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Vendor Requirements____________________________________________________

Revision 09

TABLE OF CONTENTS

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CONTENTSPage

Section 1Abbreviations1.1 List of abbreviations………………………………………………………………………... 03

Section 2Definitions2.1 Definitions…………………………………………………………………………………… 04

Section 3Vendor Requirements

3.1 Mission statement.………………………………………………………………………… 07

3.2 Vendor requirement’s aim………………………………………………………………… 07

3.3 Supplier code of conduct………………………………………………………….……… 07

3.4 Quality management……………………………………………………………….……… 09

Section 4Declaration 4.1 Declaration of acceptance of Methode’s Vendor Requirements………………..……. 30

Section 1 – Abbreviations


1.1 List of abbreviations

AAR - Appearance Approval Report

AIAG - Automotive Industry Action Group

APQP - Advanced Planning Quality Process

ASN - Advance Shipping Notice

BOH - Business On-Hold

CAD - Compute Aided Design

CBS - Cost Breakdown Structure

CPK - Process Capability Index

DFMEA - Design Failure Mode Effects Analysis

EDI - Electronic Data Interchange

FOT - First-Off Tooling

IMDS - International Material Data System

MSA - Measurement Systems Analysis

OEE - Overall Equipment Effectiveness

OEM - Original Equipment Manufacturer

PFMEA - Process Failure Mode Effects Analysis

PO - Purchase Order

PPAP - Production Part Approval Process

PPM - Parts Per Million

PPK - Parts per Thousand

PSW - Part Submission Warrant

RFQ - Request for Quotation

SPC - Statistical Process Control

STA - Supplier Technical Assistance

SQA - Supplier Quality Assistance

TQM - Total Quality Management

VAVE - Value-Added Value Engineering

Section 2 – Definitions


2.1 Definitions2.1.1 Appearance Approval Report (AAR)

A report submitted to Methode accompanied by the components which have completed fine

tuning on the aesthetic content of product.

Refer to sample in web portal: http://b2b.methode-eur.com.

2.1.2 Bailment

A transfer of possession or custody and not ownership of the item in question.

2.1.3 Buyer

Refers to the Buyer, its’ affiliates, its’ secondary Supplier(s), its’ licensees, and its’ customers

collectively.

2.1.4 Claims

All claims, suits, actions, awards, liabilities, damages, costs, attorney’s fees and other

professional fees shall collectively be known as ‘Claims’.

2.1.5 First off Tooling (FOT)

The first production samples from tooling. Submission supported by dimensional report.


2.1.6 Intellectual property rights

Means any/all:

(a) copyrights, trademarks, and patents;

(b) rights relating to innovations, know-how, trade secrets, and confidential, technical, and

non-technical information;

(c) moral rights, author's rights, and rights of publicity;

(d) other industrial, proprietary and intellectual property-related rights anywhere in the world,

that exist as of the date hereof or hereafter come into existence, and all renewals and

extensions of the foregoing, regardless of whether or not such rights have been

registered with the appropriate authorities in such jurisdictions in accordance with the

relevant legislation.

2.1.7 Original Equipment Manufacturer (OEM)

Refers to the end-customer.


http://b2b.methode-eur.com/


2.1.8 Part Submission Warrant (PSW)

A document issued by Methode indicating the acceptance of product and release tooling for

series production.


2.1.9 Parties

Methode and the Supplier

2.1.10 Product

The ‘Product’ shall refer to any one of the following:

(a) the purchased component resulting from the tooling, and meeting all design and

functional specifications as defined in the component drawings and specifications;

(b) raw material purchased by Methode;

(c) sub-assemblies or Work-in-Progress component.

2.1.11 Product release timing plan

A plan which specifies the tool development milestone dates including but not limited to:

(a) the Critical Design Review;

(b) the FOT;

(c) the submission of the PPAP;

(d) the AAR submission date;

(e) the PSW.

Refer to samples of above documents in web portal: http://b2b.methode-eur.com.

2.1.12 Production Part Approval Process (PPAP)

The process of identifying the components from the final process which are correct to drawing

print (dimensions in tolerance); PPAP Level 3 documentation is submitted along with the

components.


2.1.13 Purchase order

A purchase order is the document issued by Methode to the Supplier that defines what is

needed, in what quantity, when performance is required, and on what terms, including price

and payment terms.


2.1.14 Run@Rate






During the Run at Rate the Supplier’s actual manufacturing process will be assessed to verify

its ability to meet the quality and capacity requirements as contracted.

2.1.15 Shall

Denotes a mandatory requirement.

2.1.16 Supplier

Shall refer to the party (or its designated contractor(s) or agent(s) or authorised

representatives) with whom Methode is signing this contract for the purchased product.

2.1.17 Tooling

Means production equipment including but not limited to forging dyes, gauges, jigs, moulds,

measuring testing equipment, matrices, models, tools, devices, drawings and similar items

required for the production and examination of goods.

Section 3 – Vendor Requirements


http://www.businessdictionary.com/definition/mold.html

http://www.businessdictionary.com/definition/jig.html

http://www.businessdictionary.com/definition/gauge.html

3.1 Mission Statement

As a Supplier itself for automobile manufacturers, Methode’s aim is to be the customer's highest value

Supplier. This objective can only be achieved by striving for perfection in everything that Methode does.

To succeed Methode must seek this same level of commitment to excellence from all of its Suppliers.

3.2 Supplier requirement’s aim

This document is intended to convey and clarify Methode’s expectations and requirements from its

Suppliers, and provides the foundation upon which, as partners we can build the trust and teamwork

necessary to deliver best in class value to our customers, in terms of value for money, service and

delivery.

This document covers Methode’s specific requirements and shall read as an annex to Methode’s

Purchasing Terms and Conditions along with the requirements found in the ISO 9000 or ISO/TS 16949

standards along with the OEM specific requirements. This applies to all raw materials, component

parts, assemblies, sub-contracting and other services provided to Methode Electronics Malta Ltd.

