BDR Thermea

Supplier excellence manual

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5Andrew Vaughan - Group Procurement Director

We recognise the importance of effective and open working relationships with our

suppliers and are committed to building and developing these relationships.

The supplier excellence manual helps support this collaborative approach which is

crucial to maximising mutual benefits.

Patrick van de Werdt Group Quality Director

BDR Thermeas success is dependent on our ability to offer the highest value to

our customers through quality, service and price. A close and professional working

relationship with our supplier base is key, and helps to overcome challenges as we

strive to lead the industry.

Andrew Horton Group Supply Chain Director

As we look to achieve operational excellence by adopting lean principals, it is crucial

that our suppliers are aligned with our vision. We recognise that we must work

together with our suppliers during the continuous improvement journey.

This supplier excellence manual is intended to support this collaborative approach

which is vital in achieving our goals.

6CONTENTS

1 Doing business with BDR Thermea

1.1 Purpose of this supplier manual

1.2 About BDR Thermea

1.3 Key roles and responsibilities BDR Thermea

1.4 Key roles and responsibilities supplier

1.5 Language

1.6 Sustainability

2 Supplier selection and management

2.1 Purpose and segmentation

2.2 Definitions

2.3 Contracts and other agreements

2.4 Risk management

2.5 Supplier quality assessment

2.6 Corporate social responsibility

2.7 Supply chain

2.8 Information technology

2.9 Partnership

2.10 R&D

2.11 Commercial

3 Product qualification and release

3.1 New product creation process (NPCP)

3.2 Stage gates

3.3 Product qualification process

3.4 Production part approval process (PPAP) and submissions

3.5 PPAP level

3.6 Parts submission warrant (PSW)

3.7 Design legality

3.8 Declaration of performance document (DOP)

3.9 Timing and scope of the program

3.10 Advanced quality planning and PPAP deliverables

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4 Lifecycle management

4.1 Logistics requirements

4.2 Delivery lead times

4.3 Factory gate collections

4.4 Waste

4.5 Forecasts

4.6 Call-off

4.7 Delivery notification

4.8 Packaging requirements

4.9 Service level

4.10 Returns of non-compliant goods and packaging

4.11 Non-conforming material

4.12 Change management process

4.13 Supplier complaint handling

4.14 Traceability at supplier

4.15 Process audits

4.16 Quality management systems

4.17 Documentation and archiving

4.18 Spares requirements

5 Supplier evaluation

5.1 Overview

5.2 Vendor rating

5.3 KPI Calculation

5.4 Supplier relationship management (SRM)

6 Revision history

7 Addendum 1 - Cost breakdown template

8 Addendum 2 - Parts submission warrant

9 Addendum 3 Product change request (PCR)

81. Doing business with BDR Thermea

1.1 Purpose of this supplier manual

The purpose of this supplier manual is to clearly communicate to our suppliers the requirements for high quality

components and assemblies which need to be delivered effectively to BDR Thermea and its subsidiaries. It will

outline how we work together with our suppliers to reduce the total cost of supply and remove waste from the

whole supply chain.

We appreciate that suppliers are key to the success of BDR Thermea enabling delivery of high quality products

to our customers. It is therefore important that we tell the supplier about our expectations so that we can

both clearly identify opportunities for improvement and be able to effectively monitor improvements.

BDR Thermea values long-term relationships with suppliers who achieve the required standards of quality, cost,

delivery and continuous improvement. The intention is to achieve our zero defect target throughout the supply

chain through cooperation based on partnership.

We understand that our suppliers provide a diverse range of commodities which may have unique customer

requirements. The processes and tools described in this manual represent the core BDR Thermea expectations and

requirements. The differences suppliers may encounter across the BDR Thermea organisation will generally be

minimal and driven by customer, product, and/or market specific requirements.

1.2 About BDR Thermea

BDR Thermea owns some of the leading brands in the European market for heating products. These include

De Dietrich, Baxi, Remeha, Brtje, Chappe and Baymak. The Group has a high market position in key European

countries and strong positions in the rapidly growing markets of Eastern Europe, Turkey, Russia, North America

and China. In total BDR Thermea operates in more than 70 countries worldwide.

91.3 Key roles and responsibilities BDR Thermea

We understand that the way our individual businesses operate may differ slightly and in some cases have

unique roles and responsibilities. However, the roles and responsibilities represented in this section represent

the core of our business and the differences the supplier will see across our organisation will be minimal.

Buyer

The buyer is the primary contact for all purchasing-related issues. The supplier must inform the buyer of any

issue that impacts delivery, or to request any changes.

Commodity Manager

Many of BDR Thermeas suppliers are engaged with multiple BDR Thermea business units. The Group Commodity

Manager is responsible for ensuring that there is one face to BDR Thermea and our suppliers actions support the

global strategy through a consistent approach.

1.4 Key roles and responsibilities supplier

Customer Representative

The supplier will identify a contact within the supplier organisation to communicate with BDR Thermea.

This customer representative is the primary contact within the suppliers organisation for any key communications

including any quality, delivery, or commercial issue resolution.

