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2501 Kutztown Road

Reading, PA 19605-2961

Kanban Agreement

1. PURPOSE

Fidelity Technologies Corporation is implementing a Kanban system, which simplifies the


material procurement process. Kanban quantities (releases) are set quantities, which are
predetermined between Fidelity and the supplier. The Kanban system ensures a blanket order
for a 12-month period, avoids the time and money involved with expediting material, and
ensures a standard release quantity.

2. PROCESS

When Fidelity calls/faxes a release for one Kanban quantity of a part number in the Kanban
arrangement, Supplier agrees to ship the appropriate quantity within 1 working day.
Shipments are estimated to take 1 working day. If shipments will be late, Supplier must
call Fidelity within 48 hours, as well as expedite shipping at supplier’s expense.

3. PACKAGE IDENTIFICATION

We ask that each box or package be clearly marked with the word “KANBAN,” the Supplier
name, the Fidelity part number, the Fidelity purchase order number, and the quantity of
each part number in the box or package (note: if there are multiple boxes each box should
include the quantity in each box). Additionally, we ask that the packing list be attached to
the outside of the box only, any overdue shipments be clearly labeled “HOT” for immediate
identification, and any reference to previous shipment information or other markings be
removed or crossed off.

4. DEMAND SPIKES

Due to spikes in demand, we ask that Supplier have some flexibility in the quantity
available for shipment. Specifically, Supplier must maintain a spike cushion at all times.
The amount of the spike cushion will be predetermined between Fidelity and Supplier.

5. SUPPLIER PERFORMANCE

Part of ensuring the success of this process is monitoring the performance of all our
suppliers. Each supplier will be measured on product quality, accuracy (including quantity
shipped, proper labeling and correct part number), and delivery performance.

6. TERMINATION In the event that Fidelity Technologies Corporation terminates this agreement
for any reason other than performance, Fidelity Technologies Corporation agrees to purchase
any stock on hand, not to exceed the predetermined releases held by supplier, plus the spike
cushion.
Fidelity Technologies
Corporation Inc. Kanban
Agreement (Cont.)

7. TERMS AND CONDITIONS

To avoid conflict between the provisions of the Kanban agreement and the Terms and
Conditions of Fidelity Technologies Corporation purchase orders, the Kanban agreement,
as outlined herein, shall prevail.

_____________________ ____ _________________________________________ _____


Supplier Representative Date Fidelity Technologies Corporation Representative Date

________________________________ _________________________________________
Title Title

Kanban Start Date ________________


Kanban Definitions

Kanban – A material pull system in which a customer (Fidelity) signals suppliers


that material is required.

Kanban Card – Internal document which contains part information, used as a


signal.
•Transport Kanban Card - Internal document which contains pertinent part and
ordering information, used to signal frequent releases for purchased parts from
external suppliers.
•Reorder Card - Internal document which contains pertinent part and ordering
information, used to signal infrequent releases for low usage, purchased parts
from external suppliers.
•Subcontract Kanban Card – Internal document which contains pertinent part
and ordering information, used to signal frequent releases for subcontracted
parts from external suppliers.
•Production Kanban Card – Internal document which contains pertinent part and
manufacturing information, used to signal releases for internally manufactured
parts.
•Spike Card – Internal document which is issued by a Buyer/Planner, used to
signal releases for temporary spikes in demand for purchased parts from
external suppliers. Spike Card releases must only be made in multiples of the
predetermined kanban quantities.
Purchasing Lead Time – Length of time for Fidelity to receive a kanban quantity
when issuing a new blanket purchase order.

JIT Lead Time – Length of time for Fidelity to receive a kanban quantity when
releasing it from an existing blanket purchase order. This time period includes
supplier order processing time as well as shipment time (days in transit). JIT lead
time is typically 1-3 days.
Replenishment Period – Length of time for supplier to restock one kanban
quantity.
Kanban Quantity – Predetermined release quantity based on usage, lead time
and safety stock.

Kanban Agreement – Document which outlines the responsibilities of the supplier


and Fidelity.

Spike Cushion - A quantity, predetermined between Fidelity and supplier, of


stock to be held by supplier, in addition to agreed upon kanban quantities, to be
released by customer (Fidelity) in cases of demand spikes.