Corporate Quality Guideline for Elster

As of: 21 July 2010

Version: 1.0

Author: Tom Strohmeyer

Document owner: Theodor Bettray

Table of content
1 Introduction ........................................................................................................ 4
1.1 Purpose, scope and applicability ........................................................... 4
1.1.1 Strategy and objectives............................................................. 4
1.1.2 Impacted business areas .......................................................... 4
1.1.3 Internal policies, guidelines and manuals (PGM) ...................... 4
1.1.4 Local laws, rules and regulations .............................................. 5
1.1.5 Global regulations ..................................................................... 5
1.2 General document regulations............................................................... 6
1.2.1 Ownership................................................................................. 6
1.2.2 Document hierarchy and interfaces with other PGMs ............... 6
1.2.3 Access ...................................................................................... 7
1.3 Document lifecycle................................................................................. 7
2 Organization....................................................................................................... 8
2.1 Quality organization ............................................................................... 8
2.2 Tasks and responsibilities.................................................................... 10
2.2.1 Elster Group quality organization ............................................ 10
2.2.2 Local quality organization........................................................ 10
2.3 Collaboration ....................................................................................... 11
3 Quality management systems .......................................................................... 12
3.1 ISO 9001:2008 and ISO 14001 ........................................................... 12
3.2 Gate model process............................................................................. 12
3.3 Failure mode and affect analysis ......................................................... 12
3.4 Control plan ......................................................................................... 12
3.5 Supplier Quality Assurance and the SQA Manual ............................... 13
3.6 Product safety and the customer ......................................................... 13
3.7 Monthly reporting ................................................................................. 13
4 Product realization ........................................................................................... 15
4.1 Design requirements............................................................................ 15
4.1.1 First article checklist................................................................ 15
4.1.2 Qualified supplier list ............................................................... 15
4.1.3 Design failure mode and effects analysis................................ 16
4.1.4 Control plan............................................................................. 16
4.1.5 Assembly bill of material ......................................................... 16
4.2 Part qualification .................................................................................. 16
4.2.1 Pilot fabrication ....................................................................... 17
4.2.2 First article inspection ............................................................. 17
4.2.3 Sub-supplier certifications and tests ....................................... 18
4.2.4 Material safety data sheet ....................................................... 18
4.2.5 Gauges ................................................................................... 18
4.2.6 Gauge repeatability and reproducibility studies....................... 19
4.2.7 Gauge correlations studies ..................................................... 19
4.2.8 Process capability ................................................................... 19
5 Manufacturing control....................................................................................... 21
5.1 Process control .................................................................................... 21
5.2 Statistical process control .................................................................... 21
5.3 Process performance........................................................................... 21
5.4 Process improvement .......................................................................... 21
5.5 Lot control............................................................................................ 22
5.6 Traceability .......................................................................................... 22

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 5.7 Workmanship....................................................................................... 22
5.8 Safety and environmental .................................................................... 23
5.9 Maintenance ........................................................................................ 23
5.10 Process failure mode and effects analysis (PFMEA) ........................... 23
6 Measurement, analysis and improvement........................................................ 24
6.1 Corrective action.................................................................................. 24
6.1.1 Corrective action process........................................................ 24
6.1.2 External corrective action........................................................ 25
6.2 Product quality assurance ................................................................... 25
7 Returns, warranties and claims ........................................................................ 27
Appendix................................................................................................................... 28
Appendix 2: The Elster “Gate Model” Process for Product Development ................. 29
Appendix 3: ISO9001-2008 Standard ....................................................................... 30
Table of figures ......................................................................................................... 32
Table of links ............................................................................................................ 33
Glossary of abbreviations ......................................................................................... 34

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1 Introduction

1.1 Purpose, scope and applicability

The purpose is to provide a “corporate quality guideline”, explaining all relevant tasks
and providing guidance for everyday business procedures. The reader is requested
to provide feedback and suggestions for further releases. This document shall create
a uniform understanding within Elster for all activities related to quality.

Within this document, the term “Elster” shall refer to Elster Group SE together with all
of its direct and indirect subsidiaries. The term “Elster Group SE” shall refer to that
individual legal entity (LE).

The corporate quality guideline is written gender neutral. In case the wording “his” is
used, it is a substitution for “his/her.” The same applies for “he” and “she.”

In case of any conflict, Elster’s corporate quality guideline overrules local (internal)
policies, guidelines or manuals (PGMs). Any exceptions can only be considered if
there are local legal requirements and must be authorized by the internal control de-
partment in writing.

1.1.1 Strategy and objectives

Elster’s corporate quality guideline is designed to provide a transparent and reliable
framework for the quality organization, reaching out to Elster’s business units (BUs)
reporting units (RUs) and LEs.

1.1.2 Impacted business areas

The following functions are specifically addressed under this document:
• Procurement
• Manufacturing
• Research and development
• Inventory management
• Sales and logistics
• Finance
• Internal control
• Group compliance and Group legal

1.1.3 Internal policies, guidelines and manuals (PGM)

Irrespective of their roles and responsibilities, Elster employees are obliged to comply
with corporate PGMs, which represent an essential part of the corporate company
level controls (CLCs). CLCs are in place to provide control over specific risks that

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present a reasonable possibility of material misstatement to Elster’s consolidated fi-
nancial statements. Internal PGMs provide a framework for the functions in which all
activities are to be performed. Compliance with PGMs is monitored by the compli-
ance office, the internal audit department and the internal control department at El-
ster.

At the individual level, PGMs provide employees with guidance for making decisions
and escalating inadequate activities or transactions. Each employee has the respon-
sibility to familiarize himself with existing and relevant PGMs affecting his area of
business activities. Employees can direct their questions concerning the corporate
quality guideline to the document owner.

1.1.4 Local laws, rules and regulations

In addition to internal PGMs, all Elster employees must comply with local laws, rules
and regulations in conjunction with, and in addition to, the corporate quality guideline.
Any deviation to a PGM must be implemented with the permission of compliance of-
fice and local supervisors as well as in agreement with the document owner and the
internal control department regarding the affected subject area.

