M Sites Default Files Policy Manual

Policy Manual for Custom Injection Molders
- Instructions -
Original Copyright 2003

William Tobin and Jeffery Cohen
Revised 2011
William Tobin, Consultant Jeffery Cohen, Attorney at law

WJT Associates Cohen and Kenney
PO Box 597 600 Seventeenth Street
Louisville, CO 80027, USA Suite 2800
Wjtassociates.com Denver, CO 80202
Policy Manual for Injection Molders
Using this manual and editing it
The attached manual and its accompanying CD are to assist the molder/mold builder to do business in
today’s more competitive environment. This manual is designed to level the playing field on which
Customer and Supplier do business, and define the rules by which they will do business and the
responsibilities each must bear. All business relationships are comprised of three distinct segments:
1. The beginning -- This is when the manufacturer receives a request to bid. Through this phase the
designs are finalized, prices and volumes established quality levels agreed to and the terms of
business negotiated.
2. Production – this phase is the result of phase 1 where most business is transacted. Orders are
placed, product manufactured, invoices are sent and ultimately paid.
3. Termination – this phase is when production in phase 2 ceases. Whether abrupt or structured,
the project no longer exists as its own business entity.
Each of these phases is no less important than the other. However most businesses pay attention to the
first two and “assume” the third will be done with honesty and integrity. Business is about profit. Honor,
however is not a business concept. Many manufacturers are therefore literally “the bride left on the
church steps” when the customer stops doing business. Ignoring the need for a termination exit
strategy/procedure results in horror stories such as:
¾ Jobs being moved off shore leaving the molder with un-billable standing inventories.
¾ Customers simply declaring their terms are changing from a N-30 to a N-90.
¾ Customers requiring their molders to carry high levels of inventory simply to honor JIT
requirements while the molder has no guarantee this inventory will not become obsolete (non
saleable) at the whim of an engineering change or cancellation of the job.
¾ Molders getting reject notices and demands to return goods when actually the only reason for the
return was an unnecessary order.
¾ Molders being ‘jerked around’ with pulled up and pushed back shipments at the whim of their
customer.
This list is endless.
The predatory practices of supplying very demanding customers, has put many molders in financial straits
or even bankruptcy. In order to stay in business the Molder must have protection against these practices.
Most molders however, are afraid of the expense of having their corporate attorney draft a manual like
this and even more afraid that if they submit it to their customers, they cannot enforce it.
The cost of writing this manual for you is loading the file into your computer, making the substitutions so
that this is YOUR POLICY MANUAL, having your lawyer look it over, then printing and sending it out for
signature. Where you see the type face in red is where you need to do your own inputs.
Documents of this type seem frivolous until there is a dispute. It is impractical and nearly impossible to fit
all these terms and conditions on an offer to bid buried in the “fine print”. Usually when you receive the
purchase order it is the Customer’s “fine print” that ultimate defines the business relationship. A simple
reference to this manual and the few documents required to define the business relationship will avoid
problems in the future.
Games Customers Play

Generally when you get the job the buyer gives it to you then whines about the price. It is his last
(almost) effort to lower the price. Many times when you offer this manual to the buyer he’ll immediately
tell you there are ‘dozens of molders out there like you’ who’ll do it without these restrictions. First of all,
there aren’t dozens who can do it better and cheaper. If there were, you wouldn’t have the job.
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In the past writing off inventory you were stuck with because of JIT was almost unheard of. Now it is a
fact of life. Think about balancing the lower production price against not having to write off excess
inventory. It is possible to turn a negative (the price reduction) into a positive (no write offs). If the
guarantee doesn’t work keep the flavor of a JIT or KANBAN but transform it into a Min Max relationship.
In this way you will at least be able to know your risks. When the buyer asks for a further price reduction
NOW is the time to ask for the guarantee.
Frequently Asked Questions
Q: Is this Legal?
A: First and foremost, once you’ve modified this to suit your business have your business attorney
give an opinion. Law is dynamic, being constantly modified by legislatures, courts, and legal opinions. If
nothing more, you have a paper trail that will be your first line of defense if you have to enforce any of
these policies.
Q: What if my customer won’t sign it?

A: If you read this manual you’ll see how much risk you’ve put on your company. If you can afford to lose
what you have now, don’t insist on your customer’s signing and returning the acknowledgement page. If
you don’t receive a signed acknowledgement page, you are putting your company at risk. For every risk
there must be a reward. Getting your customer to sign up to your policy manual will take some creative
negotiations. If you can get your customer to believe what he is doing is in HIS interest (lower costs) he’ll
first try for the cost reduction but if you say no unless he signs, he’ll view this as a trivial guarantee he’ll
never be bothered with anyway and he’ll sign.
Q: Why do I need it now, I’ve never needed it in the past?

A: Recently there has been a wave of seminars put on for buyers to “manage” their supplier base. Truth
be told, they are taught how to lie and put pressure on molders to get lower prices. Since their jobs
depend on a steady stream of product at a lower and lower cost, buyers feel completely justified in these
actions regardless of the consequences to their supplier base.
Q: What if my customer refuses to sign this and threatens to pull his work?
A: Any threat to pull the work is really a warning that the work will be pulled anyway. If your business
relationship is sound and mutually productive, your customer should have no problem in signing the
acknowledgement of receipt of this manual and signing the forms in the back. This will protect and affirm
the continuity of the Customer / Supplier relationship.
Your company was chosen to be the supplier of a specific part because you could deliver quality parts at
a competitive price with reasonable deliveries. That is the reason for your customer to stay with you and
not go anywhere else. This manual only defines the rules, it doesn’t alter pricing, quality or delivery.
Q: Do I need a form for a guarantee for each part that I make?

A: Yes. A specific reference to each part or group of parts as each project arises requires the signing of
the manufacturing agreement, the hold harmless agreement, and a Bill of Sale. The two agreements are
most important especially when dealing with entrepreneurs. Simply generally referring to the manual and
not signing the agreements will raise difficult questions if a legal dispute arises.
Q: Can I revise and reissue this manual?

A: Yes. This is the exact purpose of this manual. However, those jobs covered under the previous
revision will remain under the terms and conditions of the older manual unless you resign the documents
for the new revision.
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Q: Why are should the manuals be numbered and the letter of acknowledgement be signed by the buyer
and kept on file?
A: The buyer in most cases is the Authorized Representative of his company. The buyer’s signature is
your customer’s commitment and cannot be superceded by someone else. Many companies issue
quality control manuals or tooling specification manuals that are numbered and receipted. Under the law
a Professional Merchant – the company representatives – cannot claim ignorance if they have
acknowledged the receipt of a document.
Q: What if the customer will not agree to certain sections of this manual?
A: Most of this manual is based on the custom and practice of the plastics industry, the rest
Is based on common sense. However, there are always circumstances where some part of this manual
might need some negotiation and modification. This is a dynamic document. It is yours to change and
reissue as the need arises.
Q: Even though this has been co-written by an attorney is it “legal”?

A: It is always advisable to get a legal opinion from your corporate attorney. While the concepts of many
laws are the same in every state, the law is continually changing because of court decisions and new
legislation. It is impractical to expect a molder to keep up with these changes.
Many people think SPI’s Industry Practices are actually the basis for business relationships in the plastics
business; these practices have been alternatively upheld and negated in various jurisdictions. A prudent
business should not wholly rely on them. Having your customer sign the receipt for this manual is your
guarantee you have agreed to a set of rules to sustain your business relationship. This signed letter and
referenced manual will avoid many legal entanglements.
Why use the Manual?
A Customer/Supplier relationship is not about the sale of goods. It is a relationship where both parties
must show a profit to continue to be in business. By its very nature business has both risks and benefits.
The Customer designs his product, tests the marketplace, makes his forecast, then goes into the market
with the hopes of selling his product and making a profit. His sales and profits are his benefit. His risk is
the R&D that goes into launching a product, his forecasts so that he can provide a steady stream of
product and his obligations to his supplier.
The Supplier’s benefit is his sales and profits resulting from the orders from the Customer. His risks are
the purchase of raw materials, his investment in converting them to a finished product, and his delivery to
the Customer in a timely fashion at a predetermined level of quality. Normally a Supplier takes an
additional risk in manufacturing more than is currently ordered to take advantage of economy-of-scale
purchases as well as being able to schedule his factory to honor all of his commitments to his Customer
base.
In most cases both the Customer and Supplier are in a relationship whose foundation is the anticipation
of future business. While the exception to the rule is a one-time purchase or an order-to-order purchase,
every other relationship relies on the assumption of shared risks, shared benefits, and the good faith
anticipation of future business. If there isn’t an agreement in place of an on-going relationship the
risk/benefit relationship tilts against the Molder in favor of the Customer.
In today’s litigious economic environment, it is no long possible to shake hands and make an agreement.
There must be signed documents acknowledging the type of relationship, the terms of the relationship,
how it begins, how it works, and how it will terminate. When problems arise most people call in the
attorneys instead of finding an equitable solution.
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If you are engaged in a legal action prior to going to court, the fees are can be $10,000 per month for
each side as a minimum. Getting into court can have a total bill of upwards of $250,000 for each side.
Once you are in court it is a gambler’s bet on the outcome. Even worse, courts rarely award legal costs
and punitive damages to the winning side.
During a dispute, the supplier cannot simply cut off the Customer’s flow of product. The law sees this as
economic harm caused to the Customer and therefore is subject to sanctions by the court. Conversely,
the Customer cannot simply switch suppliers without warning and not settling any outstanding financial
accounts.
The buyer has probably taken more business law courses than you have. Disputes are why you have
litigators. Of all the dispute settlement methods simple negotiation is the best. Here your litigator simply
points out the sections in the manual and the default on them. From there the matter is usually
(inexpensively) settled. This policy manual requires binding arbitration using a panel of industry experts.
Normal arbiters for these kinds of panels are retired judges and attorneys. While legally adept, they are
more expensive than hiring experts because the industry experts already understand the workings of the
industry. Experts are less expensive in the long run.
Hints for good business:

