SUPPLIER QUALITY MANUAL

This AFX Industries Supplier Quality Manual is approved for use by Suppliers to AFX Industries.

This Supplier Quality Manual is a mutual agreement between the AFX Industries issuing company and the Supplier. Compliance to these requirements will be audited and reviewed in accordance to the procedures contained herein.

All revisions to this Manual are identified per above indicated table of authorization for additions and for deletions. 

The controlled version of this manual is located on the supplier internet: www.afxindustries.com . Printed copies are uncontrolled and are for information purposes only.

This manual is reviewed annually, and updated if necessary, with numerical designation to identify the current revision level.

SECTION 1   INTRODUCTION

1.1                     PURPOSE AND POLICY          

1.2                     DEFINITIONS

1.3                     COMPANY  OVERVIEW

1.4                     SUPPLIER  APPROVAL  REVIEW

1.5                     ASSOCIATED MATERIALS

1.6                     CONFIDENTIALITY

SECTION 2   GUIDELINES FOR AFX SPECIFIC REQUIREMENTS

2.1                     CONTRACT   REVIEW

2.2                     AFX   SUPPLIED  MATERIAL

2.2.1        DESIGN CONTROL FOR TOOLING

2.2.2        AFX SUPPLIED TOOLING

2.3                     PRODUCT   IDENTIFICATION

2.4                     OPERATION STANDARDS

2.5                     INSPECTION   AND  TESTING

2.6                     METROLOGY

2.7                     HANDLING, PACKAGING AND DELIVERY

2.8                     TRAINING8

2.9                     STATISTICAL  METHODS

2.10                  ADVANCED PRODUCT QUALITY PLANNING

2.11                  PROCESS FAILURE MODE AND EFFECTS ANALYSIS (PFMEA)           

2.12                  PROCESS FLOW DIAGRAM AND PROCESS CONTROL PLAN

2.13                  PRODUCTION PART APPROVAL PROCESS (PPAP)

2.13.1      APPEARANCE APPROVAL ACTIVITY

2.13.2      BOUNDARY SAMPLE SUBMISSION AND APPROVAL

2.14                  PACKAGING AND HANDLING REQUIREMENTS

2.15                  SUPLIER DEVIATION REQUEST

2.16                  SUPPLIER PRE-PRODUCTION SAMPLE REQUIREMENTS

2.17                  SUPPLIER PROCESS CHANGE REQUEST

2.18                  INITIAL PRODUCTION PART (IPP)

2.19                  COMPLAINT NOTIFICATION AND CORRECTIVE/PREVENTIVE ACTION REPORT 

2.20                  SUPPLIER PERFORMANCE TRACKING AND REPORTING

2.21                  ENVIRONMENTAL REQUIREMENTS

2.22                  BALANCE OUT/ CLAIM PROCESS

S E C T I O N     1

INTRODUCTION [top]

1.1     Purpose   and   Policy [top]

The purpose of this manual is to provide and clearly communicate suppliers AFX quality expectations. This manual has been written to cover the general requirements of AFX Industries companies all of which shall herein after be referred to as AFX and it is not intended to replace the AIAG reference manuals or other customer specific requirements. 

It is the policy of AFX to select as sources of parts and material only those suppliers who meet our performance standards on Quality, Technology, Delivery, Management, and Cost.

All AFX suppliers shall take steps to attain compliance to ISO 9001:2000/TS16949:2002 standard.

Acceptance of a purchase order after the date of issuance of this standard constitutes acceptance of all requirements within the body of this document.

Should the supplier have questions, comments or concerns regarding the requirements set forth in this document, or suggested improvements, AFX encourages open communications in the interest of continuous improvement and successful partnerships.

1.2   Definitions [top]

All Definitions shall be interpreted per the most recent AIAG ISO 9001:2000//TS16949:2002 manuals unless otherwise specified in this document.

1.3         Company  Overview [top]

AFX offers a complete range of leather wrapped products for the automotive industry. Our main products varies from steering wheels, interior trim components, seating leather cutting and preparation, injection molding, component assembly and testing, manufactured  to the highest quality, reliability and performance specifications. Our global resources include facilities, engineering expertise and manufacturing operations. These permit us to deliver exceptionally qualified products.

