ELECTROLUX MAJOR APPLIANCES

THE GLOBAL SUPPLIER QUALITY ASSURANCE SYSTEM

SUPPLIER PROCESS AUDIT QUESTIONNAIRE EL 3000 Edition 2007 Revision A

GSQA EL29002A - 2007

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Preface The purpose of this document is to describe the supplier requirements relating to the Ongoing Performance Evaluation system that shall be in use for suppliers who produce parts for AB Electrolux. Purchased raw materials and components constitute a major proportion of the content of the products manufactured by AB Electrolux, and, consequently the quality of these materials and components is of utmost importance for the overall quality of products. The performance evaluation procedures are in place to encourage our suppliers to improve their quality and flexibility, and of course the statistics shall be used to check that there is progress. A good quality supplier will have no quality faults or will be very quickly moving towards this situation. A flexible supplier will always be able to deliver or stop delivering within the time frame that is required. AB Electrolux shall therefore, be very careful in selecting suppliers, using only those that can demonstrate the full commitment and ability to comply with the requirements of this document, and to support this through the quality of products and services provided. Signed

Francois Van Caeyzeele Senior Vice President Purchasing AB Electrolux

Dated

Sture Ögren Senior Vice President Quality AB Electrolux

Hans Stråberg President & CEO AB Electrolux

STATEMENT OF CONFIDENTIALITY AB Electrolux gives its assurance that any information provided by suppliers will be treated as totally confidential. AB Electrolux and its advisors, who are bound by a confidentiality agreement, will have sole access to this information.

GSQA EL29002A - 2007

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SUPPLIER REQUIREMENTS RELATING TO ONGOING SUPPLY AND EVALUATION EL 3040 NON-CONFORMING PRODUCT CONCESSIONS Non-conforming and reworked products shall not be dispatched or delivered unless a written concession or deviation has been formally granted by the AB Electrolux company Design authority. If any defects are discovered or suspected in deliveries immediate notification to the Electrolux company must be made. Applications for concessions shall be made through the AB Electrolux company's Purchasing department and be accompanied by full details of deviations from Specifications, quantity affected and corrective action. CORRECTIVE ACTION IMMEDIATE If non-conforming parts should be delivered to AB Electrolux there are 3 ways to deal with the situation. AB Electrolux and if time permits the supplier will choose the best solution for each occasion. 1)

Return the non-conforming lot to the supplier. This solution shall always be chosen when time permits. The supplier sorts out the bad parts or makes new good parts.

2)

The supplier comes to the AB Electrolux plant and sorts or repairs and tests the parts.

3)

AB Electrolux sorts or repairs and tests the parts. This solution is only chosen if it is absolutely necessary.

All three ways to deal with the problem will mean costs for the supplier, see AB Electrolux Chargeback Policy EL 3050. CORRECTIVE ACTION SHORT AND LONG TERM The corrective action shall ensure that the problems are not repeated. The supplier shall state what the corrective action will be within 5 days. Normally the supplier will get a "quality complaint form" on which the concern is stated and on which he shall provide an answer. The supplier shall explain the cause of the defect and shall also explain why the Quality system did not prevent or detect the problem and what has been put in place to prevent it happening again. An example of a current Supplier Corrective Action/Supplier Quality Improvement Plan is shown in Appendix D

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SUPPLIER REQUIREMENTS RELATING TO ONGOING SUPPLY AND EVALUATION EL 3050 AB ELECTROLUX CHARGE BACK POLICY PURPOSE The AB Electrolux Supplier Chargeback provides guidelines for a consistent approach to the Supply base for recovery of cost incurred by AB Electrolux for non-conforming materials. The policy is not intended to be a "punishment". It is intended to create speedy corrective actions. APPLICATION The Chargeback Policy will be applied in those situations where the Supplier is determined to be at fault for the non-conforming condition. PROCEDURE The supplier will be charged for the additional cost incurred by the AB Electrolux Plants caused by non-conforming components, materials and late deliveries. A Non-conformance is created when a dimension or characteristic is not to specification. It is also created when the supplier has changed a dimension or characteristic without notification from an established situation. The supplier shall be notified of a charge back prior to cost being incurred as follows: 1. Charges related to the receipt of non-conforming parts: - Return to supplier

X

- Scrap at AB Electrolux location

X + any direct costs related to the scrapping

- Sort and/or rework by the supplier at AB Electrolux location

X

- Sort and/or rework by AB Electrolux

X + direct hourly costs

- Use by unannounced deviation

X

- Rework on AB Electrolux final product or sub-assembly caused by the receipt of non-conforming parts X + direct hourly costs + the cost for other parts that had to be scrapped. X is the Preparation Charge. The charge shall be independent of inflation and of cost levels in different countries. Therefore it will be expressed as the cost including social charges etc. equating to 5 hours of an assembly worker.

