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RHEEM MANUFACTURING COMPANY

SUPPLIER QUALITY MANUAL

Supplier Quality Manual

Document Information

Document Number Revision Revision Date:

SQM 0 December 17, 2001

SQM 1 March 01, 2004

SQM 2 March 01, 2006

SQM 3 August 31, 2007

SQM 4 June 1, 2010

SQM 5 July 20, 2011

SQM Rev. 5Page 1 of 21

Supplier Quality Manual

Agreement

The Supplier Quality Manual is a mutual agreement between Rheem Manufacturing Company and the Supplier, whereby the supplier acknowledges and agrees to abide by the policies, procedures, and requirements contained herein.

SQM Revision 5 July 20, 2011

Assigned to:

Supplier Company Name:

Supplier Representative Name:

Supplier Signature: (Responsible Authority)


TABLE OF CONTENTS

SECTION I: INTRODUCTION

1. Preface………………………………………………………………………….… 42. Quality Policy ……………………………………………………………………. 43. Purpose ……………………………………………………………………………44. Scope …………..….……………………………………………………………… 45. Responsibilities …………………………………………………………………. 46. Confidentiality………………………………………………………………….…. 57. Objectives ……………………………………………………………………….. 58. Supplier Receipt and Acceptance of Quality Manual Content …………… 69. Approval ………………………………………………………………………….. 610. Record Retention Requirements …………………………………………….. 611. Warranty…………………………. ……………………………………….……. 712. Management of Rheem Supplied Product ……………………………………7 13. Packaging, Labeling & Handling ………………………………………………714. Supplier Quality and Recognition ………………………………………………815. Supplier Rating ………………………………………………………………… 816. Continuous Improvement ………………………………………………………817. Nonconformance & Corrective Action ……………………………………… 8

SECTION II: SUPPLIER QUALITY SYSTEM APPROVAL PROCESS

1. Introduction……………………………………………………………………….. 102. Purpose…………………………………………………………………………… 103. General Requirements………………………………………………………….. 104. Supplier Quality System Approval Initiation………………………………….. 105. Supplier Quality System Requirements……………………………………….. 116. Supplier Classification Levels…………………………………………………. 117. Supplier Quality System Approval……………………………………………… 128. Maintaining Approval……………………………………………………………. 13

9. Change of Approval Status…………………………………………………….. 13

SECTION III: PRODUCTION PART APPROVAL PROCESS

1. Introduction……………………………………………………………………….. 142. Purpose…………………………………………………………………………… 143. General Requirements……………………………………………………….….. 144. Production Part Approval Process (PPAP) Initiation………………………… 145. PPAP Required Documentation………………………………………………... 156. PPAP Process Requirements………………….…………………………….…. 157. PPAP Approval…………………………………………………………………… 188. Guideless for Initial Production after PPAP Approval………………..……… 19

TABLES:

Table 1 - Supplier Classification Matrix …………………………………………….11Table 2 - Production Part Approval Process Initiation ………………………….. 14Table 3 – Process Capability Criteria ……………………………………………. 16

SECTION IV: GLOSSARY/APPENDIX

Terms & Definitions ……………………………………………………………….....20


SECTION I: INTRODUCTION

1. Preface

Rheem’s success is based on the product’s quality, performance and service provided to our customers, this is impacted heavily by the quality of the products purchased from our suppliers. Because of this, Rheem views our supply base as an integral part of the business and as our key partners of the Supply Chain. The capabilities of our suppliers support the fulfillment of the Rheem Quality Policy and the achievement of company objectives. Relationships with our suppliers are built on total quality principles and practices to achieve the best performance, delivery, service and total cost. As such, all suppliers must abide by the policies set forth in the Corporate Supplier Quality Manual.

2. Quality Policy

3. Purpose

This supplier quality (SQM) manual establishes general policy and outlines the minimum quality requirements, which the supplier shall establish, document and implement, in order to be approved as a Rheem supplier. The requirements within this manual are provided as a supplement to, and do not replace or alter the terms or conditions within Rheem supply and purchase documentation, engineering drawings and/or specifications.

4. Scope

This manual applies to all new and currently authorized suppliers of production materials, products or services to Rheem manufacturing facilities worldwide. Suppliers must ensure that their suppliers also support compliance throughout the supply chain.

5. Responsibilities

The Corporate Quality and Sourcing departments are responsible for SQM implementation, and have authority to ensure all suppliers meet and fulfill requirements.

Suppliers are responsible for ensuring that the products and/or services provided meet the established requirements and assume full responsibility for the quality thereafter. Approval and verification by Rheem of supplier’s facilities, systems, records and product does not in any way relieve the supplier of the responsibility and obligation to provide product that meets all of Rheem’s specifications and requirements and all other contractual terms and conditions, as well as all applicable laws and regulations, nor shall it preclude subsequent rejection by the customer.