Core Values

We pride ourselves in our excellence on quality, customer satisfaction and delivery.

Quality Policy

AFX Industries behavior is focused on satisfying our customer expectations. This will be accomplished through conscientious systems and processes which will enable us to achieve growth and profit.

1.4         Suppliers  Approval  Review [top]

In accordance with AIAG-Quality System Requirements / ISO 9001:2000/TS16949:2002, Suppliers will be evaluated and selected on their ability to meet AFX quality requirements and other requirements.

Once approved, quality performance will be monitored and evaluated. The supplier approval status shall be based upon complying with quality system requirements outlined throughout this manual including Production Part Approval Process, and sustained high quality performance.

1.5         Associated  Materials [top]

Supplier must meet AFX quality standards as outlined in this Supplier Quality Manual, in compliance with the following manuals:

ü                  AIAG  Automotive  Industry Action Group, Quality System Requirements  QS-

            9000/TS-16949:2002.

ü                  International Organization for Standardization ISO 9001:2000.

ü                  AIAG Measurement System Analysis (MSA).

ü                  AIAG Quality System Assessment (QSA).

ü                  AIAG Advanced Product Planning and Control Plan (APQP).

ü                  AIAG Potential Failure Mode and Effect Analysis (FMEA).

ü                  AIAG Statistical Process Control (SPC).

ü                  AIAG PPAP 4^th. Edition

ü                  ISO 14001:2004 Environmental Management System

Note: Copies of Automotive Industry Action Group (AIAG) manuals are the responsibility of the supplier and may be obtained by contacting them directly. Suppliers are responsible for maintaining the latest edition of these documents.

1.6         Confidentiality [top]

AFX recognizes that its suppliers may be exposed to data and/or knowledge, which is sensitive in nature. The supplier shall treat all data and/or knowledge in strict confidence and report any intentional or non-intentional breach of confidentiality to AFX management or executive level personnel immediately.

It is the supplier’s responsibility to maintain control of all drawings and specifications given by AFX.  All drawings and specifications should be treated as ”propriety” and should only be distributed with written permission from AFX.

 S E C T I O N     2 [top]

GUIDELINES FOR AFX SPECIFIC REQUIREMENTS

2.1     Contract Review [top]

a.                  The supplier  shall have a documented process  for ensuring  that  systematic, multi-disciplinary  activities are carried out by the supplier  to ensure that all customer  requirements  are clearly defined, documented, and to ensure that the supplier has the capability  to meet  said requirements, prior any formal production build commitment.

b.                  Amendments to existing contracts shall be documented and communicated to all affected suppliers personnel.

c.                   Production   changes and/or delivery date changes may occur during the normal flow of business, and in these cases, AFX shall typically request these changes in writing.

d.                  The supplier  should avoid verbal  change orders, unless in urgent circumstances, however, in these cases  shall summarize and  record  the nature of the request, including  the time, date, name, title and phone number of the person  making  the request.

e.                  With all good intent implicit of the elements above, there may be circumstances, which prevent the supplier from meeting the agreed to requirements. In  the  event the supplier can not meet any of their contractual  obligations including  quality  specifications, quantity, delivery  dates or other, the supplier  shall  notify appropriate  AFX  personnel  immediately  for further  direction.

2.2      AFX Supplied Material [top]

a.                  In the event AFX provides materials to the supplier for any purpose, the supplier shall provide for adequate care of these materials.

b.                  Any such product that is lost, damaged or otherwise unsuitable for use shall be reported to AFX immediately for further direction.

c.                   The supplier shall be responsible for the out going quality of AFX supplied materials.

2.2.1  Design Control of Tooling [top]

a.         The supplier shall establish and maintain a documented procedure to control and verify the design of any tool in order to ensure the characteristics specified on drawing provided by AFX.

b.         All drawing will be associated to such drawing by part number and rev level. A suitable system must insure that countermeasures taken during the life of the tool are reflected in the drawing.