The document owner must continually monitor the impact of local laws, rules and
regulations on his PGM.

1.1.5 Global regulations

Elster’s corporate quality guideline is based on the following global regulations:

− Accredited ISO9001:2008 certification

− Accredited International Organization for Standardization (ISO) 14001 certification
or equivalent

The Elster Group SE mandates that each BU, LE and RU (manufacturing sites only)
maintain an effective quality system in accordance to the ISO9001:2008, ISO 14001
or equivalent requirements. The ISO regulation requirements must be certified by the
accredited ISO certification body. The ISO documentation, implementation and main-
tenance is reviewed, assessed and updated on a regular basis and audited by the
ISO certification body.

The document owner must continually monitor the impact of global regulations on his
PGM.

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1.2 General document regulations
1.2.1 Ownership
The corporate quality representative of Elster Group SE is the owner of the corporate
quality guideline.

This document serves to implement the principle of adequate segregation of duties

(SoD) and ensure compliance with general corporate principles. The maintenance of
all PGMs is delegated to the internal control department.

Nr. Company Authors Function

1 Elster Tom Strohmeyer Director of Supplier Quality Assurance
Group SE

Version Date Document own- Function Changes

er
1.0 21 July 2010 Theodor Bettray Head of Corporate Devel- Document completed
opment
Figure 1: Document history list

1.2.2 Document hierarchy and interfaces with other PGMs

The corporate quality guideline is intended to prevent overlaps or interferences with

other PGMs. Should additional or stricter standards or regulations be in place in any
of the entities, then these shall be applied locally in communication with the compli-
ance office to ensure that exceptions are verified, documented and considered within
Elster.

The reader is responsible for reporting any concerns of redundancies or conflicts to

the document owner.

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The following “PGM hierarchy” defines the authority of different types of PGMs in
case of conflicts. The establishment of PGMs is based on general leading practices
that are adapted to Elster's business processes and functions. The document is ex-
pected to be improved and updated on a continual basis in order to ensure that it re-
mains meaningful and useful to its users.

A “policy” covers obligations describing group

decisions on rules, roles and responsibilities that
Policy must be complied with.

A “guideline” provides binding advice on rules,

roles, responsibilities, processes and activities of
Guideline
a nature that offers flexibility for adjustments at
the level of the operational entity.

A “manual” provides binding advice on a work-

Manual station or activity-level for day-to-day operational
transactions.

Figure 2: PGM hierarchy

1.2.3 Access
The current versions of all internal PGMs can be found in the intranet. Versions
available in paper form will be automatically regarded as “uncontrolled” and therefore
invalid.

1.3 Document lifecycle

The process steps within the PGM lifecycle, from initialization or maintenance to pub-
lishing, implementation and monitoring are defined in the “corporate policies, guide-
lines and manuals management and maintenance guideline”.

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2 Organization
The objective of Elster’s quality management is to provide Elster with a competitive
advantage by improving service and functional quality to its internal and external cus-
tomers as well as to maintain its position as leader in advanced metering infrastruc-
ture (AMI) and integrated metering and utilization solutions to the gas, electricity and
water industries.

2.1 Quality organization

The quality organization is led by the Corporate Quality Representative (CQR) and
includes a central quality organization and a local quality organization. Elster’s central
quality organization is comprised of the CQR and the supplier quality assurance
(SQA) director. The local quality organization consists of the quality departments of
each BU and/or manufacturing site managed by a specified quality manager (QM),
LE/BU head of quality or quality manager.

The quality organization is managed by a global quality management team (GQMT)

which is in charge of strategic decisions and internal compliance. The GQMT con-
sists of the CQR, LE/BU heads of quality and the head SQA. GQMT decisions may
be overruled by the CQR.
Managing directors of Elster
Group SE Audit and compliance committee Administrative board
… … …

Corporate functions 1 1 Internal Audit

Accounting Quality organization
CEO
VP
Compliance
2 Internal
Audit

Legal General Managers/ Corporate Quality

Presidents Representative

Tax

Manufacturing
Manufacturing Site
Sites3
... Quality Supplier
Site Quality
Quality
3 Managers Supervisors
Engineers
4
Business units
Manufacturing Site 1 Manufacturing Site 2 Manufacturing Site 3
W Gas Site Quality Site Quality Site Quality
Supervisors Supervisors Supervisors

E …

Reports potential and/or Collects site quality reports;

1 identified quality issues
3 harmonizes all areas of the
Legal entities quality program within the BU

Verifies reporting accuracy of Designs and implements the BUs

2 local quality results
4 quality management system
3
Figure 3: Quality organizational structure

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Elster’s corporate quality organization aims for the balance and compliance of exist-
ing rules and regulations as well as internal demands. A further objective is the focus
on the people’s skill set to ensure adequate documentation transparency and compli-
ance with Elster’s processes.

Quality control is essential for both new designs (e.g. Gate Model Process) and im-
provements as well as when changes on products and services are introduced. This
responsibility extends throughout each phase of development, design, product reali-
zation and production. It is mandatory that LE/BU senior management monitor the
quality within their delegated areas of responsibility throughout all product lifecycle
and development phases. Their approval must be in writing (signature) before mov-
ing on to the next phase.

In general, Elster’s quality managers and quality representatives are responsible for
all quality related issues, quality cost and product quality performance of the Elster
Group SE and must therefore ensure that adequate monitoring systems are in place.

Business decisions are based on the ISO requirement as well as Elster’s internal
demands (customer satisfaction, internal cost of quality on manufacturing, cost of
supplier poor quality etc.).

The BU management and its operating subordinates must also maintain an effective
quality organizational structure.

The BUs and LEs quality organization evaluates the effectiveness of the actions tak-
en and ensures that its personnel are aware of the relevance and importance of their
activities and how they contribute to the achievement of the quality objectives.

