SUPPLIER EVALUATION ON THE STANDARD MATERIAL AND COMPONENT MARKETS IN THE ELECTRONIC MANUFACTURING
EQUIPMENT INDUSTRY
The Title of the Master’s Thesis was approved at Council Meeting of Industrial En- gineering and Management Department on 14.2.2001.
Supervisor: Professor Timo Pirttilä
Director of Material Sourcing Raimo Lehto Director of Business Development Jari Partanen Lappeenranta 27.4.2001
Miika Sunikka Soanlahdenkatu 27 80200 Joensuu tel. 0400 978 928
komponenttimarkkinoilla elektroniikkateollisuuden tuotantojärjestelmien valmistuksessa.
Osasto: Tuotantotalouden osasto Vuosi: 2001 Paikka: Oulunsalo
Diplomityö. Lappeenrannan teknillinen korkeakoulu.
75 sivua, 13 kuvaa, 4 taulukkoa ja 3 liitettä.
Tarkastajana professori Timo Pirttilä
Hakusanat: toimittaja-arviointi, elektroniikkateollisuus, suorituskykymittaus, toimittaja-auditointi
Keywords: supplier evaluation, electronic industry, performance measurement, supplier audit
Työn tavoitteena oli arvioida ja selvittää toimittajasuhteeseen vaikuttavia tekijöitä JOT Automation Group Oyj.n ja sen alihankkijoiden välisessä yhteistyössä ja muodostaa yrityksen kilpailukykyä parantava toimittaja-arviointiprosessi. Työssä keskityttiin tarkastelemaan yleisillä materiaali- ja komponenttimarkkinoilla toimivia toimittajia elektroniikkateollisuuden tuotantojärjestelmien valmistuksessa.
Ensin tutustuttiin toimittajasuhdetta ja sen arviointia käsitelleeseen kirjallisuuteen.
Teorian tueksi tehtiin haastatteluja ja kartoitettiin ensisijaisia tarpeita ja tavoitteita arviointiprosessille. Valmis prosessi testattiin käytännössä kahden eri case-esimerkin avulla. Prosessista muodostui kahteen eri työkaluun jakautunut kokonaisuus, joista auditointi arvioi toimittajan kyvykkyyttä vastatta sille asetettuihin vaatimuksiin.
Toimittajan suorituskyvyn mittaaminen puolestaan testaa ja vertaa jatkuvasti toiminnan todellista tasoa auditoinnissa saatuihin tuloksiin.
Työ sisältää selvityksen ja ohjeistuksen toimittaja-arviointiprosessin käytöstä.
Prosessin käyttö alentaa toimittajaan kohdistuvaa materiaalien saatavuuteen ja hankintaan liittyviä riskejä. Esimerkeistä saadut kokemukset osoittivat, että prosessin avulla päästään pureutumaan tärkeisiin ydinalueisiin ja kehittämään niitä sekä toimittajalle, että ostajayritykselle edullisella tavalla. Toimittaja-arviointiprosessista kehittyy toimintatapa yrityksen ja sen toimittajan välisen suhteen ylläpitämiseksi.
ABSTRACT
Author: Miika Petteri Sunikka
Name of the thesis: Supplier Evaluation on the Standard Material and Component Markets in the Electronic Manufacturing Equipment Industry Department: Industrial Engineering and Management
Year: 2001 Place: Oulunsalo
Master’s Thesis. Lappeenranta University of Technology.
75 pages, 13 figures, 4 tables and 3 appendices.
Supervising Professor Timo Pirttilä
Keywords: supplier evaluation, electronic industry, performance measurement, supplier audit
Hakusanat: toimittaja-arviointi, elektroniikkateollisuus, suorituskykymittaus, toimittaja-auditointi
The aim of this thesis was to clarify factors appearing in the relationship between JOT Automation Group Plc. and its suppliers and also to gain competence by forming a supplier evaluation process. This thesis focused on the standard material and component suppliers in the electronic manufacturing equipment industry.
Literature investigation was done before modelling the supplier evaluation process.
In addition to the theory several interviews were done to clarify the requirements and the targets of the evaluation process. After the modelling was completed two case examples were studied to test the evaluation process in practice. The supplier evaluation process includes two different tools. First is a supplier audit, which allocates suppliers capability of fulfilling the expected requirements and needs.
Secondly a supplier performance measurement continuously measures supplier’s performance and compares the data with the results of the supplier audit to find out the supplier’s operating level.
Thesis includes an operation manual of the supplier evaluation process. Use of the process tool decreases risks in supplier operation and material supply. Case studies showed that the supplier evaluation process helps to focus on the essential areas of the relationship and to make the improvements on both sides of the relationship. The supplier evaluation process is a foundation of the relationship management.
