ASPIRE Guideline - AGCO

ASPIRE GuidelineASPIRE GuidelineAchieving Greatness. Together

2ASPIRE GuidelineTogether, we strive forperformance excellence.WelcomeAGCO has committed itself to provide high-tech solutions forprofessional farmers feeding the world by generating profitablegrowth through superior customer service, innovation, quality andcommitment. AGCO Supplier Relationship Management Program(ASPIRE) is a strategic part to reach this goal.Josip T. TomasevicVice President & ChiefProcurement OfficerGlobal Purchasing andMaterialsThomas C MelcherGlobal Manager:Supplier Development &Relationship ManagementOur goal is to build strong relationships with a select number ofsuppliers who can contribute to our global competitive advantagewhich includes superior product quality, innovation and total cost.To enable continuous improvement and to foster closecollaboration, AGCO has introduced ASPIRE to foster a paradigmshift from typical customer-supplier relationships to value-addedsupplier partnerships. AGCO desires to be your customer ofchoice. ASPIRE will lead the way to improve and streamline oursupply base, while continuously developing long-termrelationships with high-performing and committed suppliers.AGCO aims to exceed customer and industry expectations andneeds the full participation and support from all suppliers to meetor exceed AGCO’s cross-functional performance requirements.We invite you to join us, ASPIRE toward performance excellence:Achieve Greatness. Together!

3ASPIRE GuidelineContentsWelcomeFinding the right partner.360 Degree PerspectiveThe Approach4Relationship Status and Recognition5Increasing Performance andTransparencyAchieving Greatness. Together!Objectives and Benefits of PartneringAPEX Performance System & KPI’s67Performance RequirementsRisk & Contract ManagementThe DetailsPerformance Requirements8How AGCO Monitors Supply Chain RiskBeing a Supplier to AGCO1415QualityQuality Requirements9Logistics and Materials ManagementOn Time Supply (OTS) PerformancePerformance Compliance10111213Performance Based ClassificationKPI Thresholds andValue Added ty and BenefitsSummary of Expectations16Technology and SystemsIndirect at AGCO and KPI’sNPI CollaborationPPAP Parts – RFT & OTD PerformanceEnvironmental, Collaboration,Human Rights & Diversity,& Zero ToleranceCollaboration and BenefitsCost ManagementCost Transparency and Reduction IdeasSupply Chain Sustainability19

4ASPIRE Guideline360 degree perspective.The ApproachAGCO looks to build strong, lastingrelationships with key suppliers that add valueto our products and services. Theserelationships provide increased profitability aswell as global competitive advantage. Oursuppliers must share our vision andcommitment to corporate ethics, theenvironment, and continuous improvement in allperformance areas. Consequently, we apply across-functional approach that enable’s AGCOto communicate with a ‘single-voice’ regardingrequirements and expectations for success.AGCO as ‘Customer of Choice’Close cooperation and partnering including jointdevelopment projects will built trust andcontinue to elevate AGCO as your ‘Customer ofChoice’. Both AGCO and suppliers benefit fromongoing delivery of high-quality, reliableproducts at competitive prices that ensuresmooth operations, productivity and success ofAGCO’s products in the global marketplace.Aligned Cross-functional CriteriaCriteria will be measured (KPI’s), monitored andreported transparently using the APEX SupplierPerformance System. Quality Logistics and Materials Management Cost Management NPI Collaboration Risk and Contract Management Supply Chain Sustainability Technology Capabilities

5ASPIRE GuidelineAchieving Greatness.Together!Objective and BenefitsA large number of internal and external factors arereshaping our products, markets and industry. To bethe ‘customer of choice’ and maintain a leadershipposition in the global marketplace, AGCO hasdeveloped the ASPIRE Supplier RelationshipManagement program to anticipate, react and takeadvantage of these forces jointly with its globalsupply base.ObjectiveThe main objective of ASPIRE is that AGCO and itsglobal supply base can benefit together from futuretrends and opportunities in a sustainable way.Continuous improvement of products, processes andservices is an integral requirement for our success.Key Benefits of PartneringBenefits of PartneringProgressive Benefits of Classification StatusContinuous Improvement is not anevent but an ongoing process thatrequires two-way collaboration andtransparency. AGCO’s approach tosupplier classification follows asystematic and objective evaluationmethodology, that rewards excellentperformance with reasonablebenefits. Becoming a partner andjoining AGCO’s relationshipmanagement program provides openinteraction with key contacts atAGCO to help achieve the greatestopportunities and results.Global GrowthShared innovationStrategic segmentationPartnerNPI collaborationGlobal recognitionPreferredOperational segmentationTactical segmentationSecondary sourcingConditional RFQ’sAlternate sourcingRegularNo consideration for RFQ’sConditionalAlternate sourcing options