The BUs quality organization determines, provides and maintains the infrastructure
needed to achieve conformity and safety to product requirements. Infrastructure in-
cludes, for example, buildings, workspace, process equipment and supporting ser-
vices such as transport, communication or information systems. (Please refer to ISO
9001:2008 (E).)

The BUs and LEs quality organization determines the necessary competence for
personnel performing work affecting conformity to product quality and product safety
requirements. Such personnel have to be competent on the basis of appropriate edu-
cation, training, skills and experience. Where applicable, the specific BUs quality or-
ganization provides training or takes other actions to achieve the necessary compe-
tence.

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2.2 Tasks and responsibilities
2.2.1 Elster Group quality organization
Tasks and responsibilities within the group quality organization include, but are not
limited to, the following:

Corporate Quality Representative (CQR)

− Manages and coaches the GQMT
− Oversees the definition, planning, implementation and modification of Elster’s
corporate quality program. Note: The Elster Group SE has mandated all Elster
manufacturing sites to implement the necessary standards and report on ISO
quality as well as internal quality demands to the CQR.
− Reports to executive management on a regular basis on potential and/or identified
quality issues as well as preventing/solving plans
− Acts as an expert to support the managing directors of Elster Group SE and de-
cide on selected issues
− Interfaces between the corporate and local quality organization
− Reviews the corporate quality management system
− Manages global (quality) financial reporting and monitors quality results
− Reports directly to the chief executive officer (CEO).

2.2.2 Local quality organization

Tasks and responsibilities within the local quality organization include, but are not
limited to, the following:

General Manager (GM)

− Is responsible for the reporting accuracy of local quality results
− Verifies data that represents the local company’s true financial and operational
results

Quality Manager (QM)

− Works in close cooperation with and reports to the GM
− Supports the CQR or an equivalent corporate quality representative operationally
− Identifies and evaluates quality risks
− Develops the BU quality program in close collaboration with the site quality super-
visor (SQS)
− Harmonizes all areas of the quality program within the BU
− Designs the BU quality training concept as it pertains to a continuous improve-
ment methodology
− Manages and collects site quality reports
− Verifies and consolidates the quality data accuracy
− Creates a corporate consciousness of the minimum quality requirements (ISO
9001:2008) and additional Elster specific quality requirements (gate model proc-
ess, SQA manual etc.)
− Creates a general understanding and administers the education and adherence to
the Elster Gate Model process

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− Is responsible for the implementation of the local quality management system as
well as the quality system administration and quality reporting to the corporate
level
− Monitors adherence to Elster’s corporate quality guideline, internal quality system
audits and training

Site Quality Supervisor (SQS)

− Works in close cooperation with and reports to the QM on a weekly basis
− Acts as the interface to engineering, design and development (D&D), production
and other departments
− Designs and implements the BUs quality management system as it pertains to
ISO certification, training and recertification process
− Focuses on customer satisfaction by maintaining a quality system that supports
and controls the quality of data, delivery, warranty and service
− Understands and verifies that the BU meets all local and foreign regulations.
− Controls the internal and external document revision for all Elster drawings and
specifications
− Tracks the quality data, statistical models, control charts, process capability, proc-
ess experimentation, model building and the evaluation of measurement proc-
esses
− Approves the in-process, assembly, test and final inspection to adhere to Elster’s
standards and customer requirements
− Manages the administration, revision level, distribution and the overall mainte-
nance of the quality control manual
− Inspection: the quality inspector (QI) executes the inspection and has a direct re-
port to the SQS. He tracks and records the inspection results of incoming materi-
als, tools, gauges, in-line parts and non-conforming material to verify that all of the
mentioned meet Elster’s and customer requirements.

2.3 Collaboration
The collaboration between the quality relevant departments and quality team mem-
bers is important to achieve a competitive advantage. As such, the following quality
calls are necessary.

CQR call
Bi-weekly, the QM informs the GQMT members about the latest quality activities, in-
ternal Elster developments and projects while controlling, tracking results and com-
municating the outcome on a monthly basis to the CQR. Additionally, the QM pre-
sents the current status of quality, cost and products to the CQR or an equivalent
corporate quality representative on a monthly basis.

GM call
Monthly, the QM presents a consolidated status update regarding quality, cost and
products to the GM.

QM call
Bimonthly, the SQS presents the current status of quality, cost and products to the
QM to discuss any outstanding quality issues.

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3 Quality management systems

3.1 ISO 9001:2008 and ISO 14001

The ISO 9001:2008 specifies requirements for a quality management system where
an organization needs to demonstrate its ability to consistently provide product that
meets customer and applicable statutory and regulatory requirements. Additionally,
the standard aims to enhance customer satisfaction through the effective application
of the system, including processes for continual improvement of the system (Please
refer to the ISO 9001:2008 (E))

ISO 14001 or equivalent is an additional standard for Elster’s quality strategy. It is a

standard for environmental management systems to be implemented in any busi-
ness, regardless of size, location or income. The aim of the standard is to reduce the
environmental footprint of a business and to decrease the pollution and waste a busi-
ness produces.

Elster is committed to industry leadership, uncompromised integrity, and unsur-

passed product and service quality. Furthermore, Elster Group SE mandates the
commitment of each LE for continuous improvement through the empowerment of its
employees to address any quality concern in a timely manner.

3.2 Gate model process

The gate model process outlines the mandatory steps for implementing a new prod-
uct or solution in Elster’s business, with a focus on the business investment to gener-
ate good returns. The gate model process is utilized by a project team that consists
of the departments that are involved in the development of a new product or solution
(e.g. Sales/Marketing, Engineering). The process requires all key aspects to be con-
sidered and agreed upon by the LE general management. (Please refer to Elster’s
gate model process in Appendix 2.)

3.3 Failure mode and affect analysis

The failure mode and effect analysis (FMEA) is a standard quality tool that is manda-
tory for use by Elster. It is utilized by a project team before and during the production
of a part or assembly. The FMEA comprises a design FMEA and a process FMEA.
For more guidance on the FMEA tool, please refer to the template FMEA -
CORPSQA-004 in Appendix 1 and to chapter 4.1.3 design FMEA.

