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EXHIBIT 10.2
MASTER MANUFACTURING AGREEMENT
This Master Agreement ("Agreement") is effective as of 2/17/97 ("the Effective
Date") between Hewlett Packard Company ("HP") and Dovatron International
("Dovatron"). The term "Agreement" includes all Exhibits, Agenda, and
References.
1.0 EXHIBITS
1.1 These Exhibits are attachments that support this Agreement, and are
incorporated by reference.
E.1.0 Product Description and Assembly Requirements
E.2.0 Quality Yield Expectations
E.3.0 Quality Reference Standards
E.4.0 Pricing of Assemblies
E.5.0 Material and Supplier Management Procedure and Responsibilities
E.6.0 HP-SDD Standard Confidential Disclosure Agreement
2.0 ADDENDA
2.1 The referenced Addendum A.1.0 is the sub-Agreement that defines the
specific working relationship between the HP Mexico International
Procurement Organization and Dovatron Mexico (HP-MIPO and DMEX). The
referenced Addendum A.2.0 is the sub-Agreement that defines the specific
working relationship between HP Asia Hardcopy Manufacturing Organization
and Dovatron Malaysia (HP-AHMO and DMAL). Both Addenda are incorporated
by reference.
3.0 REFERENCES
3.1 The following References summarize the processes, procedures and
operating guidelines for the Denali project which are incorporated by
reference.
R.1.0 Quality Reporting
R.2.0 ICT and FCT Plans
R.3.0 RMA
R.4.0 Corrective Action Procedure
R.5.0 PCO Process and AVL Control
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R.6.0 T (Technology), Q (Quality), R (Responsiveness), D (Delivery),
C (Cost), and E (Environmental) Review
4.0 SCOPE OF WORK
4.1 This Agreement covers the Denali Project of Printed Circuit Assemblies,
("PCAs"), as outlined in the attached EXHIBIT 1, PRODUCT DESCRIPTION AND
ASSEMBLY REQUIREMENTS, ON BEHALF OF HP'S SAN DIEGO DIVISION ("HP SDD).
4.2 Dovatron shall support the project by installing two dedicated
manufacturing lines for the main PCA (one line in Mexico and an identical
manufacturing line in Malaysia) with projected initial manufacturing
capacity of 60k to 75k PCA's per month per facility. In addition,
Dovatron will install a dedicated manufacturing line to support the North
American LIU in Mexico with a projected initial manufacturing capacity of
120k to 150k per month. At each given current run rate, a 20% surge
capability will be available within twelve weeks of receipt of written
notice by Dovatron for HP-SDD. HP-SDD agrees to initiate one 20% surge
within a six month period.
5.0 QUALITY
5.1 The specific quality guidelines and yield expectations are outlined in
EXHIBIT 2, QUALITY YIELD EXPECTATIONS for each PCA.
5.2 Achieving and maintaining the highest level of quality is a strategic
objective for HP-SDD. Dovatron shall be committed to implementing and
continuously improving the manufacturing processes and quality systems in
accordance with the expectations set forth in EXHIBIT 2, QUALITY YIELD
EXPECTATIONS.
5.3 Dovatron shall materially meet the requirements of all HP-SDD conducted
ESD audits. These surveys will use the HP-SDD "Workmanship Specification
for Electrostatic Discharge Control," Drawing No. A-5951-1589-1, Revision
F as the basis of the reviews. Dovatron shall also conduct at a minimum
monthly self audits at all locations which manufacture products for
HP-SDD.
5.4 Dovatron shall properly monitor, identify and provide prompt notification
to HP-SDD of any significant or consequential component or process
quality problems. Each party will demonstrate due diligence to remedy
such problems as required to effect a full and complete corrective
action.
5.5 Dovatron shall to provide to HP-SDD production yield data, failure
analysis reports and defect yield data as specified in REFERENCE R.1.0,
QUALITY REPORTING.
5.6 Dovatron shall to follow the ICT and FCT plans and requirements as
outlined in REFERENCE R.2.0, CT AND FCT PLANS.
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5.7 The listed IPC documents as identified in EXHIBIT E.3.0, QUALITY
REFERENCE STANDARDS will be used in the acceptance or rejection of
assembly workmanship by both HP-SDD and Dovatron.
5.9 Dovatron shall to follow the requirements as specified in REFERENCE
R.2.0, RETURN MATERIAL AUTHORIZATION (RMA) for all returned PCA's.
5.10 Dovatron shall to follow the corrective action process as outlined in
REFERENCE R.4.0, CORRECTIVE ACTION PROCEDURE in resolving quality issues.
6.0 PRICING AND COST LEADERSHIP.
6.1 Dovatron and HP-SDD mutually agree to aggressively and proactively seek
to reduce the overall product cost and HP-SDD's price where appropriate.
Dovatron will reduce its cost through pro-active efforts to include:
process improvements, material cost reductions, improved quality and
reduce the overall supply chain. HP-SDD shall provide assistance and
information to aid Dovatron in the reduction of its costs, where
appropriate.
6.2 HP-SDD and Dovatron will meet once per quarter to review volume, assembly
and procurement pricing, materials management and other pertinent
business issues during the TQRDC reviews. The price review shall include
a costed ▇▇▇▇ of Materials (BOM), any proposed material and or cost
changes and any process/test/yield improvements. The materials
management review will include: component lead-times, supplier
performance on quality and delivery, suggested Approved Vendor List
changes, and component material exposure.
6.3 The pricing structures are identified in EXHIBIT E.4.0, PRICING OF
ASSEMBLIES.
6.4 Purchase price variance (PPV) will be addressed as follows: All MIPO and
SIPO procured components and any specific and previously negotiated
component by HP-SDD for price adjustment ***
6.5 All other components with a price change from the current standard will
be reflected in the standard costed BOM at the end of the current
quarter ***
6.6 Both Companies agree to meet April 1st and October 1st to review
pricing. The reviewed pricing will be effective May 1st and November 1st
respectively.
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*** MATERIAL HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
COMMISSION.
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7.0 PURCHASE ORDERS AND FORECAST
7.1 DMEX will receive its firm purchase orders for PCAs through HP-MIPO.
Reference ADDENDUM A.1.0 for details of purchase order management.
7.2 DMAL will receive its firm purchase orders for PCAs through HP-AHMO.
Reference ADDENDUM A.2.0 for details of purchase order management.
7.3 HP-SDD will provide Dovatron with a 12 month rolling forecast for
production builds every month.
7.4 HP-SDD may postpone or decrease any purchase order by written notice to
Dovatron at least five work days prior to the delivery date. HP-SDD may,
without charge, extend the delivery date by up to thirty days from the
original delivery date. For any reschedule beyond thirty days of the
original delivery date, HP-SDD will be responsible for a 1.5% per month
carrying charge on material acquired pursuant to the original delivery
date.
7.5 The preprinted standard purchase order terms and conditions of both
HP-MIPO and HP-AHMO are incorporated by reference, and shall govern
transactions between Dovatron and those HP sites, respectively.
8.0 DELIVERY
8.1 HP-SDD expects 100% on time delivery unless delivery commitments are
impacted by actions taken by HP-SDD, defined as receipt of product by
HP-SDD within a window of three days early and zero days late of the
mutually agreed upon committed delivery date.
8.2 Dovatron shall immediately notify HP-SDD of any prospective failure to
deliver the specified quantities on the specified delivery date. Should
only a portion of the products be available on the delivery date,
Dovatron may ship the partial amount only after receiving prior approval
from HP-MIPO or HP-AHMO.
8.3 Dovatron is responsible for any expedition fees that may result in
ensuring that a shipment meets the committed delivery date, if the
lateness is attributed to Dovatron. Likewise, if a delay in shipment is
prompted by HP-SDD, expedition fees will by paid by HP-SDD.
8.4 Delivery requirements for DMEX are detailed in ADDENDUM A.1.0
8.5 Delivery requirements for DMAL are detailed in ADDENDUM A.2.0
9.0 MATERIALS AND INVENTORY MANAGEMENT
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9.1 In order to insure fulfillment of HP-SDD schedule requirements, all
quantities of parts planned and ordered by Dovatron in support of the
Denali Project are to be used exclusively for Denali, unless otherwise
authorized by HP-SDD in writing.
9.2 Dovatron shall follow prudent purchasing practices in order to meet
HP-SDD's demand flexibility as outlined in the respective ADDENDUM A.1.0,
A.2.0 while minimizing total inventory exposure. Dovatron shall
implement a comprehensive purchasing system that ensures that HP-SDD's
purchase orders will be fulfilled. The purchasing system must utilize a
rolling forecast to the component suppliers and allow for accurate
percentage award allocations.
9.3 Dovatron shall buy all components according to HP-SDD's approved vendor
list ("AVL") and any sourcing plans.
