Motor Coach Industries Supplier Manual

Transcription

1 Motor Coach Industries Supplier Manual THIS DOCUMENT IS UNCONTROLLED IF PRINTED ON PAPER

2 Table of Contents MCI Business Philosophy Section #1 Vision & Strategy Section #2 Quality Policy & Mission Statement Section #3 Supplier Manual Goals & Scope Section #4 Supplier Code of Conduct Section #5 Sustainability Section #6 Supplier Manual Access/Responsibilities MCI Supplier Requirements & Processes Section #7 Commercial Expectations 7.1 Purchasing Process 7.2 Continuous Improvement 7.3 Service & Replacement 7.4 Terms & Conditions 7.5 Confidentiality 7.6 Warranty 7.7 Invoicing 7.8 Application Approvals Section #8 Tooling & Gauging Policy 8.1 General 8.2 Definitions 8.3 Quotation & Design 8.4 Invoicing 8.5 Tooling Identification & Ownership Rev. B: Jan 25, 2018 Page 2 of 39

3 Section #9 Prototypes 9.1 General 9.2 Submission Requirements 9.3 Prototype Identification 9.4 Prototype Tooling Section #10 Quality Requirements 10.1 General 10.2 Product Quality Planning 10.3 Supplier Readiness Assessment 10.4 Product Qualification (PPAP/FAI) 10.5 Treatment of Non-Conforming Parts 10.6 Supplier Development 10.7 Supplier Recovery Charges 10.8 Record Retention Section #11 Supplier Change Management 11.1 General 11.2 Temporary Changes 11.3 Permanent Changes 11.4 Review Process Section #12 Materials/Delivery Expectations 12.1 Delivery Expectations 12.2 Packaging/Containerization 12.3 Labeling & Identification 12.4 International Transportation 12.5 Preferred Transportation Carriers Rev. B: Jan 25, 2018 Page 3 of 39

4 MCI Supplier Performance Section #13 Supplier Performance Metrics 13.1 General 13.2 Quality Performance 13.3 Delivery Performance 13.4 Cost Performance 13.5 Engineering Performance 13.6 Service Performance 13.7 Aftermarket Performance Appendix A-1 Supplier Manual Revision History A-2 Acronyms & Abbreviations Rev. B: Jan 25, 2018 Page 4 of 39

5 MCI Business Philosophy Section #1 Vision & Strategy 1.1 Vision Reliability Driven in product and support and to build on MCI s position as the coach leader in the U.S. and Canada with coaches that deliver the Lowest Total Cost of Operations. MCI must be the best business partner for operators. 1.2 Strategy Vision Core Competencies Target Segments New Coach & Aftermarket Competitive Advantage Strategic Imperatives Rev. B: Jan 25, 2018 Page 5 of 39

6 Section #2 Quality Policy & Mission Statement 2.1 Quality Policy Motor Coach Industries (MCI) builds the most reliable coaches in the industry. 2.2 Quality Mission Statement MCI s goal is to remain the U.S. and Canada leader in the supply of inter-city motor coaches by delivering coaches fit for service every time. MCI is dedicated to meeting or exceeding our customers requirements, and exceeding our owners financial expectations. We are committed to complying with all applicable requirements and continually improving the effectiveness of our quality management system. MCI s quality objectives are reviewed at planned intervals to ensure our organizational goals are met or exceeded. MCI is dedicated to developing our employees through education, training, and involvement. Section # 3 Supplier Manual Goals & Scope We need Suppliers who are capable of delivering near automotive quality Before presenting the following guidelines, we want to provide the general principles that drive this program to make sure that each supplier s decision to participate is made with a complete knowledge of our objectives, of the procedure used, and what is expected of all supplier companies. 3.1 Supplier Manual Goals The demand for improved product quality is widely recognized as the primary challenge facing our industry. MCI is committed to producing the most reliable product possible. Our policy is to meet and strive to exceed customer requirements. This manual details the procedures and systems of this quality approach, the basis of which is defect prevention and continuous improvement. MCI is committed to this approach, and we expect the same commitment from our suppliers. MCI has created this common Supplier Manual applicable for all MCI locations. The purpose of this manual is to: Communicate MCI s expectations, goals, and minimum requirements to assure quality of supplied parts. Encourage open and free communication of ideas, information, and problem notifications between suppliers, MCI, and its customers in the spirit of teamwork and cooperation. Develop an overall plan to ensure smooth production start-up and ramp-up both at MCI and the supplier, based on effective planning and communication. Rev. B: Jan 25, 2018 Page 6 of 39

