• The primary goals of the Supply Chain / Supplier Quality Assurance Program (SQA) are:
  1. Insure a 100% on-time, consistent delivery of usable parts into the production processes of STEMCO at a reasonable cost to STEMCO and a reasonable profit to the supplier.
  2. Reduce and eventually eliminate the need for inspection upon delivery by a supplier to STEMCO.
  3. Eliminate the costs of rework, repair, rejection, handling and return of substandard material or components to suppliers.
  4. Reduce the "total cost of ownership" through continuous waste reduction, improvements to process and product, and re-engineering efforts by both STEMCO and the suppliers.

• The principles to be recognized in support of this program are:
  1. The supplier must assume full responsibility for the quality of its products and services and the integrity of its processes, achieving a minimum of 4.5 sigma quality level.
  2. STEMCO should not be required to verify that the supplier has provided acceptable product.

• STEMCO's expectations for a supplier's quality system:
  1. Each supplier should have in place or develop an effective quality system based on the fundamentals listed within the ISO/TS 16949 "Technical Specification of a Quality System."
  2. A supplier's quality system should target defect prevention rather than defect detection, monitor the performance of its manufacturing and business system processes, to include statistically based quality planning, with the goal of reduced variation and continuous improvement.

• STEMCO's Supply Chain Department is responsible for coordinating the supplier selection and approval process. Assistance from other departments within STEMCO is utilized to assure that recommended suppliers can consistently meet STEMCO's specifications.
• STEMCO requires each potential supplier to complete a Supplier Profile, which provides STEMCO the essential information necessary in the supplier selection / approval process.
• Suppliers are expected to have a formal Quality Management System, be ISO 9001:200 certified and ISO/TS 16949 compliant. As such, an uncontrolled copy of the Quality Manual will be asked to be supplied to STEMCO at the time the Supplier Profile is submitted.

1. Accord a prompt and courteous reception with fair and equal treatment for all suppliers.
2. Provide equal opportunity for all suppliers to make price and specification quotations or re-quotes.
3. Guarantee the confidentiality of any specification and/or price quotations submitted by suppliers.
4. Not take advantage of a suppliers error that unfairly enhances STEMCO.
5. Explain clearly to suppliers the reason(s) for any bid or proposal rejection.

Supplier Related Communications

• STEMCO contact information:
  STEMCO LP
  P.O. Box 1989
  Longview, TX 75606-1989
  903.758.9981
  1.800.527.8492
• The Supply Chain Department is the sole authority within STEMCO to negotiate prices and delivery rates, and to commit STEMCO to any purchase.
• All communications from suppliers regarding commercial aspects should be directed to STEMCO Supply Chain Department to the Coordinator assigned to the supplier or subject material.
• All communications from suppliers regarding quality issues related to its products should be directed to STEMCO's Supplier Quality Department.
• Suppliers shall be received at STEMCO's facility at any time during normal working hours. Appointments arranged in advance are necessary and encouraged to ensure proper time and attention will be available.
• In general, the use of electronic communication is the preferred means to exchange data. The STEMCO Supply Chain Coordinator will provide detailed information on STEMCO's use of and capabilities to receive electronically transmitted information.

1. Avoid the intent and appearance of unethical or compromising practice in relationships, actions, and communications with existing or potential suppliers.
2. Demonstrate loyalty to STEMCO by diligently following the lawful instructions of the company, using reasonable care and granted authority.
3. Avoid any personal business or professional activity that would create a conflict between personal interests and the interests of STEMCO.
4. Avoid soliciting or accepting money, loans, credits, or preferential discounts, and the acceptance of gifts, entertainment, favors, or services from existing or potential suppliers that might influence, or appear to influence, supply management decisions.
5. Handle confidential or proprietary information with due care and proper consideration of ethical and legal ramifications and governmental regulations.
6. Promote positive supplier relationships through courtesy and impartiality.
7. Know and obey the letter and spirit of laws applicable to supply management.
8. Conduct supply management activities in accordance with national and international laws, customs and practices, company policies and these ethical principles and standards of conduct.

1. Any STEMCO employee who is offered gifts or gratuities, of more than a nominal value, shall refuse to accept it or shall return it to the giver.
2. No STEMCO employee may accept personal loans or other special considerations from an individual or organization involved in an existing or potential supplier relationship with STEMCO.
3. No employee shall permit any influence that could conflict with the best interests of the company or prejudice the company's reputation.
4. Association with supplier representative at luncheons, dinners, or business meetings are helpful in establishing or maintaining better business relationships and is neither questionable nor unethical, provided the STEMCO employee keeps himself or herself free of any obligations. To ensure this, Supply Chain personnel are to act as hosts on some occasions and such efforts are to be part of their appropriate business expenses.