9.4 Dovatron shall maintain a supplier database for all the purchased
components on the AVL. Dovatron is required monthly to supply to HP-SDD
a report highlighting any supplier that falls outside the required
lead-time and that affects the purchase order requirements and demand
flexibility requirements as outlined this Agreement and in the respective
ADDENDUM A.1.0, A.2.0.
9.5 Dovatron shall provide HP-SDD, once per quarter, a report statistically
showing the quality, delivery, lead-time and cost trends for the
component suppliers. This report will be broken down geographically and
consolidated for both manufacturing facilities as outlined in EXHIBIT
E.5.0, MATERIAL AND SUPPLIER MANAGEMENT PROCEDURE AND RESPONSIBILITIES.
9.6 As referenced in EXHIBIT 5.0 SECTION 5.0.2 Both Companies agreed on the
issuance by Dovatron of a monthly report on component inventory
exposure.
10.0 MATERIAL LIABILITY
10.1 In the event of an engineering change pursuant to Section 12.2 below, or
complete or partial termination/cancellation, (including a severe volume
drop, or discontinuance of an HP-MIPO or of an HP-AHMO purchase order),
HP-SDD shall be liable for Dovatron's actual termination inventory in
accordance with the following conditions:
a) HP-SDD SHALL PURCHASE DOVATRON'S on hand inventory and material ordered
within the reported cancellation window as defined in EXHIBIT E.5.0,
MATERIAL AND SUPPLIER MANAGEMENT PROCEDURE AND RESPONSIBILITIES, that is
required to support the scheduling, safety stock and flexibility
requirements described in the respective ADDENDA A.1.0 AND A.2.0.
HP-SDD will acknowledge the document found within Exhibit E5.4. within
five working days from the date submitted to HP-SDD.
b) Dovatron shall demonstrate best efforts to cancel its purchase order
commitments or return for credit or find other uses for the materials
intended for use in the HP-SDD product provided that HP-SDD shall be
liable for any cancellation charges and penalties.
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c) Dovatron will cancel all possible pending orders to component suppliers.
d) HP-SDD will purchase the liable inventory as follows:
1) For all raw material, *** as quoted and within agreed to
inventory amounts for all material on-hand in the stockroom, all
material on-order inside the suppliers stated cancellation lead time
as outlined in EXHIBIT E.5.0, MATERIAL AND SUPPLIER MANAGEMENT
PROCEDURE AND RESPONSIBILITIES., and for any supplier stated buffer
and safety stock that is non cancelable also outlined in EXHIBIT
E.5.0, MATERIAL AND SUPPLIER MANAGEMENT PROCEDURE AND
RESPONSIBILITIES.
2) For work-in-process, ***
3) For finished product, ***
11.0 PAYMENT TERMS
11.1 HP-SDD and Dovatron shall pay NET 30 days upon proof of shipment of
product from Dovatron. Reconciliation of discrepant receipts are
outlined in the respective ADDENDA A.1.0 AND A.2.0
11.2 Currency will be in U.S. dollars.
11.3 Dovatron shall pay all HP-SDD component suppliers based on the terms
and conditions outlined on Dovatron purchase orders.
12.0 WARRANTIES:
12.1 WARRANTY. DOVATRON warrants to HP-SDD that items assembled or
manufactured by DOVATRON will conform to mutually agreed upon
specifications and be free from defects in workmanship under normal use
and service for a period of one year after shipment by DOVATRON.
DOVATRON's responsibility shall be limited to procurement of materials,
incoming inspection, and safe handling of the components while in-house
at DOVATRON. HP-SDD is responsible for the selection of all materials,
as well as ensuring the quality of the vendors and the compatibility of
the components. HP-SDD is also responsible for designing a product which
does not unduly stress the components being used. DOVATRON's obligation
under this warranty is limited to replacing, repairing, or issuing credit
for any said items that after inspection are deemed defective by
DOVATRON. All
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*** MATERIAL HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
COMMISSION.
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defective products shall be returned to DOVATRON manufacturing facility,
F.O.B. HP-SDD, with reference to a DOVATRON supplied Returned Materials
Authorization number ("RMA"). No products inspected by DOVATRON shall be
returned without the prior written consent of DOVATRON unless the cause
for the rejection or defect is mutually determined to be the
responsibility of DOVATRON. A shipping and handling charge will be
assessed for invalid returns or those where no defect is found.
THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES WHETHER STATUTORY,
EXPRESS OR IMPLIED, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR PARTICULAR PURPOSE AND FOR ALL OTHER OBLIGATIONS OR
LIABILITIES ON DOVATRON'S PART.
12.2 DOVATRON neither assumes nor authorizes any other person to assume for
DOVATRON any other liability in connection with the sale of the said
items. This warranty shall not apply to any of such products which shall
have been repaired or altered except by DOVATRON or which shall have been
subject to misuse, negligence, or accident. A prior written
authorization must be obtained from DOVATRON before any items can be
returned to DOVATRON pursuant to a warranty claim. DOVATRON is not
liable for incidental, consequential or special damage of any kind or for
personal injury resulting directly or indirectly from the design,
material, workmanship, operation or installation of the items being
assembled under this agreement.
12.3 PRODUCT RECALL. Dovatron shall reimburse HP-SDD for reasonable and
mutually agreed to recall costs incurred by HP-SDD for recall campaigns
[related to] that are the direct result of workmanship defects in the
Products [provided thereunder] manufactured by Dovatron hereunder in
order to remedy a breach of Dovatron's warranty provided in Section 11.1
hereof. In the event of any dispute between Dovatron and HP-SDD with
respect to such recall costs, the "Dispute Resolution Process" specified
in Section 15.4 hereof shall apply.
13.0 PROCESS OR ENGINEERING CHANGES
13.1 Dovatron shall not undertake any significant process changes affecting
performance, form, fit or function, or life reliability without the
prior written notice to and concurrence of HP-SDD.
13.2 HP-SDD may, effective upon notice to Dovatron, change HP-SDD's design,
specification or process requirements at any time. If any such change
directly affects the price, delivery or quality performance of product,
an equitable impact proposal shall be presented to HP-SDD for approval
prior to Dovatron initiating any change.
13.3 Dovatron shall follow the requirements as specified in REFERENCE R.5.0,
PCO PROCESS AND AVL CONTROL.
14.0 TECHNICAL, QUALITY, RESPONSIVENESS, DELIVERY, COST (TQRDC)
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REVIEW
14.1 Dovatron will be evaluated quarterly by means of HP-SDD's supplier
performance expectations as outlined in REFERENCE R.6.0, TQRDC REVIEW.
14.2 HP-SDD will collect feedback from both MIPO and AHMO to prepare a TQRDC
review with Dovatron. Where objectives are not met, both parties will
establish a mutually agreed upon corrective action plan.
14.3 HP-MIPO and HP-AHMO may elect to establish their own TQRDC schedule and
will be highlighted in the respective ADDENDUM A.1.0 AND A.2.0. If
referenced in an Addendum, the Addendum will take precedence over the
terms of this Agreement.
15.0 TERMINATION
15.1 All orders issued prior to the effective date of any termination shall
be fulfilled pursuant to the terms of this Agreement, even if the
delivery dates of the products of this Agreement under such orders are
after the effective date of the expiration or termination.
15.2 If Dovatron fails to perform this Agreement HP-SDD and Dovatron shall
immediately initiate a senior management meeting to resolve the related
issues, concerns, or deviance. If Dovatron is unable to remedy the
problem, a one month written notice of cure will be issued by HP-SDD to
serve as notice of the need for final resolution. HP-SDD reserves the
right to terminate this Agreement (in whole or part) by furnishing
Dovatron with six months written notice of termination. Dovatron
reserves the right to terminate this Agreement, (in whole or part), by
furnishing HP-SDD six months written notice of termination
15.3 Termination for any other reason by either party will require a senior
level management meeting between HP-SDD and Dovatron to discuss the
reasons relating to termination. This meeting will focus on reviewing
the reasons for termination and, in good faith, attempt to resolve the
issues through exploring other alternatives to negate the need to
terminate this Agreement. If a resolution cannot be obtained, HP-SDD will
use best efforts to provide Dovatron with a six month phase out plan. In
addition, all remaining inventory will follow the Material Liability
Process outlined on 9.0.
15.4 DISPUTE RESOLUTION PROCESS. It is the intent of the parties that any
dispute be resolved informally and promptly through good faith and
negotiations between HP-SDD and Dovatron. Either party may initiate the
proceedings by written notice to the other party setting forth the
particulars of the dispute. The parties shall meet in good faith to
jointly define the scope of the problem and a method to remedy the
dispute. If these meetings are not productive of a resolution, then the
mutually agreed to assigned representatives of HP-SDD and Dovatron will
meet and confer in a bona fide attempt to resolve the matter. If
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complete Agreement cannot be reached by the parties within 30 days of
initiation of this process either party may seek to have the dispute
redressed by litigation.