7 Define the quality assurance procedures and documents the supplier must follow to assure the supplier has an effective quality system (preferably based on ISO9001). 3.2 Supplier Manual Scope This supplier manual applies to all production material suppliers and service part suppliers that supply product to MCI. These procedures may also be applied to other parts and materials (such as consumable tools and supplies). Applicability of special procedures to those tools and supplies should be informed by an MCI representative. 3.3 Responsibilities Suppliers must maintain a comprehensive quality system to ensure compliance with the requirements of this manual and the applicable contract. This manual explains MCI expectations as well as the process MCI will follow to assess the capability and performance of each supplier. Section #4 Supplier Code of Conduct 4.1 Supplier Code of Conduct The MCI Beliefs serve as a guide for our employees on the way we conduct our business with our customers, our employees, our suppliers and our communities. These beliefs, which are deeply rooted in our culture, also serve as a framework for the standards of business conduct we expect of any supplier that does business with us. 4.2 Respect for Each Other MCI operates in a climate of respect, courtesy and impartiality. The same fairness and impartiality should be extended to all suppliers who wish to compete for MCI business. We expect open, honest, and timely communication. MCI suppliers should encourage a positive and diverse workplace by not tolerating harassment or discrimination, including that involving race, color, religion, gender, age or disability. 4.3 Power of Collaboration Successful business relationships are the result of mutual goals and values. We encourage differentiating technologies that challenge the status quo and help support MCI s product leadership model. We view every supplier relationship as an opportunity to extend our enterprise and grow our business. Information given to us must be accurate, and when requested we will treat it as confidential. 4.4 Passion for Excellence MCI wants to excel in serving our customers, advancing our technologies, and rewarding all who invest in us. To extend our competitive position, we expect our suppliers to relentlessly improve their own performance and to bring urgency to every business challenge and opportunity. Rev. B: Jan 25, 2018 Page 7 of 39

8 4.5 Personal Integrity We at MCI demand uncompromising ethical standards in all we do and say we expect our suppliers to do the same. Our policies prohibit the acceptance of gifts, services or anything of such value that may influence the judgment of the recipient, or that a third party might reasonably perceive as influencing that judgment. Payments of money, property, or services for the purpose of obtaining or maintaining business or special consideration are prohibited. MCI recognizes that in some cultures, business gifts and business entertainment are considered an important part of the development of business relationships. Any proposed gift or entertainment must be evaluated to ensure it is in the best interest of MCI, consistent with MCI policies and the law, and in accordance with local custom. No listing of ethical guidelines can be considered complete. It is incumbent upon those affected by this policy to avoid the misconception that if it is legal, it is ethical. Appropriate conduct must reflect good judgment, fairness and high standards. 4.6 Responsibility to Our Communities We are committed to good corporate citizenship. We expect our suppliers to abide by all applicable employment, environmental, health and safety laws, and regulations. We also believe that suppliers should provide wage and benefit levels to their employees that address the basic needs of people in light of local conditions. 4.7 Adherence We expect your cooperation in ensuring adherence to our Supplier Code of Conduct. If you or anyone in your company believes that an MCI employee or other supplier has violated this policy, please contact the MCI/New Flyer Ethics and Compliance Hotline by phone at +1 (844) (US/Canada), website: or Ethics@newflyer.com Section #5 Sustainability 5.1 Shared Principle of Sustainability MCI is committed to environmental responsibility that leads to sustainability a practice or process that meets today s needs without compromising the ability of future generations to meet their own needs. We believe that this focus will benefit society, future generations, and each of us as individuals, as well as contribute to our competitive advantage in the global marketplace. We expect our suppliers to share these beliefs. 5.2 Environmentally Responsible Products and Process To assure that our products and processes will provide the maximum benefit and least damage to the environment, we expect MCI suppliers to: Develop and offer products that help contribute to improved fuel efficiency and reduced emissions. Rev. B: Jan 25, 2018 Page 8 of 39

9 Evaluate and minimize the complete-life cycle environmental impact of your products and processes. Minimize waste generation. Lead in the conversion to environmentally friendly materials including the use of recycled and recyclable materials. Maximize the efficient use of resources. Section #6 Supplier Manual Access/Responsibilities 6.1 MCI s Responsibility Provide supplier access to the latest released version of the MCI Supplier Manual. Specific approach to access and notification will be determined by your MCI representative. Update the Supplier Manual as required and notify suppliers accordingly. 6.2 Supplier s Responsibility Ensure supplier uses the current released version of the MCI Supplier Manual. Provide training to suppliers personnel regarding the location of the controlled version of the MCI Supplier Manual. Suppliers must ensure that MCI has the correct supplier contact information and notify MCI promptly with any changes. Rev. B: Jan 25, 2018 Page 9 of 39