Supplier Performance

• To assist suppliers in gauging their performance, STEMCO's Supplier Quality Assurance and Supply Chain Departments compile and distribute a "Supplier Performance Report". This report quantifies each supplier's quality performance, and the overall replenishment efficiency of the ordering system based on established criteria.
• A delivery performance "credit" is applied to each shipment (per Purchase Order line and release number) received during a particular calendar month, with a due date falling within that calendar month.
• The quality performance percentage is calculated by dividing the number of shipments "accepted as received" by the total number of shipments. A shipment "accepted as received" is one in which no discrepant characteristics were discovered during any receiving inspection or subsequent use in the respective production process.
• STEMCO Supplier Performance Standards listed below are to be used to guide suppliers' performance and continuous improvement programs to achieve the expected level.

STEMCO Supplier Performance Standards
Rating		Status
Quality	Delivery
100	100	Excellent	Expected Performance
99	99 - 98	Good	Almost There
98 -95	97 - 90	Conditional	Improvement Needed
Below 95	Below 90	Unacceptable	Improvement goals with specifics may be required. Supplier may be a candidate for replacement.

• Supplier performance is also evaluated via the ISO/TS elements:
  • Disruptions to STEMCO's customers caused by supplier defects.
  • Premium freight shipments required to be made to STEMCO.
  • If STEMCO is placed on "special status" by its customers due to supplier defects.

• The part certification program is used to reduce and eventually eliminate STEMCO's inspection of supplier parts. The inspection intervals and levels are reduced, over time, on products that demonstrate good quality routinely.
• Should a discrepancy with a certified part or service be discovered on the production line or advance deviation requested by the supplier, immediate steps will be taken to solicit Cause and Corrective Action (CCA) from the supplier. This CCA should include any planned modification to the supplier's operating systems that will be implemented to prevent further occurrence of the discrepancy. The supplier's response will then be reviewed by STEMCO's Quality Assurance for effectiveness to determine what action is appropriate. The CCA may be rejected if STEMCO determines it is ineffective or inadequate.
• Each supplier is strongly encouraged to conduct quality planning and utilize SPC for control of processes. Product produced by processes demonstrating less than acceptable levels of capability is to be effectively screened or 100% inspected to prevent the receipt of non-conforming material or components by STEMCO.

• Certification of material and/or process control is required where so stated on STEMCO prints, specifications or as otherwise requested by STEMCO's Supply Chain or Supplier Quality Assurance personnel.
• One copy of SPC charts and/or certifications, if required, shall be provided with the packing slip unless otherwise directed by STEMCO Supplier Quality Assurance.
• Failure to supply required certifications can result in rejection of the shipment.
• The supplier is responsible for assuring that it has the needed drawings and specifications. Verification of revision status may be obtained by contacting the Supply Chain Coordinator responsible for the material. Current drawing levels are stated on each purchase order.

Defective Material

• All incoming material subject to potential inspection by STEMCO Quality Assurance personnel.
• When defective material is received, several alternatives are possible:
  • Whenever practical, rejected material will be returned to the supplier, at the expense of the supplier, for replacement and/or credit at STEMCO's option.
  • The parts may be accepted by STEMCO under deviation, sorted to remove the unusable parts or reworked before they are accepted into STEMCO stock.
• A $100, per occurrence, fee will be charged to suppliers who provide material that does not meet the STEMCO expectations for quality (i.e. packaging and paperwork not to guide or drawing/specifications for the material not achieved). Additionally, all expenses incurred by STEMCO in regard to sorting and/or reword may be accumulated and back-charged to the supplier.
• If material is to be returned, STEMCO will contact the supplier for return authorization and arrange for the shipment of the defective material back to the supplier at the supplier's expense. The supplier's account will be debited for both the fees and expenses above along with the value of the defective material.
• The supplier is responsible for analyzing the defect and providing a complete explanation and plan of action (Cause and Corrective Action) to STEMCO's Supplier Quality Assurance Department. Recommended guidelines for addressing corrective and preventative action can be found in Element 8.5 of ISO/TS 16949.
• Rejections and deviations become a part of the supplier's performance record and will be reflected in the periodic Supplier Performance Report provided by the SQA and Supply Chain Departments.

