Supplier Management of hago Automotive Corp. · LB Subcontracting (German: Lohnbearbeitung) PPM...

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24/11/2016 L. Bendel 24/11/2016 J. Blumenstock 9999/ / 00 1 of 13

Supplier Management

of

hago Automotive Corp.








Table of Contents

Table of Contents ............................................................................................................................................. 2

Table of Figures ................................................................................................................................................ 3

Abbreviations ................................................................................................................................................... 3

1 Introduction .......................................................................................................................................... 4

2 Escalation Procedure ............................................................................................................................. 4

2.1 Escalation Steps ............................................................................................................................. 5

2.1.1 Escalation Step E0 .................................................................................................................. 5





2.2 Controlled Shipping Level (CSL) Program ........................................................................................ 6

2.2.1 CSL 1 ...................................................................................................................................... 6

2.2.2 CSL 2 ...................................................................................................................................... 7

3 Q Discussions ........................................................................................................................................ 7

4 Supplier Assessment ............................................................................................................................. 7

4.1 Supplier Assessment of Coil, ZKTL, and LB ...................................................................................... 7

4.1.1 Purpose, Method, and Assessment Criteria ............................................................................ 7

4.1.2 Assessment ............................................................................................................................ 8

4.1.2.1 Ability ................................................................................................................................ 8

4.1.2.2 Quality Performance .......................................................................................................... 8

4.1.2.3 Reactions on Complaint Reports or Objections ................................................................... 9

4.1.2.4 Delivery Reliability .............................................................................................................. 9

4.1.2.5 Customer Satisfaction ........................................................................................................ 9

4.1.3 Deductions Based on Escalation Steps .................................................................................. 10

4.1.4 Rating and Measures ........................................................................................................... 10

4.2 Supplier Assessment of Logistic Providers .................................................................................... 10

4.2.1 Purpose, Method, and Assessment Criteria .......................................................................... 10








4.2.2 Assessment .......................................................................................................................... 11

4.2.2.1 Ability .............................................................................................................................. 11

4.2.2.2 Quality Performance ........................................................................................................ 11

4.2.2.3 Reaction on Complaint Reports or Objections .................................................................. 12

4.2.2.4 Invoice Reports ................................................................................................................ 12

4.2.2.5 Customer Satisfaction ...................................................................................................... 12

4.2.3 Deductions Based on Escalation Steps .................................................................................. 12

4.2.4 Rating .................................................................................................................................. 13

Table of Figures

Figure 1: 3-Points Program ................................................................................................................................ 4

Figure 2: Escalation Procedure .......................................................................................................................... 5

Abbreviations

Coil Coil and sheet metal

CSL Controlled shipping level

FPM Freights per million

LB Subcontracting (German: Lohnbearbeitung)

PPM Parts per million

ZKTL Purchased parts (German: Zukaufteile)




24/11/2016 L. Bendel 24/11/2016 J. Blumenstock

1 Introduction

As a TS16949-certified company and supplier for the automotive industry,

standards. Hago strives to meet the requirements of its global

know, fulfill, and continuously work on furt

The 3-Points Program of our Supplier Management helps to meet individual customer requirements,

consistent verification, and encourages

The individual points are discussed in more detail as follows

2 Escalation Procedure

Whenever a supplier-caused problem

propriate actions are taken within defined due dat

All scheduled actions are documented

tion steps can also be assigned to a supplier following a

Depending on the severity of the problem,

serious problem can be directly categorized as an E2

can lead to the direct downgrading from step E2 to E0.

tees, which are part of the escalation procedure

Should a supplier reach the E2 escalation step

of the supplier’s certification.

The following escalation process applies to all process suppliers

tractors, etc.).

on (dd.mm.yy) by (Name) Changed on (dd.mm.yy) by (Name)


24/11/2016 J. Blumenstock

certified company and supplier for the automotive industry, hago hold

the requirements of its global customers. As a result,

know, fulfill, and continuously work on furthering all automotive industry processes

Points Program of our Supplier Management helps to meet individual customer requirements,

encourages continuous improvement.

