Supplier ManualSupplier manual for partnership-based cooperation

with HOERBIGER Compression Technology

Compressor Solutions -

For oil, gas and process industry

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Preface .................................................................................................................................................................... 4

1. Cooperation with suppliers ............................................................................................................................................ 5

1.1 Communication with suppliers ................................................................................................................................. 5

1.2 Enquiries ............................................................................................................................................................... 5

1.3 Supplier selection ................................................................................................................................................... 5

1.3.1 Supplier’s self-assessment ............................................................................................................................... 5

1.3.2 Procurement process/order processing ............................................................................................................... 5

1.3.3 Tool order ....................................................................................................................................................... 5

1.3.4 Framework agreement, delivery plan, individual order ......................................................................................... 6

1.4 Logistics ................................................................................................................................................................ 6

1.4.1 Packaging ....................................................................................................................................................... 6

1.5 Advanced product quality planning (APQP) ........................................................................................................... 6

1.6 Quality assurance agreement ................................................................................................................................... 6

1.6.1 Quality management ........................................................................................................................................ 6

1.6.2 Management of faulty products ......................................................................................................................... 7

1.6.3 Supplier assessment ........................................................................................................................................ 7

1.6.4 Confidentiality agreement ................................................................................................................................. 7

1.7 Data exchange/electronic data ................................................................................................................................. 7

1.7.1 Commercial EDI data exchange ......................................................................................................................... 7

1.8 Insurance .............................................................................................................................................................. 8

2. Quality assurance by the supplier ................................................................................................................................... 9

2.1 General requirements pertaining to the QM system of our suppliers ............................................................................. 9

2.1.1 Traceability ..................................................................................................................................................... 9

2.1.2 Archiving ........................................................................................................................................................ 9

2.1.3 Legal requirements .......................................................................................................................................... 9

2.2 Communication - services to be rendered by the supplier.......................................................................................... 10

2.2.1 Deliveries of prototypes .................................................................................................................................. 10

2.2.2 Production part release procedure ................................................................................................................... 10

2.2.3 Re-sampling ................................................................................................................................................. 10

2.2.4 Proof of quality ............................................................................................................................................. 11

2.2.5 Goods receipt inspection ................................................................................................................................ 11

2.2.6 Usage and monitoring of testing equipment ..................................................................................................... 11

2.2.7 Packaging planning ....................................................................................................................................... 11

2.3 Troubleshooting - measures to be implemented by the supplier ................................................................................. 12

2.3.1 Deviations and corrective measures ................................................................................................................. 12

2.3.2 Making corrections and solving problems ......................................................................................................... 12

Other applicable documents, forms, work aids, and bibliography ......................................................................................... 13

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PrefaceThe market position achieved by Hoerbiger Compression Technology with valve systems for oil, gas and process industry is

primarily based on the high quality of our products. Our suppliers contribute significantly to this, and thus determine our ability

to satisfy our customers. Our shared goal is to achieve a zero fault rate in quality and logistics.

This supplier manual is intended to serve as the basis for the further development of successful cooperation.

Our aim is to create genuine partnerships with fairness and efficiency.

The only way to stay ahead among harsh competition is to ensure that we have motivated supply partners. And the way to achieve

long-term cooperation with our suppliers is to constantly implement improvements and to share a desire to try out new things

together.

The three main goals in purchasing – quality, price and time - can only be achieved to the economic benefit of both sides if we

work together in a trusting partnership. This is why we are striving to ensure an open dialog with our suppliers.

As our supplier, we are now providing you with this practical guide that describes the measures and working methods you can

implement to become a top supplier („A-grade supplier“).

The stipulations made in this manual do not release suppliers in any way from their obligation to produce and deliver fault-free,

fully functioning goods in accordance with the corresponding purchase order.

Randolph Richardson

Head of Global Production

Karl Doppler

Head of Procurement

Johann Hipfl

CEO Compression Technology

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1 Cooperation with suppliers1.1 Communication with suppliersWe recommend that each of our suppliers has a separate e-mail account for enquiries which can be accessed by several people so

that e-mails are still read if the primary contact is on holiday or absent for any other reason. Any changes concerning our contact

partners at your company should be notified to Hoerbiger Compression Technology immediately to ensure smooth communication.

