DMDO (Defective Material Disposition Order)

Nonconforming Products and Mat erials (NCM) & Processes (ADR)

I. W hat are nonconfo r m i ng product s , m aterials, or processes? II. W hat are NCMs, ADRs, and O S &Ds? A. W hat do NCMs, ADRs, and OS&Ds look like? III. W hy are NCMs, ADRs, and OS&Ds issued? IV. W hat are the different types of nonconfo r m ance paperwork, and what are my responsi b ilities for each type? V. W hat is a Corrective Action/Preventive Action (CAPA)? VI. W hat do I have to do if a CAPA is requested? A. Required In f or m ation on CAPA Fo r m VII. W hat happens if I do not co m plete these for m s on ti m e? VIII. How does a NCM affe ct my Right First Time (RFT) Score?

I. What are nonconforming products, materials, or processes?

A nonconfor m i ng product or m aterial is any purchased product or raw material received by Amway that does not conform to the specifications or agreed upon standards. For all nonconforming products or materials, a Non Conformance Material (NCM) report will be issued to the Supplier and an investigation is initiated. For all supplier caused non- conformances, a Corrective Action/Preventive Action (CAPA) will be requested.

A nonconfor m i ng process refers to shipping, packaging, identification, or paperwork errors leading to a delay in product or material receipt. Such nonconforming processes lead to the issuance of an Arrival Defect Report (ADR) or an Over, Short, and Damaged Report (OS&D). For all supplier caused ADR errors, a Corrective Action/Preventive Action (CAPA) will be requested.

Retu rn to Top II. What are NCMs, ADRs, and OS&Ds?

A NCM (Non-Conforming Material) report is generated when components, raw materials or products do not conform to established specifications or standards. This tool is used to notify internal and external parties of the issue. NCMs may be written for non-conformances found during incoming inspection, production, or in market.

An ADR (Arrival Defect Report) report is generated when shipping, packaging, identification, or paperwork errors lead to a delay in product or material receipt. This tool is used to notify internal and external parties of the issue.

An OS&D (Over, Short and Damaged) report is issued to document miscounts and shipment damages on incoming shipments of products and materials. This tool is used to notify internal and external parties of the issue.

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of 12 Revision Date: 05/01/2013 For Reference Only A. What do NCM s, ADR s , and OS&Ds look like?

Refer to the examples below as guides to reading NCMs, ADRs, and OS&Ds.  All areas in red should be closely reviewed. Non Conformance Material (NCM) # XXXXX

Edit Preliminary Disposition Enter Final Disposition Reassign Disposition Route to Affiliate

Form Name Non Conformance Material (NCM) Form Revision 0 Entered By Jane Doe Initiating Department QA - Incoming Physical Date Initiated 8/8/2012 Nonconformance Details Non Conformance External Incoming Stock Status Rejected Type Item Number (BPN/SKU) PCA1217E Branch Plant 80009 (All CAPS, No - or spaces) Description of Material CAN SAT VOLUMISING MOUSSE Brand/Customer Purchase and Work Order Information

Purchase or Work Order Type 732651 OP Order# (OP, OU, MQ, WO, IC) PO Line No. 1 PO Receipt Line No. 1 Non Conformance Details continued... Primary AMC 2012221Z5UB Primary Vendor Lot# 039019-1 NOTE: Please be sure you have entered All the AMC's including the Primary AMC once you have Submitted the NCM in the AMC table below! Work Center # Total Quantity 61194 Total Rejected Quantity 61194 Received: Unit of Measure each ACCEPTABLE MAJOR DEFECT LIMIT EXCEEDED. 80 SAMPLES WERE INSPECTED Nonconformance ALLOWING FOR 2 MAJOR DEFECTS. 5 CANS WERE FOUND WITH FADED/ MISSING PRINT Details: ON THE BACK AND 1 CAN WAS FOUND WITH WRITING ON THE BOTTOM FOR A TOTAL OF 6 MAJOR DEFECTS. SEE ATTACHED PICTURES. Link To: Failure Mode & Assignable Cause Taxonomy Failure Mode Level 1 Product Appearance Failure Mode Level 2 Artwork, Decoration, Label Failure Mode Level 3 Illegible

Contact Information Buyer Department Procurement Buyer John Smith Planner Department Ada Planning Planner Bob Jones Vendor Number 456132

of 12 Revision Date: 05/01/2013 For Reference Only 456123 Grand Lake LLC Vendor Contact 789 Lake Dr. Information Grand Rapids MI 49505 Email: Corrective Actions Link to: Create a CAPA Immediate Action Corrective Action Summary Disposition Due Date Disposition Return to Vendor (RTV) 8/15/2012 (Default is 5 business days) Reason Comments Enter Preliminary Disposition Reason for Edit Assign to Jenny Smith Status Initiated, Awaiting Disposition Creation User JDoe Creation Date 8/8/2012 3:25:36 PM

