DSQR Training Supplier Quality Manual HEATING, COOLING & WATER HEATING PRODUCTS DSQR Training Supplier Quality Manual Bill Kennedy Corporate Quality

SQM Training

SQM Training Contents Review Introduction: Preface, Policy, Purpose, Scope, Responsibilities, Confidentiality, Objectives, Approval, Record Retention, Warranty, Rheem Supplied Product, Packaging/Handling, Recognition, Supplier Rating, Continuous Improvement, Nonconformance & Corrective Action Section I Section II Supplier Quality System Approval Process: General Requirements, Initiation, Requirements, Risk Classification, Approval, Maintaining Approval, Change of Approval Section III Production Part Approval Process: Purpose, Requirements, Initiation, Documentation, Approval, Guidelines

SQM Training CUSTOMERS

SQM Training Supplier-Partners Key to Our Success Suppliers Processes are an actual extension of Rheem process. Suppliers’ Quality Systems are an extension of Rheem Quality System. Rheem is ultimately responsible for our supplier’s product performance with our end customers. Product quality, reliability, responsiveness, service and support and change control are critical.

SQM Training Sect I – Quality Policy Rheem Corporate Quality Policy It is our policy to promote a culture of continual improvement that is committed to exceeding customer expectations and requirements, by providing products and services of excellent quality.

SQM Training Sect I - Purpose The Supplier Quality Manual defines the general policy, procedures, minimum requirements and expectations for new and previously authorized Rheem suppliers of production materials, products and services, including Quality System requirements and risk classification level; Qualification and Approval of the supplier quality system; Qualification and Approval of the supplier material/parts; General requirements and performance expectations.

SQM Training Sect I - Scope Raypak All Rheem Manufacturing Business Units Water Heating Air Conditioning SQM North America All Rheem Suppliers Globally Europe China/Asia

SQM Training Sect I - Responsibilities Suppliers are responsible for ensuring that the products and/or services provided meet the established requirements and assume full responsibility for the quality thereafter. Approval and verification by Rheem of supplier’s facilities, systems, records and product does not in any way relieve the supplier of the responsibility and obligation to provide product that meets all of Rheem’s specifications and requirements and all other contractual terms and conditions, as well as all applicable laws and regulations, nor shall it preclude subsequent rejection by the customer.

SQM Training Sect I – Supplier Approval Supplier Approval Process Overview Supplier Quality System Approval PPAP Approval Supplier Approval

SQM Training Sect I - Records & Warranty Quality records and records shall be maintained and available for review by Rheem upon request for defined periods Records of production materials shall be maintained per defined periods or industry requirements; whichever is greater Suppliers must have the capability of supporting product life cycle requirements. They are expected to demonstrate reliability that meets or exceeds Rheem requirements Supplier having design or co-design responsibility must participate in reducing the number of warranty concerns. They are expected to track and analyze causes of warranty claims and returns

SQM Training Sect I – General Requirements Supplier shall properly identify and maintain all Rheem supplier materials and tooling and gauging. Suppliers of products and materials will be monitored and measured on an ongoing basis; Supplier rating and scorecard is distributed to the supplier via Rheem’s web-based system. Suppliers are expected to demonstrate a commitment to continuous improvement in products and processes provided to Rheem. Suppliers to Rheem are expected to provide defect-free products and services. However, when material or product quality issues occur the supplier will be notified via Rheem web-based CAR process. Supplier must reply and provide a response within the defined timeframe and must take immediate action upon notification and receipt of a supplier nonconformance report (SNCR) or supplier corrective action request (SCAR).

SQM Training Sect II – General Requirements Suppliers must establish, maintain and demonstrate quality systems with supporting procedures to ensure that products and services conform to Rheem purchase agreements and product specifications at the supplier locations and throughout the supply chain. Supplier qualification and approval processes are managed via the Rheem web-based (Reliance) system. All suppliers must complete and submit a supplier profile, signed agreements page, and quality system survey. Based upon the review of the document evaluation and information provided the Rheem Supplier Council determines if a potential supplier is an “qualified and approved”. The supplier quality system may be required to ensure that products are traceable to raw materials or components used in the manufacturing process, production operation, date of manufacture, revision level and records of evaluation of acceptance and conformance.