10 MCI Supplier Requirements & Processes Section #7 Commercial Expectations 7.1 Purchasing Process Supplier Agreement Unless otherwise directed, suppliers must sign and return the Supplier Agreement regarding Proprietary Information Security and Disclosure to the appropriate MCI supplier representative prior to being issued an invitation to quote. Supplier must sign and return all other agreements as requested Request For Quotation (RFQ) Potential suppliers may be invited to participate in the quoting process. Suppliers are required to use the forms supplied in the request for quotation, including detailed cost breakdowns. Failure to complete the documents fully and accurately may result in MCI rejecting a quotation as being nonresponsive. Contact your MCI representative for further instructions Supplier Selection Criteria In selecting a supplier for the award of new business, MCI will consider the following criteria, among others: The supplier's demonstrated performance in safety, quality, delivery, cost reduction, and environment Supplier quality assessment (when applicable) Supplier's total cost competitiveness and commitment to continuous improvement Supplier's demonstrated technical capabilities, engineering support of MCI programs, and program management of new product launches Supplier s overall financial condition Supplier s acknowledgement and acceptance of MCI s Purchase Order Terms and Conditions. Other factors, such as aftermarket, customer-directed, regional requirement, etc Cost Breakdown Analysis As requested, suppliers must provide detailed and accurate cost information on appropriate forms Purchase Orders Refer to the specific MCI purchase order terms and conditions. 7.2 Continuous Improvement General Continuous Improvement (CI) in regard to cost reduction is an essential element of long-term business success for MCI and for its suppliers. Rev. B: Jan 25, 2018 Page 10 of 39

11 In order to remain competitive, MCI and its suppliers must recognize the requirement to find effective ways to eliminate waste and reduce the cost of our products Expectation Year-Over-Year Improvements MCI expects all suppliers to demonstrate year-over-year cost reductions. All suppliers are expected to constantly examine and optimize the entire cost structure of their business and the products supplied to MCI. This includes process improvements, cycle-time reduction, scrap reduction, die/tooling setup reduction, design improvements, Sales, General and Administration (SG&A) reduction, fixed and variable overhead reduction, transportation, etc. In order to ensure proper review and validation of suppliers design and process improvement ideas, suppliers must strictly comply with MCI s change management requirements (SREA process) for all design and process change proposals. 7.3 Service & Replacement Duration Suppliers are expected to provide service component requirements for a minimum period of 15 years following the conclusion of series production or as otherwise stated in writing by MCI and approved by the appropriate MCI representative Pricing Service components shall be priced at production pricing for a minimum of 5 years after MCI Customer production has ceased or as otherwise stated in writing by MCI and approved by the appropriate MCI representative. In no event will replacement parts be made available to MCI at prices that are not competitive or exceed those charged to other comparable customers of the supplier. 7.4 Terms & Conditions General The supplier must comply with all written agreements made with MCI as well as the terms and conditions contained in the MCI purchase order. The supplier will consult with the appropriate MCI representative for clarification. 7.5 Confidentiality General All non-public information shared with suppliers is considered confidential. Disclosure of any MCI confidential material, outside MCI, will be considered grounds for immediate supplier dismissal and may result in MCI pursuing available legal remedies Non-Disclosure Agreement Suppliers are expected to sign and comply with a binding Non-Disclosure Agreement (NDA) when requested by MCI. Rev. B: Jan 25, 2018 Page 11 of 39

12 7.6 Warranty The supplier will accept the warranty requirements specified in the purchase order terms and conditions and/or separate agreements. Additionally, the supplier will be responsible for all applicable warranty costs. 7.7 Invoicing General Instructions The supplier will contact the MCI plant that will be receiving the product or service (MCI receiving plant) for invoicing requirements. The supplier will ensure that information included on all production part invoices are adequate for proper processing by MCI, containing but not limited to: original and duplicate invoices, unique invoice number, MCI part numbers, purchase order numbers, quantity, unit and total price, complete description of the merchandise, country of origin, etc. The supplier will ensure that all information provided on all invoices and shipping/business documents and/or electronic data accurately reflects the physical goods in the shipment Invoicing Consigned Inventory Consigned inventory may or may not require an invoice depending on the MCI purchase order and requirements from the MCI receiving plant. If an invoice is required, the general Instructions (above) are required. If an invoice is not required, follow the information from the Invoice-less Instructions (below) or specific instructions from the MCI receiving plant Invoice-less Instructions If MCI plant and purchase order indicate payment from evaluated receipts, the supplier may not be required to submit an invoice with the shipment (unless required by local customs authorities with respect to shipments of goods across international frontiers or borders or government regulations). Contact the MCI receiving plant for verification. 7.8 Application Approval An application approval is an agreement between MCI and its supplier that certifies that a component part, assembly, or system offered for sale by the supplier will meet the following when installed in MCI s coaches: Functional MCI operating conditions and requirements. Any general terms and conditions of the MCI purchase order. Warranty obligations. Quality obligations An application approval is required when: MCI purchases a part or assembly from a supplier that is the supplier s proprietary design, and MCI requires the supplier to warrant the part / assembly for a specified warranty period. Rev. B: Jan 25, 2018 Page 12 of 39