1. If your agreement is in writing you can prove it. If it is verbal, it is difficult to prove it even existed.
2. Both the Customer and Supplier’s Authorized Representatives are considered Professional
Merchants. In the course of business Merchants must act in a reasonable and timely manner. Freely
interpreted it is your duty to resolve problems expeditiously. If you don’t, there is a lot of law that
limits the time span you have to act or file a legal action.
3. When you need heart surgery you don’t go to your family doctor, you go to a heart surgeon. Lawyers
like doctors, specialize. Your business attorney probably does not specialize in litigation. If you are
involved in a legal action your odds of success are much better with a litigator than a technician.
How to use this Policy Manual
This is kind of a ‘fill in the blanks’ document. While protected by copyright it is designed to be modified to
suit the needs of your company. The instructions below are the most basic.
General Modifications
TITLE PAGE
You’ll note this booklet in hard copy and the electronic file only has the words “Title Page”. Put your own
title to this book and make it yours.
THE FOOTER
The Footer on the title page has both a volume and issue date. The issue date is for you to keep track of
what revision this particular manual is. Once you have read and edited it to its final form, fill in the date
on the Footer with your computer. Do not use the computer to fill in the volume number unless you are
individually printing out volumes on your computer and not photocopying from a master. Once it is
printed individually number all pages of each volume along with the letter of receipt. The letter of receipt
will be your proof that the manual was received, its particular volume, and the revision date it was issued.
THE LETTER OF RECEIPT

This is a letter acknowledging the receipt of this specific volume and its issue date. “Cut and Paste” it off
separately. Either on your own letterhead or substituting the appropriate addresses, print it out. The
Letter of Receipt along with a SASE should accompany the manual for your customer’s buyer or
Authorized Representative to sign and return. When you get this letter back, keep it on file.
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FORMS
In the back of the book are certain forms that define the relationship you will have for a given part or
project. Where the form says “SUPPLIER” you can choose to put in your company name or not.
Specific Modifications
At best, this manual is a skeleton that you must flesh out. Edit it until you are satisfied. Please read the
entire manual carefully. There are some specific notations written that will probably surprise you. They
are there for your own protection. Send a copy to your corporate attorney for an opinion. When you
are finally satisfied, send it out to your customers.
Without a guarantee on your business relationship with your customers, you are specifically at risk for all
invested work and unpaid inventory. With the acknowledgement and agreement to this manual and its
associated documents your relationship with your customers will be free of misinterpretations and
pressure tactics so commonly used by the current set of buyers. If you do get into a legal entanglement
producing your signed receipt of this manual and the signed documents from the disputed part will quickly
resolve the matter and minimize the legal expenses.
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Title Page
Issued to _______________________________________________________________________
Volume # ___ Rev. ____ Issue Date ____ / ____ / 20____

Letter of receipt of this manual
FROM:
Customer’s name
Company Name
Street Address
City, State, Zip Code,
TO:
Supplier’s Name
Company Name
Street Address
City, State, Zip Code
Dear Sir or Madam:
This letter is to acknowledge the receipt of Company’s Name Policy Manual for Doing Business
with Company Name dated _____________________, Volume # _______.
It is acknowledged that for purposes of this manual are referred to as the Customer and
understand the policies of Company Name as a Molder.
Signed this _____day of _____, 20______
Authorized representative for the Customer.

.
Why this manual exists
It would be easy to assume all business transactions are honorable and honest. While most are the very
few that aren’t the ones that can cause both parties irreparable harm. This book is a dynamic document.
It will be modified from time to time to improve it. For this reason, it is important this document exists:
1. Our company works this way. We will maintain this policy in all our transactions throughout the life of
the products assigned to it.
2. As conditions change, we will modify this document and abide by what we have written for the new
products assigned to it.
3. At the end of this book are forms that should be removed and photocopied. As we enter into a
Customer/Supplier relationship the part number, name etc. is filled in defining the relationship and the
policy that we will abide by.
4.
Industry Practice
Every industry has commonly accepted practices. Ignorance of how the Customer/Supplier relationship
exists in the plastics industry is a high cause of misunderstanding and problems. Industry practices are
usually set forth in writing by acknowledged professional societies in that particular industry. In the
plastics industry it is The Society for the Plastics Industry, with its main headquarters in Washington, DC.
The recommended reading at the end of this document highlights some publications known throughout
the industry that are purchasable by anyone to further their knowledge.
Partnering
It is a common industry practice for the Molder to participate in the design of a part. When this type of
relationship exists, the Molder will be reimbursed for his engineering expertise and effort by including the
charges in the mold build price. If the Molder is not given the mold build and production contract the
Supplier will be billed directly for the engineering time and services.
By participating in the design of a product, which is for the sole use of the Customer, the product
responsibility for this product and its design is transferred to the Customer by the Indemnification
Inventory Liability Agreement in the Forms section of this manual.
Patents, copyrights, trade names.
We assume no responsibility for the legality of the design of Customer’s products, parts, or components
produced to the Customer’s specifications. The Customer assumes all responsibility and indemnifies the
Molder for claims of infringement on any (but not limited to) patents, copyrights, and trade names or
service marks.
Entering in, Adjusting, Exiting a business relationship

Authorized Communication
While communication is essential to any business relationship, communication from those not qualified to
act as a company agent can often lead to mistakes. For this reason both the Customer and Supplier shall
designate an Authorized Representative. All communications that will result in a decision from either the
Molder or Customer, regardless of its nature, must be between these two individuals. The decisions
arrived at by these individuals will be considered the decisions of the two companies and only modifiable
by them or their representatives and confirmed in writing. Should these individuals change a new
Authorized Representative is to be designated in writing. Should a dispute arise only the written records
of both the Customer and Supplier are the substance of the agreement.
Best effort quoting
Quotations are made on a best effort for the current market price of raw materials and the professional
estimation made by the Molder. Quotations will remain firm for purposes of job placement for a maximum
of thirty days unless a different time frame is agreed to prior to the presentation of the quotation. If the
quotation is for the building of tools and molding of parts, the part price will be requoted on completion of
the tools per the paragraph titled Price Changes. If the quote requires final agreement of specifications
for acceptance, the final part price will depend on the agreement.
Price changes controllable and non-controllable

Pricing is made on the most economical basis possible for both the Customer and Supplier. However,
with the ever-changing environment of the marketplace the cost components that originally went into
developing the original quoted price structure may no longer be valid.
For those costs that are highly variable, for example but not limited to, the price of plastic resin, colorants,
or decorations, the job will be requoted each time it is put into production. It is the responsibility of the
Molder to inform the Customer of this variation in price if it will exceed 5% of the original stated price. The
Customer must respond in writing to the Supplier’s Authorized Representative before production begins
authorizing the pricing change.
Productivity improvements
Jobs are generally awarded on a ‘lowest bidder’ basis. If the Molder further lowers his cost, it is to
increase his competitive advantage. There should be no expectation of a pass-through price reduction
without some offsetting benefit to the Molder as described below.
It is in everyone’s interest to improve productivity. However, an improvement by the Supplier does not
necessarily mean it will be passed on to the Customer as a price reduction. When a Molder acquires new
equipment with the expectation of improved productivity, his risk is the financial obligation of the purchase
of this equipment. His benefit from taking this risk is the productivity improvement that will provide the
return for taking the risk.
If a Customer provides equipment or expertise which result in a productivity improvement, the Customer
has taken the risk and should participate in the benefits derived therefrom.
Expectation of business
Quotations / Request for Quotations (RFQs)
Budgetary Quotations
The first step in a business relationship is the RFQ. If you are only trying to establish a budget for on-
going production, please label your RFQ as “BUDGETARY” It would be our pleasure to provide this
information to you. However what is quoted on a Budgetary Quote should in no way be interpreted at a
formal quotation with the expectation of it generating business.
Requirements for Quotations