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The charges are of two kinds: One to cover Preparation costs, and One for the Costs per hour of work for the people assigned to, e.g. sorting The Preparation Charge shall cover costs such as; a) Disturbance of the operator b) Eventual dis-assembly of the part c) Disturbance of the foreman d) Administration to take the part out of stock e) Disturbance of the quality department f) Disturbance of the planner to get a new part g) Transportation back to the receiving area h) Communications with the supplier - what shall be done with the part? i) New instructions j) Attention from engineers k) Packing and arranging transport back to the supplier l) Invoice The Per Hour Charge shall cover the hourly wage and social costs. Our calculations show that the actual costs are higher that the amount that will be charged to the supplier. However, the discussion between AB Electrolux and the supplier shall focus on corrective actions and not the chargeback amounts. 2.

There will be a charge if the packing slip represents more or less than actual receipts. The charge will be X.

3.

The additional freight charges resulting from the receipt of non-conforming parts will be charged to the supplier. It can be for return shipment, premium freight cost for quicker transportation, freight cost for scrapped parts.

4.

A Chargeback for downtime and loss of production will be at the discretion of the local Product Division. Each Plant will document costs due to unavailable components/materials caused by a late delivery or rejected shipment.

5.

There may be a Chargeback for incidental costs incurred due to schedule changes traceable to occurrences of non-conformance of product. This Chargeback will also be at the discretion of the local Plant. The cost will be documented for review.

6.

Other situations in which Supplier liability is appropriate and expected: Field failures Product failure due to component or material failure Product recalls due to components or material fault The supplier will be requested to participate in the evaluation process to determine actual cause and responsibility. All suppliers are encouraged to contact the purchasing representative to review any and all specifications where questions exist as to the intent of the Engineering and Quality Specifications.

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SUPPLIER REQUIREMENTS RELATING TO ONGOING SUPPLY AND EVALUATION EL 3060 SUPPLIER ONGOING EVALUATION PURPOSE The different purposes are listed in order of importance. 1. 2. 3. 4. 5.

To make the suppliers strive to improve their overall performance To follow each supplier's rate of improvement To compare suppliers To eliminate suppliers who perform too badly or who are not rapidly improving To be a management tool for purchasing

TARGETS Each Electrolux Plant will set targets for each of their supplier’s parts or families of parts yearly. The activity is co-ordinated by Central Quality and Commodity Groups with the aim of having common targets for common components. See Appendix A1 & A2 REPORTING FREQUENCY The Supplier Ongoing Evaluation result form will be sent to each supplier every month. See Appendix B, and a future version Appendix F that relates to problem parts. RATINGS and DEMERITS The various items chosen to be monitored are given Demerits by each Plant dependant upon the supplier’s performance. The quantity of Demerits given determines the Final Supplier Rating. The Demerits and Rating rationale will be the same for all Plants. The Demerits and the Ratings shall be modified at various times based on AB Electrolux customer’s expectations and the supplier performance. The Ratings and associated Demerits until otherwise notified, are.Demerits Rating

Status

0-10 11-50 51-150 151 +

Very good Acceptable Poor Unacceptable

GSQA EL29002A - 2007

Q A B C

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THE ONGOING EVALUATION FORM AND DEMERIT ALLOCATION The information gathered is in relation to the criteria for which Targets have agreed to, between suppliers and the Purchasing Groups. 1. Product Quality - Incoming Inspection and Line Rejects. Incoming Inspection For those Plants that are still using Incoming inspection, it is possible to give demerits for each refused or reworked lot. Each Refused or Reworked Lot shall be allotted 30 demerits. On Line and End of Line (Statistical) Rejects The On Line/End of Line demerits are related to the Absolute level of PPM quality. There is one exception to this rule. See Appendix C. The PPM is calculated by comparing the Qty. failed with the Qty used or tested The On Line and End of Line PPMs are added together to give the overall PPM. Each 10-PPM is allotted 1 demerits. If an On line/End of Line problem escalates such that it eventually becomes a Lot reject then this is recorded as a Lot rejection as well as a PPM problem. Diagram A illustrates how this operates.