1.5 Language

The language to be used for all communications between BDR Thermea and the supplier is English.

1.6 Sustainability

BDR Thermea believes in a sustainable future based on developments that meet the needs of the present without

affecting resources required for the future. We recognise and support all national and international environmental

legislation and we believe we have a duty to pursue sustainable development in all we do.

Protecting the environment for a sustainable future is important to BDR Thermea and is reflected in our innovative

products and sustainable initiatives. We are focused on ensuring our supply chain correctly manages recycling,

disposal, packaging and transport. We work with our partners to remove waste from our shared supply chain.

Sustainable procurement policy

This policy describes the framework within which BDR Thermea group companies procurement functions will

conduct their activities in order to contribute towards our total sustainable objectives. Our sustainable procurement

policy is available on the BDR Thermea website.

Ethical sourcing code

The principles of this code apply to all suppliers to the Group, but, within the EU, compliance will be defined as

adherence to local legislative minimum standards. This code of practice is written specifically as a guide for

supplying companies and factories based outside the EU. The ethical sourcing code is available on the

BDR Thermea website.

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2. Supplier selection and management

2.1 Purpose and segmentation

BDR Thermea collaborates with suppliers that best support our business and who can deliver the required level

of quality, cost, delivery performance and innovation. The diagram below reflects how we segment our supply

base. We work in close collaboration with those suppliers we identify as partners, actively manage the supplier

relationship with our supplier relationship management (SRM) suppliers at a Group level, those identified as

preferred suppliers are eligible to be shortlisted to take part in the development of new products and vendor rating is

carried out at local sites in a consistent way with a larger selection of important suppliers.

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2.2 Definitions

BDR Thermea is constantly striving to achieve the most relevant supply base and the pyramid below shows how

suppliers are categorised to achieve this.

To achieve preferred supplier status new suppliers are evaluated using our supplier selection criteria listed below.

This ensures that suppliers are of a sufficiently high standard to supply consistent quality products on time at a

competitive price and are also able to collaborate with BDR Thermea on new products and initiatives.

Only suppliers that meet these criteria will be considered eligible to be selected for inclusion in our NPCP.

The following table describes the evaluation criteria.

Preferred supplier

New supplier

Specialist supplier

Essen4al parts

Ac4vely eliminate

No new business

Supplier

performance

Item Criteria

Contracts Is a contract in place

Risk BDR Thermea risk assessment score

Dunn & Bradstreet risk rating

Quality Supplier potential review score

Quality performance (PPM)

Warranty Performance (PPM)

CSR CSR audit results (EcoVadis)

Supply chain Delivery performance (on time in full)

Supply methods (Kanban/VMI)

Systems compatibility Supplier integration CAD/IT

Supplier partnership Level of collaboration

Supports multi sites

Continual improvements

R&D New development support

Support future needs

Commercial Provides open book costing

NPCP target agreement

Collaborate in VA/VE/product teardowns

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2.3 Contracts and other agreements

Order of precedence

The requirements within this document are intended to be a supplement, not a replacement for or altering of

the terms or conditions within existing supply agreements, engineering drawings, or specifications. If conflicting

interpretations of the standards arise, the following order of precedence applies unless agreed otherwise in

our agreements:

1. Confidentiality agreements

2. Specification requirements

3. Supply agreements/contracts/trade products agreement

4. Terms and conditions

5. Design and development agreement

6. Service level agreement

7. BDR Thermea purchase orders

8. This supplier manual

Explanation and use of agreements

Confidentiality agreements

All suppliers to BDR Thermea must sign a non-disclosure agreement. It is our policy to use a BDR Thermea

standard form that has been created for this purpose. The supplier shall not use, transmit or disclose confidential

information to any third party except in accordance with the terms of the non-disclosure or any other written

agreement. We value the relationship with our suppliers and therefore would like to protect it through the use of

this formal agreement. The non-disclosure agreement can be found on the BDR Thermea website.

Specification requirements

A drawing or technical/part specification created by BDR Thermea R&D and used to describe components

or materials. A specification will contain the dimensions, functionality, quality requirements and other details

necessary to manufacture reliable parts.

Supply agreements

In addition to the requirements contained in this manual, we will determine if a supply agreement is required with

the supplier. Once the need is determined based on risk and strategic benefit, it is expected that suppliers will work

with BDR Thermea to put this agreement in place.

Our supply agreement outlines our specific requirements for cost, quality, supply chain and other elements of our

business relationship. The purpose is to outline the responsibilities of the two parties and the problem

resolution process.

2. Supplier selection and management

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Trade products agreement

Occasionally we will buy in finished goods and services and brand them. If we do this we will want to agree on

issues such as branding, contract period, exclusivity etc.

Design and development agreement

We may want to design a new product or service in cooperation with our suppliers, and will require our chosen

partners to agree to the process and project details including timescale, deliverables and IP ownership. We will do

this under our design and development agreement.

Terms and conditions (available on the BDR Thermea website)

Our general terms and conditions.