1 INTRODUCTION ... 4
1.1 Objective of the thesis... 5
1.2 Standard material and component markets ... 6
1.3 Methodology ... 7
1.4 Structure of the thesis... 7
2 JOT AUTOMATION GROUP PLC. ... 8
2.1 Production process in the electronic industry ... 9
2.2 Products and markets ... 10
2.3 Future Trend: Mass Customisation ... 12
2.4 Supplier Management ... 13
2.5 Sourcing Strategy: Local Supplier Networks... 14
2.6 Development steps of the supply chain... 18
3 SUPPLIER EVALUATION ... 20
3.1 Responsive supply chain... 22
3.2 Purchasing and supply management under development ... 23
3.3 Gaining competence by supplier evaluation ... 24
3.3.1 Supplier audit ... 24
3.3.2 Supplier measurement... 27
3.3.3 Measurement methods ... 29
3.3.3.1 Categorical method ... 30
3.3.3.2 Cost ratio method ... 30
3.3.3.3 Weighted point method... 31
3.3.3.4 Dimensional analysis method ... 31
3.3.4 Comparing the methods ... 33
3.3.5 Suppliers self-assessment... 34
3.4 Relationship assessment... 34
3.4.1 Weaknesses and threats of supplier evaluation... 35
4 MODELLING SUPPLIER EVALUATION PROCESS ... 37
4.1 Modifying supplier evaluation process for JOT Automation Group Plc. ... 39
4.1.1 Supplier audit ... 39
4.1.1.1 Position of supplier audit at ISO 9000 quality standard ... 40
4.1.1.2 Selecting audit levels ... 40
4.1.1.3 Main elements of the supplier audit... 42
4.1.2 Supplier measurement... 45
4.1.2.1 Dimensional analysis ... 46
4.1.2.2 Main elements of the supplier measurement... 47
4.1.2.3 Dimensional analysis as a supplier performance measurement at JOT Automation Group Plc. ... 50
4.1.3 Supplier self-assessment ... 50
4.2 Supplier evaluation process ... 51
4.2.1 Supplier selection... 51
4.2.2 Supplier evaluation planning ... 52
4.2.3 Supplier audit preparation... 52
4.2.4 Supplier audit process ... 53
4.2.5 Supplier audit reporting ... 54
4.2.6 Supplier acceptance or rejection ... 55
4.2.7 Supplier action plan preparation ... 55
4.2.8 Performance measurement and reporting system implementation 56 4.2.9 Continuous performance measurement and reporting ... 56
4.2.10 Continuous feedback and development ... 57
5 SUPPLIER EVALUATION PROCESS AT JOT AUTOMATION GROUP PLC... 58
5.1 Supplier selection... 58
5.2 Supplier evaluation planning ... 59
5.3 Supplier audit preparation... 61
5.4 Supplier audit process ... 62
5.5 Supplier audit reporting ... 63
5.6 Supplier acceptance or rejection ... 63 5.7 Supplier action plan preparation ... 64 5.8 Performance measurement and reporting system implementation 65 5.9 Continuous performance measurement and reporting ... 66 5.10 Continuous feedback and development ... 69 6 CONCLUSIONS AND RECOMMENDATIONS ... 70
REFERENCES APPENDICES
1 INTRODUCTION
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.
2 JOT AUTOMATION GROUP PLC.
The JOT Automation Group Plc. develops, manufactures and markets production automation systems, equipment and services to enhance production. The most important customers are the telecommunications industry’s original equipment manufacturers (OEM). In addition to OEMs essential customers are also electronic manufacturing services (EMS) providers as well as component and sub-assembly manufactures. JOT Automation Group Plc. production automation enables customers to mass-produce high quality, globally recognized branded products. JOT Automation Group’s own service network with its local representatives and partners serves our customers worldwide. (JOT Automation Group Plc. Annual report, 2000,p. 1)
JOT Automation Group Plc was established in 1998 due to public listing. Previously company was known by name JOT Invest Oy which changed the name into JOT Automation Yhtiöt Oy in 1996. In the same year the Group acquired major ownership of JOT-Product and Salon CAF. Thus today’s Group is based on these two Finnish production automation pioneers. JOT-Product was founded in 1988 in Oulu and its area of expertise was industrial automation. The history of Salon CAF dates back to 70´s when the engineering company of Mauri Kataja started to produce manufacturing equipment for TV production. Salon CAF was established in 1985 and it specialised in robotics. (JOT Automation Group Plc. –Annual Report 1997, p.
8)
The Group’s parent company is JOT Automation Group Plc. The domestic subsidiaries of the group are JOT Automation Oy, JOT Robotics Oy, JOT Automation Service Oy and Visual Components Oy, as well as JOT Automation CMS Oy. These are situated in Oulunsalo, Vantaa and Salo. The Group has ten foreign subsidiaries: JOT Automation, Inc. (USA), OÜ JOT Eesti (Estonia), JOT Automation Sweden AB (Sweden), JOT Automation UK Ltd. (Great Britain), JOT
Automation GmbH (Germany), JOT Automation Asia Pacific Ltd. (China, Hong Kong), JOT Automation Italia S.r.l. (Italy), JOT Automation Hungary Kft.
(Hungary), as well as the new units, JOT Automation de México, S.A. de C.V.
(Mexico) and JOT Automation Romania S.R.L. (Romania). Global network and regional split is illustrated in figure 1.
Gl o b a l N et w o r k
Asi a - Pa ci f i c Reg i o n Eu r o p e Reg i o n
N o r d i c Reg i o n
Am er i ca s Reg i o n
Figure 1. JOT Automation Group Plc.’s global network. (JOT Automation Group Plc. company presentation overheads, 1999)
2.1 Production process in the electronic industry
Production process in the electronic industry can be divided into four phases as seen in figure 2. Process starts from board handling. In this phase PCBs (printed circuit boards) are fastened with parts needed and PCBs are separated from each other.
After board-handling PCBs will go trough test handling where boards functionality are tested. Third phase is assembly, which can be made either automatically or
manually depending on the availability of automation. In assembly components and parts attached to each other and after will move to packing or inventory.
Figure 2. Production process of electronic industry. (JOT Automation Group Plc.
presentation overheads, 1999)
2.2 Products and markets
JOT Automation Group Plc. designs, manufactures and markets manual, semi- automated and automated manufacturing equipment and production lines for the electronic industry. JOT Automation Group Plc. focuses on final assembly, test and packaging automation, as well as service concepts enhancing customer production efficiency and the development of production process and product development networks.
Most products are standardised and therefore they have a broad user and application base, although electronic industry is the main application area. All the JOT
Automation Group Plc.´s products can be connected together and so its possible to build the whole production lines from different products.
JOT Automation Group has activities worldwide and its customers use manufacturing automation in their production of electronic commodities for the telecommunication, information technology and automotive electronics sectors.
