Eaton Corporation Global Supplier Excellence Manual. Last updated June 2016 Available at

Transcription

1 Eaton Corporation Global Supplier Excellence Manual Last updated June 2016 Available at

2 Table of Contents 1 DOING BUSINESS WITH EATON Purpose of the Global Supplier Excellence Manual About Eaton Supplier Responsibilities Ethics Supplier Confidentiality Supplier Diversity Business Changes Communications SUPPLIER QUALITY SYSTEM REQUIREMENTS Quality Planning Sub-Tier Supplier Control Lot Traceability Problem Solving Internal Audits Operator and Inspection Instructions Drawing and Change Control Change Management SUPPLIER PERFORMANCE AWARD SUPPLIER ASSESSMENT AND QUALIFICATION Initial supplier Profile Supplier Screening/Data Analysis Process Supplier Assessment Assessment Results Approvals status for Business Awards QUALITY PLANNING AND PRODUCT APPROVAL General Requirements Record Retention International Material Data System (IMDS) Advanced Product Quality Planning (APQP) Performance Test Requirements Measurement System Analysis (MSA) Requirements for Special Characteristics Process Capability Requirements for Special Characteristics Production Part approval Process (PPAP) COST OF POOR QUALITY CLOSED LOOP CORRECTIVE ACTION SUPPLIER DEVELOPMENT SUPPLIER MANAGEMENT Jun 2016 Page 2 of 31 CQD-P-127 Rev. 12

3 10 WISPER AND SUPPLIER VISUALIZATION DUNS Number WISPER & Supplier Visualization Supplier Web Based Software Fee CONTINUOUS IMPROVEMENT Innovation Drives Excellence, Achievements and Savings (IDEAS) SUPPLY CHAIN RISK MANAGEMENT AND BUSINESS CONTINUITY GUIDELINES GLOBAL LOGISTICS ELECTRONIC COMMERCE SUSTAINABILITY, ENVIRONMENTAL, AND REGULATORY INFORMATION Sustainability Environmental Health and Safety (EHS) Conflict Minerals Carbon Disclosure Project (CDP) U.S. Government Contracts Counterfeit Electronic Parts Product Stewardship Materials Declaration Packaging Product Lifecycle Assessment BUSINESS SPECIFIC REQUIREMENTS Electrical Group Vehicle Group Automotive Vehicle Group Truck Hydraulic Group Aerospace Business Group APPENDIX Definitions Jun 2016 Page 3 of 31 CQD-P-127 Rev. 12

4 1 DOING BUSINESS WITH EATON 1.1. Purpose of the Global Supplier Excellence Manual The purpose of this manual is to define the minimum requirements, processes, and systems for doing business with Eaton (Eaton and its affiliates shall be referred to herein as Eaton ). The manual outlines processes used to ensure that Eaton s supply base is continually improving to prevent quality and delivery disruptions, provide the lowest cost, and top level service. Implementation of the processes outlined in this manual will not only reduce risk of supply chain disruptions, but will also help Eaton and its suppliers to increase our competitive industry position and ensure our continued mutual success. In this manual, the terms shall and must mean that the described requirement is mandatory, while the term should means that the described requirement is needed and expected with some flexibility in how it is implemented. When the WISPER system is referenced within this manual, the Supplier shall submit the information requested in the WISPER system. For Eaton locations not yet on WISPER, the Eaton site will provide the Supplier with the required equivalent submission format About Eaton Eaton is a diversified power management company. Eaton is a global technology leader in electrical components and systems for power quality, distribution and control; hydraulics components, systems and services for industrial and mobile equipment; aerospace fuel, hydraulic and pneumatic systems for commercial and military use; and truck and automotive drivetrain and powertrain systems for performance, fuel economy and safety. Eaton has in excess of 103,000 employees and sells products to customers in more than 175 countries. For more information, visit Eaton works with suppliers who deliver the best quality, value and service at the most competitive cost. Our suppliers are innovative and dedicated to driving continuous improvement in their operations. Together we address all aspects of cost reduction, waste elimination and efficiency improvement in a dynamic global environment. To learn more about doing business with Eaton, please access our web-site at: Supplier Responsibilities It is the responsibility of all suppliers including distributors and each Tier-1 Supplier s sub-tier/sub-contract suppliers to review, understand and ensure compliance with this manual as part of doing business with Eaton. Eaton understands that our businesses are different in nature and in many cases have unique supplier quality requirements that are market specific. However, the processes and tools represented in this manual represent the core expectations and requirements of our business. The differences that you will see across our organization will be minimal and will be driven by customer and/or market specific requirements. Business Specific requirements can be found in Section 16 of this manual Ethics Code of Conduct: This Code outlines Eaton s minimum expectations regarding workplace standards and ethical business practices. Eaton requires our suppliers to adhere to this Code. Please make your employees aware of our Supplier Code of Conduct. The Supplier Code of Conduct has been translated into multiple languages and may be downloaded from the website link below to share with your organization as appropriate. The review and acceptance of the material contained within the Eaton Code of Ethics and Supplier Code of Conduct shall be completed by your company s highest ranking official. Eaton requires that the appropriate person access the on-line form available at the 'Selling to Us' page on Eaton.com (link at end of section) to affirm your organization s commitment to ethical business practices. Corporate Social Responsibility: As a premier diversified power management company, Eaton cares about doing business right in meeting the needs of our global customers, employees and communities. Jun 2016 Page 4 of 31 CQD-P-127 Rev. 12

