PNOs-Suppliers Technical Interfaces Heidelberg, 3 March 1998 Telecom Italia Supplier Qualification and Monitoring 1 TELECOM ITALIA SUPPLIER QUALIFICATION AND MONITORING SYSTEM Michele Carmosino Telecom Italia - Supplier Quality

PNOs-Suppliers Technical Interfaces Heidelberg, 3 March 1998 Telecom Italia Supplier Qualification and Monitoring 2 SUPPLIER QUALITY The Line has the goal of keeping under control the Process “Supplier Quality”, aiming to manage: 4Procurement Marketing 4Supplier Qualification 4Incoming Quality 4Vendor Rating Systems to build unified and homogeneous Interfaces for optimising Quality and related costs of Products, Services and Works purchased by the Company and by Telecom Italia Group.

PNOs-Suppliers Technical Interfaces Heidelberg, 3 March 1998 Telecom Italia Supplier Qualification and Monitoring 3 PROCUREMENT MARKETING It champions: 4continuous studies of National and International Market 4constant researches of new methodologies for offer evaluation and the activities useful for: 4the management of technological innovations 4the redefinition of supply strategic objectives 4the identification of new alternative proposals It concretely adds new value to the procurement process as a spring of competitive advantage and as a true improvement of Sale Marketing.

PNOs-Suppliers Technical Interfaces Heidelberg, 3 March 1998 Telecom Italia Supplier Qualification and Monitoring 4 PROCUREMENT MARKETING INFORMATION SYSTEM Procurement Marketing is split into three segments: 4Market Analysis 4Cost Analysis 4Benchmarking Analysis managed by an Information System centrally implemented, whose Data Base is continuously enriched by the operative activities perfomed by the Procurement and the User Departments

PNOs-Suppliers Technical Interfaces Heidelberg, 3 March 1998 Telecom Italia Supplier Qualification and Monitoring 5 SUPPLIER QUALIFICATION It keeps under control the definition and the management of “Supplier Qualification” Process and of the “Qualified Supplier List” for the Company and for Telecom Italia Group, by assuring: the expected quality levels of the Supplier in the competitions 4an improvement of Supplier quality level 4a permanent and objective observatory over the Supplier World, obtaining a clear Vision through the management / updating of the centralised Qualified Supplier List of the Company 4the transfer to the Supplier of the Company Requirements on Quality in a unified, transparent and homogeneous way

PNOs-Suppliers Technical Interfaces Heidelberg, 3 March 1998 Telecom Italia Supplier Qualification and Monitoring 6 SUPPLIER QUALIFICATION SYSTEM It is composed by three phases: 4Basic 4Economical and Financial 4Technical and Organisational It is tailored to 195 Product/Performances Categories 4155 Categories require ISO 9000 certification 4134 Categories require Technical / Organisational Qualification Qualification is compulsory for most of the competitions

PNOs-Suppliers Technical Interfaces Heidelberg, 3 March 1998 Telecom Italia Supplier Qualification and Monitoring 7 INCOMING QUALITY It assures the availability to the Internal Customer of Products / Works / Services conformant to the standards he requires, by following their life cycle, from the Identification of Needs to the Disposal, in order to achieve: Optimisation of life cycle costs -price + internal process costs (including costs of Quality / Poor Quality) 4Definition / monitoring of Supplier Process improvement actions -Incisive Comaking activities -researches on new quality control methods 4Supply acceptance test - not detailed and dispersive, -but attentive and effective, according to modern methodologies

PNOs-Suppliers Technical Interfaces Heidelberg, 3 March 1998 Telecom Italia Supplier Qualification and Monitoring 8 INCOMING QUALITY ASSURANCE It is performed according to the following procedures: 4Conformity Control: Lot by lot incoming control:new products or low quality problems  4 Conformity Validation: Product Traceability, Supplier Declaration of Conformity, availability of Test Report for every supply lot. Telecom may participate to Supplier lot tests.ISO 9000 approach  4 4 Comaking: Set of strategic activities, aiming to Total Quality, according to Supplier and Customer competence and responsibilities. TQM approach The choice is related to the Degree of Confidence of Telecom Italia in the couple Supplier / Product

PNOs-Suppliers Technical Interfaces Heidelberg, 3 March 1998 Telecom Italia Supplier Qualification and Monitoring 9 VENDOR RATING It assures the evolutional development of Company wide Vendor Rating System, to obtain indicators based on: 4Objective evaluation, or made objectives by Supplier acceptance 4Systematic evaluation 4Adequate sampling rate 4Detailed visibility over Supplier criticality / points of strength Final evaluations will be applied to: 4Qualified Supplier List management 4Contractual clauses 4Improvement trend measurement With the overall objective of: 4improving the provided quality — reducing Poor Quality costs

PNOs-Suppliers Technical Interfaces Heidelberg, 3 March 1998 Telecom Italia Supplier Qualification and Monitoring 10 VENDOR RATING SYSTEM The Vendor Rating System is the continuous observatory over Supplier and Product / Performance / Service Quality The evaluation is based on Indexes / Indicators, tailored to the different activities to be monitored, that measure strategic components of the purchased “goods” The identification of the Supply types / activities to be monitored in the set of the purchased ones is based on economical, criticality and strategic aspects.

PNOs-Suppliers Technical Interfaces Heidelberg, 3 March 1998 Telecom Italia Supplier Qualification and Monitoring 11 CONCLUSIONSCONCLUSIONS The effectiveness of Supplier Quality Assurance activity comes from: 4the high degree of integration among the involved Actors 4the synergy among the pursued objectives and the requirements of the Procurement / Users departments 4the direct involvement and responsibilisation of the Suppliers in the application of continuous improvement actions 4the decrease of Quality control costs, thank to the increase of the possibility of trusting in the reliable Suppliers The existence of International Standards on Products and Process Quality helps in improving System efficiency.