Supplier Performance Management Guide. A Technology Leader

Supplier Performance Management Guide A Technology Leader

Supplier Performance Management Guide Table of Contents Background 1 Company History...1 Gentex Vision...1 Quality Statement of Quality Responsibility...1 Introduction...2 Supplier Quality Assurance System Approval 2 Supplier Ratings...2 Performance...3 Quality...3 Delivery...3 Service...4 Supplier Performance Report...4 Supplier Improvement Plan (SIP)...4 Supplier Benefits 5 Summary 5 Gentex Bid/Purchase Order Requirements 5 Requirements Come From Drawings And Purchase Orders...5 Purchase Orders...5 Drawings...6 Gentex Responsibility For Bid / Purchase Orders...6 How Are The Requirements Defined?...7 Written Word...7 Picture Representation...7 Suppliers Responsibility For Gentex Bids And Purchase Orders...7 Bids...7 Purchase Order...9 Defective Material Return Policy...9 Tooling Provided By Gentex...9 i

Supplier Performance Management Guide Background Company History Gentex Corporation is an advanced technology company, which specializes in the development, manufacture, and worldwide distribution of personal life support equipment and performance enhancement devices. Gentex has existed in its current form since 1932 and can trace its origins to textiles and textile manufacturing. Throughout the years, the company has evolved into diverse operations, known as Business Groups, with associated product lines. Gentex Vision Gentex Corporation will be the recognized world leader in the development, fabrication and service of products, which provide performance enhancement to our customers. The vision begins with the recognition that everyone has a personal stake in the success of the company, and it is through our collective efforts that we will achieve customer satisfaction and technical leadership in our markets. Employees are the source of our strength, and we are committed to their community, continuous development, and personal satisfaction. Quality Statement of Quality Responsibility Gentex management has established a quality system to ensure that all products designed, fabricated, and inspected meet the quality requirements established by our customers and the highest quality standards set by the company. Gentex will plan and control purchases to ensure that purchased products meet requirements for quality, configuration, and service with on time delivery at competitive prices. This is accomplished by ensuring that Gentex pursues a close working relationship with its suppliers as well as clear, accurate, and concise purchase documents, and vendor assessments of either product or capabilities to satisfy specified requirements. We intend to continuously improve to remain a world-class manufacturer of military and commercial products. 1

Introduction Supplier Performance Management Guide In pursuit of our vision, and quality objectives, Gentex has developed the following strategic supply base management plan that addresses our needs. The plan communicates the Gentex Corporation purchasing strategies, policies and criteria for managing its supplier base. The purpose of this plan is to: Analytically determine preferred suppliers. Focus business with preferred suppliers and build long-term strategic relationships based on quality, delivery and service. Work with current and potential preferred suppliers to continuously improve performance standards and enhance the supplier s position to receive future business opportunities. Gentex Corporation s goal is to channel business to preferred suppliers, thereby reducing the supplier base to an optimal size. Supplier Quality Assurance System Approval Suppliers will be evaluated through a Quality Pre-Award System Survey (QPASS). A QPASS will be conducted with all prospective new suppliers. The survey may be conducted on site or through the mail if an on site survey is not logically feasible. Once the survey has been completed, the Supplier Quality Questionnaire will be reviewed and the completed copy will specify the recommended rating. Purchasing will notify the supplier of the survey results. Supplier Ratings The categories established by Gentex Corporation are satisfactory, conditional, and unsatisfactory. All new suppliers will be given a conditional status. Satisfactory - A supplier who has sustained superior performance and has achieved a partnership with Gentex Corporation enhancing our joint ability to address the marketplace is considered satisfactory. These suppliers provide the best value and are the ones with whom we want to focus as much business as possible. Conditional - A supplier who has an acceptable level of performance but may fall short of the superior performance levels required for a preferred rating. For supplies in this category, Gentex Corporation may seek other sources until finding a supplier with superior performance levels that support our strategic business needs. 2

