Description
Supply chain management (SCM) is the management of an interconnected or interlinked between network, channel and node businesses involved in the provision of product and service packages required by the end customers in a supply chain
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A Dissertation report On
“ANALYSIS OF SUPPLIER’S PERFORMANCE IN SUPPLY CHAIN MANAGEMENT IN DELHI/NCR WITH RESPECT TO AUTOMOBILE INDUSTRY”
A report submitted to Amity University as a partial fulfillment of full time MBA Telecommunication Management
Date of submission: 5/3/2012
SUBMITTED TO: Mrs. ASHIMA AGARWAL Assistant Professor MBA TELECOM
SUBMITTED BY: NISHTHA NIGAM A1603710026 BATCH 2010 - 12
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CERTIFICATE
This is to certify that the dissertation done on “Analysis of supplier’s performance in supply chain management with respect to automobile industry in delhi/Ncr ” submitted to Amity Institute of Telecom Technology & Management by Nishtha Nigam in the partial fulfillment of the requirement for the award of degree of MBA telecom, is a bonafide work carried out by him under my supervision and guidance. This work has not been submitted anywhere else for any other degree / diploma. The original work was carried during Dec 2011 to March 2012
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Mrs Ashima Agarwal Assistant Professor MBA Telecom
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ACKNOWLEDGEMENT
I, with deep sense of gratitude would like to pay my sincere thanks to Prof. Marshal Sahni - Head of Department, AITTM, Amity University for giving me this opportunity to conduct a research work during my curriculum of MBA. I express my cordial gratefulness to my academic mentor Mrs. Ashima Agarwal for providing me guidance, valuable advice, constant encouragement and necessary facilities to complete this project. I would like to thank all those people who gave me their valuable time and input during my course of dissertation.
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DECLARATION
This Dissertation Report “Analysis of supplier’s performance in supply chain management with respect to automobile industry in delhi/Ncr” is submitted for full time fulfillment of the requirement for the award of degree of MBA Telecom at Amity University. I declare that this Dissertation Report is my own work and it does not contravene any academic offence as specified in the University’s regulations. I confirm that this Dissertation Report does not contain information of a commercial or confidential nature or include personal information other than that which would normally be in the public domain unless the relevant permissions have been obtained.
Name: Nishtha Nigam Date: Program: MBA (Telecom) Operations
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TABLE OF CONTENTS • • • • Certificate…………………………………………………………………….…...…2 Acknowledgement………………………………………………………………..…3 Declaration……………………………………………………………………..……4 Chapter1:Introduction…………………………………………………….....…..6-12 ? 1.1. Introduction to Automobile Industry……………………………. …6 ? 1.2 Dissertation Background…………………………………..……..… 9 ? 1.3 Objective of Dissertation……………..…………………………… 12
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Chapter2:Literature Review…………………………...…………………….….13-21 Chapter3:Research Methodology………………………...………………….….22-31 ? 3.1 Research Design…………………………………………………… 22 ? 3.2 Defining Data and Sources of Data……………………………. …..23 ? 3.3 Methods of Data Collection……… ………………………………..24 ? 3.4 Analysis of Collected Data……………………………. …………...25
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Chapter4:Conclusion……………………………………………………………32-33
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Chapter5:Suggestions……………………………………………………………....34
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Chapter6:Bibliography……………………………………………………………..35
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Chapter7: Annexure……………………………………………………………..36-42
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Datasheet. ……………………………………………………………...36
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Questionnaire…………………………………………………… ……..37
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Sample Questionnaire……………………………………………….....40
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Chapter-1 INTRODUCTION
1.1 Introduction to automobile industry
The Automobile industry in India is one of the largest in the world and one of the fastest growing globally. India's passenger car and commercial vehicle manufacturing industry is the seventh largest in the world with an annual production of more than 3.7 million units in 2010. India emerged as Asia's fourth largest exporter of passenger cars, behind Japan, South Korea, and Thailand. Product market share: The dominant products of the industry are two wheelers with a market share of over 75% and passenger cars with a market share of about 16%. Commercial vehicles and three wheelers share about 9% of the market between them. About 91% of the vehicles sold are used by households and only about 9% for commercial purposes. The industry has a turnover of more than USD $35 billion and provides direct and indirect employment to over 13 million people. The supply chain is similar to the supply chain of the automotive industry in Europe and America. Interestingly, the level of trade exports in this sector in India has been medium and imports have been low. However, this is rapidly changing and both exports and imports are increasing. The demand determinants of the industry are factors like affordability,
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product innovation, infrastructure and price of fuel. Also, the basis of competition in the sector is high and increasing, and its life cycle stage is growth. With a rapidly growing middle class, all the advantages of this sector in India are yet to be leveraged. The level of technology change in the Motor vehicle Industry has been high but, the rate of change in technology has been medium. Investment in the technology by the producers has been high. System-suppliers of integrated components and sub-systems have become the order of the day. However, further investment in new technologies will help the industry be more competitive. Over the past few years, the industry has been volatile. Currently, India's increasing per capita disposable income which is expected to rise by 106% by 2015 and growth in exports is playing a major role in the rise and competitiveness of the industry.
The major manufacturers in automobile industry: Maruti Udyog Ltd General motors India Ford India ltd. Eicher motors Bajaj auto Daewoo motors India Hero motors Hindustan motors Hyundai motor India Royal Enfield motors
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Telco TVS motors DC designs Swaraj Mazda ltd.
Top Automobile Companies in India: Tata Motors Tata Motors is the largest automobile manufacturing companies in India. Established way back in 1945 Tata Motors is a multinational automobile company with its headquarters in Mumbai. Previously known as Telco TATA Engineering and Locomotive Company Tata Motors belongs to Tata Group. This company manufactures compact medium sized utility vehicles. Over the last few decades it has stood as the undisputed leader in the commercial vehicles segment. It is also the third largest producer of passenger cars in India. This automobile company in India is listed on both the Bombay Stock Exchange and the New York Stock Exchange. The revenues earned by Tata Motors in 2010 accounted to $20.572 billion. Some of the well known cars manufactured by Tata Motors are: Tata Indigo, Tata Indica, Tata Sumo Tata Indigo Marina and Tata safari.
Hindustan Motors lmtd. Hindustan Motors Limited was founded in the year 1942 by B.M Birla. It is an operative subsidy of the Birla Technical Services group. This company held the title of the biggest manufacturer of cars in India before Maruti Udyog. Hindustan Motors was the pioneer in
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manufacturing automobiles in India. The company accounted for a sales turnover of Rs 150.66 crore in 2010. Some of the important cars and multi utility vehicles manufactured by Hindustan Motors Limited include; Mitsubishi Lancer, Trekker, Contessa, Ambassador, Porter, Pushpak and the Mitsubishi.
Maruti Suzuki India Limited Maruti Suzuki India Limited was established in 1981. A part of this company is owned by Suzuki Motor Corporation of Japan. It is the country's largest passenger car manufacturing company. Credited for having brought in the automobile revolution in the country Maruti Suzuki India Limited was known as Maruti Udyog Limited till 2007. With its headquarters in Delhi this automobile company in India happens to be the largest producer and market share holder of cars. The company accounted for consolidated revenues of US$4.8 billion in 2010. Maruti Suzuki India Limited is credited for manufactures a variety of passenger cars SUVs, and Sedans. Some of Maruti's most popular cars are: Alto, Gypsy, Omni, Wagon R, Maruti 800, Versa, Zen, Esteem, Baleno and Swift.
Hyundai Motor India Limited Hyundai Motor India Limited (HMIL) is owned entirely by Hyundai Motors of South Korea. Hyundai Motors happens to be the largest car manufacturer in South Korea and the sixth largest in the world. This automobile company in India is also the largest passenger cars exporter in India. Established on May 6 1996 this
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company in a short span of time has taken the Indian automobile industry by storm. Some of the popular cars manufactured by this company are; Santro, Getz Prime, Hyundai i10, Hyundai i20 Accent and the Verna and Sonata
Bajaj Auto Bajaj Auto is another important automobile manufacturing company in India. It is one of the India's most trusted car manufacturers. It is an operative subsidy of the Bajaj Group. Bajaj Auto happens to be the largest two and three wheeler manufacturer in India and also ranks in this field across the globe. This automobile company was established on 2 November 1945. The company was then known as M/s Bachraj Trading Corporation Private Limited. The company made a modest beginning by importing and then selling two and three wheelers in India. Today Bajaj Auto has become synonymous with two and three wheelers in the country. Some of its popular two wheelers are; Pulsar 220DTS and Kawasaki Ninja 250R.
The key to success in the industry: To improve labour productivity, labour flexibility, and capital efficiency. Having quality manpower, infrastructure improvements, and raw material availability also play a major role. Access to latest and most efficient technology and techniques will bring competitive advantage to the major players. Utilizing manufacturing plants to optimum level and
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understanding implications from the government policies are the essentials in the Automotive Industry of India.
1.2 Dissertation Background: Analysis of supplier performance in supply chain management
Manufacturing companies have been using supplier scorecards to measure basic supplier performance metrics for a long time. In the past decade, however, both manufacturing and service firms have become increasingly aware of the importance of supplier performance and its critical impact on their own performance and market competitiveness. The increasing reliance on outside suppliers has transformed both the perception of and the need for understanding and improving supplier performance from just a vitamin to a real painkiller. A number of factors have converged to create the perfect storm in the supplier performance world: Increased outsourcing and reliance on suppliers for both goods and services Globalization of business and of supply chains Increasing complexity in managing suppliers Increasing supply risks Viewing suppliers not just as a cost, but as a as a strategic input to their bottom line
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Good supplier performance is a key ingredient in enabling firms to achieve business performance excellence. But how can firms manage or even influence the performance of outside suppliers? Supplier performance management (SPM) is being widely adopted as a method to understand and improve the performance of the extended enterprise. Many companies have supplier performance or supplier management programs. These programs, typically designed to measure, reward and penalize suppliers based on performance, often do more harm than good. To the small business owner, setting up a supplier performance program might seem a bit daunting, even unnecessary. The benefits for the small business that implements a well-designed supplier performance program include increased efficiency and service levels, and reduced operational cost. Goal Measuring supplier performance acts as an integral part of a supplier management program. Most companies use supplier management programs to penalize suppliers for poor performance or reward suppliers for exceptional performance. In the initial states of an SPM project, the burning questions are often: What metrics do other firms use on their supplier scorecards? Should we benchmark other industries to find the best metrics to use?
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Aligning KPMs & Corporate Goals with Supplier Performance The purpose of SPM is to measure the performance of one's own suppliers and should be derived from a firm's own goals and strategies, not borrowed from other companies even if they are in the same industry and/or appear to be good at managing supplier performance. Assessment
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Companies must determine the approach used to assess supplier performance. Some companies base their approach on third-party standards, such as ISO 9001:2008 standards or the Malcolm Baldrige National Quality Award. Whatever assessment approach is used, the key lies in creating metrics relevant to the business and that make use of industry-best practices. The assessment portion of supplier performance analysis becomes part of the integrated approach to proactively engage suppliers to add more value.
