Quality Management Manual

in compliance with EN ISO 9001:2008

Copy No.: 001

subject to revision copy for information - without revision

This quality assurance manual is the property of heco gmbh and is not permitted to be copied, reproduced nor made accessible to third persons without the strict written permission of heco gmbh.

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A Introduction and Approval This quality management manual describes the QM system in place at heco gmbh. The QM system is based on EN ISO 9001:2000 and fulfils all requirements of this international standard. This manual and the other relevant documents define the authorities and responsibilities of the individual areas of the company, describe the process sequences and also take into account the requisite safety and environmen-tal concerns. At the core of implementation of the QM system stipulations is each individual staff member who, as part of his or her job remit, is responsible for observing the quality of our products and services within the framework of the contractual obligations. This ensures that we meet our quality expectations and the high demands made of our products and services. Our aim is to achieve a continuous improvement of our products, services and processes by being quality conscious in all activities, promot-ing motivation and an awareness of responsibility and the close contact with the customers. We aspire and are able to fulfil the demands of the market and the expectations of our customers. We understand our customers' problems - technical and economical - and offer corresponding solutions. In the process we are keen to work with our customers and suppliers as partners. The general management of heco gmbh approves the QM manual and hereby puts it into effect. It instructs and obliges all staff members and the general management as part of their activities within the company to be consciously involved in the im-plementation of the QM system. heco gmbh General Management

signature

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B Table of Contents and Revision History / QM Manual Index

A Introduction and Approval ................................................................................. 2 B Table of Contents and Revision History / QM Manual......................................... 3 1. Company Portrait ............................................................................................... 4 2. Business Processes and Supply Catalogue ........................................................... 5 3. Company Policy and Objectives ........................................................................ 11 4. Quality Management System ........................................................................... 12

4.1 Documentation of the QM System .............................................................................. 12 4.2 Document Control ........................................................................................................ 13 4.3 Control of Quality Records ........................................................................................... 13

5. Responsibility oft he Management ................................................................... 14 5.1 Obligation of the Management .................................................................................... 14 5.2 Customer Focus ............................................................................................................ 14 5.3 Quality Planning and Objectives ................................................................................... 15 5.4 Responsibility, Authority and Communication............................................................. 16 5.5 Management Evaluation .............................................................................................. 18

6. Management of Resources ............................................................................... 19 6.1 Personnel Ressourcen .................................................................................................. 19 6.2 Training ......................................................................................................................... 19 6.3 Infrastructure ................................................................................................................ 20 6.4 Workplace and the Environment ................................................................................. 20

7. Product Realisation .......................................................................................... 21 7.1 Planning of Product Realisation ................................................................................... 21 7.2 Customer-related Processes ......................................................................................... 21 7.3 Development ................................................................................................................ 23 7.4 Procurement ................................................................................................................. 23 7.5 Production and Rendering Services ............................................................................. 25 7.6 Control of Monitoring and Measuring Equipment ....................................................... 26

8. Measuring, Analysis.......................................................................................... 27 8.1 Customer Satisfaction................................................................................................... 27 8.2 Internal Audits .............................................................................................................. 27 8.3 Monitoring and Measuring of Processes...................................................................... 29 8.4 Testing the Products ..................................................................................................... 29 8.5 Control of Faulty Products ............................................................................................ 31 8.6 Data Alalysis .................................................................................................................. 31

9. Improvement ................................................................................................... 32 9.1 Continuous Improvement ............................................................................................ 32 9.2 Corrective Measures..................................................................................................... 32 9.3 Preventative Measures ................................................................................................. 33

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1. Company Portrait heco gmbh was established in 1978 and has specialised in the sector of piping ma-terial made of stainless steel in compliance with DIN and ASTM standards (dimen-sional standard ASI). heco gmbh customers come from the following sectors: ma-chine and plant construction, chemical and petrochemical industry, painting plant and vehicle construction, environmental and disposal technology, food and drinks industry, offshore industry and paper manufacture. For the business of piping connection components heco gmbh supplies the follow-ing products:

• Pipes (welded and seamless) • Fittings (welded and threaded fittings) • Flanges • Fixtures (industrial and drinking supply fixtures) • Pipe couplings • Hygienic applications • hecoNNECT (low-gap pipe connection system)

The individual items kept in stock can be found in the supply range list (QMH, Chap. 2). The articles are managed by a computer warehousing system. The company currently employs 65 workers and generates sales of approximately 17 million EUR annually. There is approximately 400 tonnes of stock. The company is based in Remchingen-Nöttingen.

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2. Business Processes and Supply Catalogue Overview of Business Processes: To render the services and assure the requirements of the QM system all business processes required to render the services and the requirements on the QM system are implemented in the company. Our core processes include:

• Sales/marketing • Procurement/purchasing • Stock management • Manufacture of reductions, welding saddles and • special dimensions (according to customer wishes)

The management processes in place ensure a controlled sequence of these core processes, the provision of the resources required and assure, on the basis of com-pany planning measures and evaluation of all processes, the constant further devel-opment and improvement of the overall system. Close contact with the customers and suppliers relays expectations and requirements and assures customer satisfac-tion. We define supporting processes as:

• Control of faulty products • Selection and evaluation of suppliers • Control of documents and drawings • Designation and trackability of products • Test equipment monitoring

This "classic" process landscape corresponds to the clear company structure and the process sequences. The following representation gives a good overview of the business processes and their interaction. In addition, a matrix depicts the corre-sponding process documents and drawings.