Telecom is the number one sector with more than 68% share of their net sales in 2000, figure 3. Typical customers in telecommunications segment are Nokia, Ericsson, Siemens and Motorola. Subcontractors (EMS) and other electronic industries as automotive electronics and information technology are the other sectors.
Solectron, SCI-Systems, Flextronics and Elqotec are examples of subcontractors, who buy their production equipment from JOT Automation Group Plc. Compaq, VTI, Hella are the typical customers of other electronic industry segment.
Net Sales by customer segments
Telecom 68% (87%)
Autoelectronics and others 1% (1%)
GDT 19% (12%) EMS 12% (6%)
Figure 3. Net sales distribution to different industry segments. (JOT Automation Group Plc. Financial Statement 2000 overheads, 2000)
The sales unit co-ordinates sales of JOT Automation Group Plc. system and equipment, distribution activities and the provision of local services within the
Group’s entire territory. Sales are organised by segment and by market area.
Specified account organisations serve larger clients. These organisations operate globally and develop solutions through close, long-term cooperation with the customer. Contract manufacturers in turn are served by a single central organisation.
Third team concentrates on distributor channel activities, and consists of JOT Automation Group Plc. own sales unit, global partners, and local channel networks.
JOT Automation Group Plc. sales concentrates on Europe and Nordic Countries.
Together year 2000 sales were 63% of the total net sales as presented in figure 4.
Net Sales By Market Area 2000
Net sales 2000 (Net sales 1999)
Americas 17 % (24 %) Asia 20 % (20 %)
Europe 40 % (31 %) Nordic Countries 23 % (25 %)
Figure 4. JOT Automation Group Plc.’s net sales by market regions. (JOT Automation Group Plc. Financial Statement 2000 overheads, 2000)
2.3 Future Trend: Mass Customisation
JOT Automation Group Plc.’s aim is to develop and satisfy customer’s demands as well as possible also in the future. One key trend has been the mass customisation.
Advantage of it is that companies are able to offer individualisation needs at mass production level prices. Customisation will create challenges in the production and supply chain, as well as in product design. Cycle times will become critical,
especially during product launch windows. Quality is important and even the importance will grow due to lead- and cycle-time squeezes. In addition developing product range, applying new technologies and deepening and expanding the company’s know-how will increase JOT Automation Group Plc.’s competitiveness.
Standardisation and modernisation of product platforms have been a continue process lately. These all add ups for stronger dependence of JOT Automation Group Plc.’s suppliers and their ability to serve Group’s needs. (JOT Automation Group Plc.’s Financial Statement 2000)
2.4 Supplier Management
The structure of the supplier chain management and purchasing is decentralised at JOT Automation Group Plc. Decentralisation is due to very fast growth of the business and lack of development resources. Purchasing functions are operating traditionally and bureaucratically and mainly handling orders of material demands coming from production. Some different occur between local manufacturing sites and these features are based on local development. There is no central level that would be directly responsible of the improvements in purchasing company wide.
Purchasing organisation is fully stacked with operative work and time for development and re-organising is very limited.
On the company level there is a sourcing function, which takes care of JOT Automation Group Plc.’s wide sourcing strategies. This strategy is made in a line with company strategies. Sourcing strategy gives guidelines and targets to operative purchasing concerning issues like delivery promptness and payment terms. There are also some points related to development processes. Sites communicates and contracts with local suppliers, while Group concentrates commutating and contracting with the global supplier base.
General advantages of the decentralised situations are that sites have direct responsibility for profits centres. There are stronger customer orientation towards
internal users, less bureaucratic purchasing procedures and less need for internal co- operation. Also communication with supplier can be more direct and frequent.
Disadvantages of the decentralised situations are dispersed purchasing power, no uniform attitude towards suppliers, scattered market research and limited possibilities for building up specific expertise on purchasing and materials. (van Weele, 2000, pp.
232-235)
These advantages and disadvantages can be found from JOT Automation Group Plc.
Major disadvantages are avoided by making global frame contracts with suppliers.
Consistency of the face toward suppliers is improved by, having regular meetings with purchasing and sourcing organisations, where experiences and possible feedbacks are discussed.
JOT Automation Group Plc.’s growth is based on general success of the telecommunication industry giants like Nokia, Ericsson, Siemens and Motorola. By supplying manufacturing equipment to the new factories, buyer customer relationship has developed very strong. Some OEM companies have manufacturing planning organisation which designs and tests their manufacturing equipment as well as the most essential components of the manufacturing lines. Result is that customer gives strong specifications, which kind of equipment they need, and which kind of components and material should be included. In practice this means, that a lot of the names of the supplier are known before starting the design and manufacturing of the product. This means, that supplier knows that they are going to be used, so building a strong mutual relationship in general base has not been possible to form.
2.5 Sourcing Strategy: Local Supplier Networks
JOT Automation Group Plc. has developed supply chain strategies for many years aiming to fulfil customers’ expectations and needs. Strategies and ideas of the development are up to date and in line with present requirements. Material supply is based on the model, which core are Local Networks and the Global Technology
partners. In this model the production have been outsourced to Local Networks and strong supplier relationships with Global Partners exists and offers technology support.
Main Network Partners, which are so called first tier suppliers, are the centres of the Local Networks. These suppliers supply ready-made modules and end products, which can be assembled and attached to the final system or production line in system factory level, shown in figure 5.
LOCAL NETWORK PARTNERS Area 1
JOT Product Factory
JOT Product Factory
M a in net wor k pa r t ne r M a in net wor k pa r t ne r
Loca l component supplier / M odule supplier pa r tner Loca l component supplier
/ M odule supplier pa r tner
LOCAL NETWORK PARTNERS Area 2
LOCAL NETWORK PARTNERS Area 3…N
Figure 5. JOT Automation Group Plc.’s supply networks (JOT Automation Group Plc.’s sourcing strategy overheads, 2001)
Main Network Partners (MNP) has a minor local supply network. In this network MNP have outsourced their production to they Module Supplier Partners. MNP purchase general product, material and components from Local Component Supplier, which can also be Global Technology partners. In addition to manufacturing JOT Automation Group Plc. has outsourced some of the standard design work to MNP.
