BUSSCM 1740 Purchasing & Supply Management Assignment #2 Supplier Performance Evaluation As Purchasing Manager for a leading manufacturer of high end wireless security monitoring systems, you've been challenged by VP of Supply Chain to improve the cost and reliability of supply for the core digital camera device for your company's security systems. Recent complaints from your top customer has escalated supplier performance as a key strategy for the coming fiscal year. Coming out of a recent off-site strategy meeting, the executive team believes that a key step in the supplier improvement process will be to more fully evaluate and potentially rationalize the number of suppliers currently supplying the camera device. You currently purchase camera devices from four (4) suppliers to ensure competitive pricing. However, despite the success you've realized in minimizing inflation for these devices and recognition you've received from your manager, in your last performance review you acknowledged to your manager that the number of complaints you've been receiving (formal and informal) has increased notably over the last 6 months. At the conclusion of your performance review, you and your manager agree that a more robust evaluation system is needed to more completely evaluate supplier performance and ultimately the true cost of doing business with them. Your company has been tracking supplier performance measures for years in the categories of cost, quality, service, and innovation - the last 12 months' data for the 4 suppliers of digital cameras is in the table below. With the increased emphasis on total performance, you know the traditional metrics aren't going to be good enough to make a fully informed assessment of the suppliers' performance. With the help of one of your peers in the Cost Accounting group, you were able to calculate costs of non-performance as well. Performance Criteria (last 12 months) Purchase Volume (units) Unit Price ($) Delivery Cost ($/unit) 3-Year Price Inflation (annualized %) Defect Rate (#/000) Received Damage Rate (#/000) Order Fill Rate (%) On-Time Delivery (%) Supplier Non-Performance Costs Rework / replace cost $42 / unit Disposal / credit recover cost $10 / unit Every 1% pt below 98% adds stockout recovery cost of $0.15/unit (n/a if >= 98%) Every 1% pt below 95% adds expedite cost $0.05/unit (n/a if >= 95%) Process Improvements initiated by supplier (#) Technical Advances initiated by supplier (#) % electronic purchasing transactions 4731bcfbba7e747f80b009c05f1265de97ff4ebd.docx Vision Plus 650,000 $9.75 $0.50 1.0% 4 10 Digicam 425,000 $8.95 $0.75 2.0% 15 20 ICU Tech 400,000 $9.85 $0.75 0.5% 1 5 Clearpic 150,000 $10.15 $1.00 1.5% 5 15 95% 92.0 99% 88% 92% 80% 95% 82% 2 0 5 1 3 1 2 0 80 50 65 10 Page 1 of 2 Assignment Questions (50 pts)* 1) Calculate the supplier performance index (SPI) for each supplier? (10 pts) 2) Applying the SPI from question #1, calculate the forward-looking total unit cost for each supplier? Include inflation expectations in your answer. (10 pts) 3) Produce a weighted point system evaluation matrix for these suppliers. (10 pts) a) Use primary categories of Cost, Quality, Service, and Innovation - determine your own sub-categories. b) Determine your own weighting and scoring criteria 4) If your goal is to rationalize and consolidate your purchasing volume with 2 suppliers, which 2 would you recommend keeping? Why? Based on your SPI-adjusted pricing, what will be your annualized savings? (5 pts) 5) For the 2 suppliers that you choose, identify 2 areas in which you can challenge them for further savings and/or continued performance improvement? (5 pts) * 1-2 bonus points for completing assignment using MS Excel worksheet. Transcribing data elements into worksheet, demonstrated use of formula calculations with fixed/relative cell references, comparison analysis, and/or charting. Feel free to complete the written answers to questions 3-5 in Excel worksheet as well if that is easier - otherwise, complete and upload both a MS Word and/or a MS Excel file with your submission. 4731bcfbba7e747f80b009c05f1265de97ff4ebd.docx Page 2 of 2