Service level agreements

Our specific logistics requirements pertaining to individual sites

BDR Thermea purchase orders

An order raised by a manufacturing site to authorise the manufacture of products. This is normally preceded by a

supply agreement which sets out the working arrangements. The order may be for an open quantity to cover such

parts as we wish to order or it may be for a specific quantity.

This supplier manual

2.4 Risk management

Business continuity

As a supplier to our business we require the supplier to have a formal business continuity/disaster recovery plan in

place to ensure no interruption in supply to our production line. We understand that contingency plans cannot be

developed for all possible scenarios, but we do expect the supplier to maintain robust plans to enable a rapid

resolution in the event of disruptions.

We need the supplier to have a crisis management approach to deal with potential disruptions. The approach should

include action and communication plans, activity checklists, escalation procedures, and the organization of teams,

roles, and responsibilities. This plan should address the recovery time needed for a variety of business interruptions,

contact information for key locations, supply chain assessment of risk to our products and/or services provided.

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2.5 Supplier quality assessment

Supplier potential review

The supplier assessment process is designed to get an insight into a suppliers ability to meet our quality,

delivery and cost requirements during the creation and realisation of products and services.

An audit of the main suppliers process, the supplier potential review, is part of the process and will focus on :-

Product development process

Product realisation process

Management process

Customer satisfaction

Change management

The supplier potential review score will result in a final rating of A to D.

2.6 Corporate social responsibility

Our suppliers must meet our minimum standards of CSR and must achieve our minimum required standard

using the EcoVadis sustainable supply management online audit. See http://www.ecovadis.com and also

comply with our Ethical Sourcing Code GPP.01.003 available to download on the BDR Thermea website.

2.7 Supply chain

Suppliers must deliver on time and in full. BDR Thermea has appointed a fourth party logistics provider who

organises all collections and deliveries to BDR Thermea sites and suppliers must follow the required process.

2.8 Information technology

Our minimum compatible CAD file type that suppliers should be able to output is a neutral format IGES file and

suppliers must have the ability to communicate electronically. If required electronic consolidated invoices, delivery

information and other two way data sharing using EDI and other data transmission methods will be used.

Rating Requirements

A. Quality capable / no action plan required Potential score > 85% and all individual elements

score a minimum of 71%

B. Partially quality capable / action plan voluntary Potential score > 71% ~ 84% or score > 85% with

elements < 70%

C. Potentially quality incapable

/ action plan mandatory Potential score > 60% ~ 70%

D. Not quality capable / supplier is non-preferred Potential score < 59% or one or more elements

score < 59%

2. Supplier selection and management

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2.9 Partnership

Collaboration

Suppliers should consider BDR Thermea as the customer of choice and will allocate resources to BDR Thermea first

and be prepared to share intellectual property for our mutual benefit. Suppliers must be prepared to integrate with

project teams and potentially other suppliers in the BDR Thermea NPCP and join quality improvement teams as well

as providing market intelligence and assistance with the sales and marketing of products.

Support

Our suppliers should support us with a high level of commitment in providing a timely service.

Communication is essential so any situation can be jointly managed at the earliest point to minimise adverse effect.

Rapid response to enquiries for new products, changes in specification or other communications should be dealt

with in a positive way. When a problem occurs the supplier should be prepared to own and positively resolve it in

a timely and effective way.

Continuous improvement

Suppliers should be prepared to integrate with BDR Thermea and may be asked to participate in the BDR Thermea

procurement excellence - vendor rating and SRM programme.

2.10 R&D

BDR Thermea would like suppliers to have an open dialogue to present on-going development strategies and

interesting new technologies for products and processes which can be shared with senior management both

at the supplier and/or BDR Thermea.

BDR Thermea would also like to work with suppliers so that specifications are developed to remove transactional

costs through investment in equipment and processes and to quickly and effectively overcome technical

challenges during the design process to achieve reliable, affordable and cost effective components.

Suppliers to BDR Thermea should be capable of supporting the BDR Thermea product road-map and

allocate sufficient resources to product development projects which may include providing development resource,

embedded team members or expertise to support BDR Thermea in achieving reliable specifications, the correct total

cost outcome and on time project completion.

2.11 Commercial

Open book costing

We want to work with suppliers to reduce the total cost of the parts we purchase and cost breakdowns enable us to

understand the elements of total cost and enable us to work with suppliers in reducing this. Cost breakdowns should

be on the BDR Thermea cost breakdown template.

NPCP target agreement

Suppliers should be willing and able to work with target costing agreements to achieve the correct product cost.

VA/VE

Value analysis/value engineering is a technique used in BDR Thermea to remove unnecessary product cost.

Suppliers should be willing to collaborate with VA/VE cost down initiatives which could include product teardowns

and deliver cost saving ideas to improve competitiveness.

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3. Product Qualification and Release

3.1 New product creation process (NPCP)

Introduction

It is our expectation that our suppliers actively participate in our NPCP. It is essential that we work together to

understand requirements, design for manufacture, design robust processes where capabilities are understood and

effectively controlled so that together we will deliver a cost effective and reliable solution. We want our suppliers

to actively participate in the entire process, be open to changes and look for ways to continuously improve in all

aspects of the product and processes.

