Which department of the supplier should sign the PCN agreement

In most companies, the Product Change Notification (PCN) agreement is primarily led and signed by the Quality or Engineering department, but other departments such as Legal, Sales, and Procurement may also be involved. Below is a breakdown of responsibilities:


Primary Responsible Departments

1. Quality Department (QA / Quality Management)
This is typically the lead department because:

  • They are responsible for product consistency and change control

  • They understand customer requirements regarding change notifications (e.g., PPAP, FAI)

  • They can evaluate the technical impact and manage validation processes

2. Engineering / R&D Department
When the change involves design, material, or process modifications:

  • Engineering defines the change content and impact assessment

  • They work with customers to evaluate and approve the technical details


Supporting Departments

3. Sales / Key Account Management

  • Facilitates communication with the customer

  • Coordinates timing and customer approval for changes

  • Understands PCN clauses in customer contracts, including notification lead time

4. Legal Department

  • Reviews legal liability, indemnity clauses, and notification obligations in the PCN agreement

  • Ensures compliance and minimizes contractual risks

5. Procurement Department (if applicable)

  • In cases where the company is a tier-1 or tier-2 supplier, procurement may need to ensure upstream suppliers also follow PCN procedures


Practical Recommendations

  • For key customers (e.g., in automotive, medical, aerospace industries), it's advised to include PCN terms as part of the main contract or as an annex to the quality agreement

  • The agreement should clearly specify:

    • What types of changes require notification

    • Notification timelines (e.g., 90 days, 180 days)

    • Whether the customer has the right to approve or reject changes

    • Responsibilities and liabilities for unauthorized or unnotified changes (e.g., fines, returns, compensation)


Summary

The PCN agreement is usually signed by the Quality or Engineering department, with support from Sales, Legal, and Procurement as needed.

Which changes to the PCN protocol will result in fines

In a PCN (Product Change Notification) agreement, the following types of changes—if not properly notified or approved—can typically result in penalties, fines, or claims from the customer. This is especially true in industries with strict quality and compliance requirements, such as automotive, medical, electronics, and semiconductors.


1. Material Changes (BOM Changes)

  • Replacement or substitution of key raw materials or components

  • Changes in suppliers without prior approval

  • Component upgrades or replacements due to EOL

Risk: Product performance deviation, batch quality issues, rejection by customer.


2. Manufacturing Process Changes

  • Process flow adjustments, addition/removal of steps

  • Changes in soldering, coating, or assembly methods

  • Switching between manual and automated processes

Risk: Decreased consistency, fluctuating defect rates, revalidation may be required.


3. Production Site Relocation

  • Factory relocation or adding new production lines

  • Change of outsourced factories (e.g., EMS providers)

Risk: Inconsistent quality systems, PPAP or revalidation often required.


4. Critical Equipment Changes

  • Replacement of molds, jigs, or key production equipment

  • Updates to software or testing equipment

Risk: Affects dimensional accuracy or testing consistency; may require new sample approval.


5. Packaging or Labeling Changes

  • Changes to packaging materials, structure, or label content

  • Barcode format or batch number modifications

Risk: Logistics issues, scanning failures at the customer’s warehouse, product returns.


6. Product Design Changes

  • Modifications to product structure, functionality, or interface

  • Software/firmware version updates

Risk: Re-certification required, and unapproved changes may violate contract terms.


7. Product Discontinuation (EOL Notification)

  • Failure to notify customers within the agreed lead time (e.g., 12 months)

Risk: Customers may claim compensation for supply disruptions or redesign costs.


8. Changes in Delivery Conditions

  • Lead time extensions, minimum order quantity (MOQ) changes, price adjustments

Risk: Breach of framework agreements; customers may impose penalties or file claims.