Advance Deviation

• The appropriate STEMCO Quality Assurance Representative must be notified immediately by the supplier prior to any suspect or defective materials being shipped by the supplier. These materials shall be identified, segregated and dispositioned per the guidelines of Element 8.3 of ISO/TS 16949.
• Authorization for deviation from specifications may be obtained through the Supply Chain Coordinator responsible for the material or component. A deviation number may be issued after STEMCO agrees to the deviation.
• The shipping documentation and packaging related to any deviation should be marked with the deviation number, along with all other standard package marking information.
  

Delivery

• Purchase orders are placed or released with specific delivery dates requiring receipt at STEMCO's docks. Suppliers are expected to achieve 100% on-time deliveries. If the supplier determines that delivery dates cannot be met, the STEMCO Supply Chain Coordinator must be advised of the situation immediately.
• Delivery lead-times are based on agreement between the supplier and STEMCO's Supply Chain Coordinator.
• STEMCO utilizes a window of available delivery dates. A supplier may deliver up to 5 days earlier than the required date. Deliveries are not desired earlier than this and in some cases may be returned, freight collect.
• Shipments from suppliers are expected to match the quantity ordered. Partial shipments and excess quantity shipments will cause additional work within STEMCO and as such, are counted against a supplier's performance.
• Purchase orders reaching past due status will be expedited with freight costs becoming the responsibility of the supplier. Should the product be utilized in STEMCO's oE customer's production line and the delay cause that customer to stop production, any back charges to STEMCO will become the responsibility of the offending supplier.
• In some cases, depending upon the supplier's geographical location, STEMCO may make arrangements to pick up orders directly from the supplier.
• All packing slips, box identification labels and invoices must contain STEMCO's purchase order number, line and release number, and part number.

Tooling Control

• All tooling purchased by STEMCO shall remain the property of STEMCO. Routine storage, maintenance and repair of tooling, unless otherwise negotiated, is the responsibility of the supplier such that expected tool life will be achieved and conforming parts will be produced. The supplier shall have formal procedures addressing tooling handling, storage, preventative maintenance and documentation. Upon completion of tooling build, the supplier shall provide the Supply Chain Coordinator a full and complete set of tooling drawing in a format acceptable to STEMCO.
• Suppliers are to advise the appropriate Supply Chain Coordinator when the condition of tooling will not allow the production of parts in conformance to established STEMCO quality requirements. The supplier should provide adequate time to rework, repair or replace the tooling to assure continuity of supply without the need for deviation from the specifications. This advisement should be accompanied by a capability study that documents the trend toward lack of capability.
• All STEMCO proprietary tools are to be permanently identified with STEMCO assigned tool numbers and/or part numbers as instructed by the Supply Chain Coordinator. Tooling, gaging and fixture changes shall be documented and traceable by the supplier.
• STEMCO provided gages must be maintained, used and stored in accordance with best practices. Suppliers are expected to control provided gages as part of their internal gage calibration program. STEMCO supplied gages (such as high value thread ring gages) will be recalled at planned intervals for calibration by STEMCO Quality Assurance. Suppliers that determine problems with any STEMCO supplied gages should contact STEMCO's Quality Assurance personnel immediately for instructions.
• Suppliers possessing STEMCO-owned tooling should issue reports that denote the following:
  • Quarterly - description of available tooling
  • Quarterly - condition of tooling
  • Quarterly - date tooling was last used and total number of parts the tool has produced
  • Quarterly - revision level to which the tool was made
  • Quarterly - tooling location, if not at supplier plant
  • Annually - insurance coverage

Packaging

• Suppliers are responsible for assuring that all components and material shipped to STEMCO are packaged and protected to prevent transit and handling damage (Ref. Element 7.5.5 of ISO/TS 16949).
• Suppliers are responsible for any special packaging methods as indicated on the purchase order or in the applicable STEMCO engineering or material specifications.
• The supplier will request approval from the Supply Chain Coordinator prior to any packaging change.
• When different parts are shipped together, the purchase order number, line and release numbers, part number(s), and quantity of each part must be clearly marked on the outside of each box and visible without unloading the pallet or container.
• Bar code labeling of incoming product is strongly encouraged, and may become mandatory, by STEMCO as it contributes to faster data entry using scanners to enter information directly into computers, increased accuracy levels of data entry and reduced training time for new employees.
• If requested, the supplier should utilize the bar code format required by STEMCO (Automotive Industry Action Group format) on all incoming material.