Last Edit User JSmith Last Edit Date 4/1/2013 11:21:44 AM Assignee Dept to Disposition QA - Supplier Quality Dev Emp to Disposition Jenny Smith Void No

Arrival Defect Report GB # XXXXX

Assign to Action Create New Action Reassign Action Request

Arrival Defect Report Form Name Form revision 18 GB ADR Date 4/5/2013 Entered By Jane Doe

ABG SKU (All capitals, no hyphens or DNP039 Date Received 4/4/2013 spaces) PO Number 814928 PO Order Type OP Purchase Order Line No Receipt Line No. Bill of Lading No. Branch Plant 80002 RESPONSIBILITY (You must Purchased Unit of Measure KG Supplier Responsibility select one) Material Description and Shipment Information Description of material OXYBENZONE Other (Type in the carrier PO Freight Terms Collect Carrier, if unknown type in below below) Other Carrier Name (if applicable) PRO Number PRO Date Vendor Pickup Address (VPU)

of 12 Revision Date: 05/01/2013 For Reference Only Receiving / Warehouse Issues (Route to Procurement) Warehouse Reason Codes Assign to Action or Create a New 5/17/2013 Action by Due Date QA Laboratory Requirement Issues Quality Assurance Reason Codes Q2 - C of A information missing (sku's, specs, tradenames, etc.) Transportation Issues Transportation Reason Codes Variance - Vendor Used Non- Variance - PPD Shipped as Collect 0 0 Core Carrier Miscellaneous Reason / Comments Missing information from COA

The spec. states SOME CO. as the manufacturer. The COA does not give a manufacturer only the supplier of Rice. Misc Reason / Comments The spec. states China as the manufacturer location. The COA does not give a manufacturer location.

AMC: 2013094FX9B LOT: 2121127220 ABG and Vendor Contact Information Buyer Department Procurement Buyer SMITH, JOHN Planner Department Ada Planning Planner JONES, BOB Vendor Number 461521 461521 MCN Inc Vendor Name / Address 890 Road Grandville, MI 45606 Assignee Dept QA - Supplier Quality Void No Emp Assignment Dev Jenny Smith Reason for Edit New record Creation Date 4/5/2013 9:52:02 PM Creation User JDoe Last Edit Date 4/5/2013 9:52:02 PM Last Edit User JDoe Status Awaiting Action

Over Short and Damaged # XXXXX

Edit Preliminary Disposition

Form Name Over Short and Damaged Form revision 6 Date DMDO Initiated 5/12/2011 Entered By Jane Doe DMDO Type Damaged Department MFG - Plastics

of 12 Revision Date: 05/01/2013 For Reference Only ABG SKU PO Number (All capitals, no PCI1323A (as noted on 623561 hyphens or spaces) the receiving tally) Date Received 5/12/2011 PO Order Type OP Purchase Order Line No 1 Receipt Line No. 1 Bill of Lading No. T190062278 Branch Plant 81150 Purchase currency type USD Purchased Unit of each Cost per Unit of Measure 0.045 Measure Material Description and Received Quantity Description of material CLOSURE-QUIX ABG Lot Number (a) 2011322M7B Quantity (a) 1000 ABG Lot Number (b) Quantity (b) 0 ABG Lot Number (c) Quantity (c) 0 ABG Lot Number (d) Quantity (d) 0 ABG Lot Number (e) Quantity (e) 0 ABG Lot Number (f) Quantity (f) 0 Quantity of Received Receiving Unit Skid 240000 Units If palletized, enter 30000 Quantity per Unit 2000 number of units per skid Total Received 40000 Units of Measure Cases Carrier Towne Air Freight Freight Terms Prepaid PRO Number PRO Date Trailer Number PNPP 001 Damaged Goods Information Damaged Goods Qty (in Value of Damaged 1000 45 purchased units) Goods 2 Boxes damage when put on trailer, when taken off 1 Damaged Goods - Who appears responsible box caught on side of trailer and ripped. 1/2 box fell on Carrier Receiving Comments for the Damage? floor. Short - Receipt Information Short Receipt Qty (in Value of Material 0 0 purchased units) Shortage Short Receipt - Receiving Comments Over - Receipt Information Over Receipt Qty (in Value of Material 0 0 purchased units) Overage Over Receipt - Receiving Comments ABG and Vendor Contact Information Buyer Department Procurement Buyer Planner Department Ada Planning Planner BJones Vendor Number 456789 Vendor Contact 456789

of 12 Revision Date: 05/01/2013 For Reference Only LJT INC Information 456 Lakeview Grand Rapids MI 45905 Retu rn to Top

