Dave Watkins, Executive VP and Director of International Operations

Omnex Inc.

dwatkins@omnex.com

Q1 Second Edition

R1 08.04 © OMNEX 3

2001 - 2004, Omnex, Inc.

3025 Boardwalk Suite 120

Ann Arbor, MI 48108

734-761-4940First EditionAugust 2004

This publication is protected by Federal Copyright Law, with all rights reserved. No part of this publication may be reproduced, stored in a retrieval system, translated, transcribed, or transmitted, in any form, or by any means manual, electronic, electro-

magnetic, mechanical, chemical, optical, or otherwise, without prior explicit written permission from Omnex, Inc.

R1 08.04 © OMNEX 4

Table of Contents

• Introduction • Overview of Ford Q1• Eligibility, Process and Requirements• Revocation • Manufacturing Site Assessment

Introduction

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Focus of Q1A Process—Not An Award

• Capable Systems• Ongoing Performance (SIM)• Manufacturing Site Assessment• Customer Endorsement• Site Action Plan• Evolving standards and expectations• Continuous Improvement• Elimination of Q1 Probation

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Strategy –Q1 2nd Edition

• Objectives: – Communicate Ford expectations to drive continuous

improvement and customer satisfaction– Provide recognition for quality achievement

• Who: Tier 1 suppliers of production or service product to Ford

• What: Set of fundamental systems, quality and manufacturing disciplines, metrics and tools that are predictive and drive continuous improvement

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Strategy –Q1 2nd Edition

• How: – Ensuring capable systems– Manufacturing Site Assessment– Supplier Improvement Metrics (SIM)– Defined Objectives– Consistent application of continuous improvement

systems, tools and methodologies

• Benefit: Becomes a valid predictor and monitor of ongoing capability, quality performance and continuous improvement

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Q1 Then Q1 2nd Edition

Diploma

SIM

SIM

Discrete Approach

Holistic Approach

Supplier Self-assessment

Roadmap Execution Deployment Including Program Deliverables

Supplier Corrective

Actions

QualityResults

Supplier Manufacturing

Assessment

Predictive In-process

Metrics

Verify Results

Q1 – Ford Perspective

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Significant Changes in 2nd Edition

• Revised ppm requirements• Revised Stop Shipment Waiver Criteria• Elimination of partial site assessment• Site assessment based on Segmentation• Violation of Trust provision• Add ppm and delivery to Europe Service

suppliers• Site Warranty specifics• Include Launch Performance in Site

Assessment

Overview of Ford Q1

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Q1 Expectations

• Q1 status means that a supplier’s facility achieves excellence in these key areas:– CAPABLE SYSTEMS: 3rd Party Certified to

QS-9000 or TS 16949, ISO 14001; MS 9000/MMOG compliant (self assessment)

– ONGOING PERFORMANCE: Ford tracks and communicates to suppliers by linking a supplier’s Q1 status directly to Supplier Improvement Metrics (SIM).

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Q1 Expectations

– SUPERIOR MANUFACTURING PROCESS: The Manufacturing Site Assessment evaluates supplier capability and performance to customer expectations.

– SATISFIED CUSTOMERS ... CONTINUAL IMPROVEMENT: Demonstrated customer satisfaction by Customer Endorsement.

– CONTINUOUS IMPROVEMENT: Rising thresholds for performance acceptance criteria.

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• Third Party Certification – QS 9000 (or TS 16949); ISO 14001 and compliance to MS 9000/MMOG/Odette*

• Q1 overall score > 800 points• Acceptable Manufacturing Site Assessment• No Field Actions (with supplier responsibility)• <2 Stop Shipments (with supplier responsibility)

Acceptance Criteria for Q1

*Volvo Suppliers

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Acceptance Criteria for Q1

• PPM less than 100% of Commodity Average or <110• Minimum Delivery Rating of 81 points• Shipping History – 6 months• No Violations of Trust• Acceptable Warranty Performance (TBD)• Endorsement – STA and Customers

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Ongoing Evaluation for Q1

• CONTINUOUS IMPROVEMENT– Thresholds may be raised annually:

• SIM Metrics• Warranty Performance• Manufacturing Site Assessment

– Site Action Plan - corrective action plans assessed based on timeliness, thoroughness and effectiveness

Q1 Eligibility, Process and Requirements

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Q1 Eligibility

• Who Is Eligible for Q1 2002?– An External Supplier whose manufacturing

facility currently supplies production or service product to Ford, and has an active Ford purchase order

• Minimum six consecutive months of production or service shipping history

– Current Q1 suppliers must meet the new criteria

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Q1 Process Steps

1. Obtain 3rd Party Certification:– ISO/TS 16949 (QS-9000 may be acceptable until

2006)– ISO 14001

2. Achieve compliance to MS9000/MMOG or Odette (Self Assessment)

3. Contact Ford STA Site Engineer

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Q1 Process Steps

4. Establish eligibility– Identify Ford Customer sites– Determine Supplier Site Classification– Agree on process: Ford STA or Self-Assessment

to Q1 Criteria – Obtain Customer Endorsements

5. Submit Formal Application to Ford STA

6. Q1 On-site Evaluation (at STA option)

7. Obtain Final Recommendation from STA

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Q1 Requirements

• Established Eligibility– Suppliers must have a purchasing contract with

Ford, and at least six consecutive months of production, or service, shipping history.