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Process description Process documents Records / drawings

M1 Company planing QM manual Quality policy and QM targets Annual report / statistics

M2 Management evaluation QM manual VA 5.5.1 Com-pany and system evaluation Management review

M3 Internal audits QM manual VA 8.2.1 inter-nal audits Audit review, QM review

M4 Ongoing improvement and data analysis QM manual QM review Protocols man-

agement circle meetings

M5 Personal training QM manual Training records, Personnel

C1 Query processing QM manual Customer query Customer correspondence

C2 Offer QM manual General terms and conditions of business

Offers, Price lists, Delivery range

C3 Study of contract QM manual Customer order, Offer, Order confirmation

C4 Order planning QM manual Commissioning not/ work chart

C5 Stock (supply stocks) QM manual Customer order Commission-ing note Delivery note Mate-rials

C6 Mechanical processing QM manual Commissioning note, Restam-ping certificate

C7 Bought-in parts (regulate stock) QM manual Matchcode (comp sys.) Stock

inventory lists

C8 Inspection QM manual Commissioning note Delivery note Despatch release

C9 Despatch QM manual Despatch papers

C10 Commercial processing QM manual Customer query Customer correspondence Offers, Bills

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C11 Complaints management

QM manual VA 9.2.1 Corrective measures VA 9.3.1 Preventive measures

Fault report Customer correspondence Complaints evaluation

C12 Implementation of correc-tive measures

QM manual VA 8.5.1 Control of faulty products VA 9.2.1 Corrective measures VA 9.3.1 Preventive measures

Protocols of the management circle meetings Complaints correspondence

C13 Order query / order QM manual Supplier queries Orders Order confirmation

C14 Incoming goods inspection QM manual VA 8.5.1 Control of faulty products

Despatch notes, Delivery notes orders

C15 Assigning / storage QM manual Matchcode (comp. sys.)

S1 Selection and evaluation of suppliers

QM manual Supplier list Management review

S2 Designation and trackability QM manual Matchcode, Directive Restamping certificate

S3 Control of documents VA 4.1.1 Production of VAs VA 4.2.1 Control of docu-ments VA 4.3.1 Control of quality records

Distribution lists Filing and archiving

S4 Test equipment monitoring QM manual Tst and calibration records, Equipment data sheets

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supply catalogue:

Description Dimensions Material

Fittings

Threadedfittings 10,2 – 114,3 mm V2A

1/8 “ – 4 “ V4A

Welded fittings

10,2 – 508,0 mm V2A

1/8 “ – 20 “ V4A

Screw connections

10,2 – 114,3 mm V2A

1/8 “ – 4 “ V4A

Flanges

Pre-weld flanges 21,3 – 609,6 mm 1/2 “ – 24 “

V2A V4A

Smooth flanges

Loose flanges Blank flanges

Threaded flanges

21,3 – 114,3 mm V2A

1/2 “ – 4 “ V4A

Aluminium flanges

DN 10 – 600

1/8 “ – 24 “ Aluminium

Industrial fixtures Ball valves

13,5 – 219,1 mm

1/4 “ – 8 “ V4A

Slides & valves 10,2 – 168,3 mm

1/8 “ – 6 “ V4A

Automated ball valves 1/4 “ – 8 “ V4A, Aluminium, PA (Polyamid)

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Pipes 10,2 -– 323,9 mm V2A

1/8 “ – 12 “ V4A

Pipe Couplings 26,9 – 508,0 mm V2A

3/4 “ – 20 “ V4A

Low-gap pipe connection system

13,5 – 53,0 mm 1/4 “ – 2 “

V4A

hecoNNECT „railing construction“

V2A, V4A

Seals 10,2 –323,9 mm EPDM, NBR, PTFE

1/8 “ – 12 “

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3. Company Policy and Objectives heco gmbh based in Remchingen-Nöttingen has specialised in the distribution of pipe connection parts and produces reductions, welding saddles and special parts tailored to customer wishes. In line with the mission statement of our company, market success of our products and services is closely related to their quality and at the core of the relationship of trust with our customers. The principle at heco gmbh is always to deliver punctually products of uniform quality that meet customer re-quirements. We believe it is important that we continually develop and improve and expand our customer base. In this endeavour the company relies on:

• motivated and qualified employees • many years of good and trusting cooperation with • numerous customers and suppliers • open communications • a high degree of flexibility in fulfilling specific customer requirements

In order to meet to this commitment, the company management defines and dis-closes in this QM manual its quality policy. By planning, controlling and monitoring of our QM system we not only assure the required product quality, but also a continuous improvement of our processes. On the basis of the focus of our quality measures in the sense of EN ISO 9001:2000 and by their targeted application within the entire company, we would like to ce-ment the trust of our customers in our products and services, and ensure customer satisfaction and thus also customer loyalty.