3.3 Supplier code of conduct

Suppliers shall ensure operations are being performed in a manner that is appropriate, as it applies to

their ethical, legal, environmental, and social responsibilities. Below is a listing of the basic

requirements:

3.3.1 Compliance with Local Laws and Regulations

Suppliers must adhere to the laws and regulations in the locality in which they reside. This

includes all local, state, and federal laws/regulations in the country of origin.

3.3.2 Compliance with Environmental, Health, and Safety Laws

The Supplier must maintain and operate its manufacturing/production facilities and processes in

accordance with local, state, and federal laws/regulations in the country of origin.

At no time shall any Methode person be exposed to hazardous materials or unsafe conditions

as a result of Supplier shipments to a Methode location, or while visiting a Supplier’s location.

For items with inherent hazards, safety notices must be clearly visible. As applicable,

documented safety handling and protection information must be provided.


3.3.3 Product Safety

In all instances where a product is manufactured to a new design, for a new system, or for a

new application, it is important that Supplier and Methode allocate responsibility for assuring

that all performance, endurance, maintenance, safety and warning requirements are met. It is

preferred that this allocation of responsibility be in writing.

3.3.4 Non-Discrimination

Suppliers shall not discriminate against race, color, sex, religion, age, physical disability, political

affiliation, or other defining characteristics as prohibited by local, state, and federal

laws/regulations in the country of origin.

3.3.5 Labor3.3.5.1 Child Labor

Suppliers shall employ workers of minimum legal age in accordance with local, state, and

federal laws/regulations in the country of origin. Child labor laws must be followed.

3.3.5.2 Forced/Indentured Labor

Suppliers shall not practice the use of forced or indentured labor.

3.3.5.3 Work Hours/Days

Suppliers shall not exceed the daily and weekly working hours as permitted by local, state, and

federal laws/regulations in the country of origin.

3.3.5.4 Wages and Benefits

Suppliers shall compensate workers in accordance with local, state, and federal

laws/regulations in the country of origin. This includes minimum legal wage, overtime wages,

and benefits (required by law).

3.3.6 EthicsEvidence of corruption, bribes, improper advantage, or any other form of illegal practice by the

Supplier or associated operations will terminate all relations with Methode.

3.3.7 Code of Conduct and Policy EnforcementThis policy applies to Suppliers and their sub-tier sources. It is the responsibility of the Supplier

to verify and monitor compliance of this code at their operations and sub-tier source operations.


3.4 Quality Management

Suppliers are expected to implement and operate a total quality management system that ensures that

only defect free products are produced and delivered to Methode. Unless otherwise waived during a

Supplier Technical Feasibility Commitment [STFC], the quality acceptance criteria shall be Zero ppm.

Suppliers are required to be registered to one of the following Quality Management Systems:

a) ISO 9001:2008 (minimum registration).

b) ISO/TS 16949:2009 (conformity recommended, registration preferred).

It is the supplier’s responsibility to ensure current copies of upgraded or renewed certifications are

forwarded to Methode Supplier Development. Suppliers must assume full responsibility for the quality of

their products and services.

3.4.1 DocumentationMethode documentation is available on the web portal under supplier information section –

http://b2b.methode-eur.com.

Key documents are explained further-on in this manual. PPAP documentation in Supplier

which is different from the layout proposed by Methode, will be accepted upon agreement.

3.4.2 Regulatory ComplianceMethode suppliers shall comply with all applicable governmental and legislative regulations.

These may relate to Health & Safety, Environmental Protection, Toxic and Hazardous

Materials, Import / Export Regulations and Free Trade. Suppliers are duty bound to recognise

that additional government regulations might apply in the country of sale / end use as well as

the country of manufacture.

3.4.3 Environmental RequirementsProtection to our Environment, land, water and air can only be achieved through joint efforts

of Industry, Governments and the Society in General. Methode Electronics Inc. is committed

to continually improve our environmental performance. We strive to improve our processes in

the choice and use of raw materials, energy, water and other goods and eventually their

disposal. This means that together with our supply base our focus shall be to reduce any

impact on the Environment to the minimum. Therefore we expect from our suppliers to be

actively engaged in environmental concerns and adopt an environmental management

system as per ISO 14001 or equivalent standard. Registration to ISO 14001 is strongly

recommended and a plan to achieve this is required.



3.4.4 ELV/IMDS – End of Vehicle Life / International material databaseThe End-of-Life Vehicle (ELV) Directive, 2000/53/EC, was enacted by the European

Commission to minimise the impact of end-of-life vehicles on the environment. The use of

lead, mercury, cadmium and hexavalent chromium are prohibited in vehicles and their

component, with the exception of certain exemptions as stipulated in Annex II of the

Directive. This is a mandated requirement for the European Union (EU) Member States and

also required by North American and Japanese vehicle manufactures. All suppliers in all

regions shall ensure that all components and materials supplied to Methode comply with the

above requirement.

To this effect, all automotive suppliers are required to report information on materials within

their respective components on the International Material Data System (IMDS). Suppliers are

required to submit the required EL/IMDS data to Methode as soon as possible upon award of

a new business, but in any case prior to the respective PPAP submission. As part of the

PPAP submission the suppliers shall provide confirmation to Methode’s acceptance of the

ELV/IMDS data, by including the respective reference number from the international

database. Suppliers are responsible to submit the respective ELV data by direct entry into

IMDS via the Internet (www.mdsystem.com)

3.4.5 PackagingThe European Packaging and Packaging waste directive 94/62/EC covers all packaging

placed on the EU market and restricts the presence of heavy metals in packaging. Supplier

shall ensure that all packaging material used complies with this directive.

3.4.6 REACH ComplianceMethode Suppliers shall be responsible for ensuring that all REACH legislation requirements

are met for the product/s supplied and through the complete upstream supply chain for all

sub-suppliers in accordance with REACH Regulation (EC) No. 1907/2006. This also applies

to substances that were registered in accordance with Directive 67/548/EEC (registration of

new substances). Supplies are governed by the last applicable versions in each case of

Directive (EC) No. 1907/2006.