Supplier Performance Management Guide Unsatisfactory - A supplier whose performance is poor or commitment to Gentex Corporation is weak. These suppliers would not be utilized in new design products. Gentex Corporation will work actively to increase the supplier s performance or find an alternate. Doing business with these suppliers increases cost and decreases production efficiency. Suppliers receiving three consecutive unsatisfactory ratings, will be presented to the Corrective Action Board (CAB) for possible removal from the Approved Suppliers List. Suppliers removed from the list will not receive a supplier performance report. A supplier s rating is an important factor in selecting a supplier for future business. The table below describes the criteria to achieve each rating. These ratings are used and communicated to suppliers via a supplier performance report. Performance Service Supplier Rating Criteria Unsatisfactory Conditional Satisfactory < 75% quality 75-90% quality >90% quality < 70% delivery 70-90% delivery >90% delivery Below expectations Meets expectations Exceeds Pricing Pricing expectations Service Service Pricing Corrective Corrective Service Action Action Corrective Action Performance Performance is rated on specific quality and delivery criteria. Quality First pass lot acceptance rate Product-line feedback Delivery On-time delivery* measured against supplier purchase order promise date. * On-time delivery is considered to be up to seven calendar days after the purchase order promise date. Currently, early delivery does not impact a supplier s rating. 3

4 Supplier Performance Management Guide Service The supplier s performance is rated biannually. The supplier will be given a rating of satisfactory, conditional or unsatisfactory, using the following criteria to determine the rating. 1. The supplier provides the most competitive price for the product(s). 2. The supplier improves cycle times and reduces costs by defining and eliminating non-value added activities. 3. The supplier is responsive to quality corrective actions, and replaces or returns rejected material in a timely manner. 4. The manufacturing processes use state-of-the-art or advanced technologies, and are capable of producing consistent and reliable product. 5. Sales and technical support. The supplier: is responsive to schedule and engineering design changes. provides advance notification of problems, product discontinuation and identifies alternatives. provides suggestions to reduce product cost, and is receptive to process changes to lower costs. 6. The supplier meets purchase order terms and conditions, and promptly notifies the buyer when taking exceptions. Supplier Performance Report The supplier Performance Report is a key tool in the supplier base management process and helps drive continuous improvement in our suppliers performance. This report system evaluates each supplier in terms of quality, delivery, and service based on objective and subjective evidence accumulated during a reporting period. A performance report, based on activity, will be issued semi annually. An Overall Supplier Rating will be given on each report. Exceptions: Maintenance, repair and operation (MRO); consultants, contractors; and traffic and travel suppliers are exempt from the report process. Supplier Improvement Plan (SIP) Suppliers falling short of our expectations are required to develop and execute a continuous improvement plan. An improvement plan is an agreement that can range from a single, short-term action required to resolve a discrete problem to a long-term complex action plan for systemic problems. If the plan contains long-term actions, it will be documented, jointly agreed to by all parties, and managed by a commodity team.

Supplier Benefits Supplier Performance Management Guide Preferred suppliers receive increased business and the establishment of a longterm strategic relationship. Long-term strategic relationships include multi-year managed purchase agreements and along with engineering and quality support. This type of supplier relationship allows problems to be resolved quickly and improves manufacturability, which leads to a more open and informal partnership that enhances cooperation and information sharing between suppliers and Gentex Corporation. Ultimately, this relationship between the supplier and Gentex Corporation reduces total cost and provides significant financial benefit to both parties. Supplier benefits may include: Recognition as a preferred supplier Likelihood of increased business Mutually developed specifications Reduced cost and improved quality through improved processes Shared market demand forecast Long-term purchase agreements (two-five years) Engineering, manufacturing and quality assistance from Gentex Corporation Summary This plan is a system for rating our suppliers based on quality, delivery, and service performance. Suppliers in the top two categories (satisfactory and conditional) will be given the opportunity to do more business with Gentex Corporation. Unsatisfactory suppliers should immediately begin to implement corrective actions to improve performance standards or they will risk losing future business opportunities from Gentex Corporation. Gentex Bid/Purchase Order Requirements Requirements Come From Drawings And Purchase Orders Purchase Orders The purchase order is the governing document for our suppliers, as it dictates what is required of them when supplying material/product to Gentex. The purchase order establishes these requirements by the Gentex part number and revision as well as any additional quality requirements, clarification of requirements, or any approved drawing waivers for the supplier. Quality requirements are added through QEP-65, Product Assurance Requirements And 5