6ASPIRE GuidelineFinding the right partner.Relationship & RecognitionRelationship StatusAGCO must seek out top performing suppliersand cultivate partner relationships to effectivelyleverage global spend, improve quality ofproducts and services, reduce infrastructurecosts, manage risk and meet internal andexternal customer requirements. A suppliersrelationship status should be seen as a keyelement to unlocking business opportunitiesacross AGCO’s global operations.RecognitionInnovation is the key to AGCO’s success andexpected from our leading suppliers as part ofour approach to global recognition. Our valuedsuppliers will be recognized at annual supplierevents. Awards will be given to top performingsuppliers by commodity and honored fordistinguished performance.Selection criteria is based on the achievementof stringent performance criteria for quality,delivery, cost, environmental, customer serviceand technical expertise - the Achievement ofGreatness. Together!Relationship LevelsRelationship Levels- Partner: Exceeds AGCO’s performance standards,serves as a world-class benchmark, contributesactionable contributions, fosters leading innovation.- Preferred: Exceeds cross-functional performancestandards, surpasses cost saving targets, providesAGCO with a competitive advantage.- Regular: Meets minimum cross-functionalperformance standards, contributes toward costsaving targets.- Conditional: Fails to meet minimum performancestandards

7ASPIRE GuidelineIncreasing Performance andTransparencyCollaboration &TransparencyKey Performance IndicatorsAGCO’s business performance is closelyintertwined with the performance of its valuedsuppliers. A failure to manage and monitorsupplier performance can lead to major supplychain disruptions, delivery problems, poor quality,and other issues that damage a AGCO’scredibility, as well as the bottom line.The APEX system will be used to measure,track, and report select key performanceindicators (KPI’s) and enable two-waycommunication for continuous improvement.APEX will also provide access to supplierinformation and documents including contracts,quality, logistics and more.A key objective of the ASPIRE SupplierRelationship Management program is the abilityfor AGCO to accurately measure, monitor, reportand communicate global supplier performance.APEX is the web-based system that will enableboth quantitative and qualitative measures ofoverall supplier performance to help guideGlobal Commodity Team sourcing decisionsbased upon relationship status derived fromperformance results.KPI’s Include: Parts Per Million (PPM)Non-conformance Claims (NCR’s)On-time Delivery (OTD)New Product Introduction (PPAP/OTD & RFT)Risk Scores (financial & non-financial)SavingsWarrantyAPEX will foster increased collaboration andprovide transparency of status and performanceresults for suppliers through individualizeddashboards and scorecards.APEX KPI dashboard illustration

ASPIRE GuidelineThe detailsCross-Functional Performance Requirements forDirect & Indirect Purchasing:The following pages summarize performance targets within ASPIREBe part of it.8

9ASPIRE GuidelineQuality1. Quality RequirementsIn order to pursue our goal of zero defects, aconsistent advanced quality planning process(APQP) must be implemented between AGCOand its suppliers. This includes effective serialmonitoring, re-qualification, and continuousimprovement of both products and processes.Failure-free processes and products must bedeveloped, planned, implemented and assured,jointly, by AGCO and its Suppliers.AGCO can only make progress if it can rely on thecommitment of its suppliers. This is why AGCOoffers a quality approach based essentially onpreventive action based in four areas: The Supplier Validation Process based on theSRR Assessment Audit and TechnicalProcess Assessment (TPA) for definedprocesses.The Nomination Process, based in theTechnical Review, including feasibility analysisby the Supplier.Preferred Target Product Quality Assurance, to ensure that thepreventive and formalized quality measures aredefined and applied. From the PPAP process(APQP process for more complex componentswith development tasks), to the serial follow up. Supplier Performance (KPI). AGCO monitors theSupplier’s performance taking into account thefollowing KPI’s (Supplier Quality Indicators). PPM compared with the Global Target percommodity familyNCR (Non conformity Report) Impact andReactivity. Project Status compared with Schedule Non Quality Costs and parts in PQAFor additional definition and explanation onAGCO’s quality standards, please reference:AGCO’s Supplier Quality Guideline: GSQ 01 (orlatest version).Global Quality Score: 100%PerformanceExpectationsMin. ThresholdGlobal Quality Score: 75%Global quality rating criteria (PPM SCORE NCR Impact-reactivity)/2

10ASPIRE GuidelineLogistics & MaterialsManagement1. On Time Supply (OTS)PerformanceOn time supply measures the supplier’s ability tomeet AGCO Corporation’s requirements on timeand at the right quantity to our global locations.Our objective is to achieve a stable flow of on timesupply into our operating sites in support ofAGCO Corporation meeting our customer deliveryexpectations 100% of the time. One time supplyenables our AGCO Production System (APS) toproduce world class products on a consistent andreliable basis.AGCO Corporation desires to choose preferredsuppliers and strategic partners who consistentlysupply the right quantity of product at the righttime to our sites around the world.AGCO Corporation’s measurement foron time supply is:A. Direct Material Suppliers - 2 days early and0 days late to the order shipping or deliverydate. 100% of the order line quantity, nopartial credit will be given for partial quantities.B. Freight Carriers - 0 days early and 0 dayslate to the agreed to transit time and 100% ofthe transportation order quantity . No partialcredit will be given for partial deliveryquantities. The transportation lead time isbased on the agreed to transportation time asspecified in the Transportation Agreement.2. Logistics AgreementSuppliers are expected to participate andcomply with the terms of the AGCOCorporation Logistics Agreement. TheLogistics Agreement defines the AGCOCorporation expectations in the key areas of:1) Lead time, 2) Supplier NetworkCollaboration (EDI or Portal) SNC Systemparticipation, 3) Packaging and labelingcompliance, 4) Transportation ManagementSystem participation, and 5) CapacityManagement System participation.