ITT Motion Technologies Supplier Quality Manual

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2 ITT Motion Technologies Supplier Quality Manual PO rev. 11 Oct. 2010

3 I am pleased and proud to introduce first time ever our Supplier Quality Manual, key tool for future development of ITT Motion Technologies. Since we are looking for fastest growing and to achieve all future challenges, our supplier base will be crucial instrument for it and based on that we'll spend as much as we need in order to develop our relationship and partnership with our suppliers in the same way we do with our customers. Full compliance of SQM will be key selection ingredient for our current and future suppliers. Looking forward to winning together. President ITT Motion Technologies, S.Torrisi ITT Motion Technologies develops and produces competitive components and systems looking for faultless quality in cooperation with its Suppliers, who bring their own know-how and capacity to innovate. ITT has on innovation, quality and competitiveness his company footprint: all the process to improve this areas must be pursued tirelessly. These depends heavily on our supplier capacity for it: Supplier commitment is then a necessary condition for our progress. To maintain leadership role, side to innovative and faultless products implementation, quality of purchases is considered one of the key driver for it, to eliminate waste and perturbations. The target of this strong integration with our supplier base is to: achieve continuous innovation in term of products and manufacturing process to maintain market leadership, supporting ITT production preventing any disturbances through high level of supplies quality and service level, developing effective productivity plans. To identify the best partners, ITT Motion Technologies is looking to his supplier base through a detailed evaluation of each company strength on the areas of quality, innovation, service and cost. The scope of the Supplier Quality Manual, as deployment of ITT Supplier Expectations (SEITT), is to provide clear expectations of ITT and is the basis for integration between ITT and its Suppliers towards achieving all objectives. ITT Motion Technologies clearly recognize the importance of Suppliers contribution on this path and how quality of items delivered to ITT are decisive factor in ensuring the correct form, fit, function and reliability of ITT products, the competitive flow of these products and services through ITT factories. For all of these reasons ITT trust on Your full commitment. ITT Motion Technologies Global Quality Director, P. L. Scarabelli ITT Motion Technologies Global Purchasing Director, M. Pesci 1

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5 Summary I - SQAE Supplier Quality Aptitude Evaluation 1. GOALS 2. SUPPLIER CATEGORIES 3. PRE-EVALUATION PROCESS 4. FOLLOW UP AUDIT 5. AUDIT FREQUENCY II - PQA Product Quality Assurance 1. OBJECTIVES 2. PQA PROCEDURE Scope of application PQA Procedure - Stage 1: Selection of suppliers, product and references - Stage 2: Definition of ITT Motion Technologies requirement file with the supplier - Stage 3: Definition and Acceptance of the PQA Dossier - Stage 4: Validation of production process (Run@Rate / Process audit) - Stage 5: acceptance of initial samples - Stage 6: Probationary Period - Stage 7: PQA Management III - CQI Continuous Quality Improvement 1. GOALS 2. CLAIM PROCESSING Definition of Claims Claim Processing CSL: Control Shipping 3. QUALITY, COST AND LOGISTICS PERFORMANCE MEASUREMENT Definition of PPM, %PQA and Service Rate indicators Product Quality Indicator = Q Cost Indicator = C Logistic Indicator = D QCD Indicator 4. VENDOR RATING Score Card pag. 5 pag. 6 pag. 7 pag. 8 pag. 8 pag. 9 pag. 10 pag. 10 pag. 11 pag. 11 pag. 11 pag. 11 pag. 12 pag. 12 pag. 13 pag. 13 pag. 15 pag. 16 pag. 16 pag. 17 pag. 18 pag. 19 pag. 19 pag. 20 pag. 21 pag. 21 pag. 22 pag. 23 pag. 23 3

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7 I - SQAE Supplier Quality Aptitude Evaluation 1. Goals An efficient Quality System is fundamental to produce parts with high quality level. It must: guarantee the reliability of tasks performed and the information communicated (in particular to Customer/Supplier interfaces); drive continuous improvement; ensure the continuity of the company s know-how. It is based on: a clearly defined and expressed Quality Policy; an organization capable of assuring quality and process ownership at all stages of the product s life with ITT Motion Technologies project development phases; consistent ownership of each process step; the commitment to work with ITT Motion Technologies in a spirit of partnership and progress. 5