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4. Quality Management System

4.1 Documentation of the QM System The QM system describes the internal rules and processes used to help assure that the demands and expectations that our customer has of our products and services are entirely fulfilled. The QM system and the precautionary measures contained in the QM system help to detect and rectify quality problems beforehand. The principles and processes of the QM system described here are binding for all areas and employees of heco gmbh. The quality policy is to be made known to all employees. The documentation of the QM system consists of the QM manual, the related QM documents (process and work instructions, regulations, standards...) and correspond-ing quality records. The QM manual serves both internally and externally to explain the QM system. It is largely subdivided in accordance with EN ISO 9001:2000 and takes into account, along with the relevant system documentation, all requirements of this standard. The requirements of the standard section 7.3 "Development" do not apply to our company and are not included. The exclusion of the "development" section is based on the fact that our company does not develop new products as defined in the standard. The process instructions, insofar as this is required, give a detailed description of the process stages according to which the individual areas work and also define responsibilities. The PSs are numbered according to the relevant chapters of the QM manual and are also numbered in sequence. Work instructions enable and even greater degree of detail. Process and work instructions are only intended for internal use. Quality records are documents that contain evidence of the activities undertaken or results achieved and are also used to evaluate the effectiveness of the QM system. All QM documents and quality records are controlled and archived.

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4.2 Document Control The general management and the QM officer make sure that all requisite docu-ments produced internally are properly produced, checked and approved. All doc-uments are to be clearly designated and the respective version identified by means of the revision status (for system documents) or date (for contract-related docu-ments). It is ensured that applicable documents are always available in a current version at the respective places of use in a legibly or easily recognisable form. The documents are evaluated by means of internal audits, updated as required and approved before reissue. The new revision status or the updated issue date pre-vents the unintentional application of outdated documents. Their exchange, de-struction or, if required, archiving are assured. Documents originating externally (standards, drawings, customer specifications, other regulations) are also analogously approved, evaluated, updated and ar-chived. Detailed regulations are described in the process instructions "Producing Process Instructions" and "Document Control".

4.3 Control of Quality Records To verify conformity with requirements, the activity carried out and the documenta-tion of achieved results, records are produced and controlled in the required ex-tent. The documentation requirements and the responsibilities (what - who - when- where) are listed in the respective process descriptions. The records record the quality or qualification of products, facilities, personnel and our QM System. The designation, the secure archiving and the retention periods are given in detail in the process instruction "Control of Quality Records".

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5. Responsibility oft he Management

5.1 Obligation of the Management The top level of management of heco gmbh in the sense of the standard DIN EN ISO 9001 is the general management. It stipulates the quality policy and the quali-ty objectives. The policy of heco gmbh includes the obligation to pursue continu-ous improvement and to observe all relevant laws and regulations. The general management works with the QM officer to assure that this quality policy and the importance of fulfilling customer demands and the statutory requirements are un-derstood and implemented by all employees. The general management of heco gmbh demonstrates its obligation to fulfil customer demands by:

• creating and maintaining the awareness of the importance of • customer demands among all employees and in all activities • the stipulation of this quality management system • the carrying out of management evaluations • the provision of the required means

5.2 Customer Focus The intention of the QM system and the qualification of the employees are to en-able the recognition of the wishes and needs of the customers and to assess their feasibility. It is an objective of the general management to achieve a high degree of customer satisfaction. This applies to the exact and contractually correct pro-cessing of the order and also constant customer care. The analysis and evaluation of customer needs and satisfaction is a key component of the management circle meetings and the management review. Market and Product Observation To ascertain customer expectations of potential products and to maintain the prod-ucts on the market a systematic market and/or customer analysis is carried out at least once a year. Exhibition visits and contacts with suppliers support these measures. All areas with customer contacts (as a rule, general management, sales) document important information on our products that are reported either directly or indirect-ly by the customer/market.

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Customer Consultancy on the Range of products To meet customer requirements competent contact partners are available who can make an informed selection and offer from the range of products. In the case of spe-cial products or special customer problems that are not covered by the standard product range, we try to work closely with our suppliers to obtain corresponding products in order to be able to offer the optimum solution here, too. Customer Satisfaction We obtain feedback on customer satisfaction primarily through the processing of complaints. Direct customer contacts and questioning by the general management completes the overall picture. Market and customer analyses provide important find-ings on the continuity of our customer relations.

5.3 Quality Planning and Objectives The quality objectives of heco gmbh accord with the defined quality policy and are subject to ongoing improvement. The general management in cooperation with the QM officer is responsible for setting out the annual quality objectives as well as their periodic monitoring and revision. The objectives are set out by the end of the current financial year for the following year and describe concrete objectives with responsibilities and deadlines. The evaluation of the degree of achievement of these objectives and the resulting measures are a per-manent component of the annual management review of the general management. The objectives are recorded and made known separately and made known and are not a part of the QM manual. Main areas of focus of these objectives are:

• Improvement of the quality or reduction of quality costs optimisation of the indi-vidual process sequences objectives

• supplier selection and evaluation • resources management

Quality planning as regards order processing is effected as part of the processing of each contract in coordination with the customer. This ensures that agreed speci-fications, deadlines etc. are observed.