Rheem Corporate Quality PolicyIt is our policy to promote a culture of continual improvement that is committed to exceeding customer expectations and requirements, by providing products and services of excellent quality.

6. Confidentiality

Rheem recognizes that its suppliers may share proprietary or confidential information. The supplier shall treat all data in strict confidence and report any intentional or non-intentional breach of confidentiality to Rheem Management immediately based on the applicable Non-Disclosure Agreement (NDA). The supplier is responsible to maintain proper control of all drawings and specifications provided by Rheem, and all drawings and specifications should be treated as Rheem property.

7. Objectives

Rheem has the following expectations of all its global supplier-partners. The supplier-partner shall

7.1 Provide 100% conforming parts/services with 100% on-time delivery;

7.2 Continually strive to enhance product quality and manufacturing productivity to meet increasing competitive pressure in our global economies;

7.3 If involved in importing goods to the United States of America, follow U.S. Customs security guidelines for C-TPAT. Rheem is a participant in the joint initiative between U.S. Customs and businesses to enhance homeland security via tighter controls on entering cargo.

7.4 Provide all documentation and information in English to ensure documents are transferable and understood within all Rheem facilities. This requirement is for all requests for records and documentation submitted to Rheem as specified in this manual. This requirement can only be waived by the Business Unit and/or Location receiving the documentation.

7.5 Support Rheem in addressing field failures related to the supplier’s product/service to include financial reimbursement and assisting the customer;

7.6 Embrace electronic communication with Rheem as an intended benefit to both parties. Rheem supports two electronic methods of sending data: via Electronic Data Interchange (EDI) and via the Internet. Using one of these two methods enables exchanging Planning Schedules, Inventory Position, Purchase Orders, Purchase Order Changes and Invoices, for example.

7.7 Demonstrate advanced quality planning to foster continuous improvement, defect prevention and process optimization. Preferred Quality Planning methods may include, but are not limited to,

• Design and Process FMEA’s to document the completeness and affectivity of design and manufacturing process controls.

• Process capability analyses with statistical process controls

• Control plans incorporating process controls to detect and correct manufacturing defects before finished products are completed

• Operator and inspection instructions eliminating non-productive steps required to inspect quality into the supplied materials

• Process flow charts

• Root cause analysis, corrective action and preventive action


8. Supplier Receipt and Acceptance of Quality Manual Content

Prior to being awarded business from Rheem all new suppliers must:

1. Read the Rheem Supplier Quality Manual

2. Print, sign, date and return the Supplier Agreements Page (2) from the SQM to acknowledge having received, read, and agreed to comply with its requirements.

9. Approval

9.1 Suppliers will be evaluated and selected on their ability to meet:

1. Rheem’s Supplier Quality System Requirements and other approval processes, per SECTION II of this manual; and

2. Production Part Approval Process (PPAP), per SECTION III of this manual.

9.2 As necessary, a new supplier may be approved for use outside of the normal and expected qualification and approval process, as defined within this manual. Specific justification for the deviation to the SQM and approval must be given however, per a formal deviation request.

9.3 Current or previously approved suppliers in use prior to the release of this manual are considered “grandfathered in” and may not have been subject to the same initial approval criteria or process as a new supplier (per sect. II, par 7). However, at minimum grandfathered suppliers will be assigned a designated classification level (per sect II, par. 6), and must maintain compliance to SQM sect II & III requirements and approval status thereafter.

10 Record Retention Requirements

Quality records shall be maintained so they remain legible and are available for review upon request and may be in any media such as electronic or hardcopy. Records should include accurate, updated and complete quality data, including applicable international documentation, certificates of analysis (C of A), process documentation, or other information as applicable and required. Records shall be kept for defective components and assembly processes to highlight problem areas and trends.

Records of production parts and materials shall be maintained for a minimum of five (5) calendar years, or per the accepted industry standard requirements, or per customer requirements whichever is greater.

Records of non-production parts and materials and services shall be maintained for a minimum of three (3) calendar years, or per the accepted industry standard, or per customer requirements, whichever is greater.

Specific quality records generated as a result of this manual and the supplier qualification and PPAP processes will be retained historically by Rheem as follows:

Quality Record Where Filed Indexed By Responsibility RetentionSQM Agreements Page

Centralized, Web-based Repository

Supplier Name

Supplier Quality

3 yrs


PPAP Forms (SF001 – SF006)


Supplier Name

Supplier Quality

3 yrs

SF-008 Survey Summary


Supplier Name

Supplier Quality

3 yrs

Supplier Profile Centralized, Web-based Repository

Supplier Name

Supplier Quality

3 yrs

Quality SurveyQuestionnaire


Supplier Name

Supplier Quality

3 yrs

11 Warranty

Suppliers must have the capability of supporting defined life cycle requirements of the product, and as required are expected to demonstrate reliability that meets and/or exceeds Rheem requirements. Suppliers must also participate in reducing the number of product warranty concerns and complaints. The supplier shall support Rheem to track and analyze the causes of warranty claims and use the information gathered to improve their processes and product quality. This will support enhanced customer satisfaction and continued business for Rheem and suppliers.

