SRS 2.5 Supplier Information

7/5/2012

Supplier Quality System – SRS 2.5

Table of Contents

I. Introduction 4

II. SRS 2.5 Measure (Criteria) 5

III. Measures 6

IV. Supplier Improvement Plan 18

SRS 2.5 Introduction

• To improve our communication and performance with

Suppliers, Flextronics established the Supplier Rating

System using the scorecard as a vehicle to provide

feedback to our suppliers on their performance every

quarter.

• It is a tool to facilitate constructive discussion in the

context of regular business reviews (QBR’s)

• Scores are calculated systemically using data from ERP

transactions and are refreshed Quarterly.

• It is intended to promote world class suppliers and provide

continuous improvement

• The Supplier Rating System process is now enhanced

and automated to establish an unbiased rating for supplier

management.

3

Measures (Criteria)

The eight (8) Measures are as follows:

1) On Time Delivery (OTD) %

2) Order Acknowledgement %

3) Supplier Managed Inventory and Continues Replenishment Program Spend (SMI-CRP) %

4) Terms of Payment

5) Quality Performance

6) Pricing Competitiveness

7) Environmental Response Time %

8) Quotation Response Time %

Supplier ratings are based on scores from eight measures, with targets by corporate goals.

5

Measures

On Time Delivery % Intended to improve on time delivery to achieve 95% which will ultimately increase manufacturing efficiency

If the receipt data is earlier than 3 days and later than 2 days according to the confirmed delivery date , it’s considered

late

Logic: The total 1’s and 0’s are used to calculate the delivery percentage based on total count of PO sequence (line)

numbers.

Score Definition

0.00 All less then 70%

1.00 Greater than or equal to 70% and less than 80%

2.00 Greater than or equal to 80% and less than 90%

3.00 Greater than or equal to 90% and less than 95%

4.00 Greater than or equal to 95%

6

S ALL DELIVERIES

% = X 100

N

1

N = No. of Deliveries <= -3 days and

>=2 days (calculation bases in

working days)

DELIVERIES - 3 AND +2 DAYS ACCORDING TO

SUPPLIER CONFIRMATION DATE

On Time Delivery % Table

Measures

Order Acknowledgement %:

Intended to increase PO confirmation to 95% or greater, which ensures more on time deliveries. Based

on total count of open PO lines, divided by number of open PO lines that have been confirmed

Score Definition

0.00 All less then 70%

1.00 Greater than or equal to 70% and less than 80%

2.00 Greater than or equal to 80% and less than 90%

3.00 Greater than or equal to 90% and less than 95%

4.00 Greater than or equal to 95%

10

S ACKNOWLEDGED P.O. LINES

TOTAL OPEN P.O. LINES

% = X 100

Order Acknowledgement % Table

Measures

SMI – CRP Spend % (Supplier Managed Inventory and Continuous Replenishment Program)

Intended to increase SMI/JIT and CRP spend to 80% or greater

The percentage of SMI-CRP spend compared to overall spend (for the specified time frame), dictates

the score.

Score Definition

0.00 All less than 20%

1.00 Greater than or equal to 20% and less than 40%

2.00 Greater than or equal to 40% and less than 60%

3.00 Greater than or equal to 60% and less than 80%

4.00 Greater than or equal to 80%

7

S SPEND FOR PO TYPE = ((SMI + JIT)+(CRP/2))

TOTAL SUPPLIER SPEND

% = X 100

N

1 N = No. of Suppliers w/ SMI,JIT & CRP

SMI-CRP Spend % Table

Measures

Score Definition

0.00 Payment terms are less than 60 days

2.00 Payment terms are equal to or greater than 60 days, but

less than 80 days

3.00 Payment terms are equal to or greater than 80 days, but

less than 90 days

4.00 Payment terms are equal to, or greater than 90 days

Terms of Payment:

Target is 90 days or greater.

This measure is based on the Site Business Partners’ Terms dictated by contracts or PO Terms

9

Terms of Payment Table

Measures

Quality Performance:

Intended to improve Quality of components and materials delivered to Flextronics, achieving PPM less

than or equal to 1000, less than 1 Quality Events and SCAR Responses Time should be closed at

least 4 days later according to Flextronics Requested date.