1.2 EnquiriesEnquiries from HOERBIGER Compression Technology will be sent by e-mail or fax. The supplier is responsible for acquiring the

standards and directives (DIN, EN, ISO, VDA, TS etc.) referenced in each enquiry on his own account. Moreover, the supplier

is obliged to regularly check that these standards and directives are still current. Specific standards of Hoerbiger Compression

Technology (HOERBIGER Specifications (HN), order and delivery conditions) will be made available to the supplier and any

changes will be communicated. Before submitting a quotation, the supplier must carry out a feasibility assessment, taking into

account the available technology and specifying daily/weekly capacity. Please state any possible technological, quality-related,

or other potential improvements in your quotation, along with any possible problems. Alternatively, please discuss these with the

responsible purchaser. Constructive suggestions will be judged positively at the supplier rating. Please quote for the requested

batch sizes. However, your own suggestions are welcomed as long as they are listed separately.

1.3 Supplier selectionOnly suppliers in the list of approved suppliers can be selected as the supplier of a product or service. The acknowledgement of

the documents listed below is a prerequisite for approval as a supplier:

1.3.1 Supplier’s self-assessment

New suppliers must be approved by Hoerbiger Compression Technology. To achieve this, you are provided with a self-assessment

form which requests further information on details such as contact persons, the size of your business, your product strategy,

insurance policies, and quality management system. Completed and signed form has to send back to Hoerbiger Compression

Technology.

1.3.2 Procurement process/order processing

At Hoerbiger Compression Technology, orders are always placed in writing. Our General Terms and Conditions of Purchase

form the basis for all our orders and contracts. In order to safeguard project-specific requirements pertaining to quality, costs,

and deadlines, the supplier must create a project plan for the realization of an order. This project plan must be submitted to

Hoerbiger Compression Technology on request.

1.3.3 Tool order

A tool order states the part number, price, and delivery date/ tool completion date. You will also receive an agreement for tools

(SMP - Special Means of Production). This contains detailed information on the rights and responsibilities of the manufacturer

and owner. Completed and signed agreement has to send back to Hoerbiger Compression Technology within one week.

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1.3.4 Framework agreement, delivery plan, individual order

Delivery plans are compiled for our repeated series orders involving recurrent articles. Articles that are not ordered repeatedly are

ordered using individual orders. Changes to a part and/ or increases in part number indexes are communicated duly by means of

new drawings or initial sample orders. Please check after receiving if pending orders are affected.

1.4 LogisticsDelivery instructions are sent by e-mail or fax on the basis of concluded contracts. An order request is classed as confirmed if

a written objection is not received within 3 working days. Please contact the responsible purchasing agent for this. The delivery

of the required quantity takes place strictly in accordance with the current delivery instruction. The delivery instruction also

states the relevant material and production releases. If the required quantity and delivery dates have not changed for a delivery

instruction, the system automatically extends at least the material and production releases on a weekly basis. Please only

manufacture resp. order the approved quantity stated in the delivery instruction, since we are only obliged to accept this quantity.

1.4.1 Packaging

Packaging is to be planned in a part-specific manner, taking into account the requirements of logistics, quality assurance,

environmental protection, and economy. If Hoerbiger Compression Technology makes no specifications regarding packaging, you

are required to submit your own packaging proposal for our approval.

1.5 Advanced product quality planning (APQP)In the case of new suppliers or new parts, it may be necessary to take special precautions in advance to ensure a smooth start

of production. To help suppliers with their start of production, an APQP is carried out with the manufacturer and the appropriate

HOERBIGER contact partners. This documents details on the order such as quality inspections, measurement procedures,

process capability, packaging, handling and so on.

1.6 Quality assurance agreement1.6.1 Quality management

The quality of the partnership relationship between Hoerbiger Compression Technology and our suppliers results from the quality

of each company’s individual service performances such as the fulfillment of technical specifications and stipulations, adherence

to delivery dates, cost responsibility, general reliability and so on.