12 Management of Rheem Supplied Product and Equipment

12.1 All tools, manufacturing, test or inspection equipment belonging to Rheem or Rheem’s customers shall be used exclusively for Rheem products unless an authorization in writing exists.

12.2 All Rheem tooling or capital assets must have an asset number for tracking. This information should be captured by Rheem in the purchase order transaction record. The supplier shall establish procedures for the permanent identification and tracking of Rheem supplied product and equipment including preservation of the asset number.

12.3 The Supplier shall notify Rheem in writing of supplied tooling or gauges that are lost, damaged or are otherwise unsuitable for use. Rheem supplied tooling and gauges shall not be disposed of without written authorization from Rheem. Supplier is responsible for calibration, proper storage, etc.

13 Packaging, Labeling, & Handling

13.1 In-process and finished products shall be appropriately packaged to protect from damage.Packaging shall meet applicable shipping laws, codes, and regulations. All shipments shall be packaged or placed in a new container unless otherwise specified. Packing slips shall be attached to the carton exterior in shipping envelopes. All packaging must be qualified to International Safe Transit Association (ISTA) test standards as appropriate. Wood packaging must be in compliance with ISPM15 regulations.

13.2 The supplier shall ensure that all Rheem packaging is clean and free from dirt, debris, foreign materials, and damage. All returnable packaging and dunnage that is not clean and free from dirt, debris, foreign material and damage may be subject to rejection.

13.3 Packaging shall be labeled in accordance with all Rheem standards, unless otherwise specified. The packaging and labeling shall meet Rheem specifications or requirements. Each shipment shall be marked with the Rheem part number, manufacturing part number, quantity, lot number, Rheem site name, address, gross weight in pounds, and any other specified requirements as applicable.


14 Supplier Quality and Recognition

Rheem strives to consistently offer quality parts and services at a good value; to lead design and technology; to drive continuous improvement and to provide consistent, quick delivery to the end user. These same guiding principles towards maintaining customer satisfaction and continuous improvement necessarily become a mutual goal of Rheem and its suppliers.Suppliers are accountable for product conformance, system and process compliance and increased performance in a globally competitive environment.

As such, it is Rheem’s policy to support the development of its suppliers as applicable, and to formally recognize and award its supplier-partners for sustained excellence in performance and for continuing improvement.

15 Supplier Rating

Suppliers of products and materials will be monitored and measured on an ongoing basis in several key categories and criteria. The criteria measurements are weighted to develop an overall mathematical score. The resulting Supplier rating and scorecard is distributed to the supplier via Rheem’s web-based system. Supplier ratings are monitored and tracked over time and evaluated by Rheem Management for consistency and/or needed improvement.

16 Continuous Improvement

Suppliers are expected to demonstrate a commitment to continuous improvement in products and processes provided to Rheem. Objective evidence of “self-development” may be requested such as copies of revised procedures, updated training records, audit results, and statistical data as applicable. Quality system emphasis is placed on preventing nonconformity rather than detecting nonconformity.

Rheem encourages suppliers to implement business systems eliminating non-value added activity, while implementing mistake-proofing and cost reduction/ avoidance. Cost reduction must be an integral part of the long-term success of Rheem and its suppliers in order to remain competitive and strong in the marketplace. Suppliers are expected to develop or maintain the ability to offer cost avoidance/reductions through effectively implementing internal quality improvement programs and value analysis techniques.

17 Non-Conformance and Corrective Action

17.1 Suppliers to Rheem are expected to provide defect-free products and services. However, when material or product quality issues occur the supplier will be notified via Rheem web-based CAR process. They are required to apply robust problem-solving methodologies to determine root cause and corrective/preventive action to resolve the issue; and to ensure no recurrence. Suppliers will support Rheem, as necessary with technical assistance and field support to rectify any substantiated non-conformance. Rheem reserves the right to recover justified expenses from suppliers for performance failures related to quality and delivery issues.

17.2 Non-conformance


17.2.1 Defective material or service may be identified at any point in the process, including incoming inspection, production use, assembly or packaging. Defects can also be discovered during audits, surveillance, and validation at the end customer or through warranty claims.

17.2.2 Suppliers will be formally notified via communication of a supplier nonconformance report (SNCR) upon the detection of non-conforming material and/or service; or when late delivery results in a line shutdown condition.

17.2.3 Non-conformance discovered at Rheem may be handled in any of the following ways and at the discretion of the Rheem Business Unit and/or facility:

• Rejection of individual components, materials, or the entire lot/shipment and return to the supplier.

• Use-As-Is Deviation initiated by Corporate Sourcing or Plant Quality and approved per Rheem internal deviation procedure. Product cannot be shipped or consumed prior to deviation approval.