Supplier Performance Management Guide Guideline For Purchase Order Quality Review (Copies of QEP will be provided upon request). Such quality requirements are added to the purchase order during our quality planning activity using the number reference of the Gentex Product Assurance Requirements (PAR). As minimum PAR clauses 2, 4, 10 and 11 are invoked on all purchase orders. Other PAR clauses maybe invoked per the requirements of QEP-65. The supplier is required to comply with all the purchase order requirements. All requests for clarification or change to a drawing, PAAR clauses, specification, or any other engineering definition or quality related requirement must be made through Purchasing. The purchase order is the only formal and binding document through which the requirements are communicated, and Purchasing alone can modify and issue such changes. All other departments within Gentex are required to communicate such changes in writing to Purchasing before modifications can be made to the purchase order. Drawings The Gentex drawing as defined on the purchase order must be complied with fully. All dimensions, tests, and any other requirements called out on the drawing MUST be complied with. These requirements are found in notes, drawing block information, tolerance block information, controlling document block, the body of the drawing and within the written documents of the specification referenced as well as Product Acceptance Test Procedures (PATP) called out on the drawing. The supplier is required to comply with all these requirements at the current revision of the drawing. NOTE: Requests from the supplier to change the requirements must come through Purchasing. Only written correspondence from purchasing to the supplier is binding. Gentex Responsibility For Bid / Purchase Orders The bid package should be complete and contain documents with information to the latest revision. Any changes to the documents in the bid package will be forwarded to the suppliers immediately upon receipt. An approved request for a requirement change by any supplier that effects the requirements of the product will be forwarded to all the suppliers currently bidding the product. The bid package will indicate the standard PAR clauses which will be invoked on the purchase order and a copy of all PAR clauses will be provided so the supplier is aware of them. 6

Supplier Performance Management Guide The Purchase Order will reflect the conditions agreed upon during the bid. The supplier shall be advised to review the purchase order prior to accepting it to ensure any changes agreed to during the Bid stage are reflected and that no additional requirements are present which were not included in the bid package or otherwise agreed to in writing. If the need arises to request clarification of requirements during the performance of the purchase order, the supplier shall contact Purchasing for clarification. Requests will be forwarded to Engineering and Product Assurance (Quality Engineering) for concurrence. All requests shall be in writing. For those requests which are more than simple clarifications the supplier shall provide a rationale as to why the request is being made, what the effects of the request are, what was done to ensure that the form, fit, and function of the product will not be affected, etc. How Are the Requirements Defined? Written Word By normal English usage and industry standards. Drawings, specifications, and PAR clauses are read verbatim. The supplier at any time during the bid can ask for clarification through Gentex Purchasing if needed. The request will be forwarded by Purchasing to Engineering and then to Quality Engineering. Purchasing will forward the Gentex response to the supplier once received. Picture Representation By industry Standards for drawing practices. NOTE: Gentex has the final word on requirement interpretation. Suppliers Responsibility for Gentex Bids and Purchase Orders Bids Request to Bid on a product. Receive the Bid package. Review every Bid package as if it were the first time that you are seeing the products as previous awards do not influence current Bids. In addition, information, specifications, and requirements may have changed since the last time you bid or manufactured the product. 7