Suppliers have the legal responsibility to inform Methode about the presence of any

substances of a very high concern (SVHCs) and are requested to update information about

parts and materials delivered, following any update of the candidate list, twice a year when

required (http://echa.europa.eu/candidate-list-table). If SVHC’s are present in the supplied


http://echa.europa.eu/candidate-list-table

http://www.mdsystem.com/

product but they are not banned by these or subsequent directives, the supplier is still

required to submit an action plan and timing to eliminate them.

Supplier of chemicals must classify, label and package the substances and mixtures in

accordance with the CLP Regulation (EC) No 1272/2008.

3.4.7 RoHS ComplianceThe RoHS directive (2011/65/EU) restricts the use of certain hazardous substances, in the

manufacturing of electrical and electronic equipment. Methode suppliers shall ensure that the

presence of these substances do not exceed the permitted concentration in non-exempt

products. This directive restrict the presence of lead, mercury, cadmium, hexavalent

chromium, polybrominated biphenyl, polybrominated diphenyl ether, with a maximum

concentration of 0.1% (except for cadmium, limited to 0.01%) by weight.

3.4.8 Restricted SubstancesSuppliers are responsible to ensure that all materials that are used in part manufacture,

satisfy current applicable legislation, regulations, customer or government and safety

constraints on restricted, toxic and hazardous materials as well as environmental, electrical

and electromagnetic considerations applicable to the country of manufacture and sale. All

suppliers and sub suppliers shall use the industry reporting standard, International Material

Data System (IMDS).’’

3.4.9 Supplier response and pro-activenessSuppliers are expected to reply to Methode general enquiries promptly and accurately.

Furthermore, the Supplier shall assume a proactive approach and inform Methode well in

advance of any setbacks falling short of agreed targets. Procedures to follow and applicable

documents will be explained further-on in this manual.

3.4.10 CommunicationAll communication between both parties and documents applied as part of this contract shall

be in the English language. The Supplier shall submit and maintain on a yearly basis a

Supplier Contact Persons List including but not limited to the names of the Operations and

Quality Managers and anyone to be contacted after normal working hours


3.4.11 Service and Supply Chain Management All Suppliers must meet 100% on time delivery on all supplied products.

Schedules are communicated through ‘Web EDI’ or ‘Traditional EDI’. The Supplier shall

create ASN’s including labels as approved by Methode.

Suppliers are expected to ensure the quality and capacity of material and component parts of

their sub-Suppliers.

3.4.12 Resident EngineerSuppliers whose annual turnover with Methode exceeds €5M are required to appoint an

engineer who will be allocated for Methode.

3.4.13 Supplier Classification List When quoting for business, Methode buying team is restricted to request quotations from a

list of ‘approved’ Suppliers. A Supplier will be introduced in this list after an assessment and

qualification process is followed.

3.4.14 Qualification processThe qualification process for first-time Suppliers’ assessment can be referred to in the web

portal: http://b2b.methode-eur.com.

3.4.15 Pre-Sourcing Requirements When submitting an offer in response to a Request for quotation (RFQ), Suppliers are

requested to compile a package consisting of:

(a) Cost Breakdown Sheet

(b) STFC – A document in which a Supplier is accepting commitment to produce the product

at the price quoted on the Cost Breakdown Sheet. Supplier is encouraged to identify any

specification that cannot be met / technical improvement and highlight this on the STFC.

Supplier must also commit that Methode`s maximum weekly demand can be met. A

quote is not valid and business shall not be awarded if STFC document is not received;

and accepted by Methode. The STFC document is available on the company website in

the web portal under supplier information section – http://b2b.methode-eur.com.

(c) Supplier Packaging Data sheet (SPDS) – Packaging proposal by Supplier designed to

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document must be completed and sent to Methode within three (3) working days from

receipt of this document. This package must be completed and returned to Methode

category buyer.

The SPDS and packaging guidelines are available on the web portal under supplier

information section – http://b2b.methode-eur.com.

3.4.16 Post-sourcing requirementsNominated Suppliers are required to satisfy Advanced Product Quality Planning (APQP)

activities on all new products and major re-designs of existing products. The guide to be

used in this process is the “Advanced Product Quality Planning and Control Plan” reference

manual published by the Automotive Industry Action Group (AIAG), and all associated

customer specific requirements.

The key requirements are:

a) Participation in Design Reviews and compiling changes agreed on Methode Design

review document.

b) Follow APQP with respective Methode STA and buyer on a weekly basis.

c) Submit and maintain DFMEA (where applicable).

d) Submit and maintain Process Flow, PFMEA and Process Quality Control Plan(s).

e) Conduct and provide Measurement System Analysis / Gauge Reviews

f) Complete a Launch Readiness Review.

g) Fulfill all PPAP (AIAG Level 3) requirements, prior to delivery of pilot production.

h) Conduct a Capacity Analysis Report (OEE + Run@Rate)

The conclusion of each APQP phase must be documented. Methode STA may conduct

audits at specific intervals to review the Supplier’s APQP activities Periodic reporting

(weekly basis) is required using the APQP Status Report as per Methode format or OEM

format if specifically required by end customer.

3.4.17 Sourcing requirements for manufactured components

3.4.17.1 Approving Parts for Production

Once business is awarded, a timing plan defining milestones is set. This should define

clearly FOT, IMDS and PPAP submission dates. These dates are to be considered as major

milestones; hence these must be realistic, achievable and jointly established.

3.4.17.2 First Off Samples



First-of-Samples delivered by the Supplier from a controlled process must be accompanied

with the Interim PSW and the Initial Sample report – including dimensions, except

references.

3.4.17.3 IMDS – International Material Data System

The Supplier must fill the IMDS report. PPAP release shall not be granted unless the

information submitted is complete and accurate. IMDS registration is to be submitted at a

date which is to be mutually agreed between both parties during the design review and is

tracked as an APQP milestone. Instructions are shown in the web portal under supplier

information section: http://b2b.methode-eur.com.

