User Manual for Signify models including: QS-014190, World Leader in Lighting, High-Quality Energy Efficient Lighting
We expect that the way of working, as described in this manual, will be followed for all parts* used in Signify products, including the ones defined by Signify, but sold and shipped to our outsourcing partners. * Throughout this document the terms ‘part’ is used for all materials, components, products, and services supplied to Signify. 1.3.
Signify Classified - Internal Document Name Document ID Document Version Document Owner Total number of pages Start Date Valid Date for Next Review Related Documents Supplier quality manual QS-014190 3 Hoen Hwa Lee 42 11-11-2020 11-11-2023 Signify Classified - Internal Supplier Quality Manual Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 2 of 43 Signify Classified - Internal Foreword Signify is the world leader in lighting. We produce high-quality energy efficient lighting products, systems and services. We are the global leader in conventional, LED and connected lighting systems and services and serve both professional and consumer markets. Our offers comprise: · Professional lighting products, such as lamps and luminaires. · Professional systems such as our Interact software suite. · Professional services including design, consultancy and maintenance, management, lifecycle services, etc. · Consumer products comprising lamps and luminaires. · Consumer smart home lighting systems through our Philips Hue portfolio. Our 2 main brands are: · Philips our global brand in professional and consumer lighting products. · Interact our Internet of Things platform and connected lighting systems. Signify supply base is a key enabler to help secure the brand promise to our customers and as such we expect our supply base to be fully compliant with all Signify policies and requirements. Only if our suppliers deliver outstanding quality of components, products and services and support Signify in the continuous drive for innovations and excellence, we are able to deliver. The Lighting world is changing rapidly as a result of the growing importance of LED Lighting and Lighting systems and services. The change towards LED and Lighting systems and services requires a different approach and mindset regarding quality where you as our suppliers are key players in realization thereof. To optimally work together, our processes in product development, lifecycle management and quality cooperation need to be aligned with our suppliers. This Supplier Quality Manual describes our standard ways of working. Next to the General Purchase Agreement as the official document, we request you as a supplier to acknowledge this manual and adhere to the mentioned statements and descriptions. Moreover, we expect you to proactively work together with us to ensure a competitive advantage, which will sustain and strengthen our market leadership and ensure a profitable future. Great quality performance shows us in a tangible way the supplier willingness to "Team-up with Signify" and is certainly one of the key factors in building stronger sustainable Supplier quality manual QS-014190/ Version: 3 Downloaded & printed copies are uncontrolled Page 3 of 43 Signify Classified - Internal partnerships. Thomas Lazer Head of Quality & Business Transformation Hans Bellemans Head of Supplier Quality Luc Broussaud Head of Procurement Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 4 of 43 Signify Classified - Internal Contents Foreword 3 1. Introduction 8 1.1. Signify Supplier Quality Principles 8 1.2. Supplier Quality Management Processes 9 1.3. Supplier Quality Organization 9 1.3.1. Roles and Responsibilities 11 1.4. General Requirements to suppliers 12 1.5. Change Control Requirements to suppliers 12 1.6. Reliability Requirements to suppliers 13 1.7. Sustainability Requirements to suppliers 14 1.7.1. Supplier Sustainability Declaration, Sustainability audits 14 1.7.2. Regulated Substance Management 16 1.7.3. Conflict Minerals and responsible sourcing 17 1.7.4. Carbon disclosure 18 1.7.5. Wood & Packaging Requirements 18 1.7.6. Supply Chain Security audits (SCS) 18 2. Supplier Selection and Qualification 19 2.1. Supplier Selection and Qualification Process 19 2.2. Mandatory Pre-check & Pre-qualification requirements 20 2.3. Supplier Audits (SAT) 2.3.1. Types of audit 2.3.2. ODM audit 2.3.3. Requirements of audit 2.3.4. Audit Follow ups Supplier quality manual Downloaded & printed copies are uncontrolled 21 21 22 23 24 QS-014190/ Version: 3 Page 5 of 43 Signify Classified - Internal 2.3.5. Failed audit (waiver process) 3. Supplier Quality Contracting 3.2. General Purchase Agreement 3.3. QUALITY AGREEMENT 3.3.1. Specification Agreement 3.3.2. Product warranty 3.4. 2nd Tier Supplier Quality Management 4. Production Part Approval Process 4.1 Technical Documentation 4.2 Prototype Requirements 4.3 Part testing 4.4 Manufacturing Release 4.5 Process Release 4.5.1. Supplier Process Capability Requirements 4.5.2. Measurement System Analysis (MSA) 4.5.3. Calibration 4.5.4. Process Special Requirements 4.5.5. Maintenance 4.6 Supplier Application Signoff 5. Quality Performance Management 5.1 Cost of Non-Quality Reduction 5.2 Receiving Inspection Supplier quality manual Downloaded & printed copies are uncontrolled 24 25 25 26 26 26 26 27 28 29 29 30 30 30 31 31 31 32 32 32 32 32 QS-014190/ Version: 3 Page 6 of 43 Signify Classified - Internal 5.3 Traceability 33 5.4 Part Quality 33 5.5 Supplier Rating 34 6. Incident Management 36 6.1 Analysis of Customer Returns 36 6.2 Non-Compliance Report (NCR) 36 6.3 Supplier Corrective Action Request 37 6.4 Cost Recovery 37 6.5 Cost Prevention 38 7. Supplier Development 38 7.1 General Business Reviews 38 7.2 Continual Improvement 39 7.3 Supplier (Quality) Workshop 39 7.4 Warning letters 39 7.5 Exit Procedure 40 Glossary 41 Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 7 of 43 Signify Classified - Internal 1. Introduction 1.1. Signify Supplier Quality Principles Signify is committed to provide the highest possible level of customer satisfaction by delivering high quality, sustainable lighting products, solutions, and services. Together with our suppliers we ensure that our lighting products, solutions, and services fulfil our brand promise, are fit for use and comply with local regulatory and environmental requirements. Our way of working is based on the following principles: Suppliers are qualified based on their competences via assessments using SAT. (Based on VDA 6.3) Supplier are involved early in product development using competences and innovation of Signify and the supplier to assure Six Sigma quality. Parts are released and changes are controlled using Production Part Approval Process or PPAP resulting in signed performance agreement per product/component. Supplier accountable & responsible for production performance of released parts, including tier two supplier management. Supplier monitors and manages quality performance continiously and assures no deviating products leave the company. Suppliers are integral part of the Signify Sustainability Programs and comply to Signify policies. Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 8 of 43 Signify Classified - Internal 1.2. Supplier Quality Management Processes As a supplier of Signify, you will be confronted with 6 main supplier quality processes. These 6 processes are further defined in their respective chapters. 1. Supplier Selection and Qualification 2. Supplier Contracting 3. Production Part Approval Process 4. Quality Performance Management 5. Incident Management 6. Continious Improvement We expect that the way of working, as described in this manual, will be followed for all parts* used in Signify products, including the ones defined by Signify, but sold and shipped to our outsourcing partners. * Throughout this document the terms `part' is used for all materials, components, products, and services supplied to Signify. 1.3. Supplier Quality Organization Within SIGNIFY the Supplier Quality organization is responsible to assure the supply base delivers components, products, systems, services that meet consistently the quality requirements and customer expectations and that are produced according Signify policies. As such they are the main contact towards the supply base regarding quality related aspects. The Supplier Quality Management organization is part of the Procurement organization of Signify. A schematic representation of the different SQ functions and responsibilities is shown below: Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 9 of 43 Signify Classified - Internal a. Product SQM: Responsible to assure new products meet requirements and to handle life cycle management & compliancy of the products & systems. Specification signoff in contracting system. b. Component SQM: Responsible to assure new components meet requirements and to handle life cycle management & compliancy of the products & systems. Specification signoff in contracting system. c. SQ Central Team: Supplier qualification, shuttle4vendor supplier creation 1st level approval & GPA quality content review plus signoff. Initiate and follow up structural (nonproduct/component related) improvement programs. Each supplier in the supply base will have a QAM (Quality Account Manager), who is responsible to: a. Manage the quality relationship with the supplier, b. Ensure all quality requirements fulfilled by/for the supplier for a smooth-running business, c. Involve especially activities such as supplier improvement program, Master Quality Agreement life cycle change, negotiation of Annual Quality Target, supplier quality performance monitoring and follow up. Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 10 of 43 Signify Classified - Internal 1.3.1. Roles and Responsibilities RACI definition. The following activities are classified per the RACI Matrix with following definitions: (R) Responsible (A) Accountable (C) Consulted (I) Informed Party who is assigned to do the work. Party who approves (makes the final decision). Party who must be consulted before decision is taken. Party who must be informed after decision is taken. Quality Processes Supplier selection & qualification Supplier contracting New product introduction Quality control Supplier Improvement Supplier quality activities Supplier audit (SAT) Initiate, approve, and follow up improvement programs of the supplier Supplier creation 1st level approval in Shuttle for vendor Compile & ensure signoff Product Quality Agreement (PSW including requirements) Signoff GPA with focus on quality content. Annual Quality Targets (within specification) PPAP or other qualification methods Incident management (8D) Country & end Customer audit * Change management - PSW revalidation Ongoing reliability test ** Product driven waiver by supplier - approval Supplier internal Q incident (non-delivery) Supplier monthly performance report Supplier rating (GSRS) Sub supplier's quality management Supplier Quality reviews Warning letters or requests for improvement Continuous improvement (product level) ***Continual improvement & repeat audit (supplier level) QAM C A I A A I I I I I I A A A A A C A Business SQM I I A I R A A C A A A A I R C CI R A I Central SQ RA R RA R I A I I I R Supplier I R C C C C R R R R R R R R I R R I R C Denotes: * C will be with development or R&D. ** Suppliers prepare the waiver, business SQ (including factory SQ) liaise with internal stake holders. To cross check with internal procedures too. *** Structural processes issue falls at supplier level. Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 11 of 43 Signify Classified - Internal 1.4. General Requirements to suppliers ISO 9001 Compliance to latest IEC/ISO version required to all suppliers and their manufacturing sites. IATF16949 compliance is not a mandatory requirement but it will be an added plus and possibly reduce the need for SAT audit. ISO14001 Expected that all supplying sites have ISO 14001 environmental management systems according to latest edition or equivalent OHSAS18001 To ensure the Health and Safety of their IEC QC80000 employees certification to ISO/OHSAS 18000 is Certification to IEC preferred. QC80000 is preference to have but will greatly reduce the requirements Signify puts on suppliers related to Hazardous Substance Management. It is expected that suppliers to Signify will have a well-developed mature quality management system in place and functioning effectively. As a minimum all suppliers are required to have quality system that has been registered to ISO-9001:2015. We encourage suppliers to have or be working towards implementing a quality system compliant to IATF-16949. A copy of the 3rd party certificate must be submitted to Signify when first certified and after each recertification audit. IATF-16949, ISO14001, ISO18001 & IEC QC80000 remain a preferred certification for time being, but will greatly reduce additional audit, governance or certification that Signify will put on supplier. 1.5. Change Control Requirements to suppliers There are two sources of change, Signify driven and supplier driven. Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 12 of 43 Signify Classified - Internal Signify-driven changes · Review the change internally within the Change Control Board (CCB) · Communicate that the change has been processed and supplier is in compliance with new requirements · In case of non-acceptance - notify SAM & QAM · Submit revalidated PSW Supplierdriven changes · Formal, written notification of the proposed change shall be sent to the Signify SAM and QAM · No less than 90 days in advance (Ref GPA) · Submit revalidated PSW Suppliers shall demonstrate via PPAP or QualPack/FAI documents that the change will result in the same or improved performance. Signify may ask for additional time and samples for testing and may schedule an on-site assessment or may request additional quality documents, e.g., risk-assessment, updated Control Plan, transfer FMEA or a Delta analyses. Suppliers shall make sure that the change is traceable, without changing or adding any visible marking on the outside of the parts. No change is allowed without written approval from Signify in the form of PSW Part design Change of material or its source Manufacturing process or technology Manufacturing site Change of source for sub-contracted parts Controls of CTQ's In process testing PPAP or QualPack/FAI document Change results in same or improved performance Written approval from Signify (PSW) For Part Termination Notifications, the Supplier shall inform Signify twelve (12) months in advance of last planned production date and eighteen (18) month before last shipment date unless otherwise agreed in the GPA. Supplier is expected to secure quality at all time even though of this last buy or transition to new or alternate parts. 1.6. Reliability Requirements to suppliers Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 13 of 43 Signify Classified - Internal Suppliers shall test the reliability of the parts as agreed in signed PSW (specification/drawing) in accordance with international industry standards. In case of doubt supplier shall contact the Signify QAM. Supplier shall monitor and analyze reliability testing results and inform Signify immediately in case of abnormalities or deviations. 1.7. Sustainability Requirements to suppliers Signify has integrated sustainability throughout the company: in the strategy, organization, and culture, in manufacturing and products, and with the suppliers. Signify' s policies and practices can be found at: https://www.signify.com/global/contact/suppliers/sustainability/ourprograms Supplier Sustainability Declaration (based on RBA code of conduct) Main elements related to suppliers are shown in the graphics. Detailed requirements for all suppliers to Signify as well as templates and further information can be found at above mentioned web pages. Regulated Substances (including ROHS /REACH & other regulations in BOMCheck/RSL) As Signify often works in an outsourced manufacturing environment, the outsourcing party is expected to act on Signify behalf towards 2nd tier suppliers when it comes to Compliance, Performance Monitoring and Improvement related to sustainability. IEC QC080000 Responsible Minerals Carbon disclosure Wood & Packaging Requirements 1.7.1. Supplier Sustainability Declaration, Sustainability audits All suppliers are required to comply to the Signify Supplier Sustainability Declaration (SSD). By signing the GPA, supplier commits to be compliant. The latest version of SSD can be found at http://images.philips.com/is/content/PhilipsConsumer/PDFDownloads/Global/sustainabilitydownloads/ODLI20181207_001-UPD-en_AA-Signify-Supplier-Sustainability-Declaration.pdf The Signify Supplier Sustainability Declaration (SSD) covers labor and human rights, worker health and safety, environmental impact, ethics, and management systems. The Declaration also requires suppliers to cascade the RBA Code as a total supply chain initiative down to their next-tier suppliers. We monitor supplier compliance with the Declaration through a system of regular audits, which are mostly performed by an independent audit firm. We require all our suppliers to comply with the Supplier Sustainability Declaration and evaluate their compliance through a sustainability audit based on the RBA (Responsible Business Alliance) requirements. This requirement forms an integral part of any commercial agreement between Signify and the supplier. A sustainability audit may be executed depending on the risk profile of a supplier. The detailed program can, and requirement be found at: https://www.signify.com/global/contact/suppliers/sustainability/our-programs/supplier-sustainabilitymanagement List will be reviewed regularly, and changes will be made based on the Supplier's risk profile is determined by criteria relating to: Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 14 of 43 Signify Classified - Internal The Sustainability audit may result in non-compliances. These non-compliances need to be closed as soon as possible but at least as per schedule below: Zero tolerance (ZT)/ Critical/ Major NonConformances Minor Nonconformances Progress check against milestones According to milestones determined in CAP (1month max. for ZT, 3 months max to critical and major NCs) Monitoring takes place in supplier development program if applicable. No official follows up by Signify. Resolution Audit 1 Before end of the longest timeline agreed in the CAP N/A Resolution Audit 2 3 months after the 1st Resolution Audit if necessary N/A New Audit Cycle 3 years after the Full-Scope Audit date 3 years after the Full-Scope Audit date If Signify notices that there is a delay in the realization of the CAP, the following situations may arise: Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 15 of 43 Signify Classified - Internal CAP off track ·SAMs will give early warning to Supplier ·Signify will prepare contingency plan ·SAMs will prepare phase-out plan Failed 1st Resolution ·SAMs will phase out the Supplier if it fails the 2nd time Resolution Audit Audit ·SAMs will implement phase-out plan Failed 2nd Resolution ·Supplier will be phased out Audit Potential suppliers may only start shipments after all non-compliances have been corrected 1.7.2. Regulated Substance Management The supplier shall comply with the Regulated Substances List (RSL). This listing of chemical substances brings together all legal, industry and voluntary requirements to which Signify is committed regarding the chemical substances contained in our products. By signing the GPA, supplier commits to be compliant. The latest version of RSL can be found at: http://images.philips.com/is/content/PhilipsConsumer/PDFDownloads/Global/PDFs/ODLI20190125_00 1-UPD-en_AA-Lighting_Regulated-Substances_List_RSL_Policy_Requirement-2019-1.pdf Suppliers must demonstrate their compliance with the Restricted Substance List by uploading their compliance declarations into BOMCheck, an online cross-industry platform. Supplier shall provide evidence of compliance for products, raw materials, and process materials according to the latest requirements. For RoHS compliance evidence we require test report not older than one year measured by a third-party accredited laboratory. Data will be regularly validated by Signify and request evidence to suppliers. If suppliers are IECQ HS QC080000 certified or HSPM Signify assessment will be passed with A or B score, evidence will not be required. Hazardous Substances Process Management assessment is mandatory for all suppliers and can be done in form of self-assessment or as part of onsite audit. As a results supplier will get one of the below categories: Hazardous Substances Process Management Requirements (HSPM results) Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 16 of 43 Signify Classified - Internal Category A: Category B: Category C: · IECQ HSPM 080000 certified OR · ISO 9001 (or equivalent) certified AND HSPM assessment passed 80% (and all mandatory questions) AND · Signed Regulated Substance List for all parts/materials (e.g., part of GPA) · No HS non-compliances in previous 2 years ( · ISO 9001 (or equiv.) certified AND HSPM assessment passed 60% (and all mandatory questions) · Signed Regulated Substance List for all parts/materials (e.g., part of GPA) · No HS non-compliance in previous year years · Supplier does not fulfill requirements under A or B categories · Supplier put wrong information in declaration without proper check and/or to stay on safe side 1.7.3. Conflict Minerals and responsible sourcing Conflict minerals are minerals mined in conditions where armed conflict and human rights abuses occur. The term is often used to refer to four minerals tungsten, tantalum, tin, and gold (also known as 3TG) that are mined in the eastern region of the Democratic Republic of the Congo (DRC). Responsible sourcing of minerals is an important part of our supplier sustainability commitment. We implement measures in our chain to ensure that our products are not directly or indirectly funding atrocities in the DRC. In addition to these conflict minerals, Signify also aims to ensure we do not source Mica, Lithium, Graphite and Cobalt from sources where human rights may be abused. Suppliers are required to provide information on their sourcing of raw materials that may contain conflict minerals, mica, lithium, graphite, or cobalt. On a yearly basis, a CRMT template needs to be submitted for conflict minerals, where this information is provided. The latest template can be found at: Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 17 of 43 Signify Classified - Internal https://www.signify.com/global/contact/suppliers/sustainability/our-programs/conflict-minerals 1.7.4. Carbon disclosure Signify believes that climate change and the growing need for energy consumption require innovative solutions and transformation in the behavior of companies and people. We contribute with energyefficient products and our carbon neutral commitment for our own operations. In addition, we motivate our supply chain to reduce its carbon footprint. We are a member of the CDP Supply Chain program and Suppliers are yearly required to provide information on their carbon footprint in the CDP Questionnaire with focus on emission reduction activities and commitment on Renewable Electricity (RE100) or Scientific Based Targets (SBTs). We support our suppliers with training and tools to facilitate transparency and emission reduction activities. https://www.signify.com/global/contact/suppliers/sustainability/our-programs/carbon-disclosure 1.7.5. Wood & Packaging Requirements As part of our environmental approach towards wood and packaging, Signify requires packaging suppliers to use the recycled materials and/or other certified renewable resources or bio-based materials with final targets according to the document "Signify Sustainable Packaging Policy Requirement" and report it to Signify in "Supplier Packaging Reporting Template". The basic targets are paper-pulp, corrugated cardboards >80%; PET plastic > 25% (Europe, America), PET plastic >10% (rest of the world). Sustainable wood products shall be used from responsible sourcing. Signify Sustainable Packaging Policy Requirement can be found at: https://www.signify.com/global/sustainability/downloads 1.7.6. Supply Chain Security audits (SCS) The purpose of the Supply Chain Security (SCS) Program is to enable Signify to secure the goods flow in such a way that tampering, theft, unobserved goods replacement, addition of unfamiliar goods or other unauthorized access to the goods flow will be prevented as much as reasonably possible. This includes internal and intercompany transport. Signify's Supply Chain Security is in line with programs set up by governments, such as: Customs-Trade Partnership Against Terrorism (C-TPAT) from the US Department of Homeland Security, Authorized Economic Operator (AEO) in the European Union, India, and Japan. In line with the SAFE framework of the World Customs Organization more countries are developing programs. Not following these programs will lead to more complex customs procedures and serious delays at international borders resulting in higher pipeline inventories and cash flow impact for Signify. The SCS Policy is mandatory for all Logistics Service Providers and Finished Goods Suppliers that are involved with managing cross border shipment of Signify products. To verify compliance, the SCS (Supply Chain Security) self-assessment/audit is used. Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 18 of 43 Signify Classified - Internal The SCS self-assessment/audit checklist requires evidence of implementation of security measures as well as evidence of specific documentation related to supply chain security. Sample procedures are available at Signify to support the supplier with establishing documentation. The requirement is that suppliers are reaching over 90% compliance rate after audit/ self-assessment and CAP follow up. Supply chain sustainability audits/ self-assessments follow up are performed by 3rd party/Signify team and costs are covered by Suppliers. It is Signify policy that suppliers must be compliant to all SCS requirements during qualification process and prior to the part or product release. 2. Supplier Selection and Qualification 2.1. Supplier Selection and Qualification Process Signify maintains a supplier selection process that evaluates and identifies potential sourcing partners. Commodity Management is responsible for identifying potential supplier, supplier quality is responsible for qualifying it via supplier assessment tool (SAT). This is done in cooperation with Procurement Engineering too. The supplier selection and qualification are based on a formal evaluation process as outlined below: Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 19 of 43 Signify Classified - Internal For sustainability audit, please follow instruction as outlined in paragraph 1.7.1. For Signify supply chain security audit, please follow instruction as outlined in paragraph 1.7.6 2.2. Mandatory Pre-check & Pre-qualification requirements To ensure that our audit effort will be fruitful, it is key to gain some basic information about the supplier to learn whether they will be a good match to support our business. Thus a few "pre-checks mandatory requirements" & "two bucket of pre-qualification requirements" are established to ensure positive outcome. "Two bucket of pre-qualification requirements" do not applicable for supplier with estimated spend less than 100k euros per annum. Existing supplier who requires re-audit is exempted from both "pre-checks mandatory requirements" & "two bucket of pre-qualification requirements". Pre-check mandatory requirements are: i. Possess an ISO9001 certification ii. SAT self-assessment is expected to be completed during AA milestone of the NPDL process but no later than AA with result no less than B iii. BOMCheck registration done iv. PQQ & Policy Doc (for Systems & Services) The "two buckets of pre-qualification requirements" are to be fulfilled by the requestor of the audit/supplier. Pre-audit bucket one: (with potential supplier) i. Initial risk assessment should be preliminary pass or above. ii. On-site quick scan using Rapid plant assessment (RPA), result should be 30% or above. Pre-audit bucket two: (with potential supplier & 3rd party) i. 70% RBA audit score at the beginning with no critical/ Zero Tolerance NCs is acceptable but it needs to be 90% towards signing GPA. (RBA audit is only applicable for supplier in risk country) ii. SCS (supply chain security) audit result needs to be more than 70% (only applicable for supplier who ship products internationally or are involved with managing international shipment of products) but it needs to be 90% towards signing GPA. Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 20 of 43 Signify Classified - Internal With the fulfillment of these two buckets, supplier is assumed to be ready for an on-site audit. Requestor needs to submit a request forms with all pre-qualification evidence attached to the central audit team. Depending on Categories / BoM supplier locations, different central auditor will be assigned to review the request form along with those evidence. Full detail is described in Quality System Portal under the supplier qualification process with id#21.3.1. 2.3. Supplier Audits (SAT) The primary goal of executing a Supplier Audit is to collect objective evidence identifying potential risks for Signify in doing business with the supplier under investigation. Audits verify the desired state of suppliers against requirements predefined by Signify Quality Standard and internal stakeholders. Audits are done "for new", entry supplier into Signify supplier base and "for cause", when there are clear indications of deviations or other risks at suppliers. The Supplier Audits will be done by means of a Signify Supplier Audit Tool (SAT), covering several Business processes. The SAT contains all elements of the internationally recognized VDA 6.3 standard, but it is extended with Hazardous Substance Program Management (HSPM) supplier trustworthiness evaluation. 