8 2. Supplier categories ITT Motion Technologies classifies its supplier in three categories of supplier sites: CATEGORY OF SUPPLIER DESIGNER MANUFACTURER SUB-CONTRACTOR SUPPLIER RESPONSIBILITIES Responsible for the design and supply of a function defined by ITT Motion Technologies. The integrated supplier-designer participates in the development and definition of the function with ITT Motion Technologies Responsible for the development of a manufacturing process and the manufacturing of a product designed by ITT Motion Technologies Responsible for the manufacturing of products designed by ITT Motion Technologies using manufacturing processes developed by ITT Motion Technologies Supplier-designers Supplier-Designer Aptitude Evaluation - SDAE will be performed by the ITT Motion Technologies R&D Department and Purchasing Department with the participation of the Supplier Quality to determine the supplier s aptitude as a designer. Manufacturers Supplier of this category provides: specific components on ITT Motion Technologies requirements that includes key/safety aspects; generic components on ITT Motion Technologies requirements w/o key aspects; standard components (by catalogue, on the shelf parts); raw materials. Except suppliers of standard components, Supplier Evaluation Matrix - SEM activity will be performed by ITT Motion Technologies. Sub-Contractor Supplier of this category provides: specific components on ITT Motion Technologies requirements that includes key/safety aspects; generic components on ITT Motion Technologies requirements w/o key aspects. Supplier Evaluation Matrix - SEM will be performed by the ITT Motion Technologies R&D Department and Purchasing Department. 6

9 3. Pre-evaluation process SUPPLIER PRE-EVALUATION SQAE is the ITT Motion Technologies evaluation process for potential suppliers site, or for sites already included in the supplier list. All of ITT Motion Technologies potential suppliers must achieve a positive evaluation considering the panel of suppliers in the same business field. The criteria for comparison are collected on the Supplier Evaluation Matrix - SEM on follows chapters: STRATEGY AND MANAGEMENT, GENERAL SUPPLIER KEY FACTS (FINANCIAL, MARKET POSITION, ETC), R&D (FOR DESIGNER SUPPLIERS), PRODUCTION, QUALITY, LOGISTICS, COMPETITIVENESS. On contrary, existing supplier sites may be considered for exit strategy from the panel if they do not meet proper level of evaluation rating. For potential supplier it requires as background: pre-audit PCPA process on existing products/processes same or similar to ones to be purchased by ITT Motion Technologies; review of potential supplier quality certification and self-assessment report; review of supplier key main facts data (financial, market position, etc); a design audit for designer suppliers. The pre-selection process could classify the supplier in 4 possible levels: RATING SCORE & QUALITY CERTIFICATES RESULTS & COSTRAINTS OUTCOME A SEM > 90 and ISO/TS CE CE Fully Compliant Drive continuous improvement Supplier site is eligible for a new application development and for the production of new or transferred products AB 80 < SEM < 90 and ISO 9001 CE Mostly compliant Need Improvement Supplier site is eligible for new application development and for the production of new or transferred products with introduction of an improvement plan B 70 < SEM < 80 or No QMS Certification Not fully compliant Need Development ITT can sign a first contract with the supplier. The supplier must obtain upgraded status in 6 month max. C SEM<70 and No QMS Certification Not compliant New Business Hold The supplier must provide an action plan to solve major non conformities The supplier has 6 month to obtain a score > 80, to undertake an Automotive certification process and to have a qualified process. 7