Performance expectations can be derived from and aligned with a firm's purchasing strategy ,
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supplier performance expectation can be defined as "a specific statement of a business practice, process, policy and/or the results anticipated or required from a supplier's performance or behavior in relation to the customer". Clarity of company and purchasing team goals should guide the development of performance metrics. Performance expectations are typically the business practices that the customer would like the supplier to follow and deploy. For example, a supplier performance metric for a corporate performance goal of cycle time reduction can either be the supplier's on-time delivery or its purchased-part lead time. Or, if the customer's performance expectation is supplier responsiveness, measures of responsiveness may include a) how quickly the supplier addresses corrective actions, b) how quickly the supplier responds to order changes, and/or c) how easy it is to do business with the supplier Metrics Many companies implement metrics designed to measure a supplier performance. The majority of these metrics center on the tangible performance, such as on-time delivery performance, ship-complete performance and quality performance. Companies that use metrics in a reactive fashion to a supplier poor performance miss the opportunity to fully
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engage the supplier. This form of performance modification typically fails to produce the results the company intended. Metrics act as a warning sign of potential trouble and should be used proactively to facilitate supplier performance improvement. Metrics are more successful when they are derived from a firm's own goals, objectives and strategies than when borrowed from others. Metrics should be derived from corporate goals. Segmenting the supply base for SPM With so many suppliers past, present and future, a company cannot possibly manage performance plans for every single one of them. So what is the best approach to managing the vast number of suppliers? What percentage of, or how many suppliers should be measured? Which suppliers should be measured? Should the same metrics be used for all suppliers
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Segmenting the supply base for purposes of performance management helps firms answer those questions. Additionally they are better prepared to manage and allocate resources. Supplier segmentation is not a science. There are various four-box matrices that have been used for segmenting the supply base and can be used as starting points, not as rigid guidelines. Typically, suppliers are divided into strategic, collaborative, custom and commodity quadrants, with strategic suppliers being the primary focus and commodity suppliers requiring fewer resources. Firms should concentrate on strategic suppliers who are integrated business partners as well as core suppliers, who require integration and development plus other suppliers that may supply a high-cost or high-risk item. The
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supplier segmentation process is a starting point for discussions among Procurement and other stakeholders about which suppliers may have the greatest impacts on the company's own performance, which suppliers harbor the greatest potential risks, and which suppliers need to be measured, monitored, or improved. Supplier segmentation also helps identify supplier relationships that should be targeted for termination. Feedback A company that institutes supplier metrics also must provide performance feedback to its suppliers. Feedback must come in the form of actionable feedback in other words sending an e-mail stating that a supplier had an 80 percent on-time performance metric does not engage the supplier to make an improvement. This information is best given in a one-onone environment, where an open dialogue exists. Sending a supplier a spreadsheet report of his service via e-mail devalues the supplier and the company relationship with the supplier. Results The end result of measuring supplier performance comes in the form of results or increased value gained from the supplier. Any effort taken to measure suppliers, implement the best metrics, and evaluation and assessment systems becomes fruitless if the end result does not meet the company goal. Once the foundation of a good supplier performance system is in place, continuously improve and refine it to get the best results from the system and from the suppliers. SPM that results in Supplier Performance Improvement is not about getting a perfect scorecard for all the company's suppliers. That would indicate the best suppliers at a given moment in time. SPM is about continuously monitoring the company's business needs and measuring supplier's ability to meet those
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needs so that the company always has the best suppliers and that the capabilities of the supply base evolve with the company's business needs. SPM means monitoring requirements, collecting key supplier performance data, evaluating performance data with metrics that tie directly to high-level business goals, feeding evaluation data back to suppliers, creating meaningful supplier improvement plans, and, most of all, it means repeating all these steps to ensure performance monitoring is continuous. SPM data should be critical in selecting, rewarding, and in some cases eliminating suppliers from a company's supply base. To achieve this goal companies must store and manage SPM data in such a way that they can analyze it with trend reports on individual suppliers over time and comparison reports on multiple suppliers. SPM data allow companies to see deeply into their supply chains but its primary value doesn't stop there. SPM enables them to extend the reach of their company's goals and values so they can influence their suppliers to bring about change that resides outside of their company but rolls directly into what the company delivers to their customers.
1.3 Objective of Dissertation
• • • To understand the supply chain management in automobile industry To understand the supplier performance in supply chain management To analyze the practices to improve supplier performance in supply chain management with respect to automobile industry
Limitations of this dissertation are that the research is carried only in a specific geographic location that is Delhi/NCR. Hence the results may vary for other locations.
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This also limits the scope for the dissertation. The sampling methodology used is convenience sampling. Convenience sampling is a non-probability sampling technique where subjects are selected because of their convenient accessibility and proximity to the researcher. The most obvious criticism about convenience sampling is sampling bias and that the sample is not representative of the entire population. Another significant criticism about using a convenience sample is the limitation in generalization and inference making about the entire population. Since the sample is not representative of the population, the results of the study cannot speak for the entire population.
Chapter-2
LITERATURE REVIEW
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Purchasing and suppliers are of major strategic importance to most companies today. This is because a substantial amount of the resources used by a company are made available through its suppliers. Purchases from suppliers account for more than half of total costs for most companies and in some industries, such as electronics, telecommunications, construction, and automotive, this portion is normally substantially higher (Gadde and Håkansson 2001). Suppliers are important to buying firms not only in financial terms. To an increasing extent they provide customers with new technology. Supplier performance thus considerably impacts on the efficiency and effectiveness of the customer firm and is of vital importance.
Evaluation of supplier performance The case of Volvo Car Corporation and its module suppliers Evaluation of supplier performance is thus a prerequisite for supplier development. Most studies of supplier evaluation, however, are concerned with selection of new suppliers (for an overview see for example Vokurka et al. 1996, de Boer et al. 2001). The aim of this paper is to analyze how buying firms evaluate the performance of the suppliers they use. The paper
Concluding discussion
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Evaluation of the performance of module suppliers is an onerous task. As the study of Volvo and its suppliers shows a huge number of combinations of evaluation criteria, scopes, time horizons and methods are used simultaneously. These multiplex combinations provide different views of the supplier’s performance. By varying the perspective in this way the buying company captures many different aspects of the focal supplier. Consequently, by the use of different evaluation perspectives a huge potential for performance enhancement is revealed. However, the implementation of appropriate measures to ripe these opportunities require fine-tuned balancing. For example, too much emphasis on the module price might hamper the development of the supplier’s product and process quality. As the study shows, supplier evaluation is not concerned with a single set of homogenous activities. Instead, the evaluation of a supplier and its performance involves several activities representing various perspectives that lead to complex results and require different skills. Therefore, we need to further explore the relationship among the various combinations of evaluation procedures. In this final section we discuss the implications for the customer and the suppliers.
Evaluation in interaction As suggested above enhanced interaction between customer and supplier concerning what corrective actions to take on the basis of the evaluations would reduce the problems related to complementary, overlapping and contradictory procedures and outcomes. Involving various departments from both sides would make it possible to better understand the multiple consequences of different improvement proposals. The benefits
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accompanying joint teams in this respect have been expressed, for example, by a representative of ITT Automotives (Purchasing 1997). His argument is that “when you get a supplier, an engineer, and a purchasing person together” it is possible to jointly “review the cost parameters versus a target”. Accordingly, the change process becomes better co-ordinated because “by having them work as a team all expectations are set out with respect to quality, cost, and timing” Arrangements of this type should increase the opportunities to conduct the relationship assessments suggested by Lamming et al. (1996). On the basis of this study we find it important that the activities to improve conditions on the supply side are extended from the ambition to just develop suppliers. The opportunities for a supplier to improve its performance are considerably circumscribed by the rest of the network in which it is involved. In particular, the conditions set by the customer in terms of specifications and demands for adapted solutions impacts on supplier performance. For example, Quinn (1999) argues that the buying firm should avoid too detailed direction of a supplier because this provider has been chosen for its competence and, typically has more knowledge depth than the buying firm. If the buyer specifies how to do the job in too much detail “it will kill innovation and vitiate the supplier’s real advantage” (ibid. p. 19). In the same vein Araujo et al. (1999) recommend buying firms to stimulate the development of ‘interactive interfaces’ with suppliers. This type of customer-supplier interface enables firms to consider productivity and innovation consequences for both parties as well as the benefits that can be jointly developed with specific third parties, such as the buyer’s customer and the supplier’s supplier. Of particular importance in this respect is a joint view of the time dimension.
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The final conclusion of the study is that multiple evaluation perspectives are rewarding for enhanced supply performance. On the other hand these perspectives make life complicated both for the buying company and the supplier. Volvo’s module suppliers, perceived the contradictory and conflicting feedback difficult to handle. Still, the performance of these suppliers was evaluated by a single customer only. A much more common and complex situation occurs when suppliers have many important customers, each with its own priorities and ways of providing conflicting control signals. Peter Fredriksson and Lars-Erik Gadde Department of Industrial Marketing Chalmers University of Technology www.chalmer.se
A study of supplier performance rating using total-involved-quality-costs analysis Journal of the Chinese Institute of Industrial Engineers
The development of the total-cost based supplier performance evaluation system described in this article is based on our work with an international electronics firm (D Company). The relevance of the system to design, purchasing and the other functions in organizations is presented, as well as a review of other such systems. In addition to
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describing the system, the process used to develop such an approach is reviewed and both applications and conclusions are drawn. This research refers to a quality cost reporting system recommended by the Institute of Management Accountants and the process for developing a total cost system by The 6-step process for a total cost of quality measurement system is suggested below: Step 1: Define the total quality cost structure and the cost categories. Step 2: Identify total cost items to evaluate. Step 3: Identify nonperformance events and criteria for each item or supplier. Step 4: Identify affected functions or activities and associated costs. Step 5: Record nonperformance occurrences and the related costs. Step 6: Establish standardized and objective measurement index.
Conclusions The cost-effectiveness based supplier performance evaluation using total involved quality cost (TIQC) analysis presented in this research was intended to provide methodologies and approaches in a very efficient, accurate and objective manner for: 1. Total quality companies, to enhance their ability to identify the costs actually caused by each downstream activity, department, product, cost and organization unit. 2. Company management to clearly understand and measure all intangible quality costs (consequential cost of failures) that have greater impact on the company’s performance image in the eyes of its customers.
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3. Internal departments and supplier performance promotions by identifying areas of nonperformance along with responsibility for corrective actions. This analysis also helps identify cost savings opportunities. Chee-Cheng Chen Department of Business Administration Vanung University www.vnu.edu.tw
The Supplier Performance Measurement Benchmarking Report Aberdeen group isource
Summary Nowhere does this adage ring truer than in today’s supply chain environments. Global competition, mass customization, heightened customer expectations, and harsh economic conditions are forcing companies to rely on external suppliers to contribute a larger portion of parts, materials, and assemblies to finished products and to manage a growing number of processes and functions that were once controlled internally. These trends suggest that future competitiveness will be determined by a company’s ability to develop strategies to optimally align and manage an extended network of supplier relationships. Put simply, a company’s performance is increasingly driven by (and reliant upon) the performance of external supply partners. The effective management of these extended supply networks will require companies to employ strategies for measuring and
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improving the performance of network participants. Supplier performance measurement is the process of measuring, analyzing, and managing supplier performance for the purposes of reducing costs, mitigating risk, and driving continuous improvements in value and operations. Common and consistent measurements can help companies focus resources, identify performance glitches, develop strategies for supply chain improvements, and determine the total cost of ownership (TCO) of supply relationships, products, and entire supply chains. In November 2002, Aberdeen Group’s supply chain research practice and iSource Business magazine examined the supplier performance measurement practices of procurement and supply chain executives across multiple industries and geographies. The findings of this joint Supplier Performance Measurement Benchmarking Project clearly signal that measuring supplier performance is a critical activity that is sub-optimally managed at most organizations. More than 70% of enterprises examined view measurement of supplier performance as “very important” or “critical” to their companies’ overall operations. However, only about half of enterprises have instituted formal procedures for measuring supplier performance. Even more alarming, the large majority of enterprises measure the performance of less than half their supply base. In fact, the typical supplier performance measurement program targets less than a third of the total supply base. There is clear evidence that the failure to accurately measure, evaluate, and manage the performance of these partners can increase a company’s costs, damage its product quality, and hinder its competitiveness in the marketplace. Considering the above factors, it is not surprising that nearly 60% of enterprises are less than satisfied with their ability to consistently measure and manage supplier performance.
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These findings clearly indicate that most organizations continue to grapple with insufficient and inconsistent supplier performance measurement capabilities. However, the Aberdeen/iSource study also showed clear evidence of the value that can be derived from effectively measuring supplier performance. The study identified four key strategies that were common to the enterprises achieving the greatest return from supplier performance measurement: 1. Track the performance of a broader portion of the supply base 2. Standardize supplier performance measurement procedures across the enterprise 3. Collaborate with suppliers on performance metrics, reporting, and improvements 4. Automate key supplier performance measurement activities. Specifically, enterprises applying consistent performance measurements and procedures were able to improve supplier performance by more than 26%, on average.
