Supplier Performance Measure Rating System

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QUALITY PROCEDURE

MANUAL

Document Title: SUPPLIER PERFORMANCE MEASURE & RATING SYSTEM PROCEDURE

Document No:

Issue No: 2

CONTROLSTATUS

All users of this document/Procedure are to identify and ensure the latest approved issue.

ISSUE 1Prepared By: Reviewed By Approved By Date

Signature

Designation

Issue Prepared By Reviewed By Approved By Date

SUPPLIER PERFORMANCE MEASURE & RATING SYSTEM PROCEDURE

QUALITY PROCEDURES MANUAL

Doc No:Issue :

2

TABLE OF CONTENT

Section Description Page

1.0 PURPOSE..........................................................................................................32.0 SCOPE...............................................................................................................33.0 ABBREVIATION/DEFINITION......................................................................34.0 RESPONSIBILITY............................................................................................45.0 PROCEDURES..................................................................................................56.0 REFERENCES.................................................................................................107.0 AMENDMENT RECORDS............................................................................108.0 FLOW CHART................................................................................................11

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1.0 PURPOSE

To provide documented procedure for the control of supplier performance measuring & rating system procedure and improve communication with suppliers.

2.0 SCOPE

Scope of this procedure for measure; RPPM (Rejected Part Per Million) Percent PPM (Part Per Million) Improvement Written Complaint (Non-Conformance Report) Delivery performance Accountability & Cost of Quality Service or Responsiveness

3.0 ABBREVIATION/DEFINITION

3.1 BA (Business Agreement)A written contract established between CTRM AC and the supplier / sub-contractors

3.2 CTRM ACCTRM Aero Composites

3.3 PRPurchase Requisition

3.4 POPurchase Order

3.5 HODHead of Department

3.6 HOSHead of Section

3.7 AVLApproved Vendor List

3.8 SOMSupply Operation Management Section

3.9 QPQuality Procurement Section

3.10 QE Quality Engineering Unit

3.11 IQCIncoming Quality Check

3.12 EDCEngineering Document Control

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3.13 SCARSupplier Corrective Action Report

3.14 SRSSupplier Rating System

3.15 RPPMRejected Part per Million

3.16 NCRNon-Conformance ReportA form used to record details of discrepancy, causes of problem, dispositions and actions for correction and improvement of a nonconforming item.NCR includes (Goods Discrepancy Report,Service Discrepancy Report and Corrective Action Request).

4.0 RESPONSIBILITY

4.1 System UnitSystem Unit is responsible for the maintenance of this procedure and to ensure this procedure is adhered to, during the measurement of supplier performance measure and rating activities.System unit is also responsible for the implementation of supplier performance measure and rating summary and/or report.This unit will perform supplier audit if necessary and to include the NCR issued to supplier for performance measure.

4.2 Material Management and SOM SectionMaterial Management Section is responsible to supply data for measurement of delivery performance and written complaint issuance (NCR).They allso need to monitor the supplier corrective action plan for unsatisfactory delivery & service performance.

4.3 Quality Engineering Unit (QE)QE Unit is responsible to supply data for measurement of the quality (written complaint issuance-NCR), and service or responsiveness performance based on supplier response.QE also need to monitor the supplier corrective action plan for unsatisfactory quality & service performance.

4.4 Incoming Quality Check Unit (IQC)IQC unit is responsible to supply data for measurement of quality (RPPM).IQC also need to monitor the supplier corrective action plan for unsatisfactory performance.

4.5 Engineering Document ControlEDC is responsible to supply data for measurement of service or Responsiveness based on the external document distribution response.EDC also need to monitor the supplier corrective action plan for Unsatisfactory performance.

Section (S.O.M)

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5.0 PROCEDURES

5.1 This measurement is divided into 4 categories:a) Quality

i) RPPM (Rejected Part Per Million)ii) Percentage PPM (Part Per Million) Improvementiii) Written Report (Non-Conformance Report)

b) Deliveryc) Accountability & Cost of Qualityd) Service or Responsiveness

5.2 Scoring Criteria & Scorecard

5.2.1 Scorecard as a vehicle to provide performance & rating to supplier. Scorecard will be issued to supplier every quarter, half & end yearly to all suppliers under AVL & Customer approval together with SCAR if required. Full mark of score is 100 percent.