• Sorted, reworked or scrapped at Rheem facility; Supplier resource(s) and or third party may be required to support rework.

17.3 Supplier Response

17.3.1 Supplier must reply and provide a response within the defined timeframe and must take immediate action upon notification and receipt of a supplier nonconformance report (SNCR) or supplier corrective action request (SCAR).

17.3.2 The response shall include or document, as applicable:

• Short-term containment action plan with timing to prevent additional non-conformance at Rheem and to replace non-conforming material with conforming material. This may include the inventory at Rheem facilities, in the distribution system, at the supplier and in supplier production;

• Definition of the non-conformance root cause, permanent corrective action(s), lot number/effectivity date for long-term corrective action implementation, including supporting data or documentation, as necessary;

• Any updates to the corrective action plan, such as completion dates, must be communicated to Rheem.


SECTION II: SUPPLIER QUALITY SYSTEM APPROVAL PROCESS

1. Introduction

The review of a suppliers quality system is critical to the overall approval process and provides the necessary evidence needed to ensure product and process integrity and continuous improvement. Suppliers must be capable of meeting quality, delivery, cost and continuous improvement objectives and are evaluated for such.

2. Purpose

The purpose of this section is to define the Supplier Quality System Requirements, which is the first step in the supplier approval process.

3. General Requirements

3.1. Rheem Supplier Quality has overall responsibility for coordinating the qualification and approval process and is the primary point of contact for all communications relative to this process.

3.2. Supplier Quality System Requirements approval per this SECTION II does not imply approval of the supplier’s processes, parts, products or services. Supplier Quality System Approval is an indispensable requisite to start the PPAP process per SECTION III of this manual.

3.3. Suppliers must establish, maintain and demonstrate quality systems with supporting procedures to ensure that products and services conform to Rheem purchase agreements and product specifications at the supplier locations and throughout the supply chain.

4. Supplier Quality System Approval Initiation

4.1. Rheem Sourcing initiates the supplier qualification and approval process via the Rheem web-based system by initiating the supplier company profile form for completion by the supplier.

4.2. Upon notification, Rheem Supplier Quality will provide the potential supplier with the SQM and documentation for review and completion; i.e. Supplier Profile, Agreements Page and Supplier Quality Questionnaire.

4.3. Upon receipt and initial review of the information provided back from the supplier, Rheem Supplier Quality will initiate a review by the Supplier Council.

4.4. Based upon the results of the evaluation of the information provided in the “Supplier Quality Questionnaire” the Supplier Council determines if a potential supplier is an “acceptable” candidate to initiate the next step in the supplier qualification and approval process; per Sect II, par 6 & 7 of this manual.

4.5. If the Supplier Council “rejects” the supplier as a candidate, Rheem Sourcing will notify the supplier of this decision and another potential supplier may be identified, thereby ending the approval process with respect to that specific supplier.


5. Supplier Quality System Requirements

5.1. Requirements for Suppliers of Production Materials and Components

5.1.1. Suppliers must establish, maintain and demonstrate quality systems with supporting procedures to ensure that products and services conform to Rheem purchase agreements and product specifications at the supplier locations and throughout the supply chain.

5.1.2. All suppliers must complete and submit a supplier profile and quality system survey for review.

5.1.3. The supplier quality system may be required to ensure that products are traceable to raw materials or components used in the manufacturing process, production operation, date of manufacture, revision level and records of evaluation of acceptance and conformance. Product should have positive identification at all times to address traceability via lot numbers, production date codes or other means; as applicable. In cases where a supplier’s quality system is inadequate, the supplier must provide an action plan and timeline for any required action items and improvements.

5.2 Requirements for Non-Production Material and Services Suppliers

5.2.1 Suppliers of services and non-production materials to Rheem shall be required to show proof of an effective quality management system. In cases where a supplier’s quality system is inadequate, the supplier must provide an action plan and timeline for Rheem approval.

6. Supplier Classification Levels

6.1. Suppliers will be assigned a designated classification level (i.e. A, B, C, D) for part(s) or materials being supplied. The classification level will be determined and assigned by the Supplier Council and is based on a combination of the technical and business risk. This classification will be used to determine the level of assessment required for the Supplier Quality System Approval. The following table shows the classification levels:

TABLE 1 – SUPPLIER CLASSIFICATION LEVEL MATRIX

High Business Risk Medium Business Risk Low Business Risk

High Technical Risk Level A Level A Level B

Medium Technical Risk Level A Level B Level C

Low Technical Risk Level B Level C Level D

6.2 Supplier classification levels will be reviewed periodically by the Rheem Supplier Council and may be subject to change based on any recent change in the type, complexity, or volume of parts or materials being supplied to Rheem.


7. Supplier Quality System Approval

7.1 All “new” class A & B suppliers Completed Supplier Profile, Quality System Questionnaire, a formal onsite assessment

at the Supplier location, approval by the business unit Supplier Council; and Current third party registration to ISO9001, TS16949, or other recognized international quality system standard by an accredited registrar. Note: A copy of the supplier’s third party registration must be provided to Rheem.