All RFQ’s must contain the following information:
1. A reference to a design
2. The annualized estimate of number of parts
3. The expectation of the lot size and frequency.
4. The packaging expectation: pieces per container and any specialized packaging requirements
5. The specified material and the allowable percentage of regrind.
6. The quality specifications using the SPI standards referenced in the back of this publication.
7. The surface finish of the highly visible, usually visible and rarely visible surfaces.
8. The color standard
9. The designated gate location
Requirements such as: ‘free of manufacturing defects’, ‘High polish’, ‘blue’ or “+/- .1mm with a CpK of 6’
are impossible/impractical specifications. Your designs will be returned to you with a “No Quote” notation
until these defects are corrected.
Frequency of Quotations
Bundled Quotations
Any RFQ received as a group of parts will be quoted individually and not as a combined number of parts
unless we are assembling them into a unitary part.
Successful Quotations
It is our expectation to invest time an expertise to provide the most competitive price and delivery for
every part that we quote. It is our expectation that a high percentage of these will result in the awarding
of the production contract. If we continually quote jobs and are not awarded our fair share the only
conclusions that can be drawn are (1) our time and expertise is being used as free consultant advice or
(2) our pricing and delivery terms are used to ‘motivate’ other molders.
If you would wish consultant advice you may hire our company on an hourly basis. If you have no
intention to do business with us, we will no-quote your RFQ’s.
On-going or one time

A business relationship between a Customer and Supplier generally takes two discrete forms:
(1) A One-Time or Order-To-Order relationship shall be defined as a job placed for between one to five
production shipments within a year’s time for a product. This will be defined in the purchase order titled
One Time or Order To Order. It is not an on-going relationship for the following reasons: Each shipment
will require the purchase of raw materials, scheduling of manufacture, and the complete shipment of what
was produced with no expectation of future business.
(2) It is the expectation of future business that defines an On-Going business relationship. While the
frequency of shipments may be as low as that described above, the Molder and Customer, agree that
there is an expectation of future business. In this manner, both parties can benefit from the economy of
scale manufacturing and purchase of raw materials.
The purchase Transaction – documents back and forth

The purchase transaction is the result of several documents being exchanged. The purchase order along
with its associated documents is to be considered a contract and the working definition of the business
relationship.
The following documents are to be exchanged and kept on file in a business relationship. These manuals
and documents reduce amount of specific writing on the requests and offers to bid. They also clarify the
expectations of both parties.
1. Tooling specifications
2. Quality manuals
3. Business manuals
4. An indemnity agreement for terminating the relationship signed by both Customer and Supplier.
5. A signed copy of the acceptance of this manual.
Documents exchanged for the production or parts:

1. A request for quotation or Offer to Bid (including terms and conditions if not referenced in the
business manuals)
2. A response to the request for quotation (including terms and conditions if not referenced in the
business manuals)
3. The purchase order (including terms and conditions if not referenced in the business manuals)
4. The acknowledgement of the purchase order. Including terms and conditions if not referenced in
the business manual.
Acceptance of Orders the Whole Document

When the quotation is signed by an Authorized Representative of the Molder coupled with a purchase
order signed by the Authorized Representative of the Customer this will be sufficient to constitute the
entire contract so long as it refers to retained documents on specifications and business practices. This
shall be considered the entire document and the business transaction method without exception unless
modified in writing. Verbal assurances are invalid.
Document discrepancies:
If terms, prices, or issues are not resolved, work is not to begin until an acceptable resolution is in place.
Business Relationships
Order-to-Order relationships
An Order-to-Order relationship is self-terminating. An order is placed, the raw materials are purchased,
on arrival the job is integrated into the production schedule, and on completion all the parts are invoiced
and shipped. Upon presentation of the invoice, the relationship is terminated until a new request for bid is
received as described in the Type 1 purchase order. If an additional purchase order is received with
pricing based on a previous order, this has now converted itself to an on-going relationship with all the
responsibilities described below.
On-going relationships
An On-going has as its foundation the expectation of future business. It contains all the steps of an order
to order relationship except is it not self terminating. When the relationship is terminated, the following
steps are to be followed:
1. Notice is to be given so that all inventory building is stopped
2. Any orders for raw materials are canceled
3. All returnable goods are returned
4. The Customer purchases all existing finished goods and work in progress and removes all capitol
equipment.
The description of the characteristics of this kind of relationship is described in Type 2, 3, and 4 Purchase
Orders.
All manufacturing agreements have special characteristics that are noted on the purchase order. The four
most common agreements are listed below with their identifying characteristics. Depending on the type
chosen these characteristics are to be included in the purchase order documentation package.
The Four Basic Business Relationship Purchase Orders

Type 1: One Time or Order To Order
Description: This order is for the one time purchase of goods. There is an offer to bid given, a quote
received, and a purchase order issued. The raw materials are ordered and parts manufactured to this
one particular purchase order. When goods are shipped and invoiced the relationship is terminated. No
future business can be generated from the quotation or the purchase order.
Expectation of future orders: The order is for a one-time production only and therefore there is no
expectation of future orders.
On-going business relationship: None exists.
Description of Business relationship: One Time transaction
Necessary Documents: Offer to Bid, Quotation, Purchase order, Acknowledgement, Tooling
specifications, Quality manuals, Business manuals, quality manuals, Bill of Sale if tooling is built,
Indemnification Agreement and the Inventory Liability Agreement.
Inventory
Disposition: All inventories are shipped and invoiced.

Storage: Tooling may be stored per the terms of the business manual.
Termination of the agreement
Exit Strategy: Job is terminated on shipment of order.

Raw materials: All materials related to this specific job returnable or non-returnable are billed to the
Customer.
Work in progress: None retained.
Finished Goods: None retained.
Disposition of all tooling: Upon full and complete payment of all outstanding purchase orders the
customer owned tooling will be released for shipment.
Type 2: Forecast Master Purchase Order
Description: There is an offer to bid given, a quote received, and a purchase order issued. The raw
materials are ordered and parts manufactured to this one particular purchase order. This order, however
establishes a shipping schedule into the future based on a forecast. The forecast shall be frozen (i.e. a 4-
6 week order schedule from the current week) and then a non-frozen forecast into the future. The
forecast shall be updated weekly or on terms agreed upon in writing by the Customer and Supplier.
Expectation of future orders: Yes
On-going business relationship: Yes
Description of Business relationship: The Customer supplies an ongoing forecast. The Molder ships
the volumes of parts to the prearranged dates based on the order schedule. The Molder builds inventory
levels based on the order schedule and the forecast.
Indemnification Agreement, the Inventory Liability Agreement and Manufacturing Agreement.
Inventory
Disposition of goods: Goods are shipped per the order schedule

Storage of goods: Finished goods, work in progress and raw inventory is maintained as determined by
the order schedule, the forecasts, and Molder‘s shop load.
Exit Strategy: Notice is to be given so that all inventory building is stopped per the forecast or build
schedule
Raw materials disposition: All returnable materials related to this specific job are returned. Non-
returnable goods are either made into finished goods or billed and disposed of upon agreement between
the Customer and Supplier.
Work in progress disposition: Converted to finished goods.
Finished Goods disposition: Shipped and billed to the Customer as the final order per the Inventory
Liability Agreement.
Type 3: Min Max Purchase Order
materials are ordered and parts manufactured to this one particular purchase order. Orders are shipped
in specific lot sizes. The Purchase order however, establishes a maximum inventory level of goods and a
minimum inventory, which will trigger a rebuilding of inventory to the maximum level. The minimum level
is determined by the time required to build back to the maximum level. Shipments are made based on a
forecast but NOT an order schedule. The forecast shall be updated weekly.
On-going business relationship: Yes
Description of Business relationship: The Customer supplies an ongoing forecast. The Molder ships
based on a shipping schedule received. The Molder builds inventory levels based on the order schedule
and the forecast.
Inventory
Disposition of goods: Goods are shipped per the order schedule priced according the size of the
shipped lot.
Storage of goods: Finished goods, work in progress and raw inventory is maintained as determined by
the order schedule, the forecasts, and Molder‘s shop load. Inventory will be automatically scheduled to be
rebuilt to the maximum level when the current inventory approaches or it at the agreed upon minimum
level. Inventory rebuild will be based on the Supplier’s backlog, time to acquire raw materials and the
customer’s ordering history. As conditions change in the marketplace this may not be when the current
inventory level approaches or is at the minimum agreed to level.
Exit Strategy: Notice is to be given so that all inventory building is stopped.