BDR suppliers should be familiar with the NPCP concepts:

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3.2 Stage gates

Introduction

Stage reviews between stages of a project are described as process stage gates and the structure of each stage gate

is similar. A decision to progress the project is judged by a measurement of the quality of the pre-determined stage

deliverables against set criteria. Criteria are what the project is judged against in order to make the go/kill decisions.

These criteria should be agreed prior to the stage gate review meeting. Criteria should contain both financial and

qualitative criteria but change from gate to gate.

3.3 Product qualification process

The BDR Thermea product and qualification process involves the advanced quality planning (AQP) process and the

production part approval process (PPAP). These are structured methods to define the steps necessary to assure all

manufactured parts always meet the customer requirements. These steps are standardised and defined in 15 quality

planning requirements, the 15 PPAP elements. These 15 PPAP elements shall be worked out during the different

phases of the project.

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3.4 PPAP and submissions

The following circumstances shall require a part approval submission:

New product/routine re-submissions

Engineering changes

Tooling transfer, replacement or refurbishment

Correction of a discrepancy

Changes to optional construction or material

Sub-supplier or material source change

Parts produced at additional location or original location has changed

Process change

This list is not exhaustive and all changes must be communicated to BDR Thermea supplier quality assurance (SQA).

The BDR Thermea PPAP checklist should be used to track and report PPAP progress.

3.5 PPAP Level

PPAP submission levels will be defined as part of the BDR Thermea Advanced Quality Planning Process system.

Unless otherwise advised by BDR Thermea SQA, the PPAP will default to level 3. Level requirements are in-line

with the automotive Industry.

3.6 Parts submission warrant (PSW)

The parts submission warrant (PSW) shall have all the relevant sections completed and clearly identify the

engineering drawing change revision level and part specification approval.

3.7 Design legality

Where specified the design of the device must meet relevant international standards and regulations. The

supplier shall therefore perform all the required actions to obtain the related approvals and provide all the test

reports or any needed information to allow the customer to demonstrate the compliance on request of any local

authority. Where a specific country of manufacture or sale is specified by the customer it is the responsibility of

the supplier to identify all relevant standards and ensure product design of the device is compliant therewith.

3.8 Declaration of performance document (DOP)

The supplier must be compliant with the DOP. The DOP is the key concept in the construction products regulation

(CPR). The DOP gives the manufacturer the opportunity to deliver the information about the essential characteristics

of the product he wants to deliver to the market. The manufacturer shall draw up a DOP when a product covered by

a harmonised standard (hEN) or a European technical assessment (ETA) is placed on the market.

3. Product qualification and release

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3.9 Timing and scope of the programme

At BDR Thermea, projects are carried out according to the NPCP. In the NPCP nine stage gates are defined.

According to supplied parts the key deliverables for the supplier are shown in key deliverables supplier.

The BDR Thermea AQP shall be matching with these stage gates and shall be part of the project planning of

the supplier.

The scope of the BDR Thermea AQP, in other words the scope of applicable PPAP requirements, depends on the type

and complexity of the part.

The scope will be mentioned in the request for quotation (RFQ) and will be identified and communicated on the PSW

which will be submitted by BDR Thermea at the start of the project.

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3.10 Advanced quality planning and PPAP deliverables

BDR Thermea will review the status of the PPAP file at the different stage gates. The PPAP requirements shall

either be submitted to BDR Thermea or reviewed by BDR Thermea at the location of the supplier.

Beside the PSW for series validation at stage gate 6, BDR Thermea will define a PSW for sample delivery at each

stage gate. On this PSW the applicable stage gate is mentioned and the requested PPAP requirements are marked

with an S (submitted to BDR Thermea) or an R (required and to be reviewed at BDR Thermea)

3. Product qualification and release

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4.1 Logistics requirements

Our basic logistics requirements are flexibility, good communication and the ability to supply to our

manufacturing sites on a next day just in sequence basis. Any agreement detailing how this will be achieved

will be recorded in a BDR Thermea multi site agreement. If there are circumstances where an individual country

has exceptional requirements, they can be found in the local logistics service level agreements (SLAs).

4.2 Delivery lead times

BDR Thermea embraces the principle of lean supply and requires suppliers to commit to and adopt the same

philosophy. Suppliers will be required to be able to offer and maintain lead times in keeping with lean supply chain

(ie Kanban or Just in Sequence (JIS)) using logistics arrangements, relocation, local stock or other techniques.

4.3 Factory gate collections

BDR Thermea uses a nominated logistic provider to organise all collections of goods from suppliers premises and to

deliver goods to BDR Thermea production facilities. Suppliers should comply with the processes employed by the

nominated carrier in order to achieve agreed lead times. The logistic provider will measure supplier compliance

with requested lead times and quantities and report them to BDR Thermea.

4.4 Waste

We strive to remove waste throughout the supply chain and therefore we require our suppliers to embrace lean

techniques such as value stream mapping and process capability and work together with BDR Thermea and our

customers to make materials flow effectively.