JOT Automation Group Plc.’s target is to develop a supplier network where there is only few JOT Automation Group plc.’s System Factories, which are responsible for whole line and system deliveries. Single equipment sales are decreasing and more and more customers are willing to order full-line concepts.
Coming trend have given the foundation of the supplier networks and relationships.
By forming strong local networks lead-times can be cut down constantly. Trust and mutual understanding of the benefits of the current partnership is driving down costs and saving can be continuous. Excellent quality and zero defects are result of efficiency and effective supplier relationships.
Supplier Network management has divided to the site level. Factories seek and contracts with potential suppliers building and controlling constantly the shape and condition of the network. Main Network Partners are suppliers with whom transactions have been made many years. During the years relationships is developed and Main Network Partner relation can be established. JOT Automation Group Plc.’s educates and assists MNP to develop their own network and help contracting with suppliers.
All stages of the network needs global and local technology and component support.
Global and local technology and component partners can be considered as standard material and component suppliers. Structure of the network supply can be seen in figure 6.
P ro d u c t F a c to rie s G lo b a l T e c h n o lo g y /
C o m p o n e n ts
P a rtn e r s J O T Su p p l y Ch a i n M a n a g e m e n t
JOT System Factory
JOT System Factory
Main Network Partners( whole units) Global Technology /
Component
Partners JOT Su p p l y Ch a i n M a n a g em en t
JOT Product Factory
Main Network Partner
JOT Su p p l y Ch a i n M a n a g em en t Global Technology /
Component Partners
Local Network Partners( modules, parts)
Figure 6. Structure of the network supply. (JOT Automation Group Plc. Sourcing Strategy, 2001)
Instead of the case that each step selects own technology and component partner, global agreements and co-operation models should be formed. Combining volumes gives costs saving on purchase prices. Also using of same suppliers and components gives a lot of advantages to keep products similar and easy to maintain. As a result, global product material and component suppliers will be found.
Current situation of the development is in the JOT Automation Oy site that, there are two Main Network Partners. These MNPs are developing their own local network and suppliers in it. JOT Automation OY supports network coordination and assistance. Possibilities to start developing a new network are under investigation.
Network will manufacture products with high volumes and little customer
customisation. Experiences of networks have been encouraging; improved quality and reduction of lead-time. Cost saving have also been remarkable.
2.6 Development steps of the supply chain
JOT Automation Group Plc. has given out the development steps vision related to they business strategy, figure 7. It illustrates improvement from manufacturing equipment supplier to delivery chain controller. At the moment step to take is from equipment supplier to system supplier. This step relates to network construction, which is detailed above.
JO T’ s D e v e l o p m e n t St e p s
Equipment Supplier
System Supplier
Capacity Provider
Operator Partner
Delivery Chain Controller
Equipment Supplier
System Supplier
Capacity Provider
Operator Partner
Delivery Chain Controller
Figure 7. JOT Automation Group’s development steps vision (JOT Automation Group Plc. company presentation overheads, 1999)
In practice evolution guides also the development in the supply chain. Outsourcing activity is on going process already at the moment, but importance of it will rise in
the future. It is obvious that JOT Automation Group Plc. will just concentrate on its core competence, reliable manufacturing solution provider in the future.
Development strategies exist and are the base on the improvement process. To fulfil strategies in practice everyday operation must be enhanced and transformed. This means stronger mutual collaboration with suppliers. Stronger relationships need to be regulated and measured. The operational guidance at the practise level is consequential, if changes and development wants be seen happening. This thesis aim to resolve of these issues and form the foundation of operation with one class of the supplier.
3 SUPPLIER EVALUATION
It is essential to take a look at the business environment itself to understand changes and movements in the supply chain. After industrial revolution business and production systems have been developing along with times and trends. David Walters (Walters, 2000, p. 420-436) has made a research on organisation development and it’s models. In his paper he states three important recurrent management characteristics demonstrating continuity throughout the period reaching from the industrial revolution to the virtual organisation. These three factors are knowledge management, technology management and relationship management.
Moving from mass production to the mass customisation relationships between knowledge, technology and relationship managements are changing.
Looking 200 years back a sign of the supplier co-operation can be found. According to Walters (Walters, 2000, p. 422) co-operation with suppliers is also reported to be a strong feature of the American system starting from 1875. He states that we can assume there must have been an exchange of knowledge and this suggests an early development of relationship management.
Mass customisation used to be and still is a reason for the response to changing customer circumstances and expectations. Consumer disposable incomes increased thereby increasing their spectrum of choice; these included variety and an immediacy in demand satisfaction. Through the application of so-called new technology together with approaches to management, industry created an alternative paradigm. Here the object is to deliver affordable products and services with sufficient variety and customisation. Figure 8, identifies development of the management interfaces that contribute to success in mass customisation. By inference there is stronger integration and coordination. Knowledge/ relationship management has been influenced by the integration of thinking and doing, resulting in stronger external and internal alliances and there by developing the notion of co-productivity, where
suppliers and customers agree to share the production and logistics tasks for some benefit, such as price. (Walters, 2000, pp. 420-426) Although Walters’s research is focused on consumer markets, similar trend and ideas can be found in the industrial market sectors as well. This model can be used to explain the importance of supplier evaluation.