Sect II - Classification SQM Training Sect II - Classification Supplier Risk Classification Levels High Business Risk Medium Business Risk Low Business Risk High Technical Risk Level A Level B Medium Technical Risk Level C Low Technical Risk Level C Level D

SQM Training Sect II - QMS Approval Process 1.Supplier Profile, Supplier Quality System Survey, Onsite assessment by Rheem, Supplier Council approval 2. Third party registration to ISO9001, TS16949 or any other recognized international quality system standard. Level A & B 1.Supplier Profile, Supplier Quality System Survey, Onsite assessment; as necessary, Supplier Council approval Level C 1. Supplier Profile, Supplier Quality System Survey Supplier Council approval Level D

SQM Training Sect II - Maintaining Approval Status Any of the following may result in either the temporary or permanent forfeit of approved supplier status: Failure to maintain minimum “acceptable” supplier rating level Major or unknown changes in the supplier’s organization; location of manufacture; or in the manufacturing process Negative changes in performance or delivered quality Failure to maintain current 3rd party certification; i.e. ISO9001, UL, CSA Customer’s inputs suggest a pattern of potentially significant problems with supplier’s products or services Failure to submit and implement required corrective actions to correct a known system, product or process deficiency

Sect III - Production Part Approval Process SQM Training Sect III - Production Part Approval Process PPAP Initiation Event Supplier QA Review PPAP Initiation Form SF-001 Supplier provides CA responses Supplier prepares PPAP Documentation Supplier Provide Corrective Action Response Yes PPAP Report Supplier C/A ? Supplier provides C/A responses Deviation Required Interim Approval Rejected No Full Approval Identify New supplier PPAP Approved Notify supplier

SQM Training Sect III - Production Part Approval Process The PPAP process is flexible to accommodate “all types” of supplier products and materials. Minimum requirements will vary* dependent on part complexity, engineering change, and event type and risk The PPAP process determines if the supplier fully understands and can “meet” Rheem Engineering and Specification requirements The PPAP process verifies the suppliers manufacturing process has the “capability” to consistently produce product(s) under actual production conditions that meets Rheem requirements and expectations

SQM Training Sect III - Production Part Approval Process PPAP INITIATION EVENTS Design Change New Supplier Rheem’s Request PPAP INITIATION EVENTS Material Change Die / Mold Change New Machine/ Tooling Manufacturing Method Change Process Change

SQM Training Sect III - PPAP Documentation and Forms * Required documentation and forms will vary per individual PPAP PPAP Initiation Requirements Form Control Plan SF-003 Material/ Performance Test Results SF-005 Rheem Drawing Process Capability Data Feasibility Commitment SF-006 Process Flow Diagram Gauge R&R Reliability Data Process/Design FMEA SF-002 Dimensional Results SF-004

SQM Training Sect III -PPAP Process Requirements Product samples must be from a normal “production” run of consecutive parts. Run quantity, sample size TBD The run shall be manufactured at the supplier “production site”, using the standard tooling, gauging, process, materials and operators from the production environment. The “supplier” shall perform all required material and performance testing, dimensional and capability studies, and inspections; as specified by Rheem. Minimum capability Cpk / Ppk required for specific CTQ’s

SQM Training Sect III - PPAP Approval Rheem Supplier Council (R&D, QA, Sourcing) will review and approve the PPAP/documentation package. Formal approval will be automatically communicated to the supplier; Full Approval: Meets all Rheem SQM requirements. Approval w/Reservations: Meets partial Rheem SQM requirements. Allows production shipment for production requirements on a limited time/piece quantity basis. Corrective action may be required Rejected: Does not currently meet Rheem requirements. Corrected product and/or documentation shall be re-submitted and approved before production quantities may be shipped.