5 Outlined in this document is a summary of some of the commitments that exemplify our approach to ethics and integrity in everything Eaton does. Eaton Code of Ethics: Eaton Corporation requires that its directors, officers and employees abide by these fundamental principles of ethical behavior in performing their duties. Eaton Ethic's Guide: The Ethics Guide is intended to give Eaton employees around the world general guidance in making ethical business decisions and to direct them to sources for further help. Gift and Entertainment Policy: Eaton developed this policy to help employees make the right decisions when providing or accepting gifts, entertainment or travel while conducting business on behalf of Eaton. To access each of the Eaton policy documents, and to confirm your agreement to abide by the Eaton code of conduct, click the link below to access the 'Selling to Us' page on Eaton.com Supplier Confidentiality Documents furnished by Eaton to the Supplier are solely for the purpose of doing business with Eaton. These documents shall be controlled by the Supplier and must not be transmitted to others without the consent and approval of Eaton Supplier Diversity Eaton believes that our corporation and our communities benefit from providing equal opportunities for diversity business enterprises to compete for Eaton business. Our suppliers are our business partners, and it is important that these partnerships reflect the communities where we live, work and serve. Eaton is seeking small, veteran, minority and women-owned businesses as well as HUB Zone enterprises that provide quality products and services at competitive prices. Companies wishing to apply as a diverse business must be US-based, 51% owned, controlled or operated by the diverse business owner. For more information, please access our website at: Business Changes Any significant changes in business climate such as acquisitions, divestitures, pending litigation, or any activity that may change the financial viability of the supplier s organization must be communicated to Eaton Communications All documentation must be communicated to Eaton in English unless otherwise specified by the using facility. Suppliers must maintain and have access to an electronic form of communication i.e., the internet/worldwide web. Jun 2016 Page 5 of 31 CQD-P-127 Rev. 12

6 2 SUPPLIER QUALITY SYSTEM REQUIREMENTS All suppliers must be compliant to an internationally recognized quality management system, certified by a 3rd party registrar, as specified by each Eaton business group. Refer to the business-specific information in Section 16 for the minimum certification requirements. Suppliers must notify Eaton within 30 days if their third party registration status changes. All existing / legacy suppliers not having 3 rd party registration shall maintain a minimum quality management system that encompasses the following: 2.1. Quality Planning Suppliers shall follow industry standard Quality Planning. Please see the Advanced Product Quality Planning (APQP) section for additional examples. Quality planning must be maintained throughout all phases of the product life cycle, from inception to delivery to the customer. See section 5.0 of this Manual for more detailed information Sub-Tier Supplier Control The supplier must maintain sub-tier suppliers/contractors qualification records along with on-going quality and performance test data as applicable on products purchased through these sub-tier suppliers. Supplier shall flow down requirements to their sub-tier suppliers that enables supplier to meet Eaton product print, specification, quality expectations, and any contractual agreement. Eaton reserves the right to specify or approve sub-tier suppliers contracted by its suppliers for work performed on Eaton material. This applies to all suppliers including special process (Non-Destructive Testing, Heat Treating, Welding, Chemical Processing, Plating and Coatings), material testing services, and distributors Lot Traceability Suppliers shall establish a lot traceability system that tracks components throughout the value stream, from raw material through shipment to Eaton. This includes all process steps including inspection and test procedures, rework and sub-tier supplier operations. Where a 'shelf life' restriction applies, suppliers shall ensure that materials are tracked and controlled to prevent expired materials from being used in production. Suppliers must certify, as part of sample submission, compliance with current constraints on restricted substances as specified by PO or contract, especially toxic and hazardous substances (i.e. International Material Data System) Problem Solving All suppliers for Eaton must establish and maintain documented procedures for implementing a system of closed loop corrective and preventive action with disciplined problem solving methods (i.e. 8D) Internal Audits Suppliers must conduct regular internal audits to ensure continued compliance with internal procedures and customer requirements. Jun 2016 Page 6 of 31 CQD-P-127 Rev. 12

7 2.6. Operator and Inspection Instructions To ensure manufacturing and quality personnel are qualified, the supplier will prepare written operator and inspection instructions for employees who have responsibilities for completing production process and inspection tasks. In addition, suppliers will prepare, train and appropriately maintain operator and inspection instructions. The supplier may use reduced-frequency (sampling) inspection plans only when historical records indicate that a reduction in inspection can be achieved without jeopardizing the level of quality. The supplier may employ sampling inspection in accordance with nationally accepted or customer required standards, as-specified by the Eaton business. If sampling identifies a defect or discrepancy, 100% inspection of the lot is required. The supplier shall maintain quality records in sufficient detail to establish evidence that required tests and verifications were properly performed, and that only material meeting specified requirements have been accepted for production and delivery to Eaton. These records shall be available for review by Eaton or an Eaton authorized representative. Copies of individual records shall be furnished to Eaton upon request Drawing and Change Control The supplier s quality system must ensure that the latest engineering drawings and specifications are available at the manufacturing, test and inspection location. The written procedure(s) should indicate the method utilized for receipt, review or distribution of all changes and the method of recalling and disposing of an obsolete item. A review process must be established in that system to confirm that applicable drawings and specifications are at the latest revision level with the issuing source. If Eaton contract/po is for purchase of previous revision, then supplier must ensure the applicable prior revision documentation is available for manufacturing, test and inspection; in this case, additional care must be exercised to ensure correct revision is produced Change Management Eaton understands that change is necessary to achieve continual product and process improvement and is in support of this; however it is a decision that must be made mutually with input from all the affected parties. Unauthorized changes to products and/or processes can have a significant financial impact on both of our organizations. Eaton requires all suppliers to submit and obtain change request approval in writing prior to any change being implemented. The applicable changes covered under this requirement are adopted from AIAG PPAP manual and is referenced in the table below. Eaton may elect to require formal PPAP submission and approval. In these cases, suppliers shall not ship products to Eaton sites prior to approval. Failure to contact Eaton and obtain formal approval prior to implementing changes and shipment of product may result in New Business Hold and responsibility for compensating Eaton for all associated costs as a result of the unapproved change. Conditions requiring Eaton notification include, but are not limited to the following: Change of material New or modified production tooling Production parts produced at a new facility Product or process changes (internal or externally by sub-suppliers) Change of raw material suppliers or sub-supplier for outside services (heat treat, plating, Non Destructive testing, etc.) Change in test/inspection methods (techniques) Shipping to additional Eaton facilities (approval at one Eaton facility does not constitute approval at other facilities) Change in engineering drawings or specifications Jun 2016 Page 7 of 31 CQD-P-127 Rev. 12