4.5 Forecasts

BDR Thermea will provide a forecast of our requirements in order to help suppliers plan the demand of BDR

Thermea in their facilities. It is the suppliers responsibility to monitor this information along with actual usage and,

to the fullest extent possible, adjust its capacity and processes to accommodate any indicated changes in demand.

Any large variances should be checked and confirmed with BDR Thermea purchasing department.

4.6 Call-off

Suppliers should use lean principles to enable supply to BDR Thermea with a maximum of one days stock being

held at BDR Thermea. The supply methods, delivery point, packaging and other details should be in line with the

BDR Thermea standard methods as defined in the BDR Thermea logistics SLA.

BDR Thermea will give advance notice of delivery requirements. Where it is agreed that suppliers are supporting a

lean manufacturing processes this will be a maximum of one day in advance.

If a supplier is unable to adhere to any delivery requirements notification is required immediately and the

consequences and remedies can be agreed.

Parts delivered which are not in accordance with any delivery request will be rejected. In the event of a late or

incorrect delivery or other failure, we will require a full investigation and corrective actions to ensure the standards

we require are met in full.

4. Lifecycle management

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4.7 Delivery notification

A detailed delivery note is required. If agreed this may be in electronic form and be input directly to the BDR

Thermea ERP system. Any outer packaging containing a delivery note must be marked accordingly.

4.8 Packaging requirements

Packaging should be as detailed in the BDR Thermea labelling and packaging service level agreement.

4.9 Service level

Deliveries should be on time and in full. Compliance with this requirement will be measured and communicated to

key suppliers each month.

Any site specific requirements are available from the specific BDR Thermea site logistics team.

Baxi Commercial

Baymak

Chappe

Baxi Italy

Site contact details are listed on the BDR Thermea website.

4.10 Returns of non-compliant goods and packaging

This will be managed through our fourth party logistics provider at the suppliers cost.

4.11 Non-conforming material

Notification of nonconforming material - customer

Suppliers must notify BDR Thermea of nonconforming or suspect material immediately, whether they are may be in

transit or already delivered. This action is required by BDR Thermea to reduce the impact of a quality incident.

Communications must be directed to the BDR Thermea site that receives the goods, and to the commodity manager

and local buyers.

Containment of nonconforming material at the supplier facility

Suppliers must contain any nonconforming or suspect parts immediately to minimise the impact on BDR Thermea

production and shall implement 100% off-line inspection of suspect parts. Records of nonconforming material and

customer notification shall be kept per quality system requirements and made available if requested by BDR

Thermea supply chain management and/or the receiving BDR Thermea site.

Baxi Spain

Baxi UK

Brtje

De Dietrich

Heatrae Sadia

Remeha

SenerTec

Sofath

4. Lifecycle management

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Deviation request

Suppliers must quarantine nonconforming, suspect, or unapproved material and may be granted a concession in

order to continue shipments. A request to be granted a concession should be directed to the receiving BDR Thermea

site and copied to the commodity manager and buyer. BDR Thermea will evaluate any risks in using nonconforming

material and any impact on production schedules and customer deliveries prior to approval being given.

Material must not be delivered under concession unless written approved is given by the receiving BDR Thermea

site. Concessions will be for a specific quantity or time period which will be determined by the receiving BDR

Thermea site. Should a concession be granted and parts shipped to BDR Thermea, these parts must be labelled on all

four sides of the packaging. If necessary a receiving site could request additional labelling at the suppliers expense.

4.12 Change management process

Suppliers shall request in writing, approval from BDR Thermea for ALL changes prior to their implementation by

means of a product change request (PCR). This includes, but is not limited to, changes in supplier(s) of raw

materials, packaging, package size, product name, product specification or dimensions, manufacturing location,

process conditions, manufacturing equipment, raw materials or sub-components. Requests for changes shall be

submitted using a BDR Thermea PCR form shown and sent to the local commodity manager and the buyer.

Change requests to BDR Thermea are only considered to be received when the requesting supplier receives a

confirmation back from BDR Thermea after submitting the PCR. A request and an acknowledgement is not

a guarantee that approval will be granted. When the request is reviewed the supplier will be notified:

if the request is rejected,

if a PPAP should be submitted for the change

or if a waiver of PPAP is approved.

BDR Thermea reserves the right to determine the timeline for change implementations. No change will be allowed

without prior written approval from the receiving BDR Thermea site. BDR Thermea may require test samples for

plant trial run requirements.

All suppliers are expected to notify BDR Thermea when a change in the management structure and/or ownership of

the organisation occurs.

4.13 Supplier complaint handling

BDR Thermea has implemented a uniform complaint handling system. A complaint notification is documented

by BDR Thermea when a complaint occurs and the complaint handling form should be available from the affected

BDR Thermea site.

Suppliers are expected to use structured problem solving techniques such as 8D or 5-why, to generate a timely

response with corrective actions that permanently eliminate the root cause of the defect (see structured problem

solving section). Responses are expected in common electronic format (e.g. MS Word, MS Excel) and should be

submitted via e-mail.

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Structured problem solving

Suppliers to BDR Thermea are expected to implement and support a system of structured problem solving.