Quality Performance Measure is composed by three Quality metrics:

1. DPPM = Defective Parts Per Million

2. Quality Events = It is the number of created SCAR’s during the Quarter

3. SCAR’s Responses Time = It’s the difference days between Close Date from Supplier and Flex

Requested Date

In the next slide we will see in details these quality three metrics

11

Measures

Quality Performance continuation:

DPPM = Defective Parts Per Million

DPPM Logic

DPPM Category Table

11

DPPM =

Number of Defective Parts

Number of used Parts X 1,000,000

Quality Performance continuation:

Quality Events

• It is the number of SCAR’s created during the Quarter due to occurrences of nonconforming product, that was unable to be used without intervention

Quality Events Category Table

Measures

Quality Performance continuation:

SCAR Responses Time

• This is a difference between Close Date vs. Flextronics Requested Date

SCAR Response Time category table

Measures

Measures

Quality Performance continuation:

Quality Performance Score

Quality Performance category table

11

Score Definition

0.00 DPPM > 3001 , Quality Events > 3 , SCAR’s Response Time > 20

1.00 DPPM< 3001 , Quality Events <= 3 , SCAR’s Response Time >= 15 AND <= 20

2.00 DPPM<=3000 , Quality Events = 2 , SCAR’s Response Time >= 10 AND <= 14

3.00 DPPM<=2000 , Quality Event = 1 , SCAR’s Response Time >= 5 AND <=9

4.00 DPPM<=1000 AND Quality Event = 0 AND SCAR’s Response Time <=4

Measures

Pricing Competitiveness:

Target is pricing that is equal to or less than 3.0% below average price for a commodity

(known as WAP, Weighted Average Price)

Score Definition

0 .00 Price is greater than 2.0% above WAP

1.00 Price is less to 2.0% above WAP

2.00 Price is less than or equal to 0.5% above WAP

3.00 Price is less than or equal to -0.5% below WAP

4.00 Price is less than or equal to -3.0% below WAP

12

N = No. of commodities from supplier [ S 1

N

WAP SCORE x SUPPLIER COMMODITY SPEND

TOTAL SUPPLIER SPEND

WEIGHTED SCORE = ]

Pricing Competitiveness Table

Measures

Environmental Response Time %:

In the Supply Chain is a critical component in Flextronics ability to ensure our compliance to both legal and customer

requirements. To gain such compliance, we must be capable of determining that the materials Flextronics sources and

approves can meet these regulations

Intended to increase the time of responses on environmental compliance from Manufacturers

Score Definition

0.00 All less than 20%

1.00 Greater than or equal to 20% and less than 40%

2.00 Greater than or equal to 40% and less than 60%

3.00 Greater than or equal to 60% and less than 80%

4.00 Greater than or equal to 80%

8

Logic: If the Responded Date is less

or equal to Due Date then 1, Else 0.

The total 1’s and 0’s are used to

calculate the response percentage

based on total count of Manufacturer

Part Number or line.

S RESPONDED DATE <= FLEXTRONICS REQUESTED DATE

ALL REQUESTED LINES

% = x 100

N

1 N = No. REQUESTED LINES

Environmental Response Time % Table

Measures

Quotation Response Time %:

Intend to increase the On Time responses from Supplier to Quotation Team (Global or Regional)

Score Definition

0.00 All less than 20%

1.00 Greater than or equal to 20% and less than 40%

2.00 Greater than or equal to 40% and less than 60%

3.00 Greater than or equal to 60% and less than 80%

4.00 Greater than or equal to 80%

8

Logic: Number of On Time

Responses divided by Number of

Quoted parts from Supplier

Quotation Response Time % Table

Supplier Improvement Plan

Final Score Table

8

Score Status Explanation of ACTIONS to be taken

0.00 – 1.49 Poor

Suggest Non-Use

Supplier must provide Improvement Plan (SIP) within 2 weeks of receipt of scores. Non-response

and/or lack of improvement may initiate SCAR’s and/or disqualification process

1.50 – 2.49 Needs

Improvement

Supplier must provide Improvement Plan (SIP) within 4 weeks of receipt of scores. Business maybe

diverted from suppliers needing improvement until improvement is made. Non-response and/or lack

of improvement may initiate SCAR’s

2.50 – 3.49 Acceptable Supplier is performing on an average level with room for improvement

3.50 – 4.00 World Class Supplier has potential to become a preferred supplier and to receive additional quote opportunities

and/or business

• A score with NA simply means there was no data available to calculate that particular measure. No action

is needed from Supplier or Flextronics

• Should any scores fall in “Poor” or “Needs Improvement” flags, Supplier is encouraged to submit (to the

appropriate Flex contact) the Supplier Improvement Plan within the timeframe specified in the action table

accompanying the scorecard form that Supplier receives. They should work with their Flextronics

representative to discuss improvement and subsequent actions.

• A Flex representative may initiate a SCAR at any time if supplier is non-responsive and/or improvement

plan has not been submitted by supplier within the time frame stated below.

Thank You