In the event a supplier’s quality system registration status changes or is suspended, the supplier must notify all Business Units and locations to which product is supplied, within five (5) business days. In this case, the supplier may be audited by Rheem and/or be required to provide documentation explaining the status change, including a plan for corrective action.

7.2 All “new” class C suppliers Completed Supplier Profile, Quality System Questionnaire, and approval by the

business unit Supplier Council. A formal onsite assessment at the Supplier location may be required.

7.3 All “new” class D suppliers Completed Supplier Profile, Quality System Questionnaire, and approval by the

business unit Supplier Council. A formal onsite assessment at the Supplier location is not required.

7.4 Results of onsite evaluation and approval status will be formally documented and communicated via the Supplier Quality System Survey Results form, SF-008. Dependent on the results….

7.4.1 The supplier’s quality system may be deemed as “fully approved”;

7.4.2 The supplier’s quality system may be deemed as “approved with reservations”; with full approval pending completion of a probationary period in which delivery and quality performance are monitored, and/or a formal corrective action plan is completed and approved;

7.4.3 The supplier’s system may be deemed as “needs improvement” and supplemental actions are required by the supplier to address any identified deficiencies or areas of concern before full approval is awarded;

7.4.4 The supplier’s system may be “rejected” and the supplier will not be considered as a potential Rheem supplier.

7.5 An approved Supplier Quality System is required before proceeding with the SECTION III PPAP of this manual, and no contract or receipt of material or services are allowed unless approved otherwise via a formal deviation (SF-0012).

7.6 Supplier Quality System Approval is valid only for the products/parts originally categorized on the assessment level or below, i.e. if a supplier categorized C wants to supply parts/products categorized A, the supplier shall then be approved per the higher category level A (see 8.1 above), and prior to the PPAP process per SECTION III. Existing Suppliers may be surveyed by Rheem to establish capability prior to placement of new business.


8 Maintaining Approval Status

8.1 Once approved, supplier performance will be monitored and evaluated on an ongoing basis. Continued supplier approval status shall be based upon complying with quality system requirements outlined throughout this manual, including a sustained level of “acceptable” performance. Supplier performance will be formally evaluated and rated via the Rheem supplier rating system.

8.2 Suppliers are formally notified of their performance and status via the distribution of

delivered quality data and/or rating scorecards. Dependent of the results of the periodic performance review suppliers may be subject to any or all of the following:

9.2.1 Formal corrective action to address deficiencies in performance;

9.2.2 Onsite re-assessment of their quality system;

9.2.3 Change of their approval status (see 10 below).

8.3 Depending on the results of on-site assessments and/or periodic supplier rating performance, a supplier may be required to obtain 3rd party registration to a recognized quality system standard in order to maintain “approved” status as a Rheem supplier.

8.4 Rheem reserves the right to perform periodic on-site appraisals of the supplier’s facility, quality systems, records and product ready for shipment, and based on their ongoing performance, and/or any significant changes in their organization, processes and quality system, and/or status of 3rd party registration, if applicable.

8.5 Suppliers are required to complete the supplier quality questionnaire every three calendar years or as requested by Rheem.

9 Change of Approval Status

Suppliers may forfeit approval status based on any or all of the following:

9.1 Major changes have occurred in the supplier’s organization, the location of manufacture, the manufacturing process or product that have not been formally documented, communicated to Rheem for review and approval.

9.2 Major negative changes in delivered quality performance and/or failure to maintain an “acceptable” supplier rating.

9.3 Failure to respond with acceptable corrective action within the timeline established, or failure to implement stated corrective action as planned to correct a known deficiency.

9.4 The Supplier Council is responsible for any decisions regarding the change in a supplier’s approval status. If a supplier’s status is changed from fully approved, then they will be temporarily re-classified as “conditionally approved”.

9.5 Supplier’s must meet the following requirements in order to regain “approved” status:

9.5.1 A supplemental review and approval by the supplier council of actions taken to address specific deficiencies and/or;


9.5.2 A follow-up on-site quality system assessment and/or;9.5.3 A minimum of an acceptable rating for the next rating period.

SECTION III: PRODUCTION PART APPROVAL PROCESS

1. Introduction

1.1 Once the Supplier’s Quality System has been approved, parts or components being sourced must be approved for production using the Production Part Approval Process (PPAP). This is the documented verification that all Rheem’s Engineering Design requirements are met by the Approved Suppliers. It is the supplier’s responsibility to meet all applicable PPAP requirements and Rheem specifications. Suppliers are not authorized to begin shipment of production quantity material to Rheem prior to part/process approval.

1.2 The PPAP process and requirements as defined below and within the SQM, sect III may vary per individual supplier dependent on the individual component or material being qualified and approved. Some or all of the PPAP requirements may or may not be applicable, and will be formally defined and communicated in advance and directly to applicable supplier; per the PPAP Initiation form (SF-001).