8 3 SUPPLIER PERFORMANCE AWARD Eaton recognizes suppliers who achieve benchmark performance levels in the standard metrics of cost competitiveness, quality and delivery performance. The highest performing suppliers receiving our top award must also display high value add contributions of value engineering, innovative technology, service and sustainability while embracing the highest standard of ethics and values in working in partnership with Eaton. 4 SUPPLIER ASSESSMENT AND QUALIFICATION Each Eaton business group maintains a supplier selection and sourcing process that adequately evaluates and identifies potential sourcing partners. Eaton suppliers must be capable of meeting the applicable Eaton business group s quality, delivery, cost, environmental health and continuous improvement requirements. Eaton will validate these requirements as a part of their supplier selection process through supplier assessment and qualification activities. Supplier Quality Assessment results from one Eaton business may be a sufficient endorsement for another Eaton business to use that supplier without re-qualification. This is at the discretion of each Eaton business and any such assessment may require additional surveillance for specific business needs. The supplier assessment and qualification process includes the following: 4.1. Initial Supplier Profile The Initial Supplier Profile Survey (Access via WISPER tool) or similar tool is used to obtain initial data and information concerning a supplier that will be used throughout the sourcing and assessment process Supplier Screening/Data Analysis Process The SCM Group will perform the screening process based on several factors, most important considerations below: Supplier s current delivery performance based on 100% on-time expectation Supplier s quality performance Supplier s registration to an industry-standard quality system. (i.e., TS16949) Cost competitiveness Supplier s financial strength for future growth Upon completion of the initial screening process, the group responsible for sourcing approval will meet and review the outcome. This group will make a determination whether the supplier qualification process will continue. Further follow-up and/or corrective actions may be requested of the supplier. If the results are considered acceptable the process continues Supplier Assessment Once the initial screening process is completed and the supplier is identified as a potential supplier to Eaton, a thorough assessment of the suppliers Quality System shall be completed either on-site or via desk-audit or self-assessment. Suppliers are encouraged to conduct self-assessments to become familiar with Eaton s Quality System expectations. The results of the assessment will be reported and maintained via the Eaton WISPER system. In addition, Eaton business groups may use an audit format that is specified by market and or customer requirements. Eaton may also, at its option, conduct financial assessments/reviews on a periodic basis. Per customer requirements, some Eaton facilities may require annual on-site supplier quality assessments. Eaton reserves the right to schedule additional assessments based on factors not limited to risk, performance and/or non-compliance to quality system requirements. The cost associated with audits performed as a result Jun 2016 Page 8 of 31 CQD-P-127 Rev. 12

9 of risk induced by supplier performance or compliance issues may be charged to the supplier at Eaton s option. Third party quality system registration may be recognized in lieu of a periodic on-site assessment if the Eaton business group deems it appropriate. Any third party providing certification to these standards must be accredited from a country authorized entity such as ANAB (USA) Assessment Results When system deficiencies are identified, a response time expectation will be provided by Eaton personnel for the supplier to define corresponding corrective actions. Failure to provide a suitable response in a timely manner is cause for a supplier to be removed from further consideration. Eaton reserves the right to discontinue the qualification process at any time Approvals status for Business Awards Eaton shall not award new business to suppliers who are not approved. Once Approval has been established, the supplier will be added to an Approved Supplier Listing (ASL) as defined by the business group. 5 QUALITY PLANNING AND PRODUCT APPROVAL 5.1. General Requirements Advanced Product Quality Planning (APQP) is a structured method of defining and establishing the steps necessary to assure that a product meets customer expectations, and that the Supplier s manufacturing processes have the capability to consistently meet these requirements. This section defines the general requirements for production part qualification and approval. requirements may apply. Additional Prior to first production shipment, each part or component being sourced must be approved for production by the Eaton facility. The Eaton facility or business group will approve parts through the PPAP process Record Retention The supplier must retain adequate quality system records, including records associated with management reviews, internal audits, calibration, change management, maintenance, and root cause corrective action. Additionally, supplier must maintain all advanced quality planning documents; including process guidelines, laboratory test instructions, gauge/test equipment verification, calibration and performance test methods and product and process validation test results International Material Data System (IMDS) Where required by our customers, Eaton may request supplier s entry of product data into IMDS. It is Eaton s full expectation of supplier cooperation and agreement to fully enter product data into the IMDS and to manage that data as required. Where necessary Eaton may provide assistance to suppliers not otherwise enabled to engage the IMDS Advanced Product Quality Planning (APQP) The work practices, tools, and analytical techniques describing Advanced Product Quality Planning are based on the latest version of the AIAG (Automotive Industry Action Group) APQP and Control Plan manual. Some of the most important items are listed below: Technical and Specification Review Jun 2016 Page 9 of 31 CQD-P-127 Rev. 12