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5.4 Responsibility, Authority and Communication Organigram of heco gmbh - see appendix Responsibility of the Individual Areas of the Company General Management: Responsibility for the quality of the products and the processes rests with the general management. All areas of heco gmbh are under its control. It appoints the quality officer and implements the QM manual by furnishing its signature to the content directories / revision lists and the section "Introduction and Approv-al" and all the process and work instructions applicable to the company's opera-tion. Approval gives these documents directive character. The general management stipulates the quality policy and the company objectives and as part of the implementation of the described management processes (Section 2 of the QM manual) is responsible for the observance, monitoring and continuous improvement of the QM system. The management system is to be evaluated at least once a year in the management review undertaken by the general manage-ment in order to judge its efficacy and, if required, to initiate timely corrective measures. It makes available suitable means and personnel, lays down the responsi-bility and authorities of all employees and ensures that the quality policy is known, understood and implemented. Quality officer: The QO reports directly to the general management and supports it in updating and maintaining the introduced system. It is responsible in cooperation with the individual areas for the set-up, monitoring and for ongoing improvement of the QM system. He is responsible for carrying out internal audits and for monitoring the effectiveness of all stipulated corrections and preventative measures. He re-ports to the general management regularly on the performance of the QM system and the requisite improvements. His duties also include the maintenance of the system documentation, the provision and control of applicable standards and works standards, management and control of the material certificates and the release of outgoing goods.

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IT: Data processing and development Marketing: Advertising, sales promotion, exhibitions, internet presence Head Office Administration: Document management, post distribution, Payment transactions, issue of invoices and despatch papers Accounting: General ledger accounts, accounts receivable and accounts payable payment transac-tions, annual financial statements, payroll accounting Sales: Drawing up offers, pricing and order processing Purchasing: Material procurement, complaints management, supplier evaluation Logistics/warehousing: Warehouse management, incoming and outgoing goods inspection, ensuring the labelling and trackability of goods, test equipment monitoring Manufacture/technology/construction: Mechanical working of semi-finished products and their restamping Internal Communication The internal communication processes (notice-board bulletins, announcements, regular meetings and one-to-one employee discussions) enables the general man-agement to actively integrate every employee in the company philosophy and the company objectives. By direct personal contact with every employee the general management promotes the responsibility awareness and the motivation and as-sures that every employee is informed about the quality policy, objectives, measures and performance status of the QM system.

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External Communication External queries regarding the quality system are answered by the QM officer or the general management. Sale is responsible for communication with the customer con-cerning quality.

5.5 Management Evaluation In order to evaluate the efficiency of the system as regards its utility, appropriate-ness and effectiveness, the general management along with the QO and the indi-vidual areas carry out discussions at regular intervals (at least twice yearly) on the basis of the following input:

• Reports and results of the internal audits • Feedback from customers (complaints, customer satisfaction) • Process performance and product quality • Status of the corrective and preventative measures • Follow-up actions of previous management evaluations • Recommendations for improvement • Alternations with possible effects on the QM system

The results of the discussions are written down and contain information on the measures decided upon, responsibilities as well as any effects on the declared ob-jectives. A summary is effected by the general management at least once a year in the QM review report. The results of this evaluation contain, among other things, concrete decisions and measures regarding

• Improvement of the efficacy of the QM system and the processes • product improvement to meet customer requirements • resource requirement

Further instructions are described in the process instruction "Company and Sys-tem Evaluation".

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6. Management of Resources

6.1 Personnel Ressourcen Qualified personnel are employed to carry out all work in the company. Checking the suitability when the person is given an employment contract and by requirement-led further training The general management is responsible for providing sufficient human resources for the realisation of the company objectives and to maintain and improve the QM system on the basis of the requirements of the customers and the market. Person-nel planning and development is a component of the annual management review. New employees are inducted by colleagues. In the process the employees also learn to acquaint themselves with the records, processes and measures that assure quality in the area they are working in. The QO is responsible for a comprehensive instruc-tion in the existing QM system and the contents of the documentation.

6.2 Training To assure the technical competence of personnel with the activities relevant to the QM system, information, training and in-service training measures are carried out as required. The general management stipulates suitable internal and external training measures for the coming year. It is also responsible for every employee being aware of his area of responsibility, the significance and importance of his activities and letting him know how he can personally contribute to achieving the quality objectives. Apart from the recording of training and experiences of the individual employees the QO also keeps records of all training measures. This includes who participated, type, extent and date (form: "participation in training"). The participation in training measures is confirmed by the employee's signature. The general management personally checks by means of the work processes or by means of other suitable measures the efficacy of the training undertaken (was the agreed objective achieved - are other training measures necessary?) and documents the evaluation in the appropriate form "Training Participation". The evaluation is effected at least 6 months after the training measure in question has been carried out.

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6.3 Infrastructure The general management evaluates the requirement for office space, works and warehouse space, manufacturing plant and other supporting services (transport, communication etc.). It assures that sufficient means are provided to ensure the achievement of the stipulated company objectives, the achievement of customer satisfaction and the required product and process quality. Planning is effected yearly in the investment plan (in certain circumstances as a component of the man-agement review) of the general management.