3.4 Control plan

The control plan is a common standard quality tool that is mandatory for use by El-
ster. The control plan is a detailed description of the proposed processing steps re-
quired to produce the part. The control plan defines the action steps to take when an
out-of-control condition occurs at the production site. The plan is developed and ap-
proved by quality, manufacturing, engineering and a representative of the BU man-

Page 12 of 34
agement. A control plan must be written for each new or changed material, part or
assembly. The control plan must include all items contained in the corporate Elster
Group control plan template (please refer to the control plan template CORPSQA-
005 in Appendix 1).

3.5 Supplier Quality Assurance and the SQA Manual

The Elster Supplier Quality Assurance (SQA) manual is distributed to all key suppli-
ers followed by the auditing of all potential and key suppliers pursuant to Elster’s
SQA requirements. Elster’s Director of Supplier Quality Assurance, supported by an
SQA-team, is in charge of SQA. Please refer to “Elster’s SQA manual” (ELSCORP-
001, rev.3) in Appendix 1. The purpose of the SQA manual is to communicate the
Elster Group’s expectations and overall requirements regarding the supplier’s quality
system, management commitment and manufacturing process controls. It is manda-
tory and the responsibility of the BU and LE supply management team to retrieve the
SQA manual supplier sign-off sheet. It is this sign-off sheet that states the supplier’s
acceptance of Elster’s SQA requirements.

The outcome of the supplier audit is the SQA audit report, an over-all audit score, key
audit performance indicators (KAPIs) and audit “action item” reports which are docu-
mented and stored centrally. The supplier audit should be performed by the local
supplier quality engineer (SQE) and directed by the supplier quality assurance direc-
tor.

If major discrepancies arise between the SQA result and the standard requirements
(stated in the SQA manual), the director of supplier quality assurance informs the
head of corporate development, the respective BU head of procurement, the Global
Commodity Directors (GCD) and the procurement controlling and systems depart-
ment. In all other cases, procurement develops an action plan to improve and/or to
motivate the supplier. The suppliers receive timely and objective performance feed-
back.

3.6 Product safety and the customer

Elster emphasizes that only perfect, safe and reliable products, systems and solu-
tions are in place and delivered to our customers.

Strict global regulations are in place that must be adhered to by all Elster BUs. Addi-
tionally, each regional Elster BU or LE must document the local, regional and country
specific regulations to strictly enforce them on a continual basis.

3.7 Monthly reporting

The BU QM and LE Management must keep a live quality reporting system. The sys-
tem must consistently be able to calculate and report on the following:

− Cost of Poor Quality

− Internal Cost of Quality on Manufacturing
− First Pass Yield
− Cost of Supplier Poor Quality
Page 13 of 34
− Customer Satisfaction

The above 5 reports are submitted to the CQR or Group Quality responsible on
a monthly basis.

Specific Note
It is the BUs Senior Management (GM) that is responsible to direct, control and verify
that the above reports are accurate and delivered to the designated Group Level per-
son and with a copy to the MDs by the first week of each month.

The CQR will assist in the standardization of the reporting method and/or format so
that all LE and BUs have the support required to fulfill this mandatory requirement.

Page 14 of 34
4 Product realization
The product realization comprises all phases of the development of a product, from
the design requirements through the part qualification. The Elster Gate Model guide-
lines, see ‘Appendix 2’ have been established as the standard for project and part
implementation control. It is mandatory that all Elster BUs and their operating units
use the newly redesigned Elster process.

4.1 Design requirements

The design requirements provide guidance to each QM to implement and administer
the processes needed within each LE/BU quality control manual (QCM) to deliver
quality products to the customer.

Mandatory design requirements include the following:

− First article checklist
− Qualified supplier list
− Design failure mode and effects analysis (DFMEA)
− Control plan
− Assembly bill of material (BOM) (if a requirement)

The first article checklist and the qualified supplier list are part of the gate model
process (please refer to the gate model process, gate 5, in Appendix 2). The check-
list is stored locally.

The DFMEA, the control plan as well as the assembly BOM are additional require-
ments beyond the gate model process.

4.1.1 First article checklist

The first article checklist identifies the requirements that must be completed for quali-
fication of the material, part, or assembly for volume production (please refer to first
article-inspection checklist template CORPSQA-003 in Appendix 1) as defined by
engineering. For each new or changed material, part, or assembly, a quality engineer
(QE) or an equivalent quality designated person completes a first article inspection
checklist to assure that the proper quality requirements are achieved. In case of a
negative result, the QE or an equivalent quality designated person informs the engi-
neering and the quality department (e.g. LE quality manager, site quality supervisor).

4.1.2 Qualified supplier list

The qualified supplier list provides guidance to assure that the proper supplier is util-
ized. Each BU and LE maintains a list of its qualified supplier(s) for each production
part. Only qualified suppliers are allowed to ship volume production to Elster. Suppli-
ers must successfully complete the general supplier qualification process described
by the Elster SQA manual. As part of the process, suppliers must pass the part quali-
fication requirements for a specific production part or material (part number). The
qualified supplier list is maintained by Elster’s procurement department in collabora-
tion with Elster’s quality department. Qualified suppliers are allocated to Elster’s sup-

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plier panel, which include all active suppliers (please refer to the Elster’s corporate
procurement manual).

4.1.3 Design failure mode and effects analysis

A DFMEA must be performed by the responsible LE design project team led by the
project leader for each new Elster material, part or assembly. The DFMEA is a quality
tool that analyzes the product characteristics and evaluates the feasibility and reliabil-
ity. A DFMEA must be executed and documented prior to the release of any drawings
or specifications to the supplier or customer. The design features and characteristics
must be taken into consideration during the design phase, even if the design is
owned by the customer. It is a living document that is completed in conjunction with
the gate model process. Therefore, the DFMEA covers possibly weeks or a month
depending on the comprehension of the project. For more guidance on the FMEA
tool please refer to the template FMEA - CORPSQA-004 in Appendix 1.