15.5 This Agreement shall be interpreted and governed by the laws of the State
of California. Dovatron and HP hereby consent to the jurisdiction and
venue of such courts.
16.0 PROPRIETY INFORMATION
16.1 HP-SDD owns all rights, titles, and interests with respect to the
intellectual property of the Product.
16.2 HP- SDD and Dovatron shall execute as part of this Agreement the E.6.0,
HP-SDD Standard Confidential Disclosure Agreement. The term "confidential
information" shall include:
a) HP-SDD furnished drawings, specifications, software, photographs and
other engineering or manufacturing information shall remain proprietary
property and when no longer required for the performance of the PCAs to
be manufactured, shall be returned to HP-SDD. This property shall only
be duplicated as authorized in writing by the disclosing party and shall
be returned to the disclosing party upon request.
b) All information or data concerning or relating to HP-SDD's products
(including the discovery, invention, research, improvement, development,
or sale of HP-SDD products) or business operations of either party
(including sales costs, profits, pricing methods, materials pricing,
organization, employee or customer lists and processes).
c) All procurement information including component contract pricing of
the disclosing party, including supplier names/AVL, HP-SDD part numbers,
production schedules, component and assembly lead-times, forecast data,
order quantities and other terms and conditions, including fully costed
(BOMs).
16.3 ALL HP CONFIDENTIAL INFORMATION SHALL BE USED ONLY IN THE PERFORMANCE OF
THIS AGREEMENT AND SHALL BE RETURNED TO HP UPON ANY EXPIRATION OR
TERMINATION OF THIS AGREEMENT.
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17.1 Dovatron shall be solely liable and responsible for any loss of or damage
to HP-SDD equipment, test fixtures or inventory in the care, custody and
control of Dovatron.
18.0 PRODUCT SUPPORT
18.1 Discontinuance leading to a lifetime buy requirement shall be used by
Dovatron as a last resort, and only under extreme circumstances where
Dovatron is unable to support an HP Product through the life of this
Agreement. In the exceptional case where Product will not be available
from Dovatron after the conclusion of this Agreement, Dovatron shall give
a
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minimum of one year's notice in advance of the last order date that
Dovatron will accept an order for the Product(s).
19.0 MISCELLANEOUS
19.1 SURVIVAL. The following terms and conditions of this Agreement shall
survive termination of this Agreement for any reason: Section 11
(Warranties), Section 14.2 (Dispute Resolution Process), and section 15
(Proprietary Information).
19.2 SEVERABILITY. In the event that any provision of this Agreement shall be
unenforceable or invalid under any applicable law or be so held by
applicable court decision, such unenforceability or invalidity shall not
render this Agreement unenforceable or invalid as a whole, and in such
event, such provision shall be changed and interpreted so as to best
accomplishes the objectives of such unenforceable or invalid provision
within the limits of applicable law or applicable court decisions.
19.3 RIGHTS AND REMEDIES CUMULATIVE. Except as expressly provided herein, the
rights and remedies provided in this Agreement shall be cumulative and
not exclusive of any other rights and remedies provided by law or
otherwise.
19.4 THIRD PARTIES. Nothing in this Agreement is intended, nor shall be
deemed to confer any rights or remedies upon any person or legal entity
not a party hereto.
19.5 ASSIGNMENT. The rights, duties and obligations under this Agreement
shall not be assignable by any party without the prior written consent of
the other parties, except as provided by this Agreement. Any attempted
assignment without the required consent will be void. Notwithstanding the
foregoing, all rights, duties and obligations under this Agreement may be
assigned to an affiliate of a party ("affiliate" is identified as a
company in which a party owns 50% or more of that company) without the
prior written consent of the other parties.
19.6 ENTIRE AGREEMENT, AMENDMENT. This Agreement, along with the exhibits,
addenda and references, attached hereto, embodies the final, complete and
exclusive understanding between the parties, and replaces and supersedes
all previous agreements, understandings or arrangements between the
parties with respect to the subject matter contained herein. No
modifications or waiver of any terms or conditions hereof nor any
representations or warranties shall be of any force or effect unless such
modification or waiver is in writing and signed by an authorized officer
of each party hereto.
19.7 FORCE MAJEURE. No party shall be liable to any other party for its
failure to perform any of its obligations under this Agreement, other
than the failure to pay any sums where due, during any period in which
such performance is delayed because rendered impracticable of impossible
due to circumstances beyond its reasonable control, provided that the
party e experiencing the delay promptly notifies the other parties of the
delay.
19.8 NOTICES. All notices, consents, agreements, communications, requests
and the like required
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or permitted under this Agreement will be writing and will be deemed
given and received (a) when delivered personally, (b) when sent by
confirmed telecopy, (C) three days after having been duly mailed by first
class, registered or certified mail, postage prepaid, or (d) two days
after deposit with a commercial overnight carrier, with written
verification of receipt. All notices will be addressed as follows:
If to Dovatron:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇ ▇▇▇▇
If to HP-SDD:
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇ ▇▇▇▇
or to such other address as the person to whom notice is to be given may
have furnished to the other in writing in accordance herewith.
19.9 WAIVER. The failure of any party to enforce the provisions of this
Agreement shall not be deemed a waiver of such provisions or of the right
of such party thereafter to enforce such provisions.
19.10 COUNTERPARTS. This Agreement may be executed in counterparts with the
same force and effect as if each of the signatories had executed the same
instrument.
19.11 HP-SDD will defend, at is expense, any action brought against Dovatron to
the extent that such action is based on the claim that a PCA manufactured
by Dovatron in conformance with HP-SDD's specifications directly infringe
the intellectual property rights of any third party, provided that HP-SDD
is promptly notified in writing of the commencement of such action and is
given the authority, information and reasonable assistance ( at HP-SDD
expense) necessary to defend or settle such action. In addition, HP-SDD
shall pay all damages and costs finally awarded in such action.
19.12 ORDER OF PRECEDENCE. In the event of any conflict with or inconsistency
between any of the terms of this Agreement, any Addendum hereto or the
purchase order terms and conditions, the following order of precedence
shall apply: (1) this Agreement; (2) any Addendum; and (3) the purchase
order terms and conditions.
19.13 LIMITATION OF LIABILITY. In no event shall either party hereto be liable
for any incidental, consequential, indirect, or special damages,
including (without limitation) damages for lost
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profits, loss of revenue, cost of capital, claims or customers for
service interruptions. The total liability of Dovatron (including its
subcontractors and suppliers) for all claims, whether in contract, tort
(including negligence and product liability) or otherwise, arising out of
or connected with this Agreement shall not exceed the total amounts
received by Dovatron from HP-SDD with respect to any Products that give
rise to such claim or claims.
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▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
Global Procurement Senior Vice President
Hewlett-Packard, SDD Dovatron International
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EXHIBIT 1.0 PRODUCT DESCRIPTION
THE FOLLOWING ASSEMBLIES ARE COVERED BY THIS AGREEMENT:
MAIN DENALI PCA ASSEMBLY C3801-60104
MAIN KODIAK PCA ASSEMBLY C5316-60101
▇.▇. ▇▇▇ TOP ASSEMBLY C3801-60028-1
▇.▇. ▇▇▇ PCA ASSEMBLY C3801-6015
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EXHIBIT 2.0: QUALITY YIELD EXPECTATIONS
THE FOLLOWING ARE THE FINAL ASSEMBLY TARGET YIELDS AT SDD & HMO:
Q1 after MR less than or equal to 5000ppm
Q2 after MR less than or equal to 2000ppm
Q3 after MR less than or equal to 1500ppm
One year After MR less than or equal to 500ppm
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EXHIBIT 3.0 QUALITY REFERENCE
The following listed IPC documents will be used for reference in the acceptance
or rejection of assembly workmanship by both Dovatron and HP.
IPC-T-50 Terms and Definitions
IPC-CH-65 Guidelines for Cleaning Printed Boards and Assemblies
IPC-RB-276 Quality and Performance Specification for Rigid Printed Boards
IPC-A-600D Acceptability of Printed Board
IPC-QE-605 Printed Board Quality Evaluation Handbook
IPC-A-601A Acceptability of Electronic Assemblies
IPC-R-700G Guidelines for Modification, Rework, and Repair of Printed
Board and Assemblies
NOTE: These are nonattached references.
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Exhibit 4.0
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*** EXHIBIT (1 PAGE) OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
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Exhibit 5
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*** EXHIBIT (23 PAGES) OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. THE OMITTED MATERIAL IS FILED SEPARATELY WITH THE COMMISSION.
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EXHIBIT 6
CONFIDENTIAL DISCLOSURE AGREEMENT
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Effective Date: January 31, 1997
In order to protect certain confidential information, Hewlett-Packard Company
and its corporate affiliates ("HP"), and the "Participant" identified below,
agree that:
1. DISCLOSING PARTY: The party disclosing confidential information
("Disclosure") is both parties (Note: Fill in "HP", "Participant", or "both
parties".)
