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This case is important because supply managers must have systems in place to monitor supplier quality and processes to address supplier quality issues.

Read the following case on Industrial Products PLC and then answer the questions that follow.

Industrial Products PLC

On Thursday, October $5,$ Wendy Lee, North American packaging purchasing manager for Industrial Products PLC $($Industrial Products$)$ division in Charlotte, North Carolina, wondered what she should say at the meeting the following day with the plant manager of Branco, a custom packaging supplier. In the last three quarters, Branco$$s performance rating had shown a steady decline. Wendy believed it was essential to get the plant manager$$s cooperation to avoid future problems.

COMPANY BACKGROUND

Industrial Products was a diversified international manufacturing organization headquartered in London, UK$,$ that offered a wide range of products to both industrial and consumer markets. The Charlotte plant employed approximately $400$ people. Annual North American sales were approximately $$250$ million, and the company had a long$-$standing track record of successful business performance. Each division operated within a set of corporate guidelines and was responsible for its own financial performance.

QUALITY CONTROL

Contributing to the success of Industrial Products was a commitment to strict quality standards in purchasing. Coordination between each supplier and Industrial Products$$ plant was crucial to avoid production problems. Contact was maintained directly between plant personnel and supplier sales representatives. When a problem in the manufacturing plant arose due to a supplier$$s product, the appropriate sales representative was immediately notified by email that included a standard form called a $$nonconformance action report,$$ which was completed by the plant operator involved with the problem. The sales representative was required to return, by email, a standard $$corrective action report$$ to acknowledge the problem and explain how it was to be resolved.

Supplier deviations from standard, as reported on the nonconformance action report, were also forwarded to each purchasing manager. An analyst in the purchasing department compiled these forms, together with information collected on other supplier performance criteria, including accuracy of the quantity delivered, shipments on$-$time, and accuracy of paperwork $($see Exhibit $1).$ The data were used to compute the $$performance rating$$ for each supplier. All suppliers were rated on the same scoring criteria.

The criteria and scoring system implemented by Industrial Products had been developed by the headquarters supply group in the United Kingdom several years earlier and reflected the key aspects of supplier performance deemed to be important by company management. Suppliers received a copy of the scoring criteria so that they were fully aware of how the evaluation system worked. At the end of each quarter, they were advised of their rating. The Charlotte plant maintained detailed documentation of supplier activity and variance from norms.

The rating criteria included three categories: quality, delivery, and continuous improvement, with quality accounting for the largest portion$50$ percent of the total rating. Within each category there was a list of items. Each item was scored according to the supplier$$s provision of that item, on a scale from $0$ to $4.$ Scores were then weighted and totaled. The supplier performance rating for the quarter was derived by summing categories $($see Exhibit $2$ for Branco$$s performance rating for the most recent quarter$).$ A supplier$$s maximum possible score was $4,$ and an overall rating of $3$ was considered the minimum acceptable performance rating.

BRANCO

Wendy had been watching Branco$$s performance ratings for the last three quarters with some concern. Although the problems incurred each quarter were rectified by Branco, the next quarter brought additional problems. As a result, Branco$$s performance rating had dropped further. In the most recent quarter, Branco$$s rating dropped below the minimum acceptable standard of $3($see Exhibits $2$ and $3).$ When Branco$$s sales representative, Jackie Newall, received the rating, she called Wendy immediately and was just as concerned. They agreed that a meeting was necessary right away, and that Industrial Products$$ production manager, Diego Sanchez, and Branco$$s plant manager, Todd Armstrong, should also attend. They agreed to meet at Industrial Products on Friday, October $6$ at $2$:$00$ p$.$m$.$

Branco was the supplier of packing cartons for Industrial Products$$ custom products. These packing cartons were odd sizes and required custom specifications. Custom packaging was required for a variety of reasons, including special orders, promotions, and unique customer requirements. Many orders involved small lots and specifications changed frequently. As a result, it had been necessary for Branco to customize produc