Supplier Evaluation Status 2007-09-21doc

Supplier Management of 11

Supplier Management Supplier Evaluation / Classification

Preamble:

BOS uses global sourcing to find the most suitable suppliers for making deliveries to all BOS plants around the world.

In particular it is the company’s intent to qualify local suppliers (located in proximity to our production plants) to reach a level enabling them to supply to all plants across the BOS Group.

Author: PO Version 2.0


Page1 Introduction / Preface 32 Evaluation Criteria 32.1 Standard Evaluation Criteria 32.1.1 Non-Conforming Delivery Dates 32.1.1.1 Delivery Date Metric 42.1.2 Non-Conforming Quantities Delivered 52.1.2.1 Delivered Quantity Metric 52.1.3 PPM Analyses on Q-reports 62.1.3.1 Metric PPM 62.2 Additional Evaluation Criteria 72.2.1 Number of Customer Complaints 72.2.2 Premium Freights 72.2.3 Supplier Launch Quality Evaluation 83 Weighting of Evaluation Criteria 103.1 Supplier Rating for Overall Evaluation 103.2 Standard Evaluation Criteria 103.3 Additional Evaluation Criteria 104 Consequences 114.1 A – Level Rating 114.2 B – Level Rating 114.3 C – Level Rating 11



Introduction

1 Preface

BOS intends to establish a standard evaluation scheme for the entire BOS Group. The supplier qualification provides the basis for collaboration between all BOS locations regarding the selection, determination and evaluation of suppliers which are planned to be – or have already been – integrated in the value chain of our products.

2 Evaluation Criteria

The supplier evaluation will be performed according to the following criteria:

- Standard evaluation criteria- Additional evaluation criteria

2.1 Standard Evaluation Criteria

The evaluation consists of three standard evaluation criteria:

- Delivery date (weighted at 20%) - Quantity delivered (weighted at 20%)- PPM on Q-reports (weighted at 25%)

The evaluation period for the three standard evaluation criteria listed above will be established for a continuous 12-month time frame. The standard evaluation criteria will only be weighted at 65 % in the overall evaluation.

2.1.1 Non-Conforming Delivery Dates

Delivery dates are assessed based on the difference between the delivery date agreed on the purchase order and the actual receipt of the shipment in the receiving docks of therespective plant. If the delivery date is stated as a calendar week Friday is deemed to be the agreed delivery date. Each inbound shipment will be rated according to the score below:

Days To Days Points> 14 0

14 To 10 309 To 4 603 To - 3 100

> - 3 60Responsible: Central Logistics



2.1.1.1 Delivery Date Metric

The points for all deliveries made per type of delivery are added and then divided by the number of shipments received.

Example:Supplier AOrdered Delivered Workdays Points991800384400 30 July 06 26 Aug 06 19 0991800205001 18 Aug 06 04 Sep 06 11 30991800205001 08 Sep 06 11 Sep 06 3 100991800252100 08 Sep 06 16 Sep 06 6 60991800121300 08 Dec 06 02 Dec 06 -4 60Total: 250

Point score for all deliveries madeDD =

Number of shipments received

250DD = 50

5

The DD metric will be reported by Central Logistics to Central Purchasing by plant and supplier at the end of the established interval.



2.1.2 Non-Conforming Quantities Delivered

Quantities delivered are assessed based on the difference between the quantity agreed on the purchase order and the quantity actually received. Each inbound shipment will be evaluated using the point score below:

From quantity in % To quantity in % Points>40 0

40 >10 3010 >1 60

0 100

2.1.2.1 Delivered Quantity Metric

The points for all shipments received per supplier are added and then divided by the number of shipments received.

Example:Supplier AOrdered Quantity Delivered Variance Points991800384400 10000 pcs 5000 pcs 50 % 0991800205001 10000 pcs 9500 pcs 5 % 60991800205001 6000 pcs 6000 pcs 0 % 100991800252100 1000 pcs 650 pcs 35 % 30991800121300 8000 pcs 13000 pcs 62.5 % 0

Total 190

Point score of all deliveries madeDQ =

Number of

190LM = 38

5



2.1.3 PPM Analyses on Q-Reports (8D Reports)

PPM rates are analyzed by comparing the reported non-conforming quantity with the quantity delivered. The reported non-conforming quantity includes all quantities which the supplier has accepted as non-conforming quantities (8D Reports accepted by supplier). It is immaterial whether such quantities were physically shipped or only posted as returned quantities. Non-conforming parts which were installed despite the non-conformance are PPM-relevant if a Q-report (complaint from SAP) was created.In comparisons with the supplier, in other words if partial quantities from a total delivery have been accepted; only the rejected quantity will be posted as a reported non-conforming quantity. The point score below considers the O-defects philosophy to which the BOS Group is committed.

2.1.3.1 Metric PPM (Q-Report + 8 D Report)

The ratio between the reported non-conforming quantity / delivered quantity * 1,000,000 results in the ppm rate. For the purposes of performing the supplier evaluation, the overall delivery situation of the supplier will be considered. Hence the total quantity delivered across all of the supplier’s part will be reviewed.

Example:Supplier AOrdered Quantity Rep. non-conf. ppm

991800384400 10000pcs 5 pcs 500991800205001 10000pcs 8 pcs 800991800205001 6000 pcs 0 pcs 0991800252100 1000 pcs 2 pcs 2000991800121300 8000 pcs 1 pcs 125

Total 35000 pcs 16 pcs 457 ppm (ratio to 1mill.)

The “PPM“ metric is determined from the ppm-rate using the point score below:

ppm Rate ppm Rate Points> 9000 0

8999 6000 205999 3000 302999 1800 601799 500 80

< 500 100Responsible: QMI

Hence the “PPM“ metric for supplier A in this example is 100 points.