13 The part, assembly or system is deemed vital to coach reliability and customer satisfaction as determined by MCI Engineering authorities (managers, directors, and executives). Delivered coaches exhibit repetitive quality and/or warranty claim issues related to specific components identified through the MCI quality system For additional information please contact your MCI representative. Section #8 Tooling and Gauging Policy 8.1 General MCI will issue purchase orders for special tooling including dies, jigs, fixtures, templates, inserts, molds, patterns, gauges, test equipment, etc. as agreed upon. MCI will normally require the supplier to enter into a separate tooling agreement detailing the parties respective contractual rights and obligations MCI reserves the right to immediately remove MCI-owned tools from supplier s possession Suppliers must receive written authorization from MCI before: Moving or destroying MCI tooling. Altering MCI tooling. Disposing of MCI service parts tooling Selling products made from MCI tooling to any other customer is not allowed All tooling owned by MCI must be properly identified as Property of MCI (see item 8.2.1) The supplier is responsible to adhere to all legal safety requirements as applicable, and will bear the risk of loss to any MCI tooling while the tooling is in supplier s possession or under its control The supplier is responsible for ensuring that its sub-tier suppliers adhere to the above requirements. 8.2 Definitions Special Tooling (MCI tooling) The following general (not all inclusive) guidelines provide characteristics that MCI typically considers in determining whether tooling and measurement devices are considered special tooling: Specifically designed for an MCI part or product with little or no other application. Life and value are limited to the production and service life of the part(s) which they produce or measure. Directly affect the part they measure or produce including part specific gauges, dies, fixtures, gear cutters, broaches, molds, jigs, etc. Can usually be re-located. Rev. B: Jan 25, 2018 Page 13 of 39

14 May be found between bolster plates of a machine or pieces of equipment (including dies, welding fixtures, sub plates, or automation handling devices) and is not part of the general equipment. Unique computer software required to operate the tooling is considered part of tooling and is also the property of MCI Measurement Systems Any gauges, fixtures, tools, test equipment, etc., required to measure the part/process. Measurement Systems may be general in application and usable for many purposes Parts Any purchased or manufactured component or assembly intended for further manufacture or resale. 8.3 Quotation & Design Tooling Quotation The items in this section must be considered as part of a tooling quotation to MCI unless otherwise specified by MCI. Tooling quotation must include tool description, physical address, expense breakdown, including fixtures, dies, gauging and other costs as well as tooling design (i.e., number of cavities, material, etc.). Capacity of the tool (days/week, shifts/day) must be clearly defined on the quotation. Tool life must be clearly defined on the quotation. Cavity replacement must be clearly defined on the quotation. This should be provided as a per part cost or as a cavity replacement cost. The quotation must specify lead-time breakdowns including design, build, testing and PPAP/FAI submission & approval Supplier's Responsibilities The supplier is responsible for maintaining, repairing, refurbishing, & replacing tooling in production condition at no cost to MCI. The supplier is responsible for properly disposing of the tooling at no cost when directed in writing by MCI. The supplier will keep detailed maintenance records for the tooling. The supplier will make these records available to MCI on request. The supplier will monitor the tool life and performance to ensure that repair, replacement and maintenance, whether or not the responsibility of the supplier, are identified and corrected prior to the time that part quality or production capacity are affected. This will include regular dimensional reviews on specific part characteristics. The supplier agrees to make this data available to MCI on request. Rev. B: Jan 25, 2018 Page 14 of 39

15 The supplier will on a regular basis monitor tool life and advise the MCI supplier representative well in advance when tooling replacement is necessary. The supplier will ensure that sufficient quantities of components will be in supplier s inventory and available to support MCI production prior to and during the time period that the tooling is being refurbished or replaced Tool Design When tooling is designed by the supplier or a 3 rd party, MCI must be provided with electronic and hard copies of the design and all related drawings and specifications upon request Tooling Run-off The supplier must document tooling run-off and pre-production trial quantities in the quotation Measurement System MCI's expectation is that all measurement system devices must be calibrated in accordance with international applicable standards. Gauge tolerances must be defined by SAE/DIN/ISO standards unless agreed to in writing by MCI. The supplier is expected to maintain the integrity of the measurement system and provide reports when required by MCI. 8.4 Invoicing Invoice Amount Supplier invoices should document expenditures for MCI-owned tooling (including a full cost breakdown). In addition, invoices must show the exact physical location by city, town, state or province, and country where the tools will be used in production. Supplier invoices for tooling should reflect the tooling order amount or the actual costs incurred, whichever is less. Any discrepancies should be brought to the attention of the MCI Supplier representative. The measurement system equipment invoice must include complete descriptions of each device. Note: supplier must provide photographs of MCI-owned tooling with all tooling invoices Payment Authorization MCI will authorize payment for tooling and measurement system devices when PPAP/FAI and all other applicable customer requirements (regarding tooling audit) are met, statistical studies are approved, and all photographs received, or as otherwise agreed upon with MCI Bill of Sale The supplier will provide a bill of sale acknowledging payment and ownership of all MCI tooling and measurement systems. 8.5 Tooling Identification & Ownership All tooling and materials which MCI furnishes either directly or indirectly to supplier or which MCI buys from or gives reimbursement to supplier in whole or in Rev. B: Jan 25, 2018 Page 15 of 39