Knowledge Management
Relationship Management Technology Management
Creating Stakeholder Value
Integration of thinking and doing
Fragmentation od demand and the development of hetegenerous markets
Integration of innovation and production No inventories-make to order
Total process efficiency premier
Customer/ supplier interdependence High investment in, and utilisation of labour skills
Sound long and short-term decisions by management and labour
Sense of community Short product development cycles
Brakthrough and incremantel innovations
Lean management: low cost profile Minimise overhead costs
Economics of scale and scope Flexible production
Lot sizes of one Affordable high quality customemised products Quick response to changing customer desires
Low Cost of variety
Knowledge Management
Relationship Management Technology Management
Creating Stakeholder Value
Integration of thinking and doing
Fragmentation od demand and the development of hetegenerous markets
Integration of innovation and production No inventories-make to order
Total process efficiency premier
Customer/ supplier interdependence High investment in, and utilisation of labour skills
Sound long and short-term decisions by management and labour
Sense of community Short product development cycles
Brakthrough and incremantel innovations
Lean management: low cost profile Minimise overhead costs
Economics of scale and scope Flexible production
Lot sizes of one Affordable high quality customemised products Quick response to changing customer desires
Low Cost of variety
Figure 8. Characteristics of mass customisation (Walters, 2000, pp. 425)
Customer/ supplier interdependence, lot sizes of one as well as quick response to changing customer desires have a strong supplier impact to business success. Longer, stronger and more co-operational relationships are developing between the customer and the buyer. Sharing risks and working for mutual benefit are important aspects in mass customisation production.
3.1 Responsive supply chain
The success of the mass customisation is depended on the operations in the supply chain. Different kinds of studies have been made on this subject. According to Hughes (Hughes, 1999, p. 95-104) many significant developments have been made over the past forty years in managing supplier and the supply chain. A few major innovations have been dominant during the past years.
In the 1960’s prevailing approach was on securing stability in production through modelling on economic batch quantities, safety stocks and order levels. Many western companies adopted Manufacturing Requirements Planning (MRP) in the 1970’s and the early 80’s. At the same time in eastern countries such as Japan, a different focus was emerging. Just-in-Time (JIT) practices were evolving alongside total quality management (TQM) in a drive to eliminate waste from manufacturing operations. A mix of improvement interventions was adopted. In fact concentration of ideas emerged.
This was based around three-core principle:
• Continually improving quality assurance system is needed to meet customer requirements. This means that each of company’s manufactured and delivered product is defect free. Due to the improvement there are no needs for buyer to do any incoming quality inspections.
• Continually improving cost management is needed to provide the product at an attractive price to the customer while securing reasonable profit for the manufacturing company. This means that there must be all the time on going process for making saving. The prices of the end products will decrease due to market competition, so cost must be cut to gain profit margin.
• Continually improving delivery system is needed to ensure that products arrived on time. This means that product deliveries must be present at the agreed moment. If deliveries are not in time supplier will damage the whole manufacturing process, because reduction of the safety stocks.
Manufacturing Requirements Planning
Just-in-Time Production
Lean Production and Lean Supply
Responsive Supply Chain Responsive Supply
Chain
1980s
1990s
2000s
• A push system
•Materials ordered against projected demand
•Elimination of safety stock and stock in the cycle
•Demand upon orderly schedules and reliable demand forecasts
•Required flexibility is taken up by varying the demand on the suppliers
• A pull system
•Regular volume demand from the customer market
•Capacity matched to demand
•Regular production pattern
•Flexible manufacturing systems
•A narrow range of similar products
•Low economic batch quantity
•Regular quantity demands
•Short supplier lead times
• Waste elimination
•Minimization of inventory and work in progress
•Cost transparency in the supply chain
•Multi-skilled workers
•Cutting of work queues
•Reduced changeover times
•Low volume of products in great variety
•Continuous improvement at every stage
• Quick response
•Supply flexibility
•Customized manufacturing
•Synchronized scheduling with final demand
•Controlled supply process
•Capability integration of trading partners
•Full use of electronic commerce
•Concurrent product development
• Quick response
•Supply flexibility
•Customized manufacturing
•Synchronized scheduling with final demand
•Controlled supply process
•Capability integration of trading partners
•Full use of electronic commerce
•Concurrent product development
Figure 9. Innovation in the production supply chain builds on previous platforms of best practice. (Hughes, 1999, p.96)
3.2 Purchasing and supply management under development
Purchasing and supply management as a discipline has changed considerably in many companies. Considering the amount of money generally involved in the preparation and the execution of purchasing and supplies decisions. An effectively and efficiently operating purchasing and supply function have an important contribution to company’s success and result. As a result of the implementation of
improvement programmes in engineering, manufacturing and logistics management, many companies feel the need for improved relationships with suppliers. These relationships necessarily should result in the lead-time reduction of the new product development, just-in-time delivery and zero defects on components. Traditionally, the purchasing department acts as the intermediary, which records the agreements with suppliers on these issues and supervises their fulfilment. This traditional role however, is changing rapidly. Moving away from their traditional, operational roles purchasing and supply management is assuming more strategic roles in the organizations focusing on getting better performance from suppliers and the active management of supplier relationships. (van Weele, 2000, p. 3-13) All these changes are affecting to organisational place of purchasing in the company. Place of the purchasing is no longer next to manufacturing line but it should be much higher.
3.3 Gaining competence by supplier evaluation
The role of purchasing in the mass customisation phase will be essential. In fact the whole supply chain and process should be managed and controlled by purchasing function. Importance of well-maintained supplier relationship and performance needs to be measured. Prevailing supply-risk and defects in the material flow are one of the major responsibilities. High-grade supplier evaluation and performance measurement can offer benefits and opportunities which leads to increasing competence.
3.3.1 Supplier audit
Supplier audit can be divided into two different cases. First, in the cases of selecting supplier it is important to clarify supplier’s capabilities to fulfil requirements expected on the product, the process, the quality assurance system and the company levels.
• Product level focuses on establishing and improving the supplier’s product quality. Incoming inspections and quality inspections are conducted, which
result in establishing the degree of quality conformance of incoming materials.