2. Purpose

The purpose of the PPAP process is to verify that the supplier fully understands all Rheem engineering design and specification requirements. In addition, the PPAP process will validate that the manufacturing process used by the supplier has the capability to produce product consistently meeting these requirements during an actual production run, at the quoted production rate.

3. General Requirements

3.1 For a new supplier, the PPAP process will be initiated by Rheem after the Supplier Quality System Approval per SECTION II of this manual.

3.2 For existing and approved suppliers, the PPAP process will be initiated per Table 2 below.

3.3 The PPAP process is managed and maintained via the Rheem web-based system, including electronic email notifications, review, approvals and record keeping. All suppliers will have direct access to this system.

4. Production Part Approval Process (PPAP) Initiation

PPAP initiation is required when any of the events shown below on the PPAP Initiation Table 2 occurs.

Table 2 - Production Part Approval Process (PPAP) Initiation

Item Area PPAP Initiator Events

1 Design Change Rheem Newly designed part. Rheem’s design change (ECN) that affects the part itself


Supplier Supplier’s Design Change that affects fit, form, function, durability, or performance of the part itself

2 New / Change of Supplier

Rheem Rheem’s new supplier providing parts, materials or

services.

Supplier

Adding or changing a sub-supplier (companies that supply to Rheem’s suppliers)

Changing from in-house production to outside sub-supplier Change of manufacturing location for the current supplier.

3 Material Change Supplier

Change in raw materials used by supplier Change from purchasing material to supplying in-house. Change supplier sources of material. Change in material itself (including anti-rust oil, lubrication

oil, etc)

4 Process Change Supplier

Any change in which Rheem product requirements for fit, form, function, durability, or performance are potentially affected.

Use of another optional process than was used in the previously approved part.

Removal of any process used in the previously approved part.

Initial use of new machine. Product re-released after the tooling has been inactive for

volume production for twelve months or more. Replacement of Die section or new Die

5 Rheem’s Request Rheem At Rheem’s request due to a supplier quality concern.

5. PPAP Required Documentation

5.1 “PPAP Initiation / Requirements” form SF-001 must be completed and submitted for all PPAP’s.

5.2 Applicable PPAP forms will be provided to the supplier by Rheem as part of the initiation

request and are available via the Rheem web-based system.

5.3 Excluding the SF-001 PPAP Initiation Form, Suppliers may use their own forms; as long as all information required on Rheem’s documents is clearly included within the supplier’s documents. Supporting Documents can be submitted electronically as an attachment, if necessary.

6. PPAP Process Requirements

6.1 For production parts, PPAP samples shall be taken from a minimum production run of consecutive parts. This run shall be from one (1) to eight (8) hours of production, with the goal to replicate a normal day’s production run. The production run quantity and sample size may vary and will be agreed upon in advance by Rheem and the supplier.

6.2 The PPAP production units shall be manufactured at the production site using the same tooling, gauging, process, materials, operators, and from the production environment that will be used to produce production quantities of the part.


6.3 PPAP submission documentation will include the SF-001, as well as all documentation requested on said form by Rheem. The SF-001 form is used as a check-off sheet by both the Supplier and Rheem in an effort to formally define the PPAP requirements.

6.4 Measurement results for all items listed on the approved print are to be reported on “Dimensional Test Result” form SF-004 or supplier equivalent. When tooling or assembly processes are used that produce multiple parts, each unique tool or process must be measured and tested. Each multiple cavity mold or duplicate work cell may require a minimum number of parts from each cavity or from each cell to be measured, to be determined and agreed to by Rheem and the supplier.

6.5 Material and performance testing may be required and shall be performed and reported as follows:

6.5.1 The supplier shall perform all material and performance tests as necessary to verify the requirements of the drawing or technical specification.

6.5.2 When a third party laboratory performs testing, a qualified facility shall be chosen to perform material and performance testing for PPAP. Proof of facility qualification may be required to accompany the PPAP submittal.

6.5.3 The supplier must submit required Material/Performance Test Results on the laboratory letterhead, the laboratory’s normal report format, or Rheem SF-005 form.

6.6 Initial process capability studies may be required for all “Critical-to-Quality” characteristics (CTQ’s) noted on the Rheem drawings as K, F or P. The purpose of the initial process capability study is to understand and establish both short term and long term process capability (variability) versus specifications. A separate capability study may be required on each CTQ for each process used to produce the product, including product produced by multi-process methods (each cavity of a multi-cavity process, or each line of multi-line product). Minimum sample size is to be 32 parts, unless otherwise agreed to by Rheem and the supplier. If other methods or quantities are to be used, Rheem must be formally contacted prior to final PPAP submittal for approval.

6.6.1 Both Cpk and Ppk shall be calculated and reported, including raw data. Data must be submitted in Excel format at a minimum, but the preferred Rheem method is via Minitab software.