Figure 1: 3-Points Program

are discussed in more detail as follows.

problem occurs, hago reacts by employing a uniform method that

within defined due dates.

are documented during the “Q discussions” held at the respective escalation level

to a supplier following a negative supplier assessment

Depending on the severity of the problem, hago reserves the right to skip entire escalation steps

serious problem can be directly categorized as an E2 escalation step. In return, the introduction of suitable actions

downgrading from step E2 to E0. All support measures performed by hago or hago appoi

scalation procedure, will be invoiced to the supplier.

scalation step, hago reserves the right to notify the certification agency

The following escalation process applies to all process suppliers (raw materials, purchased parts

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9999/ / 00 4 of 13

holds its suppliers to the highest

s a result, all hago suppliers must

.

Points Program of our Supplier Management helps to meet individual customer requirements, supports

a uniform method that ensures that ap-

the respective escalation levels. Escala-

negative supplier assessment.

escalation steps. For example, a

In return, the introduction of suitable actions

performed by hago or hago appoin-

notify the certification agency in charge

purchased parts, shippers, subcon-








Supplier Escalation Steps hago

Dis

con

tin

ua

tio

n C

on

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l

Change of Supplier Purchasing

Management

Action Catalog

Management,

Purchasing, and

Quality Manager

New Business On Hold

Q Discussions

Management

Act

ion

an

d D

ev

elo

pm

en

t P

lan

Supplier Development Program

Purchasing and

Quality Manager CSL 2

Q Discussions

Quality Manager

Action Plan

Quality Manage-

ment Employee

and Purchasing

CSL 1

Q Discussions

Quality Man-

agement Em-

ployee

Action Plan Quality Manage-

ment Employee

Figure 2: Escalation Procedure

2.1 Escalation Steps

2.1.1 Escalation Step E0

Escalation step E0 means that the supplier has a problem, which must be resolved with an action plan. For exam-

ple, a problem is recognized during an inspection of the incoming goods. As a result, hago’s respective quality de-

partment will specify special inspections which must be performed on the shipments of the supplier. These inspec-

tions must be documented in inspection reports. The processing and remediation of the problem must be docu-

mented in an 8-D report. This report must be submitted to hago within a specified period. This standard procedure

applies to every supplier.

Escalation Step E4

Escalation Step E3

Escalation Step E2

Escalation Step E1

Escalation Step E0









Escalation step E1 is assigned if the supplier-caused issues increase in frequency or if the action plans from escala-

tion step E0 are only implemented effectively in part or not at all within the specified period. In this case, hago

may prescribe the CSL 1 Program (see 2.2.1) by notifying the supplier’s quality officer in writing.

If shipping dates and/or shipping quantities are frequently no met, hago will impose the E1 escalation step on the

respective supplier. If the supplier-implemented actions are effective, and if there are no further quality or deliv-

ery complaints within a predefined period, the supplier is downgraded in writing from step E1 to E0.


An E2 escalation step is assigned if the supplier continues to experience quality and/or shipping problems while

categorized as an E1. Hago can impose the CSL 2 Program (see 2.2.2) on the supplier by notifying the supplier’s

management in writing. As part of the supplier development, hago and the supplier will draw up an action catalog.

Should the agreed action plans prove effective, and if there are no further quality and/or delivery reliability com-

plaints, the supplier is downgraded in writing from E2 to E1.


Ongoing quality and/or shipment issues, as well as a poor forecast based on an extended duration within the E2

escalation step, can lead to an E3 escalation. The supplier’s management is alerted in writing of the imposed “New

Business on Hold” status (SAP status E3, blocked for inquiries). The supplier’s management must submit a binding

and signed action catalog within one week illustrating possible actions for returning to step E2.

New orders are also on hold if the QM system certificate has expired or become invalid. In this case, the supplier

will not be informed in writing. Should the supplier not yet be in possession of a new certificate, he can provide a

letter issued by the certification agency confirming the positive recertification outcome in substitution.

The supplier can also be blocked from new orders if there is no evident active and cooperative problem-solving

behavior from the supplier or if the supply guarantee is strongly at risk.