3.4.17.4 PPAP – Production Part Approval Process

The inspection and evaluation of PPAP samples shall be conducted in accordance to AIAG

PPAP manual or ISO/ TS16949 requirements. Unless otherwise specified, the submission is

to conform to Level 3, whereby the sampled parts shall be presented with the accompanying

set of documentation.

3.4.17.5 Documentation

A checklist of documentation required to be presented at PPAP is on the web portal under

supplier information section – http://b2b.methode-eur.com.

3.4.17.6 Submission of PPAP documentation

PPAP documentation package needs to be submitted in electronic format to Methode. A

signed (hard copy) PSW front sheet shall accompany the PPAP samples package. When

presenting the PPAP, the Supplier is required to highlight products’ non-conformities and

indicate the necessary time-frame to conform to specifications. A revised PPAP waiver to

this clause is only accepted by written Supplier’s request and should be approved by

Methode.

3.4.17.7 Deliveries of PPAP samples

Supplier’s deliveries of PPAP samples which are quality inspected by Methode and which do

not comply with the set specifications will be rejected by Methode. Upon notification by

Methode, the Supplier has to correct the non-conformities and re-submit PPAP package

(PSW front sheet, any documentation which is affected by correction, and corrected

samples) and re-submission from the Supplier is expected within five (5) working days.

3.4.17.8 Approval of PPAP




PPAP release is granted when components have attained the required specifications and

the PPAP documentation package is approved. Methode shall rely on the Supplier’s data to

approve PPAP. The accuracy of data submitted in the PPAP is the sole responsibility of the

Supplier. Methode reserves the right to instruct the Supplier to investigate and rectify data

errors.

3.4.17.9 PSW – Part Submission Warrant

Document is to include all details of submission. Relevant data details such as IMDS

registration document and Run @ Rate document need to be made available upon request.

Refer to sample in web portal under supplier information section: http://b2b.methode-eur.com.

3.4.18 Filling of forms and reports3.4.18.1 ISIR – Dimensional results

When parts are produced from tooling having multiple cavities, measurement report shall be

carried out on one full shot. The same parts used for the measurement report are to be

marked as ‘PPAP samples’ and submitted to Methode as part of the PPAP package.

3.4.18.2 PFMEA – Process Failure Mode Effect Analysis

Process FMEA should address all the potential failure modes which in the Supplier’s

experience are considered as critical. Moreover, the PFMEA has to address also those

product characteristics indicated in the MEM drawing as being design critical. These are

indicated with the SC or symbol.

A risk priority number has to be scored for each of the mentioned failure modes according to

the AIAG FMEA manual. Failure modes with an RPN >100 have to be reconsidered by both

parties’ teams or further action should be taken. Severity, Occurrence and Detection

rankings are to be classified as shown in the web portal under supplier information section:


Unless specifically directed otherwise by the OEM, the below guidelines are to be used for

PFMEA and these shall be reviewed when changes have a direct effect on the

manufactured component or the manufacturing process itself.

3.4.18.3 PPAP Samples

A batch of parts needs to be submitted for approval. The samples which were measured for

PPAP shall be clearly identified and submitted to Methode accompanied by the front sheet

PSW. Qualification samples are to be from production tooling and process must be taken

from a significant production run. Typically the production run should be from one hour to

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order stage (minimum of 300 consecutive parts).The package containing PPAP parts &

documentation shall be clearly labelled as PPAP SAMPLES.

3.4.18.4 Master Samples

Where applicable, once PPAP approval has been granted, master samples are to be

established with the Supplier retaining one and Methode retaining the other. These master

samples shall be used for comparison purposes and to verify part attributes at time of

sample approval when deemed necessary. Any deviation in visual appearance of production

parts from the original master samples shall be deemed unacceptable.

3.4.18.5 Control Plan

The Supplier shall submit a copy of his control plan, defining in detail product and process

control, methods of measurement, reaction plan and corrective actions. Reaction plans

should define the actions planned for inspecting, repairing and replacement of tooling to

ensure the consistent capability of the production process tools throughout the project

lifetime.

3.4.18.4 Measurement systems analysis (ISO/TS 16949 cl. 7.6.1)

Gauges used for checking Methode components need to be specified on the control plan

and shall have a gauge R&R performed in accordance with the appropriate methods

described by the latest AIAG Measurement Systems Analysis Manual (MSA) to determine

measurement capability. Any measurement equipment not meeting the specifications

stipulated in the MSA shall be approved by Methode. Effective attribute gauge study

samples include parts within specification and parts outside specification for each criterion

being measured and within the expected range of manufacturing variability.

3.4.18.5 AAR – Appearance Approval Report

Appearance approval report is to be compiled whenever components being acquired are

aesthetical to the end customer. This report is to be related to the samples submitted with

the PPAP package.

3.4.18.6 CAR - Capacity Analysis Report (OEE + Run@Rate)

A Capacity Analysis Report shall be filled in to demonstrate available machine capacity to

meet both Methode`s Average and Maximum (+20%) weekly demands. The actual


Run@Rate must me filled up during PPAP, which shall be part of a production run of

minimum 4 hour representing the production process being released.

A yearly CAR shall be requested to reconfirm capacity and in the event of a customer

volume uplift. The number of good quality parts produced during these runs shall be stated

on the PSW as rate/ hour.

3.4.19 SPC – Statistical Process Control3.4.19.1 As part of the PPAP qualification, a short run capability study shall be carried out on all the

checking characteristics indicated with the SC or symbol on the Methode drawing. During

design review, the Supplier must confirm with Methode, the method of control of these

characteristics.

3.4.19.2 Unless otherwise specified on OEM requirements or mutually agreed during a design

review, the Supplier shall prove and report a short run capability of Ppk 1.67. Additional

characteristics generated from the PFMEA should also be identified in the Supplier’s Control

Plan. These shall be identified by the symbols as shown in table 2, and the method of

control should be verified at least at PPAP stage by a process capability study.