2. PRIMARY REPRESENTATIVE: Each party's representative for coordinating
disclosure or receipt of confidential information is:
HP: HEWLETT-PACKARD SAN DIEGO DIVISION
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PARTICIPANT: ▇▇▇▇▇▇▇ ▇▇▇▇▇
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3. DESCRIPTION OF CONFIDENTIAL INFORMATION: The confidential information
disclosed under this Agreement is described as:
HP: ALL NECESSARY INFORMATION TO MANUFACTURE
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PCAS FOR DENALI & KODIAK PRODUCTS.
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PARTICIPANT: ALL PROCESS PROCEDURES TO ENSURE
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QUALITY AND DELIVERY. ALSO FINANCIAL INFORMATION.
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(Note: Be specific; for example, individually list materials provided.
Attached additional sheets if needed.)
4. USE OF CONFIDENTIAL INFORMATION: The party receiving confidential
information ("Recipient") shall make use of the confidential information only
for the following purpose (e.g., "evaluation and testing for a make/buy
decision on project xyz"):
HP: TRACK PERFORMANCE OF DOVATRON INTERNATIONAL
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PARTICIPANT: MANUFACTURE PCAS FOR HP-SDD
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5. CONFIDENTIALITY PERIOD: This Agreement and Recipient's duty to hold
confidential information in confidence expire on:
DECEMBER 31, 1999
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(Note: This is the period of protection of confidential information.)
6. DISCLOSURE PERIOD: This Agreement pertains to confidential information
that is disclosed between the Effective Date and
DECEMBER 31, 1999
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(Note: This is the period during which confidential information is going to be
disclosed.)
7. STANDARD OF CARE: Recipient shall protect the disclosed confidential
information by using the same degree of care, but no less than a reasonable
degree of care, to prevent the unauthorized use, dissemination, or publication
of the confidential information as Recipient uses to protect its own
confidential information of a like nature.
8. MARKETING: Recipient's obligations shall only extend to confidential
information that is described in paragraph 3, and that: (a) comprises specific
materials individually listed in paragraph 3; or, (b) is marked as confidential
at the time of disclosure, or, (c) is unmarked (e.g. orally disclosed) but
treated as confidential at the time of disclosure, and is designated as
confidential in a written memorandum sent to Recipient's primary representative
within thirty days of disclosure summarizing the confidential information
sufficiently for identification.
9. EXCLUSIONS: This Agreement imposes no obligation upon Recipient with
respect to information that: (a) was in Recipient's possession before receipt
from Disclosure; (b) is or becomes a matter of public knowledge through no
fault of Recipient; (c) is rightfully received by Recipient from a third party
without a duty of confidentiality; (d) is disclosed by Discloser to a third
party without a duty of confidentiality on the third party; (e) is
independently developed by Recipient; (f) is disclosed under operation of law;
or (g) is disclosed by Recipient with Discloser's prior written approval.
10. WARRANTY: each Disclose warrants that it has the right to make the
disclosures under this Agreement. NO OTHER WARRANTIES ARE MADE BY EITHER PARTY
UNDER THIS AGREEMENT. ANY INFORMATION EXCHANGED UNDER THIS AGREEMENT IS
PROVIDED "AS IS".
11. RIGHTS: Neither party acquires any intellectual property rights under this
Agreement except the limited rights necessary to carry out the purposes set
forth in paragraph 4. This Agreement shall not restrict reassignment of
Recipient's employees.
MISCELLANEOUS
12. This Agreement imposes no obligation on either party to purchase, sell,
license, transfer or otherwise dispose of any technology, services or products.
13. Both parties shall adhere to all applicable laws, regulations and rules
relating to the export of technical data, and shall not export or reexport any
technical data, any products received from Discloser, or the direct product of
such technical data to any proscribed country listed in such applicable laws,
regulations and rules unless properly authorized.
14. This Agreement does not create any agency or partnership relationship.
15. All additions or modifications to this Agreement must be made in writing
and must be signed by both parties.
16. This Agreement is made under, and shall be construed according to, the laws
of the State of California, U.S.A.
HEWLETT-PACKARD COMPANY
San Diego Division
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(Entity Name)
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇ ▇▇▇▇▇ , ▇▇ ▇▇▇▇▇
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(Address)
BY
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(Functional Manager's Signature)
▇▇▇▇ ▇▇▇▇▇▇
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Manufacturing Manager
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(Title)
PARTICIPANT
Dovatron International
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(Company Name)
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------------------------------------------
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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(Address)
BY
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(Authorized Signature)
▇▇▇▇ ▇▇▇▇▇▇▇
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VP HP WW Programs
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(Title)
19
ADDENDA
A.1.0 Not yet executed
A.2.0 Not yet executed
20
REFERENCE 1.0
CM: DOVATRON MEXICO
PRODUCT: NORTH AMERICAN LIU
WORKWEEK: 18
WEEK ENDING: MAY 2, 1997
1) LINE YIELD LOSS SUMMARY
====================================================================================================
Station Description Prev. Mth WW14 WW15 WW16 WW17 WW18 Cur. Mth
----------------------------------------------------------------------------------------------------
Station Description Prev. Mth WW14 WW15 WW16 WW17 WW18 Cur. Mth
====================================================================================================
Total PCA Inspected
---------------------------------------------------------------------------------
AUTOMATIC Total Defective PCA
---------------------------------------------------------------------------------
Insert/production Yield Loss In PPM 0 0 0 0 0 0 0
---------------------------------------------------------------------------------
100% inspect Target In PPM 50ppm 50ppm 50ppm 50ppm 50ppm 50ppm 50ppm
====================================================================================================
Total PCA Inspected 0 0 0 0 0 0 0
---------------------------------------------------------------------------------
Total Defective PCA 0 0 0 0 0 0 0
---------------------------------------------------------------------------------
Yield Loss In PPM 0 0 0 0 0 0 0
---------------------------------------------------------------------------------
Target In PPM
====================================================================================================
Total PCA Inspected
---------------------------------------------------------------------------------
POST WAVE Total Defective PCA
---------------------------------------------------------------------------------
Production 100% Yield Loss In PPM 0 0 0 0 0 0 0
---------------------------------------------------------------------------------
Inspection Target In PPM 500ppm 500ppm 500ppm 500ppm 500ppm 500ppm 500ppm
====================================================================================================
Total Tested
---------------------------------------------------------------------------------
Total Defects
---------------------------------------------------------------------------------
ICT Yield Loss % 0 0 0 0 0 0 0
---------------------------------------------------------------------------------
Target In % 2% 2% 2% 2% 2% 2% 2%
---------------------------------------------------------------------------------
Total Repaired
---------------------------------------------------------------------------------
WIP For Repair
====================================================================================================
ICT Breakdown Material
Process
Workmanship
NIF
Others
====================================================================================================
Total Tested
---------------------------------------------------------------------------------
Total Defects
---------------------------------------------------------------------------------
FCT Yield Loss % 0 0 0 0 0 0 0
---------------------------------------------------------------------------------
Target In % 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%
---------------------------------------------------------------------------------
Total Repaired
---------------------------------------------------------------------------------
WIP For Repair
====================================================================================================
ICT Breakdown Material
Process
Workmanship
NIF
Others
====================================================================================================
Total Inspected
---------------------------------------------------------------------------------
OBA Total Defects
---------------------------------------------------------------------------------
Yield Loss In % 0 0 0 0 0 0 0
---------------------------------------------------------------------------------
Target In % 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01%
====================================================================================================
21
===========================================================================================
WORK WEEK: 18
DEFECT BREAKDOWN WEEK ENDING: 05/02/97 PRODUCTS: NORTH AMERICAN LIU
-------------------------------------------------------------------------------------------
STATION CLASS QUANTITY BOARDS DEFECT BREAKDOWN QUANTITY DEFECTS LOCATIONS
-------------------------------------------------------------------------------------------
STATION CLASS QUANTITY BOARDS DEFECT BREAKDOWN QUANTITY DEFECTS LOCATIONS
===========================================================================================
Automatic
Insertion
Top side
===========================================================================================
POST IR BOT
===========================================================================================
POST WAVE
===========================================================================================
22
===========================================================================================
WORK WEEK: 18
DEFECT BREAKDOWN WEEK ENDING: 05/02/97 PRODUCTS: NORTH AMERICAN LIU
-------------------------------------------------------------------------------------------
STATION CLASS QUANTITY BOARDS DEFECT BREAKDOWN QUANTITY DEFECTS LOCATIONS
-------------------------------------------------------------------------------------------
STATION CLASS QUANTITY BOARDS DEFECT BREAKDOWN QUANTITY DEFECTS LOCATIONS
===========================================================================================
ICT
===========================================================================================
FCT
===========================================================================================
OBA
===========================================================================================
23
REF. 2.0 - ICT AND FCT PLANS
DEVELOPMENT AND IMPLEMENTATION OF AN INTEGRATED GLOBAL TEST STRATEGY
WITH CONTRACT MANUFACTURERS
BY
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
ABSTRACT
The San Diego Division has targeted the Home Office/Small Office market
with its multi-function product line. The highly successful OfficeJet, which
is running at 60,000 units per month is being replaced with the Denali
platform. Currently, SDD is developing manufacturing plans to produce upwards
of 500,000 units per month within the next three to five years. Implementing a
global test strategy with world-wide contract manufacturers has become crucial
to ensure HP quality levels are maintained.