2.2.2 AFX Supplied Tooling [top]

a.            AFX tools and components are considered proprietary and the supplier will maintain such control so as to insure that no information or components are provided to anyone except AFX.

b.            AFX  tools and  fixtures will only be used  to manufacture AFX  product.

c.             The supplier is responsible for all tools and fixtures used for manufacturing AFX product.

d.            The supplier shall execute routing maintenance that extends the life of the tool i.e.  Lubrication, sharpening, cleaning.

e.            General Maintenance will be carried out at the expense of the supplier i.e. spring replacement, welding.

f.              Major Repairs. When major repairs are needed, the supplier will notify AFX Purchasing and Supplier Quality before a problem with production is experienced. The supplier  must explain in writing what tool, what happened, where in the tool the problem is, how it was detected, what are the inventories, and details  on the  repair that is needed ,as well as the cost  if readily available.

g.            AFX can audit a tool, fixture and all related documents without notice to the supplier. In such a case where this type of inspection is executed, the supplier will support such review with the appropriate personnel. AFX will try and give appropriate notice to the supplier prior to any inspection.

h.      All AFX tools and fixtures are to be identified as “AFX”. Each tool is to have the part number identified on the tool.

i.       The supplier will maintain proper documentation related to the maintenance history and repair of the tool.

2.3     Product Identification [top]

a.         The supplier shall have system in place to ensure consistent and proper identification of components, subassemblies, or products through all process phases and activities.

b.         In some cases, detailed product identification requirements will be communicated via other official means such as product specifications, drawings, purchase orders or AFX correspondence.

c.         The supplier shall ship material to AFX on a First-In-First-Out basis.

2.4     Operation Standards [top]

a.         The supplier shall establish and maintain a documented quality system for floor operations. These documented operation procedures shall specify the objectives and requirements of the various activities having an impact on quality and be available for use by employees in the work area.

f.          Supplier shall maintain or exceed process capability/performance characteristics as included in the AFX approved PPAP.

2.5     Inspection and Testing [top]

The supplier shall ensure that systematic processes are established and documented to ensure effective implementation of material and product inspection and approval. This shall cover from material receipt to final product shipment to AFX. 

2.6     Metrology [top]

The supplier is required to have an adequate means to test and measure any dimension

and perform accurate analysis of dimensions. In any case where the supplier cannot

perform such measurement; an accredited measurement facility must be on contract to

execute the requirements of the supplier at the supplier’s expense.

2.7     Handling, Packaging and Delivery [top]

a.         The supplier shall define, document  and implement  effective handling  and  packaging  procedures  which  provide  for satisfactory  protection  of  products  against  damage, deterioration or contamination  during  storage, transportation  or any  later period  until  the supplier’s  responsibility  ceases.

b.         Products with limited shelf-life or requiring special protection during transportation or storage shall be identified, and procedures shall be maintained to ensure that out-dated products are not utilized.

2.8     Training [top]

The suppliers training program is essential for the achievement of quality objectives. This includes specific training necessary for performing assigned task and general training both to build incentives and to heighten quality awareness.

2.9      Statistical Methods [top]

a.         The supplier is to use statistical methods including data collection and analysis. Evidence of statistical conformance may be required per individual AFX drawing or specification.

b.         Quality improvement decisions should be based on numerical data.

c.         Statistical methods should be used for product, service and process design, in-process control, non-conformity evidence, problem analysis, risk determination, finding root causes, establishing product and process limits, forecasting, verification and measurement or assessment of quality characteristics. The supplier shall utilize all statistical methods mandated by AFX.

d.         The documentation  resulting  from  the application  of statistical  methods  shall  be  used  to  demonstrate  conformance  to the requirements  of AFX.

2.10   Advanced Product Quality Planning (APQP) [top]

AFX is committed to flawless launches 100% on time, for this reason suppliers are expected to use systematic planning for new products.

Advanced Product Quality Planning (APQP) has become the industry standard by which new products are introduced into the automotive market.  APQP will be the tool used to monitor launch activities for all suppliers.

AFX utilizes a Product Quality Planning activity as described in the Automotive Industry Action Group (AIAG) and Control Plan Manual. The manual provides general guidelines for preparing plans and checklists for ensuring that proper planning is being utilized.  The supplier must demonstrate progress and the current status of all projects through the application of Advanced Quality Planning techniques.  This is achieved by using the above mentioned manual or similar approved format.