2.3.1. Types of audit There are several types of audit available depending on the audit decision matrix as shown below: Product Criticality SQ Decision Matrix A B C Supplier Quality Risk Low Medium High II III III I II III I I II Class I audit is only to validate the ISO9000 certificates of the supplier. This can be easily achieved through reviewing the validity of the certificate via an electronic copy from e-mail or FTP website. Class II audit is a desktop audit, where audit can be achieved remotely with evidence shared and shown online via the internet during a schedule session between a member from the audit central team and supplier. Class III audit is an on-site audit at the supplier, organized fully by the central audit team with help & cooperation from procurement & supplier. Supplier Quality Risk and its levels descriptions are as shown in table below: Supplier Quality Risk Criteria's Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 21 of 43 Signify Classified - Internal Low Medium High - IATF certified, with no Major issue from surveillance audit; and - Supply to Automotive customers - Distributors that supply standard/low risk components - S&S: mainly for L0 and L1 architectures* - IATF certified, with Major issue from surveillance audit; and - SAT self-assessment score "A." - S&S: Mainly for L2 and L3 architectures* - No IATF; or - SAT self-assessment score "B" SAT self-assessment score "A" without proper evidence. - S&S: 3rd party Products Products & Services criticality and its levels descriptions are as shown in table below: Product & Services Criticality A B C High Level Criteria - Entirely new product family (based on a new platform or new technology) with high technical complexity (PPAP); or - Finished Goods; or - ODM Module/Packaging; or - Components with Severity from DFMEA "8/S"; or - Single sourced component supplier - S&S: Project Category 1 suppliers or used in PUBLIC - ARENA's Segment - New product, derived from an existing platform or proven technology (PPAP); or - OEM Module/Packaging, or standard component; or - Components with Severity from DFMEA "3/5" - S&S: Project Category 2 suppliers or used in Industrial, Road & Street or Public (rest) Segments - Improved (new) product, based on an existing product, with low technical complexity (PPAP); or - Components with Severity from DFMEA "1" - S&S: Project Category 3 suppliers used in Office, Warehouse or Retail & Hospitality Segments Information regarding "Supplier Quality Risk" & "Products & Services Criticality" shall be provided by the audit requestor audit in the "Supplier Qualification Request" form. 2.3.2. ODM audit If potential supplier is to be qualified as ODM, then they must undergo the ODM checklist on top of the usual SAT audit. This step is extremely crucial in identifying whether supplier is the right fit to be our ODM partner, instead of just a regular EMS/CMS/JDM supplier. Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 22 of 43 Signify Classified - Internal For ODM/JDM suppliers, the overall qualification result will continue to maintain SAT rating when below scores of ODM Checklist audit are met. In the event when ODM Checklist audit score is not met, the overall qualification result will be downgraded to C. · ODM Checklist audit score 60% · ODM Checklist audit score 80% for JDM suppliers for ODM suppliers 2.3.3. Requirements of audit All supplier requires qualification prior phase into Signify supplier base. This is applicable for all case except for supplier that fulfilled the L032-2018 OTV directives. In case the One-time vendor or OTV spend is 100K Euros, outgoing inspections are required. OQC arrangement through relevant business QAM. Responsible SAM is responsible to monitor the said supplier and request for an audit in case "one time" supplier turns out to be more than just "one time". Tritium list will also help to reflect suppliers who was allowed into our supplier base without initial audit. Prescribed suppliers due to ETO businesses, government tender projects, distributors, 2nd tier by/from 1st tier, B brand or private label also do not need to be audited as that decision was made by customer. In these cases, the accountability of quality (no warranty) is not with us but with the customer. Relevant PE of the project must ensure this liability clause be included as part of the sales agreement by our salesperson. For this, we shall follow warranty policy in QS-011881 Standard Warranty Template Signify that specified in clause 7 - The Warranty Period for customized or non-standard Products is one (1) year. Signify does not provide any warranty related to any Defect arising from designs, instructions or specifications supplied by Customer to Signify. Re-assessments are based on risk. Only those suppliers with significant risks for Signify or where we have recently experienced issue are identified will be re-assessed. "For cause" audits may be triggered by events such as Change of Location. Performance issues such as Warning letters or 3 times red in supplier quality scores. Change of Technology. During the audit observations of the following types may be made: o To start (10): Full compliance with requirements o On track (8): Requirements mainly* satisfied; minor deviations o Warning (6): Requirements partially satisfied; significant deviations o Off track (4): Requirements inadequately satisfied; major deviations o Realized (0): Requirements not satisfied o Stopped (NR): Not in scope of audit, not addressed Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 23 of 43 Signify Classified - Internal At the end of the assessment, the Signify team will provide the results and areas for improvement. SAT Audits can result in a GREEN, YELLOW, RED or BLACK score. Depending on the outcome different follow up is required as shown in the table below. Class A B C D NR Audit classification Details Pass. Supplier meets requirements. No or limited improvements needed. Conditionally pass. Corrective action and containment are required. Limited risk. Fail. Supplier's process is incapable to meet requirements. Corrective action and containment are required. Major risk. Fail. Blocking issues found. Project or regular production on hold until corrective actions have been implemented. Not Rated 2.3.4. Audit Follow ups Only applicable for A, B & C with waiver's supplier - Findings from the Signify on-site audit shall be followed up and closed with corrective actions. Proof needs to be handed over to Signify. Depending in evidence provided Signify could decide to do initiate follow up audit in case there is doubt on effectiveness of implemented measures. Re-audit report shall be submitted back to Signify SQ for validation. Once verified and if supplier is deemed improved then the previous audit result shall be corrected in `Tritium program' per the latest report or evidence. 2.3.5. Failed audit (waiver process) The only way to continue business with a C supplier is through the waiver process, as described in procedures "QS-000204 Procedure for Quality Waiver" with "QS-013284 Waiver Template". Waiver needs to be approved by Business Owner, Head of Procurement and Head of Supplier Quality. Such waivers should be issued only in exceptional cases and needs to have a clear reason why the supplier is needed, and which resources/timing are needed to bring them to the required A and B level. Until then, no project allocation shall be done with a non-released supplier. Full RACI table concerning the entire supplier qualification process as describe below: (RACI definition follow 1.2.1.) Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 24 of 43 Signify Classified - Internal Steps CPO / Business Owner / Q SVAL / Operation's Lead* CCL's (BP) 1 Check & confirm One-time buying suppliers 2 Check involvement of the commodity manager 3 Manage on-site OQC for one-time buying suppliers Do we have existing suppliers which 4 can deliver the products/services for the region. If yes reject and advise the alternative supplier 5 Does the supplier fit in the CSD. If not reject and advise alternative supplier If expected yearly Turn 6 Over >250kEuro is there a supplier contract (or in progress). If not initiate contracting process 7 Check if ISO9001 Certified 8 Check supplier spend 9 Input for Product Criticality 10 Review Input Criticality & decision for Product 11 Input Supplier Quality Risk 12 Review Quality Input Risk & decision for Supplier Request audit (submit forms along 13 with all pre-audit requirement's results.) 14 Review request & decision I Organize audit (interface with 15 supplier org.), execute audit & report (issue CAR) 16 Review audit result & decision I I 17 Waiver (only if applicable) A R CAP, follow up and close (For waiver 18 approved suppliers (C) re-audit mandatory to close CAP, by SQ is I Central team) 19 Follow up (validate report into TSL) & upload audit 20 Quality Contracting Agreement - MQA) (Master Quality I 21 Register new supplier into TSL 22 Update process the Supplier Qualification I I CT/PE (SAM / Requestor in S4V) RA RA C C C R R RA CI I RA I RA C C I R I I R RA C Commodity Central Business Manager ** SQ SQ C I C I I A AR I AR I A C A I I I I R RA I CI RA C C I RA I RA I RA I C C A I RA I A I I I RA C Product / Industrial Quality C C Business R&D Supplier R I I I C C RA C C C I R C Site manager's approval required for suppliers delivering to this site * Operation's Lead only involve when Signify factory will be impacted ** CT managers see approval flow SFV 3. Supplier Quality Contracting 3.2. General Purchase Agreement Depending on the expected size of the business and the nature of the business relationship, Signify and the new supplier may sign a General Purchase Agreement (GPA) prior to release into the Signify supply base. This agreement governs all commercial aspects of the relationship with Signify. The GPA includes aspects such as change control, product release, regulated substances, quality targets, product Supplier quality manual QS-014190/ Version: 3 Downloaded & printed copies are uncontrolled Page 25 of 43 Signify Classified - Internal verification, process control and warranty. Although Signify Procurement is responsible for this agreement, Supplier Quality will be consulted on the content of the contract. The Supplier Account Manager is responsible to agree with suppliers on the GPA content. GPA needs to be reviewed by Legal and SQM prior to final signing. 3.3. QUALITY AGREEMENT As mentioned, Signify is placing more emphasis on identifying potential problems and acting to prevent occurrence, therefore our quality contract will not only emphasis on consequence or claim management but also preventative measures that supplier should take to their best effort to avoid any potential quality issue. 3.3.1. Specification Agreement Signify recognized that certain quality targets are bound to be upgraded or change, in view of on-going activities from continuous improvement, new product launch, new technology & etc. Some improvement or changes could also be due to a direct result from a customer complaint & field return too. For quality targets that are expected to change, Signify has made specification document available. Elements that are usually included in a specification are annual quality target, OQC PPM target, supplier reporting timeline, sampling plan of reliability tests, continuous improvement projects, GSRS & other concerned items defined from the BG's. Normally all quality targets within the specification will be reviewed and revised again during the annual negotiation but in some special or urgent cases, Signify SQ will still reserve the rights to review and revise specification even outside of the negotiation period. 