrative" time, including: issuing NMN, filling out Subcontractor Charge Back Worksheet, generating Shipping Documentation, notifying the subcontractor (faxes and phone calls), and moving suspect material from "available" status to “non-conforming” status, moving material from “nonconforming status to “available” status once sort has been completed and material is considered certified.

2) Subcontractor is expected to pay a $75 per hour sort fee for the actual sort hours performed by Eaton ACD personnel (formula: $75/hr X Sort hours X Number of Eaton ACD employees sorting material). 3) Subcontractor is expected to accept responsibility for costs related to returning (freight invoices) or disposing (scrap charges) of any non-conforming material.

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6.11.2 There will be a 30 calendar day period between the time the Subcontractor Charge Back Worksheet is mailed to the subcontractor, and the date that the costs are actually deducted from the subcontractor's account. This will allow sufficient time for the subcontractor to contact Eaton ACD personnel with any questions regarding the complaint or the amount of the charge back. The date field in the upper left of the Subcontractor Charge Back Worksheet titled "Charge Back Report Date" is the date that the Worksheet is generated and sent to the subcontractor and is considered the start date for the 30 day review period. The costs identified on the Worksheet will not be charged to the subcontractor until 30 days after the "Charge Back Report Date". 6.12

VERIFICATION AT SUBCONTRACTOR PREMISES 6.12.1 Eaton ACD and their customers reserve the right to verify product conformance to any and all specified requirements at the subcontractor and/or subcontractor's premises.

REFERENCE DOCUMENTATION: Engineering Deviation form Delivery Notice of Product/Process Change form

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SECTION 07: PPAP SUBMISSIONS 7.1

Table of Contents

GENERAL 7.1.1 Subcontractors must comply with the latest edition of the AIAG Production Part Approval Process (PPAP) manual and all Eaton ACD requirements. 7.1.2 Eaton ACD requires Level 3 PPAP Submission. Parts for production part approval must be taken from a significant production run. This run would typically be from one hour to one shift’s production, with the specific production quantity to total 300 parts minimum unless a different quantity has been agreed upon and documented on the PPAP Purchase Order. Parts from each position of a multiple cavity die; mold, tool or pattern is to be measured and representative parts tested. Subcontractors are expected to retain one master sample from the PPAP run. 7.1.3 Subcontractors must resolve all quantity and revision level discrepancies between parts and part drawings, prior to PPAP run and submission. 7.1.4 Eaton ACD will notify the subcontractor when the PPAP submission is approved or rejected via a countersigned PSW. 7.1.5 Subcontractor PPAP submissions must include:  

     

A copy of the PPAP purchase order and/or ECR. A 6-piece sample with a dimensional layout inspection report for Eaton ACD verification and approval (subcontractor may use the Production Part Approval – Dimensional Results form located in the Forms Section of the AIAG manual. The Material Test Results form and the Performance Test Results form may be used, if applicable). All part characteristics serial numbered in correlation with the inspection results and engineering drawings. Material certification of the finished part (complete material analysis). A full gage R&R study including bias, stability and linearity. Engineering Specification (ES) test data. Sub-assembly subcontractors must submit PSW copies of subcontracted parts with the sub-assembly submission. Sample of production intent shipping container/packaging including proper Bar Code labeling.

Last Revised: 08/01/02 Revision Number: 1

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7.2

PART SUBMISSION WARRANT (PSW) 7.2.1 Subcontractors need only submit a PSW when Eaton ACD, specifies a Level 1 PPAP. Please utilize the AIAG Part Submission Warrant form when completing a Level 1 PPAP.

7.3

PPAP WAIVER 7.3.1 Subcontractors must submit a request for PPAP Waiver when requesting any variation from the above stated requirements. The request will be review by the Eaton ACD Quality, Product Engineering, Purchasing department s for content. Eaton ACD will issue a written authorization upon concurrence.

