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QUALITY PROCEDURE MANUAL

Document Title:

SUPPLIER PERFORMANCE MEASURE & RATING SYSTEM PROCEDURE

Document No:

Issue No:

CONTROL STATUS
All users of this document/Procedure are to identify and ensure the latest approved issue. ISSUE 1 Prepared By: Signature Designation Issue Prepared By Reviewed By Approved By Date Reviewed By Approved By Date

SUPPLIER PERFORMANCE MEASURE & RATING SYSTEM PROCEDURE

QUALITY PROCEDURES MANUAL Doc No: Issue : 2

TABLE OF CONTENT Section Description Page

1.0PURPOSE.................................................................................................................3 2.0SCOPE.......................................................................................................................3 3.0 ABBREVIATION/DEFINITION...........................................................................3 4.0RESPONSIBILITY...................................................................................................4 5.0PROCEDURES.........................................................................................................5 5.1This measurement is divided into 4 categories:....................................................5 6.0REFERENCES........................................................................................................10 7.0 AMENDMENT RECORDS...................................................................................10 8.0FLOW CHART.......................................................................................................12

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SUPPLIER PERFORMANCE MEASURE & RATING SYSTEM PROCEDURE

QUALITY PROCEDURES MANUAL Doc No: Issue : 2

1.0 PURPOSE To provide documented procedure for the control of supplier performance measuring & rating system procedure and improve communication with suppliers. 2.0 SCOPE Scope of this procedure for measure; RPPM (Rejected Part Per Million) Percent PPM (Part Per Million) Improvement Written Complaint (Non-Conformance Report) Delivery performance Accountability & Cost of Quality Service or Responsiveness 3.0 ABBREVIATION/DEFINITION 3.1 BA (Business Agreement) A written contract established between CTRM AC and the supplier / subcontractors CTRM AC CTRM Aero Composites PR Purchase Requisition PO Purchase Order HOD Head of Department HOS Head of Section AVL Approved Vendor List SOM Supply Operation Management Section QP Quality Procurement Section QE Quality Engineering Unit IQC Incoming Quality Check EDC Engineering Document Control

3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12

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SUPPLIER PERFORMANCE MEASURE & RATING SYSTEM PROCEDURE

3.13 3.14 3.15 SCAR Supplier Corrective Action Report SRS Supplier Rating System RPPM Rejected Part per Million

QUALITY PROCEDURES MANUAL Doc No: Issue : 2

3.16 NCR Non-Conformance Report A form used to record details of discrepancy, causes of problem, dispositions and actions for correction and improvement of a nonconforming item.NCR includes (Goods Discrepancy Report,Service Discrepancy Report and Corrective Action Request). 4.0 RESPONSIBILITY 4.1 4.2 System Unit System Unit is responsible for the maintenance of this procedure and to ensure this procedure is adhered to, during the measurement of supplier performance measure and rating activities.System unit is also responsible for the implementation of supplier performance measure and rating summary and/or report.This unit will perform supplier audit if necessary and to include the NCR issued to supplier for performance measure. Material Management and SOM Section Material Management Section is responsible to supply data for measurement of delivery performance and written complaint issuance (NCR).They allso need to monitor the supplier corrective action plan for unsatisfactory delivery & service performance. Quality Engineering Unit (QE) QE Unit is responsible to supply data for measurement of the quality (written complaint issuance-NCR), and service or responsiveness performance based on supplier response.QE also need to monitor the supplier corrective action plan for unsatisfactory quality & service performance. Incoming Quality Check Unit (IQC) IQC unit is responsible to supply data for measurement of quality (RPPM).IQC also need to monitor the supplier corrective action plan for unsatisfactory performance. Engineering Document Control EDC is responsible to supply data for measurement of service or Responsiveness based on the external document distribution response. EDC also need to monitor the supplier corrective action plan for Unsatisfactory performance.

4.3

4.4

4.5

4.6

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SUPPLIER PERFORMANCE MEASURE & RATING SYSTEM PROCEDURE

QUALITY PROCEDURES MANUAL Doc No: Issue : 2

5.0 PROCEDURES 5.1 This measurement is divided into 4 categories: a) Quality i) RPPM (Rejected Part Per Million) ii) Percentage PPM (Part Per Million) Improvement iii) Written Report (Non-Conformance Report) b) Delivery c) Accountability & Cost of Quality d) Service or Responsiveness

5.2 Scoring Criteria & Scorecard 5.2.1 Scorecard as a vehicle to provide performance & rating to supplier. Scorecard will be issued to supplier every quarter, half & end yearly to all suppliers under AVL & Customer approval together with SCAR if required. Full mark of score is 100 percent. Quality criteria represents for 40 % from the total mark. - RPPM (Rejected Part per Million) - 20%; - Percentage PPM (Part Per Million) Improvement - 5%; and - Written report (non-conformance report) 15% Delivery criteria represents 20% from the total mark. Accountability & Cost of Quality represents 20% from the total mark. Service or Responsiveness represents 20% from the total mark.

