QRIP Training

1. QRIP Training John Deere Worldwide Supply Management & Logistics

2. Quality Rating Impact Policy (QRIP) • Development of the Policy • Enterprise team representing all Divisions. • Goal to commonize how we handle rejects. • Develop consistent, enterprise approach. • Encourage suppliers to be pro-active, take responsibility for their quality. QRIP Policy Training |

3. QRIP – Policy Description • 1.0 In order to encourage suppliers to be open and honest about problems incurred with non-conforming, or “suspected” non-conforming material, the following policy is effective with the approval date of this procedure. John Deere reserves the right to waive this policy should the supplier repeatedly abuse this privilege. A supplier’s Achieving Excellence quality PPM rating can be positively impacted if a supplier proactively contacts the [Supplier Quality Organization] about a known or “suspected” quality problem. The following conditions must be met. The supplier: 1.1 Contacts [Supplier Quality Organization], prior to the point of use (defined as being within John Deere. If notification is not received prior to point of use, see section 2. If improperly labeled parts see section 4. 1.2 Conducts the investigation, sorting or reclaim personally, or through a qualified third party. 1.3 Reports the results of the investigation, sorting or reclaim, to the [John Deere TQE], or his representative prior to leaving the [John Deere unit] 1.4 Provide an acceptable corrective action in writing, in a timely manner (per section 5 of JDWW SQP-01), to ensure that the defect cannot occur again in the future. (*Ref: JDS-G223 section 5.12) 1.5 The appropriate [John Deere TQE], is the sole judge of timeliness and acceptability of the corrective action. 1.6 This policy does not relieve the supplier of any financial, commercial, or material responsibilities. 1.7 Once disposition of nonconformance is complete, the CQE is responsible for any PPM adjustments requested by supplier. Quality Rating Impact:If the above criteria are met, (0) zero pieces will be rejected against the supplier’s quality rating regardless of the number of non-conforming parts found, returned, or reworked. • NOTE: Adjustments to Achieving Excellence numbers can only occur with (60) sixty days from the original date of reject (applies to section 1.0 and 2.0). QRIP Policy Training |

4. QRIP – Policy Description cont. • 2.0 If John Deere discovers non-conforming pieces, and the supplier responds per sections 1.2 through 1.6, only the material actually found non-conforming will be counted against the supplier’s quality rating. Note: Reclaimed parts will be counted against the supplier’s quality rating. Only the exact amount of non-conforming material will be recorded if the supplier’s response is timely. 3.0 If the supplier and the [John Deere unit] find it necessary to return a defective lot of material for sorting, the entire quantity returned will be initially considered as non-conforming and will count against that supplier’s quality rating. The supplier can request adjustment to these figures by reporting results of the sort and complying with sections 1.2, 1.4, 1.5 and 1.6. • 4.0 If mismarked/mislabeled containers or incorrectly packaged containers are shipped to Deere with a wrong part number or wrong parts in box or are packaged incorrectly, all parts will be counted against the supplier as (1) one piece and (1) one occurrence if a supplier ensures the part packaging or labeling is corrected by a method acceptable to the John Deere Tactical Quality Engineer (TQE). The TQE may request corrective action at the time of the reject (NCCA). The John Deere TQE reserves the right to count all pieces as non-conforming if issues of mislabeling/packaging are chronic or poorly handled. • 5.0 If containers that are shipped to Deere with a box containing 2 or more different part numbers, they will be counted against supplier as the total number of incorrect part numbers that affect line production. This number will be at least (1) one non-conforming piece and the total number may or may not be equal to the total number of incorrect parts in the box. Only that number of parts that affected line production should be counted against the supplier’s quality rating. Deere may request corrective action at the time of the reject (NCCA), in compliance with sections 1.4 and 1.5. Deere reserves the right to count all pieces as non-conforming if issues of mixed part shipments are chronic or poorly handled. • 6.0 If non-conforming parts are shipped to Deere, but are still able to be used on the manufacturing line, they will be counted against the supplier’s quality rating as follows: If the supplier provides a deviation for parts to be used “as-is”, only the parts that affected line production should be counted as non-conforming parts. Deere may request corrective action at the time of the reject (NCCA), in compliance with sections 1.4 and 1.5. Deere reserves the right to count all pieces as non-conforming if issues of deviation-requiring shipments are chronic or poorly handled. QRIP Policy Training |