10 4. Follow-up audit The aim of the follow-up audit evaluation procedure is to check the progress of the corrective action plans implemented following the initial audit. A follow-up audit must be performed: no later than 6 months after the evaluation audit for sites with a rating of B/AB; if the follow-up audit confirms that corrective actions have been implemented to resolve all critical problems, the supplier can be upgraded; if necessary, a second follow-up audit can be performed no later then twelve months after the evaluation audit. In this case supplier might be requested to cover relevant expenses, or activity done by 3 rd party at his charge. 5. Audit frequency Supplier sites will be re-evaluated at least once every two years and at least once every three years for quality certification. A new audit will be scheduled if there have been major organizational changes at the supplier site or if there have been serious or repeated incidents which can be shown to have resulted from a failure in the quality system ITT Motion Technologies recommends that all its Suppliers achieve ISO/TS certification. 8

11 II - PQA Product Quality Assurance 1. Objectives Product Quality Assurance is designed to assure long-term product quality. It results in fewer incoming inspections at ITT Motion Technologies Plants without in any way reducing supplier responsibility for product quality. ITT Motion Technologies objective is to obtain 100% PQA deliveries 9

12 2. PQA procedure PQA The Product Quality Assurance procedure starts with the drawing up of a quality assurance plan for the product/process (APQP File) the aim of which is to provide ITT Motion Technologies with all the guarantees concerning the means to achieve product quality. The APQP File consists of a: ITT Motion Technologies requirements file, quality assurance file, supply chain requirements file, initial samples file, quality monitoring file. SCOPE OF APPLICATION A technology family is a set of products used to achieve the same function, manufactured for ITT Motion Technologies by same supplier site, which rigorously follows the same flow using specific tooling, as the case may be. Standard parts are not considered to be part of PQA procedure. PQA apply also to development samples/prototypes in the terms of certification of: Fit to the development scope of key characteristic (dimensions, materials, treatments, physical characteristics, etc.) Level of representativeness with respect of forecasted final production configuration - materials; - process flow and steps; - jigs/tools and equipment set-up; - production site. 10

13 PQA Procedure The Product Quality Assurance procedure has 7 stages. These stages apply to all customer application project parts and to parts already used in production. STAGE 1: SELECTION OF SUPPLIERS, PRODUCT AND REFERENCES Potential suppliers from approved panel are given a set of functional specifications (supplier-designers) or technical specifications (supplier-manufacturers). At this state, requirements concerning: product specifications, timing milestones, quality and logistics, are defined or restated. Requirements must be updated for components existing or that are carried over to another project. STAGE 2: DEFINITION OF ITT MOTION TECHNOLOGIES REQUIREMENT FILE WITH THE SUPPLIER This file details ITT Motion Technologies requirements concerning the above items together with the documents to be provided by the supplier and / or ITT Motion Technologies during the PQA process. These requirements are drawn up and discussed by ITT Motion Technologies and the supplier during stage 2. At the end of this stage, ITT Motion Technologies finalises the requirement file and sends it to the Supplier for confirmation. STAGE 3: DEFINITION AND ACCEPTANCE OF THE PQA DOSSIER This file formalises supplier responses to ITT Motion Technologies Quality Requirements in term of feasibility, capability of processes, final capacity and timing milestones. It is presented by the supplier and jointly examined with ITT Motion Technologies. Once this file has been examined and approved with regard to the ITT Motion Technologies requirement file, the supplier undertakes to comply with it and submit all proposals for modifying or improving the product or process for approval to ITT Motion Technologies including in the event of a transfer of production. This stage ends with the supplier feasibility confirmation and launch of the tooling production at the supplier. 11