3.4.19.3 For those characteristics/features resulting in a Ppk less than required, the Supplier must

create an action plan with necessary process improvements.

3.4.19.4 Once parts are released for production, Supplier must prove and maintain his process with

minimum controlled variance. The target for a long term capability study should report a Cpk

1.33 or as specified by OEM requirements.

3.4.19.5 This data which shall be part of the ‘Annual Re-qualification PPAP’ is to be readily

available for review by customer upon request.

3.4.20 PPAP release 3.4.20.1 Once PPAP package (documents and samples) are received and evaluated, Methode STA

will contact the Supplier and inform him about the PPAP status. Status will be documented

through PSW that will be signed and submitted to the Supplier.

3.4.20.2 PPAP rejection

A rejection is notified through a PSW which will be sent to the Supplier by the Methode STA.

No release shall be issued unless complete documentation is in place. Documentation


includes the packing method of the parts being submitted (Supplier Packaging Data Sheet)

and tooling data (Tool Data sheet) – where applicable.

3.4.20.3 Payment to the Supplier will be withheld if PPAP is not released. Payment of tooling will be

paid once the part is fully approved by Methode, tool data sheet signed-off and CAD data

available from the Supplier. Failure to achieve PPAP release within a stipulated time frame

shall be penalized as follows:

(a) late PPAP release is charged at €15 per day elapsed;

(b) the cost of an audit, including travel, accommodation and expenses should the

situation warrant Methode’s presence at the Supplier’s premises;

(c) OEM debiting if customer milestones are affected.

3.4.20.4 It is important to note that PPAP release date affects directly laboratory testing, OEM

milestones, and final customer release which apart from cost impact also on Methode’s

reputation.

3.4.21 Document control and engineering changes 3.4.21.1 Document control

The Supplier is responsible to produce materials according to drawings or/and specifications

by Methode. The Supplier shall set up and follow an effective procedure to control

drawings, documents and specifications. This shall be in compliance with ISO TS

16949:2009, section 4.2.3.

3.4.21.2 Engineering change notices

Changes requested by OEM/Methode. With every change/modification requested, being a

specification or a drawing, Methode shall send a revised set of documents to the Supplier.

Since the Supplier is responsible to meet all print specification requirements, any questions

pertaining to the new requirements must be resolved in a design review prior accepting and

implementing the change. Written mutual agreements shall be documented on a design

review document.

The request shall be accompanied by the appropriate drawings and/or specifications.

Should the availability of updated drawings be untimely, the Supplier may proceed with the

requested change, provided that a marked, signed and dated drawing is received.

3.4.21.3 Changes requested by Supplier


During design review (at initial stage of a project), the Supplier is requested to highlight all

changes that could be of detriment to the final product. Once in production, a Supplier is

encouraged to ask for a design/process change deemed necessary to:

(a) enhance process capabilities/reliability/control;

(b) improve part design;

(c) Decrease cost.

For each of the following requested changes, an approval from Methode is required:

(d) new subcontractor engaged by the Supplier to manufacture Methode’s components;

(e) significant change to the manufacturing process;

(f) relocations of existing tools/manufacturing process;

(g) new tooling/modifications in existing tool;

(h) Change in product design.

Refer to MB35 form in Supplier web portal under supplier information section:


3.4.21.4 Engineering changes

If a design/process change is required by the Supplier, the following procedure should be

followed:

(a) The Supplier shall fill in the Supplier Request for Design/Process Change Form, attach

all relevant details and send them to Methode;

(b) Methode will present the documented request to the change notice team and the

change is discussed. Details such as need of customer approval, testing, benefits and

risk assessment are looked into. If the team agrees that the change is appropriate, a

change notice is processed for execution and the Supplier informed accordingly;

(c) The Supplier has to inform Methode of the date when the change will be completed;

(d) The Supplier shall submit the samples from modified process/design to Methode STA

for approval.

PPAP submission is needed to qualify the change. The level of documentation required is to

be discussed and agreed at initial stage of the process. Methode will not accept any

deliveries of the modified product unless PPAP sample approval has been granted by

Methode.



The modified product must be clearly identified when packed for delivery to Methode such

that it is distinguished from previous products delivered. PPAP submission components and

the first three consignments after change-release are to be clearly marked with a label

reading ‘Components modified according to CN No.’. An identification label shall be affixed

to each box delivered.

3.4.21.5 Electronics components

In the event of obsolescence of components the Supplier shall inform Methode six ( 6)

months in advance for passive components (resistors, capacitors, etc.) and twelve (12)

months in advance for dedicated components (ICs, LEDs, etc.). Any changes shall follow

the same engineering procedure explained above.

3.4.21.6 VAVE

Methode’s understanding towards VAVE is not just reducing cost. This process is

considered as rediscovering the product to improve its functionality, durability, reliability,

manufacturability and cost. Value is defined as the ratio of function to cost. Value adding

may therefore be increased by either improving function or reducing cost.

The Supplier is requested to highlight any changes deemed necessary to achieve the above

stated improvements. Basic functions must be preserved. These improvements shall lead to

mutual benefits to Methode and its Suppliers by:

(a) Increasing product competitiveness;

(b) Decreasing unnecessary costs.

Such improvements are to be communicated through a Supplier Request for Design/

Process Change Form which shall be submitted to Methode.

3.4.22 Concern management3.4.22.1 Production issues

The organization shall have processes and systems in place to prevent delivery of non-

conforming products to Methode. If a non-conformance to specification occurs, and these

are determined to be significant in nature, a concern report will be initiated and sent to the

Supplier. In urgent cases a Supplier may be contacted by phone in order to start immediate

actions. A formal concern report will follow.