5. QRIP Training Case Studies / Policy Explanation

6. QRIP Policy Explanation – Case Studies The supplier calls his Supply Management Specialist/Quality Engineer and tells him / her that they discovered they had a problem with their parts. They would like to come in and inspect the inventory of their parts. After inspection they find 20 parts which were bad and need to be returned. No defects were found on tractors. Answer: 0pcs Interpretation: This case applies section 1 and addresses the original intent of the Quality Rating Impact Policy, to encourage a supplier to notify us in advance of a problem, sort and purge the system of defective components. The only case where defects would be counted against the supplier is if defective parts were placed on tractors. QRIP Policy Training |

7. QRIP Policy Explanation – Case Studies We discover a problem with parts on the line in one box of parts. The box is set aside and the supplier comes in and sorts parts. 20 parts are found bad and the supplier takes the bad parts with an ESA. Answer: 20pcs Interpretation: This case applies to section 2 of the QRIP. A defective lot is found at the point of use, the lot is sorted and actual quantity of defects is charged against the supplier. (Supplier sorts, but could not repair the parts). QRIP Policy Training |

8. QRIP Policy Explanation – Case Studies • We have 5 parts that are found bad on the assembly line and are put in the reject area. The supplier comes in and sorts parts. The supplier finds 30 additional non-conforming parts out of 500 inspected. All 35 parts are reworked and are returned to inventory. Production was not affected. Answer:5pcs Interpretation: In this case the supplier was able to rework the parts and not interrupt production, we would charge them with the initial 5. The intent is to encourage support for production and give an incentive for the supplier to sort and rework the parts. QRIP Policy Training |

9. QRIP Policy Explanation – Case Studies • 150 parts are shipped in under the wrong part number. We find the error when we go to install the parts. • They are re-ID'd or returned, inventory is adjusted, and accounting adjusted if necessary. • Production is not affected. Answer:1pc. Interpretation: The quantity rejected against the supplier can be reduced to 1pc, only after an acceptable corrective action is received. It is important to remember that the Module Specialist reserves the right to waive the QRIP if a supplier repeatedly commits errors. QRIP Policy Training |

10. QRIP Policy Explanation – Case Studies A component (1pc) fails and causes a tractor to be written up with a non-conformance. The part is repaired by the supplier or by our repair person. It is not removed, nor sent back to the supplier. Answer: 1pc Interpretation: In many instances it is more economical to just fix the defect on the tractor and not remove it for the supplier to see. It is best if we can document the defect with digital photos, but in these cases the non-conformance should still stand. QRIP Policy Training |

11. QRIP Policy Explanation – Case Studies • A problem part is found on the line by Deere. The supplier is unable to come to our factory to sort parts. We sort through 600 parts taking one person 4 hours to sort parts. 300 parts are defective and will be returned to the supplier. Answer: 300pcs. Interpretation: All defective parts found during sorts conducted by us will be charged (+ hours) to the supplier. They must be proactive and supply the sorting manpower or schedule a qualified 3rd party to conduct the sort / repair. In this case all of the defective parts found at point of use would be counted. QRIP Policy Training |

12. QRIP Policy Explanation – Case Studies A load of 50 rusty, excessively oily, or excessively dirty parts is found by Deere on the line. The load was received in the last month and has not been stored in an abnormal location. We washed and used the parts. *This assumes there is nothing to indicate a problem caused by transportation or Deere. Answer: 50pcs. Interpretation: Defective parts that we had to rework, wash, repaint, etc, would be charged against the supplier, plus the time to repair. QRIP Policy Training |