• Process level focuses on investigating the production process. The underlying idea is that the quality of the product strongly relates to the supplier’s manufacturing process. If this process is under control through consistent application of quality procedures, this will result in a product, which conforms, to the expressed quality standards and specifications. In this approach the state of the supplier’s machinery and the quality control system are subjected to in-depth auditing.
• Quality assurance system level focuses on checking the manner, in which procedures regarding quality inspection are developed, updated, maintained and refined. In the other words, not only the procedures and guidelines are investigated, but also the entire quality organisation is the subject of investigation by the customer.
• Company level focuses on investigation of the company itself. Financial aspects, quality of the management, research and development are taking in the account. Overall evaluation of learning and educating capabilities and management and control of human resources.
(van Weele, 2000, p.270)
In addition to the levels mentioned above, it is advisable to focus on information technology (IT), security, environmental and innovation levels as well. These are quite new aspects to look into, but in this case importance can be essential. IT and innovation levels are related on the lead-time reduction as well as the flexibility of the whole supply chain. Four levels mentioned above are mainly focused on “zero defect” –issues. Business success is related to innovation and new product development. Industrial spying is increasing, so importance of security, but also trust
in the relationship will rise. Security is not just covering information; it is just as well securing production and supply against accidents and problems, like fires.
Environmental issues are the coming trend. End-users insist environmental friendly manufactured products. Fame of the quality certification has pulled aside environmental standards. These standards will be an advantage in the short run and a necessity in the future.
• Information Technology level focuses on the company’s IT management and systems compatibility. Investigation should give an overview of IT systems in the company, how they are maintained and developed in the future, for example e-commerce.
• Security level focuses on the security operation plan and it’s coverage. Under investigation should be the security development and management inside the company.
• Environmental level focuses on how environment is taken into account. If a company has a certified standard for environment investigation the company will focus on it.
In the case of the suppliers who subsequently become partners, further assessments on an intermittent basis can map out progress being made and can track the effects of improvement programmes. Supplier development in other words can be closely linked to the process of regular assessment. Areas requiring improvement can be identified, action plans drawn up and progress monitored. (Saunders, 1997, p. 265- 268) The linking of assessment systems to development programmes underlines the dynamic nature of partnerships highlighting the overriding concern for progressive improvement of performance.
Surveys indicated (Saunders, 1997, p.267) that 83 % of the largest purchasing organisations carried out formal supplier site audits and other were preparing to do
so. Main purposes of the audits were to facilitate communication with suppliers, identify candidates for certification and partnership and drive product/ process improvements within supply base. Concern was expressed about the duplication of efforts by buyers and the time and expense incurred by suppliers in hosting customer visits. However, proprietary system of audits develop by buyer organisation thought to be more comprehensive than any general third-party assessment and therefore their use seemed to be both justified and necessary. Furthermore, audits in the context of forming partnership are intended to support more than just approval activities.
Supplier audits are the foundation of supplier relationships. After supplier evaluation supplier is either rejected or accepted to operate as the supplier for the evaluating company. Acceptance can be done also if the sign of the corrective actions will be seen in the short run. Evaluation should not be advisable to do very often and the frequency of the assessment can vary years. An audit can be time consuming and demands a lot of preparation.
3.3.2 Supplier measurement
Supplier measurement target is to measure supplier performance. This is linked with promises and levels inspected during the audit process. Auditing is based on visual surveillance, but also on questions that has to be answered by the supplier. Results are based on trust and data given by supplier. There are no exact variables to give unambiguous information. Especially when audits are made quite seldom constant performance is needed to trace up the levels of performance. Performance measurement can weight the trust against promises.
Humphreys (Humphreys, 1998, p. 175-176) has indicated in his research that a surveillance of the supplier will expect to achieve dramatic and immediate improvement in four critical areas:
• Cost reduction
• Quality improvement
• Increased exposure to technology
• Delivery and reliability improvements
It is difficult to measure performance improvement directly on the areas mentioned above. To get the image, areas are divided into four main criteria, which will be classified by the importance of the area.
The first one is price criteria, which focus on tracing trend of product’s prices purchased from the supplier. This support cost reduction and keeps purchase savings up to date. Price criteria may also include factors, how supplier is willing to response price negotiations and reduction requirements.
The second one is quality criteria, which focus on tracing trend of the product’s defects and reclamations. This support continues zero defect improvement. Quality criteria include factors, how supplier response to reclamation and what kind of actions supplier is willing to make preventing similar defect in the future.
The third one is service performance criteria, which focus on tracing trend of the service level. This includes product availability, order-size, delivery time, delivery reliability and consistency of delivery. Service performance criteria supports continue improvement of the supplier relationship. Can supplier keep the requirements and promises?
The fourth one is relationship criteria, which focus on tracing customer service level.
This is highly related to service performance criteria, but is more qualitative.
Relationship criteria concentrate factures, which are depending on personnel’s working efficiency of the supplying company. This includes order delivery speed, reliability and flexibility of the supplier and attitude of the supplier to handle feedback.
3.3.3 Measurement methods
The methods used to collect data for supplier performance measurements may vary but generally two types can be found, subjective and objective method. Subjective methods are used when companies evaluate suppliers’ through personal judgements, for example by combining various departments’ experiences with supplier. An objective method is to quantify the supplier’s performance. A subjective method is used in the relationship criteria, while the three remaining are done by objective method.
There are a number of methodologies, which have been developed to measure supplier to assist in evaluating prospective supplier. According to Humphreys (Humphreys, 1998, p. 176-180) studies four main methods can be indicated like shown in the table 1.