A “blocked status” can only be canceled after hago reviews the effectiveness of the defined actions and notifies

the supplier’s management accordingly in writing.


If the entire escalation process does not lead to an improvement of the delivery quality and/or schedule/quantity

reliability, the blocked status remains and hago will initiate a supplier change.

2.2 Controlled Shipping Level (CSL) Program

In line with the escalation steps, the CSL Program is employed to control the quality of the delivered goods over a

specified period and/or quantity. The following CSL levels are possible.

2.2.1 CSL 1

In addition to the regular inspections, before shipping, the supplier must perform at his expense a 100% inspec-

tion pertaining to the material numbers and characteristics. Type and expense of the inspections must be coordi-

nated with hago. The inspected shipments must be marked. The type of marking and documentation (characteris-

tic and quantity of separated parts) must be coordinated with hago.








2.2.2 CSL 2

In addition to the regular inspections, prior to shipping, the supplier must order at his expense an external service

provider to perform a 100% inspection pertaining to the material numbers and characteristics. The supplier must

issue appropriate inspection/sorting instructions for the external service provider. These instructions must be

approved in advance by hago. The inspected shipments must be marked. The type of marking and documentation

(characteristic and quantity of separated parts) must be coordinated with hago.

3 Q Discussions

Q discussions with the supplier can be held/scheduled at any time. They not only assist in coordinating and docu-

menting the escalation process, but also serve to document the operative business. Q discussions may involve

rolling meetings to improve cooperation, for pricing, etc.

4 Supplier Assessment

Hago defines three types of supplier assessments: Assessments for steel suppliers (COIL), for purchased parts

(ZKTL) and subcontractors (LB), and for shippers. PPM is only calculated for ZKTL/LB parts, but not for COIL materi-

als.

4.1 Supplier Assessment of Coil, ZKTL, and LB

4.1.1 Purpose, Method, and Assessment Criteria

This method evaluates the ongoing ability, performance, and readiness of the supplier for continuous improve-

ment. The following assessment forms the basis for continuing the cooperation.

Criteria Weighting

2.1 Ability (valid management system) 10 %

2.2 Quality (number of complaints) 40 %

2.3 Reactions to complaints 20 %

2.4 Delivery reliability (quantity and adherence to delivery schedules) 25 %

2.5 Customer satisfaction (service, reaction in daily business) 5 %








4.1.2 Assessment

4.1.2.1 Ability

The proof of the ability of an implemented management system is significant for the supplier’s evaluation. A max-

imum of 100% is possible.

Management System* Maximum 100 %

ISO 9001 or VDA 75 %

TS 16949 85 %

Hago/customer audits (ISO or TS16949 not implemented) A=90% B=80% C=70 %

ISO 14001 in addition 5 %

Signed Service Level Agreement in addition 10 % * Proof must be provided in the form of a certificate issued by a DAkks, EA, IAF or ELAC-registered certifier. If a valid certificate is not

submitted, the supplier is assigned a E3 status (blocked for inquiries).

4.1.2.2 Quality Performance

Quality performance is based on the quantity of non-conformances found during incoming goods inspection or in

production. Non-conformances are communicated to the supplier in form of a complaint report, and the PPM

figure is calculated accordingly. The number of complaints is also reflected in the assessment. PPM is not calculat-

ed for COIL suppliers. COIL supplier assessments reflect only the quantity of complaints.

Quantity rejected

PPM: ────────────────── x 1 Mio.

Quantity shipped

Assessment of the PPM figure:

Actual PPM 100

───────────── = Value => ───── = x % (whereas a max. of 100% is possible)

Target PPM Value

The target PPM must be coordinated with Feinwerktechnik hago’s purchasing department at the beginning of a

year. If the supplier fails to do so, hago will prescribe the supplier’s annual target PPM as part of the annual as-

sessment.

Number of Complaints:

Number of Complaints Assessment

0 complaints 100 %

1 complaint 90 %

2 - 3 complaints 80 %

4 - 5 complaints (Q discussions when indicated) 60 %

> 5 complaints (Q discussions and Business on Hold status) 0 %








The quality performance is based on the PPM evaluation and the number of complaints. Both are incorporated in

equal parts into the assessment.