REFERENCE DOCUMENTATION: AIAG PPAP Manual

Last Revised: 08/01/02 Revision Number: 1

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SECTION 08: PURCHASING / DELIVERY EXPECTATIONS 8.1

Table of Contents

PURCHASING EXPECTATIONS 8.1.1 All subcontractors must comply with the Eaton ACD Purchasing expectations defined in this section. 8.1.2 Eaton ACD will specify expectations for Purchasing via the APQP process, quotations, purchase orders and other forms of communication. The requirements include:           

Labeling Capacity FOB Point Containers Warehousing Consignment Product Identification Preservation of Product Release and Pull Systems Transportation Mode and Carrier Route Returnable Dunnage (when cost effective)

8.1.3 Subcontractors are expected to comply with the following general expectations and requirements:    

8.2

AIAG B-3 publication, "Shipping Parts & Identification Label Application Standard" AIAG B-1 publication, "Bar Code Symbology Standard" AIAG RC-8 publication, "Single and Multi Use Container Systems Guideline" AIAG RC-5 publication "Returnable Containers Management Guideline"

INVENTORY OF DUNNAGE 8.2.1 Subcontractors are expected to manage returnable dunnage and ensure material flow. Damaged containers, trays, or other Eaton ACD supplied product should be removed from use, tagged as defective and returned with notification to the Eaton ACD facility. The subcontractor will reimburse Eaton ACD for damages incurred by the subcontractor.

Last Revised: 08/01/02 Revision Number: 1

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8.3

DELIVERY PERFORMANCE – PRODUCTION SUBCONTRACTORS 8.3.1 The subcontractor must ship 100% on time (three days early to two days late) to the Eaton ACD facility. Subcontractors are financially responsible for all freight charges and costs incurred due to late deliveries. 8.3.2 Subcontractors must ensure Shipment Quality, which includes Labeling/Identification and Shipping Information. Labeling / Identification Requirements:  Packing Slip must be present and contain correct information  Shipping Label must be present, bar coded, in the correct location, contain the correct information and meet AIAG standards  Special Labels (PPAP, PSW, ECR) must be present, if applicable Shipping Information Requirements:  Shipments must be 100% on time (2 Days Late / 3 Days Early)  Eaton ACD preferred carriers must be used per routing instructions  Specified Pallet and Carton Pack Quantities must be adhered to  Must obtain premium freight authorization, in writing, to address responsibility for expedited freight charges prior to shipping

8.4

PRODUCTION PARTS INVENTORY 8.4.1 Eaton ACD requires our subcontractors to ensure proper rotation of inventory using a First In/First Out (FIFO) system. 8.4.2 Subcontractors must obtain a written Stocking Agreement from Eaton ACD’s Purchasing department prior to carrying safety stock of finished goods inventory

8.5

DELIVERY METRICS AND RATINGS FOR FREIGHT CARRIERS 8.5.1 Freight Carriers will be required to:  Deliver 100% on time (Meet published delivery standards).  Submit a monthly service report with an explanation for late deliveries.

REFERENCE DOCUMENTATION: AIAG B-3 publication, "Shipping Parts & Identification Label Application Standard" AIAG B-1 publication, "Bar Code Symbology Standard" AIAG RC-8 publication, "Single and Multi Use Container Systems Guideline" AIAG RC-5 publication "Returnable Containers Management Guideline"

Last Revised: 08/01/02 Revision Number: 1

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SECTION 09: SUBCONTRACTOR METRICS

Table of Contents

9.1 METRICS 9.1.1 Eaton ACD uses Subcontractor Metrics as:  A measurement system for award of new business and identification of long term subcontractors.  As a communication tool for alerting the subcontractors’ Management of problems with their quality system and requires a timely response from the subcontractors’ Management. 9.2 QUALITY METRICS = 50 POINTS 9.2.1 Defective Parts Per Million (PPM). The expectation is 0 PPM. Formula: (Total # of Defective Parts Found / Parts Delivered in the Month) x 1,000,000. Eaton ACD will count only nonconforming parts but the subcontractor must forward sort results from 'in house' sorts or the full quantity will be applied to the subcontractors' PPM calculation.