This report on the Aberdeen/iSource Supplier Performance Measurement Benchmarking Project covers the following:
• Examines the factors driving the increased requirements for measuring supplier performance; • Benchmarks current performance measurement processes on an industry, geographic, and company size basis;
• Identifies emerging “best practices” for effective supplier performance measurement.
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Conclusions The Aberdeen Group/iSource Business Supplier Performance Measurement
Benchmarking Project provides strong evidence that most enterprises have insufficient infrastructure and inconsistent strategies for measuring and managing supplier performance. Enterprises that established standard metrics and procedures for measuring supplier performance were able to improve supplier performance by 26.6%, on average, since the program’s inception. Most often, these improvements came in the areas of quality, on-time delivery, price, total cost, contract compliance, lead times, and overall responsiveness. These improvements manifested themselves in direct hard dollar savings to the enterprise as well as enhancements in responsiveness and service to end customers. An increased reliance on external supply partners to manage a larger portion of product content and growing number of business processes has only increased the need for companies to improve their ability to track, measure, and analyze supplier performance. These factors make supplier performance measurement a vital business strategy for controlling costs, managing risks, and driving continuous improvement across the extended supply chain. Aberdeen group isource www.aberdeen.com www.isourceonline.com
Supplier evaluations: communication strategies to improve supplier performance
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Journal of Operations Management
Conclusions When the buying ?rm uses collaborative communication for the supplier development programs, it is perceived by the supplier as an effective mechanism to improve the buyer–supplier relationship. Collaborative communication includes indirect in?uence strategy, formality and feedback. However, this study shows that the implementation of several supplier evaluation communication strategies by itself is not enough to in?uence the supplier’s performance. Although the buying ?rm currently considers their commitment and the importance of the supplier’s product and/or service to the supplier when initiating their targeted supplier development programs the buying ?rm may want to also consider the supplier’s perspective of the relationship prior to initiating supplier development programs. Supplier development programs will be successful in terms of operational performance measures if the supplier is committed to the buying ?rm. As noted by a buying ?rm manager in “Are we the customer of choice with our suppliers?” The supplier evaluation communication process could be the catalyst that strengthens the buyer–supplier relationship and supplier’s commitment. There appears to be an explanation for why some suppliers have not adequately improved their performance to meet the buying organization’s SDP initiatives. The supplier must feel a strong sense of commitment, loyalty, and longevity in the relationship with the buying ?rm. The buying ?rm can in?uence the supplier’s commitment through enhanced communication and relationship development. Relationship development includes enhancing cooperation, problem solving, and expressing their commitment, loyalty and desire to continue the
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relationship for many years into the future. Several implications for business managers can be drawn from this research. For the buying ?rm manager, speci?c communication strategies should be designed into their SDP efforts. The program should be formalized with routine communication; incorporate supplier training, education and site visits to aid in the learning process; and provide opportunities for feedback to clarify program objectives and improvement suggestions. The result of the SDP collaborative communication effort should enhance supplier’s perceptions of the business relationship and their commitment to the buying ?rm. Buying ?rm managers should focus their SDP implementation efforts on suppliers that exhibit commitment to the buying ?rm. Although the buying ?rm’s perceptions of the supplier’s commitment are inherently biased, it represents the \ best proxy for the supplier’s commitment. As the recipient of their customer’s SDP efforts, the supply ?rm manager has the opportunity to improve the relationship with the customer. Improved relationships can result in increased market share, growth opportunities and other bene?ts. In addition, when SDPs are implemented, the supply ?rm can take advantage of the learning opportunities and improve its overall performance with the buying ?rm and with their other customers. This research has explored a relatively new area of supply chain communication and supplier development programs. Insights from this study have implications in the marketing area for speci?c channel conditions, such as structure, climate and power. Further theoretical work could expand the model by including other dimensions of communication strategy. This research incorporated indirect in?uence strategy, formality and feedback, as well as an encompassing construct, collaborative communication. Other communication dimension strategies include: direct
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in?uence strategy, informality (such as word-of-mouth communication) and measures of frequency and media richness. Carol Prahinski &W.C. Benton Richard Ivey School of Business, Operations Management Area Group, University of Western Ontario, London, Ontario, N6A 3K7 Canada www.elsevier.com/locatedsw
Supplier selection on retail: analysis with two multi –criteria evaluation Methodologies
Conclusion Increasing competition among the corporations in the global market is today leaving the stage to the competition among the network of corporations. Leading this competition requires increasing productivity, minimizing costs and customer response times. An efficient supply-chain and performance-based supply chain management as well as other within-corporation processes are vital to reach these objectives. Suppliers are one of the most important chains of the supply chain. The quality of products, total costs and
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customer satisfaction under these circumstances are directly affected by the supplier performance. Hence, supplier evaluation has a strategic importance for the corporations. The results reached by using the right performance criteria and evaluation method would produce robust solutions towards improving the performance of suppliers. The first aim of this study is to develop suitable supplier performance criteria and criteria weights based on the performance criteria determined for the retail industry in the literature. The evaluation of supplier performances by DEA and AHP and make a comparison between them is the second aim of this study. The performance criteria used for supplier evaluation are, markup, delivery and selling history. The best t supplier based on AHP methodology is S1. S1 and S5 are the best suppliers based on the DEA method. The objectivity, benchmarking, determining improvement targets and negotiation tools proprieties make DEA better supplier performance evaluation methodology than AHP. The rankings obtained by the two methodologies are highly consistent based on the Spearman’s rank correlation coefficient. Two multiple-criteria supplier performance
evaluation methodologies and their comparison presented in this study. The integration of the these two methodology is left as a subject for future research. H. Ahmet akdeniz, Prof. Dr., Department of Econometrics, Faculty of Economics and Administrative Sciences, Dokuz Eylül University www.deu.edu.tr
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Supply management orientation and buyer-supplier performance in automobile supply chains in india-few insights
Analysis The SMO is characterized by the constructs like 1) Long term supplier – buyer relationships, 2) Supplier participation in new product development, 3) Quality criteria in supplier selection and 4) Reduced supplier base.
The Buyer’s Performance (BP) is characterized by 1) Process flexibility 2) Product cost 3) Serviceability 4) Delivery cycle time 5) Delivery reliability 6) Production lead time 7) Production cost 8) Product features 9) Product conformance to specification 10) Volume flexibility 11) On time delivery.
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The supplier performance (SP) is characterized by 1) Flexibility 2) Environment friendly 3) Multiple sourcing 4) Cost 5) Quality 6) Delivery reliability 7) Technology 8) Design up gradation 9) USP 10) Lead time for new product development 11) No. of iterations for a new product approval 12) On time delivery
The 35 variable analyses resulted in the following 8 dimensions with their corresponding variables: Delivery Performance – Delivery speed, Delivery reliability, on time delivery, Time for new product development. Production lead time – Production lead time, cycle time Unique product features - USP, Design development, Serviceability. Sourcing Cost - Product cost, Lead time, multiple sourcing. Lean supplier base – Small no of suppliers Supplier selection - Quality criteria for supplier selection, Cost
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Supplier involvement - Involvement in new product development, Long term relationship Contemporary product - Environment friendly, Durability of product
This analysis, with additional variables, lead to the following interesting observations. Addition of variables has resulted in regrouping of variables and has made different dimensions to emerge. The variables like the unique product features and product contemporariness have emerged as separate dimensions, in the Indian scenario where the products are in the stage of high growth and intense competition, the factors adding to the product differentiation are highly appreciated, (like Product USP and the
contemporariness in automotive industry - Euro –II etc.) This redistribution of variables is found very much relevant, as these are the factors, which do influence the supplier and buyer performance and provide orientation to the SMO itself. Another interesting dimension emerging from this analysis is the sourcing cost. This dimension consists of variables like the multiple sourcing, supplier productivity and lead times. These are very critical variables in the Indian context where the suppliers are not standardized and the SMO performance is influenced by these critical factors. The results indicate that in Indian contexts, the SMO strategies are yet to find its importance as Supplier Relationship Management initiatives have very lately begun. From an initial environment of working as independent organizations without getting integrated, the supply chains are moving towards some integration with the results above showing that the linkages of Supplier’s performance are linked with the buyer’s performance but mostly in quality and flexibility rather than in cost and delivery. The
35
results are to some extent limited by the small sample size and probably more insights can be drawn if sufficiently a large sample is studied and studies are done across industries. Dr. Vijayaraghavan Faculty at XLRI, Jamshedpur. www.xlri.ac.in
Chapter-3 RESEARCH METHODOLOGY
3.1 Research Design: Descriptive
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Descriptive research design is a scientific method which involves observing and describing the behavior of a subject without influencing it in any way. Many scientific disciplines, especially social science and psychology, use this method to obtain a general overview of the subject. Some subjects cannot be observed in any other way; for example, a social case study of an individual subject is a descriptive research design and allows observation without affecting normal behavior. It is also useful where it is not possible to test and measure the large number of samples needed for
more experimentation. These types of experiments are often used by anthropologists, psychologists and social scientists to observe natural behaviors without affecting them in any way. It is also used by market researchers to judge the habits of customers, or by companies wishing to judge the morale of staff. The results from a descriptive research can in no way be used as a definitive answer or to disprove a hypothesis but, if the limitations are understood, they can still be a useful tool in many areas of scientific research. Descriptive is a valid method for researching specific subjects and as a precursor to more quantitative studies. Whilst there are some valid concerns about the statistical validity, as long as the limitations are understood by the researcher, this type of study is an invaluable scientific tool. Whilst the results are always open to question and to different interpretations, there is no doubt that they are preferable to performing no research at all.
?
Sample size: 8-10 automobile industries
37 ? Sample scope: Delhi / NCR
?
Sampling method: Convenience sampling
Convenience sampling
Convenience sampling is a type of non-probability sampling technique. Non-probability sampling focuses on sampling techniques that are based on the judgment of the researcher. Convenience sampling should be treated with caution, its low cost and ease of use makes it the preferred choice for a significant proportion of undergraduate and master’s level dissertations. It is a sampling method in which units are selected based on easy access/availability. The disadvantage of convenience sampling is that the units that are easiest to obtain may not be representative of the population. For example products on top of a box of parts may be a different quality from those at the bottom, people who are at home when the market researcher calls may not be representative of the entire population. It is also called as Accidental Sampling.
3.2 Defining data and sources of data
Data: Data is a collection of facts, such as values or measurements. It can be numbers, words, measurements, observations or even just descriptions of things. Data are qualitative or quantitative attributes of a variable or set of variables. Data are typically the results of
38 measurements and can be the basis of graphs, images, or observations of a set of variables. Data are often viewed as the lowest level of abstraction from which information and then knowledge are derived. Raw data, i.e., unprocessed data, refers to a collection of numbers, characters, images, etc. The terms data, information and knowledge are frequently used for overlapping concepts. The main difference is in the level of abstraction being considered. Data is the lowest level of abstraction, information is the next level, and finally, knowledge is the highest level among all three. Data collection is a term used to describe a process of preparing and collecting data, for example, as part of a process improvement or similar project. The purpose of data collection is to obtain information to keep on record, to make decisions about important issues, to pass information on to others. Primarily, data are collected to provide information regarding a specific topic. Data is classified into two categories based on the s ource of data:
Primary Data & Secondary Data. Primary Data: Primary data is important for all areas of research because it is unvarnished information about the results of an experiment or observation. It is the data observed or collected directly from first-hand experience. It is like the eyewitness testimony at a trial. No one has tarnished it or spun it by adding their own opinion or bias so it can form the basis of objective conclusions. Primary data is the specific information collected by the person who is doing the research. It can be obtained through clinical trials, case studies, true experiments and randomized controlled studies. This information can be analyzed by other experts who may decide to test the validity of the data by repeating the same experiments. The popular ways to collect primary data consist of surveys, interviews and
39
focus groups. It is usually more costly and time consuming than collecting secondary data. Secondary Data: Secondary data is data collected by someone other than the user. Published data and the data collected in the past or other parties is called secondary data. It can also be defined as the pre-existing data not gathered for purposes of current research. Common sources of secondary data for social science include censuses, surveys, organizational records and data collected through qualitative methodologies or qualitative research. Secondary data analysis saves time that would otherwise be spent collecting data and, particularly in the case of quantitative data, provides larger and higher-quality databases that would be unfeasible for any individual researcher to collect on their own. In addition, analysts of social and economic change consider secondary data essential, since it is impossible to conduct a new survey that can adequately capture past change and/or developments. In secondary data, information relates to a past period. Hence, it lacks aptness and therefore, it has unsatisfactory value.