14 STAGE 4: VALIDATION OF PRODUCTION PROCESS / PROCESS AUDIT) The aim of this validation phase is to ensure that the processes and quality procedures drawn up are suitable and efficient for the production lifetime of the product. This stage includes: Verification, if required, of the PQA Dossier; Process Control Plan Audit during The audit is valid only if the process audited is the one that will be used in volume production (equipment and conditions). Following the full production day run, the following reports must be issued: day report: conditions, quantities produced and rejected, analysis of defects, speed of the production line, etc.; PCPA audit report; test report, if the supplier is a designer and if specified in the ITT Motion Technologies requirement file; part inspection report; capabilities (according to PQA dossier requirement files). The process is audited by ITT Motion Technologies by PCPA approach: in case of items not compliant, the supplier must draw up an action plan ad a follow-up audit performed. PCPA audit results are part of PPAP dossier. Initial samples must be taken during the Run@Rate and delivered in volume production packaging together with full documentation as specified in the ITT Motion Technologies Requirement files. Periodic audits of the process must be performed by the supplier at the intervals defined in the control plan. Audit reports and corrective action plans must be available for consultation by ITT Motion Technologies at all times. ITT Motion Technologies will perform process audits at least once every 3 years and reserves the right to carry out new audits whenever sees it fits. STAGE 5: ACCEPTANCE OF INITIAL SAMPLES The aim of Supplier Initial Samples (PPAP) is to check that the product (performance, characteristics, reliability, capability, tests, etc.), production processes, lines and equipment comply with specifications. ITT Motion Technologies uses the PPAP to qualify products on the basis of the validation plan. 12

15 Acceptance of Supplier PPAP by ITT Motion Technologies can only be given if this internal qualification stage is satisfactory. If supplier PPAP is rejected, full production cannot go ahead STAGE 6: PROBATIONARY PERIOD This stage is compulsory for all PQA specific components that includes key/safety aspects and for all non PQA parts. It is designed to optimize and validate quality inspection conditions, once the PPAP have been accepted. Deliveries are subjected to quality inspection for a defined probationary period: during this period supplier is requested to provide with each batch conformity certificate by statistical sampling. The probationary period lasts for at least 2 months and involves at least 7 production batches* of the parts involved. ITT Motion Technologies checks that the product manufactured in line with the APQP Dossier does not present any non-conformance, whatever the cause, during this period. If an incident occurs, the part will be subjected to a new probationary period after an appropriate action plan approved by ITT Motion Technologies, has been effectively implemented. At the end of stage 6, the probationary period inspection reports become part of the APQP Dossier. STAGE 7: PQA MANAGEMENT Stage 7 applies to PQA-ble parts only. PQA STATUS A PQA part is a part that is free pass to ITT Motion Technologies production line: no incoming inspection considered except for product quality audits which are carried out perio- * Batches sizes will be defined with the supplier during preparation of the APQP Dossier. 13

16 dically as defined by ITT Motion Technologies. Free pass parts conformance is guaranteed by the supplier through the strict application of the APQP Dossier. PPAP will be re-qualified in line with the periodicity specified in the ITT Motion Technologies APQP Dossier. PQA status can be maintained if: supplier is approved based achieved rating; no incidents involving the part in question must have occurred during the probationary period and the quality objectives (line ppm) have been achieved. If a part belongs to a technology family, non-conformance can be considered if have been identified in the common production process during the probationary period. If all the above conditions have been met ITT Purchasing Department officially confirms to the supplier the date on which PQA deliveries can start for the part. All PQA deliveries must be identified by a PQA label on all boxes, containers, etc. The supplier must be in a position to inform ITT Motion Technologies on specific request about the results of inspections carried out for each batch delivered in line with the requirements of the APQP Dossier. FINAL ACCEPTANCE OF PQA STATUS Once all requirement has been satisfied the Supplier is requested to sign a final contract indicating the PQA part number list. SUSPENSION OF PQA Any incident will result in the immediate suspension of PQA deliveries. After analysis of the causes, suspension of PQA is confirmed for: the technology family of part, if it is the generic process that is at fault; the part involved if a specific process is found to be at fault. In all cases, ITT Motion Technologies will give the supplier written notification of the date for resumption of PQA deliveries after the problem has been solved and a new probationary period completed. If a product or process is modified or production transferred, PQA deliveries are suspended. It may be decided by ITT Motion Technologies Purchasing Quality that the supplier must go through stages 2 to 6 again. NOT ACHIEVEMENT OF PQA Parts that do not achieve PQA status has to be checked 100% with respect to key characteristics; checking certificates has to be attached to shipping documentation identified as parts 100% certified. For parts/material that are involved on ITT Motion Technologies processes related to legal/safety requirements, supplier might be requested to submit for every batch specific certificates showing single measured values. Missing documentation/incorrect identification will be raised as a claim and relevant cost charged at supplier. 14