0 ppm 01 ppm to 10 ppm 11 ppm to 20 ppm 21 ppm to 40 ppm 41 ppm to 60 ppm 61 ppm to 100 ppm 101 ppm to 150 ppm 151 ppm to 250 ppm 251 ppm to 500 ppm 501 ppm to 750 ppm 751 ppm to 1000 ppm 1001 ppm to 1250 ppm 1251 ppm to 1500 ppm 1501 ppm to 2000 ppm 2001 ppm to 2500 ppm > 2500 ppm

9.2.2 Responsiveness to 8-D's The expectation is: Preliminary Written Response within 24 Hours and Final 8-D Written Closure submitted within 30 days - regardless of the number of 8-D submissions that are required. Subcontractors will not be penalized if granted a Long Term Action Pending to the 30-day period for 8-D submission.

Last Revised: 08/01/02 Revision Number: 1

Preliminary written 8-D response(s) submitted within 24 hours 8-D closure(s) submitted within 30 days. Preliminary 8-D response(s) submitted later than 48 hours and Final Closure submitted beyond 30 days.

Points Awarded 15 points 14 points 13 points 12 points 11 points 10 points 09 points 08 points 07 points 06 points 05 points 04 points 03 points 02 points 01 points 00 points

Points Awarded 05 points

05 points

00 points

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9.2.3 Issue of NMN's The expectation is no NMN’s issued to the subcontractor. Formula: Total number of NMN’s issued.

0 NMN’s issued 1 NMN’s issued 2 NMN’s issued 3 NMN’s issued 4 or more NMN’s issued

9.2.4 Type of Quality Assurance System The expectation is subcontractor registered to QS-9000. Formula: Current type of Quality system third party registration.

QS-9000 Registered ISO-9000 Registered and working toward QS9000 ISO-9000 Registered

Points Awarded 10 points 09 points 06 points 03 points 00 points

Points Awarded 15 points 10 points

05 points

9.3 DELIVERY METRICS = 30 POINTS 9.3.1 On-Time Deliveries The expectation is 100 % on-time delivery with accurate quantities. Formula: # of Deliveries on time / # of Releases or Standard Packs required.

100% on time 95% to 99% 85% to 94% 75% to 84% < 75 %

Points Awarded 20 points 15 points 10 points 05 points 00 points

Eaton ACD appreciates subcontractors' quick reaction to schedule fluctuations and will not penalize the subcontractor when lead-time is excessively crushed. 9.3.2 Use of Eaton Specified Freight Carriers The expectation is the use of Eaton specified freight carriers. It is the responsibility of the subcontractor to contact the Eaton Purchasing department to resolve any questions pertaining to routing instructions prior to shipment.

Last Revised: 08/01/02 Revision Number: 1

100% Compliance Use of non-specified carriers

Points Awarded 10 points 0 points

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9.4 COST METRIC = 20 POINTS 9.4.1 IDEAS Program

Points Awarded

The expectation is a Value Improvement of 5 % annually. Formula: Subcontractor's IDEAS dollars Approved / Subcontractor's Annual Sales to Eaton ACD. Eaton ACD started maintaining records on IDEAS in January of 2001. Subcontractors will be awarded the full *20 points on the COST metric per the calendar year beginning January 1, 2002 and if non-compliant will be downgraded in January 2002.  Subcontractor’s “IDEAS Dollars Approved” includes both cost savings from IDEAS that were approved and implemented and cost savings that are “Bookshelved” for the calendar year. Internal Eaton ACD operational cost savings generated from subcontractor’s IDEAS will be included. Monthly calculations for IDEAS will be based on projected sales. Annual calculations will be based on actual sales. Competitive Pricing (non-calculated rating granted by Purchasing Formula: Pricing trends are competitive with market prices Price Containment (non-calculated rating granted by Purchasing Formula: Actions are taken to expedite price decreases or delay price increases

5.0% 4.5% to 4.9% 4.0% to 4.4% 3.5% to 3.9% 3.0% to 3.4% 2.5% to 2.9% 2.0% to 2.5% 1.5% to 1.9% 1.0% to 1.4% 0.1% to 0.9% 0%