APQP meetings are held for all new products, this is considered by AFX to be critical to the success of any product launch.  Meetings consist of AFX and when required supplier representative who meet to review and assess the progress of the product quality planning process for the subject product and to address any open issues, preventing successful and timely product launch.

It is still possible that we may require some unique customer specific processes or documents.  If this is the case you will be notified accordingly.

Your Quality Engineer and or/Sales representative will be the main contact throughout the launch.

2.11                 Process  Failure  Mode and Effects  Analysis ( PFMEA) [top]

AFX requires format and development as per the FMEA AIAG manual last edition

2.12                 Process Flow Diagram (PFD) and Process Control Plan [top]

AFX requires format and development as per the APQP and Control Plan AIAG manual last edition

2.13                 Production  Part  Approval  Process ( PPAP) [top]

a.         All Suppliers are required to submit Level Three (3) Production Part Approval process package per the latest revision AIAG/PPAP manual or per the “Vendor PPAP Notification email” unless written direction is received from AFX stating otherwise. Refer to AIAG PPAP Manual for further reference. Supplier must ensure that all PPAP documentation is submitted and conforms to standards outlined in AIAG manuals, unless exceptions have been outlined in Purchase Agreement.

b.         The PPAP package shall be submitted to AFX Quality department for approval.  Supplier Quality Engineer is responsible for reviewing supplier PPAP package and providing approval once is in conformance with AFX requirements.

c.         Interim PPAP may be granted only in special cases to support mass production. Interim PPAP will be granted only with corrective actions and due dates listed.  PPAP will be revoked if corrective actions are not completed by the due dates agreed upon. Refer to PPAP AIAG Manual for the appropriate format.

d.         Starting mass production, the PPAP shall be submitted on a yearly basis unless waived by AFX.  If no changes have occurred from the last PPAP submission, the annual submission may be the Part Submission Warrant only with reference to the previous submission.

2.13.1         Appearance Approval Activity [top]

Color / Grain / Gloss appearance reviews typically used by AFX’s customers to be used as an initial target reference. These may also be used as color standards once properly approved. The following shall be considered by the supplier:

a.                  The supplier shall submit the Appearance Approval Report properly filled out

along with color readings and any other important reference information, with any appearance submission.

b.                  AFX requires 3 pieces for appearance review. Material or parts must be identified individually with supplier name, lot number and submission date.

c.                   Approval is based on visual and numerical evaluation of component parts. Emphasis is on visual evaluation to the master and mating components. Since AFX customer approval is required for final component approval, supplier appearance approval will be given after material has been processed by AFX and approved by AFX’s customer.

    d.         Supplier must document all processing parameters used to create the color/ Grain Sample, as well as visual and numerical data(e.g., L, a, b readings).The parameters must be tightly controlled and reproduced.  Supplier must request AFX approved master sample for production reference as well as AAR document written approval.

2.13.2 Boundary Sample Submission and Approval [top]

Boundary samples must be prepared for items stated “as per boundary sample” as noted on the control plan or operation instructions.

Boundary samples may be created to define problems discovered in pre-production and /or mass production stages. This may include things such as color limits, product

characteristic limits, physical property limits such as density or performance limits.

Boundary sample submission requirements shall be negotiated between the suppliers

and AFX and shall meet AFX’s requirements. The number of submission samples is

negotiable.

a.       Consider the following for boundary sample submission:

            1.         Collect the necessary number of samples with similar levels of quality.

2.         Complete and attach the Boundary Sample Tag to each sample (Boundary Sample Label QF-8-008-4 Rev. 2)

                3.         Submit the samples according to the requirements agreed to by AFX.

b.          Upon submittal of temporary boundary samples, a countermeasure plan detailing the root cause, countermeasure and recurrence prevention activities should be included when so directed by AFX.

2.14   Packaging and Handling Requirements [top]

The supplier shall comply with AFX packaging and labeling specifications and shall submit examples and / or recommendations with the initial sample submission. It is the supplier’s responsibility to obtain AFX approval.

The outer packaging shall provide a clear description of the contents. Labels shall include AFX part numbers. A lot number must be present on packaging and should comply with AFX requirements. Bar coding is a requirement for our labels must comply with AIAG B-10 Standard and code 39 format.