5.2.2 Quality criteria represents for 40 % from the total mark. - RPPM (Rejected Part per Million) - 20%; - Percentage PPM (Part Per Million) Improvement - 5%; and - Written report (non-conformance report) – 15%

5.2.3 Delivery criteria represents 20% from the total mark.

5.2.4 Accountability & Cost of Quality represents 20% from the total mark.

5.2.5 Service or Responsiveness represents 20% from the total mark.

5.3 Quality Performance

5.3.1 RPPM (Rejected Parts Per Million)

5.3.1.1 RPPM (Rejected parts per million) is calculated on the basis of the amount of goods defective versus the total amount of goods inspected in a given fiscal month. This calculation is then normalized to reflect a constant basis of the one million units received.

5.3.1.2 RPPM Formula:(Total Goods Defect / Total Goods Inspect) x 1 Million

Example: A supplier ships 10,000 parts to a plant & Incoming Inspector inspect all goods received, of those 7 found to be defect.

The calculation will be (7 / 10,000) x 1,000,000 = 700 RPPM

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5.3.1.3 The following table outlines parts per million ranges and their respective scores:

RPPM Rating Score0 20%1 to 100 19%101 to 200 18%201 to 300 17%301 to 400 16%401 to 500 15%501 to 600 14%601 to 700 13%701 to 800 12%801 to 900 10%901 to 1000 9%1001 to 1500 8%1501 to 2000 7%2001 to 2500 6%2501 to 3000 5%3001 to 3500 4%3501 to 4000 3%4001 to 4501 2%4501 to 5000 1%5001 or greater 0%

5.3.2 Percentage Part Per Million (PPM) Improvement

5.3.2.1 The Percent PPM Improvement is a supplier who reduces their RPPM from the CTRM management target can earn additional point toward their RPPM score. Refer to the following chart for explanation of the scoring system:

% Improvement Points75 to 100 5%60 to 74 4%45 to 59 3%30 to 44 2%15 to 29 1%

5.3.3 Written Report (Non-Conformance Report)

5.3.3.1 The Non-Conformance Report category system rates Suppliers on the number of NCR’s and the severity of each complaint with the following formula.

Level Categories Issues Points per occurrence

Level 1 Minor Issues 0.10 pointsLevel 2 Major Issues 0.50 pointsLevel 3 Severe Issues 1.00 points

Example: A supplier 3 NCR’s in Level 1, 1 NCR’s in Level 2.

The total number of points will be calculated as (3 x 0.1) + (1 x 0.5) = 0.8 total.

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5.3.3.2 The following below table outline NCR’s ranges and their respective scores.

Total Quality NCR’s Rating Points

Score

0.00 ~ 0.10 15%0.11 ~ 0.20 14%0.21 ~ 0.30 13%0.31 ~ 0.40 12%0.41 ~ 0.50 11%0.51 ~ 0.60 10%0.61 ~ 0.70 9%0.71 ~ 0.80 8%0.81 ~ 0.90 7%0.91 ~ 1.00 6%1.01 ~ 1.20 5%1.21 ~ 1.40 4%1.41 ~ 1.60 3%1.61 ~ 1.80 2%1.81 ~ 2.00 1%2.01 or greater 0%

5.4 Delivery Performance

5.4.1 The Delivery ratings are calculated on the basis of the amount of shipments that have errors versus the total amount of shipments in given fiscal month. This information is then calculated into a percentage.

5.4.2 Delivery ratings are determined on the occurrence of the following criteria only when it is determined to be the Supplier’s responsibility:

No Item Description1 Late deliveries More than 5 days from date of

delivery required.2 Early deliveries Less than 5 days from date of

delivery required.3 Premium freight

occurrencesPremium freight occurrences routings required due to supplier delivery or quality problems.

4 Over shipment of the quantity ordered

Supplier supply over quantity from the ordering.

5 Short shipment of the quantity ordered

Supplier supply short quantity from the ordering.

6 Incomplete Documentation

Incomplete documentation & impact to delivery activities (such as invoice, pick list etc)

5.4.3 The potential for more than one occurrence does exist. If no shipments are received in the given month, a notation will appear on Scorecard in the comment section.