3.3 Methods of data collection
• Frame out questionnaire to analyze the supplier performance in supply chain management with respect to automobile industry
? Primary Analyze the data/ results from the questionnaire
? Secondary Analysis of papers in journals
40
? Collect relevant data from white papers
Qualitative research is a type of scientific research. In general terms, scientific research consists of an investigation that: • Seeks answers to a question • Systematically uses a predefined set of procedures to answer the question • Collects evidence • Produces findings that were not determined in advance • Produces findings that are applicable beyond the immediate boundaries of the study
Qualitative research shares these characteristics. Additionally, it seeks to understand a given research problem or topic from the perspectives of the local population it involves. Qualitative research is especially effective in obtaining culturally specific information about the values, opinions, behaviors, and social contexts of particular populations.
41
3.4 Analysis of collected data
•
Has the supplier provided the products as sample?
42
•
Has the supplier responded appropriately to enquiries and requests?
43
•
Has the supplier provided necessary technical support?
44
•
Has office support Technical Expertise?
45
•
Has the supplier effectively assisted on emergencies and / or irregular situations?
46
•
Has provided products/services by supplier consistently meet purchase order specification?
47
•
Has the supplier consistently adhered to quoted lead time?
•
Has the delivery lead time meet the order requirements?
48
•
Has the supplier delivered orders to on and off site?
49
•
Has the supplier adhered to packaging, shipping and other transportation requirements?
•
Has the supplier offered warranties?
50
•
Has the supplier consistently submitted accurate invoices?
51
•
Has the supplier improved payment terms?
•
Has the supplier resolved discrepancies quickly?
52
53
Chapter-4 CONCLUSION
Analyzing the supply chain management in automotive industry on the basis of secondary data Indian automobile and auto components industry is on a roll and there is an immense scope for management for enhancing the supply chain of the sector. India has become a favorable destination for foreign companies to establish their facilities and form alliances with domestic companies. Low cost of manufacturing and conducive government support have been the major drivers for foreign companies investing in India. India’s large young population, higher GDP growth, and most importantly per capita passenger car penetration is low at 8.5 car per thousand population, which creates great opportunity for industry players to offer an affordable four wheeler alternative to the two-wheeler customers. According to Planning Commission of India, Indian automobile industry is expected to grow at CAGR of 15% over the next five years. The Indian economy is now gaining momentum in the world of free trade and liberal movements of goods and services between countries. Therefore, efficiency in supply will be critical for India’s automobile success. Analyzing the supplier’s performance in supply chain management on the basis of secondary data
54
For a supplier, there are a number of steps to make sure suppliers are supplying safe products. one should know about all product regulations that apply to business and stay informed about any changes to them. assess a product’s risks and identify its hazards, It is essential to have a risk management process. Suppliers should apply the standard to all stages in the life of a product, asset, project, activity or function. They usually get the most benefit when apply the risk management process right from the start. Using an effective product safety compliance program to comply with the law will result in supplying safer products. Suppliers should consider each product on its merits. Many products need testing to ensure they are safe and free of faults and consistently meet any mandatory standards that apply. If suppliers are supplying products covered by mandatory standards or bans, every item must comply. Having a complaints handling system in place will help to pick up on any adverse incidents and trends relating to products.
55
Analyzing the practices followed by suppliers in the automobile industry from the collected data
•
Most of the time supplier provided the product as sample. It helped the suppliers to provide the solution to a set groups needs and to figure out which sample is beneficial for the particular automobile. They responded appropriately to enquiries and requests the feedback is both qualitative and quantitative due to which customers showed their willingness for repeat purchase.
•
The supplier provided necessary technical support always and most of the times suppliers has office support Technical Expertise. Supplier Technical Support is an optional add-on service that helped the suppliers to gain direct access to technical support engineers for assistance troubleshooting or data issues.
•
Most of the time the supplier effectively assisted on emergencies and / or irregular situations but some of them rarely assisted on emergencies. The supplier performance programs trained the suppliers every time in such a way so that in case of any emergency they are able to supply the right product to right customer and it also helped to fix the position of a particular supplier for the respected company.
•
Products/services
provided
by
supplier
consistently
meet
purchase
order
specification. It helped to control the purchasing of products and services from external suppliers and allowed buyers to clearly and explicitly communicate their intentions to sellers A purchase order is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services. No
56
contract exists until the purchase order is accepted. It also helped a purchasing agent to manage incoming orders and pending orders..
•
Most of the times supplier consistently adhered to quoted lead time and delivery lead time meet the order requirements. The lead time between the placement of an order and delivery of a new car from a manufacturer may be anywhere from 2 weeks to 6 months, so supplier quoted a lead time in such a way so that he will be able to deliver the product but In industry, lead time reduction is an important part.
•
The supplier delivered orders to on and off site always The delivery of the products can be on/off the sites as per convenience of buyer and seller both and transportation requirements are provided by the suppliers only and most of the time adhered to packaging, shipping and other transportation requirements
•
The supplier offered warranties and consistently submitted accurate invoices. It will provide the buyer with peace of mind in knowing that various aspects are covered. ensured that financial investment is protected
•
Most of the suppliers improved payment terms and resolved discrepancies quickly. This helped the buyer and supplier to maintain a healthy and long term relationship with each other.
57
Chapter-5 SUGGESTIONS
•
Establish an SPM strategy and plan – Any supplier scorecard should be developed with corporate goals in mind. The overall SPM strategy should make sure it is aligned with corporate objectives so they enhance them not conflict with them.
•
Develop supplier performance criteria and expectations – Identify basic criteria the company expects from all suppliers.
•
Select evaluation tools and process steps – The team must identify how it will collect, monitor and measure performance. It should also create a rollout plan to both the stakeholder and supplier communities.
•
Collect supplier performance data (qualitative and quantitative information) – Performance data must be collected and becomes valuable over time. Teams should establish time period associated with data collection, for example, quarterly.
•
Measure and share results – Once collected the data should be reviewed against criteria and shared with suppliers and stakeholders.
•
Set improvement goals and plan – Companies must act on the performance data collected so they can influence supplier behavior.
58
•
Review and recalibrate goals, strategy and metrics periodically – As a business grows and changes, the goals, strategies and metrics must be recalibrated so that everything is aligned.
59
Chapter 6 BIBLIOGRAPHY
1. www.tdctrade.com 2. www.emeraldinsight.com 3. www.igi-global.com 4. www.telecomitalia.it 5. www.sciencedirect.com 6. http://smallbusiness.chron.com 7. http://supplyperformance.wordpress.com/ 8. http://www.esourcingwiki.com 9. http://www.emptoris.com 10. http://www.economywatch.com 11. http://www.siamindia.com 12. http://www.surfindia.com 13. http://business.mapsofindia.com 14. www.aberdeen.com 15. www.isourceonline.com 16. www.elsevier.com/locatedsw 17. www.asq.org 18. www.deu.edu.tr
60
Chapter 7 ANNEXURES
DATASHEET
DESIGNATIO SNO. SUPPLIER COMPANY VolksWagen 1. (FIBRO) India 2. TVS Wadco Afro Asiatic 3. Exporters 4. 5. pvt. Lmtd. 6. MICO Bosch Tata Motors Valvo -Eicher 7. Eicher Pvt.Ltd Vehicle Ltd. 8. Exide battries Tata Motors R. D. Channe Ast. Manager Rakesh Jain Store Manager R. D. Channe Ast. Manager MRF Tyres Delloroto India Maruti Suzuki Maneesh Chahal Ast. Manager Tata Motors R. D. Channe Ast. Manager Hero Honda Vinod Sharma Store Manager Tata Motors R. D. Channe Ast. Manager Amit Srivastava Manager EMPLOYEE N
CONTACT NO. 9167831019
8871083380
8882863507 8871083380 8126707989
8871083380
9826644437
8871083380
61
Brakes India 9. lmtd. Tata Motors R. D. Channe Ast. Manager 8871083380
62
QUESTIONNAIRE
Topic-To
analyze
the
supplier
performance
in
supply
chain
management with respect to automobile industry
A. SAMPLES AND QUERIES
1. Has the supplier provided the products as sample? • • • • Always Most of the time Rarely Never
2. Has the supplier responded appropriately to enquiries and requests? • • • • Always Most of the time Rarely Never
63
B. SUPPORT AND ASSISTANCE
3.
Has the supplier provided necessary technical support? • • • • Always Most of the time Rarely Never
4.
Has office support Technical Expertise? • • • • Always Most of the time Rarely Never
5.
Has the supplier effectively assisted on emergencies and / or irregular situations? • • • • Always Most of the time Rarely Never
64
C. ORDER COMPLIANCE
6. Has provided products/services by supplier consistently meet purchase order specification? • • • • Always Most of the time Rarely Never
7. Has the supplier consistently adhered to quoted lead time? • • • • Always Most of the time Rarely Never
D. DELIVERY REQUIREMENT COMPLIANCE
8. Has the delivery lead time meet the order requirements? • • Always Most of the time
65
• •
Rarely Never
9. Has the supplier delivered orders to on and off site? • • • • Always Most of the time Rarely Never
10. Has the supplier adhered to packaging, shipping and other transportation requirements? • • • • Always Most of the time Rarely Never
66
E. PAYMENT / SERVICE OFFERED
11. Has the supplier offered warranties? • • • • Always Most of the time Rarely Never
12. Has the supplier consistently submitted accurate invoices? • • • • Always Most of the time Rarely Never
13. Has the supplier improved payment terms? • • • • Always Most of the time Rarely Never
14. Has the supplier resolved discrepancies quickly?
67
• • • •
Always Most of the time Rarely Never
68
SAMPLE QUESTIONNAIRE
Name of the Company: VolksWagen India Name of the Employee: Amit Srivastava Designation: Manager Contact no: 9167831019 Name of the Supplier: Fischer-Brodbeck GmbH (FIBRO)
Topic-To analyze the supplier’s performance in supply chain management with respect to automobile industry
A. SAMPLES AND QUERIES
1. Has the supplier provided the products as sample? • • • • Always Most of the time Rarely Never
2. Has the supplier responded appropriately to enquiries and requests?
69
• • • •
Always Most of the time Rarely Never
B. SUPPORT AND ASSISTANCE
3. Has the supplier provided necessary technical support? • • • • Always Most of the time Rarely Never
4. Has office support Technical Expertise? • • • • Always Most of the time Rarely Never
70
5. Has the supplier effectively assisted on emergencies and / or irregular situations? • • • • Always Most of the time Rarely Never
C. ORDER COMPLIANCE
6. Has provided products/services by supplier consistently meet purchase order specification? • • • • Always Most of the time Rarely Never
7.