4.1.4 Control plan

The control plan is developed by the operational and quality team. It is submitted to
quality, manufacturing, engineering and a representative of the BU management for
approval.

The control plan must include the following information:

− All in-house processing, external processing, inspection, testing, packaging and
shipping
− Measuring devices and fixtures designed and built to check parts
− All critical product and process characteristics
− Detailed instructions, if required, on production details or on instructions for an
inspection method

In the control plan, inspection methods, sample sizes, and sampling frequencies are
defined based on the process capabilities, seriousness and likelihood of potential
non-conformances, and process stability. Critical characteristics that do not meet
process capability requirements must be fully inspected by the quality department,
unless the Elster Group QE or an equivalent quality designated person approves an
alternate control method in writing.

4.1.5 Assembly bill of material

The assembly BOM is an extensive list that specifies the required assembly materials
with additional information such as suppliers, part numbers, specifications etc. The
assembly BOM is a part of the work instructions. It is formulated by the engineering
department and utilized by the operational department. Where needed and when
designated by the LE quality engineer or an equivalent quality designated person, the
BU or LE is required to formulate an assembly BOM.

4.2 Part qualification

Part qualification is the first step in achieving volume production. The part qualifica-
tion is executed by the BU or LE quality department in close collaboration with the LE

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engineering department based on ISO and Elster’s internal quality standards (e.g.
gate model process).

The part qualification follows these specific process steps:

1) The QE or an equivalent quality designated person notifies the quality QI of
the specific data required in the part data package (similar to the first article
inspection checklist (CORPSQA-003) in Appendix 1), the number of samples,
and the time frame. The required specific data relies on internal quality stan-
dards based on ISO 9001:2008, customer and engineering specifications.
2) The QI takes all the appropriate steps to fulfill the requirements. The part data
package and part samples are submitted to the QE for internal approval.
3) The documents have to be included in the final acceptance part package spe-
cifically referencing the Elster part number and current drawing num-
ber/revision.

4.2.1 Pilot fabrication

The in-house pilot fabrication is a production run for the end-product qualification. It is
a verification that the product is at the stage to be produced in volume production.
The required pilot run cycles are to be agreed by the quality department and produc-
tion. The requirements are specified in the production work order. The items must be
produced under volume-production conditions, including material, machines, tooling,
processing parameters, cycle times, etc.

Any exceptions to the volume-production conditions must be approved in writing by

the QE in close collaboration with the quality department and the production depart-
ment before volume-production. The exceptions are recorded in the production order
data package that is submitted to the production manager by the QE.

The production manager coordinates the timing of the pilot fabrication. It is manda-
tory that the QE, quality process engineer and other project team representatives are
present during the production run to verify the correct process flow and/or gathering
additional changes to the product or the production.

4.2.2 First article inspection

The first article inspection is the first quality control after the pilot fabrication. The QE
must select representative material, parts, or assemblies from the pilot fabrication run
for first article inspection. The QE or an equivalent quality designated person notifies
the QI of the quantity to be inspected.

During the first article inspection, the QI tests each sample against all dimensions,
drawing notes, material requirements, and specification requirements listed on the
current revision of the Elster drawing. The QI records the results on the first article
report. The QI numbers a copy of the Elster drawing and specification to correspond
with the results. The final report is reviewed by engineering and approved by quality.

For all nonconforming characteristics that are identified during the first article inspec-
tion, the following must occur:
− The production manager and the QE investigate and correct the tooling and/or
process, including issues on quality, material costs etc.

Page 17 of 34
− Nonconforming deficiencies are tagged and given to the QE after all has been
done to correct the parts, and after obtaining approval from the production man-
ager.

Nonconforming material are not accepted by any Elster facility or sent to a customer
without an approved written engineering deviation accepted by the customer.

4.2.3 Sub-supplier certifications and tests

For material and other specified requirements for which the quality department does
not have the equipment to test, the quality department must obtain material certifica-
tions (or test reports) from their sub-supplier or other test agencies.

The material certification reports must include, but are not limited to, the following:
− Specification/drawing number
− Specified material/dimensional/physical requirements
− Inspection/test results
− Signature of the organization that performed the testing
− Complementary information such as material certificates

The requested certifications and tests are controlled and filed locally by the quality
department in each BU/LE.

4.2.4 Material safety data sheet

Incoming raw material must be delivered with a material safety data sheet (MSDS).
The MSDS provides information on handling and storage of the material. Quality
must have a copy of the MSDS for all materials shipped to the customer or an Elster
Group facility. Reference to restriction of hazardous substances directive (ROHS),
registration, evaluation, authorization and restriction of chemical substances
(REACH) or other must be included if applicable.

4.2.5 Gauges
From first article inspection to final inspection, gauges build the foundation for part
qualification. Gauges are a measurement (as of linear dimension) according to a de-
fined standard or system and are used to inspect material. Attribute (go/no-go) gaug-
es, color/texture standards or variable gauges are designed to inspect the aesthetics
and functionality of the material. Additionally, gauges aim to control the processes
and inspect the product.

Gauges must have a material certification that verifies the correct material type.
Gauge standards have to be aligned with country-specification, e.g. measurement
types (inch, feet, meter) etc. Country specifications have to be determined by the LE
quality management in coordination with the LE GM.

Internal gauge performance is to be performed by a certified employee. It is the re-

sponsibility of the quality department to keep all gauges and test equipment cali-
brated to industry standards. External certifications are to be performed by accredited
gauge companies.

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Duplicate gauges are to be supplied to Elster’s supplier. The duplicate gauge is used
by Elster´s supplier to verify the first article inspections including adherence to all col-
or and texture standards.

The up-to-date sub-supplier certifications are to be kept on file locally at the quality
department for verification.

