Electronic industry has grown remarkable during the last few years. Especially on the area of telecommunication strengthened competition have led to the growing demand of the electronic manufacturing equipment industry. The electronic manufacturing equipment industry is developing and producing solutions to production manufacturing lines for electronic industry companies. JOT Automation Group Plc.
is one of the electronic manufacturing equipment suppliers.
Automation will continue to influence dramatically the electronic industry production processes and therefore the speed in the production line in the manufacturing process is accelerating. Product quality is stabilizing and new products are being introduced with increasing speed. Collaboration between system suppliers and customers enables concurrent production processes and product developments.
On the electronic manufacturing equipment industry market situation is changing.
Buyer of the manufacturing equipment needs cheaper, faster and better products all the time and thus new solutions and products are needed to be successful in business.
It has been advisable for companies to outsource functions to release more effort to their own core competence and R&D. This engages risks and threats, which lead to very selective actions in the process of choosing partners, suppliers. Companies are in search for know-how, skill and ability to rabidly apply new information. For them superior product quality, advanced technological solutions and cost-competitiveness are prerequisites for survival and success.
Collaboration and a relationship between suppliers and customers is one of the key success factors in the future. Price or quality as a criterion for selecting a supplier is appropriate for short-term, transactional purchasing, but it is inadequate when searching partners. For the latter purposes factors that determine long-term future performance, potential for innovation and improvement need to be identified. Less
tangible issues such as commitment, openness and trust are also involved if the partnership is to succeed. The propensity of firm to develop and apply these attributes is not easy to access.
1.1 Objective of the thesis
In the company’s business chain the role of supplier is increasing and this need for objective evaluation of supplier performance. In many cases it is not sufficient that the supplier is able to meet the materials and service requirements of today. The buyer wants to determine whether supplier is sufficiently equipped to live up to the company’s longer-term requirements and needs. This requires knowledge of the strong and weak sides in the supplier’s performance. Furthermore it is necessary to know whether the gathering of supplier performance data enables the buyer to negotiate strict agreements about improving reject rates, reducing total lead time and cost reduction.
Supplier evaluation can be time-consuming activity, especially supplier auditing, which needs to have clearly defined objectives if gaining value to business. In a traditional supplier-consumer relationship the supplier audit often seems to be used as a way of finding as many faults as possible in the supplier operations, in order to provide a negotiating level. In customer-supplier relationship in which the supplier is regarded as a partner rather than someone to be exploited, the role of quality auditor changes into one of advisor, identifying areas for improvement of mutual benefit.
When the quality standards are used as a basis for evaluation of supplier’s quality management system, a basic supplier audit may be limited to checking that systems and written procedures exist. However, this form of audit does not establish whether the supplier is following the system and procedures. This leads to the non-conformance supplier audits.
Nowadays more meaningful approach is required. Therefore if the supplier is regarded as a partner, the purpose of the supplier audit is to achieve an improvement in the relationship between customer and supplier. Such an improvement is not a one-sided process. There may be opportunities to improve the communication between customer and supplier.
Nowadays quality standard based supplier audits have become a routine work in industrial companies. Due to outsourcing supplier audits have more and more been focused on relationships in the cases that suppliers are subcontractors and contract manufacturers for the buying company. Supplier evaluation concerning standard material and component markets is not widely used. In the industry of electronic manufacturing equipment a lot of standard components and products are purchased and then assembled to final products. This means a remarkable amount of suppliers from the area of standard material and component markets.
Along with the supplier audits, a supplier performance measurement system is established. Measurement is needed to control supplier audit’s results and to indicate present performance. The supplier performance measurement is most of the cases published as a quarterly report indicating historical and current situations.
The object of this thesis is to create an operating model for supplier evaluation, including tools and procedures to use with the standard material and component suppliers. Supplier evaluation model should be an easy and efficient model to work without spending a lot of time. This thesis should give to its reader ability to adapt the way of working with supplier relationships.
1.2 Standard material and component markets
A standard material and component markets means a market were materials and components, supplier’s end products, are purchased frequently to use in the buyer’s production line in an assembly phase. A supplier, which is active on this area, is
having many customers with same kind of product demands. Materials or components are not custom-made; they are mainly made according to international standards and expectations. A relationship with this kind of suppliers is most of the cases commodity trading. Suppliers are usually global giants with continental or country based retail office networks. From this point a word supplier is used to describe companies described above.
1.3 Methodology
Defining of the supplier evaluation process started with an investigation to literature and articles. By studying the materials the aspect to evaluation was widened. It was very essential to read different conclusion and ideas from different authors to find the right way to build up the process. A lot of researches have been made on this area, but they were more focused on relationship, in which a supplier manufactures material and components according to buyers needs.
Building the process needed ability to combine current systems existing at JOT Automation Group Plc. and research conclusions from the literature. People were interviewed to customise process as much as possible to get the most benefit out of it.
1.4 Structure of the thesis
Thesis consists of six chapters. First is an introduction, where thesis is described and objectives defined. Chapter two focuses on demonstrating JOT Automation Group Plc. and it’s sourcing policy. Chapter three creates theoretical background for the thesis. Chapter four concentrates modelling the process based on chapter three and operational requirements. Chapter five describes two case examples, which have been done as a pilot supplier evaluation processes. Chapter six includes conclusions and recommendations.