Managingsupplier qualityDEVELOPMENT – NEW PRODUCT – AFTER-SALES

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Our requirements

Three basic principles formanaging supplier quality

Being selective

Acting collaboratively

Providing incentives

The supplier quality management processes

Major process implementation documents

contents

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The quality of our vehicles must meet worldwide customerexpectations of our two PEUGEOT and CITROËN brands.

The quality of our vehicles is directly impacted by the quality of our external suppliers, which account for over 70% of the manufacturing cost of a vehicle. The Group therefore intends to commit to extensive actions with its suppliers to support theirdevelopment and manufacturing competences, and continuously improvetheir performance, and, where necessary, their reactivity.

The Purchasing Division is responsible for managing supplier relations,and ensures that all quality methods, processes and tools are thoroughly known and used by Group suppliers at every stage of a vehicle project and throughout its production life.

We are therefore counting on the constant and full commitment of suppliers to meet our customers’ expectations with respect to the Group and its brands.

It is in everyone’s interest to be more exacting in everything they do so as to ensure the competitiveness of PEUGEOT and CITROËNsales, and through them, the future of PSA Peugeot Citroën and its suppliers.

Jean Martin FolzChairman

PSA Peugeot Citroën

Our keyOur requirements

Goals

The highest quality levels forcustomers

A project that starts on time

Supplier quality performance fornew products of less than 50 PPM

What we expect

0 safety incidents

0 breakdowns

No product/process modificationswithout the formal agreement ofPSA Peugeot Citroën

Demonstrable control of compliancewith “Essential MonitoredCharacteristics” (CSE)

If there is any slippage, alert PSA Peugeot Citroën and takeprotective measures immediately to safeguard customers

Reactivity and efficiencyin eliminating faults and handling crises

Reducing warranty costs

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principlesThe Purchasing Division is building up supplier quality

by adopting an exacting management system, in line with the Group’s strategic challenges, from supplier selection through to volume production.

Managing external supplier quality is an integral part of the Supplier Quality Assurance (AQF) process and

forms part of the Group’s overall quality policy. It is based on three clear principles:

Selectivemanagement

Supplier quality performancethroughout a product’s lifecycle is taken into account inthe same way as prices duringthe contract attributionprocess.

Incentive-drivenmanagement

PSA Peugeot Citroën favours the best supplierswhen awarding new contracts,and avoids failing suppliers.

The group has set up a Quality Trophy scheme to reward its best suppliers,together with a gradedsanctions programme that can go as far as excludingfailing suppliers.

Collaborativemanagement

Suppliers form an integral partof PSA Peugeot Citroën’sdesign and productionsystems, and play a major rolein quality control in production, for new productsand in after-sales.The Group works closely with its suppliers, from thespecifications stage rightthrough to delivery of parts,with the overall aim ofanticipating, identifying and controlling the risk of non quality.

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A supplier working with PSA Peugeot Citroën must providefull guarantees for costs anddeadlines as well as quality: this relationship commits the Group to its customersthroughout the lifetime of the supply contract.

From the initial consultationprocess, the quality contractmeans working with the supplierto obtain the best proposal.

Qua l i t y

Selectivema

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To achieve this, the Purchasing Division objectivelymeasures and analyses its suppliers’ quality results and identifies any major risks(timing, resources, etc.)...using a special tool calledQuality Snapshot.

Suppliers who do not deliverexpected results will beexcluded from newconsultations, or even struck off the panel.

In any new supply contract,negotiations will lead to a riskresolution plan for each majorrisk identified.

Quality targets negotiated with a supplier are formalised in a letter that specifies the supplier’s commitments.A supplier who does not meetthese targets will be penalised.

per formance is an in tegra l par t o f the supp l ie r se lec t ion process

nagement

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Once selected, the supplier concerned is inducted into this continuous quality process. They commit contractually to the specified results targets.

From design through to production, the objective is to create a climate of

During the development and industrialisation stage

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A commitment to collaborativemanagement means committing the human resources necessary to support suppliers, with the aim of:

co-managing thedevelopment of the part upto approval by the projectleader to proceed withproduction tooling,

qualifying the product and process with thequality assurance manager,

ensuring smoothindustrialisation and the required productioncapacity with the projectbuyer.

Committing to collaborativemanagement also meansthe sharing of workmethods and tools between the Group and its suppliers to closely track part design(transparency and reactivity).

The Q3P processensures a qualified productand process that meetsdeadlines set during the initialisation review, by:

progressively qualifying the product and processthroughout the project,

anticipating potentialproblems and implementingappropriate action plans,

harmonisingcommunications bothinternally and withsuppliers.