Supplier Performance Management Guide Make sure all documents referenced are present. Make sure you have the capability to manufacture the part as detailed in the Bid package. You must comply with all the drawing requirements, including the specification documented on the drawing. The Gentex drawing and purchase order are the superseding documents (when and if there is any conflict between any supplier-related documents.) You are responsible for any testing and certifications, which substantiate that the product will meet all requirements, such as, performance, finish, and dimensions. Any request for drawing clarifications, wavier of requirements or any other type deviation from those in the Bid package MUST be requested in writing through purchasing. The Bid package requirements are only changed through written response from purchasing. No other department can authorize a change. Nor can any change be authorized verbally. Review the enclosed Product Assurance requirements (PAR) which come with the Bid. PAR clauses 2, 4, 10 and 11 are invoked on all Gentex Purchase Orders. The following is a general understanding of what the above PAR clauses require. PAR 2 The supplier will maintain records which demonstrate that the product / material delivered to Gentex meets fully the requirements of the Gentex Drawing / Purchase Order. Gentex has the right to review these records at the supplier facility. These records would contain at a minimum, test results, inspection dimensions and certification from outside source suppliers for material or services used to manufacture the product / material delivered to Gentex. These records at a minimum must be lot specific for the product / material delivered to Gentex. PAR 4 The supplier will send with each shipment a Certificate of Conformance (C of C) clearly stating and in no uncertain terms that the material / product provided to Gentex for Purchase Order?, Part Number?, Revision? meet fully the requirements of the Gentex Drawing and purchase order for all dimensional, finish, paint, etceteras, and that the records are on file and available for review. PAR 10 The supplier is not authorized to deliver any material to Gentex that does not meet the requirement of the Gentex Drawing and purchase order. Request to deliver such must be requested in writing to Gentex through purchasing. PAR 11 Gentex has the right to enter the supplier facility to audit records and systems pertinent to items specified on the purchase order. PAR other Any of the remaining PAR clauses may be invoked based on the requirements of the contract. Therefore, if there are any of the remaining PAR 8

Supplier Performance Management Guide clauses that your company can not satisfy please inform Gentex Purchasing as these clauses may be added to the final Purchase Order. Purchase Order Review the purchase order to insure that; The drawing revisions are as quoted. The PAR clauses are as expected. All requirements in addition to or reduced from the Drawing requirements were expected. Ensure there is nothing different between what was agreed upon at the bid stage and is requested or represented in the Purchase Order. Once the company representative signs the Purchase Order the company is obligated to meet all the requirements as stated on the Purchase Order, regardless of the bid history!! Therefore, prior to accepting the purchase order, contact Gentex Purchasing in writing with any questions or issues, which must be resolved prior to your acceptance. Only the responses received in writing from Gentex purchasing are binding when making changes to the purchase order, drawing, PAR s, specification or any other purchase order related issues. Defective Material Return Policy All supplies furnished against the Purchase Order must be free from defects in material or workmanship and must conform to all requirements stated on the Purchase Order. When return of the supplies to the vendor and redelivery, if applicable, is required, transportation charges and responsibility for the supplies while in transit shall be borne by the vendor. All rework costs incurred by Gentex Corporation to repair defective products will be the responsibility of the vendor. In addition, all handling costs and incidental charges incurred by Gentex Corporation in the preparation of supplies for return will be the responsibility of the vendor. Tooling Provided By Gentex When using tooling provided by Gentex to manufacture parts, you are responsible to ensure that the parts meet the purchase order requirements. That is to say that during your inspection you must discover that there is a problem and then notify Gentex if it is tool related. You are however, still responsible for the product and material run until the problem was discovered. As during your standard manufacturing practices (during tool setup) along with the obligation to meet PAR clauses 2 and 4 you should have discovered a tool type problem prior to manufacturing any substantial quantity. 9

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Supplier Performance Report Percent of Lots Accepted Total Lots Received Total Lots Accepted Total Lots Rejected Ratings (also see notes section below) Satisfactory Conditional Unsatisfactory 100.00% Satisfactory: Supplier given preference for purchases whenever feasible. Vendor may be subject to reduced sampling per MIL-STD-105E, Table II-C. Conditional: Supplier may be subject to vendor visits to help resolve problems. Parts may be subjected to tightened inspection per MIL-STD-105E, Table II-B. Supplier may be eliminated as a supplier of problem parts if definitive corrective action is not evident. Unsatisfactory: Supplier will be subject to visits to help resolve problems. Parts will be subject to tightened inspection per MIL-STD-105E, Table II-B. Supplier will be eliminated as a supplier if definitive corrective action is not evident. Notes :

CORPORATION C ARBONDALE, PA 18407 December, 2003