• QMS/EMS Systems Certification• MS9000/MMOG or Odette Compliance

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Q1 Requirements

• Ongoing Manufacturing Site Assessment– Acceptable Site Assessment:

• Planning and Demonstration of Manufacturing Process Capability

• Variability Improvements (e.g., Consumer Driven 6 sigma)

• Manufacturing Efficiencies (FTT & OEE)• Customer Satisfaction documented in robust

Quality Operating System (QOS)

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Q1 Requirements

• Performance MetricsFive areas of performance measurement:

1. Field Service Actions

2. Stop Shipments

3. PPM Performance

4. Delivery Performance

5. Violations of Trust

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Q1 Requirements

• Customer Endorsement– Each Ford plant that receives the supplier’s

products

For Service Parts– Ford Customer Service Division (FCSD)– Material Planning & Logistics (MP & L)– Supplier Technical Assistance (STA)

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Q1 Requirements

• Customer Endorsement CriteriaConsiders immediate prior six months– No Stop Shipments with any supplier

responsibility– Commodity PPM <150% for relevant industry– Weighted average Delivery Rating >80– Improving or flat trend in QR for 6 months– Site action plans effective at addressing

concerns

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Q1 Requirements

• Continual Improvement: Ongoing Excellence– Acceptance criteria for

performance metrics and site assessment may be raised periodically to encourage continuous improvement.

• Continual Improvement is built into the heart of the Q1 designation.– According to Ford, to

maintain Q1 status suppliers must “keep a step ahead of the game, becoming better and better each year.”

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Q1 Score

• Each site begins with 1000 points• Each site must maintain a score of 800

or better• Sites gain or lose points based on

performance metrics and must meet all Q1 manufacturing site expectations.

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Q1 Scoring Thresholds

• Field Action (-250 points)– Directly impacts Customer Satisfaction and Brand

Image

• Stop Shipment (-100 to -250 points)– Directly impacts Customer Satisfaction

• PPM (+100 to -250 points)– Provides incentive to continually improve, increasing

Customer Satisfaction

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Q1 Scoring Thresholds Continued

• Delivery Rating (+100 to -250 points)– Drives excellence in communication and shipping

performance

• Manufacturing Site Assessment (-150 to –250 points– Late– Ineffective

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Q1 Scoring Thresholds Continued

• Violation of Trust (-250 points)– Trust issue which severely impacts Ford-Supplier

business relationship

• Warranty (TBE)– Scoring threshold planned to be available 3rd Qtr.

2003*

*Check https//:web.bli.ford.com

Q1 Revocation Process

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Revocation of Q1

• Q1 status:– A supplier’s overall Q1 score will be updated

monthly to reflect the most recent six months of mature data.

– Suppliers must maintain a minimum of 800 points of the initial 1,000 Q1 points

– The effect of triggering criteria cannot be offset by positive Q1 performance in other areas.

– Result is recommendation to revoke Q1 status.

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Q1 Status - Revocation

• Situations which may result in Revocation: – Any loss of certification – Field Service Action with any supplier responsibility– Stop Shipments -- two or more (may be waived)– Commodity PPM level exceeds commodity average

by 100% and site PPM >110– Delivery Rating <81 Points– Delinquent Mfg. Site Assessment– MSA Corrective Action Plan delinquent or ineffective– Violation of Trust– Overall Score falls below 800

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Q1 may be regained by satisfying all requirements for 6 consecutive months, including STA and Customer Endorsements, as appropriate.

Q1 Status- Revocation

• Triggering situations cannot be offset by positive performance in other areas

• If not satisfactorily addressed, Q1 status will be affected

Manufacturing Assessment

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Q1 Site AssessmentEvaluation Matrix

• Electronic checklist to provide objective evidence

• Completed Checklist is provided to STA• Maintain completed copies on-site

– Corrective Action Plans– Retain for prior 24 months

• Process Manufacturers use Manufacturing Process Checklist

• Employs R/Y/G and Expectation Ranking

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General Areas of Assessment

• Planning for Manufacturing Process Capability

• Demonstration of Manufacturing Process Capability

• Continuous Improvement– Launch Performance– Lean Manufacturing– Variability Reduction– Customer Satisfaction

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2 Stage Process Affecting Q1 Status

• At Discretion of STA. Triggered if:– Site assessment is late to the required

frequency– Corrective action plan is not submitted within

30 days of assessment– Corrective action plan is ineffective in

execution

• First Action = -150 points

• Second Action = -250; loss of Q1 status

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*Focus areas: require semi-annual self-assessment

Manufacturing Site Assessment

• Quality procedures, QS- 9000/ TS 16949, QOS

• FMEAs and Control Plans*

• Employee Readiness, Training Review

• APQP, Launch, Run-at-Rate Review *

• Manage the Change

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Manufacturing Site Assessment, Cont’d

• Sub-supplier Quality Management*• Control on Incoming Quality• Control Plans, Operator Instructions *• Process Variability Monitoring, reduction*• Gage Calibration and Use *

*Focus areas: require semi-annual self-assessment

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Manufacturing Site Assessment, Cont’d

• Part Identification, Nonconforming Parts, Packaging, Shipping

• Testing, Engineering Specifications• Preventive Maintenance/Housekeeping *• Manufacturing Flow, Six Sigma & Lean

Manufacturing Metrics *• Problem Solving and Corrective Action *

*Focus areas: require semi-annual self-assessment

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Integrated Systems

The 2nd Edition Q1 Approach

3rd PartyCertification

(QS-9000, ISO14001)

CustomerEndorsements

AcceptableSupply

Performance(SIM Results)

Acceptable SiteAssessment

ScoreContinuous

Impro

vemen

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++ Q1Q1