The Q3P grids help identify,where necessary, any slippagethat occurs duringdevelopment. Quality personnelcan then act (e.g. trigger anescalation process) to remedythe situation.

Collaborativema

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confidence, mobilise energies, and work better together to control compliance.

During the volume production control phase

The Essential MonitoredCharacteristics (CSE) are jointly identified by PSA Peugeot Citroën and suppliers.

The supplier develops the product and itsmanufacturing andmonitoring process to ensure compliancewith CSE.This CSE compliance is vitalfor meeting customerexpectations and eliminatingany safety, breakdown or performance risk.

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Where there are difficulties,the Group supports thesupplier to reach their targets.

New product qualityperformance is evaluated bythe level of PPM for the partsdelivered compared to thesupplier’s annual commitment.

In case of failure-defects ortargets not met, the suppliersite will be supported by the Supplier Site Pilot (PSF),a new position created by the Purchasing Division (DA)and the Industrial andManufacturing Division (DIFA).

The PSF works with and isdedicated to 4 or 5 supplier sites,enabling a mutual understandingof requirements and problems.They represent customerexpectations, and their mission is to:

check that protectivemeasures have been set up to safeguard PSA Peugeot Citroën sites andcustomers where necessary,

draw up action plans andensure they deliver qualityresults by eliminating the root causes of failures,

ensure that any actionsintroduced operate cross-functionally.

Quality control for customersshould translate into lowerwarranty costs. The supplier will use the information receivedto make proposals and takeactions to:

eliminate defects,

reduce after-sales costs.

nagement

Awarding of Quality Trophyto Argentine Supplier Basso.

The group wishes to:

recognise and reward suppliers who meet targets,encourage and support graduated progress,develop a penalty policy for high-risk behaviour andcontinuing unsatisfactory results.

Quality TrophiesThe prize-winners will bechosen on qualitative andquantitative grounds by a process involving the Group’s Purchasing, Qualityand Manufacturing divisions.

Candidates will be judged on the basis of:

their quality performance based on evaluationsduring development,on new products and in after-sales,

unacceptability criteria(safety-related stop-shipments, supplyshortages, etc) whichautomatically excludefailing suppliers from the hit parade.

The best reward will always be to develop our suppliers’ businesses. This rewards,the competitiveness of their products and their flawless quality.

Rewarding the best

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Reward ing the bes t ,

Incentive-driven ma

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In cases of unacceptable behaviour,a graded sanctions scheme is applied.

Behaviour in question may include:

non-respecting of commitments,

unauthorised modifications,lacking formal approval by PSA Peugeot Citroën.

This kind of behaviour leads to:a stop-shipment order,

an unacceptable quality audit,

an exceptional action procedure“démarche rupture” in the projectphase,

an exceptional action procedure“démarche rupture” in volumeproduction.

One key principle: For suppliers who do not respect their commitments, make themfinancially responsible for their acts.This can go as far as excluding themfrom any new consultation, or even from the panel entirely.

If there are seriousdefects,crisis processes (projectescalation or production crisis management are set in motion.They are designed to mobilisethe supplier to make a rapid return to normality.

The “Bottom 30”This ranking of the worstperforming suppliers for PPMincidents allows everyone to see their monthly results and position among the suppliers who cause most incidents.

Their managers are called inthree times a year to presenttheir plans for improving quality performance to reachthe targets.

The names of failingsuppliers will be postedon each site.In each manufacturing plant,it has been decided togetherwith the FEG department(Group External SupplierQuality) to post a list eachmonth of the site’s supplierswith the worst performancerecord.

Supplier site directorsconcerned will also receive a letter notifying them of this posting.

Sanctioning high-riskbehaviour

Encouraging suppliers to improve

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e n c o u r a g i n g i m p r o v e m e n t , a n d s a n c t i o n i n g f a i l i n g s u p p l i e r s

nagement

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E-MAIL PROCESSINGInformation systems

Consultation process

Quality Snapshot and

Quality Contract

Letter of commitment

to contract

Probationary and sanctions process

Supplier rewards process: Quality Trophy

Supplier Selection

The

Control process

Audit

Protection process

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FOQUALIS AMADEUS

ALTIS

Process for controlling Q3P Measurement process

CSE audit

Quality AssuranceManager

Projectleader

Projectbuyer

In after-sales:

Lower warranty costs(IQCF)

New product:

Annual commitment andmotivation scheme (ppm)

Development andindustrialisation

Volume production

Production linestops

PSFBottom

30

Escalation

Safetystop-shipments

CrisisReactionProcess

(RPC RUQ)

Project breakdown

Over v iew o f the qua l i t y p rocess a t PSA Peugeo t C i t roën g roup

quality process

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The qualitymanagement

processes operated by

the PurchasingDivision are

described in separate

quality documents.

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