16 part (collectively, MCI s Property ) will be and remain the property of MCI and be held by supplier on a bailment basis. The supplier will sign or authorize MCI to sign on its behalf any documents deemed reasonably necessary by MCI to be filed with federal, state or local officials to record MCI s title and interest in MCI s property. Supplier will not sell, lend, rent, encumber, pledge, lease, transfer or otherwise dispose of MCI s property. Furthermore, the supplier will not assert or permit any person claiming an interest through supplier to assert any claims of ownership to or any other interest in MCI s property The supplier will clearly mark or tag tooling and/or dedicated measurement devices and associated materials, as appropriate, with Property of MCI and asset number (as provided by MCI) The supplier will permanently mark the tooling with the part number, which the tool is intended to produce In the event that directly marking the tool is not practical, an identifying mark will be made and a corresponding record will be maintained that defines the corresponding part number to the mark. This record will be maintained for the life of the program A descriptive breakdown of each of the various components that make up the tooling and/or measurement devices, as well as photographic evidence of the completed tooling and/or measurement devices must be submitted with PPAP/FAI documentation The tooling and/or measurement devices must be stored and handled in a manner to avoid damage and deterioration Any supplier logo or other identifying mark placed in a tool/die that results in a supplier logo on the end part is prohibited unless otherwise approved by MCI in writing. Section #9 Prototypes 9.1 General In most programs prototypes are required to verify the design concepts. All requirements listed below apply to all suppliers who have been issued a prototype order. 9.2 Submission Requirements The following items may be required with each prototype shipment. The specific details are to be defined by the purchasing location: MCI Drawing Include a copy of the approved MCI drawing supplied with the purchase order. If the drawing is not pre-numbered by MCI, number the print to coincide with the dimensional report % dimensional inspection to all print dimensions (except reference and basic dimensions) as required. Rev. B: Jan 25, 2018 Page 16 of 39

17 The sample(s) must be identified appropriately. Part number and revision level must be listed on the print. If no revision level is listed, write N/A. The method of inspection (CMM, Calipers, micrometers, gauges, etc.). All dimensions MUST meet the print specification or have a written and signed deviation by MCI attached (See Section#11 of this manual). MCI must approve the deviation prior to shipment of parts. Out of specification dimensions must be clearly identified. The preferred method would be to highlight the dimension with a note refer to attached MCI approved deviation. Any special requirements, details or deviations should be identified in the comments/remarks section of the inspection report Inspection standards shall be developed and noted for Key Control Characteristics (KCC), special characteristics, critical to quality characteristics, etc. if applicable The shipment of prototype parts may also require the submission of material test results, material certification or any other item specified by the appropriate MCI representative In the event that a prototype part fails due to supplier-responsible design or part quality issue(s), the supplier is expected to pay for all replacement parts and resulting damage to MCI property. 9.3 Prototype Identification All packages shall be labeled accordingly. Labels should be applied on the top and side of the package unless otherwise specified by MCI Each shipped part must have an attached identification tag identifying the part number, engineering change level, and a serial number or lot tracking number. On small parts, such as fasteners, listing wires and similar, this requirement may be waived by the MCI representative. 9.4 Prototype Tooling Unless otherwise specified by the MCI representative, the supplier will retain the prototype tooling at their facility. All prototype tooling paid for by MCI is the property of MCI and will be marked accordingly. The supplier will provide such tooling upon MCI s request. Section #10 Quality Requirements 10.1 General Quality Management System Suppliers are fully responsible for the quality of their products. Rev. B: Jan 25, 2018 Page 17 of 39

18 Suppliers are expected to work in accordance with the requirements described in ISO 9001 and ISO/TS and towards achieving future certification. In the absence of certification, depending on the product, its application, value, and criticality, the MCI quality representative may authorize the acceptance of other evidence of compliance. This may include 2 nd party (MCI) audit or 1 st party (self) assessment to the applicable basic quality requirements. Suppliers are also responsible for assuring their subcontractor s quality systems are approved and are under a controlled system of evaluation and review. These records must be made available for MCI examination when requested. MCI representatives reserve the right to assess and evaluate a supplier s quality system, its facilities and related processes, provided it has been scheduled accordingly. Assessment of supplier s subcontract vendors requires the approval of the MCI supplier representative Plant/Customer Specific Requirements In addition to complying with the quality expectations defined in this section, suppliers must also comply with the additional quality expectations, where applicable, of specific MCI locations or MCI Customers Product Quality Planning General MCI organizes all new product development into projects. Suppliers must have an effective quality planning process capable of supporting these projects. All suppliers are expected to develop and use a detailed plan for the installation and prove-out of a robust production process when the MCI project includes any of these following elements: Safety critical components Complex components (as defined by MCI) Long lead time components New technology A supplier with a history of problems with product launching (as defined by MCI) MCI requires all suppliers to take ownership of and manage their launching processes to assure they are in-sync with MCI requirements. An MCI representative will initiate the planning process with suppliers. However, suppliers have an obligation to establish a cross-functional team to manage their Product Quality Planning Process (APQP or similar). MCI will provide suppliers the initial project timeline. Suppliers will be responsible for keeping their product planning timelines up to date. Suppliers are expected to supply updated copies on frequent intervals or when there is a change that will impact overall program timing. Suppliers are responsible to manage the launching process from their subcontractors and have the records available for review when requested by MCI. Rev. B: Jan 25, 2018 Page 18 of 39