The high growth projections and cost pressures of the Denali project
requires San Diego Division to utilize contract manufacturers for the assembly
of the Division's products. SDD is using multiple contract manufacturers for
the manufacture of printed circuit boards and electro-mechanical assemblies.
Concurrently, the San Diego Division is faced with meeting the challenges of
shorter product development cycles, aggressive ramp schedules and multiple
product launches. With HP's quality level being highly influenced by its
suppliers, SDD must still maintain global control, while keeping its resources
at minimum.
In order to meet the challenge of implementing a global test strategy, San
Diego Division has elected to partner with TTI Testron, a test development
contract manufacturer. The objective of this partnership is to develop a
global test strategy that ensures a comprehensive test system is implemented
across its contract manufacturing base, thus eliminating the need to maintain a
traditional internal test engineering and development infrastructure.
This paper explores the challenges of establishing and implementing a
global test strategy with an external partner. It also outlines the project
management challenges of coordinating the multiple interfaces. The ultimate
success is determined by maximizing and leveraging off the multiple cross
expertise's and the timing of the coordination
INTRODUCTION
During the development and launch of the Denali program, San Diego's
resources in test development were very limited. Due to the critical
development path, additional engineering resources were to be focused on
product development and not test development. Yet, without early planning and
focus on test development, significant opportunities would be missed and the
ability to achieve maximum test coverage would be jeopardized. Further
complicating the situation was SDD's manufacturing strategy to completely
outsource its printed circuit assembly requirements across multiple contract
manufacturers. TTI Testron was chosen to support the San Diego Division in
developing and implementing its global test strategy due to its global presence
and engineering test capabilities. It was recognized that in order for the
test strategy to be successful, a strong partnership would have to be
developed. This paper explores some of the major challenges faced by
establishing and implementing this partnership.
The following major challenges are addressed:
1. Establishing the overall global test strategy and objectives.
2. Defining the roles and responsibilities of both the internal support
personnel and contract manufacturer.
3. Defining and getting agreement on the deliverables for each phase of the
development cycle.
4. Coordinating and managing test development during the product development
phases.
5. Developing new and/or modifying existing procedures to handle changes and
modifications after MR.
24
CHALLENGE ONE: ESTABLISHING THE OVERALL GLOBAL TEST STRATEGY AND OBJECTIVES
Clearly defining the test strategy at the start of the project is
absolutely critical to ensuring a successful implementation. The test strategy
and timing of the plan must be correlated to the product development cycle.
But the effort is highly weighted towards the front end of the project, where
the most positive impact can be made. Also, by driving the test requirements
from the top down ensures that the same information structure and system is
established throughout the various contract manufacturers. The most
significant windows of opportunities lie at the start of the design and waiting
too long for incorporating the test plans, precludes one from incorporating
them.
In addition to establishing the tactical objectives and focusing on the
test coverage, it is important to define the strategic test objectives.
Identifying the strategic objectives determines the full scope of resources
required. A well defined strategy, also anchors the project effectively,
enabling one to compare against the core objectives to ensure that the project
is effectively on track.
The San Diego Division established the following test objectives:
1. Maximize test coverage at the ICT level.
2. Minimize test cycle times.
3. Establish identical test systems for the same printed circuit
assemblies across the contract manufacturing base.
4. Maintain global control over test systems, both test fixtures
and test programs.
5. Coordinate test platform changes to maintain identical systems.
6. Establish a flexible development plan that enhances product
development and not hinders it.
By establishing these strategic objectives, SDD essentially determined the
scope of resources that would be required. Test support would be needed
immediately at the start of the program and would also be required globally to
ensure full implementation of the strategy. Since SDD's test resources were
limited, the only remaining choice was to outsource the test development.
Developing the internal infrastructure was immediately ruled out because of the
limitation placed on test resources. The short development cycle precluded the
possibility of creating an internal infrastructure in time to support the
program.
There was another immediate benefit to pre establishing the strategic
objectives. The objectives stated by themselves have merit. They set the
stage and focus for selling the strategy and getting buy-in from all affected
parties. One could always reference these objectives and then build consensus
by adjusting for minor differences without significantly deviating from the
core. Without pre-establishing clear objectives, endangers one from diverging
and getting lost in a tangent path. Successful implementation of the plan
requires close cooperation and coordination between numerous organizations
within the San Diego Division, AMMO, TTI Testron and the contract
manufacturers. The objectives always enables a starting point of reference and
serves as the foundation for any discussion. Each project will have its unique
set of objectives and the San Diego Division attempted to establish its
objectives to encompass all affected parties interests. Maintaining this
consensus is an on-going task.
CHALLENGE TWO: DEFINING THE ROLES AND RESPONSIBILITIES OF BOTH THE INTERNAL
SUPPORT PERSONNEL AND CONTRACT MANUFACTURER.
A crucial step in establishing the partnership is defining the
responsibilities of the individual and team. Without having a clear
understanding of each others area of responsibility, it is impossible to have a
successful project. This is especially true when working with an outside
partner. Unless the supplier has worked extensively with the division, he
cannot be expected to understand all the various changes and personalities that
make up an organization.
25
Therefore, it is imperative that one defines for both parties the roles and set
the expectations. This step is also crucial in identifying any voids that one
may have in the plan.
The detail and definition of the responsibility of the supplier becomes
more crucial with the larger scope of work being outsource. As the suppliers
role becomes more involved, then the importance of clearly defining his role
becomes more critical. This is true because as the role of the supplier
becomes more of a partner, the level of interactions becomes more
sophisticated. His expectations and demands must be viewed as an equal with
the division as they relate to supporting the objectives of the project.
Without a clear definition of the roles, then there is a tendency to slide back
into the standard supplier/customer mode and communication tends to be
unidirectional A successful project requires true bi-directional communication.
Time must be taken at the start of the project to map out and create a
responsibility matrix to eliminate any potential misunderstandings.
During the beginning of the project SDD and TTI established a rough draft
of the roles and responsibilities with each other. This also allowed both
companies to create a set of common objectives. It is also critical that you
periodically review the responsibility matrix to ensure that everyone's
expectations remain the same as the project itself evolves. Organizations are
changing and as new people are added to the program expectations can change.
It is absolutely critical that the team members re-calibrate themselves,
especially for the supplier. The supplier is working without the benefit of
being within the HP organization and he tends to receive his information in
step wise fashion. The changes that take place always appear more severe to
him. So it is imperative that one road maps out the various program changes
and establishes the expectations of the team members for the various program
stages. One of the major objectives of outsourcing the test development is to
accomplish more with less and to leverage off and use each other's expertise.
Without clearly defining the roles, there is a tendency for redundant activity
to take place, thereby eliminating one of the advantages of outsourcing.
CHALLENGE THREE: DEFINING AND GETTING AGREEMENT ON THE DELIVERABLES FOR EACH
PHASE OF THE DEVELOPMENT CYCLE.
Defining the deliverables for each of the project development phases is
absolutely critical. The project and test development is undergoing a constant
evolution with each new phase potentially requiring changes and/or
modifications. Without clear tactical deliverables defined for each
development phase and their associative test coverage expectations established,
there will be a constant misunderstanding between the parties. This will only
lead to a deterioration in the relationship and potentially yield an
unsatisfactory result. By establishing the test expectations for each phase,
clearly sets the base line and metrics for tracking the performance of the
plan. The success of the test plan and coverage requires strong cross
communication between the test development supplier and HP. Clear defined
deliverables, objectively sets the requirements amongst the team members and
allows for a more productive interface. It also serves as an objective measure
of the success of the strategy at the various stages of the project.
SDD established a set of test coverage deliverables with TTI prior to
critical phases of the project. It was evident that a formal definition of
the deliverables is required up front and that they need be reviewed
periodically. As the project evolved, the deliverables had to be adjusted to
accommodate the changes that were encountered. But without a formal
pre-established deliverable list, one could never be assured whether previously
established commitments were being met. One of the biggest generators of
tension and frustration between a partnership is the feeling that commitments
are not be met. The list serves as the objective means of measuring the
success of the commitments.