10 Design Failure Mode and Effects Analysis (DFMEA) Process Flow Diagram Process Failure Mode and Effects Analysis (PFMEA) Control Plan MSA Studies Process Capability Full Dimensional Layout Pass Through Characteristics 5.5. Performance Test Requirements If performance testing is required to be done by the supplier to confirm that current production meets design requirements, Supplier shall document the test requirements in a control plan and perform testing accordingly. Performance test failures are cause for a supplier to stop production immediately, pending analysis of the process and corrective action. Suppliers are required to immediately notify the Eaton location of test failures, suspended shipments, and identify suspect shipped lots, if quality or deliveries to Eaton will be impacted Measurement System Analysis (MSA) Requirements for Special Characteristics The Supplier shall perform Measurement Systems Analysis (MSA) studies for all gauges used to measure special characteristics (see Definitions) as defined by the Design Record (drawings and specifications). The supplier s measurement and calibration methods must be agreed to by Eaton to ensure consistent qualification of parts. Any Gage R&R over 30% is unacceptable. Due to the importance of the application of Eaton products, Eaton s expectations are Gage R&R to be under 10%. Suppliers should reference the latest version of the AIAG Measurement Systems Analysis manual for further details Process Capability Requirements for Special Characteristics Process Capability Study: When Special Characteristics are identified, Supplier shall perform process capability analyses at new product launch and when product or process changes affect these characteristics. Additional periodic capability analyses may be required by each Eaton business. If no special characteristics are identified, the Supplier should evaluate and identify product and/or process characteristics that can be used to ensure process capability. This should be reviewed and agreed to by Eaton representatives to ensure alignment with Eaton expectations. Initial process studies shall be summarized with the following capability or performance indices: (C p / C pk / P p / P pk ) Results and Interpretation: Eaton minimum requirements for short-term capability and stability is an Index > Eaton minimum requirements for long-term capability and stability is an Index >1.33. If acceptance criteria are not satisfied, Supplier shall contact Eaton with a corrective action plan and a modified Control Plan providing for 100% inspection and/or error-proofing mechanism. Variation reduction efforts shall Jun 2016 Page 10 of 31 CQD-P-127 Rev. 12

11 continue until the acceptance criteria are met, or until approval is obtained from Eaton. Note: 100% inspection methodologies are subject to review and concurrence by Eaton. For special cases where the annual usage volumes do not meet the guidelines for a thorough process capability assessment, requirements shall be defined by the Eaton business. Suppliers should reference the latest version of the appropriate AIAG manual for further details Production Part Approval Process (PPAP) The PPAP submission will be based on the latest edition of the Production Part Approval Process (PPAP) Manual, available through AIAG (Automotive Industry Action Group). An Eaton representative from Quality Assurance or Supplier Development will identify the appropriate PPAP submission level and additional requirements for the part or component to be sourced. Unless otherwise specified, a Level 3 PPAP shall be submitted. All PPAP samples must be produced using production tooling and processes at the production line rate. Supplier shall ensure compliance to all requirements listed on Eaton Design Record (drawings and specifications) and purchase orders. Additional acceptance testing may be required. PPAP documents may be posted via the Eaton WISPER system, and sample parts shall be submitted to Quality Engineering and/or specified Eaton personnel. Suppliers may be required to perform annual layout / re-validation and PPAP submission as directed by the Eaton business. PPAP Status (As determined by the Eaton facility): Approved: Indicates that the product meets all Eaton requirements and authorizes supplier to ship production quantities of the product. Interim Approval: Permits supplier to ship product on a limited time and/or piece quantity basis. Note: Interim approval expiration will be determined by each business. A PPAP re-submission is required by the supplier, along with a corrective action, to obtain a status of Approved. Additional guidelines on product containment should be reviewed in the latest edition of the AIAG PPAP manual. Rejection: Indicates that the PPAP documentation and/or product does not meet Eaton s requirements for approval. Appropriate action shall be taken by the supplier to correct the deficiency and PPAP resubmission is required. Note: Supplier is not authorized to ship product until product is at least interim approved by Eaton. 6 COST OF POOR QUALITY All costs incurred by Eaton that are associated with the failure of a supplier to meet Eaton s quality requirements will be charged back to the supplier. Supplier shall pay a minimum $250 Administration Fee for any Defective Material Report (DMR) issued regardless of the value of rejected Lot received or number of parts being rejected. Costs incurred beyond this administration fee will be assessed separately; below is a sample list of Cost of Poor Quality charges: Sorting Line Disruption / Speed Reduction Premium Freight Premium product cost paid to Overtime Outside processing & testing Jun 2016 Page 11 of 31 CQD-P-127 Rev. 12