Work in progress disposition: Converted to finished goods
TYPE 4: JIT, KANBAN, FLOWMAN, - Zero Inventory etc.
materials are ordered and parts manufactured to this one particular purchase order. This purchase order
only has a forecast but no order schedule. There are no agreed to Minimum or Maximum agreed
inventory levels. The sustained inventory levels are based on the experience of the Molder.
On-going business relationship: Yes, deliveries are expected to be within days or receipt of the order.
Description of Business relationship: The Customer supplies only orders. The Molder ships and bills
the jobs according to the size of the orders. The size of the orders are completely variable. The Molder
charges a minimum engineering charge when the order size is so low the administration cost exceed the
profit of the shipment. Pricing changes depending on the size of the order.
Inventory
Disposition of goods: Goods are shipped per the order schedule.

Storage of goods: Finished goods, work in progress, and raw inventory is maintained at the discretion
of the Molder but only limited in size by the indemnity agreement. The Molder may exceed this size at his
own risk.
Exit Strategy: Notice is to be given so that all inventory building is stopped.

Work in progress disposition: Converted to finished goods
Exceptions to orders
It is recognized that there can be unanticipated changes in an order forecast.
Pull-ups/special orders
1. Advanced deliveries or special orders not part of an agreed to schedule will be quoted separately
and run on a premium basis of 30% markup over the normal cost.
Push-backs or schedule cancellations

1. Scheduled push-backs (cancellation orders in the ‘floating’ forecast – above) are acceptable.
Cancellation of a scheduled shipment will incur a one time 30% order-cancellation fee.
2. Inventory that is held but not shipped for a period of six months will be considered billable,
whether it is shipped to the customer or not. If paid for but not shipped, it will be stored at no cost
for an additional six months at which time it will be scrapped if no other arrangements have been
made.
3. Tooling that has not been run for a period of 12 months will incur a storage fee
4. Tooling that has not been run for a period of 36 months will be considered ‘retired’. The customer
will pay for its return or deposition as scrap metal.
Molds and Tooling
Tooling in General
Tooling whether consigned to the Molder or built by the Molder is considered to be the property of the
Customer. All production from this tooling is for the exclusive disposition of the Customer and the
Customer’s assigned agents. Shipment of parts to any other party must be in writing by the Customer’s
Authorized Representative. Cancellation of a tooling order is to be made in writing by the Customer’s
Authorized Representative to immediately stop work on the construction of the tooling. This cancellation
is subject to a cancellation charge. This charge shall be equal to the expenses incurred to the mold
builder plus the engineering time invested by the Molder in the mold build project up to the date of receipt
of the ‘stop work’ written communication.
Tooling Acceptance / qualification

Sample sizes
On completion of the mold build the mold shall be sampled as part of mold build purchase order. Once
the process has been optimized to the satisfaction of the molder the parts will be dimensionally inspected
for purposes of correcting discrepancies. Once the molder has the best possible parts from optimized
process 10 samples per cavity will be submitted for functional and cosmetic acceptance. If the submitted
parts are cosmetically and functionally acceptable, the customer will then perform a dimensional analysis
and modify the design to comply to the part. Tooling corrections will not be made unless the part cannot
function.
Tooling payment terms

Our payment terms are as follows: 30% with acceptance of mold build purchase order. 30% upon 50%
completion, 30% on completion of the mold. 10% on submission of samples. It is agreed that all
engineering changes will be reflected and quoted as amendments to the original purchase order or a
separate purchase order with payment terms as stated as above. Progress payments will be invoiced.
All work will stop until progress payments are received. The mold will not be released for molded part
production and no further samples will me manufactured until all invoices relating to the mold build have
been paid.
Amortized Tooling
The cost of tooling is a large expense compared to the individual part price. We will not amortize the cost
of the tooling over production of parts without a secured loan agreement and an indemnification
agreement from the Customer with tangible assets. Otherwise, the risk is unfairly burdened on the
Molder with all the benefits to the Customer.
Customer design or Customer built tooling

When the mold is designed or built by the Customer, we cannot be held liable for any claims arising from
the mold’s failure to produce parts of specified quality or premature wearout. In order to produce parts of
specified quality, modification to the tooling may be required. This will be billed to the Customer.
Tooling built by the Molder

Molded parts produced from tooling built by the Molder are built to specifically fit into the Molder’s
equipment for the production of parts. The Molder will determine the optimum number of cavities and
mold type for the most economical production of parts for the Customer. Because there is a large amount
of un-billable engineering time invested in qualifying a new mold, the Molder must be allowed to recover it
through normal production. As a condition of sale, the Customer agrees that if the Customer removes the
mold within one year of completion of the mold the Customer agrees to pay an engineering fee of one
third (1/3) the cost of the mold as compensation for engineering time invested in the mold.
Payments for tooling construction are usually in sequential payments or negotiated at the time of
placement of order. Payment in full is due and payable 30 days after submission of parts for Functional
Inspection. The final invoice will be marked up 15% with an allowed discount if the final payment is made
within the appropriate time. If payment is delayed, the discount cannot be taken. The final invoice will
include all charges for engineering changes made during the tooling construction.
Production of parts beyond those for functional sampling will not be made until full payment on the mold is
made. At the time of full payment, the Molder/tool builder will execute a release of lien quit claim deed
giving undisputed ownership of the mold and its associated tooling to the Customer.
The Customer shall specify surface finish of the mold with reference to the SPI finishes plaque.
Texturing, graining, and engraving shall be contracted for directly by the Customer. The Molder and mold
builder cannot assume any responsibility for the quality of the molded product from the texturing. It is the
Customer’s responsibility to work with the texturing/engraving company until the desired results are
achieved.
Tooling built by others whether new or shipped from another molder.

Tooling of this type is to received on a consignment basis without the molder giving any warrantee for the
life of the tool, quality of the parts, or required maintenance to produce acceptable part.
The consignment tool should be accompanied by the following:

1. All related tools, jigs, inspection gauges and fixtures
2. Complete mold designs
3. The part design at the latest revision level.
4. The latest full inspection report showing compliance to the part design at the latest revision level.
5. A mold history reporting maintenance, cycles run etc. as complete as possible.
6. Spare cavities
7. The quality specifications, sampling plans, etc.
8. Packaging and shipping specifications
Before accepting the job the following be established:

1. Proof the mold can produce the quality and quantities required by the customer at the required
production rate. If it can’t who will pay for repairs and maintenance until it is deemed fully
capable.
2. The last shot of the prior run – virgin – not trimmed, or modified in any way which is the basis for
proof of repeatability when the first shot of the new production run is produced.
3. Color of the product.
4. Material used, regrind allowance.
5. Warp allowance, Dimensions and dimensional stability.
6. Cosmetics – specs, voids, flash, decorating etc. etc. How much, where, how big?
7. Flatness.
8. Assembly characteristics – does this part have to fit into, onto, or is screw/welded/pressed to
another part? What are the dimensions for assembly?
9. Physical tests – heat resistance, impact, chemical, pressure resistance.
10. Payment terms.
11. Volumes of shipment.
12. The size of the JIT warehouse expected to be maintained.
13. The exit strategy – who pays for all finished goods, work in process, and raw material when the
job is finally moved elsewhere?
14. The appropriate proof of ownership, indemnity and manufacturing agreements signed and
exchanged.
These requirements must be
1. In writing.
2. Mutually agreed to.
3. Signed by the appropriate representatives of the molder and customer.
Tooling Wear Out: Maintenance, Repair and/or Replacement
Tooling purchased from a custom will be designed and built to sustain production for the Customer’s
expected lifetime volume of parts with routine maintenance. The mold is worn out when parts can no
longer be produced to specification with reasonable maintenance. With sufficient notice, when normal
parts produced are no longer capable of meeting the Customer’s specifications, quotations will be
submitted by the Molder in writing to either (1) rework, repair, or replace components of the mold so that
production can again produce parts to the Customer’s specifications or, (2) rework to the molded parts
With no work on the mold to bring the parts to specification. If the Customer declines either the repair of
the mold or the cost of the secondary part rework but still requires parts, the Customer will modify the
specifications to accept the parts as molded in writing.
Routine maintenance is included in the part price. Major maintenance will be quoted separately. Unless
otherwise agreed to in writing at the beginning of production, the Molder will not include the cost of major
maintenance in the part price.
While molds are built to last their required lifespan, the Molder will not be held liable for premature wear
out due to low volume runs requiring frequent setups and start ups. Frequent startups are a common
cause of premature wear out.
Damage due to shipping the mold is not the responsibility of the Molder. A claim arising from shipping is
a freight damage claim against the carrier.
Molds built by the Molder are the property of the Customer, and held at the Molder’s facility on a
consignment basis. The Customer should carry proper insurance for repair and replacement of the
tooling in the event of liability, fire, or other natural causes.
Mold consumables.
Certain items in a mold wear out with use. Slides, rack and pinion mechanisms, valves, and other
mechanical moving mechanisms are typical examples of consumable parts. Replacement of these parts
as a normal part of wear and tear on the mold is the responsibility of the customer. Ejector pin wear and
breakage is not considered a consumable, likewise are leader pins/bushings, ejector return mechanisms
etc. These components should only be considered billable to the customer as part of Major Maintenance
wherein the tool has past its expected life and is now being refurbished to extend its production capacity
as described above.
Storage molds, secondary tooling etc.