Diagram A

Ongoing Evaluation - Bad Part Quality - Recording Simulation

Supplier Batch Qty produced during a single Production Set-up.

Batch Reject

Elux. Plant Lot Qty used during a Production shift.

Lot Reject

Incoming Inspection

GSQA EL29002A - 2007

PPM

On Line

PPM

End of Line (Statistical)

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2. Delivery Performance Delivery Demerits are given when AB Electrolux production has been disrupted in some way or when AB Electrolux is not able to satisfy its customers as was scheduled. If AB Electrolux is not able to satisfy the customers it is a lost sale - even if the customer requested this at very short notice. Alternative A A Minor disruption typically is when the planner is engaged for a maximum of 2 hours. A Major disruption is when there is a loss in productivity. Major disruption examples: a line stoppage, incomplete products built, a rescheduling or batch size reduction that comes so late that productivity goes down. A major disturbance shall be allotted 30 demerits and a minor 0 demerits. No consideration is taken in the demerit calculations as to whether the supplier supplies a few or many parts. Alternative B. The Plants that use the MRP system to measure the delivery performance will automatically use Alternative B. Alternative B means that all deliveries that are the wrong part or with the incorrect quantity or late, will generate demerits. Each Late occasion gives 30 demerits. 3. Is intended to be used for Field (Warranty) Failures. To be issued at a later date when the systems can deliver. 4. and 5. Each Plant can use these sections as it may wish. They can be used to put emphasis on co-operation, responsiveness, ability to avoid reoccurrence of faults, credit terms or any other concern that the Plant wishes to emphasise with the supplier.

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Ongoing Evaluation Demerits The actual figures for the above criteria are then converted into Demerits so that the various different types of information can be summed up to produce one overall figure for Ongoing Evaluation combining Quality and Delivery. This is done as follows: Monthly Demerits A Rejected/Reworked Lots B PPM C Quality total D Delivery total E Ongoing Evaluation

= = = = =

Qty x 30 (On Line + End of Line) PPM/10 A+B Qty x 30 C+D

There is one exception to the above in relation to Prepainted steel where PPM is calculated as (On Line + End of Line) PPM/100 relative to Target. Progressive Demerits The Progressive results for Quality and Delivery criteria are based on a 3 month moving average involving the current month and the two previous. The progressive results for Lots (A) and Delivery (D) are 3 month Averages. The progressive results for PPM are based on the comparison between Total Qty rejected and the Total Qty assembled/tested over the 3 month period. The progressive demerits for Quality, Delivery and Ongoing Evaluation are then calculated on the same basis as the monthly ones. Note. If no supplies of a specific part are purchased in any month then No Monthly Ongoing Evaluation is recorded for that month. The Progressive values for the month remain the same as the previous month.

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RELATIONSHIP BETWEEN ONGOING EVALUATION and the SUPPLIER QUALITY STATUS SYSTEM The Ongoing Evaluation form as just stated and illustrated in Appendix B is the means of communicating a suppliers Ongoing Evaluation result at a specific Electrolux Plant to the supplier on a regular monthly basis. The form is flexible in that it allows the Electrolux Plant to place emphasis on as many items as it desires. Ongoing Evaluation results and ratings however are an integral part of the scoring process within the Supplier Quality Statusing process. It is essential therefore, despite the flexibility offered in the Ongoing Evaluation form, that all Plants report on exactly the same Ongoing Evaluation information consistently to the Supplier Quality Status system. The Ongoing Evaluation information which is pertinent to the Supplier Quality Statusing system is to be based only on items 1 and 2 of the Ongoing Evaluation form. I.e. Quality and Delivery as defined above. What should be recorded for the Supplier Quality Status System is the following: A The Qty of Rejected or Reworked Non Conforming Lots. Lots which are given Discretionary Approval to be used, although Non conforming, are not added in here. B On line PPM This is calculated by comparing the Qty rejected with the Qty assembled/purchased in an equivalent time. Note Qty Purchased each month is generally equated to Qty assembled each month. C End of Line PPM This is calculated by comparing the Qty rejected with the Qty tested each month. If a part problem On line or End of Line becomes such, that the decision is made to reject the Lot, then this is now recorded in A. Any PPM that has been recorded relative to this remains. D The Qty of Consequential Delivery problems Consequential Delivery problems are Line Stoppages, Incomplete builds, Rescheduling or Production batch size reductions caused by poor delivery. Poor deliveries can be due to late deliveries, wrong parts delivered, too few parts delivered, or that the quality of the part is wrong. If the quality of the part is wrong and is found at time of delivery and is subsequently rejected or reworked then it can be registered in A as well as D. The intention here is only to register those problems found at the actual time of Delivery. Consequential Delivery problems can also of course occur as a result of Quality problems which are found after the original delivery, however other than that already quoted, these are not included here.