Has the supplier consistently adhered to quoted lead
time? • • • Always Most of the time Rarely
71
•
Never
D. COMPLIANCE
DELIVERY
REQUIREMENT
8. Has the delivery lead time meet the order requirements? • • • • Always Most of the time Rarely Never
9. Has the supplier delivered orders to on and off site? • • • • Always Most of the time Rarely Never
10. Has the supplier adhered to packaging, shipping and other transportation requirements? • • Always Most of the time
72
• •
Rarely Never
E. PAYMENT / SERVICE OFFERED
11. Has the supplier offered warranties? • • • • Always Most of the time Rarely Never
12. invoices? • • • •
Has the supplier consistently submitted accurate
Always Most of the time Rarely Never
13. Has the supplier improved payment terms? • • Always Most of the time
73
• •
Rarely Never
14. Has the supplier resolved discrepancies quickly? • • • • Always Most of the time Rarely Never
doc_543612914.doc
Supply chain management (SCM) is the management of an interconnected or interlinked between network, channel and node businesses involved in the provision of product and service packages required by the end customers in a supply chain
1
A Dissertation report On
“ANALYSIS OF SUPPLIER’S PERFORMANCE IN SUPPLY CHAIN MANAGEMENT IN DELHI/NCR WITH RESPECT TO AUTOMOBILE INDUSTRY”
A report submitted to Amity University as a partial fulfillment of full time MBA Telecommunication Management
Date of submission: 5/3/2012
SUBMITTED TO: Mrs. ASHIMA AGARWAL Assistant Professor MBA TELECOM
SUBMITTED BY: NISHTHA NIGAM A1603710026 BATCH 2010 - 12
2
CERTIFICATE
This is to certify that the dissertation done on “Analysis of supplier’s performance in supply chain management with respect to automobile industry in delhi/Ncr ” submitted to Amity Institute of Telecom Technology & Management by Nishtha Nigam in the partial fulfillment of the requirement for the award of degree of MBA telecom, is a bonafide work carried out by him under my supervision and guidance. This work has not been submitted anywhere else for any other degree / diploma. The original work was carried during Dec 2011 to March 2012
Date
Mrs Ashima Agarwal Assistant Professor MBA Telecom
3
ACKNOWLEDGEMENT
I, with deep sense of gratitude would like to pay my sincere thanks to Prof. Marshal Sahni - Head of Department, AITTM, Amity University for giving me this opportunity to conduct a research work during my curriculum of MBA. I express my cordial gratefulness to my academic mentor Mrs. Ashima Agarwal for providing me guidance, valuable advice, constant encouragement and necessary facilities to complete this project. I would like to thank all those people who gave me their valuable time and input during my course of dissertation.
4
DECLARATION
This Dissertation Report “Analysis of supplier’s performance in supply chain management with respect to automobile industry in delhi/Ncr” is submitted for full time fulfillment of the requirement for the award of degree of MBA Telecom at Amity University. I declare that this Dissertation Report is my own work and it does not contravene any academic offence as specified in the University’s regulations. I confirm that this Dissertation Report does not contain information of a commercial or confidential nature or include personal information other than that which would normally be in the public domain unless the relevant permissions have been obtained.
Name: Nishtha Nigam Date: Program: MBA (Telecom) Operations
5
TABLE OF CONTENTS • • • • Certificate…………………………………………………………………….…...…2 Acknowledgement………………………………………………………………..…3 Declaration……………………………………………………………………..……4 Chapter1:Introduction…………………………………………………….....…..6-12 ? 1.1. Introduction to Automobile Industry……………………………. …6 ? 1.2 Dissertation Background…………………………………..……..… 9 ? 1.3 Objective of Dissertation……………..…………………………… 12
• •
Chapter2:Literature Review…………………………...…………………….….13-21 Chapter3:Research Methodology………………………...………………….….22-31 ? 3.1 Research Design…………………………………………………… 22 ? 3.2 Defining Data and Sources of Data……………………………. …..23 ? 3.3 Methods of Data Collection……… ………………………………..24 ? 3.4 Analysis of Collected Data……………………………. …………...25
6
•
Chapter4:Conclusion……………………………………………………………32-33
•
Chapter5:Suggestions……………………………………………………………....34
•
Chapter6:Bibliography……………………………………………………………..35
•
Chapter7: Annexure……………………………………………………………..36-42
?
Datasheet. ……………………………………………………………...36
?
Questionnaire…………………………………………………… ……..37
?
Sample Questionnaire……………………………………………….....40
7
Chapter-1 INTRODUCTION
1.1 Introduction to automobile industry
The Automobile industry in India is one of the largest in the world and one of the fastest growing globally. India's passenger car and commercial vehicle manufacturing industry is the seventh largest in the world with an annual production of more than 3.7 million units in 2010. India emerged as Asia's fourth largest exporter of passenger cars, behind Japan, South Korea, and Thailand. Product market share: The dominant products of the industry are two wheelers with a market share of over 75% and passenger cars with a market share of about 16%. Commercial vehicles and three wheelers share about 9% of the market between them. About 91% of the vehicles sold are used by households and only about 9% for commercial purposes. The industry has a turnover of more than USD $35 billion and provides direct and indirect employment to over 13 million people. The supply chain is similar to the supply chain of the automotive industry in Europe and America. Interestingly, the level of trade exports in this sector in India has been medium and imports have been low. However, this is rapidly changing and both exports and imports are increasing. The demand determinants of the industry are factors like affordability,
8
product innovation, infrastructure and price of fuel. Also, the basis of competition in the sector is high and increasing, and its life cycle stage is growth. With a rapidly growing middle class, all the advantages of this sector in India are yet to be leveraged. The level of technology change in the Motor vehicle Industry has been high but, the rate of change in technology has been medium. Investment in the technology by the producers has been high. System-suppliers of integrated components and sub-systems have become the order of the day. However, further investment in new technologies will help the industry be more competitive. Over the past few years, the industry has been volatile. Currently, India's increasing per capita disposable income which is expected to rise by 106% by 2015 and growth in exports is playing a major role in the rise and competitiveness of the industry.
The major manufacturers in automobile industry: Maruti Udyog Ltd General motors India Ford India ltd. Eicher motors Bajaj auto Daewoo motors India Hero motors Hindustan motors Hyundai motor India Royal Enfield motors
9
Telco TVS motors DC designs Swaraj Mazda ltd.
Top Automobile Companies in India: Tata Motors Tata Motors is the largest automobile manufacturing companies in India. Established way back in 1945 Tata Motors is a multinational automobile company with its headquarters in Mumbai. Previously known as Telco TATA Engineering and Locomotive Company Tata Motors belongs to Tata Group. This company manufactures compact medium sized utility vehicles. Over the last few decades it has stood as the undisputed leader in the commercial vehicles segment. It is also the third largest producer of passenger cars in India. This automobile company in India is listed on both the Bombay Stock Exchange and the New York Stock Exchange. The revenues earned by Tata Motors in 2010 accounted to $20.572 billion. Some of the well known cars manufactured by Tata Motors are: Tata Indigo, Tata Indica, Tata Sumo Tata Indigo Marina and Tata safari.
Hindustan Motors lmtd. Hindustan Motors Limited was founded in the year 1942 by B.M Birla. It is an operative subsidy of the Birla Technical Services group. This company held the title of the biggest manufacturer of cars in India before Maruti Udyog. Hindustan Motors was the pioneer in
10
manufacturing automobiles in India. The company accounted for a sales turnover of Rs 150.66 crore in 2010. Some of the important cars and multi utility vehicles manufactured by Hindustan Motors Limited include; Mitsubishi Lancer, Trekker, Contessa, Ambassador, Porter, Pushpak and the Mitsubishi.
Maruti Suzuki India Limited Maruti Suzuki India Limited was established in 1981. A part of this company is owned by Suzuki Motor Corporation of Japan. It is the country's largest passenger car manufacturing company. Credited for having brought in the automobile revolution in the country Maruti Suzuki India Limited was known as Maruti Udyog Limited till 2007. With its headquarters in Delhi this automobile company in India happens to be the largest producer and market share holder of cars. The company accounted for consolidated revenues of US$4.8 billion in 2010. Maruti Suzuki India Limited is credited for manufactures a variety of passenger cars SUVs, and Sedans. Some of Maruti's most popular cars are: Alto, Gypsy, Omni, Wagon R, Maruti 800, Versa, Zen, Esteem, Baleno and Swift.
Hyundai Motor India Limited Hyundai Motor India Limited (HMIL) is owned entirely by Hyundai Motors of South Korea. Hyundai Motors happens to be the largest car manufacturer in South Korea and the sixth largest in the world. This automobile company in India is also the largest passenger cars exporter in India. Established on May 6 1996 this
11
company in a short span of time has taken the Indian automobile industry by storm. Some of the popular cars manufactured by this company are; Santro, Getz Prime, Hyundai i10, Hyundai i20 Accent and the Verna and Sonata
Bajaj Auto Bajaj Auto is another important automobile manufacturing company in India. It is one of the India's most trusted car manufacturers. It is an operative subsidy of the Bajaj Group. Bajaj Auto happens to be the largest two and three wheeler manufacturer in India and also ranks in this field across the globe. This automobile company was established on 2 November 1945. The company was then known as M/s Bachraj Trading Corporation Private Limited. The company made a modest beginning by importing and then selling two and three wheelers in India. Today Bajaj Auto has become synonymous with two and three wheelers in the country. Some of its popular two wheelers are; Pulsar 220DTS and Kawasaki Ninja 250R.
The key to success in the industry: To improve labour productivity, labour flexibility, and capital efficiency. Having quality manpower, infrastructure improvements, and raw material availability also play a major role. Access to latest and most efficient technology and techniques will bring competitive advantage to the major players. Utilizing manufacturing plants to optimum level and
12
understanding implications from the government policies are the essentials in the Automotive Industry of India.
1.2 Dissertation Background: Analysis of supplier performance in supply chain management
Manufacturing companies have been using supplier scorecards to measure basic supplier performance metrics for a long time. In the past decade, however, both manufacturing and service firms have become increasingly aware of the importance of supplier performance and its critical impact on their own performance and market competitiveness. The increasing reliance on outside suppliers has transformed both the perception of and the need for understanding and improving supplier performance from just a vitamin to a real painkiller. A number of factors have converged to create the perfect storm in the supplier performance world: Increased outsourcing and reliance on suppliers for both goods and services Globalization of business and of supply chains Increasing complexity in managing suppliers Increasing supply risks Viewing suppliers not just as a cost, but as a as a strategic input to their bottom line
? ?
?
?
?
13
Good supplier performance is a key ingredient in enabling firms to achieve business performance excellence. But how can firms manage or even influence the performance of outside suppliers? Supplier performance management (SPM) is being widely adopted as a method to understand and improve the performance of the extended enterprise. Many companies have supplier performance or supplier management programs. These programs, typically designed to measure, reward and penalize suppliers based on performance, often do more harm than good. To the small business owner, setting up a supplier performance program might seem a bit daunting, even unnecessary. The benefits for the small business that implements a well-designed supplier performance program include increased efficiency and service levels, and reduced operational cost. Goal Measuring supplier performance acts as an integral part of a supplier management program. Most companies use supplier management programs to penalize suppliers for poor performance or reward suppliers for exceptional performance. In the initial states of an SPM project, the burning questions are often: What metrics do other firms use on their supplier scorecards? Should we benchmark other industries to find the best metrics to use?
? ?
Aligning KPMs & Corporate Goals with Supplier Performance The purpose of SPM is to measure the performance of one's own suppliers and should be derived from a firm's own goals and strategies, not borrowed from other companies even if they are in the same industry and/or appear to be good at managing supplier performance. Assessment
14
Companies must determine the approach used to assess supplier performance. Some companies base their approach on third-party standards, such as ISO 9001:2008 standards or the Malcolm Baldrige National Quality Award. Whatever assessment approach is used, the key lies in creating metrics relevant to the business and that make use of industry-best practices. The assessment portion of supplier performance analysis becomes part of the integrated approach to proactively engage suppliers to add more value.
Performance expectations can be derived from and aligned with a firm's purchasing strategy ,
a
supplier performance expectation can be defined as "a specific statement of a business practice, process, policy and/or the results anticipated or required from a supplier's performance or behavior in relation to the customer". Clarity of company and purchasing team goals should guide the development of performance metrics. Performance expectations are typically the business practices that the customer would like the supplier to follow and deploy. For example, a supplier performance metric for a corporate performance goal of cycle time reduction can either be the supplier's on-time delivery or its purchased-part lead time. Or, if the customer's performance expectation is supplier responsiveness, measures of responsiveness may include a) how quickly the supplier addresses corrective actions, b) how quickly the supplier responds to order changes, and/or c) how easy it is to do business with the supplier Metrics Many companies implement metrics designed to measure a supplier performance. The majority of these metrics center on the tangible performance, such as on-time delivery performance, ship-complete performance and quality performance. Companies that use metrics in a reactive fashion to a supplier poor performance miss the opportunity to fully
15
engage the supplier. This form of performance modification typically fails to produce the results the company intended. Metrics act as a warning sign of potential trouble and should be used proactively to facilitate supplier performance improvement. Metrics are more successful when they are derived from a firm's own goals, objectives and strategies than when borrowed from others. Metrics should be derived from corporate goals. Segmenting the supply base for SPM With so many suppliers past, present and future, a company cannot possibly manage performance plans for every single one of them. So what is the best approach to managing the vast number of suppliers? What percentage of, or how many suppliers should be measured? Which suppliers should be measured? Should the same metrics be used for all suppliers
? ?