4.2.6 Gauge repeatability and reproducibility studies

In case a critical characteristic is identified during the part qualification, a gauge re-
peatability or reproducibility (RandR) study has to be performed by the QE or an
equivalent quality designated person. The LE quality department performs a gauge
repeatability and reproducibility study by using procedures described in standard
measurement systems. Additionally, the quality department analyzes the study re-
sults using the Elster approved techniques. Alternative methods have to be approved
by the BU QE or an equivalent quality designated person.

4.2.7 Gauge correlations studies

The quality department must perform a correlation study for key characteristics to
determine the correlation between the gauges. The key characteristics are specified
by the QE or an equivalent quality designated person. The correlation study is com-
posed of the following steps and based on the defined key characteristics:
− The quality department identifies measures and records a specified amount of
production material
− The quality department has the internal QI or an equivalent quality designated
person measure the key characteristics
− The QE or an equivalent quality designated person compares the measurements
with the QIs measurements to determine the correlation between the gauges

In case of a negative correlation, gauges have to be replaced by the LE QM or a de-

legated quality authority person.

4.2.8 Process capability

Elster’s corporate quality department mandates documented and up-to-date process
capability data from each production line on an ongoing basis. Critical process capa-
bility (Cpk) is a comparison of the inherent variability of a process output to specifica-
tion limits under statistically stable conditions. The methods require that the evalu-
ated characteristic is approximately normally distributed and in statistical control. The
distribution is to be determined prior to estimating capability.

If the process is not in statistical control, all assignable causes must be identified and
resolved by the quality department in collaboration with the production department.
Characteristics that define a not-in-statistical-control process are defined by the gen-
eral Cpk standard. Special techniques are provided by LE quality management in
coordination with LE GM. Those special techniques are available for calculating ca-
pability when inherent assignable causes are present, such as tool wear.

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Cpk is used for two-sided specification limits process average. Cpk is considered a
measure of the process capability, not only the process variation. It also takes into
account the location of the process average. If the process is near normal and in sta-
tistical control, Cpk is used to estimate the expected percent of defective material.

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5 Manufacturing control
The manufacturing control is a systematic approach to control the flow of production
by using quality control methods based on Elster’s internal quality standard and ISO.
Using the manufacturing controls, the quality department of each BU/LE manages
and measures the steps to deliver quality products to the customer. The results of the
manufacturing controls are maintained locally by the quality department or an equiva-
lent other department.

5.1 Process control

Process control is the control of all manufacturing processes in accordance with the
specific product control plan (please refer to 3.4 control plan). The control plan is de-
veloped and approved during the product qualification. The steps to control all manu-
facturing processes have to be included within the quality control manual of each
BU/LE. The production department in close collaboration with LE quality department
is in charge of the management of the process control.

5.2 Statistical process control

The production department in close collaboration with quality department is required
to apply effective statistical process controls in the control plan. Statistical Process
Control (SPC) is an effective method of monitoring a process through the use of con-
trol charts. Effective controls must include:

− A process control chart that displays correctly calculated control limits

− A process control chart that is at the process area, visible to the operator, or per-
sons who are responsible for controlling the process
− Actions to bring unstable processes back into control (for each out of control con-
dition); these actions must be documented and maintained by the quality depart-
ment.
− The sorting, scrapping, reworking, or disposition of all product produced during
any out-of-control condition must be documented by the production department
and maintained by the quality department.

5.3 Process performance

Elster’s quality department mandates documented and up-to-date process perform-
ance data from each production line on an ongoing basis. The documentation is
stored locally by the operational department. Process Performance (Ppk) is the com-
parison of the actual process variation to the specifications limits.

5.4 Process improvement

Out-of-control or unstable processes (which have assignable causes) that do not
meet the minimum Cpk/Ppk requirements must be identified and corrected by the
quality department in collaboration with the production department. Both are respon-

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sible for the improvement of processes with low yield rates as part of Elster’s con-
tinuous improvement performance.

5.5 Lot control

A lot consists of a product from one part number and one revision. The lot is pro-
duced at the same time, under the same processing conditions, and from the same
lot of raw materials.

Each entity of material shipped (by container, palette, box, etc.) to an Elster LE or to
a customer must be identified with the assembly lot number. Inspection records must
be traceable to lot numbers. The primary purpose for identifying lots is to determine
the scope of actions that must be taken when problems arise during further manufac-
turing or with customers (e.g., callback of products). In the end, the quality depart-
ment in collaboration with the appropriate department verifies the reasons for the fail-
ure.

The lot number changes continuously. The following are typical conditions that result
in a change of lot numbers, e.g.:

− Change of part number or revision

− Change of part number or revision of components
− Interruption of continuous production or assembly (for more than two hours)
− Repairs or modification to the tooling or equipment
− Tooling changes. (other than minor adjustment, or replacement of consumable
tooling)
− Change to a different lot of raw materials
− Change in shift
− Significant process changes

5.6 Traceability
Elster’s LE or BU quality department in collaboration with the supply management
and manufacturing departments are responsible for the traceability which ties finished
products back to the components used in the products. When traceability is specified,
the traceability marking must be effective down to the individual component (i.e. Lot
code, batch, or serial must be identifiable at a rework station). The Elster Group SE
mandates the traceability from its raw material components.

5.7 Workmanship
Workmanship describes the standard on how to work with the product, the quality
imparted to a part or assembly in the process of making it. In case those workman-
ship standards are not referenced on Elster’s drawings or specifications, the opera-
tional department is expected to follow industry accepted standards for castings,
electronics, textile, plastics, or metal-forming applications. In case the industry-
accepted standards are not clearly defined, refer to the QE or an equivalent quality
designated person of the BU/LE for clarification.

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5.8 Safety and environmental
At no time should any customer or person at an Elster facility or worker at a supplier’s
facility be exposed to hazardous material or situations that are not inherent in a com-
ponent’s structure. For items with inherent hazards, safety notices must be clearly
observable. As applicable, MSDSs must be provided during the first article process.
Residues, films, out-gassing products, and packaging materials must comply with all
occupational safety and health administration (OSHA) standards.

