Strengths of the AEP: (Q1. , p. 109) – Evaluation is carried out by Deere personnel from different departments such as supply management, operations, quality engineering etc… This makes the evealuation more transparent and comprehensive since the opinions of diverse personnel from different departments are taken into account – Suppliers were evaluated in five key areas, thus making the evaluation all inclusive – The use of the wavelength rating is an innovative approach to measure the supplier’s focus on quality, cost etc… The cost, wavelength and technical ratings are consensus composite ratings, which measures a variety of underlying aspects, rather than provide a brief overview. – Suppliers were classified into 4, making it easy to identify where each supplier stood with regard to others – The annual revision of performance level cutoffs is another strength of the AEP. Periodic revisions make sure that the ratings reflect current changes. The supplier performance summary provided each quarter provides suppliers with all pertinent data related to their classification – Training and recognition are only provided to suppliers with high ratings, thereby acting as an incentive to suppliers with low ratings to catch up. Weaknesses of the AEP: – The weakest category tends to skew the overall evaluation, which would work against suppliers providing consistent service with minor glitches.
These glitches tend to be amplified in the rating – Training is not provided to conditional suppliers, which is counter productive. A training program for such suppliers is likely to improve performance – The delivery and quality ratings are not composite ratings. Breaking down these ratings into individual components would provide more clarity. For example, the delivery rating makes no mention of the percentage of late, early or over deliveries. Other Criteria to be included: (Chapter 3, page 66) Total cost of Ownership including cost of special handling, cost of defects, rework etc… should be included in the AEP – The financial strength of the supplier should be included, possibly in the form of a credit rating – Responsiveness and flexibilty measured by responsiveness to customers, accuracy of record keeping, changes in delivery schedules, responsiveness to changing situations etc… should be included Performance over the last year: (q. 2, p 109) Complex parts has not performed adequately over the last year.
I say this because of the following reasons: – Certain requested price quotes had not reached Deere on time. – Suggestions for cost reduction and elimination of recurrent problems were not forthcoming – Increasing number of deliveries had to be expedited, which cost Deere – Complex parts delivery rating in the last quarter had hit a dismal 155,000- the level of a conditional supplier – Complex parts had not implemented the Deere quality plan at its new facility – Parts supplied for new product programs had not met Deere’s cost targets, thus reducing profit
Though Complex parts became ISO certified, internalized the Deere Quality plan elements, provided profitable suggestions through its R&D department and had been proactive in its business approach, the above shortcomings overwhelm the positive aspects. Hence, Complex parts has not performed adequately over the past year. Classification: In the absence of adequate data, it is difficult to assign a classification to Complex parts. Over the last quarter, Complex parts’ delivery rating was 155,000. The quality, wavelength, technical and cost management ratings have not been provided. Complex parts’ delivery rating of 155,000 would make it a ‘conditional’ supplier. Therefore a conditional supplier classification is most apt, based on the latest available quarterly data Alternative courses of action (q. 3, p. 109) – The first course of action would be to intimate Complex parts of its shortcomings. Having done this, the next step would be to downgrade its classification. Complex parts should then be provided an ultimatum, failing which it would cease to exist as a supplier. The ultimatum would be to meet certain set standards over the next quarter.
This course of action would be taken because of the longstanding relationship with Complex parts, which was proactive – The second and obvious course of action would be to terminate Complex parts as a supplier. Since there are 2 other suppliers who are capable of delivering the needed product, this move would make sense. However this would mean severing a relationship of ten years. – The third alternative would be to reduce the quantity sourced from Complex parts, sourcing the balance on a trial basis from either of the two capable suppliers.
This move would provide an objective assessment of the new supplier as well as Complex parts. In addition Complex parts would be provided with an ultimatum, failing which it would cease to exist as a supplier. Recommendation: – Intimate Complex parts of the shortcomings. Provide a set of standards to be adhered to within the next quarter. Make it explicitly clear that any shortfalls in set standards would lead to Complex parts being terminated as a supplier. Short term implications for Deere: (Q4, p. 109) Possibilty of costs increasing due to expedited deliveries – Possibility of increased costs in new product development programs due to Complex parts’ failure to meet estimated costs – Cost escalation because of a delay in receiving quotes – Possibility of a further fall in quality of Complex parts because of its not implementing the Deere quality plan at its new facility – Possibility of a frayed relationship as a result of the ultimatum – Need to keep a continuous watch on Complex parts to make sure standards are met. – A Continuous watch would mean extra costs for Deere
Long term implications: ( Chapter 4, p. 95) – Provides an opportunity for Complex parts to get back to its previous high standards – Cost reductions because of continuing with a trusted partner – Early supplier involvement would continue, thereby profiting both. – Value engineering provided by Complex parts through its R team would reduce cost and improve quality – The proactive approach of Complex parts would reduce new product development time – Change management would be easily implemented – Alliance development would be initiated