Molds, tooling, and equipment involved in currently producing parts will be stored at no charge at the
Molder’s facility. If the part or product becomes inactive for a period of longer than two years the
Customer will be informed in writing to either remove everything involved in the production of the
particular product or pay a storage fee of 5% of the initial purchase price of the mold, tooling and
equipment involved in producing this part per month. If the Customer fails to pay the storage fees or pick
up the tooling within a two-month period after receiving written notice, the Molder will deem the tooling to
be abandoned and sell all tooling auction in lieu of collecting the storage charges.
Removal of Molds
This is the general policy reflects and will clarify the removal of tooling from a molder by the customer.
Notice is to be given in a timely manner for the removal of tooling.
If the mold has not been in full production for a minimum period of twelve calendar months, the Customer
agrees to pay the molder an amount equal to 50% of the mold’s replacement cost as an Engineering
Services Fee for the startup, debugging, and process optimization of the mold.
If a ‘transition inventory’ is to be built to facilitate the supplier’s continued production while the mold is
being requalified at a new production source an appropriate order for the amount of Finished Goods to be
manufactured will be noted in the termination letter. In the event no ‘transition inventory’ is ordered
production will stop immediately to avoid building excess inventory.
The customer agrees that all customer-owned tooling as described in the Bill of Sale (see the Forms
section at the back of this manual) will be shipped to his designated location once all other invoices and
materials have had appropriate deposition:
All returnable materials related to this specific job are returned. Non-returnable goods are either made
into finished goods or billed and disposed of upon agreement between the Customer and Supplier.
All work in process shall be converted to finished goods
All Finished goods shall be shipped and billed to the Customer as the final order per the Inventory Liability
Agreement.
Upon full and complete payment of all outstanding invoices the customer owned tooling will be released
for shipment. The Customer agrees that by signing this document to forego any claims of Business
Interruption until all invoices and material dispositions are paid for. The Supplier will retain ownership of
all production tools, jigs, fixtures and assembly aides that were not specifically paid for by the customer.
Molded Parts
Quality
Quality will be specified by the Customer in writing and is to be as free of interpretation as possible.
Should any quality be interpretable and/or the specification change, production/shipping will terminate
and a new price negotiated based on the new specification. The definition of a rejectable part is one that
for dimensional or cosmetic reasons is no longer functional for its intended use and is significantly
different than parts accepted in the past. Quality will be sustained to the specification until the tooling is
determined to be no longer economically capable of producing parts to the acceptance criteria through
normal use. The Molder will inform the Customer in writing of this situation and production will terminate.
The Customer can authorize the Molder to repair, refurbish, or replace the mold; or adjust the
specification such that the mold can again produce parts that comply with the specification.
Quality Audits
Quality audits will be done periodically at the discretion of the Molder to continually assure production of
parts that comply with the Customer’s specifications. While the Customer is free to do whatever audits he
feels are required, the only basis for a rejecting a lot is described below regardless of the results of the
audit.
Color and Color Matching

Color matching of the molded part can only be done analytically to a preset standard. It is acknowledged
that molded components and painted metal parts while the same color, may appear to be mismatched.
The Molder will use either precolored material or color concentrate certified by the compounder of the
colored material. Color match must be done with certified standards and identical certified measuring
equipment supplied by Customer so that interpretation of color variance will be minimized.
Cosmetic standards
Cosmetic acceptance is a function of time, distance, illumination, and the surface inspected. The
Customer will specify cosmetic requirements per the industry standards. If the part or product is prone to
scratching etc., where the cosmetic requirements will degrade in shipping, special packaging and its cost
will be borne by the Customer.
Tolerances
Part dimensions will vary as defined by the industry standards. The Customer will initially define the
tolerances as ‘target’ dimensions until verified by functional acceptance.
Initial acceptance of quality requirements

The primary concept of quality is to produce parts that work in consistent volumes over the life of the
product. In an ideal world, these parts exactly fit the dimensional, cosmetic, and functional requirements
of the product’s design. However, it is rarely the case. When a part is considered acceptable the
Customer will provide a letter of acceptance and a revised product specification showing that the
acceptable parts are within the required specifications before production quantity shipments begin.
Functional
Functional qualifications and testing are to be done prior to dimensional testing. The Customer is to
specify a specific amount of parts required for testing. The Molder will produce these parts under typical
production conditions. The parts are to be then tested for their fitness for use. Upon passing,
dimensional approval is then sought. If the parts have passed functional testing, the design will be
modified to reflect the dimensions of the molded parts. If the parts did not pass functional testing the
Customer must determine if the failure is the caused by the part, the test equipment, or the test criteria.
Dimensional – ambassador dimensions

If the parts submitted for functional testing are approved for use, the Molder will do a full dimensional
analysis on all cavities of the mold. This report will be the basis for adjusting the dimensional
specifications for the part.
If the parts failed functional testing, the Customer must provide the Molder with a failure analysis report.
If the parts were within the dimensional criteria but failed, the Molder will submit a quote to modify the
tooling. If the parts are outside the dimensional limits of the specification AND considered the primary
cause of the functional failure, the mold builder will correct the tooling at his expense.
Once dimensional approval is achieved, the dimensional specifications will be altered to reflect the
combined tolerance of all cavities producing this product. The Molder and Customer will then agree on
inspection dimensions for future production. These will be the only inspected dimensions by both the
Customer and Molder to be used as the criteria for a reject based on dimensions.
Statistical Cp, CpK

The cost of a statistical qualification, its procedures, disposition of all parts made, and the investment of
labor and equipment is to be borne by the Customer. Requesting a specific Cp or Cpk after the part is
determined to be functionally approved shall be done by the Customer re-centering the dimensions and
adjusting the tolerances on each dimension to accommodate the process variability of the tooling to meet
such standards.
On going criteria
Checking dimensions by gauge is the preferable method. Duplicate gages and check fixtures are to be
constructed where one exists at the Molder and the other at the Customer’s quality department. On a
periodic basis, the gages are exchanged. All gages are to be made to a traceable standard.
If there is no formal inspection criteria required by the Customer, the Molder can choose either a
recognized procedure or Federal Inspection Standard. 105.
Acceptability of parts
1. Parts will be considered acceptable if the customer begins using or modifying them in any way in
preparation to or as part of the manufacturing process.
2. Parts are to be considered acceptable from a previous shipment if a new shipment is received whether
the manufacturing process has begun or not.
3. Parts will be considered acceptable and not defective if the subject parts are not returned within ten
working days of the receipt of the Return Material Authorization. In this instance the Return Material
Authorization and acceptance of defective parts will be considered void.
4. It is the duty of the Customer to inspect the parts for acceptability and respond in a timely manner if
defectives are found regardless of the molder’s history or assurances of quality.
Rejects
Claims for Defects
Basic Duty Limitations
Any claim for defective molded parts will not be recognized or considered unless the following procedure
is used:
1. The claim for defective parts must be made in writing to the Molder either within two weeks of receipt
of shipment or prior to the receipt of any subsequent shipments.
2. With the receipt of a claim for defective parts, further production of that particular part will cease until
the claim is resolved.
a. All work in progress and finished goods produced prior to the claim for defective parts will be
impounded with no further shipments until the claim is resolved.
3. By overnight shipment, an exemplar of the defective part and a written explanation of the defect must
accompany the initial claim to the Molder.
4. A claim cannot be made if the parts are within commercial tolerances from the parts that have been
deemed acceptable the in original qualifications for fitness for use.
5. The defect must be unique and not acceptable. A part may be in compliance dimensionally but if it
deviates from its functional acceptance beyond commercial tolerances the claim is valid.
6. A claim is invalid if in the past it was acceptable by a letter of deviation or waiver, even though such
documents have expired, withdrawn or terminated.
A written and agreed to authorization (Return Material Authorization) is required to return the claimed
defective shipment to the Molder. Freight charges for this return are at the Customer’s expense and are
not to be construed by the Customer as defective until determined by the Molder and specifications.
The claim for defective parts will not be recognized if the part has been assembled, decorated, machined,
or altered in any way after its original receipt from the Supplier.
The Molder’s liability is limited to the replacement of the molded part or product shipped only. The Molder
is not liable for extra shipping charges by the Customer, Customer inspection charges, or any
consequential damages.
Remedy: The exclusive remedy for defective parts will be replacement of those parts. There will be no
credit issued against future orders or cash refunds.
Variances and Deviations