3.3.2. Product warranty It is our expectation that suppliers develop and deliver part that is not only fully conforming at time of delivery, but also provides faultless performance during the useful life of the finished goods part. However, it is recognized that some percentage of part may experience early failures. It is our expectation that suppliers will stand by their parts and provide warranty coverage for the parts that do not reach the expected life. For all warrantable parts, Signify requires suppliers to sign PSW (from the PPAP) on top of GPA. With combination of these contracts that expressly details the recovery guidelines for expenses related to field failures caused by the supplier's part. The GPA sets the framework for managing the allocation of Cost of Non-Quality (CoNQ) related to supplier caused warranty issues. If no GPA and PSW in place, Signify will still hold the supplier responsible for field failures related to the design or manufacture of their supplied parts and costs and liabilities will be managed on a `case by case' basis. 3.4. 2nd Tier Supplier Quality Management Depending on business engagement model and whether 2nd tier supplier prescribed by Signify of not, there ownership could be different as shown in table below: Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 26 of 43 Signify Classified - Internal * Tier 1: Supplier directly engage with Signify. * Tier 2: Supplier that does not engage directly with Signify but part of the supply chain who supply to tier 1 for Semi or Finish Good assembly. Activities Ownership by business model EMS/CMS/JDM ODM BfR T2 Supplier Selection &Contracting &Qualification &Release (only for Signify imposed suppliers) T2 Supplier Selection &Contracting &Qualification &Release (only for T1 sourced suppliers) Component specification definition (only for product Design) Component specification definition (only for T1 supplier's manufacturing process) Component release & process release SIGNIFY SUPPLIER SIGNIFY SUPPLIER SUPPLIER SUPPLIER SUPPLIER SUPPLIER SUPPLIER SUPPLIER SUPPLIER SUPPLIER SUPPLIER SUPPLIER SUPPLIER Quality control of T2 suppliers SUPPLIER SUPPLIER SUPPLIER Incident management (for Field incident) SIGNIFY SIGNIFY SIGNIFY Incident management (for T1 or T2 supplier internal incident) Supplier performance monitoring (for T1 supplier) SUPPLIER SIGNIFY SUPPLIER SIGNIFY SUPPLIER SIGNIFY Supplier performance monitoring (for T2 supplier) SUPPLIER SUPPLIER SUPPLIER Engineering change approval SIGNIFY SIGNIFY SIGNIFY Warranty management SIGNIFY SIGNIFY SIGNIFY Claim handling SUPPLIER SUPPLIER SUPPLIER 1st Tier supplier must guarantee the quality of the components supplied by 2nd Tier suppliers. 1st Tier suppliers must select and qualify their suppliers and agree with them through a quality contract on specifications and other requirements. Quality assurance in line can be done through outgoing inspection at the 2nd tier supplier, Incoming Quality Control at 1st tier supplier or both. Especially the key and critical components must be considered. Non-conformities must be followed up via 8D reporting and problem solving (see also chapter 6.8). Even if 2nd tier suppliers are selected by Signify or if Signify has approved those suppliers, the 1st tier supplier remains solely responsible to ensure the 2nd tier supplier parts conform to all quality requirements. Exemption to this rule is only possible in case of explicit agreement in writing between Signify and the 1st tier supplier. 4. Production Part Approval Process Signify PPAP main objective is to support supplier defining a plan ensuring that a product, component, or subassembly satisfies Signify requirements and to facilitate easy communication with the Supplier. It has Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 27 of 43 Signify Classified - Internal a strong focus on manufacturing and industrialization and is complementary to Design for Six Sigma methodology used across Signify development organizations. PPAP allows us to match the voice of customer with the voice of the suppliers (VOC = VOS) and is the hard proof the supplier understood our requirements. Signify PPAP is based on the standard of the automotive industry (AIAG) but is customized to consider the diversity of the product portfolio, size and volumes across different business and sectors within Signify. One of its main objectives is to identify, track and control the CTQs throughout the development and manufacturing process to meet the requirements. Each CTQ agreed is to be controlled by supplier and shall be part of the supplier quality systems and as such part of the PPAP package presented by supplier as evidence of compliancy to requirements. Other PPAP objectives also include: Ensure part meets specifications. Ensure supplier has robust process controls. Ensure supplier has capable processes on CTQ parameters. Ensure supplier has the proper measurement equipment on CTQ parameters. Ensure that supplier understands that changes require notification In case of key or customized components, Qualpacks or FAI report may also be accepted instead of PPAP. Decision of which method is to be used for part release is at the discretion of component group SQM. The supplier is responsible to conduct the proper quality planning prior to PPAP or QualPack submission. Signify has defined three PPAP levels to release components and the following details are required per each level from supplier: PPAP element Level 4.1 Level 4.2 Level 4.3 1 Design records. (drawing) X X X 2 Engineering Change Documents X 3 Customer engineering approval X 4 Design FMEA X 5 Process flow diagram X X 6 Process FMEA X X 7 Control plan X X 8 Measurement system analyses X X 9 Dimensional results (Fit) X X X 10 Material & Performance test results (Function) X X X 11 Initial process study (Statistic) 12 Quality Laboratory Documentation 13 Appearance approval record (Form) 14 Sample of the product submitted (Run@Rate, Pilot Run) 15 Master sample product submitted X X X X X X X X X X X X X 16 Checking aids X 17 Customer specific requirements 18 Part submission warrant X X X X X X 4.1 Technical Documentation Depending on business model, different technical document will be supplemented from signify: Business model Input from Signify EMS/CMS/JDM Technical drawings, Supplier quality manual Downloaded & printed copies are uncontrolled Output from Supplier PPAP 4.3 (max if DFMEA shared by Signify) QS-014190/ Version: 3 Page 28 of 43 Signify Classified - Internal ODM OEM (BfR) TPD's, DFMEA & etc. FRS or MRS Label specification PPAP 4.2 (max if no DFMEA shared) PPAP 4.1 (min) PPAP 4.3 (max) PPAP 4.1 (min) PPAP not application or PPAP 4.1 (max) In the Signify system the top-level controlling document may be a drawing or a specification, which all called Technical Product Datasheet (TPD). A detailed description of the documents that support Signify product development is available upon request. This is applicable for EMS/CMS/JDM business model. In ODM, Signify simply provide FRS (Functional Requirement Specification) or MRS (Modules Requirement Specification). These high-level commercial requirements should be sufficient for an ODM supplier to develop the product into a full or completed system. Please note that if there is any question about these controlling documents, suppliers should contact the buyer or SQA for the Signify business unit placing the purchase order. It is important to understand that top level documents often contain references to sub-level documents which in turn may reference other standards or specifications. To ensure that all part requirements are identified, all documents and standards referenced at each level must be reviewed for references to lower-level documents. This must be completed at each level and each succeeding level until all documents have been identified and reviewed. All these are part of design records of PPAP. 4.2 Prototype Requirements Throughout the product development stages, Engineering will request prototype samples for testing and evaluation. The supplier shall have a PFMEA & control plan when producing the prototype samples. The samples shall also be fully traceable for future analysis purposes and supplier shall have test data (part and process) available upon request. Non-approved suppliers may submit prototype samples for testing and evaluation but must not ship production level parts until the supplier is approved through the Supplier Selection and Qualification Process. 4.3 Part testing Production Part Approval Process (PPAP) Qualification Package (QualPack) First-out-of-Tool PFMEA Control Plan Environment and reliability impact First Article Inspection Analysis & Feedback Signify component database Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 29 of 43 Signify Classified - Internal Supplier Signify Signify will request relevant data from the supplier, e.g., PFMEA, control plan and evidence of compliance to the specification, the environment and reliability impact. Upon receipt, Signify will make a judgment on compliance to the PPAP/Qualpacks requirements. If gaps are identified, Signify will request additional data or arrange for additional testing. Any failures found will be shared with the supplier. The supplier shall take actions to bring the part to the desired specifications. The part will have to be re-qualified before it is added into the Signify or BG specific Component Database. For tool related parts, First-out-of-Tool parts will be released based by means of the `First Article Dimension Inspection' report. Process for this is: The supplier shall measure, at minimum 5 parts, all dimensions on the drawings. For multi-cavity production tools, the supplier shall measure all cavities in the tool. The supplier shall perform process capability studies on CTQs. The Cpk indices must be calculated on a minimum of 30 parts and must meet the required Cpk level as described in chapter 5.1.1 Supplier Process Capability Requirements 4.4 Manufacturing Release Manufacturing release is part of the PPAP process. In case PPAP is not followed, manufacturing release through a trial run remains a requirement so that Signify can provide feedback prior to the release of the new part for manufacturing. Process Engineering will conduct the trial run and provide a Manufacturing Release Report prior based on Run@Rate to full production with the new part. Outsourced manufacturing sites will perform such a release according to their own internal procedure. The report is one of the deliverables according to PPAP (see above, element 14). 