III. Why are NCMs, ADRs, and OS&Ds issued?

Why is a NCM issued?  A NCM is issued to communicate a nonconformance internally (Amway) and externally (Suppliers)  NCMs allow the company to control and/or quarantine all non-conforming items  NCMs help ensure that the final agreed upon disposition is implemented  NCMS are used to measure and track conformance and quality history, so QA personnel can identify trends and areas for improvement

Why is an ADR issued? • An ADR is issued to communicate failure to meet a shipping, transportation, or quality assurance documentation requirement, both internally (Amway) and externally (Supplier) • ADRs are used to measure and track compliance history, so QA personnel can identify performance trends and areas for supplier improvement

Why is an OS&D issued? • An OS&D is issued to communicate shipping discrepancies (overages or shortages) and damages, both internally (Amway) and externally (Supplier)

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IV. What are the different types of nonconformance paperwork, and what are my responsibilities for each type?

There are three different types of nonconformance paperwork: NCM (external incoming and external in-process), ADR, and OS&D. Please refer to the guide below for an explanation of why NCMs and ADRs are issued and the supplier’s responsibilities in each scenario. (See Chart 4.1)

 Suppliers will be contacted regarding external incoming and external in-process NCMs from their Supplier Quality Development (SQD) Representative or Supply Chain QA.

 Suppliers will be contacted about ADRs by Quality Assurance, Transportation, or Procurement depending on the issue.

Please note: OS&Ds are handled with suppliers via Amway’s Warehousing and Global Procurement departments. Suppliers will be contacted regarding OS&D’s via Amway’s Global Procurement department and/or transportation.

*There are six types of dispositions related to NCMs, ADRs, and OSDs. (See Chart 4.2)

of 12 Revision Date: 05/01/2013 For Reference Only Page 7 of 12 Revision Date: 05/01/2013 For Reference Only Revision Date: 05/01/2013Revision Date: Page *ABG did usability adverselyaffectnot beforeor *ABG after of receipt. product

External In-Process E x tern al In co m in g Arrival Defect Report Chart 4.1 8 NCM/ADR

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and and and ; due in 30 days. Ret u rn to Top Chart 4.2 There are six types of dispositions that require vendor action:

Type Disposition Description Supplier Action

External Disposition notice issued for products, raw Incoming or Release Under materials, or components that do not meet Complete CAPA External In- Deviation (RUD) specifications but are accepted by Amway "as- Process is" because they have minimum impact.

External Disposition notice issued for rejected Complete Disposition Incoming or Return to Vendor products, raw materials, or components that Request Form; Complete External In- (RTV) will be returned to the supplier. CAPA Process External Disposition notice issued for rejected Complete Disposition Incoming or Scrap Vendor products, raw materials, or components that Request Form; Complete External In- Expense (SVE) will be scrapped at Amway and charged back CAPA Process to the supplier for payment.

External Disposition notice issued for rejected Complete Disposition Incoming or Rework Vendor products, raw materials, or components that Request Form; Complete External In- Expense (RVE) will be reworked at Amway, but the charges CAPA Process will be forwarded to the supplier for payment.

Ex. Transportation: Supplier called our core N/A - No Financial carrier directly. Ex. Receiving Warehouse: ADR Complete CAPA Impact Wrong info. on packing slip Ex. QA: Missing C of A

Ex. Stock damaged during transit. Ex: PO Quantity does not match the sum of the case Damage--Freight Claim Freight or Supplier OS&D label quantities. Ex. PO quantity and case Authorization Quantity-- Claim label quantities do not match actual count of CAPA product within case.

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V. What is a Corrective Action/Preventative Action (CAPA)?

A CAPA is a supplier created action plan focused on preventing a non-conformance from recurring. The CAPA is created in response to a NCM issued to communicate non-conforming material (or ADRs for non-conforming paperwork). CAPAs are required for all NCMs and ADRs.

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of 12 Revision Date: 05/01/2013 For Reference Only VI. What do I have to do if a CAPA is requested?

If requested to provide a CAPA, suppliers will receive a CAPA form. The form will indicate what information is needed, and will include due dates for each step of your investigation. A final response, including a preventive action plan and verification of both corrective and preventive action effectiveness, is due within 30 days of initial CAPA request.

A. Required Information on CAPA Form (See Chart 6.1) There are 6 steps involved in filling out the CAPA form:

1. Acknowledge Receipt a n d Define Issue – The supplier is expected to acknowledge receipt of NCM/ADR communication and CAPA request within 48 hours.

2. Contain m ent – Describe the containment actions taken. Containment is required prior to any subsequent shipments and must occur within 48 hours.  Has SUPPLIER segregated any remaining non-conforming material from their conforming lots?  Has SUPPLIER segregated any remaining non-conforming material from their conforming lots?  Can SUPPLIER confirm there is no more non-conforming material?