?
Segmenting the supply base for purposes of performance management helps firms answer those questions. Additionally they are better prepared to manage and allocate resources. Supplier segmentation is not a science. There are various four-box matrices that have been used for segmenting the supply base and can be used as starting points, not as rigid guidelines. Typically, suppliers are divided into strategic, collaborative, custom and commodity quadrants, with strategic suppliers being the primary focus and commodity suppliers requiring fewer resources. Firms should concentrate on strategic suppliers who are integrated business partners as well as core suppliers, who require integration and development plus other suppliers that may supply a high-cost or high-risk item. The
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supplier segmentation process is a starting point for discussions among Procurement and other stakeholders about which suppliers may have the greatest impacts on the company's own performance, which suppliers harbor the greatest potential risks, and which suppliers need to be measured, monitored, or improved. Supplier segmentation also helps identify supplier relationships that should be targeted for termination. Feedback A company that institutes supplier metrics also must provide performance feedback to its suppliers. Feedback must come in the form of actionable feedback in other words sending an e-mail stating that a supplier had an 80 percent on-time performance metric does not engage the supplier to make an improvement. This information is best given in a one-onone environment, where an open dialogue exists. Sending a supplier a spreadsheet report of his service via e-mail devalues the supplier and the company relationship with the supplier. Results The end result of measuring supplier performance comes in the form of results or increased value gained from the supplier. Any effort taken to measure suppliers, implement the best metrics, and evaluation and assessment systems becomes fruitless if the end result does not meet the company goal. Once the foundation of a good supplier performance system is in place, continuously improve and refine it to get the best results from the system and from the suppliers. SPM that results in Supplier Performance Improvement is not about getting a perfect scorecard for all the company's suppliers. That would indicate the best suppliers at a given moment in time. SPM is about continuously monitoring the company's business needs and measuring supplier's ability to meet those
17
needs so that the company always has the best suppliers and that the capabilities of the supply base evolve with the company's business needs. SPM means monitoring requirements, collecting key supplier performance data, evaluating performance data with metrics that tie directly to high-level business goals, feeding evaluation data back to suppliers, creating meaningful supplier improvement plans, and, most of all, it means repeating all these steps to ensure performance monitoring is continuous. SPM data should be critical in selecting, rewarding, and in some cases eliminating suppliers from a company's supply base. To achieve this goal companies must store and manage SPM data in such a way that they can analyze it with trend reports on individual suppliers over time and comparison reports on multiple suppliers. SPM data allow companies to see deeply into their supply chains but its primary value doesn't stop there. SPM enables them to extend the reach of their company's goals and values so they can influence their suppliers to bring about change that resides outside of their company but rolls directly into what the company delivers to their customers.
1.3 Objective of Dissertation
• • • To understand the supply chain management in automobile industry To understand the supplier performance in supply chain management To analyze the practices to improve supplier performance in supply chain management with respect to automobile industry
Limitations of this dissertation are that the research is carried only in a specific geographic location that is Delhi/NCR. Hence the results may vary for other locations.
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This also limits the scope for the dissertation. The sampling methodology used is convenience sampling. Convenience sampling is a non-probability sampling technique where subjects are selected because of their convenient accessibility and proximity to the researcher. The most obvious criticism about convenience sampling is sampling bias and that the sample is not representative of the entire population. Another significant criticism about using a convenience sample is the limitation in generalization and inference making about the entire population. Since the sample is not representative of the population, the results of the study cannot speak for the entire population.
Chapter-2
LITERATURE REVIEW
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Purchasing and suppliers are of major strategic importance to most companies today. This is because a substantial amount of the resources used by a company are made available through its suppliers. Purchases from suppliers account for more than half of total costs for most companies and in some industries, such as electronics, telecommunications, construction, and automotive, this portion is normally substantially higher (Gadde and Håkansson 2001). Suppliers are important to buying firms not only in financial terms. To an increasing extent they provide customers with new technology. Supplier performance thus considerably impacts on the efficiency and effectiveness of the customer firm and is of vital importance.
Evaluation of supplier performance The case of Volvo Car Corporation and its module suppliers Evaluation of supplier performance is thus a prerequisite for supplier development. Most studies of supplier evaluation, however, are concerned with selection of new suppliers (for an overview see for example Vokurka et al. 1996, de Boer et al. 2001). The aim of this paper is to analyze how buying firms evaluate the performance of the suppliers they use. The paper
Concluding discussion
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Evaluation of the performance of module suppliers is an onerous task. As the study of Volvo and its suppliers shows a huge number of combinations of evaluation criteria, scopes, time horizons and methods are used simultaneously. These multiplex combinations provide different views of the supplier’s performance. By varying the perspective in this way the buying company captures many different aspects of the focal supplier. Consequently, by the use of different evaluation perspectives a huge potential for performance enhancement is revealed. However, the implementation of appropriate measures to ripe these opportunities require fine-tuned balancing. For example, too much emphasis on the module price might hamper the development of the supplier’s product and process quality. As the study shows, supplier evaluation is not concerned with a single set of homogenous activities. Instead, the evaluation of a supplier and its performance involves several activities representing various perspectives that lead to complex results and require different skills. Therefore, we need to further explore the relationship among the various combinations of evaluation procedures. In this final section we discuss the implications for the customer and the suppliers.
Evaluation in interaction As suggested above enhanced interaction between customer and supplier concerning what corrective actions to take on the basis of the evaluations would reduce the problems related to complementary, overlapping and contradictory procedures and outcomes. Involving various departments from both sides would make it possible to better understand the multiple consequences of different improvement proposals. The benefits
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accompanying joint teams in this respect have been expressed, for example, by a representative of ITT Automotives (Purchasing 1997). His argument is that “when you get a supplier, an engineer, and a purchasing person together” it is possible to jointly “review the cost parameters versus a target”. Accordingly, the change process becomes better co-ordinated because “by having them work as a team all expectations are set out with respect to quality, cost, and timing” Arrangements of this type should increase the opportunities to conduct the relationship assessments suggested by Lamming et al. (1996). On the basis of this study we find it important that the activities to improve conditions on the supply side are extended from the ambition to just develop suppliers. The opportunities for a supplier to improve its performance are considerably circumscribed by the rest of the network in which it is involved. In particular, the conditions set by the customer in terms of specifications and demands for adapted solutions impacts on supplier performance. For example, Quinn (1999) argues that the buying firm should avoid too detailed direction of a supplier because this provider has been chosen for its competence and, typically has more knowledge depth than the buying firm. If the buyer specifies how to do the job in too much detail “it will kill innovation and vitiate the supplier’s real advantage” (ibid. p. 19). In the same vein Araujo et al. (1999) recommend buying firms to stimulate the development of ‘interactive interfaces’ with suppliers. This type of customer-supplier interface enables firms to consider productivity and innovation consequences for both parties as well as the benefits that can be jointly developed with specific third parties, such as the buyer’s customer and the supplier’s supplier. Of particular importance in this respect is a joint view of the time dimension.
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The final conclusion of the study is that multiple evaluation perspectives are rewarding for enhanced supply performance. On the other hand these perspectives make life complicated both for the buying company and the supplier. Volvo’s module suppliers, perceived the contradictory and conflicting feedback difficult to handle. Still, the performance of these suppliers was evaluated by a single customer only. A much more common and complex situation occurs when suppliers have many important customers, each with its own priorities and ways of providing conflicting control signals. Peter Fredriksson and Lars-Erik Gadde Department of Industrial Marketing Chalmers University of Technology www.chalmer.se
A study of supplier performance rating using total-involved-quality-costs analysis Journal of the Chinese Institute of Industrial Engineers
The development of the total-cost based supplier performance evaluation system described in this article is based on our work with an international electronics firm (D Company). The relevance of the system to design, purchasing and the other functions in organizations is presented, as well as a review of other such systems. In addition to
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describing the system, the process used to develop such an approach is reviewed and both applications and conclusions are drawn. This research refers to a quality cost reporting system recommended by the Institute of Management Accountants and the process for developing a total cost system by The 6-step process for a total cost of quality measurement system is suggested below: Step 1: Define the total quality cost structure and the cost categories. Step 2: Identify total cost items to evaluate. Step 3: Identify nonperformance events and criteria for each item or supplier. Step 4: Identify affected functions or activities and associated costs. Step 5: Record nonperformance occurrences and the related costs. Step 6: Establish standardized and objective measurement index.
Conclusions The cost-effectiveness based supplier performance evaluation using total involved quality cost (TIQC) analysis presented in this research was intended to provide methodologies and approaches in a very efficient, accurate and objective manner for: 1. Total quality companies, to enhance their ability to identify the costs actually caused by each downstream activity, department, product, cost and organization unit. 2. Company management to clearly understand and measure all intangible quality costs (consequential cost of failures) that have greater impact on the company’s performance image in the eyes of its customers.
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3. Internal departments and supplier performance promotions by identifying areas of nonperformance along with responsibility for corrective actions. This analysis also helps identify cost savings opportunities. Chee-Cheng Chen Department of Business Administration Vanung University www.vnu.edu.tw
The Supplier Performance Measurement Benchmarking Report Aberdeen group isource
Summary Nowhere does this adage ring truer than in today’s supply chain environments. Global competition, mass customization, heightened customer expectations, and harsh economic conditions are forcing companies to rely on external suppliers to contribute a larger portion of parts, materials, and assemblies to finished products and to manage a growing number of processes and functions that were once controlled internally. These trends suggest that future competitiveness will be determined by a company’s ability to develop strategies to optimally align and manage an extended network of supplier relationships. Put simply, a company’s performance is increasingly driven by (and reliant upon) the performance of external supply partners. The effective management of these extended supply networks will require companies to employ strategies for measuring and
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improving the performance of network participants. Supplier performance measurement is the process of measuring, analyzing, and managing supplier performance for the purposes of reducing costs, mitigating risk, and driving continuous improvements in value and operations. Common and consistent measurements can help companies focus resources, identify performance glitches, develop strategies for supply chain improvements, and determine the total cost of ownership (TCO) of supply relationships, products, and entire supply chains. In November 2002, Aberdeen Group’s supply chain research practice and iSource Business magazine examined the supplier performance measurement practices of procurement and supply chain executives across multiple industries and geographies. The findings of this joint Supplier Performance Measurement Benchmarking Project clearly signal that measuring supplier performance is a critical activity that is sub-optimally managed at most organizations. More than 70% of enterprises examined view measurement of supplier performance as “very important” or “critical” to their companies’ overall operations. However, only about half of enterprises have instituted formal procedures for measuring supplier performance. Even more alarming, the large majority of enterprises measure the performance of less than half their supply base. In fact, the typical supplier performance measurement program targets less than a third of the total supply base. There is clear evidence that the failure to accurately measure, evaluate, and manage the performance of these partners can increase a company’s costs, damage its product quality, and hinder its competitiveness in the marketplace. Considering the above factors, it is not surprising that nearly 60% of enterprises are less than satisfied with their ability to consistently measure and manage supplier performance.
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These findings clearly indicate that most organizations continue to grapple with insufficient and inconsistent supplier performance measurement capabilities. However, the Aberdeen/iSource study also showed clear evidence of the value that can be derived from effectively measuring supplier performance. The study identified four key strategies that were common to the enterprises achieving the greatest return from supplier performance measurement: 1. Track the performance of a broader portion of the supply base 2. Standardize supplier performance measurement procedures across the enterprise 3. Collaborate with suppliers on performance metrics, reporting, and improvements 4. Automate key supplier performance measurement activities. Specifically, enterprises applying consistent performance measurements and procedures were able to improve supplier performance by more than 26%, on average.