12 support production Rework i.e. labor, tooling, and fixturing Added inspection, certification of product, etc. Scrap Warranty costs required Reimbursement of all charges from customer 7 CLOSED LOOP CORRECTIVE ACTION All suppliers for Eaton must establish and maintain a documented process for closed loop corrective and preventive action using disciplined problem solving methods. This shall be used if a nonconformance to an engineering specification or requirements occurs. All suppliers shall notify the relevant Eaton business(es) immediately upon suspect of nonconforming product being delivered. Notification shall be provided in writing ( accepted) to the Purchasing and Quality contacts at the affected Eaton business, and include sufficient description of the non-conformance, the products affected, and associated timeframes in order for containment actions to be put in place. Containment actions shall be completed by the supplier within the appropriate time indicated by the Eaton business. When a supplier nonconformance is identified within an Eaton Business, a Defective Material Report (DMR) will be issued to the supplier via WISPER or other system by the issuing plant, which will serve as a Corrective Action Request (CAR). Containment actions must be completed within the appropriate time indicated by the Eaton facility. Failure to do so may negatively impact the supplier s quality performance metric. Suppliers should be cautious to avoid root causes of operator error and instead look deeper for underlying factors. If operator error is truly the cause, error-proofing actions must be employed to prevent recurrence; re-training alone is insufficient. Suppliers shall include adequate detail and supporting data in the corrective action response to assure that appropriate system improvements have been completed. Responses are to be returned by the date required on the DMR. Eaton may require an on-site review of implemented corrective actions to validate effectiveness. Failure to respond to a corrective action request may result in penalties up to and including loss of future business awards. Supplier shall ensure that all quality system documents affected by any implemented corrective action are updated to accurately reflect the changes. 8 SUPPLIER DEVELOPMENT Each Eaton business selects suppliers for development who present the best opportunity for improvement and the greatest potential impact to the organization. Suppliers may be selected for development based on the following factors: Strategic growth suppliers Provider of critical parts Risk revenue partner Key to manufacturing flow Performance issues Jun 2016 Page 12 of 31 CQD-P-127 Rev. 12

13 Suppliers selected for development projects must demonstrate a willingness to change and improve, and show evidence of internal continuous improvements efforts. 9 SUPPLIER MANAGEMENT Eaton recognizes that our suppliers are key to delivering world class products and services to our customers and the marketplace. To support these efforts our suppliers must share our vision, goals and performance expectations. Eaton s supplier management process recognizes that establishing supplier performance on a regular basis requires: a) Measuring results through a standardized supplier scorecard process; b) Business Reviews; and c) Continuous improvement to drive value for our end customers. Eaton s standardized supplier performance management process ensures that key direct, indirect and logistics suppliers understand our expectations and meet our requirements. Our governance processes include, but are not limited to, the following key measures: Net Productivity % Quality DPPM Delivery - OTD Pay Terms performance Third Party Certifications PPAP/FAI - acceptance & timeliness Compliance to Code of Conduct, Conflict Minerals, Sustainability requirements Continuous Improvement Service level achievement 10 WISPER AND SUPPLIER VISUALIZATION All active or new suppliers to Eaton must register for the WISPER and Supplier Visualization (VIS) systems via the supplier portal at when notified to do so. Once Suppliers are registered, Suppliers will be provided with a User ID and a password. Suppliers will then have the ability to set up additional users at their facility. In order to register Suppliers must meet the following conditions: Supplier must be a current Eaton supplier. Supplier must supply an Eaton facility that has fully implemented WISPER or VIS. Supplier must be a direct material / Direct Source Supplier DUNS Number Every supplier must have a Dun & Bradstreet number (D&B D-U-N-S number) for each manufacturing location. Eaton will use this number to track supplier by each specific manufacturing location. For information on verifying or obtaining a D&B D-U-N-S number at no cost to your company, visit the D&B website ( Enrollment in D&B Financial Service is not required WISPER & Supplier Visualization WISPER: The Eaton Worldwide Interactive Supplier Performance Evaluation Resource system (WISPER) is a webbased application utilized for gathering, summarizing, reporting, and evaluating supplier performance. WISPER provides suppliers global access to information on commodity usage for all Eaton facilities worldwide and allows suppliers to showcase their capabilities to the entire supplier resource Jun 2016 Page 13 of 31 CQD-P-127 Rev. 12

14 management personnel of Eaton. The WISPER system allows a supplier to review their own part/product activities as well as their performance across all of Eaton. Once registered in the WISPER system the supplier must establish and maintain its Supplier Profile. When completed this will give all of the Eaton facilities access to information on the following: Supplier Capabilities - the supplier must list, upload and maintain all current quality system certifications. Products Contact Information - the supplier must list & maintain all current contact information. Keeping this contact information current is critical as Eaton personnel will reference them in order to make contact with the appropriate functions at supplier facilities. Quality System Status Diversity Status, if applicable. The system will also provide the supplier and the Eaton facility with the following: PPAP / First Article Submission Tracking Deviation Tracking Ship to Stock Status Part Information Discrepant Material Reports Audit Information Performance Information Competitor Rankings The HELP tabs and Communication and Training link located within the WISPER system provide information that will assist users in setting up their profiles and working within the WISPER system. SUPPLIER VISUALIZATION: Supplier Visualization is an Eaton global web based application that supports materials replenishment by giving Eaton and suppliers shared visibility of forecasts, purchase orders, inventory, schedules, material receipts and the ability to create advanced shipping notices (ASN). Below are some of the benefits it provides to Eaton and Eaton suppliers: Improves communication with suppliers Supports inventory reduction Reduces expediting (faxes, s, phone calls) Reduced transactional costs (manual to electronic) Overall improvement to supplier ownership of the processes. An appropriate Eaton contact will contact you when it is time to register for access to and become trained on using Supplier Visualization. Please do not register until notified to do so Supplier Web Based Software Fee Suppliers shall support the ongoing maintenance of these supplier systems by contributing an annual fee based on the amount of annual business with Eaton worldwide. There will only be one Supplier Web Based Software fee assessed per supplier, which will cover all supplier locations regardless of the number of registered users for a supplier. Refer to the following link for more information: Jun 2016 Page 14 of 31 CQD-P-127 Rev. 12