Suppliers are welcome to use their own systems or the BDR Thermea system as long as a cross-functional team is

able to identify the root cause of a problem and implement permanent corrective actions. The root cause definition

should include the process root cause (how did the manufacturing process fail), the system root cause (how did

the quality system fail) and the detection root cause (why was the non-conformance not discovered). Suppliers

should evaluate the effectiveness of the corrective actions for long-term system support within their company.

4.14 Traceability at supplier

Suppliers will ensure, by identification of the parts, or if this is not possible then by other suitable means, that if

defects are detected in a product, it can immediately be established which other products could be affected.

BDR Thermea should not be obliged to accept any products that are not adequately marked and shall be entitled to

return them to the supplier at the suppliers expense.

Tracing must be designed in such a way that parts have traceable delivery data back to the original workstation and

also to the sub-suppliers level.

4.15 Process audits

BDR Thermea conducts process audits of Tier 1 and 2 suppliers if one or more of the following events occur:-

Product change

Material change

The extent of the audit is based on the VDA 6.3 standard as defined by the German association of the

automotive industry.

4.16 Quality management systems

It is our minimum requirement that our suppliers are certified to ISO 9001 or equal.

If a supplier quality system certification is suspended, placed on probation, expired, receives any major

non-conforming compliance or a warning letter from ISO notified bodies then the supplier must let us know within

five days of this occurring. New quality system certification is required by BDR Thermea if the old one becomes

invalid, for example under mergers, acquisitions etc.

4.17 Documentation and archiving

Suppliers must archive all resulting quality data for a period of at least 10 years.

4.18 Spares requirements

The supplier should supply and maintain availability of spare parts for a minimum of 15 years after the cessation

of serial supply.

Supplier evaluation

Complaints

Process change

Sub supplier change

4. Lifecycle management

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5.1 Overview

The following diagram describes the supplier management processes of vendor rating and SRM:

5.2 Vendor rating

BDR Thermea will measure supplier performance and report the results on a monthly basis to top suppliers.

Elements of measurement

MPV Price variance against budgeted standard price.

OTIF Delivery on time in full

PPM Parts per million rejects

Evaluation will be against our specific requirements as detailed in a multi-site agreement.

5. Supplier evaluation

Quality Line PPM

Field PPM

Response to quality issues

Number of corrective action reports per month

Logistics OTIF

Supply chain flexibility/communication

NPCP Support and achieve targets

Commercial Commercial performance and MPV

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5.3 KPI Calculation

5.4 Supplier relationship management

Purpose

To identify those suppliers which are strategically important and provide a methodical process for supplier

performance improvement in key areas and identify areas of value which are available to be exploited to improve

profit and customer satisfaction.

To formalise the SRM process such that Group companies adopt a common approach when using the Group SRM

process. BDR Thermea has multiple sites and may receive varying levels of service.

The focus of SRM is:

to develop mutually beneficial relationships with strategic supply partners

to deliver greater levels of innovation and competitive advantage than could be achieved by operating

independently or through a traditional, transactional purchasing arrangement

To be eligible to take part in our SRM programme a supplier should:

Deliver in the top section of criticality and value

Deliver strategically important components

Be open to work in mutually beneficial cooperation.

BDR Thermea uses a supplier scorecard to rate suppliers for strategic meetings.

Strategic meetings are usually held once or twice a year to discuss the results and improve collaboration between

us. These should be supported at a high level by the supplier.

OTIF =

On time in full

calculation

Sum of all correct lines

Sum of All lines the OTIF was calculated for

Coverage (12mth) Stock (Average last 12mth)

Consumption (Average last 12mth)

PPM Quantity Rejected

Quantity Receipts

5. Supplier evaluation

x 100

x 30 days

x 1,000,000

27

6. Revision history

Revision number Issue number Date Responsible

Revision 1 First Issue 29th Jan 2014 T. Tilford

This table shows the date and responsible person for each revision to the supplier excellence manual.

28

7. Addendum 1 - Cost breakdown template

Supplier: Code:

Date: Part No.: Desc.:

QAF of Sheet: Issue/Release No: Volume:

1. Procured Parts (from sheet 2) B.O.P. Scrap Value = Sub Total (1) = 2. Raw Material MPE Ex. UOM Gross Net Price/ Scrap Re- Mat, O/H UnitDesc./Type/Size/Grade/Supplier Y/N Rate (e.g. Kg) Usage Usage UOM (%) claim % Cost

0.00

0.00

0.00

0.00

0.00

0.00

0.00

"2.0 Raw Material Analysis" QAF - Yes/No Mat. Scrap Value = Sub Total (2) =

3. Process Costs Working Heads C/Time Dir. Lab. Soc. O/H Res. O/H Tot Lab. M/C M/C Scrap UnitOp. Operation/facility/machine-size Hrs/Wk No./Hr. Rate/Hr. Rate/Hr. Rate/Hr. Cost Rate/Hr. Cost % Cost

37.5 1 80 9 8.3 0.21625 0 0 0.00% 0.21625

0

0

0

0

0

0

0

0

0

"3.0 Process Cost Analysis" QAF - Yes/No Process Scrap Value = Sub Total (3) =

TOTAL MANUFACTURING COST(1) + (2) + (3)