*Do not complete step 2 for ADRs

3. Deter m ine Root Cause – Designate what type of fundamental deficiency occurred (manpower, materials, methods, machine, environment) to cause the material/component defect. Identify the Quality System Escape Point(s) and determine root cause of the Quality System failure. Root Cause determination is due within 7 days.  What created the issue?  What controls are in place to catch these issues?  What controls failed?

4. Corrective Action – Describe the action(s) taken to correct the defective material and reduce both the rate of failure and the rate of escape. The supplier is expected to provide verification that corrective actions performed are effective in eliminating the non- conformity. The Corrective Action Plan is due within 7 days.  How is SUPPLIER reducing the probability of a repeat issue?  What controls are being re-enforced?  What controls are changing to reduce the probability of a repeat issue?  How effective are the methods of reduction?

5. Preventive Action – Describe the action(s) taken to eliminate the cause(s) of failure and/or escape. The supplier is expected to provide verification that preventive actions performed are effective in preventing reoccurrence. The Preventive Action Plan is due within 30 days.  How is SUPPLIER preventing supplying material with this issue going forward?  How effective are the methods of prevention?

6. Recognize T eam – Both the supplier and Amway will provide names and titles of the individuals involved in correcting and preventing NCM/ADR issue(s).

of 12 Revision Date: 05/01/2013 For Reference Only

Chart 6.1

SUPPLIER CAPA FORM (Corrective & Preventive Action Plan)

Acknowledgement of NCM /ADR & CAPA Request Due by: 1/2/00 NCM #(s): Date of ABG Issuance: STEP #1: ADR #(s): Date of Supplier Response: Acknowledge Supplier: Receipt, Define ABG sku(s): Full Lot #(s): Issue Description Trade name: of Issue: ABG PO(s): For Internal Use Only SQD As s ignee: Supplier Recipient's Em ail: Lab OOS #: Advers e Event #: Field Com plaint #: Cats Web CAPA#: Tanya Hecks el tanya.hecksel@am way.com Containment Response Due by: 1/2/00 Des cribe Containm ent Actions Taken: Date STEP #2: Containment Not applicable for ADRs

Root Cause (R/C) Determination Due by: 1/7/00 R/C of Material/Com ponent Defect (include date) R/C of Quality Sys tem Es cape Point(s) (include date) STEP #3: Determine Root Cause

Which R/C Method(s) were us ed? 5 Why Is hikawa Kepner-Tregoe DOE Other (list) Corrective Action PLAN Due by: 1/7/00 Des cribe Action(s ) Taken Date Verification of Effectivenes s of Action(s ) Date STEP #4: Corrective Action(s) Action(s) taken to correct defective material; reduce the rate of failure; reduce the rate of escape

Preventive Action PLAN Due by: 1/30/00 Des cribe Action(s ) Taken Date Verification of Effectivenes s of Action(s ) Date STEP #5: Preventive Action(s) Action(s) taken to eliminate the cause(s) of failure and/or escape

SUPPLIER TEAM STEP #6: (names, titles): Recognize Team AMWAY TEAM (names, titles):

For Steps #1 and #2 - Send Reponses To: For Steps #3 - #6, all future contact is dependent on issue type/origin:

Nutrilite Division (excluding Amway NA Buyouts) Product Quality NCM's SQD Scientist [email protected] Arrival Defect Reports (ADR's) - QA Lab SQD Scientist Durables, Beauty, Home/Personal Care, ANA Buyouts For NCM's & QA Lab ADR's, the Name & Email Address of your assigned SQD [email protected] Scientist can be found in the Email Message that this CAPA FORM was attached to. EPC (Enterprise Processing Center) Arrival Defect Reports (ADR's) - Warehouse EPC/Costa Rica [email protected] Arrival Defect Reports (ADR's) - Transportation Transportation Specialist

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of 12 Revision Date: 05/01/2013 For Reference Only VII. What happens if I do not complete these forms on time?

The timeliness of your CAPA response to NCMs/ADRs affects your Supplier Segmentation standing with Amway, and could affect your Right First Time (RFT) score. While returning these forms on time and fully filled out will help, it would benefit your score more if neither NCMs nor ADRs were issued. Completing corrective/preventive action investigations promptly helps to ensure future shipments will not be rejected for the same issue.

If you have additional questions, please contact your Supplier Quality Development (SQD) Representative.

VIII. How do NCMs/ADRs affect my Right First Time (RFT) Score?

Each incoming Purchase Order Line is assigned a score of 100% or 0%. Any Purchase Order Line assigned a Supplier-related NCM or ADR will be assigned a score of 0%. Suppliers are expected to maintain or exceed an overall RFT score of 99%. SQD Representatives will discuss a quality improvement plan with you if your RFT score falls below 99%.

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of 12 Revision Date: 05/01/2013 For Reference Only