In order to achieve our shared goal of a zero fault rate, the supplier must implement appropriate preventive quality assurance

measures. The agreement applies to all development services and/ or products to be rendered or delivered during the term of the

agreement unless its scope of validity is restricted in some way. The supplier is obliged to ensure the constant application of a

quality management system as per the valid version of DIN EN ISO 9001 et seq. or ideally ISO/TS 16949 and must document

this system in the management manual. If at the beginning of working together, according to ISO 9001 none quality management

system exists, the supplier undertakes a certification within 18 months. The QM certificate we require for the maintenance of

cooperation.

At reasonable intervals and with appropriate prior notice, HOERBIGER is entitled to carry out an audit to check that the agreed

quality assurance measures are being implemented at the supplier’s premises.

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1.6.2 Management of faulty products

All parts found to be defective by Hoerbiger Compression Technology will be rejected. To prevent production downtime at

Hoerbiger Compression Technology, measures to remedy defective parts must take top priority. For this reason, measures such as

sorting, the replacement of goods, reworking and so on are required within 48 hours unless Hoerbiger Compression Technology

expressly states that they are not required. If the supplier is unable to achieve this, Hoerbiger Compression Technology will

initiate the required work and the costs will charge to the supplier. In particularly urgent cases such as when there is a risk of

production downtime, HOERBIGER is also entitled to carry out improvements or to commission a third party to do so without the

agreement of the supplier. The supplier is responsible for the costs incurred as a result of the complaints.

Following fault limitation, the following activities must be initiated by the supplier:

� All defective parts in the supplier‘s stock must be labeled and isolated.

� An 8D report detailing the completion of steps 1, 2, and 3 within 48 hours must be compiled.

The solutions to the problem and the conclusion of the 8D report must be lodged within 10 working days.

The supplier informs proactively if the date can not be met.

1.6.3 Supplier assessment

Hoerbiger Compression Technology carries out supplier evaluations for key suppliers at regular intervals, at least once a year.

The following criteria are used for the assessment:

� Quality

� Logistics

� Service

If you are classed as a „B-grade“ or „C-grade“ supplier, we expect you to respond and define appropriate measures within 14

days.

1.6.4 Confidentiality agreement

Our corporate philosophy is to foster open and constructive contact with our suppliers. This is why it’s so important to ensure that

our own know-how and also our shared know-how are not passed on to third parties. We work on the premise that our business

partners will not pass on any confidential information; however, we are still compelled to include confidentiality clauses in our

contracts and agreements.

1.7 Data exchange/electronic data1.7.1 Commercial EDI data exchange

The demand for parts at Hoerbiger Compression Technology is calculated by means of an automatic procedure and transmitted

for each item in a delivery instruction by means of remote data transmission or by e-mail. For this reason, you should provide us

with an e-mail address that can also be accessed by your substitute if you are absent from work.

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1.8 InsuranceLegal requirements are such that we feel obliged to carefully check our own insurance situation and that of our suppliers. Despite

extremely careful work and reliable quality monitoring, it is sometimes impossible to prevent a damage event from occurring.

Since we supply industrial enterprises, loss amounts can be immense despite the low price of parts, and payout can place a

medium-sized company in major difficulties.

Hoerbiger Compression Technology is determined to keep its own risk and that of its suppliers to a minimum. For this reason, we

expect the following minimum requirements of product liability insurance for our suppliers:

� Enhanced product liability coverage (dismantling and assembly costs), including deliveries to the automotive industry;

sum insured: EUR 5.000.000

� Coverage for recalls; sum insured: EUR 5.000.000

Hoerbiger Compression Technology expects its suppliers to have a policy that is equivalent to this.

For this reason, HOERBIGER checks the insurance situation of the suppliers as part of the supplier‘s self-assessment procedure

and ask our supplier to submit a copy of their policy.

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2 Quality assurance by the supplier

2.1 General requirements pertaining to the QM system of our suppliersThe minimum prerequisite in order for a supplier to qualify as a potential series supplier of Hoerbiger Compression Technology is

the verified introduction and maintenance of a quality management system as per DIN EN ISO 9001 et seq.

We see it as our duty and responsibility to use resources sparingly in order to contribute to protecting the environment. We also

urge our suppliers to do so and thus recommend that they implement an environmental management system as per DIN EN ISO

14001.

The current versions of the management systems named above must be used.