The Elster Group SE subscribes to the current industry standards of environmental

awareness and requires the same from its supplier base. Third party certification to
the ISO 14001 standard is strongly encouraged for all Elster Group facilities (please
refer to Elster´s environmental, health and safety guideline).

5.9 Maintenance
The quality department is responsible to continuously monitor all tools, measuring
devices, and other quality equipments in such a manner that the BU/LE is able to
support production requirements without interruption. Preventive maintenance of
equipment must be in line with the manufacturer’s instructions and recommendations.
The maintenance of equipment has to be documented in a log book or an equivalent
documentation form.

The semi-annual maintenance applies equally to all customers or other Elster BU/LE
supply equipment and tooling. Customer-supplied equipment and tooling must be
maintained as a quality product throughout the expected life of the equipment or tool-
ing. The quality department is responsible to notify the BU general management (BU
head) if any equipment or tooling is expected to exceed its usable life.

5.10 Process failure mode and effects analysis (PFMEA)

Elster Group SE mandates that each LE and RU maintain an effective PFMEA for
each active part or family of parts. The process FMEA considers all reasonably fore-
seeable potential failure modes of each operating process. Based on the potential
seriousness and likelihood of the identified failure, controls have to be developed via
the process FMEA. The process FMEA is a living document. It is to be updated by
the quality department in cooperation with the engineering department when one of
the following occurs:
− Process is changed.
− Defective material is produced.
− The process FMEA is updated through an additional implementation of process
controls, procedures or specifications.

For more guidance on the FMEA tool, please refer to the template FMEA -
CORPSQA-004 in Appendix 1.

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6 Measurement, analysis and improvement
Elster’s LE or BU quality organization plans and implements the monitoring, meas-
urement, analysis and improvement processes needed to
− demonstrate conformity to product requirements − ensure conformity of the corpo-
rate quality guideline
− continually improve the effectiveness of the corporate quality guideline

This includes the determination of applicable methods, including statistical tech-

niques, and the extent of their use (please refer to the ISO 9001:2008 (E)).

6.1 Corrective action

The corrective action is the identification and elimination of causes of a problem, thus
preventing their recurrence. The Elster Group SE mandates that each BU, LE and
RU maintain an effective documented closed-loop corrective action system whenever
a processing problem is encountered in the manufacturing facility or after the product
has been shipped.

6.1.1 Corrective action process

Elster’s LE or BU quality departments should use a corrective action process that is
similar to the process elements outlined below. The corrective action process is do-
cumented by the quality department in collaboration with cross functions such as en-
gineering, procurement and sales, and reported to the product owner (e.g. a cus-
tomer or another Elster facility).

1st element: The quality department utilizes a cross functional team approach to im-
mediately contain any suspect product. It contains parts in all locations such as the
customer site, in-transit, the warehouse, the supplier’s site or in line production.

2nd Element: The quality department describes the problem by outlining a process
flow diagram. Control charts are taken into consideration to indicate special causes.
Additionally, quality tools (e.g. plan-do-check tool) are utilized to define “what, when,
where, who, how and how much.” with the purpose to define an appropriate action
plan to coordinate problem definition actions.

3rd Element: The quality department implements and verifies interim (containment)
actions by investigating sheets to evaluate the effectiveness of implemented actions.
A defined action plan coordinates the interim fixes.

4th Element: The quality department defines and verifies root causes.

5th Element: The quality department implements permanent corrective actions by util-
izing control charts and checking sheets to monitor the process performance on an
ongoing basis.

6th Element: The quality department verifies the effectiveness of permanent corrective
action by utilizing control charts and histograms to evaluate process stability and ca-
pability.

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7th Element: The quality department prevents recurrence by defining an action plan to
coordinate required changes and to evaluate other areas where the problem also
occurs. An update of the FMEA is required.

6.1.2 External corrective action

Elster’s LE or BU quality departments should use an external corrective action proc-
ess that has a similar structure as the process below. The external corrective action
process is documented by the QE and reported to the product owner (e.g. a cus-
tomer or another Elster facility).
The QE, sales quality engineer or an equivalent quality designated person issues a
corrective action request (CAR) via e-mail to the supplier when nonconforming mate-
rials, parts or assemblies are found at any of the following, but is not limited to:
− Receiving goods inspection
− In production
− In test
− In audit
− By an Elster customer

The list is based on ISO standard and Elster’s quality experience. Within a specified
time period from initial notification, the supplier is required to complete and send the
CAR by e-mail to the sales quality engineer or an equivalent quality designated per-
son with the following:

− Initial observation, the containment, the supplier root cause investigation, and the
corrective actions
− Dates and the supplier contact person

Elster’s qualified suppliers consistently provide assurance that all component parts
are tested to meet Elster’s LE or BU specifications. Elster’s suppliers are required to
respond effectively and consistently in the event of unexpected delivery of defective
component parts. Suppliers are charged for any nonconformance rework required
due to supplier part failure. In general, the process of the part quality assurance fol-
lows the regulation of the SQA manual and the ISO standards. All appropriate back
up information is documented and provided in detail to all parties involved.

6.2 Product quality assurance

Outbound or outgoing goods or products have to be controlled regarding all external
quality requirements by Elster’s LE or BU quality departments in collaboration with
the LE or BU production department. The product qualification assurance process is
equivalent to the part qualification (please refer to section 4.2 part qualification).

Elster’s LE or BU quality departments must adequately plan for packaging designed

to eliminate shipping damage. The BU quality department will provide expendable
packaging, where appropriate, that provides maximum density and protection from
any damage that may occur. Packaging, labeling, and shipping materials must com-
ply with the requirements of common carriers, in a manner to secure the lowest trans-
portation costs. The Elster Group SE encourages self-initiated packaging improve-

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ments that have been validated by industry standard shipping tests (i.e. drop, vibra-
tion, crush etc.). (Please refer to Elster’s corporate sales and customer distribution
guideline.)