It is recognized that an acceptable part may not match dimensionally the product specifications.
Functionality will always supercede the specification requirements. Dimensional quality is accepted
based on the acceptance of the previous shipment. Since the usual purchase agreement is to provide
parts ‘to print’ this presents a problem. To continue a stream of acceptable parts being shipped a
Variance or Deviation allows an exemption to continue shipping parts until the specifications are updated
so that the parts and specifications are in agreement.
Deviations or Variance documents are one-time exemptions allowing sufficient time for an engineering
change to be processed. Parts will not be run on a ‘Life time’ deviation. A deviation will not be honored if
its expiration date is longer than 90 days from receipt. No extensions of time or re-issuance of the same
deviation will be honored. Without exception when the deviation expires, either an updated specification
will now become the criteria for acceptance or production/shipping of parts will cease until the
specifications are updated.
Packaging and Shipping
Packaging – custom or standard and shipping
Standard packaging to assure parts arrive at the Customer’s facility will be described in the quotation and
included in the part pricing. Where custom packaging is required there will be an addition charge to the
pricing structure.
Custom packaging such as labels, clam shell packaging, decals, UPC labels etc. may only be
economically purchased in large volumes that well exceed any prudent specified inventory level for a
particular part. The Molder will notify the Customer of this circumstance and the Customer will assume
the liability for the cost and maintenance of this inventory. The Customer will also pay for the entire
outstanding inventory of these components upon terminating the relationship for this part.
Shipping Tolerances
Unless otherwise stated, the Molder has the right to ship the quantity ordered within 10 (ten) percent of
the ordered quantity. If the Customer dictates exact shipping quantities i.e. JIT, FLOWMAN, KAN BAN,
etc., a price adjustment to the quotation will be rendered.
Shipping Schedules
Normal orders will be shipped in one complete shipment F.O.B. the Molder’s dock using the Customer’s
approved carrier timed to the Customer’s delivery schedule. Split or partial orders, will be subject to an
additional administrative charge if shipped using the Customer’s normal carrier. Split or expedited orders
will be subject to an additional administrative charge and shipped F.O.B. the Molder’s dock to the
Customer, with the Customer bearing the additional freight charges. Pushed back or delayed shipments
requested by the Customer will incur a storage charge if not shipped within two weeks from the scheduled
shipping date. Cancelled orders will be subject to a cancellation charge.
Damaged Shipments
Parts or products broken or damaged while in transit from the Molder to the Customer is considered a
claim against the freight carrier by the Customer. Filing a claim of this type shall in no way delay either
future shipments or payments on the damaged lot.
Claims for Freight

The Customer will specify the common freight carrier. The Molder will ship product FOB the molding
plant. The cost of expedited freight in any mode will be at the expense of the Customer unless otherwise
negotiated and accepted in writing by both the Molder and Customer.
Additional reports/certifications
The customer will be charged $100 per page if reports (i.e. CpK Certifications), certifications, etc are
required for each shipment.
Components and materials

Inserts, Component Parts and Materials Supplied by Molder
The Molder will assume responsibility for the delivery and quality of purchased components that go into
any part when specified but not supplied by the Customer. The cost of these components will be
incorporated into the product price along with inspection and handling charges appropriate to the
component. If these products are nonreturnable, the standard cost billed will include the inspection and
handling charges along with the component price if the Customer terminates the relationship. If the
components are returned without penalty to the component Supplier, the Customer will by liable for the
handling and inspection charges if the relationship is terminated. The Customer is responsible for all
material, inserts and components including inspection and handling charges obsoleted either by the end
of the product life or engineering change.
Inserts, Component Parts and Materials Supplied by Customer
Customer supplied materials for the manufacture of his productions will have and incoming inspection
and handling charge added. The Molder will not accept the responsibility for defective parts made from
Customer supplied defective materials. The Customer will supply additional material at no cost to the
Molder to cover the cost of spoilage and in-house scrap. Customer supplied inserts or materials must be
of a type and quality that does not damage existing tooling. Repair, refurbishment, and/or replacement of
tooling caused by damage resulting from inferior components supplied by the Customer are the
Customer’s financial responsibility. The Customer is responsible for all material, inserts and components
including inspection and handling charges obsoleted either by the end of the product life or engineering
change.
The Material Specification

In a consultant capacity, whether paid or unpaid, the Molder may be asked to recommend a molding
material for a specific product. The Molder’s recommendation is not a guarantee of fitness of use nor can
the Molder be held liable for product failure or litigation based on this recommendation. The Customer
must approve this recommendation and assume all liability for fitness for use.
Business audits and Supplier Evaluations

Many Customers they feel they should ‘manage’ their Suppliers. We are both here to do business with
each other, but unless we sit on eachother’s board of directors any attempt to ‘manage’ either side of the
equation is futile. If the Customer’s concern is our ability to take on new work, we will refer you to our
Merchant Banker where you will only be told our ability to pay our bills and take on new business.
Because we are not a publicly held company, our accounting practices and financial records are not open
for examination.
Our business is manufacturing, not filling out requests for financial, quality, and production information.
What we have to sell is our expertise, which we will not share or sell. The time spent in filling out forms or
being interviewed in the pursuit or this data is costly. If it is mandatory that you have such information,
you will be billed at the rate of $125 per labor hour to gather the data and fill out your forms should we
deem it necessary. No work will be done until we receive an authorized purchase order.
Visits:
Customer visits.
Our business is manufacturing. Each of our customers requires the proprietary nature of their products
be held in confidence. At our discretion will hold an ‘Open House’ for all customers to view our facilities.
Individual customers will not be allowed on the production floor for insurance reasons.
Face to Face communication

Both our time and yours are expensive and valuable. We will come to the customer’s facility only at our
expense in the interest of gaining new business. If scheduling permits we will also visit you at your
expense. All other ‘in-person’ communications can be done via video conferencing. Contact our
Authorized representative for suggested modes of video conferencing.
Ethics
Bribes
Commissions, bribes, finder’s fees etc paid to the customer’s employees are considered part of doing
business. If these types of payments are a necessity of doing business we will gladly add them to the
cost of your products ONLY on the condition you previously have filled out the appropriate tax forms.
These payments will be deducted on our taxes with the appropriate ‘miscellaneous income’ tax form sent
to you at the proper time.
Ethics (continued)
Threats / Demands
We are in business to provide you with a steady stream of acceptable parts on a continuous basis. Any
threat will be treated as real and dealt with immediately:
(1) Production/shipments will immediately cease until the problem is resolved.
(2) If the problem cannot be resolved, the customer should follow the procedure for removal of
tooling.
(3) A history of threats, albeit they all have been resolved, will either put the customer on notice he
will be removed from your customer list in the next six months OR and new purchasing agent
should be assigned to your account.
Design / manufacturing consultations:

It is in everyone’s best interest that your design is both produced economically and is functional for the
anticipated product life. Any good plastics product design book will give you the basics to design a
moldable part. We will provide some manufacturing feasibility consultation on all our quotations to make
our respective jobs easier. We will formally do extensive consultations once the job has been placed with
us and an Indemnity Agreement (see Forms at the end of this publication) has been signed.
Evaluations or performance reports:

Should you choose to evaluate us against other Suppliers for the purpose of withdrawing business in a
vendor consolidation program or awarding new business, we would welcome the chance on two
conditions.
1. We see the final output of your work (although it is not necessary to see whom we are compared
against) and your recommendation of our future business relationship.
2. We will also send your CEO a similar ‘report card’ ranking you as a Customer against our other
Customers and our recommendation of a future business relationship with you.
Proprietary information
Your Propriety Information

We will sign and honor your secrecy or non-disclosure agreements.
Our Propriety Information