5.2.2

5.2.3 5.2.4 5.2.5

5.3 Quality Performance 5.3.1 RPPM (Rejected Parts Per Million) 5.3.1.1 RPPM (Rejected parts per million) is calculated on the basis of the amount of goods defective versus the total amount of goods inspected in a given fiscal month. This calculation is then normalized to reflect a constant basis of the one million units received. 5.3.1.2 RPPM Formula: (Total Goods Defect / Total Goods Inspect) x 1 Million Example: A supplier ships 10,000 parts to a plant & Incoming Inspector inspect all goods received, of those 7 found to be defect. The calculation will be (7 / 10,000) x 1,000,000 = 700 RPPM

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SUPPLIER PERFORMANCE MEASURE & RATING SYSTEM PROCEDURE

QUALITY PROCEDURES MANUAL Doc No: Issue : 2

5.3.1.3 The following table outlines parts per million ranges and their respective scores: RPPM Rating 0 1 to 100 101 to 200 201 to 300 301 to 400 401 to 500 501 to 600 601 to 700 701 to 800 801 to 900 901 to 1000 1001 to 1500 1501 to 2000 2001 to 2500 2501 to 3000 3001 to 3500 3501 to 4000 4001 to 4501 4501 to 5000 5001 or greater 5.3.2 Score 20% 19% 18% 17% 16% 15% 14% 13% 12% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0%

Percentage Part Per Million (PPM) Improvement 5.3.2.1 The Percent PPM Improvement is a supplier who reduces their RPPM from the CTRM management target can earn additional point toward their RPPM score. Refer to the following chart for explanation of the scoring system:

% Improvement 75 to 100 60 to 74 45 to 59 30 to 44 15 to 29 5.3.3

Points 5% 4% 3% 2% 1%

Written Report (Non-Conformance Report) 5.3.3.1 The Non-Conformance Report category system rates Suppliers on the number of NCRs and the severity of each complaint with the following formula. Level Level 1 Level 2 Level 3 Categories Issues Minor Issues Major Issues Severe Issues Points per occurrence 0.10 points 0.50 points 1.00 points Page 6 of 12

SUPPLIER PERFORMANCE MEASURE & RATING SYSTEM PROCEDURE

QUALITY PROCEDURES MANUAL Doc No: Issue : 2

Example: A supplier 3 NCRs in Level 1, 1 NCRs in Level 2. The total number of points will be calculated as (3 x 0.1) + (1 x 0.5) = 0.8 total. 5.3.3.2 The following below table outline NCRs ranges and their respective scores. Total Quality NCRs Rating Points 0.00 ~ 0.10 0.11 ~ 0.20 0.21 ~ 0.30 0.31 ~ 0.40 0.41 ~ 0.50 0.51 ~ 0.60 0.61 ~ 0.70 0.71 ~ 0.80 0.81 ~ 0.90 0.91 ~ 1.00 1.01 ~ 1.20 1.21 ~ 1.40 1.41 ~ 1.60 1.61 ~ 1.80 1.81 ~ 2.00 2.01 or greater 5.4 Delivery Performance 5.4.1 The Delivery ratings are calculated on the basis of the amount of shipments that have errors versus the total amount of shipments in given fiscal month. This information is then calculated into a percentage. Delivery ratings are determined on the occurrence of the following criteria only when it is determined to be the Suppliers responsibility: No 1 2 3 Item Late deliveries Early deliveries Premium freight occurrences Over shipment of the quantity ordered Short shipment of the quantity ordered Description More than 5 days from date of delivery required. Less than 5 days from date of delivery required. Premium freight occurrences routings required due to supplier delivery or quality problems. Supplier supply over quantity from the ordering. Supplier supply short quantity from the ordering. Page 7 of 12 Score 15% 14% 13% 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0%

5.4.2

4 5

SUPPLIER PERFORMANCE MEASURE & RATING SYSTEM PROCEDURE

6 Incomplete Documentation

QUALITY PROCEDURES MANUAL Doc No: Issue : 2

Incomplete documentation & impact to delivery activities (such as invoice, pick list etc)

5.4.3

The potential for more than one occurrence does exist. If no shipments are received in the given month, a notation will appear on Scorecard in the comment section. The calculation on the delivery percentage and associated points based on the following formula: Delivery % = [(total shipments number of occurrences) / total shipment] x 100 Example: A Supplier sends 36 shipments for the month, of those 36, 1 shipment is late, and 1 shipment is short of the quantity ordered. This counts as 2 occurrences. The delivery percentage calculation will be [(36-2) / 36] x 100 = 94.4%