PPM assessment + assessment of number of complaints

────────────────────────────────────────────── = x % = quality performance

2

4.1.2.3 Reactions on Complaint Reports or Objections

The reaction of a supplier following a complaint (8D report) is essential for damage analysis and the definition of

actions so that future errors can be eliminated. The assessment is performed as follows:

Reaction (8D-Report) Maximum 100 %

None or not within the defined due date 0 %

Completed in full within the defined due date 100 %

4.1.2.4 Delivery Reliability

Delivery reliability involves the deviation of specified or confirmed delivery dates/quantities compared to the ac-

tual delivery dates/quantities. It is automatically calculated by the SAP system in equally weighted parts.

Adherence to delivery schedules:

+/-10% +/-15% +/-20% +/-30% +/-40% +/-50% +/-75% +/-99,9%

100% 95% 90% 80% 60% 40% 20% 1%

Example: A delivery date deviation between 20% and 30 % results in a score of 80%.

Adherence to quantity stipulated:

+/-10% +/-15% +/-20% +/-30% +/-40% +/-50% +/-60% +/-70% +/-80% +/-99,9%

100% 90% 80% 60% 50% 40% 30% 20% 10% 1%

Example: A quantity deviation between 20% and 30 % results in a score of 60%.

4.1.2.5 Customer Satisfaction

Customer satisfaction evaluates the reaction of the supplier in daily business. Flexibility, reaction time, quotation

behavior, communication behavior and feedback, etc. are all important factors.

Supplier Behavior Maximum 100 %

Spontaneous, flexible, and strongly proactive 90 - 100 %

Less spontaneous, yet still proactive 80 - 89 %

Reactive behavior, supplier must frequently be reminded or cautioned 60 - 79 %

Little or no reaction, supplier must be continuously cautioned or admonished 0 %








4.1.3 Deductions Based on Escalation Steps

If the supplier is entered into the escalation process and has an assigned E1 to E4 status, the following percentage

points will be deducted from the total of the supplier’s assessment result:

E0 = 0 percentage points deducted




E4 = No further assessment => Discontinuation

4.1.4 Rating and Measures

The supplier is rated based on the assessment of the above-mentioned criteria. The following divisions apply:

∑ in % Step Measures

≥ 90 A If one criterion is < 90%, the supplier must take actions. The supplier is not required to

notify hago of actions taken. However, hago can inquire about actions during an audit.

≥ 80 B

The supplier must develop and implement a concrete action plan within 4 weeks and

advise Hago accordingly. If the action plan is not received on time, the supplier is

blocked for new orders until the action plan is submitted.

< 80 C

As part of the assessment, the supplier will be invited to a Q discussion in the near fu-

ture. This Q discussion is intended to define a concrete action plan as a requirement for

requalification. During the meeting, it is decided if the supplier is blocked for new or-

ders and whether hago must perform an audit as a further requirement for the approv-

al process.

The audit must have an outcome of ≥ 90 points. If an audit is not required, the supplier

can be temporarily approved until the next quarterly assessment. The temporary ap-

proval must be justified in the Q discussion protocol.

4.2 Supplier Assessment of Logistic Providers

4.2.1 Purpose, Method, and Assessment Criteria

This method evaluates the ongoing ability, performance, and readiness of the supplier for continuous improve-

ment. The following assessment forms the basis for continuing the cooperation.

Criteria Weighting

2.1 Ability (valid management system) 10 %

2.2 Quality (freight per million (FPM), number of complaints) 50 %

2.3 Reactions to complaints 20 %

2.4 Invoice reports 10 %

2.5 Customer satisfaction (service, reactions in daily business) 10 %








4.2.2 Assessment

4.2.2.1 Ability

The ability proof of an implemented management system is essential for the assessment of the supplier. A maxi-

mum of 100% is possible.