4. Other Costs calculation: "4.0 O/Head Analysis" QAF - Yes/NoGeneral Overheads

Design & Development

Other Costs (PL specify)

Sub Total (4) =

5. Tooling Costs from Sheet (2) Sub Total = Tooling Amortisation (if applicable) Sub Total (5) =

Production Location: TOTAL PART COSTWorking Days/Year: (1) + (2) + (3) + (4) + (5)

Component Weight: 6. Logistics Costs "6.0 Logistics" QAF - Yes/NoDel. Quality (ppm): Transport

Inco & Duty: Packaging

Quoted Currency: Pallet Amortisation/Maintenance

Exchange Rate: GDA Pallet cost = Sub Total (6) =

Signed Supplier: TOTAL OFFER PRICEDate: (1) + (2) + (3) + (4) + (5) + (6)

QUOTATION ANALYSIS FORMCONFIDENTIAL SummaryBT 03/01/01 quote_anal1.xls

0

QAF Ref. No.

0.000

TROLLEY SYSTEM

0

Assumptions:

0

0

0.21625

0.21625

1 Model / Type:

0.21625

0.21625

0

29

8. Addendum 2 - Parts submission warrant

Doc.Nr: xx.xx.xxReleased: 24.04.2012 Part Submission Warrant

Template owner: P.vd.WerdtBDR Thermea Group BV

Part Submission Warrant

PART INFORMATION

Part Name Part Number

Engineering Drawing No Issue Level

SUPPLIER INFORMATION CUSTOMER INFORMATION

Company Name Customer Name / Division

Contact Name Buyer SQE

Address Address

Initial Submission Sub-Supplier or Material source changeEngineering change(s) Change in part processingTooling transfer, replacement or refurbishment. Parts produced at additional locationTooling change or correction Other - please specify belowMaterial Change

Sample Parts are required with this submission

1 Customer Inputs / Drawing / Design Records 9 Packaging Specifications2 Design FMEA 10 Measurement System Analysis3 Part Function / Reliability Test Plan & Results 11 Dimensional Report4 Material Property / Composition Data Sheets 12 Appearance Approval Report5 Material Safety / Environment Data Sheets 13 Master / Boundary Samples6 Process Flow Chart 14 Process Capability Studies7 Process FMEA 15 Production Process Review8 Control Plan

SUPPLIER DECLARATION (to be completed and signed by the Supplier before sending sample parts or documentation)

YES NO (explain below)These results meet all drawing and specification requirements:

Name

Additional Comments :

Supplier Authorised Signature

Name

Additional Comments :

Signature

Re-submission Date : INTERIM APPROVED

SUBMISSION REQUIREMENTS (to be agreed in advance between Supplier & BDR Thermea: A=Applicable, S=Submit)

NOT APPROVED

Result Required Result

Explanation / Comments :

I affirm that the samples represented by this warrant are: i. Representative of our parts. ii. Have been made to the applicable customer drawings and specifications from specified materials. iii. Parts have been made using regular production tooling with no operations other than the regular production process. iv. I certify that documented evidence of such compliance is on file and available for review. v. I agree to inform the customer SQE / Buyer of any further changes to this part as could be described in "Reason For Submission" section above.

Title

Date Phone No

Required

Additional Comments :

Dated

Submission Number:

CompanyLOGOhere

Date

REASON FOR SUBMISSION New Submission

APPROVED

Quantity

Re-submission

CUSTOMER APPROVAL

30

9. Addendum 3 - Product change request (PCR)

Issue1 23/04/2014

Requested By : (Company/name) Department: Date Requested: 15/02/2014

Requested Target Date for

Implementation :Apr-14 Project Number

WHB FSB BBU CommercialBoilerHeating

Box mCHP SOLAR EWH Biomass Other

Qualityissue

Manufac.efficiency

CostSaving Health & Safety

ComponentStandardiz.

Logisticaspect

Standardvariation

Document.update

Marketneed VAVE

Bassano Preston Barcelona Le BlancMesnil Rastede Apeldoorn Mertzwiller HSH

UK IT FR SP EastEurope USA/CA ChinaSouth

America Germany Russia

WHAT IS THE CHANGE PROPOSAL:

WHY IS THE CHANGE REQUIRED:

Position NAME DATEApprovers "Concept"Requesting Buyer

Group Comodity Manager

R+D Competence Center Manager

Local Procurement Manager

Approvers "in Progress"

Group Procurement Projects Manager

Group Category Director

Group Quality Director

Group R&D Director

Group Procurement Director

PRODUCT DESCRIPTION ITEM DESCRIPTION

PRODUCT CHANGE REQUEST (sheet 1)

Design authority : (Please type Y in appropriate box)

Market : (Please type Y in appropriate box)

AFFECTED PRODUCTS / ITEMS :AFFECTED ITEM NUMBERTOP LEVEL PRODUCT CODE NUMBER

Group Approvers List

PRODUCT TYPE AFFECTED:(Please type Y in appropriate box)

ECR TYPE: (Please type Y in appropriate box only)

31

32

Glossary

Term Issue number Responsible

5-whys 5 Whys An iterative question-asking technique used to explore the cause-and-effect

relationships underlying a particular problem.