6.4 Workplace and the Environment The general management assures that suitable means of production are planned and provided for all processes. Work safety is actively represented by the general management and is based on the guidelines of the professional trade association. An external medical officer has been entrusted with the care of the employees. Eve-ry employee is obliged to follow and implement the instructions of the general management. We base our environmental protection measures on the statutory stipulations, en-sure a sensible utilisation of materials and parts and initiate necessary measures. Instructions constitute the basis for the health and safety behaviour of all employ-ees. This requires knowledge of the dangers in the workplace. The instruction com-prises not only the dissemination of knowledge but also questions on suitability (ability) and motivation (will). The attitude to health and safety at work is also dis-cussed. Operating instructions issued by the professional trade association can be employed to visualise potential dangers, protective measures and rules of behav-iour. The general management assures that the preconditions for comprehensive first-aid treatment exists in all areas. Information on accidents in the company is evaluated and represented in accident statistics. Work safety and the avoidance/minimisation of accidents are important company objectives.

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7. Product Realisation

7.1 Planning of Product Realisation The process landscape represented in Chapter 2 of the QM manual shows that nec-essary business processes have been introduced in the company for all the services to be rendered and for the mechanical processing of the named products. In con-nection with the described management processes and supporting processes it is assured that the product realisation is in harmony with the QM system and the nor-mative requirements. The process descriptions in this QM manual (see also the directory of process in-structions, QM chapter C, if more detailed descriptions are required than those in the QM manual) contain preventative, controlling and corrective elements for all stages of product realisation. All activities for the contractual processing, manufac-ture and improvement of the products are always based on market demands and customer wishes as well as the company's own quality expectations. In order to satisfy customers, we have to record their wishes and demands clearly and unambiguously. We assure this by checking queries, offers and customer orders and by consultancy. The demands placed on the product are, as a rule, stipulated in the specifications, standards and drawings and are systematically observed and continuously verified. Labelling the products assures the trackability during the manufacturing processes, established regulations for handling and warehousing protect our products from impairments. In the case of deviations from required properties, the corresponding units are kept separate and intensively examined. In every instance corrective measures are initiated and the results of the examination used for the continuous improvement process. Deliveries are systematically inspect-ed; the ability to provide the required quality is decisive in the selection of supplier. Checks on our products are documented, the test results serve to improve both processes and product. The test equipment employed is calibrated and maintained at stipulated intervals.

7.2 Customer-related Processes Determination of Customer Requirements The sales department is responsible for determining customer requirements. The feasibility of fulfilling the product requirements, sales price, stock and delivery date are checked for every customer query. Lack of clarity is resolved via direct talks with the customer. By conducting regular research into standards and statutory re-quirements we assure that any alterations are taken into account and also commu-nicated to the customer.

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This process assures that: Änderungen berücksichtigt und auch mit den Kunden kommuniziert werden. Dieser Prozess gewährleistet, dass: Customer wishes of the product, including requirements as regards deadline, pro-cessing and support are determined in their entirety also the requirements not specified by the customer, but need to be taken into account are determined. Ob-ligations, including official and statutory requirements are taken into account. Evaluation of the Requirements and Communication with the Customer Before offers are submitted or an order accepted, the sales department is responsi-ble for evaluating the customer requirements that have been determined. It is ex-pressly verified that heco Gmbh is in the position to fulfil the stipulated customer requirements. The results of the evaluation are documented. All contract documents must be checked for factual correctness, clarity, unambigui-ty, completeness and are technically fulfillable in the time agreed. Deviations or contradictions between requirements stipulated in the order/offer are to be clari-fied with the customer and recorded before the contract is concluded. Contractual obligations are only entered into when it is assured that the requirements can be fulfilled. Alterations and supplements must be agreed and documented between the customer and the sales department. In many cases, companies in the oil industry, plant and pipe constructors place an order directly after consulting agreed, time-limited valid price/warehouse lists with the required data from heco gmbh that the companies have to hand. All orders/incoming orders are entered on computer. Order confirmations are al-ways sent to the customer if the customer expressly wishes this, if the delivery is not covered or if delivery is to be effected at a later date. Information contained in the order confirmation is entered on computer. In the case of changes to an order or an order cancellation the information entered on computer following checks for feasi-bility is altered or deleted by sales if the product has not yet been despatched. An order is deemed as completed when invoice and delivery note have been issued and despatch effected. The contract documents are archived according to order numbers in the sales department. Every customer query, every customer order trig-gers the generation of an order number that is stored in number order on the com-puter. Feedback from customers is predominantly derived from complaints processing and by direct customer contact with the general management. The information is sys-tematically evaluated and helps us to continually improve our products and services.

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7.3 Development The requirements of the standard section 7.3 "Development" do not apply to our company and are not included.