This report on the Aberdeen/iSource Supplier Performance Measurement Benchmarking Project covers the following:
• Examines the factors driving the increased requirements for measuring supplier performance; • Benchmarks current performance measurement processes on an industry, geographic, and company size basis;
• Identifies emerging “best practices” for effective supplier performance measurement.
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Conclusions The Aberdeen Group/iSource Business Supplier Performance Measurement
Benchmarking Project provides strong evidence that most enterprises have insufficient infrastructure and inconsistent strategies for measuring and managing supplier performance. Enterprises that established standard metrics and procedures for measuring supplier performance were able to improve supplier performance by 26.6%, on average, since the program’s inception. Most often, these improvements came in the areas of quality, on-time delivery, price, total cost, contract compliance, lead times, and overall responsiveness. These improvements manifested themselves in direct hard dollar savings to the enterprise as well as enhancements in responsiveness and service to end customers. An increased reliance on external supply partners to manage a larger portion of product content and growing number of business processes has only increased the need for companies to improve their ability to track, measure, and analyze supplier performance. These factors make supplier performance measurement a vital business strategy for controlling costs, managing risks, and driving continuous improvement across the extended supply chain. Aberdeen group isource www.aberdeen.com www.isourceonline.com
Supplier evaluations: communication strategies to improve supplier performance
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Journal of Operations Management
Conclusions When the buying ?rm uses collaborative communication for the supplier development programs, it is perceived by the supplier as an effective mechanism to improve the buyer–supplier relationship. Collaborative communication includes indirect in?uence strategy, formality and feedback. However, this study shows that the implementation of several supplier evaluation communication strategies by itself is not enough to in?uence the supplier’s performance. Although the buying ?rm currently considers their commitment and the importance of the supplier’s product and/or service to the supplier when initiating their targeted supplier development programs the buying ?rm may want to also consider the supplier’s perspective of the relationship prior to initiating supplier development programs. Supplier development programs will be successful in terms of operational performance measures if the supplier is committed to the buying ?rm. As noted by a buying ?rm manager in “Are we the customer of choice with our suppliers?” The supplier evaluation communication process could be the catalyst that strengthens the buyer–supplier relationship and supplier’s commitment. There appears to be an explanation for why some suppliers have not adequately improved their performance to meet the buying organization’s SDP initiatives. The supplier must feel a strong sense of commitment, loyalty, and longevity in the relationship with the buying ?rm. The buying ?rm can in?uence the supplier’s commitment through enhanced communication and relationship development. Relationship development includes enhancing cooperation, problem solving, and expressing their commitment, loyalty and desire to continue the
29
relationship for many years into the future. Several implications for business managers can be drawn from this research. For the buying ?rm manager, speci?c communication strategies should be designed into their SDP efforts. The program should be formalized with routine communication; incorporate supplier training, education and site visits to aid in the learning process; and provide opportunities for feedback to clarify program objectives and improvement suggestions. The result of the SDP collaborative communication effort should enhance supplier’s perceptions of the business relationship and their commitment to the buying ?rm. Buying ?rm managers should focus their SDP implementation efforts on suppliers that exhibit commitment to the buying ?rm. Although the buying ?rm’s perceptions of the supplier’s commitment are inherently biased, it represents the \ best proxy for the supplier’s commitment. As the recipient of their customer’s SDP efforts, the supply ?rm manager has the opportunity to improve the relationship with the customer. Improved relationships can result in increased market share, growth opportunities and other bene?ts. In addition, when SDPs are implemented, the supply ?rm can take advantage of the learning opportunities and improve its overall performance with the buying ?rm and with their other customers. This research has explored a relatively new area of supply chain communication and supplier development programs. Insights from this study have implications in the marketing area for speci?c channel conditions, such as structure, climate and power. Further theoretical work could expand the model by including other dimensions of communication strategy. This research incorporated indirect in?uence strategy, formality and feedback, as well as an encompassing construct, collaborative communication. Other communication dimension strategies include: direct
30
in?uence strategy, informality (such as word-of-mouth communication) and measures of frequency and media richness. Carol Prahinski &W.C. Benton Richard Ivey School of Business, Operations Management Area Group, University of Western Ontario, London, Ontario, N6A 3K7 Canada www.elsevier.com/locatedsw
Supplier selection on retail: analysis with two multi –criteria evaluation Methodologies
Conclusion Increasing competition among the corporations in the global market is today leaving the stage to the competition among the network of corporations. Leading this competition requires increasing productivity, minimizing costs and customer response times. An efficient supply-chain and performance-based supply chain management as well as other within-corporation processes are vital to reach these objectives. Suppliers are one of the most important chains of the supply chain. The quality of products, total costs and
31
customer satisfaction under these circumstances are directly affected by the supplier performance. Hence, supplier evaluation has a strategic importance for the corporations. The results reached by using the right performance criteria and evaluation method would produce robust solutions towards improving the performance of suppliers. The first aim of this study is to develop suitable supplier performance criteria and criteria weights based on the performance criteria determined for the retail industry in the literature. The evaluation of supplier performances by DEA and AHP and make a comparison between them is the second aim of this study. The performance criteria used for supplier evaluation are, markup, delivery and selling history. The best t supplier based on AHP methodology is S1. S1 and S5 are the best suppliers based on the DEA method. The objectivity, benchmarking, determining improvement targets and negotiation tools proprieties make DEA better supplier performance evaluation methodology than AHP. The rankings obtained by the two methodologies are highly consistent based on the Spearman’s rank correlation coefficient. Two multiple-criteria supplier performance
evaluation methodologies and their comparison presented in this study. The integration of the these two methodology is left as a subject for future research. H. Ahmet akdeniz, Prof. Dr., Department of Econometrics, Faculty of Economics and Administrative Sciences, Dokuz Eylül University www.deu.edu.tr
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Supply management orientation and buyer-supplier performance in automobile supply chains in india-few insights
Analysis The SMO is characterized by the constructs like 1) Long term supplier – buyer relationships, 2) Supplier participation in new product development, 3) Quality criteria in supplier selection and 4) Reduced supplier base.
The Buyer’s Performance (BP) is characterized by 1) Process flexibility 2) Product cost 3) Serviceability 4) Delivery cycle time 5) Delivery reliability 6) Production lead time 7) Production cost 8) Product features 9) Product conformance to specification 10) Volume flexibility 11) On time delivery.
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The supplier performance (SP) is characterized by 1) Flexibility 2) Environment friendly 3) Multiple sourcing 4) Cost 5) Quality 6) Delivery reliability 7) Technology 8) Design up gradation 9) USP 10) Lead time for new product development 11) No. of iterations for a new product approval 12) On time delivery
The 35 variable analyses resulted in the following 8 dimensions with their corresponding variables: Delivery Performance – Delivery speed, Delivery reliability, on time delivery, Time for new product development. Production lead time – Production lead time, cycle time Unique product features - USP, Design development, Serviceability. Sourcing Cost - Product cost, Lead time, multiple sourcing. Lean supplier base – Small no of suppliers Supplier selection - Quality criteria for supplier selection, Cost
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Supplier involvement - Involvement in new product development, Long term relationship Contemporary product - Environment friendly, Durability of product
This analysis, with additional variables, lead to the following interesting observations. Addition of variables has resulted in regrouping of variables and has made different dimensions to emerge. The variables like the unique product features and product contemporariness have emerged as separate dimensions, in the Indian scenario where the products are in the stage of high growth and intense competition, the factors adding to the product differentiation are highly appreciated, (like Product USP and the
contemporariness in automotive industry - Euro –II etc.) This redistribution of variables is found very much relevant, as these are the factors, which do influence the supplier and buyer performance and provide orientation to the SMO itself. Another interesting dimension emerging from this analysis is the sourcing cost. This dimension consists of variables like the multiple sourcing, supplier productivity and lead times. These are very critical variables in the Indian context where the suppliers are not standardized and the SMO performance is influenced by these critical factors. The results indicate that in Indian contexts, the SMO strategies are yet to find its importance as Supplier Relationship Management initiatives have very lately begun. From an initial environment of working as independent organizations without getting integrated, the supply chains are moving towards some integration with the results above showing that the linkages of Supplier’s performance are linked with the buyer’s performance but mostly in quality and flexibility rather than in cost and delivery. The
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results are to some extent limited by the small sample size and probably more insights can be drawn if sufficiently a large sample is studied and studies are done across industries. Dr. Vijayaraghavan Faculty at XLRI, Jamshedpur. www.xlri.ac.in
Chapter-3 RESEARCH METHODOLOGY
3.1 Research Design: Descriptive
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Descriptive research design is a scientific method which involves observing and describing the behavior of a subject without influencing it in any way. Many scientific disciplines, especially social science and psychology, use this method to obtain a general overview of the subject. Some subjects cannot be observed in any other way; for example, a social case study of an individual subject is a descriptive research design and allows observation without affecting normal behavior. It is also useful where it is not possible to test and measure the large number of samples needed for
more experimentation. These types of experiments are often used by anthropologists, psychologists and social scientists to observe natural behaviors without affecting them in any way. It is also used by market researchers to judge the habits of customers, or by companies wishing to judge the morale of staff. The results from a descriptive research can in no way be used as a definitive answer or to disprove a hypothesis but, if the limitations are understood, they can still be a useful tool in many areas of scientific research. Descriptive is a valid method for researching specific subjects and as a precursor to more quantitative studies. Whilst there are some valid concerns about the statistical validity, as long as the limitations are understood by the researcher, this type of study is an invaluable scientific tool. Whilst the results are always open to question and to different interpretations, there is no doubt that they are preferable to performing no research at all.
?
Sample size: 8-10 automobile industries
37 ? Sample scope: Delhi / NCR
?
Sampling method: Convenience sampling
Convenience sampling
Convenience sampling is a type of non-probability sampling technique. Non-probability sampling focuses on sampling techniques that are based on the judgment of the researcher. Convenience sampling should be treated with caution, its low cost and ease of use makes it the preferred choice for a significant proportion of undergraduate and master’s level dissertations. It is a sampling method in which units are selected based on easy access/availability. The disadvantage of convenience sampling is that the units that are easiest to obtain may not be representative of the population. For example products on top of a box of parts may be a different quality from those at the bottom, people who are at home when the market researcher calls may not be representative of the entire population. It is also called as Accidental Sampling.
3.2 Defining data and sources of data
Data: Data is a collection of facts, such as values or measurements. It can be numbers, words, measurements, observations or even just descriptions of things. Data are qualitative or quantitative attributes of a variable or set of variables. Data are typically the results of
38 measurements and can be the basis of graphs, images, or observations of a set of variables. Data are often viewed as the lowest level of abstraction from which information and then knowledge are derived. Raw data, i.e., unprocessed data, refers to a collection of numbers, characters, images, etc. The terms data, information and knowledge are frequently used for overlapping concepts. The main difference is in the level of abstraction being considered. Data is the lowest level of abstraction, information is the next level, and finally, knowledge is the highest level among all three. Data collection is a term used to describe a process of preparing and collecting data, for example, as part of a process improvement or similar project. The purpose of data collection is to obtain information to keep on record, to make decisions about important issues, to pass information on to others. Primarily, data are collected to provide information regarding a specific topic. Data is classified into two categories based on the s ource of data:
Primary Data & Secondary Data. Primary Data: Primary data is important for all areas of research because it is unvarnished information about the results of an experiment or observation. It is the data observed or collected directly from first-hand experience. It is like the eyewitness testimony at a trial. No one has tarnished it or spun it by adding their own opinion or bias so it can form the basis of objective conclusions. Primary data is the specific information collected by the person who is doing the research. It can be obtained through clinical trials, case studies, true experiments and randomized controlled studies. This information can be analyzed by other experts who may decide to test the validity of the data by repeating the same experiments. The popular ways to collect primary data consist of surveys, interviews and
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focus groups. It is usually more costly and time consuming than collecting secondary data. Secondary Data: Secondary data is data collected by someone other than the user. Published data and the data collected in the past or other parties is called secondary data. It can also be defined as the pre-existing data not gathered for purposes of current research. Common sources of secondary data for social science include censuses, surveys, organizational records and data collected through qualitative methodologies or qualitative research. Secondary data analysis saves time that would otherwise be spent collecting data and, particularly in the case of quantitative data, provides larger and higher-quality databases that would be unfeasible for any individual researcher to collect on their own. In addition, analysts of social and economic change consider secondary data essential, since it is impossible to conduct a new survey that can adequately capture past change and/or developments. In secondary data, information relates to a past period. Hence, it lacks aptness and therefore, it has unsatisfactory value.