17 III - CQI Continuous Quality Improvement 1. Goals ITT Motion Technologies goals in terms of Supplier s Product Quality and Logistics performance, can be managed with Single Supplier Progress Plans. These Progress Plans are designed to help ITT Motion Technologies and its Suppliers to continuously improve product quality competitiveness and the Supply Chain performances. In this way ITT Motion Technologies can integrate these improvements into its own products as customer logistics and quality support. The development of new business between ITT Motion Technologies and its suppliers is strongly related on the achievement of the performance levels defined in Cost, Quality and Logistics Progress Plans, based on the metrics shown in this chapter. In these sense the metrics are considered to drive ITT Motion Technologies strategic business approach on supplier base definition. 15

18 2. Claim Processing DEFINITION OF CLAIMS CATEGORY SIGNIFICATION EXAMPLE The problem affects ITT Motion Technologies internal or external customer. The problem disrupts production at ITT Motion Technologies. The problem is identified on delivery to ITT Motion Technologies and does not disrupt production. ITT Motion Technologies Customer line or end of line reject. ITT Motion Technologies end-of-line rejects. Sorting, rework and production line disruption. Repeated non-conformance identified in the manufacturing process. Non-conformance identified at Incoming Inspection. METHOD OF CALCULATION: Category 1 (C1) Any customer complaint the cause of which is the non-conformance of a primary component, or what ever related to safety characteristic is recorded as a C1 claim. Category 2 (C2) A C2 claim is recorded when a complaint is made due to disruption to ITT Motion Technologies lines. Category 3 All non-conformance identified using the sampling method, whether due to the product itself or delivery conditions, is recorded as a claim. Definition of a recurrent claim A claim which occurred on the same reference, having the same effect and out of different batches. Costs generated In addition to direct and indirect costs generated by the claims, a debit note can be issued including administrative fixed costs as indicated on General Terms and Conditions. Moreover to these costs, ITT Motion Technologies reserves its right to apply additional penalties depending on severity or reoccurrence of the generated claims. 16

19 CLAIM PROCESSING When a defective product is identified, ITT Motion Technologies will notify the supplier of the claim describing the issue identified. Supplier is requested to activate internal problem solving analysis, focusing on root cause definition (Ishikawa, 5 why s tools...) and validation on both technical and control areas, following 8D approach. Structural solution implementation is requested to ensure effective and stable process improvement. Supplier has to ensure proper information flow and prompt feedback, by clear resources appointment for resolution ITT need. Within 24 hours of the notification (Quick Response) the supplier undertakes to: Identify and remove all defective products or products that are likely to have the same defect from all stocks of finished products and WIP. Send a team of competent people to carry out sorting and inspection operations and recover products from ITT Motion Technologies, if ITT Motion Technologies so requests. If this is not possible directly from the supplier side, can be activated at supplier charge external sorting providers from an approved panel. Come to ITT Motion Technologies site if ITT Motion Technologies so requests, to analyze the problem, even if it is uncertain at this stage of analysis that the supplier is responsible for the defect. Replace the defective batch(es) of products within 24 hours of notification of the claim by ITT Motion Technologies and label those batches as products that are not defective. Within five days of the notification date the supplier undertakes to: Perform an exhaustive analysis of the root causes of the non-conformance, both on technical and on control field, using the ITT 8D method. Root cause validation results has to be highlighted. Issue ITT Motion Technologies with a corrective and preventive action plan to be approved by ITT Motion Technologies Supplier Quality. Within ten days of the notification date the supplier undertakes to: Implement the short term actions presented above and obtain validation of results from ITT Motion Technologies Supplier Quality. Extend the implementation of these actions to all production for ITT Motion Technologies. ITT Motion Technologies Production lines Disruption If a defective part is found during production operations (Category 2) ITT Motion Technologies will request immediately for the Supplier to sort affected parts with its own personnel if possible or by activating an external provider. The sorting may be requested also on already ITT produced parts instead of the single components where this is needed due to ITT production constraints. 17