2.15  Supplier Deviation Request [top]

Deviation Authorization Request (Deviation Form QF-8-007-1) is used for temporary approval to build and / or ship product that does not conform to the AFX drawing, process and /or Inspection Standard.  The following must be considered:

a.      Whenever the product or process is different from which is currently approved, the supplier shall submit the “Deviation Authorization Requests (DAR)” and obtain written approval from AFX prior to proceed to produce or ship any product.

b.      The deviation must have a signed approval by AFX Supplier Quality Engineer   to be accepted. Approval may be granted ONLY if the deviated product does not jeopardize AFX customer requirements.

2.16   Supplier Pre-Production Sample Requirements [top]

Pre-Production Samples have a very important roll in the developing, inspecting, and approving of materials or parts which feedback will be used to make decisions in a final product appearance, characteristics, packaging, dimensions or design.  Parts or Materials are not at production level at this point.

In AFX we have a dedicated process to handle pre-production samples, reason why we request our suppliers to properly identify the material and include inspection reports as applicable for each sample type.

a.         The Supplier sample part container should be properly identified to insure correct part usage. (Pre-Production label)

b.         Partial verification of pre-production sample parts to the AFX Standards is typically required for some samples. This may include verification to drawings, inspection standards or other requirements.

2.17   Supplier Process Change Request   [top]

In order to have proper control of process and design changes from suppliers, AFX requires the following be considered:

a.      All requests shall be made using the supplier Process Change Request format (Supplier Process Change Request QF-7-003-5). The Supplier Process Change Request shall be submitted in writing to Quality Engineering. This will be returned by AFX with approval or rejection notice.

Approval allows supplier to proceed with proposed change, but not to proceed with production. Production approval is given by PPAP process, unless waived by AFX.

b.         The supplier shall avoid low confidence or high-risk proposals and provide sufficient data to support the request.

c.         Design Changes request shall be negotiated with the proper AFX Engineering and Supplier Quality Engineering Departments.

d.         Any cost changes shall be approved by AFX Purchasing, in writing, prior to Engineering Change Notification Request submission to AFX Quality organization.

e.         The supplier shall not proceed with any change in production unless that PPAP is approved by AFX. 

Supplier shall use the IPP label for the first production shipment (IPP Label Format).

2.18   Initial Production Part (IPP) [top]

Initial Production Part Labels are used at AFX to acknowledge the receipt of new program parts or parts where the design or process has changed.

a.         It is absolutely critical that the supplier and sub-supplier work in tandem to maintain a First-In / First-Out (FIFO) system, which is combined with an effective method for purging the supply stream of all material that was produced prior to any change.

b.         Once the IPP procedure is initiated and the new labeling is utilized, the supplier shall not ship any of the original / older material to AFX, unless approved with deviations. Any original / older material received by AFX will be classified as non-conforming and counted against the supplier’s quality rating.

c.         The IPP label (IPP Label Format) or comparable must be submitted by the supplier shipping new product or making a change. The background color for the label should be orange or very distinctive. An IPP tag must be affixed to individual boxes /containers.

2.19   Complaint Notification and Corrective/Preventive Action Report [top]

Suppliers are notified of non-conforming material through a phone call or email from the plant quality group and through a “Corrective Action Report” (Corrective Action Format QF-8-005-2). This document is issued whenever purchased material is identified which does not conform to quality requirements.

Non-conforming material may be identified during incoming inspection, assembly, processing, audit, reliability testing or Customer notification.  A Return Material Authorization Number (RMA#) will be requested from the supplier for debit authorization of on-site scrap, rework, sort or return of material.

The Rejection document serves for the following functions:

·        Accounting Debit Memo

·        Quality Record for Generating PPM

·        Problem Effective Solving & Analysis Report

·        Communication of issues to Purchasing

·        Record to Support Adjustment of Suppliers Cumulative Shipment History

General guidance notes:

    a.         Under no circumstances shall non-conforming material be shipped to AFX without approved deviation from AFX.

b.         If a supplier discovers or suspects that non-conforming material has been shipped to AFX facility, the supplier shall immediately notify that facility’s Quality Engineer.

c.         Any non-conforming material found at the supplier’s facility shall be immediately contained, identified and properly disposed.

d.         Any suspect material shall be quarantined and sorted.

e.         Non-conforming material received at AFX facility that requires sorting or special handling to support production needs shall be the responsibility of the supplier. The supplier is expected to support these activities in an urgent manner.

f.          Any cost incurred by AFX due to non-conforming parts will be billed back to the supplier.