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5.4.4 The calculation on the delivery percentage and associated points based on the following formula:

Delivery % = [(total shipments – number of occurrences) / total shipment] x 100

Example: A Supplier sends 36 shipments for the month, of those 36, 1 shipment is late, and 1 shipment is short of the quantity ordered. This counts as 2 occurrences.

The delivery percentage calculation will be [(36-2) / 36] x 100 = 94.4%

5.4.5 The following table outlines the delivery percentages and their respective scores:

Delivery Occurrence % Score100% 20%99 ~ 99.9% 18%98 ~ 98.9% 16%97 ~ 97.9% 14%96 ~ 96.9% 12%95 ~ 95.9% 10%94 ~ 94.9% 8%93 ~ 93.9% 6%92 ~ 92.9% 4%91 ~ 91.9% 2%90.9 or less 0%

5.5 Accountability & Cost of Quality

5.5.1 The Accountability & Cost of Quality is determined on the basis of the following criteria:

5.5.2 Scrap, rework, sorting and processing costs due to poor quality from supplier.

5.5.3 Inventory & storage costs due to inspection failure during incoming.

5.5.4 Production shutdown attributed to poor quality from supplier.

5.5.5 Shipping fees related to return of defect product.

5.5.6 The following table outlines the service and their respective scores:

Cost of Quality Incidences Scores0 20%1 16%2 12%3 8%4 4%5 or greater 0%

5.6 Service or Responsiveness

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5.6.1 The Service category is determined on the basis of the following criteria:

5.6.2 On time and accurate response to quality issues, including corrective action reports for non-conforming product (NCR), audit result, supplier quarterly / annual report.

5.6.3 On time and accurate documentation (such as CofC, packing slip, invoices, test certificate etc)

5.6.4 The following table outlines the service and their respective scores:

Service Incidences Score0 20%1 16%2 12%3 8%4 4%5 or greater 0%

5.7 Supplier Rating Category & Action

5.7.1 Supplier rating category & action taken will be based on the table as follow:

Supplier Category

Percentage / Performance Remark

Actions

PLATINUM (Best Supplier)

90-100%Outstanding

performance, thus maintain the standard

Issue CTRM Best Supplier (Platinum) Certificate for recognition

GOLD(Good Supplier)

80-89.9%

Satisfactory performance, thus can be improved

Subject to continuous performance maintained (SRS point) in same category, issue acknowledgement letter to supplier’s top management for recognition

SILVER (Moderate Supplier)

70-79.9%

Below average performance, improvement required.

Issue Supplier Corrective

Action Report (SCAR) to suppliers.

QE, SOM & Material Management Sections shall monitor corrective action plan from supplier.

If remain at same category for

3 consecutive performance review, a site audit is required.

BRONZE(Poor supplier)

60% ~ 69.9%

Unsatisfactory Performance,

Issue Supplier Corrective Action Plan (SCAR) to supplier.

QE, SOM & Material Management Sections shall

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immediate improvement required.

monitor corrective action plan from supplier.

If remain at same category for 2 consecutive performance review, a site audit is required.

RED(Very Poor Supplier)

Below 59.9%Very unsatisfactory

performance, immediate action plan is required

Issue Supplier Corrective Action Request

A site audit is required

6.0 REFERENCES

Inspection ProcedureVendor Assessment, Approval & Contro Purchase Requisition

7.0 AMENDMENT RECORDS

Issue Date Description Amendment by

1 FIRST ISSUE

2 Changes made on all paragraph to be in line with current practice

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8.0 FLOW CHART

Figure 1: Basic Flow of Supplier Performance Measure & Rating System

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Start

Compile report & feedback from QE, SOM & Material Management

Submit scorecard or report to supplier (Every half & end year) & QP, SOM, Material

Management (Every month)

Supplier

Rating?

Recognize supplier by letter, email or certificate

Issue SCAR to supplier

Issue 2nd SCAR to supplier

Supplier reply SCAR

Perform System Audit

Result?

Unsatisfied

Silver and , Bronze & Red

Category

Platinum & Gold Category

Satisfied

Compile report & closed

QE, SOM, & Material Management monitor C/Action Plan

Result?

Result?

Not Improve

Improve

ImproveNot Improve

Issue Acknowledgement letter to Supplier Top Management

Recommend termination & removed

from AVL

Red Category

Red Silver, Bronze & Red

Category

Supplier Performance Measure Rating System

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