7.4 Procurement Purchasing assures that all goods purchased are procured from reliable suppliers (manufacturers or traders). The products delivered are subject to a thorough incom-ing goods inspection before their storage/utilisation. The suppliers are subject to regular evaluation by purchasing and are maintained in a supplier list. These are approved by the general management. Procurement processes for our supplier program are triggered by the requirements of minimum stocking of our computer control stock inventory management system. All the articles recorded on the computer system are defined by an unambiguous match code. The basis for article procurement is the supplier list and the last valid standard spec-ification for the article in question. The order text for the supplier is defined so that the product requirements can be unambiguously fulfilled. The text of the order must contain the following information: Article - number - dimensions - material - standard - standardised labelling (manu-facturer mark, material, batch no.) - required test certificates (as a rule approve test certificates or protocols as per DIN/ EN) and if required the required delivery dates or further delivery criteria. The documents of the order processes are assured by purchasing. Incoming products are subject to an incoming inspection in which correctness and completeness are verified. Irregularities in the delivery are recorded and flow into the supplier evaluation. Criteria in the Selection of Supplier and ongoing Evaluation Only products are procured from manufacturers or traders that are listed as ap-proved qualified manufacturer as per AD 2000 Sheet W0. This criterion cannot be applied to suppliers of pipe clamps and seals; these suppliers or suppliers for which the above-mentioned condition cannot apply (e.g. hauliers etc.) are qualified ac-cording to the following criteria: Supplier of many years' proven partnership or certified QM system according to DIN EN ISO 9001:2000 or references and more intensive inspection of the incoming goods as regards initial deliveries.

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The suppliers are listed on an article-specific basis in the heco gmbh supplier list are periodically evaluated (the evaluation period should be a maximum of one year as a rule - not all suppliers need to be evaluated all at once) according to the follow-ing viewpoints:

• Value for money • Deadline loyalty/supply availability • Quality (completeness, identity, fault free) • Complaint processing

The evaluation criteria are weighted as follows: (A): fulfilled in full (B): partially fulfilled (C): insufficiently or not fulfilled

Value for money As regards costs there is a selection between threee degrees of fullfilment: for suppliers that are more favourable than the average (A) for suppliers that have average prices (B) for suppliers with above average prices (C) Deadline loyalty suppliers who are good at observing delivery dates (A) suppliers who are satisfactory in observing delivery dates (i.e. a few days too late, but does not inhibit the process.)(B) suppliers who are poor in observing delivery dates (i.e. the process is considerably inhibited) (C) Quality for deliveries that were in order (A) for deliveries displaying slight faults, but do not inhibit the product process. (B) for deliveries with considerable faults (C)

As a rule the general management informs the main suppliers (more than 20 deliver-ies a year) once a year about the result of the evaluation. If a supplier only achieves the evaluation level B/B/B over a year, he is always informed of this; if a supplier achieves an evaluation level C in the evaluation level of deadline loyalty or quality; in addition, no more orders are placed with him. The general management documents this measure in the annual management review.

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7.5 Production and Rendering Services Processing orders or the rendering of our services is effected under "controlled conditions". The control of the core processes for rendering services is effected by sales (see QM manual 7.1 and 7.2). All processes are sufficiently described, this con-tains stipulated procedures and responsibilities. The process validation (special pro-cesses do not exist) is effected directly in the current customer-related individual orders by the individual inspection of the product. If mechanical processing is required (initial working, division etc.) of articles in stock all required details are to be listed on the commissioning note that is triggered by the order through sales. Processing (turning or sawing) is effected by the warehouse foreman. Commissioning note /delivery note and restamping certification document the secure process. The marking and trackability of products and orders is assured by records, product marking, defined storage locations (computer system) etc.. When dividing semi-finished goods into several lengths, the restamping certificate is to be followed ex-actly. The multiple lengths are always to be stamped with the material, the smelt number and, if need be, the sample number. The logistics manager stamps these parts with his own stamp and with this approves and releases the product. In the event of errors and irregularities suitable measures are to be initiated to deal with them (e.g. marking or separate storage until problem clarified). This ensures that faulty goods are not unintentionally passed on either internally or to the customer. The storage of the products is effected by a defined, article-related match code. The computer system records the place of storage and the stocks. It is assured that no damage occurs to the products during storage. When packing standard cardboard boxes, pallets or mesh boxes are used. The relevant delivery note with the required information accompanies every packing unit (despatch). Despatch is carried out with the company's own trucks, DPD, UPS or third-part haulage companies; the logistics manager is responsible for the process. The employees are familiar with the tasks or new employees are inducted in the job. They are obliged to handle the goods and machines as well as working and ancillary equipment responsibly and carefully. This also contains the packing of the goods suitable for safe transport. The measuring and test equipment employed in the course of the business processes are listed in a list and are inspected at regular in-tervals.

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7.6 Control of Monitoring and Measuring Equipment The technical department is responsible for maintaining, care, testing and approval of test equipment. The general manager is responsible for the procurement of the test equipment, the proper and correct incoming inspection of the test equipment is undertaken by the technical department. All test equipment is recorded and sequentially numbered. The following test equipment is used for dimensional and number control: Test facility data: Materials testing using an X-Ray fluorescence analyzer: Niton XL3t, year of construction: 2008, device No.: S/N 32614 Gamma Scout radiation detector Finished parts by being tested using: Pocket callipers 150mm Qty. 2 Pocket digital callipers Mitutoyo 150mm Qty. 1 Workshop callipers 300mm Qty. 1 + 500mm Qty. 1 Depth callipers 300mm Qty. 2 Mahr measuring and control plate gauge Test device for a ring expanding tests Mitutoyo AVK-A2 hardness tester Limit plug gauge for R-threads and G-threads The test equipment is reviewed once a year. Calibration is undertaken with the aid of calibration standards on the calliper gauges. The results are documented in a test equipment card; faulty equipment is to be repaired by the manufacturer or scrapped. Material identity check can be carried out by means of X-ray fluorescent analyser likewise by heco gmbh. Callipers The callipers are inspected visually every year for damage, edge wear, burring and corrosion. On account of the rare utilisation and the reliable tolerance in mechanical working on semi-finished goods, a calibration period of 3 years is sufficient if no visi-ble damage or signs of wear can be found. Calibration is effected with comparative standards.