4.5 Process Release 4.5.1. Supplier Process Capability Requirements Signify requires all suppliers to have good knowledge of Statistical Process Control. The process capability requirements for all parts Critical to Quality (CTQ) are defined below: Capability Index Comments Cpk < 1.33 1.33 Cpk < 1.67 Corrective action plan required. Production and delivery can start only after approval. In case cannot meet, 100% inspection is required to enable shipment. No action required for existing/legacy products Cpk 1.67 Mandatory for all new designs Process stability (must be proven with control chart) is a pre-requisite to Cpk calculation. Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 30 of 43 Signify Classified - Internal Suppliers shall demonstrate that they meet the process capability requirements in the PPAP or QualPack submission. Cpk requirements are subject to change depending on the project. 4.5.2. Measurement System Analysis (MSA) The quality of measurement data produced by test equipment and gages is important to determine process and part conformance. The supplier shall establish a program for all gages to identify measurement error and how it relates to process or part conformance. Gauge repeatability and reproducibility (GR&R) can be best determined by using the average and range method for a variable gage study. Gauge R&R (% Tolerance based on ANOVA method) 0 - 10% error Acceptable measurement system 10% - 30% error Conditional, depending upon importance of CTQ, process capability study >30% error The gage needs improvement and shall not be used to measure control plan CTQ's GR&R studies are required for PPAP approval for all CTQ's identified in the PQA/Project Book. 4.5.3. Calibration The supplier shall establish a calibration system that will track and account for each gauge and measuring instrument individually. Established calibration intervals shall be documented, and each instrument shall be traceable to its last calibration date. Documentation shall include the actual quantitative measurements taken during the calibration, to monitor long-term performance. Employees involved in using calibration equipment shall have documented training on the instruments they use. Documentation of training records shall be retained for verification purposes. Reference for Calibration shall be according ISO17025, latest edition. 4.5.4. Process Special Requirements For different types of manufacturing processes special requirements may be applicable. Examples of these special requirements are: Temperature and humidity control Electrostatic Discharge (ESD) protection Clean room conditions Safety products/parts Etc. In general, Signify will follow industry standards, but may deviate from this when this is deemed necessary. In these cases, the supplier will be clearly notified or vice versa. Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 31 of 43 Signify Classified - Internal 4.5.5. Maintenance All manufacturing processes require maintenance in some form or another. Signify requires suppliers to have a preventive maintenance plan in place. Corrective or breakdown maintenance is expected to be monitored, analyzed, and reduced. Preventive and corrective maintenance records need to be kept for verification. On top of all these, it is also fundamental that supplier utilize and maintain the trinity of process control documents such as process flow diagram, FMEA & control plan. All manufacturing processes should be verified and validated with a Run@Rate of continuous min 4 hrs. 4.6 Supplier Application Signoff Signify holds suppliers in high regard and recognizes them as the expert of their parts and processes. Signify depends on the suppliers to infuse this expertise into those parts and processes Signify expect the supplier to clearly indicate if requirements cannot be met so that in mutual corporation design & process changes can be agreed to assure full quality compliancy over life or critical parts, Signify may seek the help of the supplier to review the design to verify that the right part has been selected for the application and that there are no adverse conditions in the manufacturing processes that can negatively impact the reliability of the part. Signify will initiate this activity with the suppliers. Once the proper reviews have been conducted with no concerns identified, the supplier shall sign off on the application. More details available in QS-ExC1-300_Procedure for Production Part Approval Process. 5. Quality Performance Management 5.1 Cost of Non-Quality Reduction Signify is committed to the principle of Continuous Improvement and use Cost of Non-Quality as a measure of our performance. Non-conforming parts are to be reduced. Suppliers will investigate the cause of failure of non-conforming parts and the implementation of corrective and preventive actions. Although a quality issue caused by supplier shall still be recovered as much as reasonably possible. The value we claim is not only the value of the defective parts, but also direct & indirect cost as prescribed in GPA clause 13.2 Remedy cost. These claims will help us to recover our costs and will motivate supplier for structural improvement. 5.2 Receiving Inspection Suppliers must focus on prevention, not detection, and strive to improve their processes and the quality of the parts. Depending on the proven performance of the supplier a decision will be made by Signify w.r.t. inspection schedules to be applied to secure the quality of the parts towards our customers. All quality records need to be maintained by supplier. (information such as date of inspection, supplier, Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 32 of 43 Signify Classified - Internal inspector, 12NC's or part number, production line and shift.) Doing this will prevent fraudulent of the data and such records need to be signed off on regular basis by Signify. Signify or its outsourcing party may perform receiving inspection in accordance with internal procedures having an acceptance level that striving towards zero defects. Signify or its outsourcing party may reject any nonconforming parts. Final goal is to have a Direct-Ship-To-Stock way of working, but this will be only implemented for parts or suppliers with a proven track record for good quality. All preventive outgoing inspection cost are to be assumed responsible by the relevant supplier, where the inspection plan remains dynamic and could be reduced according to their outgoing inspection PPM performance. This will enable supplier to improve and achieve reward relevant to their outgoing inspection performance, which is a lower inspection level or Direct-Ship-To-Stock. Signify outsource outgoing inspection work to a 3rd party contractor and all relevant cost will be charge back accordingly to suppliers. For details, please refer to the signed Supplier Inspection Agreement. 5.3 Traceability It is expected that all suppliers have an established system for an appropriate level of part traceability in terms of batch or lot production and material control. Certain parts may be subjected to specific, defined traceability requirements. Typically, this requirement is applied to parts related to safety or legal regulations. Suppliers of parts in this category are required to maintain systems that allow traceability from a part serial number or date code to specific manufacturing, inspection and material records associated with a part and the regulated feature(s). This information must be retained and stored to be readily accessible to Signify when required. The Supplier Quality Engineer assigned to a part may define specific traceability or document requirements. If there are any questions concerning the type of traceability required or level of supporting documents, suppliers are obligated to contact the Supplier Quality Engineer immediately. Generally, parts where traceability is needed will be identified CTQ or CTS within drawings or specifications. As a rule, the criticality designation [CTQ] or [CTS] will be applied to safety critical parts. Additional information is available in the drawings or TPD. In addition to features identified as critical in Signify specifications, suppliers are responsible to identify all additional safety or regulatory requirements that are specific to their parts or commodity. 5.4 Part Quality Part quality is defined as the ratio between the number of parts rejected at delivery or during the warranty period agreed between the supplier and Signify and the number of Parts supplied in each time period. Part quality levels can be given on PPM level or percentage. A reject is defined as a part not meeting the Part Specifications. If a part is rejected, Signify is entitled to claim damages from the Supplier in accordance with the relevant terms and conditions of the GPA and/or any applicable auxiliary agreements. Suppliers may be required to provide PPM data for both their incoming materials as well as their finished goods supplied to Signify. Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 33 of 43 Signify Classified - Internal 5.5 Supplier Rating The performance of our most important Suppliers is evaluated in a consistent and standardized way using the Supplier Quality Scores in TEAMs. The results are reported back to the suppliers as a basis for further improvement programs. Supplier is expected to review their own performance monthly and to send a corrective action plan in case of RED scores. The performance is measured against mutually agreed expectations, as well as against other suppliers within the commodity. The sum of the score of 5 elements will be between 0 and 100 points. Supplier Quality is max 30 points and it constructs were made up by 3 portions: 1. Outgoing inspection PPM performance, 2. Number of incidents (A, B or NCR) & 3. Other complaints related to the effectiveness of PPAP, responsiveness & recurrence incident. Signify GSRS Score Supplier names DPPM Score: Min -12, Max +10 Data Enrty Reference PPMTarget CT Target #pcs inspected DPPM DPPM Score DPPM Score -12 -30 / case Nbr of Class A Additional Substracting points -15 / case Nbr of Class B -5/case -4if any -5if any -5if any Complaints Nbr of related to PPAP Latereply Recurrence Class NCR (Yes: - 4 pts, No = 0) (Yes = -5 , No = 0) (Yes = -5, No = 0) Max 30 Final Score -1.00 Portion 1 Portion 2 Portion 3 Portion 1: DPPM Definition: defect part per million A PPM target is the target agreed with the supplier. A PPM reference target is the target set for a group of suppliers within the same group of commodity and technology. The DPPM is measured ideally at Supplier OQC or under exception in the receiving factory (IQC / FOR). At Signify, we strive to achieve zero defects. Thus, supplier who can perform at zero PPM level shall be rewarded with full score of 10 points. However, if supplier is only able to perform within or on target of their PPM, then they will receive progressive DPPM score between 0 to 10. Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 34 of 43 Signify Classified - Internal A supplier on target but still out of reference target will receive 0 score. The following graph summarize the DPPM score Vs DPPM achievement: Portion 2: Is also known as the subtracting portion, where if an A-incident were caused by supplier then a full 30 points will be minus out, following by -15 points if supplier caused a B-incident or -5 points is supplier caused NCR. Portion 3: Signify would also like to take this opportunity to measure the effectiveness of PPAP, responsiveness of 8D, PPAP & etc. and to penalize recurrence issue on top of not to have incident or NCR. For complaint that are related to PPAP is punishable by max -4 points, complaint related to late respond PPAP, 8D or etc. and recurrence issue is punishable by max -5 points. In general (Exception for DPPM score = -12) The final GSRS score is calculated as the following: 20+ Portion 1 + Portion 2 + portion 3. The following table explains the supplier GSRS status vs quality GSRS score. Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 35 of 43 Signify Classified - Internal 6. Incident Management 6.1 Analysis of Customer Returns Signify has Customer Care as top priority and will act as quickly as possible to minimize the impact to them, whenever issues are reported. Suppliers are considered valuable members of Signify's problemsolving team. Suppliers shall have capable resources and a documented process to support a fast turnaround of customer returns. The turnaround time for the total problem resolution shall be commensurate with the urgency of the problem. The resources and the contact information, i.e., names, shipping address, shipping, and handling instructions, shall be identified in advance. The supplier shall provide a complete analysis report using the 8D format. Depending on the nature of the problem, more frequent, interim reports will be needed to keep all parties informed. Supplier's assistance may be needed in helping to resolve the problem at Signify's Customer or Manufacturing sites. In such cases, supplier shall send the technical experts to accompany the problem investigation at these sites. 6.2 Non-Compliance Report (NCR) In case parts are rejected a Non-Compliance, Report may be issued. NCR is used to recover costs from parts that do not meet Signify specifications. Non Compliance Report Supplier action (10 days) Description of nonconformance Actual measurements against specifications PPM defective of nonconforming material found Supplier lot identification information Contact information of the Signify person handling the non conformance Pictures to further clarify the nature of the defect, whenever possible Return Authorization Number Shipping address Shipping method Shipping account to be charged Shall the suppliers desire defect samples for analysis, it is the supplier's responsibility to make such arrangement. Not having defect samples is not a valid excuse for missing the 10-day requirement. Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 36 of 43 Signify Classified - Internal Signify or its outsourcing party will provide this information to Logistics for the proper return of the material. After the return, Logistics will provide Negative Receipt Number to Accounts Payable as proof of shipment. After the proper accounts have been credited, Accounts Payable will close the NCR. 6.3 Supplier Corrective Action Request In addition to the Non-Conformance Report, Signify or its outsourcing partner may request corrective actions from supplier. This is done via a Supplier Corrective Action Request (SCAR). The SCAR shall reference the NCR for complete non-conformance description where applicable. The SCAR can be communicated by e-mail or via a dedicated website. Instructions on how to complete the SCAR are included on the 8D Corrective Action Report. The mandatory 8D format can be found at: http://www.lighting.philips.com/b-dam/b2b-li/en_AA/company/supplier/problem-solving-report.docx Supplier shall comply with the following requirements, unless specified otherwise in the GPA: Non-conformance category Confirmation and containment action Critical or safety issue* 24 hrs Root cause analysis and corrective action plan (tier 1) 5 calendar days** Complaint solving/root cause analysis (tier 2) According to agreed action plan Other 2 days 10 calendar days** According to agreed action plan * "Critical or safety issue" is a non-conformance, which is assessed as likely to result in injury to person, material damage, environmental hazard, (potential) Signify customer complaint or other unacceptable consequences. ** or otherwise, in case specified in the Signify complaint report. Containment actions shall first and foremost address how to protect Signify's customers from injury or damage and to keep the production line from shutting down. Secondly, the supplier shall address what is to be done with suspect stocks, i.e., at the supplier's warehouses, at Signify warehouses, and in transit between the supplier and Signify. Thirdly, the supplier shall detail the method of screening the suspected stocks, date of first delivery of safe part and how they will be distinguished from normal stock. The Corrective Action Plan shall include the responsible person for each action and reasonable timing for completion. The supplier shall provide updates to the corrective action plan at the appropriate time. The SCAR will be closed after written approval by Signify Supplier Quality representative in charge of the complaint. If the problem recurs within a 6-month period, Signify has the right to disqualify the part. Once a part is disqualified, Signify will explore alternatives from other qualified suppliers. 6.4 Cost Recovery Signify is focused on prevention but will initiate cost recovery caused by a supplier problem as a necessary part of business. Cost recovery is part of the NCR and SCAR process. All Costs of Non-Quality related to a Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 37 of 43 Signify Classified - Internal supplier complaint shall be agreed between Signify and the supplier and credited before the complaint can be considered closed. Cost of Non-Quality charges may include (list is not meant to be exhaustive): Final product replacement (including replacement in the field and related costs) Costs of excess work (control, rework, sorting, retest, etc.) Costs for shipment Engineering costs Consequential damage OQC inspection cost Penalty(ies) Any other related costs, e.g., administration, freight, replacement costs etc. Supplier will be informed by the SAM or SQM in case a cost recovery process is started. A written summary of all costs incurred will be provided to supplier. Subject to the agreed warranty terms in the GPA, reimbursement details will be agreed with the SAM. 6.5 Cost Prevention To emphasize Signify is focused on prevention two main activities are defined to help our suppliers avoiding Cost of Non-Quality in the stages of full mass production. Monthly Quality Reporting can be requested from the supplier. Although this might seem additional work at first it is an effective way to join forces in avoiding CoNQ. By effectively discussing CTQs, the way to monitor them and by jointly analyzing the results (potential) problems can be identified early with a minimum of related cost. Next to Supplier Assessments during the stages of Supplier Selection, Certification and Process Release Signify believes it can help suppliers by conducting Supplier Assessments also during the stage of full mass production. These assessments are performed in a similar way but will mostly be focused on Quality and Manufacturing aspects of a specific site, line, process or group of parts. 7. Supplier Development 7.1 General Business Reviews Signify recognizes communication is the key to success and welcomes the suppliers to visit Signify in the headquarters and in their plants. Please schedule these informal meetings in advance. For specific suppliers Signify will conduct general business reviews periodically. These reviews will be scheduled in advance by Procurement/Supplier Account Manager. They can take place at headquarters, at the plant or at supplier's location. Typical topics for discussion include: Review of (quality and delivery) performance (GSRS) Technology updates Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 38 of 43 Signify Classified - Internal Sharing of business climate New opportunities e.g. Early Supplier Involvement (ESI) Upcoming changes to the business, if applicable Supplier site assessments For suppliers having chronic quality, delivery, or communications issues, Signify will conduct performance reviews. Depending on the nature of the issues, suppliers may be asked to come to company headquarters or at the plant on short notice. Suppliers shall be fully prepared to discuss their corrective action plan on how to rectify the situation expeditiously. Follow up meetings may be required and will be defined in the meeting. If the problem is not corrected, more serious actions will be taken. 