Management System* Maximum 100 %

ISO 9001 or VDA 85 %

Hago/customer audits (ISO or TS16949 not implemented) A=90% B=80% C=70 %

ISO 14001 in addition 5 %

Signed Service Level Agreement in addition 10 % * Proof must be provided in the form of a certificate issued by a DAkks, EA, IAF or ELAC-registered certifier. If a valid certificate is not sub-

mitted, the supplier is assigned a E3 status (blocked for inquiries).

4.2.2.2 Quality Performance

Quality performance is based on technical, logistical, or administrative errors involving the movement of goods.

These are communicated to the supplier in the form of a complaint report, and the FPM figure is calculated ac-

cordingly. The number of complaints is also reflected in the assessment.

Shipments objected

FPM: ───────────────────── x 1 Mio.

Total of shipments

Assessment of the FPM figure:

Actual FPM 100

───────────── = Value => ────── = x % (whereas a max. of 100% is possible)

Target FPM Value

The target FPM must be coordinated with Feinwerktechnik hago’s purchasing department at the beginning of a

year. If the supplier fails to do so, hago will prescribe the supplier’s annual target FPM as part of the annual as-

sessment.

Number of complaints:

Number complaints Assessment

0 complaints 100 %

1 complaint 90 %

2 - 3 complaints 80 %

4 - 5 complaints (Q discussions when indicated) 60 %

> 5 complaints (Q discussions and Business on Hold status) 0 %








The quality performance is based on the FPM evaluation and the number of complaints. Both are incorporated in

equal parts in the assessment.

FPM assessment + assessment of number of complaints

────────────────────────────────────────────── = x % = quality performance

2

4.2.2.3 Reaction on Complaint Reports or Objections

The reaction of a supplier following a complaint (8D report) is essential for damage analysis and the definition of

actions so that future errors can be eliminated. The assessment is performed as follows:

Reaction (8D-Report) Maximum 100 %

None or not within the defined due date 0 %

Completed in full within the defined due date 100 %

4.2.2.4 Invoice Reports

The value of the invoice reports is determined by their quantity with the following grading:

Number of Invoice Reports Assessment

0 invoice reports 100 %

1 invoice report 90 %

2 invoice reports 80 %

> 2 invoice reports 60 %

4.2.2.5 Customer Satisfaction

Customer satisfaction evaluates the reaction of the supplier in daily business. Flexibility, reaction time, quotation

behavior, communication behavior and feedback, etc. are all important factors.

Supplier Behavior Maximum 100 %

Spontaneous, flexible, and strongly proactive 90 - 100 %

Less spontaneous, yet still proactive 80 - 89 %

Reactive behavior, supplier must frequently be reminded or cautioned 60 - 79 %

Little or no reaction, supplier must be continuously cautioned or admonished 0 %

4.2.3 Deductions Based on Escalation Steps

If the supplier is entered into the escalation process and has an assigned E1 to E4 status, the following percentage

points will be deducted from the total of the supplier’s assessment result:





E4 = No further assessment => Discontinuation








4.2.4 Rating

The supplier is rated based on the assessment of the above-mentioned criteria. The following divisions apply:

∑ in % Step Measures

≥ 90 A If one criterion is < 90%, the supplier must take actions. The supplier is not required to

notify hago of actions taken. However, hago can inquire about actions during an audit.

≥ 80 B

The supplier must develop and implement a concrete action plan within 4 weeks and

advise Hago accordingly. If the action plan is not received on time, the supplier is

blocked for new orders until the action plan is submitted.

< 80 C

As part of the assessment, the supplier will be invited to a Q discussion in the near fu-

ture. This Q discussion is intended to define a concrete action plan as a requirement for

requalification. During the meeting, it is decided if the supplier is blocked for new or-

ders and whether hago must perform an audit as a further requirement for the approv-

al process.

The audit must have an outcome of ≥ 90 points. If an audit is not required, the supplier

can be temporarily approved until the next quarterly assessment. The temporary ap-

proval must be justified in the Q discussion protocol.

Supplier Management of hago Automotive Corp. · LB Subcontracting (German: Lohnbearbeitung) PPM...

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