Plan Implementation Clarity of results Characteristics Situational requirements
Cost Cost/ Benefit
Categorical Easiest Least clear Small organisation, few decision makers, limited resources
Lowest Lowest
Cost ratio Most difficult Moderate Large organisations, several decision makers, major resource base, computerised cost accounting system
Highest Middle
Weighted point Moderate Clear medium-sized organisation, several decision makers, modest clerical resources
Middle High
Dimensional analysisDifficult Clearest-establishes performance measures for buyer and supplier
Potentially large and medium sized organisation
High initially, but ongoing costs similar to weighted point plan
Highest
Table 1. Comparison of the supplier rating methods (Humphreys, 1998, p. 179) The models described above have a number of important applications, apart from being used to select preferred suppliers. With the tendency to reduce the size of the companies’ supplier base and at the same time moving towards more collaborative relationships with the suppliers, there is a need to establish an acceptable threshold of performance for supplier organisations.
3.3.3.1 Categorical method
The categorical method as the name implies involves categorising each supplier’s performance in specific areas, defined by a list of relevant performance variables.
Method consists of a procedure whereby the buyer keeps a record of all suppliers to be monitored, along with their actual performance by product. A list of significant performance factors are developed for evaluation purposes and the buyer assigns a grade in simple categorical term such as good neutral and unsatisfactory, indicating the supplier’s actual performance in each area. For example a rating score of two good, two neutral and one unsatisfactory would give a score of one positive.
(Humphreys, 1998, p. 176) The main advantage of this approach is that it is inexpensive, requires a minimum of performance data, lends some structure to evaluation process and allows a number of personnel from related areas to contribute to the evaluation. However this technique is largely an intuitive process relying heavily on memory on personal judgement and experience of the buyer. This method is the least precise of the evaluation techniques.
3.3.3.2 Cost ratio method
The cost ratio method evaluates supplier performance by using the tools of standard cost analysis. The total cost of each purchase will be evaluated and calculated as a selling price of the purchased item. To this price the buyer’s internal operating costs, like quality, delivery and service elements are added. The calculation methodology involves a four-step approach. The first step is to determine the internal costs associated with quality, delivery and service. Second, factors are converted to a cost ratio, which express the cost as a percentage of the total value of the purchase. The third step is to sum the three individual cost rates to obtain an overall cost ratio.
Finally, the overall cost ratio is applied to the supplier’s quoted unit price to obtain the net adjusted cost figure. For example, if a supplier has a quality cost ratio of 2 percent, a delivery cost ratio of 4 percent and service cost ratio of minus 2 percent, the total cost adjustment would be 4 percent. (Humphreys, 1998, p. 177) The cost
ratio approach is complex requiring comprehensive accounting systems, which are usually only found in larger companies. The approach also has the disadvantage that performance measures are artificially expressed in the same units.
3.3.3.3 Weighted point method
The weighted point method seeks to combine the qualitative elements of the categorical plan with the systematic nature and quantifiable procedures of the cost ratio plan. With this technique various factors that are important to customers are weighted according to their relative importance. The assigned performance score multiplies each weight. Finally these products are totalled to determine a final rating for each supplier. (Humphreys, 1998, p. 177) The main disadvantage of this approach is that the performance measures used for various criteria must apply a standardised unit.
3.3.3.4 Dimensional analysis method
Dimensional analysis method is an innovative technique for supplier evaluation. This method attempts to resolve some of the difficulties highlighted with the methodologies described before. Methods do not provide a generally applicable methodology for combining multiple criteria or attributes into a single measure of supplier performance. One way of resolving this problem is to apply the mathematical method of dimensional analysis. (Humphreys, 1998, p. 177)
Dimensional analysis combines several criteria of different dimensions and relative importance in a single dimensionless entity for each supplier. The criteria may be expressed in different dimensions with only restriction being that they are assigned ratio scale values.
wi
w i n i
i Y
VPI X ⎟⎟⎠
⎜⎜ ⎞
⎝ Π⎛
= =1 (1)
Where
VPI vendor performance index
Xi performance criteria score for supplier X Yi required performance criterion
i 1,2, …, n-th criterion
W = i
n
i W
=1
Σ (2)
Where
Wi weight assigned to criteria i (relative importance) Both the weights (wi) and the criteria measures must reflect ratio scale values.
(Humphreys, 1998, p. 177)
In this thesis vendor performance index (VPI) is converted to supplier performance index (SPI) to avoid misunderstanding.
The model combines several different criteria into a single performance measure.
Price is stated in currency used, quality and delivery in percentages, proximity in average shipping days and the rest of the criteria are expressed in various scales. The dimensional analysis is used to measure each supplier against standard set of criteria.
The dimensional analysis allows a minimum supplier performance index score to be established. For example any supplier that achieves a rating of 0.9 or higher could be deemed eligible. Such an approach helps in reducing the level of subjectivity in making such judgements and for those companies who fail to meet this minimum value, it will allow them to identify specific areas of deficiency and provide an impetus for continuous improvements.
3.3.4 Comparing the methods
The categorical plan works well for many smaller firms without the incentives or resources to administer more sophisticated approaches, but with the management experience and intuition good value adding judgements can be made. However, method is not good enough for the firms whose operation calls for careful analysis and refinement of all budgetary components. Conversely the cost ratio plan can be a tremendous aid for the firms with a highly developed, computerised accounting system that permits the generation of precise cost data on a continuing basis. The categorical method with its qualitative approach yields the least definitive results.
This method is the lowest cost of the four plans but produces the least reliable results.
The cost ratio method yields results that tend to emphasise cost-control and at the same time may not be useful in comparing supplier performance owning to the difficulties in translating certain aspects of performance into precise cost figures. In addition the approach is sophisticated and complex with implementation and monitoring costs being high. The weighted point method produces useful and reasonably reliable data and is relatively easy to implement in all except in the smallest firms. However as with the cost ratio method, standardised units must be applied, thus introducing an additional level of subjectivity into the evaluation process.