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8. Measuring, Analysis

8.1 Customer Satisfaction heco gmbh obtains regular information on the customer requirements and satisfaction to evaluate its own performance. Feedback on customer satisfaction is obtained primarily from the evaluation of complaints and the customer contacts of the general management. Market and cus-tomer analyses provide important findings on the continuity of our customer rela-tions. All feedback and complaints from the customers are evaluated and processed by sales. If the complaints are not clear-cut or cannot be settled immediately to the satis-faction of the customer, the general management is informed immediately. It is then responsible for introduction corresponding measures. In addition, the general management regularly analyses along with sales the exist-ing customer structure and checks by means of market observation, information or recommendations from regular customers and general product developments (e.g. technical articles in journals, new findings from exhibition visits etc.) whether our products continue to fulfil the wishes and expectations of our customers or need to be improved. The general management also decides, for example on the basis of customer-related sales analyses, whether the above-named activities for determining cus-tomer satisfaction are representative for the existing customer pool or whether additional actions, such as mailings, for example are necessary in order to reach a more broader customer base and thus, if possible, to increase the meaningfulness of feedback. The results of the analyses are a component of the regular management circle meet-ings and also flow into the management review of the general management. The general management determines trends and initiates corresponding activities.

8.2 Internal Audits Quality audits are a suitable instrument to examine internal processes, products and services and to identify potential improvement and risks. Detailed information on the process can be obtained from the PI "Internal Audits".

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Audit Planning The efficacy of the QM system at heco gmbh is examined once a year wit the aid of the internal audit. These are planned and conducted by the QM officer. The audit planning is coordinated with the general management and approved by it. If an audit is conducted for any particular reason that does not conform to this schedule, it is to be entered in the audit plan afterwards. Such reasons can be: errors found, deviations, short-term process changes, restructuring, new prod-ucts and processes and also the monitoring of the efficacy of corrective and pre-ventative measures introduced. Qualification of the Auditors The general management assures that the qualifications of the auditors em-ployed are suitable for a correct conducting of the audit. Conducting the Audit Corresponding audit documentation (questionnaires or checklists for the process in questions) are prepared for all areas or processes to be audited based on the QM manual and the process descriptions. The questioning or valuation in the individual areas or at the workplaces is effected with reference to the application and correct carrying out of the described processes and quality assurance measures. The control of the documents and quality records are checked in the process. The auditor documents the examples or process stages reviewed and evaluates the compliance with the requirements of the standard and existing regu-lations. All results are summarised in a final meeting with the participants. The meeting discusses weak points and measures for improvement proposed. The auditing results as well as any corrective measures are contained in an audit report. This report is used by the general management as a basis for evaluating the QM system. If deviations are found in an area or process, corrective measures are initiated imme-diately after consultation with the general management. The QM officer monitors the auditing process checks the efficacy of the corrective measures and reports to the general management. Documentation of the Audit The audit reports, plans and checklists are archived as quality records centrally by the QM officer.

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8.3 Monitoring and Measuring of Processes Suitable statistical methods are employed to ensure a constant monitoring of the business processes. The objective is the conformity of the processes and a constant optimisation of processes. The core processes are monitored constantly through their process sequences in the control of faulty products, corrective and preventative measures, processing of customer feedback and complaints and the internal audits. The process validation (special processes do not exist) is effected directly in the current customer-related individual orders by the individual inspection of the product. All internal errors and customer complaints are recorded, analysed and evaluated so that possible tendencies or trends can be detected. As part of the manager circle meetings and the evaluation by the general management it is ensured that suitable corrective, preventative measures are initiated and thus a continuous improvement achieved. By stipulating suitable key data, such as, for example, sales, fault percentage or costs of faults and delivery loyalty and corresponding stipulations (quality objectives of the general management) the company's own quality expectations can be eval-uated by means of the degree of fulfilment and documented (management review of the general management).

8.4 Testing the Products Tests are conducted on incoming goods, during restocking of the warehouse and, if necessary, during the mechanical working of semi-finished products and on ready-to-despatch products after picking. The logistics manager is responsible for the inspection and testing of incoming goods, outgoing goods (picking) and likewise for interim testing on mechanically processed articles. The QM officer is responsible for approving goods ready for despatch. Incoming Goods Inspection All purchased goods first arrive at the incoming goods department. Consignment of goods are inspected by comparing with the despatch note: the visible state of the goods for transport damage, the compliance of the delivered goods with the despatch note (supplier, object, quantity, standard, labelling, batch No. etc..)