In addition to the general requirements as per the management systems, Hoerbiger Compression Technology places the following

specific requirements on suppliers:

2.1.1 Traceability

To ensure as much accuracy as possible in identifying affected parts and thus to keep costs as low as possible in the case of a

damage event, we expect all suppliers to implement a traceability system that:

� is component-related (e.g. by means of a serial or batch number on the component) or;

� establishes a component reference through the specification of a delivery note number or delivery batch by Hoerbiger

Compression Technology.

This system should be enable traceability to the production batch and associated production/ manufacturing parameters and,

if appropriate, components from subcontractors that have been used.

2.1.2 Archiving

To enable traceability in the case of late failures and after the end of production, we recommend the archiving of quality-relevant

documents for 10 years after end of production (EOP).

2.1.3 Legal requirements

We work on the assumption that all of our suppliers are aware of and observe all valid legislation and legal requirements of their

country of origin and of Germany. Following their prior agreement, Hoerbiger Compression Technology reserves the right to check

the observance of general and specific QM requirements by means of an audit carried out by Hoerbiger Compression Technology,

with the participation of our customer if necessary.

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2.2 Communication - services to be rendered by the supplier2.2.1 Deliveries of prototypes

Each delivery of prototype parts (parts which have not been subjected to initial sampling are considered to be prototypes) must be

accompanied by inspection documentation attesting to the dimensional and material-related observance of technical specifications.

If no agreements to the contrary have been reached with the responsible employee of Hoerbiger Compression Technology, every

single component must be tested. Any deviations from these requirements must be stated explicitly and approved by Hoerbiger

Compression Technology in writing prior to delivery.

2.2.2 Production part release procedure

As a general rule, for each new part intended for series production, sampling must take place in accordance with the initial sampling

schedule defined by the Purchasing department of HOERBIGER Compression Technology. The HOERBIGER requirements for

process and production release must be observed.

Deliveries of initial samples must meet the following requirements:

� Initial sample parts must be labeled accordingly.

� The initial sample inspection report must be filled out in full.

� The drawing approved by HOERBIGER Compression Technology serves as the basis. The supplier must user it to

number all dimensions and specifications and document them accordingly in the initial sampling documentation.

� Documents and samples must only be submitted once all requirements pertaining to the production part release

process have been met. In the case of deviations, the supplier must acquire written approval beforehand to submit

the documents and samples for initial sampling (application for design deviation) and must then submit this approval

along with the documents and samples.

� If a required attachment is not included in the initial sample inspection report, this must be justified by the supplier in

the comments field of the cover sheet.

� For details on which documents are to be included for each sampling scenario, please see the HOERBIGER

requirements for process and production release or consult our purchasing department.

2.2.3 Re-sampling

If one of the following scenarios occurs, the production part release procedure must be repeated and new initial samples may

need to be submitted:

� If the initial sample inspection report is rejected or accepted with conditions

� If technical changes are made to the component (dimensions, materials, tools etc.)

� If changes are made to the production process

� If production is moved to a new location

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2.2.4 Proof of quality

Documentation compiled in order to demonstrate the observance of product-specific quality requirements by the supplier or

subcontractors must be submitted to Hoerbiger Compression Technology within 3 working days if required. In particular, this

includes material test certificates, process-accompanying inspection documentation, the results of goods receipt and goods issue

inspections and product audit/ requalification reports.

2.2.5 Goods receipt inspection

The checks required to ensure that the supplier’s quality assurance responsibilities are fulfilled take place at the premises of the

supplier. Hoerbiger Compression Technology shall check products received by the supplier immediately after receipt to ensure

that the ordered quantity has been delivered, that the product is the correct product, and that there is no outwardly visible

transport damage. Hoerbiger Compression Technology is not obliged to carry out checks over and above this scope. The aim is to

reduce or eliminate such checks as a result of excellent delivery performance on the part of the supplier (“skip lot procedure”).

Hoerbiger Compression Technology must immediately report any defect in a delivery to the supplier once the defect has been

detected as part of normal business processes. In the case of concealed defects which are detected later on at Hoerbiger

Compression Technology or which are only detected by our customer, the supplier relinquishes the right to object to a delayed

claim.

If defective deliveries are made, the supplier must take immediate steps to provide goods in perfect condition by means of

replacement deliveries, sorting, reworking or urgent deliveries.