13. QRIP Policy Explanation – Case Studies • A mixed load of parts is found on the line. There are 2000 parts in the container, the supplier sorts and finds that there are 150 of a similar part mixed in with this load. Answer:150pcs. Interpretation: Mixed parts should be considered as a defective part… These parts were not fit for use, the incorrect quantity should be charged against the supplier. QRIP Policy Training |

14. QRIP Policy Explanation – Case Studies A Supplier finds 50 defective parts at his location and calls the Supply Management Specialist/Quality Engineer and asks for a deviation. The deviation is granted prior to shipment of the parts, but parts are rejected on the shop floor when received. *The deviation authorizes the supplier to ship parts. Answer:0pcs. Interpretation: Parts approved under deviation are not to be counted against a given supplier's PPM's. Deviation = Fit for use approval QRIP Policy Training |

15. QRIP Policy Explanation – Case Studies • A defective part is found on the line at Deere, the supplier is notified and comes to our factory and sorts 100 parts at the line and 500 parts in inventory. The supplier finds 10 defective pieces at the line, 50 defects in inventory. • None of these can be repaired. • Production is not interrupted. Answer:10pcs Interpretation: In this case, the true intention of the policy is to charge the supplier with the actual % or qty. of defective parts. The correct # of rejected parts is the quantity found at thepoint of use on the line… QRIP Policy Training |

16. QRIP Policy Explanation – Case Studies • Deere finds a defective part prior to point of use, the supplier arrives, finds all 1500 parts in the lot are defective, but each can be easily repaired. The supplier repairs the parts in house and places all of the parts back into production, without interrupting production. Answer:1pc. Interpretation: If the parts have not yet reached the point of use, we want to encourage the supplier to come in and fix the parts rather than return them. The correct quantity of defects to charge the supplier is intended to be the Module Specialist’s call, the initial NC can stand, but some rejects should go against the supplier's PPM. Parts found at point of use should count if production affected QRIP Policy Training |

17. QRIP Policy Explanation – Case Studies • A lot of defective parts is discovered on our floor, the supplier visits, sorts and determines that all of the parts, 500 at the line and 2000 in inventory, are defective and can not be repaired. • The supplier brings replacement parts, and swaps the inventories without interrupting production. Answer:500pcs. Interpretation: In some cases the supplier may opt to swap the defective material. If the supplier has provided the appropriate response to our initial defect situation, they are allowed to swap material to prevent production from being interrupted. In these cases, it is appropriate to charge the supplier with the number of parts that were at point of use (on the line) QRIP Policy Training |

18. QRIP Policy Explanation – Case Studies • We find a load of bad parts and reject 200 pieces back to a supplier for additional testing. The supplier completes the inspection and says that they found there were only 50 bad pieces out of the 200 rejected. Answer: 50pcs. Interpretation: This case applies to section 3 of the QRIP and is intended to address situations where the supplier can not sort or determine pass / fail conditions at the Deere facility, such as those that require dedicated test equipment. Note: This is the most unacceptable way to address a defect and should be used sparingly. QRIP Policy Training |

19. QRIP Training Policy Intentions

20. QRIP Intentions • The Policy is intended to: • Encourage suppliers to be proactive. • Suppliers made more accountable for their defects. • Emphasis is on root cause analysis / corrective action. • It is a Consistent, fair, enterprise approach! QRIP Policy Training |

21. QRIP Intentions • How can we improve Supplier Quality? • Ensure defect investigations are accurate and fair. • Investigate the level of contamination, where was defect found? • Encourage the suppliers to support production • Encourage supplier to contain, then correct. • Emphasize effective root cause analysis / prevention of defects. • Be tough on the Supplier’s Corrective Action Reports. • Does the action prevent the defect from occurring again? • Could the defect occur on a sister part, same feature, if so fix it too! • The QRIP Policy is a privilege not a right. Don’t let it be abused QRIP Policy Training |