The dimensional analysis approach alleviates this problem by reconciling the various units of measure for each attribute into single dimensionless score. At the same time it should be noted that higher costs might be incurred during the implementation phase of this plan in order to provide staff with additional training in its operation.
3.3.5 Suppliers self-assessment
One additional way to evaluate supplier is supplier self-assessment. Asking the supplier to do a self-survey and performance reporting are good aspects for accompanying evaluation process. It is important not to compare the supplier’s self- rating to the rating measured by buyer when they conduct a survey in the future.
Comparing could lead to tensions between the partnerships if the two ratings are not agreeable. The real value of self-assessment is to allow the supplier, rather than someone else to identify the areas in which improvements are needed. The supplier can design and begin his improvement process before the buyer visits do his own survey. (Lockhart, 1993, p.68)
A significant cost and timesavings advantage is that the supplier by using the self- assessment, has the opportunity to correct problems before a supplier audit is conducted. This process increases the probability of passing the first audit. The buyer benefits by avoiding the expense of another certification visit.
3.4 Relationship assessment
During the late 1980’s a traditional version of supplier assessment began to change.
Customers were be able to criticise and even improve suppliers on the basis of supplier assessment schemes, but might themselves remain very bad customers, without the benefit of the suppliers’ criticism, experiences and viewpoint. Best practice in supply chain management might therefore be expected to include some formalized scheme for two-way assessment: the customer assesses the supplier’s performance at the same time asking for feedback on how good a customer they are.
In lean supply however this context is revealed as flawed. Even if the organisations in the supply chain could be optimised though this process the health of the vital link in the chain, the supply relationship, would not be addressed. Thus it is necessary to develop relationship assessment programmes in order to focus on the critical feature of supply in the way value flows from one organisation to another. In order to
develop this a customer would have to adopt considerable humility in agreeing that the supply relationship was jointly “owned” entity, with supplier having an equally important view on its development. This is not yet a commonly apparent feature of supply chain management. (Lamming, 1996, p. 187-190)
Relationship assessment is a core to understand supplier relationships. One of the main factures in relationship between supplier and buyer is to point out that the responsibility of having a strong and successful interaction lies on the both sides.
3.4.1 Weaknesses and threats of supplier evaluation
Supplier evaluation offers benefits as well as opportunities. The evaluation is actually a way for a relationship development and success. To avoid problems it is essential to recognise possible weaknesses and threats of the evaluation process. By making a mistake can the whole relationship and co-operation be in danger. Critical points are human resources, lack of description and reliability of the data used.
(Hines, 1997, p. 214-217)
Weaknesses and threats related to human resources are not the best-known issues, but can be most influential to the totality. Like Lamming (Lamming, 1996, p. 189) writes in his research mutual understanding and collaboration is the way to build successful relationship. There is a need to get rid of customer-supplier aspect.
Problems should be solved together instead of claims and blackmailing. Change for understanding is slow and individual process.
Lack of descriptions is related to the fact, that both sides do not achieve understanding of the evaluation. Expectations from the supplier’s point of view compared to customer’s can be total different. Lack of experience and documentation leaves gaps and uncertainty to the relationship.
Both issues mentioned above are more general weaknesses and threats in the overall reengineering processes. Auditing process is related to first two areas. Risks related to data and information, are specific issues of the supplier measurement. Setting performance indicators is important stage of measurement process. Inaccurate and useless measurement and evaluation results are a waste of work and resources.
Indicator also should be focused and weighted according to the strategies used.
While changing strategies indicators should be changed as well. Results should focus on teams and groups instead of individual working level.
In addition these aspects there is one vital risk concerning information and data itself.
In audit process information is based on trust and mutual understanding. Very seldom accurate data can be used, because issues are not so unambiguous. Data used for indicator during the measurement process can be accurate but it might be possible that mistakes and misunderstandings could occur in the system itself.
All these factors must be investigated and secured as well as possible to achieve the best possible advantage of the supplier evaluation.
4 MODELLING SUPPLIER EVALUATION PROCESS
Concept of the supplier evaluation includes various steps. These steps are the basis of the evaluation procedure and development for stronger supplier relationships. Target is to find an appropriate aspect to cope with supplier. Implementation is a routine procedure including the following steps. These steps are based on Qualitas Fennica Oy’s list of supplier evaluation actions. (Qualitas Fennica Oy, 2001, p.1-6)
1. Supplier Selection
2. Supplier Evaluation Planning 3. Preparation of the Supplier Audit 4. Supplier Audit Process
5. Supplier Audit Reporting
6. Acceptances or Rejection of the Supplier 7. Making of the Supplier Action Plans
8. Implementation of Performance Measurement System 9. Continuous Performance Measurement and Reporting 10. Feedback and Development
Following figure 10 illustrates the supplier evaluation process. Process should be continuous and developing cycle. Feedback and development is put along the whole process to support each step. Each supplier will have cycle on it’s own. This means that steps are repeated during the time, if needed. Smaller cycle between steps 6-9 will be ongoing. During the time when needed supplier is audited, so then process will go back to step two. Input, which are related to each step are marked beside steps. These inputs are standard tools, which are used in every supplier evaluation step.
Continuous Feedback and Development
Supplier Evaluation Process
Supplier Candidates
Process Inputs
Requirements for Suppliers
Audit Details Main Elements
Audit Technique
Standard Reports Documentation
IT System Support Performance
Measurement Indicators
7. Supplier Action Plan Preparation
9. Continuous Performance Measurement and Reporting 6. Supplier Acceptance or
Rejection
8. Performance Measurement and Reporting Implementation 1. Supplier Selection
2. Supplier Evaluation Planning
4. Supplier Audit Process
5. Supplier Audit Reporting 3. Supplier Audit
Preparation
Audit Team Audit Plan
Figure 10. Supplier evaluation process and inputs.