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SUPPLIER REQUIREMENTS RELATING TO ONGOING SUPPLY AND EVALUATION EL 3070 CONSEQUENCES OF SUPPLYING GOOD OR BAD QUALITY A supplier who consistently supplies good quality parts will be rewarded and suppliers who consistently supply bad parts will be penalised. The action taken by AB Electrolux shall depend on how good or bad the quality rating is and what the rate of improvement or degradation is. It is the responsibility of the purchasing department to perform either positive actions (rewards) or negative actions (penalties) towards a supplier, based on that supplier's performance. Rewards: -

The results will be viewed in the internal statistics that shall be shared between Product Divisions and Central Purchasing. Supplier and commodity rating shall be publicly displayed in the division. Letters of recognition shall be sent to the supplier. Suppliers can be awarded an increased % of supplies. Suppliers shall be given priority right of quoting and supplying new commodities to the division.

Penalties: -

The results will be seen in the internal statistics that are shared between Plant's and Group Purchasing. The Product Division shall send a warning letter to the supplier. The supplier shall be summoned to the Product Division or the Product Line to make sure he understands how serious the situation is. He will then have to show how and when the quality will improve to the acceptable level. The supplier will not be allowed to quote for new business and cannot get an order for new parts unless the supplier give AB Electrolux a plan describing how and when the quality will be returned to an acceptable level. A gradual transfer of orders to another supplier is likely until the quality has been returned to an acceptable level. Supplier's quality ratings will be publicly displayed in the Plant. A supplier ultimately will be removed from our supplier base if there is no measurable improvement in a reasonable time frame.

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Appendix A1QUALITY TARGETS

QUALITY TARGETS MINIMUM SET

PD Name

Date

QUALITY TARGETS SUPPLIER

Supplier No.

COMPONENTS

IDCO CODES YEAR

INCOMING

Current Year

Lots

Next Year

Zero Lots Non Conforming

AQL AN.O

ASSEMBLY LINE

PPM

STATISTICAL FINISHED PRODUCT

PPM

AN.O

Zero Defects

Confirmed and accepted by the supplier Place Date

Signature * Targets defined and agreed by Parties at Yearly intervals ** AQL reference value will be applied in case of disputes

GSQA EL29002A - 2007

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Appendix A2

QUALITY TARGETS

QUALITY TARGETS FULL SET

PD Name

Date

QUALITY TARGETS SUPPLIER

Supplier No.

COMPONENTS

IDCO CODES YEAR

INCOMING

Current Year

Lots

Next Year

Zero Lots Non Conforming

AQL AN.O

ASSEMBLY LINE

PPM

STATISTICAL FINISHED PRODUCT

PPM

PROCESS CAPABILITY

Cpk

AN.O

Zero Defects Re EL29003 Process Critical Parameters to be defined

RELIABILITY

Early Life

Based on Testing at Suppliers Laboratories

Ist Year

Useful Life 10 years

SCR

%

Confirmed and accepted by the supplier Place Date

Signature

*

Targets defined and agreed by Parties at Yearly intervals

**

AQL reference value will be applied in case of disputes

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Appendix B

Supplier Ongoing Evaluation Monthly Reporting sheet. QUALITY VERSION - as calculated also by SQD Supplier Ongoing Evaluation

TOTAL

ELECTROLUX MAJOR APPLIANCES

Month:

Year:

IDCO:

Telephone:

PLANT: SUPPLIER:

Contact Person:

Address:

1. PRODUCT QUALITY – LINE & INCOMING INSPECTION Last Year

Rolling (3)

Monthly

ppm

A

D

G

ppm

B

E

H

dem.