2.2.6 Usage and monitoring of testing equipment

The supplier is responsible for ensuring that suitable measurement and testing equipment (including software and programs) is

used so that appropriate process monitoring is guaranteed. To ensure reliable production and the dispatch of fault-free parts, all

measurement and testing devices must be approved and their capability must be proven. For further details, see VDA Volume 5

(test process suitability) or the QS9000 “Measurement System Analysis (MSA)” reference system handbook.

If production tools, molds and similar devices are also used as measurement or testing devices, they must be checked, approved

and documented in the same way as other measurement and testing devices. In this case, traceability must be ensured regarding

to national and international reference standards for calibration.

2.2.7 Packaging planning

The choice of packaging can influence product quality and must therefore be checked during the feasibility assessment and prior

to the submission of a quotation.

Taking into account the various transport methods and routes, the supplier must ensure the use of packaging which avoids quality

risks relating to humidity, corrosion and contamination.

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2.3 Troubleshooting - measures to be implemented by the supplier2.3.1 Deviations and corrective measures

Hoerbiger Compression Technology expects the supplier to deliver fault-free products only and to notify HOERBIGER immediately

if it is determined that materials that deviate from the specifications might be delivered. In exceptional circumstances, the

supplier may apply in writing for a special release if the quality standards prescribed by Hoerbiger Compression Technology

cannot be met. Deviation approval form, compiled by Hoerbiger Compression Technology, is to be use for this.

A special release has a limited validity measured in time or as a quantity of parts. While it is valid, the supplier must implement

measures to solve the problem so that compliant goods can be delivered once the validity of the release has expired.

The granting of a special release by Hoerbiger Compression Technology does not generally release the supplier from its delivery

obligation.

2.3.2 Making corrections and solving problems

Any parts that are returned by Hoerbiger Compression Technology must be analyzed by the supplier to find out the cause of the

defect. The supplier must then formulate solution approaches and implement corrective measures to prevent the problem from

occurring again.

For this reason, a structured problem-solving procedure (8D report) must be used. The supplier’s methods must be defined in

writing and must include the following:

� An investigation as to the underlying cause of the fault with reference to the product, procedure, and quality system

� The determination of short-term and definitive correction measures to be taken to eliminate the underlying cause

� Checks to ensure that a corrective measure is implemented and is effective

� A check to see whether the fault can occur in similar products and processes („lessons learned“)

� Preventative measures and the application of checks to ensure that such measures are effective

� The definition of responsibilities and deadlines for all actions and the corresponding documentation

We reserve the right to check the implementation of the named measures and their effectiveness at the supplier‘s premises, e.g.

as part of a process audit.

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Other applicable documents, forms, work aids, and bibliography

Work aids/forms: � Supplier’s self-assessment form

� Requirements for process and product release

� 8D report

� General Terms and Conditions of Purchase for Production Material

� Feasibility commitment

Other applicable documents: � VDA Volume 1 - “Quality evidence”

� VDA Volume 2 - “Quality assurance of supplies”

� VDA Volume 3 - “Ensuring reliability of automotive manufacturers and suppliers”

� VDA Volume 4 - “Quality assurance prior to serial application”

� VDA Volume 5 - “Test process suitability”

� VDA Volume 6.3 - “Process audit”

Further referenced documents: � DIN EN ISO 9001

� VDA 6.1 - “QM system audit”

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Notes

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HOERBIGER Compression Technology is a business unit of HOERBIGER Holding AG, Zug / Switzerland. HOERBIGER is active throughout the

world as a leading player in the fields of compression technology, automation technology and drive technology. In 2011, its 6,826 employees

achieved sales of 1.048 billion Euro. The focal points of its business activities include key components and services for compressors, gas

engines and turbomachines, hydraulic systems and piezo technology for vehicles and machine tools, as well as components and systems for

shift and clutch operations in vehicle drive trains of all kinds. Through innovations in attractive technological niche markets, the HOERBIGER

Group sets standards and delivers cutting-edge solutions for the benefit of its customers.

This product brochure contains product specifications based on research and development on the one hand and on manufacturing on the other. Dependent on place of installation, operating

conditions and specifications, several parameters of the described product may change. Thus, HOERBIGER assumes no liability or warranty for the accuracy and completeness of the

information covered in this brochure.

www.hoerbiger.com