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7 Returns, warranties and claims
Returns, warranties and claims typically result from customer complaints, customer
returns, returns inspection or warranties.

In case of customer returns, Elster’s BU sales manager reviews and approves cus-
tomer requests for the return of goods on a standardized return notification form. The
accuracy is verified based on supporting documentation, e.g. sales order. The BU
sales manager decides whether return fees are charged or not. The control is evi-
denced by dating, signing and archiving the return notification form.

Warranty claims are authorized by a delegated authority based on source documen-

tation. The repair department employee inspects the returned goods for any quality
and manufactory issues, which would justify the customer's claims. Identified mal-
function reasons are documented in the system as a finding report. The repair de-
partment employee determines and approves the warranty within the report and pro-
poses a solution for further processing (e.g. repair, new delivery).

The control activity is documented in the findings report within the system.

Warranty orders are accurate, complete, timely processed and properly authorized
based on the source documentation. Monthly, a delegated authority reviews a system
generated report on warranty orders to verify on a sample basis that appropriate au-
thorization was performed. Any identified issue is analyzed and followed up.
The control activity is documented by dating, signing and archiving the warranty order
report.

The above mentioned returns, warranties and claims have to be documented by the
responsible authority. The results must be reported to the quality department for
transparency and improvement opportunity actions.

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Appendix
Appendix 1: Applicable documents

The following corporate controlled documents are referenced documents within this
guideline. The documents are provided on Elster’s intranet.

Document Document number

Supplier audit ‘Action Item’ Report CORPSQA-001
Supplier Process audit Check List CORPSQA-002
First Article Inspection Check List CORPSQA-003
FMEA Form and Worksheet CORPSQA-004
Control Plan Template CORPSQA-005
First Article Inspection Report CORPSQA-006
Process Change Request CORPSQA-007
Corrective Action Request (CAR)1 CORPSQA-008
Sampling Plan C=0 CORPSQA-009
Supplier Assessment Questionnaire CORPSQA-010
Supplier quality File CORPSQA-011
1
CAR Forms are specific to each Elster BU. The Corporate Form is to be utilized when no other CAR
Form is specified

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Appendix 2: The Elster “Gate Model” Process for Product Development
For detailed information, please see the document “The Elster Gate Model Process
for Product Development” at Elster‘s intranet.

Page 29 of 34
Appendix 3: ISO9001-2008 Standard
In accordance with the new revisions within the ISO9001:2008 standard, the follow-
ing specific ISO guidelines must be met.

ISO9001:2008 Standard
TITLE Clause (within ISO9001:2000 to
2008)
Quality management system 4
General requirements 4.1
Documentation requirements 4.2
Management responsibility 5
Management commitment 5.1
Customer Focus 5.2
Quality Policy / Environmental Policy 5.3
Planning 5.4
Responsibility, Authority, and communications 5.5
Management Review 5.6
Resource Management 6
Provision of resources 6.1
Human resources 6.2
Infrastructure 6.3
Work environment 6.4
Product Realization 7
Planning of product realization 7.1
Customer related processes 7.2
Design and development 7.3
Purchasing 7.4
Product and customer provision 7.5
Control of monitoring and measuring devices 7.6
Measurement, analysis, and Improvement 8
General 8.1
Monitoring and measurement 8.2
Control of nonconforming product 8.3
Analysis of data 8.4
Improvement 8.5
Figure 4: specific ISO guidelines

ISO9001:2000 to 2008 Transition ID

TITLE Clause (within ISO9001:2000 to
2008)
General Statutory/Regulatory Requirements
Outsourced Processes 4.1
Documentation Requirements 4.2.1
Control of Records 4.2.4
Management Representative 5.5.2

Page 30 of 34
Human Resources 6.2.1 and 6.2.2
Infrastructure 6.3
Work Environment 6.4
Planning of Product Realization 7.1
Determination of requirements related to the 7.2.1
Product
Identification and Traceability 7.5.3
Customer Property 7.5.4
Control Measuring and Monitoring Equipment 7.6
Internal audit 8.2.2
Monitoring and Measuring Processes 8.2.3
Corrective Action 8.5.2
Preventive Action 8.5.3
Figure 5: Specific ISO guidelines – transition ID

Page 31 of 34
Table of figures
Figure 1: Document history list ................................................................................... 6
Figure 2: PGM hierarchy............................................................................................. 7
Figure 3: Quality organizational structure ................................................................... 8
Figure 4: specific ISO guidelines .............................................................................. 30
Figure 5: Specific ISO guidelines – transition ID....................................................... 31

Page 32 of 34
Table of links
www.compliance-helpline.com
http://www.iccwbo.org/incoterms
http://ec.europa.eu/external_relations/cfsp/sanctions/list/consol-list.htm
http://ec.europa.eu/external_relations/cfsp/sanctions/index.htm#2.2.
http://www.treas.gov/offices/enforcement/ofac/programs/

Page 33 of 34
Glossary of abbreviations
AMI Advanced metering infrastructure
BOM Bill of material
BU business unit
CAR Corrective action request
CEO Chief executive officer
CLC company level control
Cpk Process capability
CQR Corporate Quality Representative
D&D Design and development
DFMEA Design failure mode and effects analysis
e.g. For example
FMEA Failure mode and effects analysis
GCD global commodity directors
GM General Manager
GQMT Group Quality Management Team
i.e. That is
ISO International Organization for Standardization
KAPI Key audit performance indicators
LE legal entity
MSDS Material safety data sheets
OSHA Occupational safety and health administration
PFMEA Process failure mode and effects analysis
PGM policies, guidelines and manuals
Ppk Process performance
QCM quality control manual
QE Quality engineer
QI Quality inspector
QM Quality manager
RandR Repeatability and reproducibility
REACH Registration, evaluation, authorization and restriction
of chemical substances
ROHS Restriction of hazardous substances directive
RU reporting unit
SoD segregation of duties
SPC Statistical process control
SQA Supplier quality assurance
SQE Supplier quality engineer
SQS site quality supervisor

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