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Supplier Handbook

Rev 1.0 (February 2008)

Vision

Cymer’s vision is to be number one in the Technology and Information Equipment market by being
the best at commercializing tomorrow’s technology into compelling products today.

We are committed to supplying world class products and services to our customers and we recognize
that our suppliers play a critical role in achieving this commitment. Cymer actively seeks suppliers
whose objectives are compatible with ours. We especially value suppliers that offer us new ideas
through innovative technology or creative business techniques.

The purpose of Cymer’s Supplier Handbook is to educate our suppliers (existing and potential) of
Cymer’s supplier management process and expectations.

Objectives

Cymer’s Supplier Management objectives are to:

1. Achieve predictable delivery and quality that meets or exceeds our Purchase Specification
requirements;
2. Maintain a competitive cost of ownership; and
3. Minimize supply line risk.

To achieve these objectives, our focus must be on continuous improvement in the quality of all
products and services. By making our suppliers an integral part of our overall quality process, we can
build better products right from the start.

As dictated by the semi-conductor tool industry, suppliers must also be extremely agile and capable in
order to adapt to the rapid changes in design and manufacturing strategies. Reducing the time it takes
to develop and deliver products and services will help bring Cymer’s product to market sooner and
reduce inventory exposure for both Cymer and our suppliers.

To improve product cost and performance, Cymer and its suppliers must consider all factors that make
up the true value of the product or service being purchased. Joint efforts to identify value and
maximize results are the basis for intelligent buying decisions and will ensure higher quality at lower
total cost.

There is no one-size-fits-all approach to achieving these objectives. Cymer’s supplier management


processes are flexible. Figure 1 illustrates the variety of categories of products and services supplied
to Cymer in terms of the complexity of the product or service along with the value of Cymer’s spends.

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Figure 1
Sourcing Categories

Much of the supplier management processes and infrastructure described throughout this Handbook
apply to all Cymer suppliers. However, we have a special designation for suppliers in the ‘strategic
sourcing’ category of Figure 1. Strategic sourcing is defined as the building of long-term supplier
relationships to meet our current and future needs for goods and services.

Integrated Supplier Management

A limited number of suppliers in the ‘strategic sourcing’ category in Figure 1 are especially critical to
Cymer’s success because of their unique technical expertise and/or their ability to delivery a high
volume of quality product in a flawless manner. These suppliers are introduced to our “Integrated
Supplier Management” program. Suppliers achieving this level of distinction have demonstrated their
unique value to Cymer and receive a large percentage of our business in their respective commodity.

Integrated Suppliers have a preferred status within Cymer when new sourcing decisions are
considered. These suppliers are also first to be notified of outsourcing opportunities and higher-level
integration of Cymer modules and components. “Integrated Supplier Management” is an opportunity
for both Cymer and Supplier to strive for total process optimization and realize shared gains. The
level of increased interaction between the two companies is illustrated in Figure 2.

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Figure 2
Integrated Supplier Management

Integrated Suppliers benefit from a structured, executive level alignment with Cymer, focused on
shared goals, metrics, and objectives. We work closely with Integrated Suppliers to seek out
opportunities for shared risk and cost reduction that benefit both companies.

Suppliers that don’t qualify for the Integrated Supplier program are considered either “Key” or
“Valued” as shown in Figure 3. Depending on the supplier’s criticality to Cymer business, there may
be a need for focused attention to specific issues. If not, suppliers are approved for use and in this
case, Cymer’s supplier management objective is effective demand planning and execution.

Figure 3
Supplier Relationships

Integrated
Suppliers
Developed &
Managed ‘Highly Aligned’

Key Suppliers
‘Highly Capable’

Valued Suppliers
‘Highly Qualified’

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Organizational Structure

From a supply chain management perspective, suppliers may have multiple interfaces with Cymer, but
each supplier’s support plan will be determined by their Cymer classification. The three supplier
classifications are: Integrated, Key, and Valued. For Integrated Suppliers, a unique support plan will
be established for each relationship. The following descriptions highlight the roles and
responsibilities for some of the key supplier interface points at Cymer.

Supplier Development: Supply Chain Managers (SCMs) are the focal point for all strategic sourcing
activity. The SCM sets the strategic direction for a commodity (e.g., optics, fabricated parts, pulse
power, contract manufacturing, etc.) and serves as the Business Manager for any suppliers in these
categories. There may be multiple SCMs assigned to a commodity and each SCM manages multiple
suppliers.