3.3 Methods of data collection
• Frame out questionnaire to analyze the supplier performance in supply chain management with respect to automobile industry
? Primary Analyze the data/ results from the questionnaire
? Secondary Analysis of papers in journals
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? Collect relevant data from white papers
Qualitative research is a type of scientific research. In general terms, scientific research consists of an investigation that: • Seeks answers to a question • Systematically uses a predefined set of procedures to answer the question • Collects evidence • Produces findings that were not determined in advance • Produces findings that are applicable beyond the immediate boundaries of the study
Qualitative research shares these characteristics. Additionally, it seeks to understand a given research problem or topic from the perspectives of the local population it involves. Qualitative research is especially effective in obtaining culturally specific information about the values, opinions, behaviors, and social contexts of particular populations.
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3.4 Analysis of collected data
•
Has the supplier provided the products as sample?
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•
Has the supplier responded appropriately to enquiries and requests?
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•
Has the supplier provided necessary technical support?
44
•
Has office support Technical Expertise?
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•
Has the supplier effectively assisted on emergencies and / or irregular situations?
46
•
Has provided products/services by supplier consistently meet purchase order specification?
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•
Has the supplier consistently adhered to quoted lead time?
•
Has the delivery lead time meet the order requirements?
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•
Has the supplier delivered orders to on and off site?
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•
Has the supplier adhered to packaging, shipping and other transportation requirements?
•
Has the supplier offered warranties?
50
•
Has the supplier consistently submitted accurate invoices?
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•
Has the supplier improved payment terms?
•
Has the supplier resolved discrepancies quickly?
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Chapter-4 CONCLUSION
Analyzing the supply chain management in automotive industry on the basis of secondary data Indian automobile and auto components industry is on a roll and there is an immense scope for management for enhancing the supply chain of the sector. India has become a favorable destination for foreign companies to establish their facilities and form alliances with domestic companies. Low cost of manufacturing and conducive government support have been the major drivers for foreign companies investing in India. India’s large young population, higher GDP growth, and most importantly per capita passenger car penetration is low at 8.5 car per thousand population, which creates great opportunity for industry players to offer an affordable four wheeler alternative to the two-wheeler customers. According to Planning Commission of India, Indian automobile industry is expected to grow at CAGR of 15% over the next five years. The Indian economy is now gaining momentum in the world of free trade and liberal movements of goods and services between countries. Therefore, efficiency in supply will be critical for India’s automobile success. Analyzing the supplier’s performance in supply chain management on the basis of secondary data
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For a supplier, there are a number of steps to make sure suppliers are supplying safe products. one should know about all product regulations that apply to business and stay informed about any changes to them. assess a product’s risks and identify its hazards, It is essential to have a risk management process. Suppliers should apply the standard to all stages in the life of a product, asset, project, activity or function. They usually get the most benefit when apply the risk management process right from the start. Using an effective product safety compliance program to comply with the law will result in supplying safer products. Suppliers should consider each product on its merits. Many products need testing to ensure they are safe and free of faults and consistently meet any mandatory standards that apply. If suppliers are supplying products covered by mandatory standards or bans, every item must comply. Having a complaints handling system in place will help to pick up on any adverse incidents and trends relating to products.
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Analyzing the practices followed by suppliers in the automobile industry from the collected data
•
Most of the time supplier provided the product as sample. It helped the suppliers to provide the solution to a set groups needs and to figure out which sample is beneficial for the particular automobile. They responded appropriately to enquiries and requests the feedback is both qualitative and quantitative due to which customers showed their willingness for repeat purchase.
•
The supplier provided necessary technical support always and most of the times suppliers has office support Technical Expertise. Supplier Technical Support is an optional add-on service that helped the suppliers to gain direct access to technical support engineers for assistance troubleshooting or data issues.
•
Most of the time the supplier effectively assisted on emergencies and / or irregular situations but some of them rarely assisted on emergencies. The supplier performance programs trained the suppliers every time in such a way so that in case of any emergency they are able to supply the right product to right customer and it also helped to fix the position of a particular supplier for the respected company.
•
Products/services
provided
by
supplier
consistently
meet
purchase
order
specification. It helped to control the purchasing of products and services from external suppliers and allowed buyers to clearly and explicitly communicate their intentions to sellers A purchase order is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services. No
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contract exists until the purchase order is accepted. It also helped a purchasing agent to manage incoming orders and pending orders..
•
Most of the times supplier consistently adhered to quoted lead time and delivery lead time meet the order requirements. The lead time between the placement of an order and delivery of a new car from a manufacturer may be anywhere from 2 weeks to 6 months, so supplier quoted a lead time in such a way so that he will be able to deliver the product but In industry, lead time reduction is an important part.
•
The supplier delivered orders to on and off site always The delivery of the products can be on/off the sites as per convenience of buyer and seller both and transportation requirements are provided by the suppliers only and most of the time adhered to packaging, shipping and other transportation requirements
•
The supplier offered warranties and consistently submitted accurate invoices. It will provide the buyer with peace of mind in knowing that various aspects are covered. ensured that financial investment is protected
•
Most of the suppliers improved payment terms and resolved discrepancies quickly. This helped the buyer and supplier to maintain a healthy and long term relationship with each other.
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Chapter-5 SUGGESTIONS
•
Establish an SPM strategy and plan – Any supplier scorecard should be developed with corporate goals in mind. The overall SPM strategy should make sure it is aligned with corporate objectives so they enhance them not conflict with them.
•
Develop supplier performance criteria and expectations – Identify basic criteria the company expects from all suppliers.
•
Select evaluation tools and process steps – The team must identify how it will collect, monitor and measure performance. It should also create a rollout plan to both the stakeholder and supplier communities.
•
Collect supplier performance data (qualitative and quantitative information) – Performance data must be collected and becomes valuable over time. Teams should establish time period associated with data collection, for example, quarterly.
•
Measure and share results – Once collected the data should be reviewed against criteria and shared with suppliers and stakeholders.
•
Set improvement goals and plan – Companies must act on the performance data collected so they can influence supplier behavior.
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•
Review and recalibrate goals, strategy and metrics periodically – As a business grows and changes, the goals, strategies and metrics must be recalibrated so that everything is aligned.
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Chapter 6 BIBLIOGRAPHY
1. www.tdctrade.com 2. www.emeraldinsight.com 3. www.igi-global.com 4. www.telecomitalia.it 5. www.sciencedirect.com 6. http://smallbusiness.chron.com 7. http://supplyperformance.wordpress.com/ 8. http://www.esourcingwiki.com 9. http://www.emptoris.com 10. http://www.economywatch.com 11. http://www.siamindia.com 12. http://www.surfindia.com 13. http://business.mapsofindia.com 14. www.aberdeen.com 15. www.isourceonline.com 16. www.elsevier.com/locatedsw 17. www.asq.org 18. www.deu.edu.tr
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Chapter 7 ANNEXURES
DATASHEET
DESIGNATIO SNO. SUPPLIER COMPANY VolksWagen 1. (FIBRO) India 2. TVS Wadco Afro Asiatic 3. Exporters 4. 5. pvt. Lmtd. 6. MICO Bosch Tata Motors Valvo -Eicher 7. Eicher Pvt.Ltd Vehicle Ltd. 8. Exide battries Tata Motors R. D. Channe Ast. Manager Rakesh Jain Store Manager R. D. Channe Ast. Manager MRF Tyres Delloroto India Maruti Suzuki Maneesh Chahal Ast. Manager Tata Motors R. D. Channe Ast. Manager Hero Honda Vinod Sharma Store Manager Tata Motors R. D. Channe Ast. Manager Amit Srivastava Manager EMPLOYEE N
CONTACT NO. 9167831019
8871083380
8882863507 8871083380 8126707989
8871083380
9826644437
8871083380
61
Brakes India 9. lmtd. Tata Motors R. D. Channe Ast. Manager 8871083380
62
QUESTIONNAIRE
Topic-To
analyze
the
supplier
performance
in
supply
chain
management with respect to automobile industry
A. SAMPLES AND QUERIES
1. Has the supplier provided the products as sample? • • • • Always Most of the time Rarely Never
2. Has the supplier responded appropriately to enquiries and requests? • • • • Always Most of the time Rarely Never
63
B. SUPPORT AND ASSISTANCE
3.
Has the supplier provided necessary technical support? • • • • Always Most of the time Rarely Never
4.
Has office support Technical Expertise? • • • • Always Most of the time Rarely Never
5.
Has the supplier effectively assisted on emergencies and / or irregular situations? • • • • Always Most of the time Rarely Never
64
C. ORDER COMPLIANCE
6. Has provided products/services by supplier consistently meet purchase order specification? • • • • Always Most of the time Rarely Never
7. Has the supplier consistently adhered to quoted lead time? • • • • Always Most of the time Rarely Never
D. DELIVERY REQUIREMENT COMPLIANCE
8. Has the delivery lead time meet the order requirements? • • Always Most of the time
65
• •
Rarely Never
9. Has the supplier delivered orders to on and off site? • • • • Always Most of the time Rarely Never
10. Has the supplier adhered to packaging, shipping and other transportation requirements? • • • • Always Most of the time Rarely Never
66
E. PAYMENT / SERVICE OFFERED
11. Has the supplier offered warranties? • • • • Always Most of the time Rarely Never
12. Has the supplier consistently submitted accurate invoices? • • • • Always Most of the time Rarely Never
13. Has the supplier improved payment terms? • • • • Always Most of the time Rarely Never
14. Has the supplier resolved discrepancies quickly?
67
• • • •
Always Most of the time Rarely Never
68
SAMPLE QUESTIONNAIRE
Name of the Company: VolksWagen India Name of the Employee: Amit Srivastava Designation: Manager Contact no: 9167831019 Name of the Supplier: Fischer-Brodbeck GmbH (FIBRO)
Topic-To analyze the supplier’s performance in supply chain management with respect to automobile industry
A. SAMPLES AND QUERIES
1. Has the supplier provided the products as sample? • • • • Always Most of the time Rarely Never
2. Has the supplier responded appropriately to enquiries and requests?
69
• • • •
Always Most of the time Rarely Never
B. SUPPORT AND ASSISTANCE
3. Has the supplier provided necessary technical support? • • • • Always Most of the time Rarely Never
4. Has office support Technical Expertise? • • • • Always Most of the time Rarely Never
70
5. Has the supplier effectively assisted on emergencies and / or irregular situations? • • • • Always Most of the time Rarely Never
C. ORDER COMPLIANCE
6. Has provided products/services by supplier consistently meet purchase order specification? • • • • Always Most of the time Rarely Never
7.
Has the supplier consistently adhered to quoted lead
time? • • • Always Most of the time Rarely
71
•
Never
D. COMPLIANCE
DELIVERY
REQUIREMENT
8. Has the delivery lead time meet the order requirements? • • • • Always Most of the time Rarely Never
9. Has the supplier delivered orders to on and off site? • • • • Always Most of the time Rarely Never
10. Has the supplier adhered to packaging, shipping and other transportation requirements? • • Always Most of the time
72
• •
Rarely Never
E. PAYMENT / SERVICE OFFERED
11. Has the supplier offered warranties? • • • • Always Most of the time Rarely Never
12. invoices? • • • •
Has the supplier consistently submitted accurate
Always Most of the time Rarely Never
13. Has the supplier improved payment terms? • • Always Most of the time
73
• •
Rarely Never
14. Has the supplier resolved discrepancies quickly? • • • • Always Most of the time Rarely Never
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