19 Quality Planning Status Reporting During the launch timeline, the suppliers will submit a monthly (or as otherwise agreed) status report to the appropriate MCI representative Review Meetings Once a supplier has been awarded business, the appropriate MCI representative may establish a meeting cadence with the supplier to follow up on quality planning activities Supplier Readiness Assessment General As a verification of the supplier s production readiness, MCI may require a Supplier Readiness Assessment prior to Start of Production (SOP) Sequence of Events MCI determines level of assessment. If required, the supplier conducts self-assessment, completes forms along with supporting documentation, and returns to MCI. MCI may require formal presentation meeting from supplier. MCI and supplier agree on corrective action plan, if required. All temporary and permanent corrective actions must be in place prior to start of series production Supplier Responsibility Complete Check: All equipment and processes must have been verified at documented capacity rates and be ready to run production at the peak quoted capacity rate. Equipment and tooling should be de-bugged and an in-house validation of the process completed. Process capability, operator instructions, and measurement studies must be completed and documented. Operators and support personnel must be trained in the requirements of the current/updated process verification plan, working instructions, equipment, and gauges. Material handling systems, packaging, and routings must be in place. Preventive maintenance and equipment/tool back-up plans. Perform Run-At-Rate (normal production rate) requirements MCI Responsibility MCI representative will make a determination if the assessment will be completed on-site. Become familiar with supplier s manufacturing process. Review self-assessment if completed by supplier. Identify any items not accurately evaluated. Conduct Run-At-Rate (if required). Rev. B: Jan 25, 2018 Page 19 of 39

20 Documentation Significant amounts of documentation can be required for completion of a process assessment. The following is not a complete list. However, it is representative of the types of data that may be required: process risk assessment or PFMEA, Measurement System studies and calibrations, capability studies, special characteristics, process test/control plans, training plans, customer critical features recognition, work instructions, visual aids, inprocess handling, environmental considerations, packaging, shipping process, etc Product Qualification (PPAP/FAI) General This section defines the generic requirements for production part qualification and approval. Unless specifically waived in writing by MCI, all suppliers must submit a Production Part Approval Process (PPAP) or First Article Inspection (FAI) qualification package (documentation) PPAP/FAI requirements As a minimum, FAI or PPAP Level 2 is required to initially qualify a part/process for supplier approval, unless otherwise specified by MCI. Furthermore, a new PPAP/FAI may be requested if there is an extended gap of time since last production (at least 12 months, same part number and no revisions). The PPAP/FAI requires that all features and characteristics on the design specification and control plan be inspected and verified prior to production. Actual measured values shall be recorded as opposed to general statements of conformance or other notations simply indicating acceptance. For PPAP guidance, see AIAG PPAP Manual Production Part Approval Process (available from The supplier is responsible for obtaining the latest revision of the applicable AIAG reference manuals, training and forms if necessary PPAP Elements When required by MCI, the supplier shall submit a more comprehensive PPAP documentation (based on the PPAP Level required) including, but not restricted to, the following items: Design record, change documents, and customer approval (if applicable) Process Flow Diagrams (PFD) Failure Mode and Effect Analysis (FMEA) Measurement Systems Analysis (MSA) Control plan Working Instructions (WI) Process Capability Studies (Cp, Cpk) Material certification and test reports Parts Submission Warrant (PSW) Appearance approval MCI will communicate PPAP level and requirements to suppliers on the PO. Rev. B: Jan 25, 2018 Page 20 of 39

21 Parts for PPAP/FAI have to be produced during a significant production run. Prior to a supplier submitting a PPAP/FAI to MCI, all of it sub-supplier PPAP s/fai s must have been approved by the supplier PPAP/FAI Requirements Waiver Suppliers must gain written approval from the appropriate MCI representative(s) when requesting any variation from the above stated requirements Submission Disposition and Notification There are only two possible outcomes of a supplier PPAP/FAI submission: Approved Parts are fully approved for series production. MCI material control will specify proper delivery and release requirements. Rejected Parts may not be used for series production and tooling purchase orders cannot be paid. Note: In this case, an NCR may be issued against the supplier. For interim approvals see following section (Interim Approval) MCI will notify the supplier when its submission has been approved or rejected. The documented format of notification will be a countersigned Part Submission Warrant (PSW). In some cases, PPAP/FAI approval requires validation testing and signatory approvals from MCI's customer prior to notifying the supplier Interim Approval Suppliers must submit a Supplier Request for Engineering Approval (SREA) in cases where full PPAP/FAI approval cannot be obtained. The reasons for this request may include, but are not limited to: Out of tolerance condition(s) that still make the parts usable without compromising safety or function Incomplete PPAP/FAI submission requirements. If an interim approval is granted, a revised PSW must be re-submitted with appropriate PPAP/FAI documentation before the interim PPAP/FAI expiration date. If an SREA is submitted with an Interim PPAP, both must expire on the same date Re-Qualification To maintain validation that PPAP/FAI documentation matches current process practices and capability, Suppliers may be required to submit PPAP/FAI documents annually, per MCI discretion Shipping and Labeling Instructions Unless otherwise directed by the appropriate MCI representative, suppliers must identify PPAP/FAI accordingly: PPAP/FAI SAMPLE PARTS label below the shipping label as well as the other three sides of the container and ship separate from production parts shipments. Reference MCI plant-specific requirements for further details. Rev. B: Jan 25, 2018 Page 21 of 39