7.2 Continual Improvement Signify is committed to continually improve its performance and that of its supply base. To support these activities, Signify may run supplier (quality) development programs. Participation in these development programs is generally on a voluntary basis. However, in case of structural underperformance of a supplier, participation in the program may be required to remain qualified as a supplier. Supplier Quality Development programs typically consist of the following steps: Announcement of the development program and approach to suppliers to investigate their willingness to participate Self-assessment by the supplier, using a standard tool Quick scan by Signify representatives to verify the self-assessment or identify first quick wins Formulation of an improvement plan by the supplier Implementation of the improvement plan with regular follow up and review by Signify. In addition to the above, Suppliers may also be invited to participate in the internal Signify Business Improvement Competition. 7.3 Supplier (Quality) Workshop Signify conducts Supplier (Quality) Workshops to communicate to a large audience any important changes to (quality) requirements or any new (quality) concepts. These are not regularly scheduled events. The suppliers shall keep the company contacts updated so invitations can be sent to the proper person when these events are held. 7.4 Warning letters In case of serious underperformance Signify may issue a warning letter. Warning letters are typically issued in following situations: Category General Business Principles Contracts Deviation Any violation to the Philips' General Business Principles. Breach of GPA, GTC, IP Agreements or Non-Disclosure Agreements Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 39 of 43 Signify Classified - Internal Compliance to specification Supplier Audits (SAT, sustainability & SCS) Early Supplier Engagement Product release and change control Supplier performance Other Refusal to sign/comply with SSD, RSL and/or PSCS (for exporters to USA/Europe) as part of the GPA or separately Market recall or serious incident (>100KEuro), (at least partially) caused by supplier Failure to submit an improvement plan after an audit or to close noncompliances from audits within agreed time or refusal to have audit performed Unwillingness to support PPAP where requested Unapproved changes or unapproved outsourcing by supplier 2 times red score on Quality in supplier rating GSRS in 12 months at total supplier level, or 4 times red on Quality at supplier-site level Any other issue caused by unprofessional behavior of supplier, seriously impacting Signify or its customers In all cases a clear corrective action to improve performance needs to be submitted by the supplier. Depending on the issue, a "for cause" audit may be executed by Signify at the supplier's site. Quality of the corrective action plan and closure of the actions will be closely monitored. Once Signify is satisfied with the corrective action implementation, the warning letter will be closed. In case supplier is not willing or able to correct the deviation that was addressed in the Warning Letter, or another serious deviation has occurred within 12 months after issuing the first warning letter, a second warning letter will be issued. This will impact the business relation with Signify. Typical actions that will be taken by Signify may include a temporary new business hold or supplier phase out. In case of very serious deviations, Signify may decide to blacklist suppliers, leading to a long-term ban to deliver. 7.5 Exit Procedure Changes in business environment will sometimes lead to changes in business objectives and strategies. There may be a time when the business relationship with a supplier will end. In cases where a supplier is no longer able to serve the needs, Signify will work to protect the customers against any production interruption. Signify asks the suppliers to provide as much advance notice as possible. The supplier shall maintain the current supply until a viable alternate source can be found. In case of major quality or delivery deficiencies, Signify will notify the suppliers of their situation through a warning letter. In case of a second warning letter, Signify will act swiftly to protect its customers. After the business relationship has ended, an ex-supplier shall go through the same Supplier Selection process as a new supplier before they can be considered for re-entry into the supply base. The ex-supplier cannot be considered as a new supplier on the Approved Vendor List (AVL) within 18 months after the previous business relationship has ended, unless Signify decides differently in exceptional cases. Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 40 of 43 Signify Classified - Internal Glossary 8D APQP APQP tracker BOMCheck CAP Eight Disciplines Problem Solving - method to approach and to resolve problems. It establishes a permanent corrective action based on statistical analysis and focuses on the origin of the problem by determining its root causes Advanced product quality planning - a framework of procedures and techniques used to develop products in industry The APQP tracker is used to facilitate communication with the supplier and between all functions involved in the project. It ensures that all required steps are completed on time, with a high quality of content during product development process. The tracker has a detailed supplier timing chart synchronized with Philips milestones The BOMCheck initiative is led by the European trade association COCIR and delivered by international environmental consultancy ENVIRON. Philips uses BOMCheck portal to list restricted and declare substances for regulatory compliance (REACH, RoHS, Batteries, Packaging etc.) in our products Corrective Action Plan Carbon Disclosure Supply Chain information request CDP's supply chain program is an annual process that results in consistent information from suppliers on climate -related strategy and action Conflict Minerals CoNQ Conflict minerals are minerals mined in conditions of armed conflict and human rights abuses, mostly in the eastern provinces of the Democratic Republic of the Congo. Companies subject to the conflict minerals requirements must disclose conflict minerals information on a calendar year basis Cost of Non-Quality Cpk Critical or safety issue CTQ The process capability index or process capability ratio is a statistical measure of process capability: the ability of a process to produce output within specification limits A non-conformance, which is assessed as likely to result in injury to person, material damage, environmental hazard, (potential) Philips customer complaint or other unacceptable consequences Critical to quality DfSS Design for Six Sigma - development methodology DfX Design For X - X = manufacturability, test, service, procurement, assembly, flexibility, environment, recycling, etc. ESI Early Supplier Involvement FOR FCR FMEA Fall Off Rate, defined as the ratio between the number of produced bad parts/number of produced parts expressed in parts per million Field call rate, defined as the moving annual total number of products returned from the field/moving annual total number of delivered products to the field, expressed as a percentage Failure Mode and Effects Analysis GPA General Purchasing Agreement JQE/JQM Joint Quality Engineer/Joint Quality Manager (see chapter 7.5) Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 41 of 43 Signify Classified - Internal MSA MQA NCR PPAP PQA Kick off meeting QualPack RBA REACH RSL RFA Risk countries RoHS SAM SAT Measurement System Analysis: A specially designed experiment that seeks to identify the components of variation in a measurement. A measurement systems analysis evaluates the test method, measuring instruments, and the entire process of obtaining measurements to ensure the integrity of data used for analysis (usually quality analysis) and to understand the implications of measurement error for decisions made about a product or process. MSA analyzes the collection of equipment, operations, procedures, software, and personnel that affects the assignment of a number to a measurement characteristic. Master Quality Agreement Non-Conformance Report Production part approval process (PPAP) is used to demonstrate that all customer engineering design records and specification requirements are properly understood by the supplier and that the process has the potential to produce product consistently meeting these requirements during an actual production run at the quoted production rate. The PPAP process is described in paragraph 5.3 in more details. Under the lead of the assigned project SQE, a kickoff meeting is organized with the supplier's team to discuss relevant project information which is documented in the PQA and first page of APQP tracker. Following to this meeting, follow up sessions are organized to review the technical product documentation and the list of CTQs. The purposes of these meetings are that the Supplier understands early enough all the specifications of the part to be supplied to Philips and that the Supplier agrees on the feasibility of the technical requirements before any investment is done. Qualification package - set of data and documents (procedures, process maps, forms, etc.) required for production release Responsible Business Alliance Registration, Evaluation, Authorization and Restriction of Chemicals. REACH addresses the production and use of chemical substances (i.e., everything made of atoms), and their potential impacts on both human health and the environment. Regulated Substances List Request of Analysis As described and assessed by Maplecroft and updated based on other publicly available risk indexes. The latest list of risk countries can be found on the following Philips website: https://www.signify.com/global/contact/suppliers/sustainability/our-programs/supplier-sustainabilitymanagement Restriction of Hazardous Substances Directive 2002/95/EC, short for Directive on the restriction of the use of certain hazardous substances in electrical and electronic equipment Supplier Account Manager - Signify focal point of contact for designated supplier(s) Supplier Assessment Tool SCAR SSD Supplier Corrective Action Request Supplier Sustainability Declaration. More details can be found in https://www.signify.com/global/contact/suppliers/sustainability/our-programs/supplier-sustainabilitymanagement The Supplier Sustainability Declaration is based on the RBA code of conduct, supplemented with stricter requirements on collective bargaining and freedom of association, in line with the integrity code. Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 42 of 43 Signify Classified - Internal QAM Quality Account Manager Supplier quality manual Downloaded & printed copies are uncontrolled QS-014190/ Version: 3 Page 43 of 43Microsoft Word for Microsoft 365