Another critical use of the deliverable list is to verify and track the
effectiveness of the test program and fixtures. As one passes through each
phase of the program development and produces a certain number of units, one
can monitor the quality levels and then review the robustness of the test
program. And then intelligently make the necessary modifications to the test
platform and program to obtain the desired quality levels.
CHALLENGE FOUR: COORDINATING AND MANAGING TEST DEVELOPMENT DURING THE PRODUCT
DEVELOPMENT PHASES.
26
The success of the global test strategy and implementation is highly
dependent on the effectiveness of the management of the project. This is
especially true when using an outside supplier for both the test development
and manufacturing, which tends to complicate the communication channels.
Perhaps the most important first step in managing the project is to ensure that
you have buy-in from all the affected parties and that everyone agrees on the
project objectives. Without adequate understanding and agreement from the
affected parties, one only complicates the management and jeopardizes the
success of the plan. Extensive time and effort is required establishing and
obtaining a joint agreement. But there are other benefits from making the
effort. By getting everyone to understand and agree on the objectives, creates
a certain momentum between the team members that could not be duplicated in any
forced manner. Care must be taken to analyze and review upfront who all the
affected parties could be and immediately start building consensus. The San
Diego division sought out the support of the contract manufacturers which are
the recipients of the test platforms, HN10, SDD's Asian top level manufacturing
site, and the following organizations within SDD: R and D, Manufacturing
Engineering and Procurement. This process took numerous personal meetings and
conferences over a period of a year.
Successful project management requires the balancing of several variables.
One must ensure and maintain strong technical exchange between the R and D
team and the test development supplier. This requires direct and personal
contact between the cross team members. Anything that can be done to
facilitate this is an added benefit In order to meet the tight development
schedules, the test development supplier must be aware of the latest
information as early as possible so they can incorporate the changes. In
addition, someone must ensure that the overall test strategy and required
deliverables are on track and will support the overall project objectives.
Constant feedback and cross communication is required to ensure that everyone
is working with the latest information and that the best recommendations are
being incorporated. With all the required cross communications taken place, it
is critical to hold periodic check point and review meetings to ensure that
everyone is at the same level of understanding. One needs to accelerate and
facilitate the communication flow so that opportunities are not lost, but
without careful management it is also easy to create confusion and
misunderstandings. Holding periodic reviews and issuing detailed status
reports helps prevent problems.
The San Diego Division set up weekly reviews and meetings with TTI Testron
and R and D to review and develop the test platforms. These meetings were then
expanded to include Manufacturing Engineering. Although one does not want to
spend too much time generating status reports, it was apparent that without
regular meetings and status reports, confusion and misunderstandings quickly
generated. Procurement worked with R and D to ensure that the overall project
was tracking to the development and implementation schedule and ensured that
the contract manufacturer was included in the i communication loop. It is
extremely important that the contract manufacturer's input is included, since
you must have assurances that the robustness of the design supports the
manufacturing plans and environment. The main objective is to end up with a
platform that provides maximum coverage possible at the lowest possible cycle
count. Each player brings a certain perspective and need. By coordinating
effectively all the various players, ensures that all the perspectives are
incorporated within a reasonable balance.
CHALLENGE FIVE: DEVELOPING NEW AND/OR MODIFYING EXISTING PROCEDURES TO SUPPORT
OUTSOURCING THE TEST DEVELOPMENT.
Current procedures and support systems are structured towards test
development organizations and systems that utilize internal development teams.
One must review these systems and procedures to see how they can be adapted or
modified to support the new model of outsourcing the test development. This
becomes extremely important when one looks beyond the MR date. New questions
arise and must be answered such as how to efficiently incorporate changes after
production is launched and how to maintain and support the systems once they
have been implemented.
The San Diego Division has adopted a modified model where the ongoing
program and fixture modifications will be handled by TII Testron under the
joint review and approval of SDI) and HMO. But this will be done in a
coordinated fashion in order not to jeopardize one of the original goals of
ensuring identical test systems and coverage. The idea is that no modification
can be accomplished without the approval and knowledge of all affected parties
and the change must be incorporated universally. This ensures identical
coverage and the ability to correlate the data on a global basis. The "learned"
performance of the process is documented and distributed to all the contract
manufacturers, and not just those privy to the event. But this also highlights
the need to establish a strong partnership with your outside
27
test development supplier since his services will be required on an on-going
basis. Care must be taken when choosing the start-up supplier and on-going
monitoring of their available resources and capabilities must be maintained.
This emphasizes one of the misnomers of outsourcing that most organizations
tend to overlook. Outsourcing alone does not eliminate all the issues
associated with the task and certain requirements and issues will always
remain. Strong on-going project management will be required and the level of
sophistication of the people managing the project increases with the complexity
of the task being outsourced. Care must also be taken with the internal
resources as they rotate to other projects to ensure that the same level of
interfacing with the supplier is maintained. It does not take long for the
communication system to break down quickly, since it tends to be highly people
dependent.
In order to maintain the on-going objective of identical test systems and
to ensure the same high level of coverage, requires centralized coordination
from the engineering division. This does not imply absolute control and, in
fact, is not recommended, but some type of centralized control is required. The
complexity of the project and manufacturing strategy will determine the level
of coordination required from the engineering division.
SUMMARY
The San Diego Division chose to outsource its test development with TTI
Testron primarily due to resource constraints and the need to provide global
consistency with its test platforms and coverage. The benefits to date have
been the ability of the division to develop a more comprehensive test platform
that has kept up with its shortened project development cycle. The San Diego
Division has been able to support the development ; and launch of four
different test platforms with four different contract manufacturers in five
different countries without adding test resources. In addition, the test
program development and coverage has been controlled by the R and D team with
the tactical development and implementation being handled by TTI Testron. The
San Diego Division has been able to leverage off the test manufacturing
experience of TTI Testron while focusing on its core strength. The San Diego
and HMO division continues to focus on the project management of the test
strategy, while TTI Testron focuses on the mechanics of developing and
implementing the test platforms. TTI Testron was also tasked with managing and
coordinating the test fixture development and buy-offs with the contract
manufacturers of the printed circuit assemblies. This model allowed for each
partner to focus on their core strengths and enabled a more comprehensive test
system to be created than if being implemented and controlled by SDD alone.
With an effective project management system to support the team members, a
synergistic advantage can be successfully achieved.
The final objective of this test strategy is to enable the San Diego
Division to monitor and accurately correlate the quality data on a global
basis. The plan also ensures that the systems to monitor the printed circuit
assemblies are the same. This consistency adds to the confidence level,
enabling for more effective decisions and allowing for changes to be made
quickly on a global basis. The test platforms utilized serve as the last
quality and check barrier and must be implemented to protect HP's interest. By
utilizing TTI Testron, the San Diego Division has been able to maintain global
control over the test platforms without having to create a large test
infrastructure in order to meet its objectives.
SPECIAL THANKS AND APPRECIATION
A special thanks and appreciation to ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇ of TTI
Testron for their personal dedication, commitment and vision to ensuring that
the objectives of the San Diego Division were met.
28
REFERENCES 3.0 AND 4.0
DOCUMENT: HP RMA PROCEDURE
PART NUMBER: PMOR0009
REV: B
PAGE 1 OF 5
================================================================================
PROCEDURE NAME
--------------------------------------------------------------------------------
RMM process for HP SDD returns
================================================================================
================================================================================
APPLICATION
--------------------------------------------------------------------------------
All products manufactured to HP's SDD
================================================================================
================================================================================
VERIFIED APPROVED IMPLEMENT
REV DATE CONTENT BY BY BY PAGES COMMENT
--------------------------------------------------------------------------------
A 2/14/97 Initial Release ▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 5
--------------------------------------------------------------------------------
B 4/23/97 Updated ▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 5
================================================================================
================================================================================
REVISION FREQUENCY: WHERE ANY CHANGE OR MODIFICATION RELEASE
--------------------------------------------------------------------------------
Next scheduled revision: None
================================================================================
29
DOCUMENT: HP RMA PROCEDURE
PART NUMBER: PMOR0009
REV: B
PAGE 2 OF 5
0.0 INDEX
========================================
CONTENTS PAGE
----------------------------------------
Objective 2
----------------------------------------
Input/Output Diagram 2
----------------------------------------
Flow Diagram 3
----------------------------------------
Procedure Description 4
----------------------------------------
References 5
========================================
1.0 OBJECTIVE
The Objective of this document is to establish the procedure for the Ass'y
returns generated at Hewlett Packard's San Diego Division assembly line.