20 If needed, reworking operations of both component and finished goods will be agreed. In no case the Supplier is allowed to rework ITT Motion Technologies products. All direct cost will be invoiced to the Supplier, if they are at fault, while awaiting a return to the required quality level. The supplier will also be invoiced for all extra costs generated by the claim, including the ones generated by sorting of effected parts/goods back from Customer in case of Category 1 claim occurs. CSL1 AND 2 (CONTROLLED SHIPMENT LEVEL 1 AND 2) In case of recurrent non-conformance or heavy impact on product/production at Customer/ITT side, where the supplier clearly does not have sufficient production process control, the CSL procedure will be applied. CSL1 and CSL2 are provisional procedures implemented with a view to guarantee certified deliveries while awaiting the re-establishment of the conformance of the production process. CSL1 Following a request from ITT Motion Technologies, the Supplier will implement sorting of their production in accordance with criteria defined by ITT Motion Technologies Supplier Quality. The Supplier formally guarantees the conformance of goods delivered for each delivery that takes place while CSL1 is in the process of implementation, informing SQ sending results summary report. Audit about proper CSL implementation has to be performed at the beginning of the activity (supplier or ITT SQ). When the supplier fails to meet the commitments stipulated by CSL1, CSL2 status is recommended. CSL2 Requires that an external company validated by ITT Motion Technologies implements sorting in line with criteria defined for CSL1. The cost of sorting will be met by the supplier. Sorting results will be communicated by the external company both to ITT Motion Technologies and supplier. Termination of claims The unique format accepted by ITT Motion Technologies is 8D form, based on ITT problem solving tool. C1/C2 claims will be terminated over the 8D validation, by a process audit of the defective production stage which caused the claim. C3 claims will be terminated by the validation of the corrective action plan described in the 8D Report. With a view to achieving zero defects, the supplier commits to the following: zero recurrent claims; strict application of the PS methodology; the implementation of a formal program for Continuous Improvement. 18

21 3. Quality, Cost and Logistics performance measurement Quality, cost and logistics performance is measured and communicated monthly to suppliers. If objectives are not met, suppliers must communicate an action plan to ITT Motion Technologies to show how they intend to meet them in the future. The objectives that are part of the measurement of supplier performance are defined in conjunction with ITT Motion Technologies and officially communicated. These objectives are reviewed at least an annual basis. ITT Motion Technologies Sites will undertake monthly monitoring of PPMs and the rate of PQA parts so as to facilitate the definition of accurate QCD objectives clustered by commodity. Performances key indicator will be visible on ITT Motion Technologies Procurement portal. DEFINITION OF PPM, %PQA AND SERVICE RATE INDICATORS PPM Indicator The PPM indicator measures the ratio of defective supplier production parts detected wherever (Quality Inspection, in Production and at the Customer) vs relevant incoming quantities. It includes technical defects as well as packaging and labelling errors. ITT Motion Technologies divide PPM in two categories, Gross PPM and Net PPM: the Gross PPM is an indicator of the volume of parts rejected and for which ITT Motion Technologies had disruption (total quantity of claim); the Net PPM is an indicator of the effective number of defectives parts on which were detected the non-conformity after sorting (by ITT Motion Technologies or supplier representative). - NUMBER OF NON-CONFORMING PARTS* GROSS PPM = X ** TOTAL NR. OF PARTS RECEIVED Net Relevant PPM = Number of non-conforming parts detected in the effected batches evaluated as previously mentioned Non conformance is determined in terms of specifications: identification, size, aspect, function, mix, error in quantities, etc. * Only parts that have entered the site; consignment stocks awaiting reception and supplier stocks are not included. ** For raw materials, replace number of parts by number of units, i.e. unit of weight in most cases. 19