Methode expects immediate Supplier reaction. Within twenty-four (24) hours an 8D report is

to be initiated, completed up to section D3 and submitted to Methode’s SQA. A reasonable

time-frame for robust closure of the report is to be agreed with Methode’s SQA.G-MB 03c Retention period: End of life + min 15 yrs Page 20 of 31


(a) D1 – Identify contact person

Depending on the issue, this may require formation of a cross-functional team;

(b) D2 – Definition of problem

This shall clearly identify the reason for rejection. The Supplier shall restate the issues

and a team should be composed with persons directly related to the problem definition;

(c) D3 – Identify immediate corrective actions

This should include the actions being taken by the Supplier to rectify the problem in the

short-term.

3.4.22.2 The Supplier shall take immediate action to quarantine and evaluate the defected products’

inventory (production line, in-house stock, components in transit, and stock at Methode).

The Supplier has to immediately contact Methode’s SQA to discuss any product disposal.

Defected products stocked at Methode shall:

(a) The re-work and sorting process (if applicable) will be outsourced to a local

company. In this case, Methode will introduce the local sub-contractor to the

Supplier and there will be direct collaboration between the Supplier and the

subcontractor to sort the defected products;

(b) Methode will apply the rate of €14 p/hr. for any sorting/re-work done in-house. The

Supplier will be responsible for the sorting and all defective components will count

for Ppm;

(c) Replacement of stock. The Supplier to determine if stock at Methode shall be

returned or scrapped at Supplier’s cost. Should this option be chosen, the Supplier

has to ensure that an adequate stock level of products is available on time to keep

an uninterrupted production undertaken by Methode.

3.4.22.3 Should the Supplier fail to communicate within twenty-four (24) hours with Methode’s SQA

when defects are noticed, the costs incurred due to this rejection will be considered

accepted by the Supplier. Any suspect components identified by Methode that can

potentially be used for production, Methode will sort the components applying the rate of

€14 per hour. If components cannot be used, all commercial losses will be debited to the

Supplier – refer to debiting guidelines section 3.3.19.

3.4.22.4 Once the concern form is raised, the deliveries need to be certified and clearly identified

until D8 with permanent corrective action is received and accepted. The Supplier should

inform Methode in advance of the method applied to identify the sorted stock.


3.4.23 Report closuresClosure of report is defined once report is completed from section D4 to section D8,

submitted to Methode’s SQA and accepted as indicated below:

(a) D4 – Define root cause

This section should include the analysis carried out by the Supplier to determine the root

cause of the problem. Evidence of analytical tools shall be included to confirm that all

potential causes were looked into. To verify the root cause the Supplier shall make trials

to switch the problem on and off;

(b) D5 – Identify and implement corrective action/s

This shall describe the remedial corrective action/s addressing the root cause that will

prelude reoccurrence. Such corrective action should be implemented in a reasonable

time-frame which shall be agreed to by Methode;

(c) D6 – Verify effectiveness of long-term corrective action the Supplier is committed to

ensure that actions taken are effective. Process changes shall be audited and data shall

be documented. Preferably when implementing a corrective action, the Supplier shall

take a preventive rather than a detection approach. If the chosen solution needs to be

monitored, a set of criteria for monitoring shall be identified;

(d) D7 – Measures to prevent reoccurrence

Documentation and procedures shall be updated accordingly. Where applicable, details

of process audits, line trials, updated documentation and evidence of improved process

should be attached with 8D report and forwarded to Methode STA;

(e) D8 – Team and individual recognition

Once report is received and accepted by Methode, the Supplier shall clearly mark the

first three shipments with a label reading: ‘certified according to concern no.....’. If stock

is not identified, Methode shall assume that these components were produced by an

unmodified process and will sort at Supplier’s expense.

3.4.24 Temporary concession3.4.24.1 If a Supplier detects a part that is non-conforming but is fit for use by Methode without

repercussions, the Supplier may make a request to Methode for a temporary

concession. The Supplier shall complete the Supplier Concession Form and submit it to

Methode’s STA. All relevant assessment documents backing the use of these

components and a detailed corrective action plan describing actions to prevent

recurrence need to be attached. The form should be completed, well in advance of

products’ delivery.


3.4.24.2 If a concession is granted, the Supplier must abide by the conditions and limitations

specifically stated in the concession. Any additional costs incurred by Methode due to

special processing, handling, validation or customer penalties caused by the use of this

product shall be debited to the Supplier.

3.4.24.3 Products delivered to Methode covered by a concession form shall be clearly identified

by the concession reference number.

3.4.25 Debiting guidelines3.4.25.1 Debiting details

It is the responsibility of the Supplier to deliver the products to the agreed quality

standards, meeting all specifications in a timely manner. Failure to achieve the above

shall be debited as follows:

(a) Cost of product returned to the Supplier or scrapped by Methode. In both cases a debit

note will be issued;

(b) freight costs of product transported from the Supplier to Methode and/or transport from

Methode to the OEM;

(c) Methode’s production line shut-down at an hourly rate of €250 or overtime costs incurred

to make up for the lost production in order to meet the OEM’s milestones;

(d) administration charge of €120 for each failure;

(e) Sorting costs at an hourly rate of €14.

This is only applicable if:

Supplier opts that Methode sort the stock at its expense;

Supplier does not reply to a concern within the stipulated time-frame. In such

case Methode will sort the stock at Supplier’s cost.

3.4.26 Non-compliance 3.4.26.1 In case a non-compliance affects the OEM, Methode will debit the Supplier as follows:

(a) cost of travelling (transport and accommodation) should Methode’s STA be required at

Supplier’s premises to aid in resolving the issue;

(b) Costs of travelling (transport and accommodation) should Methode’s representative be

required to travel to the OEM to contain the non-conformity. The amount being debited

shall be commercially proven;

(c) Customer debiting. The amount being debited shall be commercially proven.


3.4.26.2 Debiting will also be affected if the Supplier fails to achieve PPAP release within a

stipulated time-frame.

3.4.26.3 The supplier shall consent in writing within forty-eight (48) hours of being notified that the

amount charged is correct and justified. Once agreement is reached, the debit note shall

be issued. No response within the established time-frame will be considered as an

acceptance of the charges by the Supplier.