22 10.5 Treatment of Non-Conforming Parts General MCI will immediately notify the supplier if non-conforming material is found. Upon verification that MCI has received non-conforming product from a supplier, MCI will issue a Non-Conformance Report (NCR) or a Defective Material Notification (DMN), based on the MCI site location. Evidence of defect such as digital photos will be provided when possible. A sample of the defect may be sent to the supplier upon request. MCI will issue an NCR/DMN to the supplier regardless of the disposition and/or use of the non-conforming material and improper PPAP/FAI submissions Sorting Activities Upon receiving an NCR/DMN from MCI, suppliers are required to immediately sort 100% of their product, including product at the MCI plant(s), in transit, in warehouses, at the supplier's production facility, etc. This is to ensure that MCI's assembly plants are supplied with enough certified stock to assure no disruptions to production. Material must be marked as certified for the specific defect or defects for the next three shipments unless otherwise directed by MCI. Depending on the continuity of supply situation, the following may occur: High inventory at MCI: The supplier may choose to have product returned or supplier may sort at MCI. Low inventory at MCI: The supplier must come on-site to MCI to sort for defective product. Extremely urgent (possible line down): MCI will take the appropriate action and the supplier will be responsible for all costs incurred. NOTE: Some of MCI s production facilities do not allow sorting of purchased material to take place on-site. Suppliers must make arrangements for transporting non-conforming material from MCI, sorting the material, re-packaging, creating new packing slips with accurate quantities, affixing new bar code labels as needed, and arranging transportation of certified stock back to MCI. MCI will contact the supplier for authorization to return the material at supplier's expense. MCI will not manage supplier sorting using an outside source. Suppliers are responsible for outside sources and should make all arrangements to ship parts between MCI and outside source. The supplier will also be responsible for inspecting and monitoring the quality of sorted parts. Reworked parts must meet specifications. The repairing of parts is not permissible without prior written authorization from MCI. The supplier is responsible for reporting accurate sorting results and to request adjusted defective quantities when appropriate. This can have an impact on the supplier s quality performance. Rev. B: Jan 25, 2018 Page 22 of 39

23 Non-Conformance Response The supplier must respond to an NCR by using the MCI 8-D Problem Solving Form or any other non-conformance report form approved by the appropriate MCI quality personnel. The documentation will be submitted in response to each NCR/DMN, unless otherwise agreed to by the appropriate MCI representative. is the preferred method of response. When notified of an NCR suppliers are expected to react in accordance with the following timeline: 24 hours: quick response: sorting at MCI (supplier or 3 rd party company). 48 hours: Containment actions fully implemented (selection, temporary action in supplier process). 10 working days: root cause analysis done for occurrence & non-detection, permanent corrective action defined and implemented. 20 working days: Effectiveness of permanent corrective action checked and recurrence prevented. If the resolution time lasts longer than 20 days, the supplier must reach an agreement with the MCI representative. MCI representatives could require suppliers to expedite the timeline listed above when special circumstances occur (safety related issues, customer demands, etc.). Approval and Closure The appropriate MCI representative prior to closure of an NCR/DMN must receive, review and agree to a supplier s non-conformance response report. If the supplier s non-conformance report identifies a change to the process or part, the supplier must communicate a timeline for PPAP/FAI submission without impacting production schedules. Supplier may be requested to present its corrective actions on-site or at the MCI facility. MCI reserves the right to verify product conformance to the requirements at the supplier s and its subcontractor s sites. Verification of the implemented corrective action on-site at the supplier may be accomplished during subsequent visits and requires appropriate appointment. MCI may require frequent follow-up meetings with supplier and its subcontractors for critical non-conformances. The MCI representative in charge of the non-conformance will notify closure to the supplier representative only when all corrective actions are completed and verified to be effective Return Material Authorization MCI will request a Return Material Authorization (RMA), also referred as Return to Vendor (RTV) or Return Goods Authorization (RGA), from the supplier that shipped defective material. If no response is provided within 5 working days, the parts will be scrapped at the supplier s expense. Rev. B: Jan 25, 2018 Page 23 of 39