15 11 CONTINUOUS IMPROVEMENT Eaton may deploy Supplier Development Engineers to work with suppliers based on the criteria stated in the Supplier Development section of this manual. However, Eaton Corporation requires all of its suppliers to pursue continuous improvement initiatives and the deployment of these initiatives are the responsibility of Eaton s suppliers. Eaton requires supplier-initiated cost-reduction and improvement suggestions. Eaton wants open, forthright dialogue with our suppliers so that, in collaboration we can reduce waste and improve quality. Eaton seeks creativity, innovation and ingenuity in improving how we do business together Innovation Drives Excellence, Achievement and Savings (IDEAS) Eaton makes available to suppliers the IDEAS program as a method to submit Continuous Improvement suggestions. For more information, download an IDEAS Program Brochure at the webpage linked below. To submit an IDEAS suggestion, download the Suggestion Form from the webpage and return the completed form to your principal Eaton Supply Chain Management contact. For more information refer to section 2.8 on Change Management and visit: 12 SUPPLY CHAIN RISK MANAGEMENT AND BUSINESS CONTINUITY GUIDELINES Eaton s supply chain has become increasingly complex, global, diversified and subject to a variety of risks that could jeopardize continued operations. In this environment, our customers have challenged us to establish Business Continuity Plans within our businesses, operations and supply chain, as these are more important than ever before. Similarly, Eaton is challenging its suppliers to establish Supply Chain Risk Management and Contingency Plans. While it is clear that contingency plans cannot be developed for all potential scenarios, Eaton is asking suppliers to establish recovery plans and steps that will facilitate quick response, reaction and resumption of parts and services in the event of disruptions. Eaton suppliers are expected to establish a comprehensive crisis management approach to deal with potential disruptions (proactive) and disasters (reactive). The approach should include plan of action, checklist of activities, communication plans, escalation procedures, and organization with teams, roles, and responsibilities. When Eaton deems necessary, based on the risk situation or as part of the Business Performance Review process, the supplier may be asked to provide risk management and business continuity plans. The supplier is expected to conform to the risk management and business continuity requirements in the Supplier Excellence Manual including alternate manufacturing site or process options wherever applicable to ensure operation s continuity. Eaton will notify suppliers in writing when identified as part of a risk situation or as part of the Business Review process. Also, in case of financial risks, Eaton expects their suppliers to provide requested financial information wherever applicable. Eaton suppliers must plan for the following (as applicable) disruptions: Business Continuity to deal with event-based risks such as fires, chemical spills, natural disasters, terrorist threats, medical emergencies, and human resources issues (Example: Strikes) Supply Chain Continuity to check and prepare the Supplier s suppliers to deal with potential disruptions (proactive) and disaster situations (reactive) Pandemics Preparedness Plan (Example: Avian Flu Pandemic) IT Disaster Recovery and IT Security for Supplier telecommunications, data, systems and infrastructure Eliminate potential disruptions due to Financial and Regulatory Non-Compliance [Example: For US publicly traded companies SOX404 or International Financial Reporting Standards (IFRS) in Europe], as applicable Jun 2016 Page 15 of 31 CQD-P-127 Rev. 12

16 Human Resources guidelines to conducting security, drug & background checks Confidentiality Policy (including protection of Eaton Intellectual Property), as applicable Eaton suppliers are expected to develop, deploy and maintain these business continuity planning requirements. Eaton suppliers are expected to periodically monitor the Global Supplier Excellence Manual for changes or additions to the risk management and business continuity requirements. Trade Compliance The purpose of this section is to re-emphasize Eaton Corporation s commitment to trade management, regulatory compliance and provide awareness to our supply base and business partners. Eaton expects all of its partners to comply with any applicable regulations listed below. As a global company, Eaton expects all of its partners to adhere to all local and regional trade management regulations. Below are two U.S. government websites for your reference and basic overview of U.S. export regulations. Export Commercial/Dual-Use articles and data controlled under the Department of Commerce (DOC) jurisdictionally need to comply with the Export Administration Regulations (EAR): Military/U.S. Munitions List articles and data controlled under the Department of State (DOS) jurisdictionally need to comply with the International Traffic in Arms Regulations (ITAR): Import As a supplier exporting to Eaton where Eaton is the importer of record with the U.S. Customs and Border Protection (CBP), there are specific Federal regulations and Eaton required procedures to follow. Refer to contractual documentation and your Eaton contact for further information regarding the Eaton required procedures. Suppliers shipping to the USA and its Territories/Commonwealths must comply with the following requirements. Commercial Invoice and Packing List Free Trade Agreement Requirements Country of Origin Marking Requirements ISPF 15 Wood Packaging Requirements Importer Security Filing C-TPAT Customs Trade Partnership Against Terrorism Please check with the local customs broker or your Eaton Corporation contact for requirements for other international shipments that are non-usa, its Territories and its Commonwealth. For further details please consult the link below: 13 GLOBAL LOGISTICS Global logistics has Regional Specific requirements as well as Global Requirements. Americas Region Shipping Instructions: -- Americas Paid Shipments: Jun 2016 Page 16 of 31 CQD-P-127 Rev. 12