3.4.26.4 If a disagreement between both parties is registered, on either the justification of the

charge or the quantity charged, the issue shall be resolved by arbitration.

3.4.27 Supplier’s quality evaluation process 3.4.27.1 Suppliers’ quality evaluation weighting system

Data related to the Supplier performance specifically related to its quality standards is

evaluated through a web-based system managed by Methode’s Supplier Development

Department. The Supplier’s evaluation weighting system is based on a set of criteria

and which can be referred to in the Supplier web portal: http://b2b.methode-eur.com.

3.4.27.2 A score card is issued at end of every quarter and sent to key Suppliers irrespective of

the rating score. If a Supplier needs clarification, Methode’s STA shall be contacted and

details in score card can be referred to in the web portal: http://b2b.methode-eur.com.

3.4.27.3 The Supplier’s quality performance will be rated as follows:

o Scoring > 90 – ‘A’ rating

o Scoring > 80 – ‘B’ rating

o Scoring > 60 – ‘C’ rating

o Scoring < 60 – BOH

3.4.27.4 An ‘A’ status gives a Supplier increased opportunity to quote for new business over a ‘B’

rated Supplier. ‘C’ rated Suppliers will be asked to submit a corrective action plan which

shall be listing all actions so as to ensure that the deficiencies leading to negative rating

will not be repeated. This shall be reviewed and accepted by Methode’s STA. Unless this

plan is received and accepted, a ‘C’ rated Supplier shall not be allowed by Methode to

quote for new business. Failure to submit a corrective action plan will lead to further

penalization in the next quarter.

3.4.28 Non-performing Suppliers




3.4.28.1 Suppliers on a BOH status will be requested to submit a corrective action plan. The

Supplier will be placed under a probationary status and will not be eligible to quote for

further business until the next quarter of the financial year. A Supplier improvement plan

may be developed with the Supplier in order to improve its’ overall performance. If

deemed necessary, Methode’s STA shall carry-out an audit at the Supplier’s premises to

assess issues related to quality and/or delivery.

3.4.28.2 The Supplier shall only be re-instated in Methode’s Suppliers’ Approval List if the

remedial corrective actions have been implemented and a score in excess of 80% is

achieved by the next quarterly assessment.

3.4.28.3 If a Supplier is ‘C’ rated for more than one quarter, a procedure is applied to downgrade

the Supplier. This procedure can be referred to in the web portal under supplier

information section: http://b2b.methode-eur.com.

3.4.28.4 Performance results will be investigated and if deemed necessary, the following actions

shall be taken:

(a) Methode’s STA undertakes an audit at Supplier’s premises.

(b) A Supplier’s representative will be requested to visit Methode to present the

corrective action plan.

(c) A Supplier improvement plan is kicked-off. Targets and actions will be set by

Methode using a step down chart and the Supplier has to follow and manage the

agreed improvement plans.

Failure to comply with these corrective actions shall lead to the Supplier being excluded

from Methode’s Suppliers’ List.

3.4.29 Quoting and purchase orders procedures 3.4.29.1 The supply of products by the Supplier is authorised by Methode through a purchase

order under the terms and conditions of this contract.

3.4.29.2 Global competitive pricing is essential for a sustained Supplier relationship and thus

Suppliers are expected to have a continuous improvement programme in place to

manage costs and to ensure that price stability and improvements are achieved through

the product life cycle.



3.4.29.3 At quoting stage the Supplier shall be requested to submit its offer by completing the Cost

Breakdown Sheet. A five year price plan is to be presented achieving 3% x 4 year’s

reductions at the beginning of each MEM Fiscal year.

3.4.29.4 The Supplier shall quote in the currency as requested by Methode. When not specified,

all Suppliers in the European region are to quote in EURO (€) and non-European

Suppliers shall quote in USD ($).

3.4.29.5 At final negotiation stage the short-listed Supplier shall present a complete piece price

and tooling breakdown, together with a completed Supplier Technical Feasibility

Commitment, thus ensuring part can be manufactured according to Methode drawing.

3.4.29.6 Methode’s minimum payment credit terms policy is ninety (90) days (starting at end-of-

month from date of invoice) for the products supplied.

3.4.29.7 Unless otherwise agreed, Suppliers will be paid for tooling costs in full on PPAP release.

PPAP will not be released unless all tooling data is submitted to Methode – CAD data and

filled-in Tool Data sheet.

3.4.30 Consignment Stock3.4.30.1 Vendors whose annual turnover with Methode exceeds EUR 60,000 are required to

provide Methode with consignment stock. Methode’s standard terms can be reviewed

from “Consignment Agreement Draft” which is subject to negotiation between respective

parties. The operational aspects of consignment stock are further covered by

Consignment Operational Guidelines. Consignment stock agreement is available in the

web portal under supplier information section: http://b2b.methode-eur.com.

3.4.31 Supply logistics 3.4.31.1 Schedules and ASN’s are the backbone of the logistical process and these shall be

exchanged electronically. Suppliers have to either have EDI capability or avail

themselves of Methode’s Web EDI portal. The Supplier is responsible to go through the

requisites and documentation associated with two logistical systems.

3.4.31.2 Deliveries against purchase orders are to be made to the quantities and dates as

specified by Methode schedules. Suppliers will be required to review schedules weekly

and required to confirm ability to meet/reject schedules within two (2) working days from

receipt of schedules. Using Methode’s web based systems. Using Methode web based

systems; Suppliers are required to print labels as indicated by Methode.G-MB 03c Retention period: End of life + min 15 yrs Page 26 of 31



Documents detailing EDI and Web EDI as well as their specific requirements are

available in the web portal under supplier information section: http://b2b.methode-eur.com.

3.4.31.3 Shipping schedules for manufactured components/sub-assemblies

The Supplier is responsible to go through the requisites and documentation associated

with the two logistical systems available, i.e. Web EDI or Traditional EDI. The choice of

logistical system must be determined by the Supplier within the time-frame established

by Methode. Methode shall provide planning and delivery schedules with a maximum

number of weeks for fabrication and raw material purchasing authorisation. The shipping

schedule for products supplied shall be defined by Methode.