C

F

dem

X

Y

dem

O

On Line - Assembly line scrap 1 demerit for every 10 ppm

End Of Line - Statistics + Reability

Monthly

Target ppm

dem

L

dem

M

N

1 demerit for every 10 ppm

Incoming Inspection 30 demerits for every lot refused

Quality Demerits

2. DELIVERY PERFORMANCE For each of the following items and for each occasion there are 30 demerits: 1. Line stopped

dem

P

T

dem

AA

2. Incomplete product

dem

Q

U

dem

AB

3. A rescheduling or batch size reduction causing lost efficiency in the production or lost sales

dem

R

V

dem

AC

4. Delivery documents precision

dem

S

Z

dem

AD

dem

AE

AF

dem

AG

Demerits

AH

AI

AL

Rating

AM

AN

AO

Delivery Demerits

Total Demerits

Legend:

GSQA EL29002A - 2007

Q A B C

0 - 10 11 - 50 51 - 150 > 150

Very Good Acceptable Restricted Unacceptable

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Ongoing Evaluation: data rules

/ Σ entries Year -1) * 1.000.000; = (Σ Defects (Statistics + Reliability) year - 1) / (Σ Checked Qty (Statistics + Reliability) year -1) *

A= (Σ Assembly Defects year -1 B

1.000.000; C

= (Σ Refused batches year - 1) / 12 * 30;

D E

= (Defects (Month + Month -1+ Month -2) / Entries (Month + Month-1+ Month -2)) * 1.000.000; = (Defects (Statistic + Reliability) (Month + Month -1+ Month -2) / Checked Qty (Statistics + Reliability) (Month + Month -1+ Month -2) * 1.000.000;

F

= Σ Refused batches (Month + Month -1+ Month -2) / 3 * 30;

G = (Month’s Defects Month / Mont’s Entries) * 1.000.000; H = (Month’s Defects (Statistic + Reliability) / Checked Qty (Statistic + Reliability) * 1.000.000; L = (G + H) / 10; M = Month’s refused batches * 30; N= Ongoing PPM target; O = L + M; X = (A + B) / 10 + C; Y = (D + E) / 10 + F; P Q R S T U V Z AA AB AC AD

= (Dem. Del.1 Year-1) / 12; = (Dem. Del.2 Year-1) / 12; = (Dem. Del.3 Year-1) / 12; = (Dem. Del.4 Year-1) / 12; = (Dem. Del.1 (Month + Month-1+ Month-2) / 3; = (Dem. Del.2 (Month + Month-1+ Month-2) / 3; = (Dem. Del.3 (Month + Month-1+ Month-2) / 3; = (Dem. Del.4 (Month + Month-1+ Month-2) / 3; = Dem. Del.1 Month; = Dem. Del.2 Month; = Dem. Del.3 Month; = Dem. Del.4 Month;

AE

= Σ (P + Q + R + S);

AF

= Σ (T + U + V + Z);

AG

= Σ (AA + AB + AC + AD);

AH= (X + AE); AI = (Y + AF); AL = (O + AG); AM = Q, A, C or C according to the value of AH (see QDMC Table); AN = Q, A, C or C according to the value of AI (see QDMC Table); AO = Q, A, C or C according to the value of AL (see QDMC Table); Notes: - Division by 0 -> force 0. - The demerits results in case of decimals will be rounded down if < 5 and rounded up if ≥ 5.

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Appendix C

PREPAINTED STEEL COMMODITY - EXCEPTION

For "PREPAINTED CARBON STEEL" commodity (...supplied in sheets/coils) The Ratings and Demerits for this particular case will be allowed to differ from the normal stated levels. This is due to the substantial difference between a Normal Component’s Target level and that of the "Prepainted Carbon Steel" Target level. The Prepainted Carbon Steel Target level is based on the Quality Expectation after the In Line Forming process operations have taken place. Because of this the realistic Demerits calculation is defined as follows : PPM and Demerits are calculated on an Absolute basis. Ongoing Evaluation Ratings “Q” “A” “B” “C”

PPM