Resolving non-conformances

The NXP Supplier Sustainability Program is based on a continuous process of monitoring and supporting the implementation of corrective actions at the Suppliers‘ manufacturing sites.

A categorization of non-conformances into major and minor non-conformance issues provides structure and focus in the resolution approach. This categorization determines mainly the period in which the Supplier should complete corrective action, the consequences for the business, as well as the audit cycle.

Major non-conformances

Major non-conformance issues are divided into issues with zero tolerance (‘red issues‘) and issues with limited tolerance (‘orange issues‘).

• Zero-tolerance non-conformances must be resolved as soon as possible but at least within one month after the audit date. If the nature of the non-conformance does not allow such a resolution period, NXP and Supplier will agree a feasible resolution period to be documented in the CAP, with defined progress milestones.
• Limited-tolerance non-conformances must be resolved as soon as possible but at least within three months after the audit date. If the nature of the non-conformance does not allow such a resolution period, NXP and Supplier will agree a feasible resolution period to be documented in the CAP, with defined progress milestones.
• Minor non-conformances must be resolved during the course of business, with a resolution period determined in agreement between NXP and Supplier.

Corrective action plan (CAP)

In the event of non-conformances, NXP requires a written Corrective Action Plan (CAP) from the Supplier, an initial draft of which is to be submitted within 5 working days of the audit date. The CAP must include the following elements:

• a description of the non-conformance
• the planned corrective action
• progress milestones - including deliverables, such as documentation, or other forms of underlying evidence
• the person(s) responsible for implementation
• the resolution period for each non-conformance to be resolved. Where the prescribed resolution periods (ref Chapter 6.1) are not feasible due to the nature of the non-conformance, the CAP will document the agreement reached between NXP and Supplier concerning an alternative resolution period.

In consultation with the Chief Purchasing Office, the NXP Lead Buyer will review and approve the CAP received from the Supplier. The NXP Lead Buyer must sign the CAP to indicate acceptance by NXP within one month of the audit date. If NXP notices a lack of progress in the drafting and the realization of the CAP, NXP will interpret the audit results as a ‘red‘ evaluation, as set out below.

Audit evaluation

The audit results can be translated into four color codes; green, yellow, orange or red. In the case of ‘green‘ and ‘yellow‘ evaluations the audit results have no impact on NXP‘s business with the Supplier. An ‘orange‘ or ‘red‘ evaluation will affect the business with the Supplier as well as the audit cycle. The consequences per color code are set out in detail below:

‘Green‘ evaluation

• Suppliers are evaluated as ‘green‘ if no non-conformances are identified during the audit
• In the Supplier selection procedure new Suppliers must have a green audit status in order to become an NXP Supplier
• Orders may be shipped
• Future orders may be placed
• Continuing Conformance Audits will be conducted at most 48 months from the Initial Audit date

‘Yellow‘ evaluation

• Suppliers are evaluated as ‘yellow‘ if one or more minor non-conformances are identified during the audit
• A CAP is to be agreed between NXP (the Lead Buyer) and Supplier within one month of the audit date
• During the resolution period orders may be shipped, future orders may be placed
• Non-conformances and implementation of corrective actions are discussed and reviewed periodically
• No Resolution Audit required
• Continuing Conformance Audits will be conducted at most 48 months after the Initial Audit date

‘Orange‘ evaluation

• Suppliers are evaluated as ‘orange‘ if one or more major non-conformances with limited tolerance are identified by the auditors
• A CAP is to be agreed between NXP (the Lead Buyer) and Supplier within one month of the audit date
• Resolution to be realized within the resolution times documented in the CAP
• During the resolution period NXP (the Lead Buyer) will monitor progress in the implementation of the CAP
• If deemed necessary, NXP will start contingency preparations
• If the Resolution Audit shows that the non-conformances have not been addressed effectively, NXP will prepare to use an alternative Supplier.
• The Resolution Audit will be conducted 3 months after the longest agreed resolution time documented in the CAP
• Continuing Conformance Audits will be conducted at most 24 months after the Resolution Audit date

‘Red‘ evaluation

• Suppliers are evaluated as ‘red‘ if one or more major non-conformances with zero tolerance are identified by the auditors
• Suppliers receive a ‘red‘ audit evaluation if they obstruct the audit and resolution process in any way, for instance in the case of :
  • No or limited access for auditors to Supplier site;
  • No or limited access to required documentation and other necessary information on site;
  • No or limited provision of access to the audit report by Supplier;
  • Lack of progress in the realization of a CAP;
  In these cases the audit process may be aborted
• A CAP is to be agreed between NXP (the Lead Buyer) and Supplier within one month of the audit date
• Resolution to be realized within the resolution times documented in the CAP
• During the resolution period NXP (the Lead Buyer) will monitor progress in the implementation of the CAP
• During the resolution time NXP will prepare to use an alternative Supplier, will not allocate any new projects and will prepare a contingency plan
• If the non-conformances are not addressed within the agreed resolution time, NXP will prepare to use an alternative Supplier, with the possibility of this Supplier ultimately being phased out.
• The Resolution Audit will be conducted 3 months after the longest agreed resolution time documented in the CAP
• Continuing Conformance Audits will be conducted at most 24 months after the Resolution Audit date

Continued non-conformance

If a Supplier does not make progress in implementing the agreed corrective actions, fails Resolution Audits repeatedly or continues to use unacceptable practices, as a last resort NXP will end its relationship with this Supplier. Prior to taking such a decision NXP will work with the Supplier in an effort to raise awareness and improve commitment with respect to a sustainable way of conducting its business, and to support the Supplier in implementing corrective actions.