Diehl AKO Quality Assurance Agreement and Guidelines for Suppliers. 3.1 Quality Assurance System. 1. Preamble
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1 Diehl AKO Quality Assurance Agreement and Guidelines for Suppliers 1. Preamble In conditions of intensifying competition quality has a constantly increasing value. Therefore the Diehl AKO Stiftung & Co. KG (in further use: Diehl AKO) has targeted to deliver zero-defect quality products to its customers. To achieve this goal it is fundamental for Diehl AKO that its suppliers deliver zero-defect goods as well. For this purpose the parties which have undersigned this agreement ( Parties ) are concluding the following Quality Assurance Agreement ( QAA ), which is in addition and simultaneously valid for orders, deliveries and supplies between and with all affiliated companies of Diehl AKO and the undersigned supplier ( Supplier ) as listed after the signatures of the Parties. This QAA is valid for all products which are delivered by the Supplier (including its affiliated companies) to Diehl AKO (including its affiliated companies) ( Products ). 2. Technical Documents The characteristics to be met by the Supplier are detailed in the order documents. These order documents are: Diehl AKO drawings Diehl AKO order instruction Diehl AKO technical delivery-specification other norms and instructions Only notified and agreed upon or accepted documents shall be binding. 3. Quality Assurance of the Supplier The Supplier has to operate according to a Quality Assurance System based on the series of International Standards (EN ISO 9000, 9001 et seq.). In any case the following is required: 3.1 Quality Assurance System To meet the quality requirements of the Products to be delivered the Supplier shall use an appropriately written, recorded quality assurance system that covers all areas of the supplying company. This requires the naming and definition of persons responsible for all quality assurance measures. The effective realization of the quality assurance measures laid down shall be controlled and this control shall be independent from the person having control of actual production. 3.2 Quality Assurance during Development Stage If the products to be delivered have been developed and constructed by the Supplier himself, he is responsible for the quality of development. This includes: First-sample tests Life-tests FMEA 3.3 Quality Assurance during Acquisition The Supplier shall take measures to guarantee that the Products obtained from his sub-suppliers fulfill the defined quality requirements. This includes sampling and release methods as well as incoming-inspections of the bought OEM-parts. A quality agreement, similar to this QAA should be used between the Supplier and its sub-supplier. 3.4 Quality Assurance during Production The following measures are required before production: Planning and written regulation of the production and test processes required and the appropriate production and test equipment Machinery, process and measuring system capability tests FMEA of production-processes. Page 1 of 6
2 The following measures are required during production: SPC Process-control Further statistical control methods The following quality tests are compulsory to ensure the quality requirements. They are divided into: First-sample test and release Production accompanying tests Product audits Reliability tests (if applicable) The extent of the tests shall be based upon the importance of the particular product characteristics and the possible consequences of any faults. In the case of defects or deviation of quality during any process, faulty units shall be sorted out, the reasons analyzed and measures for improvement introduced and tested for their effectiveness. This shall apply too, if Diehl AKO detects faults and sends faulty units back. In this case, Diehl AKO shall be informed about reasons for failure and remedial measures without delay. The faulty units shall be specially marked to prevent mixing the good Products with faulty Products. Any reworked units shall be fully retested. If the Supplier, exceptionally, wishes to deliver any product which fails to meet the required specification, a special release shall be obtained from Diehl AKO in advance of delivery. Should process defects lead to a delay in delivery, the purchasing department of Diehl AKO shall be informed immediately. 3.5 Testing-Records Records of the results of the quality control, quality tests and measures to eliminate faults, both planned and implemented, shall be kept and retained for a minimum of 10(ten) years. Supplier shall allow Diehl AKO access to these records upon request. In certain cases the regular, constantly up-dated supply of certain test records may be required. 3.6 Dispatch The handling of the products shall not impair quality and shall ensure that damage (e.g. ESD) is avoided. This applies especially for transport, storage, packaging and dispatch. Special Diehl AKO packaging specifications are to be respected. Each packaging unit shall have the following marking: Delivering company Name of component Reference number (Diehl AKO) Quantity Date of manufacture 4. Test Equipment Supplier is responsible for ensuring that all necessary test equipment for the agreed quality control procedures are available. He shall ensure that the measuring equipment used for quality assurance is tested and calibrated at scheduled intervals, to provide the necessary accuracy. 