5.4.4

5.4.5

The following table outlines the delivery percentages and their respective scores: Delivery Occurrence % 100% 99 ~ 99.9% 98 ~ 98.9% 97 ~ 97.9% 96 ~ 96.9% 95 ~ 95.9% 94 ~ 94.9% 93 ~ 93.9% 92 ~ 92.9% 91 ~ 91.9% 90.9 or less Score 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

5.5

Accountability & Cost of Quality 5.5.1 5.5.2 5.5.3 5.5.4 5.5.5 5.5.6 The Accountability & Cost of Quality is determined on the basis of the following criteria: Scrap, rework, sorting and processing costs due to poor quality from supplier. Inventory & storage costs due to inspection failure during incoming. Production shutdown attributed to poor quality from supplier. Shipping fees related to return of defect product. The following table outlines the service and their respective scores: Cost of Quality Incidences Scores Page 8 of 12

SUPPLIER PERFORMANCE MEASURE & RATING SYSTEM PROCEDURE

0 1 2 3 4 5 or greater 5.6 Service or Responsiveness 5.6.1 5.6.2

QUALITY PROCEDURES MANUAL Doc No: Issue : 20% 16% 12% 8% 4% 0% 2

The Service category is determined on the basis of the following criteria: On time and accurate response to quality issues, including corrective action reports for non-conforming product (NCR), audit result, supplier quarterly / annual report. On time and accurate documentation (such as CofC, packing slip, invoices, test certificate etc) The following table outlines the service and their respective scores: Service Incidences 0 1 2 3 4 5 or greater Score 20% 16% 12% 8% 4% 0%

5.6.3 5.6.4

5.7 Supplier Rating Category & Action 5.7.1 5.7.2 Supplier rating category & action taken will be based on the table as follow:

Supplier Category PLATINUM (Best Supplier) GOLD (Good Supplier)

Percentage / Performance Remark 90-100% Outstanding performance, thus maintain the standard 80-89.9% Satisfactory performance, thus can be improved

Actions Issue CTRM Best Supplier (Platinum) Certificate for recognition Subject to continuous performance maintained (SRS point) in same category, issue acknowledgement letter to suppliers top management for recognition

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SUPPLIER PERFORMANCE MEASURE & RATING SYSTEM PROCEDURE

SILVER (Moderate Supplier) 70-79.9% Below average performance, improvement required.

QUALITY PROCEDURES MANUAL Doc No: Issue : 2

Issue Supplier Corrective Action Report (SCAR) to suppliers. QE, SOM & Material Management Sections shall monitor corrective action plan from supplier. If remain at same category for 3 consecutive performance review, a site audit is required.

BRONZE (Poor supplier)

60% ~ 69.9% Unsatisfactory Performance, immediate improvement required.

Issue Supplier Corrective Action Plan (SCAR) to supplier. QE, SOM & Material Management Sections shall monitor corrective action plan from supplier. If remain at same category for 2 consecutive performance review, a site audit is required.

RED (Very Poor Supplier)

Below 59.9% Very unsatisfactory performance, immediate action plan is required

Issue Supplier Corrective Action Request A site audit is required

6.0 REFERENCES Inspection Procedure Vendor Assessment, Approval & Contro Purchase Requisition 7.0 AMENDMENT RECORDS

Issue 1 2

Date

Description
FIRST ISSUE Changes made on all paragraph to be in line with current practice

Amendment by

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SUPPLIER PERFORMANCE MEASURE & RATING SYSTEM PROCEDURE

QUALITY PROCEDURES MANUAL Doc No: Issue : 2

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SUPPLIER PERFORMANCE MEASURE & RATING SYSTEM PROCEDURE

QUALITY PROCEDURES MANUAL Doc No: Issue : 2

8.0

FLOW CHART
Start

Compile report & feedback from QE, SOM & Material Management

Submit scorecard or report to supplier (Every half & end year) & QP, SOM, Material Management (Every month) Platinum & Gold Category

Recognize supplier by letter, email or certificate

Red Silver, Bronze & Red Category Perform System Audit

Suppli er Rating ?

Silver and , Bronze & Red Category

Resul t? Satisfied Compile report & closed

Unsatisfied

Issue SCAR to supplier

Supplier reply SCAR

QE, SOM, & Material Management monitor C/Action Plan

Improve

Resul t? Not Improve

Issue 2nd SCAR to supplier Improve Not Improve Issue Acknowledgement letter to Supplier Top Management

Resul t? Red Category Recommend termination & removed from AVL

Figure 1: Basic Flow of Supplier Performance Measure & Rating System

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