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If there are complaints about the product, they are documented in writing on the despatch note of the supplier on a stamp supplied by the warehouse foreman and passed on as a fault report to the general management. The batch number stamped on the article is entered in the despatch note and is used along with the article No., manufacturer's mark and the labelling for identifica-tion and tracking of the product. Once it has been assured that the product fulfils all requirements, the merchandise is released by the logistics manager. The managing director compares goods with the details of the despatch note, the details of the material certificates and the order placed by heco gmbh. If the results are positive the goods are released and are entered together with the material certificates in the computer system. Released goods are stored in warehouse positions defined by match codes. In the case of faulty parts the procedure as set out in the process in-struction "Control of faulty products" is followed. Warehousing and Mechanical Processing All products are stored in defined warehouse positions and are identifiable at all times. If the customer order makes mechanical processing of the product necessary (corresponding stipulations are listed on the work card/commissioning note), the final dimensions are checked by the logistics manager and compared for correct-ness with the work card/commissioning note. In the case of deviations the process instruction "control of faulty products" comes into effect. Final Inspection and Despatch Release When an order is placed by a customer for merchandise that is in stock, a job order is triggered by the EDP system. When requested to do so, the logistics manager is to enter the batch number on the job order for each article. After completion of the order picking, the counting of the quantities, an inspection of the external condition of the merchandise and a checking of the job order, the logistics manager hands the job order with the batch numbers to sales. The batch numbers are then checked at the office in order to ensure that they match the articles, they then being accepted for the delivery note. This is when the invoice is triggered. Before despatch the QM officer adds if requested the certificate to the delivery note after he has compared the details of the delivery note with the details of the certifi-cate. All certificates are managed via the computer system and are archived accord-ing to supplier.

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Direct Delivery Procedure heco gmbh always carries out all orders with products it carries in stock. If the custom-er desires direct delivery, the procedure is as follows: After the contract has been checked an order is placed with a supplier with the notification that the goods along with a neutral delivery note are to be sent directly to the customer; at the same time an order confirmation is sent to the customer by heco gmbh. The order confirmation requested by heco gmbh, copy of the delivery note, invoice and certificate of the supplier are checked by the QM officer with the order confirmation of heco gmbh. If the details tally release is effected and the approval certificate along with the order confirmation, delivery note and invoice are sent to the customer.

8.5 Control of Faulty Products Stipulations on how to deal with faulty units assures that they are not passed on and used unintentionally. A unit deviation exists when one or more quality characteris-tics do not comply with the technical and/or QM documentation, or there is no longer an unambiguous identification. In such a case the corresponding units are not released. The same applies to faulty documentation. A document is faulty when it prevents the aim of a required quality being attained. A precise description of the procedure can be found in the process instruction "control of faulty products".

8.6 Data Alalysis To determine the effectiveness and the suitability of the QM system as well as to reveal potential improvements, data from the measuring and monitoring activities of the processes and products are collected and evaluated. Relevant data is analysed in order to obtain valuable information and findings for the following criteria:

• customer Satisfaction • fulfilment of the product requirements • Characteristics of the processes and products as regards trends and the

possibilities for preventative and improvement measures, suppliers etc. The findings of the data analyses are evaluated in regular manager circle meetings and in the management review of the general management and constitute the basis for the introduction of any necessary corrective and preventative measures and ob-jectives.

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9. Improvement

9.1 Continuous Improvement The continuous improvement of the quality system is enabled by the application of the quality policy and the QM objectives, as well as by the processes, internal audits, monitoring of the processes and process conformity, data analyses and management evaluation described in this manual. Corrective and preventative measures likewise serve as an instrument for continuous improvement. Every employee is motivated to detect possible potential improvements and to pass on corresponding information to the general management. The clear struc-tures and the size of our company assures that the employee has direct access to the general management at any time. Improvement suggestions are checked for feasibility by the general management. Data analyses make it possible to detect any tendencies or trends that are contin-uously evaluated and documented as part of the manager circle meetings. The managing director decides on necessary measures to assure continuous im-provement. Continuous improvement can be documented by means of suitable figures such as, for example, productivity, fault quota or costs of faults and delivery loyalty and the comparison between actual performance and the objectives laid down by the general management. Statements on improvement are an integral part of the management review.

9.2 Corrective Measures To remove the causes of faults targeted individual measures or, in the case of de-tectable tendencies, planned systematic measures are taken. These measures span purchased goods, products and the realisation processes. Corrective measures re-sult as a rule from:

• Customer complaints • Monitoring and measuring of processes • Product inspection • Internal quality audits • Data analyses

The procedure is covered in more detail in the process instruction "corrective measures".

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9.3 Preventative Measures Parallel to corrective measures, targeted measures are taken to prevent quality problems on the basis of data analyses of detectable, negative trends and tendencies. The decisions on this are taken at the regular Q circle meetings. The process for suitable preventative measures include:

• determination of potential faults and their causes • judgement on the need to act and the stipulation of the requisite • steps to rectify the problem • recording the results • evaluation of the measures by the general management • monitoring of the implementation and effectiveness

The procedure is covered in more detail in the process instruction "preventa-tive measures".

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Annex to 5.4: Responsibility, Authority and Communication

Organigram of heco gmbh