5. Marking of Delivered Products Supplier shall mark the delivered product or, where this is not possible, make sure by other suitable measures, that, after any fault appears, one can identify immediately any other items that could be affected by this fault. Supplier shall inform Diehl AKO about the marking system to allow Diehl AKO to identify batches of Products. 6. Altered Delivery Specification Alterations to the Products to be delivered (new Product, changed Product, altered procedure, use of new or transferred production installations or use of new material) require written information from Supplier towards Diehl AKO describing the modifications including their consequences for all of the parameters of the respective technical specification, the function, functionality and applicability of the Product. Then the following procedural steps take place: Page 2 of 6
3 1. Supplier submits samples of the changed Product together with a first sample test report. 2. Written release of the samples by Diehl AKO. 3. Delivery of the series of the altered Product. The samples shall be produced with nominal serial material and under serial conditions. The quantity of the required samples will be determined in each individual case in co-ordination with Diehl AKO. In the case of multiple moulds, samples from each nest shall be measured and delivered separately. Before the release of the altered samples, current supply with unchanged components must be guaranteed. The changeover at the Supplier shall take place only after release by Diehl AKO.] 7. Rating of Suppliers 7.1 Serial Deliveries To ensure the necessary quality of delivered goods, Diehl AKO divides the suppliers into 3 categories: A-suppliers B-suppliers C-suppliers The minimum acceptable rating is category B supplier. However, category A suppliers are preferred and will expect to receive follow-up orders. The classification is determined by rating the quality of products and service of the supplier. Therefore individual supplier performance ratings of the suppliers 'Technology', 'Quality', 'Commercial' and 'Logistics' are compiled to an overall-result. According to the overall percentage of compliance (x) the suppliers are awarded the following total grading: A-Supplier: 90 % <= x <= 100 % B-Supplier: 70 % <= x < 90 % C- Supplier: x < 70 % 7.2 Supplier Audit The purpose of this audit is to check the effectiveness of the quality assurance actions of Supplier. Supplier will grant the representative of Diehl AKO access to his premises and installations as far as it is necessary to check the effectiveness of the quality assurance elements. The total performance rate of the Supplier audit leads to a special rating which is independent from the above mentioned Supplier performance rating. Rating of the result of the audit: Total Rating Term of rating full compliance A mainly compliant AB conditionally compliant 0-59 not compliant C Should a valid certificate according to the series of International Standards (EN ISO 9000, 9001 et seq.) be presented, Diehl AKO may refrain from checking the supplier's quality management system. 8. Incoming Inspection 8.1 Right for inspection Both Parties shall see each other as a team working together to secure appropriate and effective measures to prevent defects to ensure the best possible quality of the final Product. In order that deliveries may be accepted without being inspected for faults, representatives of Diehl AKO may check products and processes at the Suppliers premises within the scope of audits, where necessary. 8.2 Obligation for Inspection and Complaint B Page 3 of 6
4 Since the quality inspection shall take place only at the Suppliers premises, Diehl AKO will upon reasonable time after receipt of the Products, but not later than delivered Products will be used for production, check only for the identity with the ordered kind of goods, the quantity received and any transport / packaging-damage, which can be recognized from the outside of the package. Diehl AKO is exempted from any additional incoming inspection required by (commercial) law. If faulty / damaged goods are in fact recognized, Diehl AKO will inform the Supplier within reasonable time after detection, but not later than 15 working days after detection. Item family ppm-rate for the lots delivered within the first year of series delivery ppm-rate for the lots delivered from the second year of series delivery onwards 9. Supply Quality 9.1 Parts Per Million (ppm) Requirement If the ppm-requirements are not detailed already in any technical delivery specification of Diehl AKO for a specific Product or agreed upon for a specific Product separately in writing, the following values shall apply for the Products of the respective item family: For each Product and item family the aim of 0 faults remains unaffected by the above mentioned ppm-rates. The rate of failure is calculated as follows: Rate of faults (ppm) = x/n * 10 