SCM key roles & responsibilities:

x Sets supplier classifications


x Negotiates commercial terms
x Manages a supplier’s consolidated cost, quality, & delivery performance
x Serves as escalation point for Cymer commercial & technical issues when necessary
x Serves as the Business Manager for Integrated and Key suppliers
x Establishes key objectives for the commodity/category and gains management approval for
key sourcing actions
x Issues specifications with Request for Quotes and Proposals
x Receives and provides long run capacity requirements
x Provides long run outlook for Cymer’s demand; based on customer ordering, market
conditions, and sourcing
x Develops sourcing strategies and allocates business among multiple suppliers

Integrated & Key Suppliers within a commodity are expected to assign Business Managers to the
Cymer relationship. The Business Manager guides the supplier/customer relationship and serves as a
single point of contact on both technical and commercial issues, as illustrated in Figure 4.

Figure 4
Integrated & Key Supplier Team Structure

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Supply Chain Engineers (SCEs) are an important part of the Supplier Development team as well.
They bring the expertise from our Manufacturing Engineering department to drive supplier quality
improvement and help set a commodity-wide strategy and sourcing allocations. SCE’s are deeply
aware of Cymer’s technical requirements as well as the capabilities of the supply base for which they
are responsible. It is the SCE’s primary responsibility to ensure these requirements and capabilities
are optimally matched.

SCE key roles & responsibilities:

x Executing Supplier Audits & reviewing supplier self audits,


x Developing qualification and re-qualification plans in conjunction with Cymer Engineering
x Evaluating change requests by suppliers
x Communicating corrective action requests (CARs) to suppliers
x Approving packaging proposals and/or requesting packaging improvements
x Reviewing First Article Inspection (FAI) reports

Procurement: Buyers & Planners are the focal point for all purchases, forecast, delivery and all other
purchase order information.

Buyer/Planner key roles & responsibilities:

x Provides rolling production forecasts on a part number basis


x Places purchase orders
x Provides delivery requirements
x Receives input from supplier regarding specific shipping information
x Evaluate/Approve Engineering and Supplier initiated Change Orders (CO’s)
x Leads Return Material Authorization (RMA) process with supplier
x Provides feedback on delivery performance
x Determines Incoming Quality Control (IQC) requirements
x Dispositions Defective Material Requisitions (DMR’s)

New Product Development (NPD) Procurement: Buyers & Planners within the NPD group focus on
meeting Engineering’s supply chain needs prior to product release. NPD supports Cymer’s design
efforts for new product introduction and work closely with the SCM and released products buyers &
planners to define the transition from Development to Released Product.

NPD key roles & responsibilities:

x Provides delivery requirements


x Issues specifications and Request For Quotes’s
x Places expedited/quick turn purchase orders
x Receives input from supplier regarding specific shipping information
x Processes change orders
x Helps suppliers expedite deliveries
x Leads RMA process with supplier
x Provides feedback on delivery performance

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Supplier Quality & Reliability

Supplier quality & reliability is critical to both the success of Cymer and its customers. Therefore, a
philosophy of continuous improvement has been adopted. Suppliers are strongly encouraged to bring
forward quality and reliability improvements in the spirit of partnership. While Cymer doest not invoke
specific quality management system requirements such as ISO9000, SSQA, AS9000, QS9000, or TL9000,
we do expect suppliers to implement a quality management system that score a minimum 3.5 out of 4.0
on the Cymer Supplier Evaluation Audit. Any individual area that scores 3.0 or less must be addressed
and corrected with 90 days of completing the audit. Generally, once a supplier successfully completes the
initial assessment, there is no firm timeline for being re-audited, however Cymer reserves the right to
request a new audit at any time. For example, Cymer may request a revised audit prior to awarding a new
contract, renewing an existing contract, or if Cymer is experiencing deliver or quality issues.

Once a supplier passes the Supplier Evaluation Audit requirements, we may begin ordering product. The
following is a description of the tools Cymer uses to manage supplier quality & reliability on an ongoing
basis.

Change Notification
Suppliers are expected to notify Cymer if any changes made to the product affect the fit, form, or
function in Cymer’s application. Additionally, if the change involves a material move of the
manufacturing location, for example, off shoring to China, Cymer must be notified in order to ensure
proper export licenses are in place and to properly document the manufacturing location of purchased
parts.