6.6.2 Control charts and histograms must be included with supporting capability analyses.

6.6.3 The following table 1 will be used as Rheem’s acceptance criteria guideline for evaluating process capability results for key characteristics and processes:

Table 3 – Rheem Process Capability Criteria

Results Cpk – Ppk Interpretation

Cpk > 1.67Ppk > 1.33 Process meets Rheem requirements

Cpk > 1.33 but < 1.67Ppk > 1.00 but < 1.33

Process is acceptable and may require improvement


Cpk < 1.33Ppk < 1.00

Process does not meet the acceptance criteria and improvement is required

6.6.3.1 Should the supplier not meet the criteria above for acceptance then additional actions will be required by the supplier. These actions may include some or all of the following until acceptable capability is established:

6.6.3.1.1 100% inspection of that characteristic

6.6.3.1.2 Submittal of supporting histogram and/or control chart

6.6.3.1.3 Additional capability studies

6.6.3.1.4 Improvement action plan

6.6.3.1.5 Approved deviation by Rheem

6.7 The supplier may be required to perform and submit a Measurement System Analysis study for CTQ’s. MSA studies should adhere to approved methods similar to those found in the Measurement Systems Analysis Manual published by AIAG.

6.7.1 Gage resolution must be less than or equal to 25% of the specification or process variation unless otherwise agreed to formally by Rheem.

6.7.2 The number of (X) Distinct Categories must be greater than or equal to 5

6.7.3 A Gage R&R study should be included for each family of gages.

6.8 The supplier may be required to prepare a Process Flow Chart (Flow Diagram) that shows all process steps in sequence used to manufacture and inspect the product supplied. The Process Flow Chart should include the path taken by nonconforming product identified and disposition, then reintroduced to the process (reworked), or removed from the process (scrapped) at each process step.

6.9 The supplier may be required to conduct either or both a Design failure Mode Effects Analysis (DFMEA) or Process Failure Mode Effects Analysis (PFMEA). The FMEA shall be developed in accordance with commonly accepted methodologies, such as those published by AIAG manuals. FMEA results may be submitted on the Rheem (SF-002) or the supplier equivalent form.

6.10 The supplier may be required to submit a process Control Plan (SF-003) that defines all controls used for process and product control. Each process step and inspection point in the process flow shall be shown on the Control Plan. The Control Plan shall be developed in accordance with commonly accepted Control Plan methodologies, such as those presented in the Advanced Product Quality Planning and Control Plan (APQP) reference manual published by AIAG.

6.11 The supplier may be required to submit product Reliability Test data, as necessary. Reliability test protocol and required data shall be defined by Rheem in advance and results submitted per the agreed upon format.

6.12 Feasibility Statement (SF-006) shall be submitted with each PPAP. The “Sign-Off” section must be signed by members of the Supplier’s management with authority to reach the Feasible or Not Feasible conclusion. Any concessions or deviations must be declared in the Comments section of form.


6.13 The Rheem Drawing shall be submitted as required on the PPAP Requirements form (SF-001). This drawing should be included with the dimensional results, appropriately marked to identify the dimension being reported for each result.

6.14 At the time of quotation Rheem’s suppliers will detail proposed packaging specifications with the size and weight limitations.

6.15 The PPAP package should include evidence of the sub-supplier approval by the supplier for all out-sourced processes associated with the product. In addition, Rheem may request additional supporting documentation.

6.16 Other specific requirements as defined per Rheem PPAP Requirement form (SF-001) shall be submitted along with the PPAP documentation package.

6.17 The supplier shall provide sample products as requested by Rheem and as defined by the

PPAP Initiation Request Form (SF-001). Samples are to be taken from parts measured and identified accordingly. The supplier shall uniquely identify the product samples sent to Rheem.

6.18 The supplier shall retain a master sample until final PPAP approval.

6.19 If requested by Rheem, the supplier shall submit with the PPAP submission any part-specific assembly or component checking aid. Checking aids can include fixtures, gages, models, templates, etc.

7. PPAP Approval

7.1 Once completed, the PPAP documentation package shall be submitted to Rheem via the electronic, web-based system. The designated Rheem contact will be automatically notified upon receipt via the system.

7.2 Formal approval by Rheem will be sent automatically to the supplier. If any additional information is required to complete the approval, the supplier will be formally contacted by Rheem.

7.2.1 Full Approval: Indicates that the part or material meets all customer specifications and requirements. The supplier is therefore authorized to ship production quantities of the product subject to releases from Rheem scheduling activity.

7.2.2 Interim Approval: Permits shipment of material for production requirements on a limited time or piece quantity basis. Interim approval will only be granted when a Rheem deviation is approved and the supplier has:

Clearly defined the root cause of the non-conformities preventing production approval; and,

Prepared an interim approval action plan agreed upon by Rheem. Re-submission to obtain “full approval” may be required.