6 x = quantity of faulty parts rejected by incoming inspection and/or production N = quantity of a delivered single lot. 9.2 Legal Effects If the relevant ppm-requirements according to item 9.1 are not met for any single lot Diehl AKO shall have the right to return the whole lot against credit or free of charge exchange by faulty-free parts. Alternatively, Diehl AKO shall have the right to return only the faulty parts against credit or free of charge exchange. The same will apply, if such ppm-requirements are failed for a lot of production and / or for goods with the same production date. 10. Warranty The Supplier will provide a warranty (for example but not limited to full conformity with the agreed specification, free from third party rights and free from any defects in material and workmanship) for all single items of delivered Products for a period Page 4 of 6
5 of 48 months from the date of the delivery of each of the items of the Products to Diehl AKO ( Warranty Period ). In the event of any failure of any delivered item of the Products recognized during the Warranty Period, other than as a result of Diehl AKO or its customer s or end user s misuse or negligence, the Supplier will provide Diehl AKO a replacement of the respective items free of charge by faulty-free items of the respective Product. If and to the extent the quantity of the faulty items exceeds the ppmrequirements out of Section 9.1 above with respect to the delivered quantity of the last [month / quarter / year] of series delivery of the respective Product before recognition of the failure, the Supplier will (in addition to the above mentioned replacement) pay to Diehl AKO (i) a lump sum of EUR 140,- for each exceeding item returned by a customer of Diehl AKO and / or from field or notified by a customer or an end customer as faulty (such amount covers the costs related to replacement of the faulty item in the production of Diehl AKO s customer and / or in the field); and (ii) the replacement cost of Diehl AKO for each faulty item (including but not limited to the repair or replacement of Diehl AKO s product in which the faulty item delivered by Supplier has been inserted and including rejections from the production line of Diehl AKO).] Supplier will undertake a fault analysis of all items sent back, prepare a fault analysis report and inform Diehl AKO about the cause and degree of all faults noted, along with a statement of the measures taken in relation to the implementation of any resultant findings. 11. General Purchasing Conditions As far as not stipulated otherwise or additionally within this QAA, the General Purchasing Conditions of Diehl AKO in their version, valid at the time being, shall apply in addition to this QAA. The actual version of such General Purchasing Conditions of Diehl AKO is attached hereto as Annex 2. No further general conditions of Diehl AKO or the Supplier will apply to the delivery of the Products under this QAA. 12. Term and Termination This QAA will come into force with its signing by the Parties and has a fixed term until [XXX]. Afterwards the QAA can be terminated by each party [by 6 month notice to the end of a calendar year, firstly with effect of XXX]. The right of each Party to terminate this QAA for cause remains unaffected by its above mentioned term. Any termination notice of any kind and nature of any Party has to be transmitted to the other Party in writing. 13. General Provisions For the avoidance of any doubt it is herewith declared and agreed between the Parties that any single order of Diehl AKO or any of its affiliated companies is and will be placed in the sole name and on behalf of the respective company and will not constitute any duty or obligation of any other of such companies. Should any of the provisions out of this QAA be or become invalid or ineffective, the validity of the remaining provisions shall not be affected thereby. The Parties undertake to replace the provision that is or has become invalid / ineffective by such a valid/effective provision as comes closest in its economic effects to the original provision. The same will apply in case of a lack of this QAA. This QAA including the delivery of Products by the Supplier to Diehl AKO shall be exclusively governed by German Law to the exclusion of the provisions of the Convention on Contracts for the International Sale of Goods (CISG) and to the exclusion of the rules of the conflict of laws. Exclusive place of jurisdiction for all disputes arising out of or in connection with this Agreement shall be Wangen im Allgäu / Germany. Page 5 of 6
6 Wangen, this , this 20 DIEHL AKO Stiftung & Co. KG [Name of Supplier] Pfannerstraße 75 [Street] Wangen im Allgäu [Town] Germany [Country] (name) (name) (name) (name) (function) (function) (function) (function) Simultaneously signed by Diehl AKO in the name and on behalf of its affiliated companies as follows: Diehl Controls Polska Sp.z o.o. Diehl Controls (Nanjing) Co. Ltd. Diehl Controls Mexico SA de CV Simultaneously signed by Supplier in the name and on behalf of its affiliated companies [as follows] [as listed in the Annex hereto] Page 6 of 6 AKO_QS
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