10 points 09 Points 08 Points 07 Points 06 Points 05 Points 04 Points 03 Points 02 Points 01 Point 00 Points

05 Points maximum 05 Points maximum

9.5 METRIC SUMMARY METRIC QUALITY DELIVERY COST TOTAL

POINTS AWARDED 50 30 20 100

REFERENCE DOCUMENTATION:

Last Revised: 08/01/02 Revision Number: 1

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SECTION 10: SUBCONTRACTOR RATINGS AND REPORT CARDS Table of Contents

10.1 SUBCONTRACTOR RATINGS 10.1.1 Eaton ACD Subcontractor Ratings is used as a basis for alerting the subcontractor’s management to problems with their quality system. Subcontractors should utilize established problem solving techniques to determine root cause(s) and provide plans for the timely implementation of corrective action(s). POINTS

RATING

CRITERIA TO DOWNGRADE Downgraded based on a 3-month numerical moving average.

CRITERIA TO UPGRADE Does not apply

91 to 100

Excellent

81 to 90

Good

Downgraded based on a 3 month rolling average.

Upgraded based on a 3 month rolling average.

71 to 80

Fair

Upgraded based on a 3 month rolling average.

61 to 70

Probationary

Downgraded based on a 3 month rolling average. Downgraded based on a 3 month rolling average.

< 60

Poor

Does not apply

Upgraded based on a 3 month rolling average.

Upgraded based on a 3 month rolling average.

SUBCONTRACTOR STATUS New subcontractor or subcontractor with no performance concerns. Preferred Subcontractors for new business long term contracts, and volume increases. Subcontractor may be awarded new business.

Subcontractor might be awarded new business but must show improvement. Subcontractor may not be awarded new business. Strongly encouraged to improve. Subcontractor is subject to removal from Eaton ACD supply base.

10.2 DOWNGRADING OR DE-SOURCING OF A SUBCONTRACTOR 10.2.1 Eaton ACD may downgrade the subcontractor's rating and/or de-source the subcontractor for any of the following reasons:       

Poor Performance Rating Subcontractor Ownership Change Subcontractor Management Behavior Significant Quality, Delivery, or Cost issues Plant or Product re-location without Eaton ACD Notification And approval Failed Assessment and Corrective Action response Design or Manufacturing Change without proper notification to Eaton ACD

Last Revised: 08/01/02 Revision Number: 1

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10.3 SUBCONTRACTOR REPORT CARDS 10.3.1 The subcontractor’s management will be issued a report card with ratings on quarterly basis for subcontractors who have shipped product within the previous 3 months. Subcontractors are encouraged to review their rating with the Eaton ACD Quality department. REFERENCE DOCUMENTATION:

Last Revised: 08/01/02 Revision Number: 1

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Acronyms 8D AIAG APQP ASL Cpk CP ECR EDI ES FIFO FMEA JIT MAPS MRO MRP MSA NMN OEM Ppk PPM PO PPAP PSW QFD QOS QR RFQ RPN RYG SC SCM SRM SPC SQ TCM TQM TQE

Eight Discipline Report Automotive Industry Action Group Advanced Product Quality Planning Approved Subcontractor List Ongoing production statistical capability monitoring Control Plan Engineering Change Request Electronic Data Information Engineering Test Specifications First In First Out Failure Mode and Effects Analysis Just In Time Manufacturing & Planning Systems Maintenance, Repair and Operating Supplies Material Requirements & Planning System Measurement Systems Analysis Non-conforming Material Notice Original Equipment Manufacturer Minimum piece run - statistical capability monitoring Parts Per Million Purchase Order Production Part Approval Process Part Submission Warrant Quality Function Deployment Quality Operating System Quality Reject Request for Quote Risk Priority Number Red, Yellow, Green APQP Status Special Characteristics Supply Chain Management Subcontractor Resource Management Statistical Process Control Subcontractor Quality Total Cost Management Total Quality Management Total Quality Excellence

Last Revised: 08/01/02 Revision Number: 1

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