First Article Inspection (FAI)


Suppliers are required to submit first articles to Cymer for review and approval on any new part. The
supplier is responsible for documenting verification results and providing the documentation along
with the part submission. First Article Inspection (FAI) Forms can be requested from a Supply Chain
Manager or Supply Chain Engineer. All parts received by Cymer are inspected in Incoming Quality
Control (IQC). If the part does not meet requirements, a Defective Material Requisition (DMR) will
be generated to document the discrepancy, and the supplier will need to provide a new first article that
conforms to established requirements.

Incoming Quality Control (IQC)


The frequency and depth of incoming quality inspection depends on the type of part being received
and its criticality to Cymer’s end products. The inspection process may include dimensional,
cosmetic (physical appearance), functional, nondestructive, go-no-go (go-limit gauges) inspections
and optics visual inspections and optics testing of specifications.

Non-Conforming Material (DMR)


Nonconforming material is documented by Cymer in a Defective Material Requisition (DMR) and
quarantined pending review. Suppliers must act quickly in resolving nonconforming material issues.
Containment and corrective action are imperative. The expectation is 48-hour turnaround time for
return material authorizations (RMAs) for items dispositioned by Cymer as return to vendor (RTV).

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Problem Solving

Cymer uses the 8D (Eight Discipline) problem solving methodology with its customers and we expect
our suppliers to do the same. This is a structured problem solving process that ensures a high quality
response to a serious customer issue or complaint. The process employs a comprehensive team
approach and focuses on containing the customer symptoms as quickly as possible. Once the problem
is contained, the process requires objective data and problem solving techniques be used to determine
the root cause and ensure permanent corrective actions are put in place to limit the chance for
reoccurrence.

Training on the 8D problem solving methodology is commercially available, and there are numerous
books and websites available on this subject.

Scorecard

The objective of Cymer’s supplier scorecard is to strengthen our supplier relationships by providing
objective and regular performance feedback. Through this evaluation tool, we are able to set clear
expectations and monitor supplier progress toward meeting these goals. The scorecard is divided into
5 categories: Delivery, Quality, Total Cost, Technology/Engineering, and Customer Service. The
categories are weighted differently depending on which commodity the supplier is supporting (e.g.,
optics vs. contract manufacturing). Scorecard results are collected on a quarterly basis and reviewed
internally as shown in Figure 5.
Figure 5:
Supplier Scorecard Trend
100%

Supplier 1
Supplier 2
Supplier 3
Goal

0%
1s

2n

3r

4t
h
d
tQ

Q
Q
Q
tr

tr
tr
tr

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Supplier Selection

Cymer follows the process in Figure 6 when making sourcing decisions.

Figure 6
Supplier Selection Process

The requirement for Cymer to source a new part can come from a variety of places (e.g., new
technology is required for next generation product offerings or there is a desire to 2nd source or replace
an existing source). Once the need for a new part or module is identified, and we decide to outsource,
suppliers are contacted to complete a Request for Quote (RFQ). Cymer may also decide to conduct an
Initial Supplier Assessment and/or a quality and business audit to determine the supplier’s capabilities
and ability to ramp to meet Cymer’s high volume requirements.

Cymer’s quest for predictable quality, delivery, performance, and other strategic objectives,
effectively limits the number of suppliers that meet our requirements. Successful sourcing at Cymer
is not achieved solely on the basis of securing competitive bids. We are not looking for the lowest
prices, but for the best value on a total cost basis. Companies under consideration as potential
suppliers are evaluated in a process using the following criteria:

x Predictability
x Quality
x Delivery
x Product Performance
x Process Control
x Cost Competitiveness
x Technology Innovation
x Financial Stability
x Service

Once a supplier’s competencies in these areas are understood, we make our sourcing decision and will
work closely with the supplier to set up the long-term business relationship. This may include the use
of Purchase Orders, Development Contracts, and/or Purchase Agreements.

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Contact Information

http://www.cymer.com/

Supporting Process Documents

Cymer will provide additional process documents to suppliers and potential suppliers upon request to the
Supply Chain Manager (SCM) or Supply Chain Engineer (SCE). These documents include:

1) Cymer’s Audit Agenda, Self Assessment Form, and Audit Process Form
2) Cymer’s First Article Inspection (FAI) Report Form
3) Cymer’s 8D Problem Solving Report Form required for all corrective action requests (CARs)

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