2.2 Additional Evaluation Criteria

2.2.1 Number of complaints (written) / total number of production parts(Number of item numbers and/or ID-No.: per year

The definition of complaints (reported non-conformances) is based on the 8D-Report and/or Q-Reports (SAP).From the total number of complaints for a supplier in relation to the number of currently approved item numbers per year, a metric is determined which will be assessed as follows:

Points Criterion100 Metric = 0 – 0,160 Metric > 0,1 – 0,330 Metric > 0,3 – 0,50 Metric > 0,5

In the overall evaluation, the complaints are weighted at 15%.

2.2.2 Premium Freights

If deliveries to BOS plants require premium freights, these will be assessed in relation to regular freights.The total of premium freights comprises the premium freights caused by the supplier and initiated by BOS.Premium freights initiated and paid for by the supplier must be reported; for this purpose, the evaluation letter inquiring about premium freights is sent.

Points Criterion100 No premium freights60 < 5%30 > 5% und < 10%0 > 10%

In the overall evaluation, premium freights are weighted at 10%..



6.2.3 Supplier Launch Quality Evaluation

For new projects, the “Supplier Launch Quality” evaluation is a preliminary evaluation of the supplier prior to SOP.

This evaluation is used for suppliers bringing new components to the project.

The “Supplier Launch Quality” evaluation is performed – by project – at the time of the PEP 4 process (pre-production).

The following evaluation criteria will be considered:

1. AQP LOB list: complete, on-time, up-to-date documentation, etc.2. Evaluation of sampling process3. How does the supplier manage its sub-suppliers?4. Evaluation of quality issues prior to SOP5. Evaluation of supplier’s communication and involvement/support

This “Supplier Launch Quality” evaluation will be performed by Quality Assurance International (QAI) and the Eng. Units. The evaluation refers to the plant as well as the project/product. Each criterion will be rated at 10, 5, or 1 point(s), with 10 points representing the worst rating. All criteria are weighted equally. The five evaluation criteria are multiplied. The result is the SLQ project evaluation for the finished project. By means of this score the supplier is classified as ALQ,BLQ or CLQ and receives the corresponding point for the total evaluation (compare table below). If, during the evaluation period, several “Supplier Launch Quality Evaluations“ are performed, the average value of the individual project evaluations will be determined. The evaluation result will be shown as follows:

SLQ project evaluation Classification supplier Points0 – 49 ALQ 10050 – 99 BLQ 60100 and more CLQ 0

In the supplier’s overall evaluation the “Supplier Launch Quality” rating will be weighted at 10%.



Example of a supplier involved in two projects:

Project 1 – Crit. 1 = 5, Crit.2 = 1, Crit.3 = 5, Crit.4 = 1, Crit.5 = 1 Multiplied = 25 [Thus being rated as ALQ -100 points]

Project 2 – Crit. 1 = 10, Crit.2 = 10, Crit.3 = 5, Crit.4 = 1, Crit.5 = 5 Multiplied = 2500 [Thus being rated as CLQ - 0 points]

Average score of project evaluation = (100 + 0)/2 = 50

Conclusion: Final result: Supplier rated as BLQ - 60 points

A supplier not being rated in the “Supplier Launch Quality” category will receive the full points score for this additional criterion in the overall evaluation.

QMI will perform this evaluation and communicate the result to Central Purchasing after the respective assessment intervals.



3 Weighting of Evaluation Criteria

The weighting is as follows:

a) Standard evaluation criteria: PPM 25%Non-conf. delivery date 20%Non-conf. quantity del. 20%Total: 65%

b) Additional evaluation criteria: Number of premium freights 10%Number of complaints 15%Quality Launch evaluation 10%Total: 35%

3.1 Supplier Rating for Overall Evaluation

After determining the scores for all metrics the scores are added and divided by the number of evaluation criteria. This will result in a rating of the supplier for the standard evaluation criteria according to scheme below:

100 - 87 points A-Level Supplier 86 - 60 points B-Level Supplier 59 - 0 points C-Level Supplier

3.2 Standard Evaluation Criteria Example:

Delivery date 50P x 20% = 10 PQuantity delivered 38P x 20% = 7.6PReturn shipments 100P x 25% = 25 P

42.6 P

3.3 Additional Evaluation CriteriaNumber of complaints (written)/total number of item numbers delivered per year. 60P x 15% = 9 PNumber of premium freights vs. regular freights 30P x 10% = 3 PRating from Supplier Launch Quality Evaluation 60P x 10% = 6 PTotal: 18 P

Grand total: 60,6 points

(B-Level Supplier)Note:A consolidated worldwide evaluation is performed by adding the total score from all plants and then dividing this value by the number of plants, for example:

HU RO PL



A83 B80 B70 83 + 80 + 70 = 233/ 3 plants = 78 P

These 78 points would then be multiplied with the score achieved for the respective evaluation metric and factored into the overall evaluation. (See above example!)

4 Consequences

4.1 A-Level Rating- No action plan required.

4.2 B-Level Rating- Supplier has to contact the respective functional areas, such as Logistics, Plant

QA, QMI (Launch Quality), Central Purchasing, and define proposed improvements (action plan with timeline).

4.3 C-Level Rating- Supplier has to contact the respective functional areas, such as Logistics, Plant

QA, QMI (Launch Quality), Central Purchasing, and define proposed improvements (action plan with timeline).

- Award of new contracts questionable.- Supplier may be included in Top Focus process (QMI)

- Supplier has to update the supplier data sheet

Approved by:

R. Hillemacher Date C. Herrington Date


Supplier Evaluation Status 2007-09-21doc

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