Developing a Supplier Scorecard - Term Paper

DEVELOPING A SUPPLIER

SCORECARDPRESENTED BY

GROUP 1

ANAND KV - DM14105

KARTHICK S - DM14123

ANAND NAMBIAR - DM14202

VIJAY KRISHNAN A - DM14257

CONTENTS

Introduction

Literature Review

Case Study 1: Honeywell

Case Study 2: TARA

Developing a Scorecard

Conclusion

INTRODUCTIONIntroduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

Challenge for organizations - Improving supplier performanceSuppliers: Key value chain participants – affect the firm’s total

performance

Balanced Scorecard- performance measurement tool

- strategic tool for decision making based on performance

- based on 4 perspectives – Customer, Internal, innovation & learning, Financial

Supplier Scorecard - measure performance of suppliers

- quantitative & qualitative - template to identify supplier performance

metrics & evaluate the suppliers against these key metrics

Contents

SUPPLIER SELECTION CRITERIA

Dickson (1966)

273 Purchasing agents

23 selection criteria

Classification of Extreme, Considerable, Average, Slight

Order Quality, Delivery, Performance, Warranty

Introduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

Contents

SUPPLIER SELECTION CRITERIA

Ellram (1990)

Qualitative Criteria

Long Term Relationship

Soft FactorsFour Groups Finance, Organizational Culture, Strategy, Technology, Misc

Introduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

Contents

SUPPLIER EVALUATION PROCESS

Linear Weighting Model

• Analytical Hierarchic Process (AHP)• Interpretative Structural Modelling

(ISM)

Total Cost of Ownership

Mathematical Programming Model

Introduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

Contents

LINEAR WEIGHTING MODEL

1986Timmerman

•Weights based on importance of the criterion.•Two other types Categorical and Cost based model

Analytical Hierarchic ProcessAHP• Prioritizing Alternatives• Hierarchy based on Goal, Criteria and Alternatives• Criteria might be like Quality, Price, Service, etc

Interpretative Structural ModellingISM• Objective – proper structure to the problem• Identify relationship among criterion• No Multiple supplier evaluation

Introduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

Contents

TOTAL COST OF OWNERSHIP (TCO)

Ellram (1995) – adds all costs like Transportation, Inspection, service to Purchasing Price.

Based on fact that certain costs are from Nature of Suppliers

Mattson (2000) – companies for Accurate Purchasing process

Enarsson (2006) – intuition of certain suppliers being better than others

Parameters of TCO – Management, Delivery, Quality, Price, Service and activity related to communications

Introduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

Contents

MATHEMATICAL PROGRAMMING MODELS

Introduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

Data Envelopment Analysis (DEA)

• Charnes (1978)• Effective Frontier from Decision Making Units (DMUs)• Pareto Optimality

Payoff Matrix

• Soukup (1987)• Futuristic scenarios for Suppliers• Find out the most stable Supplier

Contents

HONEYWELL INTERNATIONAL INC.

ACS (Automation and control system)

Delivery

Lead time

Quality

Production Savings

Payment terms

Introduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

• Beneficial for both the supplier and Honeywell

• Scoring done out of 100

Contents

TARA AEROSPACE LIMITEDIntroduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

Contents

TARA AEROSPACE LIMITED - CONTINUED

Performance Management System (PMS)

Supply chain governance

Integrates with supplier quality

SC risk management processes

Better visibility into supplier deliverables

Increase competitive advantage

Chargebacks for non-conforming material & supplies

Align practices between themselves & their suppliers

Introduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

Contents

TARA AEROSPACE LIMITED - CONTINUED

Vendor

Scorecar

d System(out of

100)

Quality

Delivery

Cost

Customer Friendly

Service

Introduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

Project Delivering to Schedule

Budget Allocated Sufficient

Deliverables – produced & approved

PMR(Program Management Review)

Contents

PRESENT RATING SYSTEMS

Analytical methods(AHP, DEA)

Rating Systems(Categorical, Weighted

Point)

Managerial DecisionsLess Meaningful KPIs

Introduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

Contents

EFFECTIVENESS OF SUPPLIER SCORECARD

Introduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

Golden Rules

Flexible – Scoring and Metrics

Real-time – Updated and Early

Warning

Cost-based

Benchmarked

Contents

KEY CHARACTERISTICSIntroduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

Contents

BALANCED SCORECARDIntroduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

Contents

BALANCED SUPPLIER SCORECARDIntroduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

Contents

BALANCED SUPPLIER SCORECARDIntroduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

Contents

BALANCED SUPPLIER SCORECARDIntroduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

Contents

SHORTCOMINGS IN PRESENT SCORECARD

Industry Scorecards were quantitative in structure

Different Scorecards for Different supplier locations absent

CSR, Eco-Friendly factors not taken into consideration

Introduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

Contents

BSSC – ENHANCEMENT FACTORIntroduction

Literature Review

Case Study 1:Honeywell

Case Study 2:TARA

Developing a Scorecard

Conclusion

FINANCIAL PERSPECTIVE

• Local Economic policies, Location, Tax & Duties

Environment Friendliness

• Design for environment, Green SCM, Pollution free

Social Development

• Social Improvement, Growth of surrounding ecosystem

Contents

“THE RESULT OF LONG TERM RELATIONSHIPS IS BETTER AND BETTER

QUALITY, AND LOWER AND LOWER COSTS”- W. EDWARDS DEMING