The Supplier must deliver the goods on the dates and in quantity batches defined as

‘firm’ in the shipping schedule release. Methode’s liabilities on this schedule are as

follows:

‘Firm’It is the authorisation by Methode to the Supplier that the stated quantities ordered are

manufactured and will be purchased by Methode;

‘Fabrication’The manufactured products shall be stocked by the Supplier until due date of delivery. It

is the Supplier’s responsibility to deliver the goods as agreed on the delivery schedule;

‘Raw material’ It is the authorisation by Methode to the Supplier to purchase raw material to

manufacture the quantity of components ordered by Methode. It is the Supplier’s

responsibility to ensure the stock availability of the raw material required;

‘Forecast’ Indicates the quantities that are planned to be purchased by Methode within the

established calendar weeks. Quantities and delivery dates can vary according to

customer orders. Quantities are not binding to both parties involved in the contract,

which means that no party is bound to purchase or manufacture any of the given

amounts ‘over/under’, and ‘early/late-shipments’ are unacceptable for Methode. It is the

Supplier’s responsibility to confirm the last invoice number and the cumulative quantity

received to date.




3.4.31.4 Standard packs

The quantity shipped shall be a multiple of the pre-defined ‘Supplier Packaging Data

Sheet’ for each component in the standard pack quantity/container with Methode’s

identification label. The Supplier cannot arbitrary change the standard pack quantity

without a prior documented change to the ‘Supplier Packing Data Sheet’.

3.4.31.5 Over-shipment

Over-shipments will not be accepted by Methode and the Supplier shall be liable for

transportation costs incurred to return the goods back to the Supplier unless otherwise

agreed differently.

3.4.31.6 Under-shipment

The Supplier shall pre-notify Methode’s material scheduler if the established delivery

schedule is not met. Details of the Supplier’s alternative delivery dates shall be notified to

Methode and the under-shipped quantity shall be delivered at the Supplier’s expense.

3.4.31.7 Early and late deliveries

The Supplier shall be liable for any expense incurred by Methode in storage, handling,

and transportation to customer as well as loss of production due to early or late deliveries.

3.4.31.8 Documentation

The Supplier is required to send the following documents with each consignment:

(a) a copy of the invoice/delivery note by fax/e-mail to the logistics office;

(b) a hard-copy of the invoice/delivery note and packing list with the goods;

(c) the original hard-copy invoice by express mail for payment purposes.

3.4.31.9 The Supplier will be penalised if the above rules are not followed and this will be reflected

when the Supplier is being rated.

3.4.31.10 Supplier’s shut-down

The Supplier shall inform Methode’s Material Scheduler on the planned factory shut-

downs at least eight (8) weeks in advance.

3.4.32 Confidential Agreement


3.4.32.1 The Supplier is obliged to treat as business secrets and to keep confidential all

commercial and technical information imparted to it by Methode during the course of the

business relationship unless such information is already public knowledge without fault of

the Supplier receiving the information.

3.4.32.2 Drawings, models, samples and similar objects shall not be disclosed or otherwise made

available to third parties without the prior consent of the party that owns them.

Reproduction of such items is only permissible if so agreed by writing and subject to

compliance with applicable copyright laws.

3.4.32.3 The confidentiality agreement shall survive the expiration or termination of any Supply contract.

3.4.33 Liability3.4.33.1 The Supplier is obliged to provide compensation for damage incurred directly by

Methode as a result of a defective delivery, through infringement of official safety

regulations or any other legal grounds for which the Supplier is accountable.

3.4.33.2 The Supplier undertakes to maintain employer’s liability and product liability insurance

cover, the insured sums to correspond to the extent of the business relationship and the

concrete liability risk. These claims remain unaffected by any further claims for damages

to which Methode may be entitled.

3.4.34 Warranty3.4.34.1 Supplier is liable for parts that fail during warranty period and without prejudice to any

claims in damages that may be made in this regard shall be debited for any costs of

remedy as detailed in any applicable procedure.

3.4.34.2 The “Warranty period” for goods installed or used in a production vehicle begins on the

date the goods are delivered to Methode and expires on the date that is the later of:

a. The date on which the applicable period of the New Vehicle Warranty covering the

goods ends – this is defined by OEM; or

b. The date on which any longer or broader statutory or other mandatory warranty

period covering the goods ends


In all cases, the system used for Warranty Chargeback will be the higher of the system

defined in any applicable procedure as between the Supplier and Methode or the system

used in applicable procedure as between the end customer and Methode under the

OEM.

3.4.35 Counterfeit Material3.4.35.1 Supplier shall not deliver Counterfeit material/parts to Methode under this Contract.

3.4.35.2 Supplier shall only purchase parts to be delivered to Methode directly from the Original

Component Manufacturer (OCM)/Original Equipment Manufacturer (OEM), or through an

OCM/OEM authorized distributor chain. Parts shall not be acquired from independent

distributors or brokers unless approved in advance in writing by Methode.

3.4.35.3 Supplier shall immediately notify Methode with the pertinent facts if supplier becomes

aware or suspects that it has furnished Counterfeit parts/material. When requested by

Methode, Supplier shall provide OCM/OEM documentation that authenticates traceability

of the affected items to the applicable OCM/OEM.

Section 4 – Declaration

DECLARATION OF ACCEPTANCE OF METHODE’S VENDOR REQUIREMENTS

On behalf of

Address: ............................................................................................................

............................................................................................................

We hereby declare that we accept the Vendor Requirements stated by Methode in this

document.

Today: .......................................................................................................................

Signed: ......................................................................................................................G-MB 03c Retention period: End of life + min 15 yrs Page 30 of 31


Position: ....................................................................................................................

Signature: .................................................................................................................

Company Stamp: .......................................................................................................

This sheet must be returned to Methode within fifteen (15) working days of receipt of the Vendor

Requirements.


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