17 EatonRoute tool provides Standard Routing/Shipping Instruction for U.S. Activity, Cross Border Canada and Mexico. These routing instructions are applicable for inbound collect shipments and third party shipments where Eaton Corporation is responsible for freight payment. Eaton Corporation suppliers should obtain Standard Routing Instructions via the Internet by accessing: Suppliers are required to access EatonRoute every 30 days to verify no changes have been made (or prior to shipping if more sporadic) by selecting Get Route Guide within the EatonRoute tool. Suppliers must adhere to routing instructions contained in EatonRoute unless a change is authorized by Eaton Corporation. Failure to follow shipping instructions prescribed in EatonRoute may result in charge backs for additional costs incurred. All Shipments billed to Eaton Corporation for non-cooper divisions require the Eaton Freight Location Number (EFLN) and instructions on mailing the freight invoice to be provided in the special instructions box of the Bill of Lading (BOL) or in the body of the BOL. Instructions should be provided as follows: Legacy Eaton (Electrical, Hydraulics, Aerospace, & Vehicle Groups) 3 rd Party Legacy Eaton (Electrical, Hydraulics, Aerospace, & Vehicle Bill To Eaton Corporation, EFLN XXXX Eaton Corporation (COMPLETE ADDRESS), EFLN XXXX Mail Freight Bill To: Eaton Corp EFLN XXXX C/O Cass Information Systems, PO Box , Columbus, OH Eaton Corp EFLN XXXX Cass Information Systems, PO Box , Columbus, OH Groups) Cooper Divisions Cooper (Division Name) Cooper (Division Name) C/O, Cass Information Systems, PO Box , Columbus, OH Shipments managed by CEVA Shipments managed by FedEx Supply Chain Eaton Corporation, EFLN XXXX Eaton Corporation, EFLN XXXX, C/O FedEx Supply Chain, PO Box 1108, 5455 Darrow Road, Hudson, OH *Shipment ID required on Freight Invoice Eaton Corp EFLN XXXX C/O Cass Information Systems, PO Box , Columbus, OH Eaton Corp EFLN XXXX C/O Cass Information Systems, PO Box , Columbus, OH All Eaton suppliers are required to set up correct processes and procedures in export arrangement. All Eaton suppliers shall check with and use Eaton managed and approved logistics services providers for Eaton paid shipments before a shipment is made. For additional information and specific routing instructions, contact your Eaton buyer. Suppliers must obtain the EFLN from an Eaton representative upon agreeing and before initiating any third party bill to Eaton shipments, for any purpose. Asia Pacific (APAC) Region Shipping Instructions: -- APAC Paid Shipments: Each Asian country has established clear requirements in shared responsibility concerning import process. All Eaton suppliers are required to understand such informed compliance and set up correct processes and procedures in export arrangement. All Eaton suppliers shall check with and use Eaton managed and approved logistics Jun 2016 Page 17 of 31 CQD-P-127 Rev. 12

18 services providers for Eaton paid shipments before a shipment is made. For additional information and specific routing instructions, contact Eaton APAC Logistics at Eaton, Shanghai, China. Europe, Middle East & Africa (EMEA) Region Standard Routing/Shipping Instructions EMEA paid Activity Eaton Corporation suppliers should obtain Standard Routing Instructions from Eaton Central Freight Procurement EMEA via CFP-EMEA@Eaton.com. This support will provide routing instructions for shipments paid within EMEA. These routing instructions would be applicable for inbound collect shipments (or third party shipments*) where Eaton Corporation is responsible for freight payment. For additional information, contact Eaton EMEA Logistics at Eaton, Morges, Switzerland. Global Shipping Hazardous Materials/Dangerous Goods to/from Eaton and its Affiliates Suppliers must comply with all applicable laws and regulations governing the domestic and international transport of Hazardous Materials or Dangerous Goods to or from all designated Eaton locations. Compliance includes adherence to the laws and regulations of the relevant, originating Eaton location and those for the destination of the shipment. The regulations and relevant authorities include but are not limited to those prescribed by the U.S. Department of Transportation (DOT) 49 CFR (USA Transport); Transportation of Dangerous Goods (Canada Transport); International Air Transport Association (IATA) or International Civil Aviation Organization (ICAO) for international and domestic air shipments; and International Maritime Dangerous Goods (IMDG) for international or domestic dangerous goods by water. Supplier s obligations include compliance with those regulations governing: Hazardous Materials/Dangerous Goods Description All documentation/recordkeeping requirements including but not limited to associated shipping papers, training records, etc. Labeling and Markings Packaging Placarding (if required) Communication - All shipments must have a Safety Data Sheet (SDS) attached with the shipment. US Companies must be registered and have a certificate showing you are registered with the Department of Transportation for the current year (expires each year June 30 th ) Required training for all appropriate employees, agents or contractors of Supplier Any of these violations could be a cause for the shipment being rejected and have it returned back at the Supplier s cost. For additional information, contact your Eaton Supplier/Commodity Management Representative. If a supplier has any questions regarding their obligation for compliance with any of the aforementioned requirements, the Eaton representative can refer such inquiries to the Eaton Global Logistics Team at Eaton WHQ, Cleveland, Ohio. Global Sourcing and Vendor Managed Inventory (VMI) Some Eaton businesses operating in North America utilize integrated logistics and VMI programs in support of global sourcing initiatives and inbound material requirements. VMI programs are currently utilized for non-u.s. suppliers shipping to Eaton facilities in the U.S. UPS currently operates a VMI hub in Carol Stream, IL (Chicago area). The Carol Stream hub stores parts and feeds Hydraulics Group plants in US. Expeditors International operates a hub in Detroit which feeds Vehicle Group plants in US. Jun 2016 Page 18 of 31 CQD-P-127 Rev. 12