We are selling products at a competitive price. Our productivity rates, unless you commercially
participate in their improvement, will not be shared with you. All process sheets, machine settings, set up
conditions, computer programs, etc. that we develop to produce your product(s) are similarly held to be
proprietary to us and will not be shared with any Customer. We will not divulge our processing expertise
to a new production source if you choose to move production of any product to one of our competitors.
We will assist your new production source in starting up your product for the fee of $5000 per day plus all
expenses per mold, part, or product at our discretion.
Payment terms and prices
General
Unless otherwise agreed to terms for payment of molded parts are net 30 F.O.B. the Molder’s dock. The
thirty-day calendar begins the day of the shipment, not the day of receipt on the Customer’s dock.
Discounts
All shipments are accompanied with invoices. The original purchase order and offer to bid has
established the terms of payment. Each invoice is marked up 15% by the Molder when it is shipped. If
the payment is made per the terms of the agreement, the Customer may take a 15% discount as
described on the invoice itself. If the Customer fails to pay the invoice within the payment timeframe, the
discount has expired and is no long available. If the Customer takes the discount and pays late, the
invoice will be considered not fully paid and late.
Late payment consequences

The first instance of a late payment, if paid in full within two weeks, will be forgiven. The second late
payment or failure to pay within two weeks of the due date will put the Customer on a COD basis for the
next six months. With a perfect COD payment history for those six months, the Customer will again be
put back on the terms of the original agreement. If the Customer is unable to make a COD payment
(meaning the shipment is returned) or has a second late payment in a period of twelve months, the
Customer will be required to prepay for each order in certified funds for the next twelve months before the
order will be scheduled into the Molder’s backlog.
Periodic Review of Charges and Costs

Due to the ever changing nature of labor, material, and energy/utility costs, all pricing structures will be
reviewed for each run. If the structure shows more than a 5% deviance of our quoted cost the price will
immediately be renegotiated. Production will not begin until full authorization is received.
Other Factors
Changes in specifications, color, materials, authorization to run with less than full cavitation, authorized
overtime production, running a family mold without making a full cavitation set will result in increased part
costs and setup charges. The new pricing structure will be quoted. Production will not begin until full
authorization is received.
Taxes
Unless the Molder is selling products directly into the retail market all products produced are to be
considered for resale. The Customer must provide the Molder appropriate documentation or tax
exemption paperwork or merchant’s certificates prior to starting the job. The Customer is responsible and
liable for all taxes (state, federal or local), license fees, royalties, or commissions to any third party.
Dispute settlement
All disputes that cannot be settled by the Customer and Molder within 45 day time span will be settled by
arbitration with each side paying their own legal costs. The board or arbiters shall be made up of three
individuals in the industry whose expertise directly bear on the issue. Both sides shall equally share in
the expense of arbitration and abide by the boards decision.
Settlements will begin by a notice of arbitration being sent to either party in the dispute before 60 days
after the disputed issue. If notice is sent later than 60 days, the issue is deemed mute.
Recommended reading
The following publications can be purchased through the websites noted below.
The Society of the Plastics Industry. www.spi.com

Customs and Standards of the Plastics Industry
Standards and Practices of the Molding Industry
Cosmetic Standards
Mold finished plaque
WJT Associates: www.wjtassociates.com

Injection Mold Tooling Standards
Customer Supplier Evaluations
From any bookstore

The Purchasing Machine by Nelson, Moody and Stegner
Be sure to read it carefully. It defines the best way to keep a continuous supply of product. Do Not
read it selectively. If you only glean the ‘best’ parts your behaviors will be predatory and ultimately
unproductive.
Vocabulary
For purposes of this manual the following terms are used and defined below
We – for purposes of this manual the term “we” shall be interpreted as the Molder
You – for purposes of this manual the term “you” shall be interpreted as the Customer.
Molder – this term will be used interchangeably with Supplier. This company molds, fabricates, and
ships to their Customer. This company is a contract manufacturer whose product is manufactured
solely for sale to the Customer.
Supplier – this term will be used interchangeably with Molder.
Customer – this term is to represent the person or firm to which goods or services are sold to by the
Molder.
Tooling – While generally referred to as an injection mold this term also includes all jigs, inserts, spare
cavities, fixtures, gauges and other production aides used to produce a specific part or parts.
Forms
The following forms are to be used along with the Purchase Order and the response to The Offer to Bid.
Photocopy these forms for each business transaction for a job so long as this manual is in force.
Many Customers will see these forms as unnecessary and restrictive. However they are for the mutual
protection of both our Customers and our company. These will merely assure the smoothness of a
business relationship and avoid the usual problems that interrupt production for both parties.
The Inventory Liability Agreement is an agreement where the Customer underwrites the expense of doing
business. It is used when the molder might assume a high amount of risk not shared by the Customer.
The Indemnification Agreement is a statement that the Customer owns the rights to his product and
assumes all of its associated responsibilities. As a Supplier, we can only be held responsible for the
quality of our workmanship.
The Bill of Sale is the transfer of ownership of all tools, jigs, fixtures and other property associated to the
Customer that may have been procured or purchase via various requisitions or purchase orders. It
establishes clear title to the tooling.
The Manufacturing Guarantee Agreement and the JIT Manufacturing Guarantee Agreement assure the
Customer that there will be a ready supply of goods when you need them, and our company that goods
manufactured for our Customer will be sold.
Inventory Liability
Agreement
This agreement is made between _______________________________________ hereinafter known as
the "Supplier" and _________________________________ hereinafter known as the "Customer" for the
Subject Part known as _________________________________________________________________.

Name Part Number Revision
(a) The Customer has engaged the Supplier to provide the Subject Part in connection with products and
tooling owned, marketed and distributed by the Customer. The Supplier has agreed to provide such
services subject to indemnification by the Customer from any claims made by third parties in connection
with such ownership, marketing and distribution of the Customer's products and tooling.
(b) The Customer personally, individually, and corporately, its successors or assignees guarantees
payment of all due and payable invoices during all business transactions and upon termination for all
amortized or unamortized tooling and inventory purchased by supplier for all purchase orders. The
obligations of the Customer hereunder shall be operative after thirty (30) days written notice to of the
default of the Customer or its successor in interest, to pay such amount. The obligation of the Customer
under this paragraph (b) shall be completely extinguished upon satisfaction of the amortization provisions
contained in the above referenced Agreement.
(c) Once satisfaction is made on this agreement the Customer will remove such inventories, raw
materials, work in process, and all associated tooling within thirty days after payment is made. If the
goods referenced in paragraph (c) are not removed after thirty days of payment all goods will be
considered abandoned. The Supplier will scrap, sell, or dispose of all goods, tools and materials to
recover the cost of storage and the labor of disposal without recourse from the Customer.
This agreement shall be binding upon and inure to the benefit of the parts, their successors and assigns.
EXECUTED effective the ____ day of ________________________, 20____

Customer Name, Address ______________________________________
Authorized Signature _____________________________________________
Title ___________________________________
Supplier Name, Address ______________________________________

Title ___________________________________
Both parties agree to waive notarizing of this document. _________ _________

Initials of both parties
Form A
Third Party Liability
Indemnification Agreement
This agreement is made between _____________________________________ hereinafter known as
the "Supplier" and ________________________________ hereinafter known as the "Customer" for the

The Customer has engaged the Supplier to provide the Subject Part in connection with products and
tooling owned, marketed and distributed by the Customer. The Supplier has agreed to provide such
services subject to indemnification by the Customer from any claims made by third parties in connection
with such ownership, marketing and distribution of the Customer's products and tooling.
The Customer shall indemnify and hold the Supplier harmless from any claims, demands, liabilities,
actions, suits or proceedings, including all costs of defense, asserted or claimed by any third party arising
out of or in any way relating to the Customer's use, sale, transfer, marketing or other distribution of any of
the Customer's products without regard to the nature of the action subject to the quality of workmanship
specified in writing by the customer. The Customer also indemnifies the Supplier for claims of
infringement on any (but not limited to) patents, copyrights, and trade names or service marks. The
parties acknowledge that this indemnification is intended to protect the Supplier from any and all potential
liability for products liability claims, negligent design or manufacture or any other claim arising our of
ownership, marketing or distribution of the Customer's products once the Customer has provided the
Supplier with approval for production.
Both parties agree to provide each other with timely notice of any potential claim. The Customer shall
undertake and conduct the defense of such claim at its own expense. The Supplier shall cooperate fully
in such as defense. If the Customer fails to defend, then the Supplier shall have the full right to defend,
pay or settle such claim with full rights of recourse against the Customer for all fees, costs, expenses and
payment made or agreed to be made to discharge such claim, including its reasonable attorney's fees.

The Customer: Name, Address ______________________________________
Title ___________________________________
The Supplier: Name, Address ________________________________________

Authorized Signature ______________________________________________
Title ___________________________________

Form B
BILL OF SALE
THIS BILL OF SALE, Executed this ____ day of __________________, 20____, by the
Supplier (name and title) _________________________________________________
whose post office address is___________________________________________
to the Customer, (name and title), _________________________________________________
WITNESSETH, That the said Supplier, for good consideration and for the sum of _______________
dollars paid by the said Customer, the receipt whereof is hereby acknowledged, does hereby remise,
release to the said Customer forever, all the right, title, interest and claim which the said Supplier has in
and to the following tools, molds, jigs fixtures and equipment manufactured by the
first party or his subcontractors for the production of ___________________(part name) as described on
drawing or electronic file # __________________, dated ________________ revision level ______. The
Description of which to wit:
Signed, sealed and delivered in presence of:
____________________________ ______________________________
Supplier Authorized Representative Customer Authorized Representative

Form C
The Planning Issue
Inventory Build-Up
Manufacturing Agreement

Whereas it is acknowledged that both parties agree that the production of the Subject Part is to be construed as an
on-going business relationship with an expectation of future business from the date of first shipment until termination
of this agreement.
(A) This is an on-going business relationship with the expectation of future business until written notice of termination
is received.
1. There will be an initial forecast of shipments by the Customer attached when this document is executed.
2. The Customer will provide the Supplier a rolling forecast namely: a firm order schedule for the current ____
weeks and a _____ month forecast for the succeeding weeks. This forecast shall be updated every ____ weeks.
3. The Supplier shall build and maintain inventory levels of finished goods per the Purchase Order at his own
expense until ordered shipped in whole or in part by the Customer.
4. Failure to update the forecast will result in inventories being built to the last available order schedule and
forecast. The Supplier shall not build additional inventory after the firm order schedule has expired. If the
Supplier’s on-hand inventory cannot meet the Customer’s immediate needs where the Customer has failed to
provide an order schedule and forecast per this agreement; the Customer agrees to pay a premium fee to build
the inventory back to its above agreed upon level.
5. The Supplier shall ship to the Customer the quantities per the order schedule. If the Customer wishes to modify
any shipment quantity or delivery date within the order schedule time frame it is agreed that the Supplier can add
an administrative fee to the order and the Customer is obligated to pay such fee.
6. Pricing of Subject Part lot shipments is agreed to in the appended Purchase Order and Offer to Bid.
(B) If half of the agreed upon maximum inventory has not been shipped in a period of nine months, regardless of its
final level, it is agreed that this agreement has been terminated and will follow the procedures in paragraph (C)
(C) This agreement shall be terminated by either party with Thirty (30) calendar days written notice. At such time of
the delivery of written notice the Customer, its successors or assignees, as defined by the above referenced policy
manual, agrees to pay the Supplier, its successors or assignees for such remaining inventories, raw materials, work
in process, and unpaid invoices. It is agreed when a full accounting is made the Customer will pay the Supplier the
full amount in secured funds. The Customer, at its cost, will remove such inventories, raw materials, work in process,
and all associated tooling within thirty days after payment is made.

Title ___________________________________
Form D
JIT Manufacturing Guarantee Agreement

Policy Manual revision date ____________, 20 ____
(A) This agreement between the above parties establishes the business relationship for a JIT relationship.
1. This is an on-going business relationship with the expectation of future business until written notice of
termination is received.
2. This business relationship is where the Supplier shall manufacture and store inventory at his own
expense until ordered shipped in whole or in part by the Customer.
3. An initial inventory will be authorized and guaranteed by the customer as described on the attached
documents.
4. There will be an initial forecast of shipments by the Customer. However there will be no order
schedules forecast.
5. The Supplier will build and maintain a standing inventory in anticipation of future business.
6. Once an order history has been established in the mind of the Supplier the inventory will be built up
to but not exceeding the total of __________ months total shipments.
7. Pricing of Subject Part lot shipments is agreed to in the appended Purchase Order and Offer to Bid.
8. Should the order pattern and history be highly volatile in size, the Molder will build a larger inventory
than stated in item A-7 and the Customer hereby agrees to guarantee and indemnify the molder for
the purchase of such inventory.
(B) If half of the agreed upon maximum inventory has not been shipped in a period of nine months,
regardless of its final level, it is agreed that this agreement has been terminated and will follow the
procedures in paragraph (C).
(C)This agreement shall be terminated by either party with Thirty (30) calendar days written notice. At
such time of the delivery of written notice the Customer, its successors or assignees, as defined by the
above referenced policy manual, agrees to pay the Supplier, its successors or assignees for such remaining
inventories, raw materials, work in process, and unpaid invoices. It is agreed when a full accounting is
made the Customer will pay the Supplier the full amount in secured funds. The Customer will remove
such inventories, raw materials, work in process, and all associated tooling within thirty days after
payment is made.

Title ___________________________________
Form E
DISPOSITION OF INACTIVE TOOLING
This instrument for the disposition of inactive tooling, Executed this ____ day of _______, 20____, by the
and the Customer, (name and title), _________________________________________________
WITNESSETH, That the said Supplier has stored at his facility the following tools, molds, jigs fixtures and
equipment for the production of
___________________________________(part name) as described on drawing or
electronic file # __________________, dated ________________ revision level ______.

The Description of which to wit:
It is agreed by both parties that the above described tools, jigs and fixtures are no longer used in
production. The party of the second part, by his mark, chooses one of the three options as sited below.
(1) ___ All tools, jigs, and fixtures relating to this part number are to be returned to the Customer freight
collect.
(2) ___ All tools, jigs, and fixtures relating to this part number are to be stored until called for by the
Customer for the sum of $1,000/year for a period of Five (5) years at which time the subject tooling
will be scrapped
(3) ___ All tools, jigs, and fixtures relating to this part number are to be scrapped by the Supplier.
Signed, sealed and delivered in presence of:
____________________________ ______________________________
Supplier Authorized Representative Customer Authorized Representative

Form F
Proof of Notarization
__________________________________________________
Name of document being notarized
STATE OF } _______________________
COUNTY OF } ______________________
Executed this ____ day of __________________, 20____, by the
and the Customer, (name and title), _________________________________________________
whose post office address is___________________________________________.
The above persons or their authorized representatives personally appeared or personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature_____________________________
Affiant____Known____Unknown_____
ID Produced_____________________
(Seal)
Form G

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Policy Manual for Custom Injection Molders

Original Copyright 2003

William Tobin, Consultant Jeffery Cohen, Attorney at law

Games Customers Play

Frequently Asked Questions

Q: What if my customer won’t sign it?

Q: Why do I need it now, I’ve never needed it in the past?

Q: Do I need a form for a guarantee for each part that I make?

Q: Can I revise and reissue this manual?

Q: Even though this has been co-written by an attorney is it “legal”?

Why use the Manual?

Hints for good business:

How to use this Policy Manual

THE LETTER OF RECEIPT

Volume # ___ Rev. ____ Issue Date ____ / ____ / 20____

Dear Sir or Madam:

Signed this _____day of _____, 20______

Authorized representative for the Customer.

Patents, copyrights, trade names.

Entering in, Adjusting, Exiting a business relationship

Price changes controllable and non-controllable

Requirements for Quotations

On-going or one time

The purchase Transaction – documents back and forth

Documents exchanged for the production or parts:

Acceptance of Orders the Whole Document

The Four Basic Business Relationship Purchase Orders

Disposition: All inventories are shipped and invoiced.

Termination of the agreement

Exit Strategy: Job is terminated on shipment of order.

Disposition of goods: Goods are shipped per the order schedule

Termination of the agreement

Termination of the agreement

Exit Strategy: Notice is to be given so that all inventory building is stopped.

Disposition of goods: Goods are shipped per the order schedule.

Termination of the agreement

Exit Strategy: Notice is to be given so that all inventory building is stopped.

Push-backs or schedule cancellations

Tooling Acceptance / qualification

Tooling payment terms

Customer design or Customer built tooling

Tooling built by the Molder

Tooling built by others whether new or shipped from another molder.

The consignment tool should be accompanied by the following:

Before accepting the job the following be established:

Storage molds, secondary tooling etc.

Notice is to be given in a timely manner for the removal of tooling.

Color and Color Matching

Initial acceptance of quality requirements

Dimensional – ambassador dimensions

Statistical Cp, CpK

Variances and Deviations

Claims for Freight

Components and materials

The Material Specification

Business audits and Supplier Evaluations

Face to Face communication

Design / manufacturing consultations:

Evaluations or performance reports:

Volume # _ Rev. Issue Date / / 20__

Signed this ___day of _, 20____

EXECUTED effective the day of ________________, 20

Both parties agree to waive notarizing of this document. _ _

EXECUTED effective the day of ________________, 20

Both parties agree to waive notarizing of this document. _ _

Both parties agree to waive notarizing of this document. _ _

EXECUTED effective the day of ________________, 20

EXECUTED effective the day of ________________, 20

electronic file # ________, dated revision level .

Both parties agree to waive notarizing of this document. _ _

Executed this day of __________, 20, by the