7.2.3 Rejected: Means that the submission, the production lot from which it was taken, and accompanying documentation do not meet Rheem requirements. Corrected product and documentation shall be submitted and approved before production quantities may be shipped.

7.3 If the PPAP is rejected, the supplier will be informed by Rheem of the reason for the rejection and the supplier must provide the corrective actions to resolve the causes of the rejection.


7.4 For any supplier related material, process or product changes that could impact multiple manufacturing plant locations, Corporate Quality is responsible to provide formal notification and approval by Rheem Management in advance of implementation; in addition to the normal PPAP process.

8. Guidelines for initial production after PPAP approval

8.1 All changes to supplied production materials must be properly documented and approved in writing by Rheem prior to implementation. All product and process changes having the potential of affecting form, fit, or function require a formal Supplier PPAP change request via SF-001 form and the Rheem web-based system to be submitted to Rheem for review and approval. If uncertain whether a Request for Change is required, the supplier shall question the Corporate Sourcing or Supplier Quality contact.

8.2 The Rheem Sourcing or Plant Materials Representative should be notified (fax or e-mail) prior to the initial shipment of the Production Parts. It is absolutely critical that the supplier, working in conjunction with Rheem Sourcing representative, positively identify the implementation and shipment dates for all affected product changes.


SECTION IV: GLOSSARY / APPENDIX

Terms & Definitions

FMEA: An analytical technique used as a means to assure that to the extent possible, potential failure modes and their associated causes/mechanisms have been considered and addressed. This systematic approach parallels, formalizes and documents the mental disciplines used to ensure the safety and producibility of any product. Design FMEA’s are used by design engineers to document the completeness and effectiveness of their design controls. Process FMEA’s look at the manufacturing process and process controls.

CONTROL PLAN: The clear and understandable document describing in writing the systems for controlling parts and processes. Control Plan is a living document and should be updated to reflect the additions and deletions of controls based on experience gained by producing parts, also the Control Plan should reinforce and concur with the Process FMEA, Process Flow Diagram, Quality Plan, Procedures and Work Instructions.

PROCESS CAPABILITY: A statistical assessment of the ability to produce within specifications.

MEASUREMENT SYSTEM ANALYSIS: The evaluation of the measurement process for the purpose of determining the precision (repeatability and reproducibility) of the particular measured response. As a minimum, the MSA will generally determine the percentage of allowable tolerances occupied by the measurement process alone (Gage R&R), or alternately the percentage of process capability taken up by the measurement process. More detailed MSA’s will often evaluate the measurement process with respect to bias (accuracy), stability, and linearity.

CRITICAL-TO-QUALITY (CTQ) CHARACTERISTIC: Characteristic that is critical to part form, fit or function.

K - Safety or Regulatory CTQA key characteristic which represents a specific design parameter or characteristic that must be met/controlled to ensure that Regulatory Agency or product safety requirements are achieved and maintained.

F - Engineering CTQA key characteristic that may affect performance, functionality, reliability, life, noise, etc...

P - Process CTQA key characteristic that may affect product produceability, process, assembly, handling, etc... RELIABILITY DATA: Historical test data used to confirm product performance against engineering and industry specifications over a given period of time.

SUBTIER SUPPLIERS: Companies that supply directly to Rheem authorized suppliers.

SUPPLIER COUNCIL: Cross-functional team consisting of Rheem Sourcing, Quality, and R&D.

SUPPLIER EXCELLENCE: Proactive program for development and continuous improvement of the Rheem supply base


PPAP (Production Part Approval Process): Defines generic requirements for production part approval. The purpose is to determine if the supplier properly understands all engineering design specifications. Also if the process has the potential to produce product consistently meeting these requirements during an actual production run at the quoted production rate.

QUALITY PLAN: A document that defines the specific quality practices, resources and activities relevant to a particular product, project or contract.

SUPPLIER CLASSIFICATION LEVEL: The classification index (A, B, C, D) assigned to suppliers based on a combination of the technical and business risk.

PROCESS FLOW CHART: A graphic technique using symbols to identify the operation in a process, their inter relationships, inputs, and outputs.

TECHNICAL RISK: The degree of risk used to determine the supplier classification level based on the technical complexity of the component/product being supplied to Rheem.

BUSINESS RISK: The degree of risk used to determine the supplier classification level based on overall volume of a component(s) being supplied to Rheem.

EDI (Electronic Data Interchange) - Electronic transmission of purchase orders and invoices (not facsimile transmission). The transfer of data between different companies using networks such as the Internet. As more and more companies get connected to the Internet, EDI is becoming increasingly important as an easy mechanism for companies to buy, sell, and trade information.

C-TPAT (CUSTOMS TRADE PARTNERSHIP AGAINST TERRORISM) --For further information on the areas of focus please visit the C-TPAT website:http://www.cbp.gov/xp/cgov/trade/cargo_security/ctpat/


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