24 Containment Plan MCI may determine that special measures are required to ensure adequate quality and delivery performance. The costs related to these measures, including but not limited to containment plans, will be at the supplier s expense. A containment plan is a requirement by MCI for a supplier to add redundant inspection process for sorting of a specific non-conformance, while implementing a root cause problem-solving process. The redundant inspection is in addition to normal and current controls. Submission of a Containment Log Sheet showing inspection results is required. The data obtained from the redundant inspection process is critical as both a measure of the effectiveness of the inspection process and the corrective actions taken to eliminate the initial non-conformance. MCI will notify the supplier it has been placed on containment for specific part numbers. At a minimum, two levels of containment exist: Level 3 Containment: Level One A quality department employee will check all feature(s) and/ or dimension(s) that had previously been identified as defects from the data provided from MCI. He or she will record on the Level 3 Containment Log Sheet the date, the part number, the number of pieces checked and his or her initials indicating that he or she has verified the part to be correct. Level Two The supervisor will do the same check as above and will record on the Level 3 Containment Log Sheet, the same items indicating that he or she has verified that the quality department employee has done the check correctly and the part is correct. Level Three A shipping department employee will verify prior to shipping that both the above checks have been completed and will record the same items on the Level 3 Containment Log Sheet and will place a sticker on the part or shipping load indicating that all checks have been made and the parts are correct. Level 5 Containment > Level One When the operator makes the part, he or she will check any feature(s) and/ or dimension(s) that had previously been identified as defects from the data provided from MCI. He or she will record on the Level 5 Containment Log Sheet the date, the part number, the number of pieces checked and his or her initials indicating that he or she has verified the part to be correct. > Level Two The team leader or supervisor will do the same check as above and will record on the Level 5 Containment Log Sheet, the same items, indicating that he or she has verified that the operator has done the check correctly and the part is correct. > Level Three A quality department employee will do the same check as above and will record on the Level 5 Containment Log Sheet the same items, Rev. B: Jan 25, 2018 Page 24 of 39

25 indicating that he or she has verified that both Level 1 and Level 2 checks have been done correctly and the part is correct. > Level Four The department head shall do the same check as above and will record on the Level 5 Containment Log Sheet the same items, indicating that he or she has verified that all Level 1, Level 2, and Level 3 checks have been done correctly and the part is correct. > Level Five A shipping department employee will verify that all the above checks have been completed and will record on the Level 5 Containment Log Sheet the same items, and place a sticker on the part or shipping load indicating that all checks have been made and the parts are correct. Other measures may be required if level 5 containment is not effective. Criteria for application for Containment Level 3 or 5: MCI will make the determination whether the supplier can effectively correct the non-conforming material situation through the normal non-conformance response report and isolate MCI or MCI s customer from the problem. One or several of the following issues may be cause for supplier to be considered for implementation of containment: Repeat failure modes for repeat part numbers. Supplier s current controls are not sufficient to ensure conformance to requirements. Duration, quantity, and/or severity of the problem. Supplier performance data (factory events, PPM, on-time delivery, etc.). Major disruptions. Major quality problem in the field affecting customers. A 3rd party or an MCI representative may perform audits. The data obtained from the 3rd party redundant inspection process as well as any audits are critical as both a measure of the effectiveness of the secondary inspection process and the corrective actions taken to eliminate the initial non-conformance. In special cases, containment may be required to be performed outside the supplier s facilities at a facility deemed appropriate by MCI. Exit criteria for Containment Levels 3 or 5: The default exit criteria will be used when no other exit criteria are defined. The default criteria are listed below and must be provided to the MCI representative when requesting removal from Containment: At least 5 production runs (unless otherwise determined by the MCI representative) from the containment activity, and a summary that verifies that normal production controls are effective for controlling the discrepancies identified in the containment activity. The time begins accumulating from the date of implementation of permanent corrective action. Rev. B: Jan 25, 2018 Page 25 of 39

26 Documentation showing the root cause was identified and verified. Usually the non-conformance response reports properly filled out would suffice. Documentation indicating that corrective action was implemented and validated. Documentation indicating that every effort was taken to implement error proofing, when applicable. Copies of Containment Log Sheets. Other information requested by MCI Supplier Development General MCI Supplier Development Engineers (SDE) engage in all critical activities that aim to improve suppliers quality performance and their capabilities to meet short or long-term supply needs. Some of the SDE activities consist of, but are not restricted to: Conduct supplier assessments. Evaluate and review supplier s processes and quality performance. Improve supplier communication. Assist targeted suppliers on continuous improvement projects. Suppliers may be contacted directly by an MCI SDE representative at any time to perform the activities listed above. MCI expects suppliers to accommodate SDE requests as early as possible in their schedule Supplier Assessments New Suppliers Supplier on-site assessments may be conducted by an MCI representative or 3 rd parties at MCI discretion. This assessment includes quality systems and financial risk evaluations. Once assessment is completed and reviewed, MCI will determine whether the candidate supplier has the required quality systems, technical core competencies, financial stability and adequate resources to be awarded new business. Existing Suppliers Depending on the complexity of the product being purchased, low quality performance or other potential risks, MCI may conduct on-site assessments at current suppliers and their subcontractors. Assessment of supplier s subcontract vendors requires presence or full consent from the MCI supplier representative. The SDE will notify supplier about the assessment and assure all required personnel will be available Supplier Responsibility MCI and its customers reserve the right to verify product and process conformance according to the requirements at the supplier's and subcontractor s premises. It is expected that all suppliers support and accommodate MCI assessment requests as early as they are communicated. Rev. B: Jan 25, 2018 Page 26 of 39