2.0 INPUT/OUTPUT DIAGRAM
SUPPLIER INPUT PROCESS OUTPUT CUSTOMER
-------- ----------------- ----------------- -------------- --------
-----------------
HP Line return RMA # DMEX Internal RMA Repaired Ass'y HP
request approved process to HP
returns
-----------------
30
DOCUMENT: HP RMA PROCEDURE
PART NUMBER: PMOR0009
REV: B
PAGE 3 OF 5
3.0 FLOW DIAGRAM
[FLOW CHART]
31
4.0 PROCEDURE DESCRIPTION
4.1 HP REQUEST & RECEIVE RMA # SAME DAY.
As soon as the SDD line has detected any problem found in the assemblies
produced by DMEX, the SDD responsible person must contact DMEX Program
Manager to request a RMA number. An RMA # will be supplied back to IAP
person by this Program Mgr. A database identified as HP-RMADB.xIs will be
keep updated with all RMA's requested from SDD with the appropriate
information including all generated corrective actions and solutions.
4.2 ISSUE FORMAT PMFT0005.
DMEX program manager will log all details on RMA in the format PMFT0005
and get all authorization signatures requested.
4.3 HP SEND BACK TO DMEX THE NON CONFORMING ASS'YS.
HP SDD then. will send the Non Conforming ASS Ys back to DMEX. As soon as
the material is received there is a period of three (3) calendar days to
these ASS'Ys must be repaired and send it back to SDD. These ASSY's must
be tagged and sent back with a description of line failures found by
Serial Number. A report of the failures found on rejected boards must be
attached with the HP shipment.
4.4 ASS'YS SEND TO THE FLOOR
Once the material is received, must be processed according to the internal
rework process factory plan, based on the HP's Non Conforming Process (
For ASS'Ys returned to the CM ) procedure, This PIP procedure is pan of
this document and is located on page 6 of this Document.
4.5 CREDIT MEMO
DMEX will generate an credit memo to HP for the same amount of ASS'Ys
described on the RMA document PMFT0005.
4.6 MATERIAL THAT HAS BEEN RETURNED BEFORE
Once the rejected ASS'Ys start to be processed internally at DMEX, the
first step is to verify how many 'R' the PCBA has stamped. Here are two
possibilities;
1. If the PCBA has two 'R', the board must to be diagnosed and
generate a report of failures found, however. the final disposition
will be 'Scrap'. It is not allowed by I IP to rework any PCBA by
third time.
2. If the PCBA has one 'R', the assembly must be processed
according to the internal rework process factory plan based on the
Non Conforming Process ( For PCA's returned to the CM, Rev 1A ).
4.7 ASS'Y REWORK
If the Ass'y has no 'R's or only one 'R', this board must be processed in
accordance to the Non conforming Process (For Ass'y returned to the CM
Rev 1A).
4.8 DATA COMPILATION AND RESORTS
Once the Ass'y has been repaired all data collected from diagnostics and
repairs will be keep in-a electronic data base named HP_LRDB.XLS. This
DataBase will be updated any lime with the data collected from the line
returns received from SDD. Also this information will serve as support to
create all the troubles found and Corrective actions reports. Also to
track the status of these corrective actions.
4.9 REPORTS DISTRIBUTION
A problems found and no trouble found report together with Corrective
actions report will be issued and] distributed to the following persons:
o RMA # requester at SDD
o Dovatron s HP world wide Program Manager
o MIPO representative
32
o DMSC Program Manager
o DMEX Program Manager
4.10 SEND REPAIRED ASS'YS
Repaired ASS y will be sent back to SDD as regular production
4.11 END OF THE PROCEDURE.
5.0 REFERENCES
o Non Conforming Process (For PCAs returned to the CM) Rev ▇▇.
▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ # ▇▇▇▇▇▇▇
33
REFERENCE 5.0 PCO PROCESS AND AVL CONTROL
================================================================================
REV RELEASED REVISION CHANGES EFFECTIVITY
--------------------------------------------------------------------------------
1 January 1 Initial Release. January 6, 1997
2 JANUARY 24 CLARIFICATION CHANGES. JANUARY 24
================================================================================
APPROVED BY: /s/ ▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ DATE: JAN. 2, 1997
PROGRAM MANAGER
DISTRIBUTION: ▇▇▇▇▇ ▇▇▇▇▇▇▇ (MIPO) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (DMEX)
▇▇▇▇▇ ▇▇▇▇▇▇ (DMEX) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (DMEX)
▇▇▇ ▇▇▇▇▇ (DMEX) ▇▇▇▇▇▇▇ ▇▇▇▇▇ (MIPO)
▇▇▇▇ ▇▇▇▇▇▇▇▇ (SDD) ▇▇▇▇▇ ▇▇▇▇▇ (TTI)
▇▇▇▇ ▇▇▇▇▇▇▇ (DOV HQ) ▇▇▇▇▇▇ ▇▇▇▇▇▇ (DMEX)
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (DMEX) ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (MIPO)
▇▇ ▇▇▇▇ (DMAL) Simon Choo (DMAL)
Lily Aw (Singapore) ▇▇▇▇ ▇▇▇▇▇▇ (DOV HQ)
1.0 PURPOSE:
The purpose of this procedure is to establish a method of communicating
and tracking Customer Engineering Changes.
2.0 SCOPE:
This procedure applies to the all Dovatron facilities involved in the
Denali program. This procedure applies to both process and materials
changes.
3.0 REFERENCE DOCUMENTS:
34
PCO (Process Change Order) Form
4.0 DEFINITIONS:
DMEX: Dovatron Mexico Facility.
DMAL: Dovatron Malaysia Facility.
DOV HQ: Dovatron Worldwide Corporate Headquarters.
Customer: HP SDD.
Customer IPO: MIPO/SIPO
PCO: HP supplied Process Change Order.
35
5.0 ENGINEERING CHANGE ORDER PROCEDURE:
5.1 A PCO is transmitted to the Denali Worldwide Program Manager.
5.2 The customer sends the following PCO information:
[ ] DATA: Part Number Affected and Change Details.
[ ] DIVISION: Site Affected.
[ ] DATES: Implementation Date.
[ ] DIRECTION: Assembly, Component and WIP Disposition.
5.2.1 The DATA portion of the PCO must include:
[ ] Part Number Affected.
[ ] Revision Level.
[ ] Tooling and Process Change Information.
[ ] Details of Change.
[ ] Customer Part Number , QTY Per and Description.
[ ] Reference Designator(s).
[ ] AVL Information and Supplier Selection.
[ ] MPN Details and Evaluation Status.
[ ] Gerber Data and Drawings.
5.2.2 The DIVISION portion of the PCO must include:
[ ] Site Affected.
[ ] Specific Implementation Details.
[ ] Qualification and Testing Requirements.
[ ] Details of Support Services Provided by Customer (If Applicable).
5.2.3 The DATE portion of the PCO must include:
[ ] Phase in or Cut in Logistics Specified.
[ ] Date Required.
[ ] Qualification Timeline.
[ ] Certification Requirements Schedule.
5.2.4 The DIRECTION portion of the PCO must include:
[ ] Disposition Needs:
o Assemblies.
o Components.
o Work In Process.
o Equipment.
36
[ ] Logistics Needs:
o Open Order Directive.
o PPV Approval.
o Scrap Authorization.
5.3 The PCO form is assigned a tracking number and logged in the PCO log.
5.4 The PCO form is transmitted to the site for implementation analysis.
5.5 The site reviews the changes identified on the PCO form and submits the
following deliverables to the Denali Worldwide Program Manager:
[ ] Material Availability.
[ ] Tooling, Process and Pricing Information.
[ ] Performance Data for Supplier Allocation Recommendation.
[ ] Equipment Availability.
[ ] Estimated Lead Time and Delivery Schedule.
[ ] Disposition Details:
o Assemblies.
o Components.
o Work In Process.
o Equipment.
[ ] Procurement Logistics Details:
o Continuous Order Execution Status.
o PPV Analysis.
o Scrap Analysis.
5.6 The Denali Worldwide Program Manager merges the Site deliverables into a
global format and communicates it to the customer for final ECO
implementation authorization and approval.
5.7 The Denali Worldwide Program Manager identifies and provides the
customer with the following deliverables:
[ ] Global Coordination Planning Model.
o Goals and Milestones.
o Action Item and Follow-up Details.
o Implementation Schedule Details.
[ ] Strategic Delivery Planning Schedule.
[ ] Project Coordination and Implementation Plan Timelines
37
5.8 Upon receiving implementation direction from the customer, the Denali
Worldwide Program Manager contacts the site to execute the implementation
plan.
5.9 The site confirms to the Denali Worldwide Program Manager completion of
all actions required to implement the ECO.
5.10 The PCO is logged as completed.
5.11 Any pertinent site implementation data is merged into a global format and
communicated to the customer.
38
HEWLETT PACKARD
SUPPLIER PERFORMANCE EVALUATION
AND DEVELOPMENT PLAN
-----------------------------------------------------------------------
SUPPLIER NAME:
SUPPLIER NUMBER:
SUPPLIER REPRESENTATIVE:
COMMODITY BEING EVALUATED:
COMMODITY BUYER:
PROCUREMENT ENGINEER:
PROCUREMENT ENGINEER (MIPO):
EVALUATION DATE:
-----------------------------------------------------------------------
This evaluation is intended as a supplier management tool and a method of
compiling performance data to provide feedback to our suppliers. The
Procurement Team will work with you to set expectations, create specific
objectives and identify actions that you and Vancouver Division can take to
continually improve the overall level of performance.