19 Program Eligibility: Final determination of supplier eligibility to participate in the program will be made by the respective Eaton Business Unit s Commodity Management Lead. Once participation is confirmed, a three-phased implementation process will commence. (1) Data acquisition, (2) inventory planning, and (3) process training, required for all participating suppliers. Program User Guide and other relevant documents will be provided during the supplier on-boarding phase. Logistics Services are provided by third party logistics service providers (LSP) and managed by Eaton Global Logistics. For additional information, contact Eaton Global Logistics Team at Eaton Center, Cleveland, Ohio. The LSP provides all logistics activities including freight/order consolidation, transport, customs entry / brokerage, physical distribution and the supporting technology. The standard incoterms are FCA (Free Carrier, named place). Ocean freight is the primary mode of transport. Eaton pays the transportation cost from named origin to the hubs, warehousing/storage cost for the hubs (for the UPS managed program) and transportation cost from hubs to plants. Inventory planning and management is a collaborative effort by the LSP, supplier and Eaton Supply Chain Management personnel. The supplier s inventory management responsibility is to maintain required inventory levels in the hub facility by working closely with the materials planners and buyers responsible for the parts purchased. The LSP provides web-based transactional visibility (receipt, number of pieces consumed by plants, etc) tools and an inventory management system to perform the necessary functions. Complete training in system use will be provided by the LSP prior to shipment of the first production order. For additional information regarding the program and its applicability to your situation, contact your Eaton Commodity Management representative. 14 ELECTRONIC COMMERCE There are three key steps to our e-commerce initiatives: Initiation of the Replenishment activities Submission of the Invoice and Payment for the goods and services. Suppliers must comply with Eaton s suite of e-commerce tools (where implemented) for electronic purchase orders, invoicing, and payments as described on eaton.com where allowable by the statutory requirements of each country. These requirements include the utilization of Eaton s Supplier portal Supplier Select, as applicable, in combination with the internet-based framework for the e-commerce tools utilized by Eaton which include, but may not be limited to the following: Electronic purchase orders Supplier Visualization, EDI, etc., Electronic invoicing EDI, ERS, OB10, Eaton s Supplier Invoicing North America Tool, etc.), and Electronic payments EFT / ACH, Wire Transfer, etc. (Doing Business > Selling to Us > Electronic Commerce) 15 Sustainability, Environmental, and Regulatory Information 15.1 Sustainability At Eaton, sustainability isn t an autonomous program or initiative. It s how we do business and it s an increasing part of our business success. Eaton has been living it for years as Doing Business Right, and it is central to our vision to become the most admired company in our markets. Jun 2016 Page 19 of 31 CQD-P-127 Rev. 12

20 Throughout Eaton, we are building a culture of responsibility that encourages every employee to ask the questions that lead to more sustainable processes and practices, and help our company support a sustainable future. Delivering on this commitment requires alignment by Eaton suppliers to principles of sustainability and doing business right. Sustainability is more than the cost of doing business for multi-national companies - it is an integral part of everyday business. Key aspects of sustainability for supply chain management include issues such as materials compliance, environmental responsibility, human rights and working conditions responsibility, antibribery and other business ethics expectations Environmental Health and Safety (EHS) Through our products, practices and people, Eaton is helping to create a more sustainable world. Eaton s commitment to sustainability goes far beyond a mere program. It s woven into the fabric of our culture. Our suppliers are an important part of this culture. Eaton encourages ISO14001 for all our suppliers, and expect suppliers to adhere to principles of Offering a safe work environment for employees Protection of the environment and pollution prevention Committing to continuous improvement in EHS performance Eaton expects all suppliers to implement Management Systems that identify, document and address operational risks to the environment and employee health and safety. These EHS Management Systems should include identification of key EHS risks and impacts, development of operational controls to address the risks and minimize the impacts and preparation of response plans to address emergencies. Product Stewardship: "Eaton is committed to compliance with global EHS related regulatory requirements including those governing product content, development and disposition (also known as Product Stewardship). To that end, all suppliers are required to comply with those requirements as applicable for the jurisdiction involved and as set forth in any supply agreement with Eaton." Eaton expects all suppliers to adhere to legal requirements for EHS (local, state, provincial, and federal) in all jurisdictions in which supplier operates. Please refer to the Eaton Supplier Code of Conduct on-line at: Conflict Minerals Eaton is committed to ensuring that the products sold do not incorporate conflict minerals (minerals which are smelted into tin, tantalum, tungsten and gold) sourced from entities which directly or indirectly finance conflict in the Democratic Republic of Congo or adjoining countries. Eaton intends to fully comply with the requirements of Section 1502 of the Dodd-Frank Act, which requires that Eaton perform due diligence into the sources of such minerals, and disclose the results of such diligence. Eaton requires its suppliers to: Perform sufficient due diligence into their respective supply chains to determine whether products sold to us contain tin, tantalum, tungsten or gold, and, if so, whether and to what extent those metals are sourced from conflict-free smelters; Report to Eaton the results of such due diligence on the Conflict Minerals Reporting Template, or other agreed format, to enable Eaton to comply with its legal obligations and policy goals; and Commit to being or becoming conflict-free, so that any such metals are sourced only from conflict-free smelters. Questions pertaining to conflict minerals should be directed to ConflictMaterials@Eaton.com Jun 2016 Page 20 of 31 CQD-P-127 Rev. 12