22 Non conforming parts formally accepted in deviation by ITT Motion Technologies are not included in the measurement of defective parts; Batches of products that have been destroyed or returned will be recorded as non conforming. In the event that sorting operations have to be carried out at ITT Motion Technologies to which the supplier has agreed and paid for, only the defective parts will be recorded as non conforming. If no reliable sorting have been performed, the whole batch is recorded as being defective. PQA Indicator It includes all APQP process positive at the first time at SOP NUMBER OF ITEMS DELIVERED UNDER PQA (OVER LAST MONTH) % PQA = X 100 NUMBER OF PQABLE ITEMS (OVER LAST MONTH) Service rate A customer order is filled if the quantity delivered is the same as that ordered (or as modified by an acceptance coefficient) and if delivery occurs within a specific time period as defined in the logistics agreement between ITT Motion Technologies and its supplier (month, week, day). SR = CUSTOMER ORDERS FILLED (FOR A GIVEN PERIOD) CUSTOMER ORDERS PRODUCT QUALITY INDICATOR = Q This indicator takes into account the number of C1+C2 claims over the last three months (rolling 3 month) as well as the number of CSL1/2 open in the current month. The result is compared with the result for the previous month and a red, yellow, or green colour code is applied: GREEN YELLOW RED zero claims in absolute value reduction of the number of claims in the current month & no C1 claim or CSL2 no progress or an increase in the number of claims in the current month, C1 claim or CSL2 open in the last month 20

23 Quality Indicator Example INDICATOR MONTH M-1 MONTH M Claims C3M (C1+C2) 25* 17* YELLOW CSL open 1 0 *: (No C1) COST INDICATOR = C This indicator measures economics performance in the current month with a view to evaluate compliance with a progressive reduction required to achieve an end-of-year target. On the basis of comparison with the theoretical curve a Red, Yellow, or Green colour code will be deemed to apply. GREEN YELLOW RED the supplier is under the theoretical curve the supplier indicator is above the theoretical curve not progress or a result that deteriorates in relation to the previous month s performance and the theoretical curve Cost indicator example: INDICATOR MONTH M-1 MONTH M Supplier indicator GREEN LOGISTIC INDICATOR = D This indicator measures the real rate of service for the current month and compares it with the rate of service for the previous month. Red, Yellow, or Green colour codes indicate improved or deteriorating performance GREEN YELLOW RED 100% Service Rate on target an improvement on the previous month s performance no progress or a result that deteriorates in relation to the previous month s performance Logistic indicator example: INDICATOR MONTH M-1 MONTH M Service rate 88% 85% Red 21

24 QCD INDICATOR QUALITY PPM 125 CLAIM C1+C2 2 vs target PQA 90% CSL 1 ECONOMICS SUPPLIER INDICATOR 98,5% DELIVERY SERVICE RATE 87% COMMENTS /ACTION PLAN 22

25 4. Vendor rating SCORE CARD On yearly base will be defined cost, quality and logistics targets that set out implementation plan in terms of results and resources agreed to by ITT Motion Technologies and the supplier. They must be regularly reviewed in line with defined milestones and results compared with objectives. ITT Motion Technologies Vendor Rating Score Card will be based both on SEM status and on QCD performance indicators, and brings to an overall ITT Motion Technologies rating: grow (green) rating will mean ITT Motion Technologies intention to improve business relation; maintain (yellow) rating will indicate the need to keep focus on the supply condition in order to identify an grow/exit approach strategy; exit (red) rating will show New Business Hold and/or exit strategy due to low confidence on supplier capability to achieve ITT Motion Technologies needs. ITT SUPPLIER VENDOR RATING QCD INDICATOR SEM RATING FINDINGS FINAL SCORE: 80/100 RATING AB Vendor rating is discussed between ITT Motion Technologies and suppliers at least on yearly base: specific action plan has to be defined for supplier that has yellow/red ratings. ITT team bases on Vendor Rating the definition of the purchasing strategy that identifies which supplier to grow business with, which to maintain and the ones that, not being compliant with ITT expectation, will be put on business hold or on exit strategy. 23

26 For any other need or explanation, please refer to following reference contact: 24

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