Supplier’s Reply to AFX

When a supplier receives a “Corrective/Preventive Action Notification”, the supplier must send to AFX Supplier Quality contact a written interim containment plan within 1 working day of problem notification using the “Corrective Action Format” (Corrective Action Format QF-8-005-2) or any other format used by supplier. Within ten working days, the supplier is expected to communicate in writing the problem solving results.

2.20   Supplier Performance Tracking and Reporting [top]

The Suppliers performance will be evaluated by AFX on a monthly basis. Supplier rating is based on the following:

1.         Non-Conforming Parts Per Million (PPM)        40 points 40%

    2.         On time Delivery                                               30 points 30%

    3.         Service / Problem Reaction                               15 points 15% 

    4.         Documentation                                     15 points 15% 

Parts per Million (PPM)

The Quality Performance of suppliers will be measured in defective Parts per Million (PPM), Corrective Actions responses and PPAP performance. The expectation for supplier performance is ultimately 0 PPM. 

The Product received into our facilities, which does not conform to the drawing, specifications, and agreed standards will be counted against a partner supplier’s PPM record unless written agreement has been settle with AFX prior the shipment of such product.  Quantities will be reported in the units that they are purchased.  This only applies to production parts after PPAP approval.

PPM Clarification Notes:

·                    You may sort parts at the appropriate location or at your premises. Parts confirmed as unacceptable, after the sort, stay on your PPM record. PPM will be adjusted after the sort is complete, unless sampling has predicted a % defective within the isolated lot, not the entire lot.  Partner suppliers have the responsibility to execute a containment plan to assure manufacturing continuity.

·                    If the supplier identifies, communicates, and takes appropriate containment action for a potential problem before the problem is identified at AFX then parts will not be counted against PPM.  If the problem is identified at AFX prior to contact from the supplier, then PPM count will be incurred.

·                    Damage resulting from inadequate packaging, from which the supplier is responsible, will result in increased PPM. Packaging standards must not be modified without prior written authorization.

Refer to the following measurable to be used for monthly supplier Quality rating evaluation:

            PPM                            POINTS

            Up to 100                    40

            101 - 200                     30

            201 - 300                     25

            301 - 400                     20

            401 - 500                     15

            501 -1000                    10

          1001 -2000                    5

          2001 - +                        0         

Chargeback Policy:

AFX will communicate in writing when a defective/discrepant product is found through a format called Return Material Authorization and/or Charge Back to Supplier and/or Customer containing the reason of the rejection and actions in consideration needed like sorting/reworking/transportation/scrap etc. Supplier must provide Authorization immediately.

Charges apply as follows:

a)      Sort/Rework $20.00 US dlls. per hr., when performed by AFX

b)      Product Identification $5 US dlls. per each label placed

c)      Transportation and or Documentation each time supplier requests samples to be evaluated will be charged at the cost of the product and shipment.

d)      All the scrap as results of non conformance material will be charged to supplier.

It is responsibility of the supplier to provide effective support to resolve any product concerns/defects found by AFX at any time, this must include immediate documented responses and on site visits for sorting or product review. AFX requires suppliers to have a representative available at the Manufacturing plant within 24 hrs of the complaint notification unless otherwise agreed with AFX Quality Representative.

Delivery

Delivery is calculated based in the ability from the supplier to meet production release schedules, refer to the following formula used to calculate and measurable to be used for monthly supplier Delivery rating evaluation:

            Number of parts on time* 100

                Number of parts requested

            DELIVERY                 POINTS         

               100%                        30                    GOOD performance                

            90% - 99%                  15                    SATISFACTORY performance

            80% - 89%                    7                    ACCEPTABLE performance

            Below 80%                    0                    POOR performance

Service

Customer Service/Problem Reaction is calculated based in the support, responsiveness, cost reductions, ability to resolve day to day situations, provided by the supplier. Refer to the following measurable to be used for monthly supplier Service rating evaluation:

            RATING                      POINTS

            5                       &