-----------------------------------------------------------------------
SUMMARY:
Area of Date Last
Performance Score Evaluated
----------- ----- ---------
Technology
-
Quality
-
Responsiveness
-
Delivery
-
OVERALL SCORE: DATE:
This score will be calculated on a periodic basis when all five areas are
evaluated.
REV. 2/90
39
TECHNOLOGY
OBJECTIVE: Hewlett-Packard must compete in the world market on the basis of
manufacturing technology, as well as design technology. We expect our
suppliers to be technological leaders in their respective fields of
design and manufacturing. Suppliers are expected to participate in
mutual engineering throughout HP's products' lifecycle to enable
timely introductions and continuous quality and cost improvements.
Provide Leading-Edge Technology Products (T1)
4 = Usually first with new technology introductions
3 = Sometimes first with new technology introductions
2 = Introduces new technology along with other industry leaders
1 = Follows with new technology within one year after technology introduced
0 = "Me too" for available technologies or none at all
N = Not applicable
T1 SCORE:____
Timely New Product Introductions (T2)
4 = Usually ahead of promised production availability schedule
3 = Sometimes ahead of promised production availability schedule
2 = Meets promised availability schedule
1 = Sometimes meets promised availability schedule
0 = Never meets promised availability schedule
N = Not applicable
T2 SCORE:____
Mutual Engineering: Technology / Design Support (T3)
4 = Proactive and effective
3 = Effective
2 = Usually available
1 = Some
0 = Little or none
N = Not applicable
T3 Score____
"T" AVG. SCORE:__
40
QUALITY
Objective: HP has set a quality goal of zero defective products for electrical,
mechanical, cosmetic, and administrative reasons. HP's quality
expectation is defect-free materials. Quality and reliability are
expected to be achieved through superior design, process control and
continuous process improvements. All material must be fit for use and
cosmetically acceptable.
Quality (Q1)
HP Incoming inspection * OR * HP In-Process Quality
4 = 0 to n ppm 4 = 0 to n ppm
3 = n to n ppm 3 = n to n ppm
2 = n to n ppm 2 = n to n ppm
1 = n to n ppm 1 = n to n ppm
0 = > n ppm 0 = > n ppm
* OR *
If you are not currently collecting PPM data for Incoming Inspection or
In-Process Quality, please answer the following metric instead:
Quality Expectations
4 = Consistently exceeds expectations
3 = Consistently meets and occasionally exceeds expectations
2 = Consistently meets expectations
1 = Occasionally meets expectations
0 = Consistently does not meet expectations
N = Not applicable
Q1 Score____
Demonstrated Quality/Reliability (Q2)
4 = No quality/reliability problems (Supplier has proactive Q/R
verification programs which are effective)
3 = Minimum number of problems. Problems or alerts identified by supplier.
Supplier presented effective and permanent corrective action
2 = Minimum number of problems. Problems or alerts identified
by HP. Prompt, effective and permanent corrective action
initiated by supplier
1 = Problems encountered with slow response by supplier
0 = Many problems and/or unacceptable corrective action
N = Not applicable
Q2 Score____
Overall Q Score____
41
RESPONSIVENESS
Objective: HP expects suppliers to be responsive to swings in demand, with short
cycle times, and appropriate inventory management, while maintaining
flexible capacity capabilities to successfully resolve problems and
improve worldwide service.
Timely Response (R1)
CRITERIA
4 = Meets all of the criteria * Timely Order Acknowledgments
3 = Meets 3 of the 4 criteria * Timely response to normal in-
2 = Meets 2 of the 4 criteria quiries (price, availability)
1 = Meets 1 of the 4 criteria * Timely communication of pro-
0 = Meets none of the criteria cess changes and/or problems
N = Not applicable * Timely response to emergency
inquiries
R1 Score____
Effective Service and Support (R2)
CRITERIA
4 = Meets all of the criteria * Meets expectations for con-
3 = Meets 3 of the 4 criteria tacting divisions
2 = Meets 2 of the 4 criteria * Demonstrates professionalism
1 = Meets 1 of the 4 criteria and product knowledge
0 = Meets none of the criteria * Easily accessible
N = Not applicable * Meets expectations for sample
part & documentation support
R2 Score____
Does your local representative meet your service expectation? (R3)
Y = Yes
N = No, comment required (Not Scored)
R3 Score___
Long Term Product Support (R4)
CRITERIA
4 = Meets all of the criteria * Committed to long term supply
3 = Meets 3 of the 4 criteria * Provides alternate solutions
2 = Meets 2 of the 4 criteria for product discontinuances
1 = Meets 1 of the 4 criteria * Meets requirements for
0 = Meets none of the criteria product discontinuances
N = Not applicable * Extends to meet special HP
requirements
R4 Score____
42
Flexibility to Changes (Accepts and completes reasonable requests for
Purchase Order changes and additions) (R5)
4 = Consistently exceeds expectations
3 = Consistently meets and occasionally exceeds expectations
2 = Consistently meets expectations
1 = Occasionally meets expectations
0 = Consistently does not meet expectations
N = Not applicable
R5 Score____
Support of Sole Sourced Parts (R6)
CRITERIA
4 = Meets all of the criteria * Assurance of supply
3 = Meets 3 of the 4 criteria * Parts priced fairly
2 = Meets 2 of the 4 criteria * Cost reductions/improvements
1 = Meets 1 of the 4 criteria implemented and passed to HP
0 = Meets none of the criteria * Long term product support
N = Not applicable
R6 Score____
Overall R Score____
43
DELIVERY
Objective: HP expects deliveries to be 100% on time all the time within a window
of -3/+0 (three days early and no days late). To achieve this
expectation there must be continuos improvement in overall delivery
performance and our suppliers must be prepared to meet commitments
worldwide. Lead times must be short by industry standards, reliable
and decreasing over time.
On-Time Delivery (Division Six Month Average - If supplier meets on-time
delivery percentage but has any deliveries greater than 5 days late select the
next lower number). Primary Weight = 60% (D1) **
4 = Greater than 95% On-time
3 = Greater than or equal to 85% On-time
2 = Greater than or equal to 70% On-time
1 = Greater than or equal to 60% On-time
0 = Less than 60% On-time
N = Not applicable
D1 Score _____ X .6 =
Lead Time - Secondary Weight = 30% (D2)
CRITERIA
4 = Meets all of the criteria * Stable (even in mkt upturns)
3 = Meets 3 of the 4 criteria * Contract lead times being met
2 = Meets 2 of the 4 criteria * Competitive
1 = Meets 1 of the 4 criteria * Decreasing over time through
0 = Meets none of the criteria supplier process improvement
N = Not applicable efforts
D2 Score _____ X .3 =
Packaging/Shipping - Secondary Weight = 10% (D3)
CRITERIA
4 = Meets all of the criteria * Requested quantity; accurate
3 = Meets 3 of the 4 criteria and complete invoicing/ship-
2 = Meets 2 of the 4 criteria ping documentation
1 = Meets 1 of the 4 criteria * Complies with shipping ins-
0 = Meets none of the criteria tructions
N = Not applicable * Consistently provides proper
packaging and markings
* Proactive in solving packa-
ging/shipping issues
D3 Score _____ X .1 =
Overall D Score__
44
ENVIRONMENTAL
HP suppliers should have an implementation plan with metrics which is tied
to their environmental improvement policy. HP suppliers should strive to
improve the environment in their location by instituting programs with
progressive and measurable improvements. Progress on these metrics should
be reported within their company and reviewed with HP periodically. Which
environmental improvement factors the supplier chooses (e.g., reduced air
or water emissions, eliminated use of toxic materials, increased recycling,
etc.) to measure and how rigorous these goals and objectives are, is the
responsibility of the supplier.
(E2) Does the supplier have an improvement implementation plan with metrics
which is directly tied to their environmental improvement policy?
4 = Documented plan with objectives, metrics, and demonstrable results
3 = Documented plan with objectives and metrics
2 = Documented plan with objectives
1 = Documented plan
0 = No plan
Weight = 33%
Elimination of ODS:
HP fully supports the Montreal Protocol, the U.S. Clean Air Act, and
international efforts to protect the earth's ozone layer through conservation
and an orderly phase-out of ozone depleting substances. HP has eliminated ODS
use in its worldwide manufacturing processes. HP expects its suppliers to
support this goal by eliminating their ODS use in manufacturing of parts
and materials used in HP products.
(E3) Has the supplier eliminated the use of ozone depleting substances?
4 = Yes
0 = No
Weight = 34%
45
SUPPLIER COMMENTS: