Purpose of the Supplier Performance Assessment
It is important to point out that in other business organizations, supplier performance assessment systems are also known as Vendor Evaluation Systems. A Vendor Evaluation system helps managers and business leaders to make decisions regarding key suppliers (Luzzini, Caniato, & Spina, 2014). The effective utilization of this particular management framework provides a quick overview of key business components, such as purchasing management, supply chain management, and performance management (Becker, Uhr, & Vering, 2013). The same thing can be said about APC Europe’s own version of the Vendor Evaluation System.
In the context of APC Europe, the company’s supplier’s performance assessment system was utilized to evaluate the performance of its suppliers. For example, the said system was used to evaluate the effectiveness of Branco, one of its key suppliers. These vendors were evaluated based on key performance criteria, such as
- quality;
- delivery;
- continuous improvement (Johnson & Flynn, 2015).
APC Europe was able to get much from the current supplier performance assessment system because it was a well-designed framework. For example, one of the key features of the said system was to maintain a direct contact between plant personnel and sales representatives. Thus, if there was a problem that crop out in the manufacturing plant as a direct result of the supplier’s product, there was a way to communicate that specific concern. There was a standardized format for the said response, and from the APC Europe’s end, the details of the problem encountered goes into “Nonconformance Action Report” (Johnson & Flynn, 2015).
On the other hand, the details of the supplier’s response are made available through the “Feedback Form” (Johnson & Flynn, 2015). Due to the existence of the “Feedback Form,” APC Europe’s plant managers and purchasing managers receive information that the suppliers acknowledged the problem and at the same time provide pertinent information regarding how to solve the said problem.
Aside from the efficiency and quick response afforded by the “Nonconformance Action Report” and the “Feedback Form” a secondary feature of the said vendor evaluation system was the “Supplier Performance Rating” (Johnson & Flynn, 2015). The use of the said system enabled APC Europe to determine if the suppliers were able to meet certain standards in terms of the quality of the products and the timely delivery of the same. Furthermore, the grading system enabled the company to figure out if suppliers are no longer able to hit certain goals. Thus, it is much easier to figure out if the company needs to look for another supplier.
Branco’s Performance as a Supplier
Maggie Agnelli, APC Europe’s packaging purchasing manager was concerned about the performance of Branco. She noted that the supplier’s declining performance in the last three quarters reached a new low when Branco failed to get the passing grade of 3.0 (Johnson & Flynn, 2015). In other words, a significant portion of the delivered goods did not conform to the agreed-upon standards. There was also a problem when it comes to the timeliness of the delivery of the said packaging products.
Besides, Branco also struggled when it comes to responding to the “Nonconformance Action Report” because the said supplier was expected to respond within a particular timeline. Also, Branco was not only expected to acknowledge the receipt of the “Nonconformance Action Report” the said supplier was also expected to identify the steps that it will take in order to rectify the problem. Therefore, the failure to take care of the problem sends negative feedback regarding the commitment of Branco to create a culture of continuous improvement causing them to receive low scores in this area.
Maggie was between a rock and a hard place. APC Europe adhered to certain standards and authorized the use of the said supplier performance assessment system in order to detect problems and to help the corporate leaders decide if it is time to change suppliers. However, Maggie realized that the decision to change supplier is more difficult than the outcome of the evaluation process seem to indicate.
It is not easy to pull the trigger so-to-speak, just to send a message to the suppliers that if they are unwilling to improve their performance, then, they have to look for new customers. Maggie understood the complicated nature of the packaging business, especially when it comes to APC Europe’s needs. The company requires certain types of products, and suppliers are having a hard time trying to comply with these requirements. To meet certain standards, there is a need for greater collaboration between suppliers and customers.
In this particular context, the vendor evaluation system that was utilized to measure the performance of Branco revealed the shortcomings of the said supplier. However, it is not easy to replace Branco, because this particular supplier of packaging products demonstrated its willingness to work closely with the representatives from APC Europe. This type of relationship is valued in a business that calls for a great deal of customization on certain product designs.
Improving the Supplier Performance Assessment System
One way to improve APC Europe’s vendor evaluation system is to shorten the time needed to respond to certain critical issues. For example, in the case of Branco, Maggie already detected a pattern of declining performance levels. Nevertheless, due to the constraints of the protocol she had to wait for more than three quarters before she was able to sound the alarm that Branco needed to overhaul its performance.
In other words, more than half a year had gone by without causing a major improvement in Branco’s manufacturing process. If there was a way to communicate the said shortcoming to the top leaders of APC Europe and Branco, then, it is possible to rectify the problem before it reached a critical level of nonconformity. For example, there is no need to wait for six months to sound the alarm; an upgraded system will enable the purchasing managers to fix a certain area of the manufacturing process every 30 days.
It has to be pointed out that APC Europe’s requirement to purchase cartons that require custom specification had taken its toll on Branco’s capability to provide excellent service all year round. Corporate leaders from both sides of the fence must consider the impact of unique customer requirements. One can argue that this type of order is disruptive to the regular manufacturing process because there is a need to change certain settings and to change certain parameters within the manufacturing plants.
It is not hard to imagine the amount of time and resources needed every time APC Europe makes changes to the agreed-upon specifications because end-user clients are promoting a new type of product or manufacturing a certain product on a limited run. Without a doubt, continuous changes in the manufacturing settings because of the need to create products characterized by small lots and unique specifications are disruptive to Branco’s normal operations process.
One way to solve this issue is for APC Europe to invest in Branco’s manufacturing plants. Maggie’s dilemma should compel APC’s corporate leaders to realize that the company cannot afford to sever its ties with Branco. Thus, if APC is unable to find another supplier, it is high time to strengthen the relationship between both companies. One way to handle the problem was to enable APC Europe to have greater control over the business operation of Branco.
If APC succeeds in forging an alliance with Branco, then, purchasing managers like Maggie can propose the creation of a dedicated factory that will focus only on special orders. In other words, Branco’s manufacturing facilities must focus on the creation of regular packaging products. However, when it comes to special orders that require custom specifications this type of job is coursed through a special manufacturing facility designed with an agile system in mind.
Thus, there is no problem when the lot sizes are small because the said manufacturing facility was calibrated to handle this type of order (Wu, 2012). Also, the creation of a separate manufacturing facility to handle special orders will prevent other manufacturing plants from operating at full capacity. Thus, Branco can eliminate system breakdowns and other management issues caused by forcing people and equipment to work at a strenuous pace (Hill & Jones, 2008).
Reference List
Becker, J Uhr, W Vering, O 2013, Retail information systems based on SAP products, Springer, New York, NY. Web.
Hill, C & Jones, G 2008, Strategic management: an integrated approach, Springer, New York, NY. Web.
Johnson, P & Flynn, A 2015, Purchasing and supply management, 15th edn, McGraw-Hill, New York, NY. Web.
Luzzini, D Caniato, F & Spina G 2014, ‘Designing vendor evaluation systems: an empirical analysis’, Journal of Purchasing & Supply Management, vol. 20, no. 1, pp. 113-129. Web.
Wu, B 2012, Manufacturing and supply systems management, Springer, New York, NY. Web.