8D Eight Disciplines Eight Disciplines Problem Solving is a method used to approach and to resolve

problems, typically employed by quality engineers or other professionals.

AQP Advanced Quality

Planning

Framework of procedures and techniques used to develop products in industry.

BBU Back Boiler Unit BDR Thermea Product.

CAD Computer Aided

Design

The use of computer systems to assist in the creation, modification, analysis,

or optimization of a design.

CPR Construction

Products Regulation

European Union (EU) regulation harmonising performance information on

construction products across the EU.

CSR Corporate Social

Responsibility

CSR is a process with the aim to embrace responsibility for the companys

actions and encourage a positive impact through its activities on the

environment, consumers, employees, communities, and all stakeholders.

DFMEA Design Failure Mode

Effects Analysis

Design Failure Mode and Effects Analysis (DFMEA) is used to uncover design

risk, which includes possible failure, degradation of performance and

potential hazards.

DOP Declaration of

Performance

Gives the manufacturer the opportunity to deliver the information about the

essential characteristics of the product.

EDI Electronic Data

Interchange

Electronic communication system that provides standards for exchanging

data via any electronic means.

ERP Enterprise Resource

Planning

Enterprise resource planning is a business management softwareusually

a suite of integrated applicationsthat a company can use to collect,

store information.

ETA European Technical

Assessment

An ETA is an approval based on testing carried out to agreed European levels.

EWH Electric Water Heaters BDR Thermea Product.

FMEA Failure Mode

Effects Analysis

FMEA activity helps to identify potential failure modes based on experience

with similar products and processes - or based on common physics of

failure logic. It is widely used in development and manufacturing industries

in various phases of the product life cycle. Effects analysis refers to

studying the consequences of those failures on different system levels.

FOT First Out of Tool First set of samples.

FSB Floor Standing Boilers BDR Thermea Product.

HEN Harmonised Standard Harmonised European Standards provide a basis for manufacturers for

testing the performance of their products. Using these standards the

manufacturer will be in position to make the declaration of performance (DoP)

of his product as defined in the Construction Products Regulation (CPR) and

to affix the CE marking.

IGES Initial Graphics

Exchange Specification

A file format which defines a vendor neutral data format that allows the

digital exchange of information among Computer aided design (CAD) systems.

JIS Just In Sequence Just in sequence is an inventory strategy that matches just in time (JIT) and

complete fit in sequence with variation of assembly line production.

Components and parts arrive at a production line right in time as scheduled

before they get assembled.

33

Term Issue number Responsible

Kanban Japanese word for

Signboard or Billboard

Scheduling system for lean and just-in-time (JIT) production.

MCHP Micro Combined Heat

and Power

A micro-CHP system is a small heat engine (power plant) which provides

all the power for an individual building; heating, ventilation, and air

conditioning, mechanical energy and electric power.

MPV Material Price Variance The difference between standard cost and current cost.

MSA Measurement

System Analyses

Purpose of MSA is to have measurement systems where the readings

can be replicated on each part.

NPCP New Product

Creation Process

The complete process of bringing a new product to market.

OTIF On Time In Full Delivery of all lines of an order at the correct time and in the correct quantity

and quality.

PCR Product Change

Request

Document containing a call for an adjustment of a system; it is of great

importance in the change management process.

PFMEA Process Failure Mode

Effects Analysis

A Process Failure Mode Effects Analysis (PFMEA) is a structured analytical

tool used by an organization to identify and evaluate the potential failures

of a process.

PPAP Production Part

Approval Process

Used for establishing confidence in component suppliers and their production

processes, by means of demonstrating that all customer engineering design

record and specification requirements are properly understood by the supplier

and the process has the potential to produce product consistently meeting

these requirements during an actual production run at the quoted

production rate.

PPM Parts Per Million Calculated as the quantity that would be rejected if a million parts

were supplied.

PSW Part Submission

Warrant

Summary of the PPAP documents. Approval indicates that the customer has

not identified any issues with a new part.

RFQ Request For Quotation Invite to suppliers to participate in a bidding process to bid on specific

products or services.

SG Stage Gate Stage-Gate divides the effort into distinct stages separated by management

decision gates.

SLA Service Level

Agreement

An SLA is a definition of services, performance measurement, problem

management, customer duties, warranties, disaster recovery, termination

of agreement.

SQA Supplier Quality

Assurance

SQA Engineers are responsible for all aspects of the quality of purchased parts.

SRM Supplier Relationship

Management

Comprehensive approach to managing an enterprises interactions with

suppliers. The goal is to streamline and make more effective the processes

between BDR Thermea suppliers.

VA/VE Value Analysis /

Value Engineering

Value Analysis is analyzing and understanding details of a situation.

Value Engineering helps in identifying specific solutions to these

detailed problems.

VMI Vendor Managed

Inventory

The supplier takes full responsibility for maintaining an agreed inventory

of the material.

WHB Wall Hung Boilers BDR Thermea Product.