Supplier Performance Evaluation - IPC and Branco Case Study - Marketing Assignment Help

Assignment Task:

Jenny Forde, the purchasing manager for the ‘packaging’ category of spend for IPC, wondered what she should say in tomorrow’s meeting with the plant manager of Branco, one of IPC major suppliers.  In the last three quarters of the year, Branco’s quality performance rating had shown a steady decline.  It was essential for Jenny to get the plant manager’s cooperation to avoid future problems. 

IPC (Industrial Products Corporation)

IPC are a diversified manufacturing organisation offering a wide range of products to both industrial and consumer markets and employ approximately 1,100 people.  Sales are £100million a year, and the company has a long-standing track record of successful business performance

Quality Control

Contributing to the success of IPC was a commitment to strict quality standards in purchasing.  Coordination between the supplier and IPC’s plant was crucial to avoid production slowdowns.  Contact was maintained directly between plant personnel and sales representatives.  When a problem in the manufacturing plant arose due to the supplier’s product, the appropriate sales representative was immediately notified by email, via a standard form called “Non Conformance Action Report” completed by the plant operator closest to the problem.  The sales representative was required to return by email a standard ‘feedback form’ to acknowledge the problem and explain how it was going to be solved. 

Supplier deviations from standard, as reported on the Non Conformance Action Report, were also forwarded to each purchasing manager.  The purchasing assistant compiled the forms together with information collected on a number of other supplier performance criteria, such as accuracy of the quantity delivered, deliveries on time, and accuracy of paperwork (see Exhibit 1).  Every quarter, each purchasing manager used the information collected to compute a “Supplier Performance Rating”.  All of IPC’s suppliers were all rated on the same scoring criteria.  

The criteria and weighted scoring system implemented by IPC was developed internally and reflected the key aspects of supplier performance deemed to be important by IPC management.  Suppliers received a copy of the scoring criteria so that they were fully aware of how they were evaluated.  At the end of each quarter, they were advised of their rating.  IPC maintained detailed documentation of supplier activity and variance from norms. 

The rating criteria included three categories; quality, delivery, and continuous performance, with quality accounting for the largest portion – 50% weighting of the total rating.  Each item was scored according to the supplier’s provision of that item, on a scale from 0-4.  Scores were then weighted and totaled.  A total performance rating for the quarter was derived by summing categories (see Exhibit 2 for Branco’s scoring sheet).  The suppliers’ maximum possible score was 4.  An overall rating of 3.2 was considered the minimum acceptable performance rating.  

Branco

Jenny had been watching Branco’s performance ratings for the last three quarters of the year with some concern.  Although the problems incurred each quarter were rectified by Branco, the next quarter brought even more problems.  As a result, Branco’s performance rating had dropped further each quarter.  Finally, in the most recent quarter, Branco’s rating dropped below the minimum acceptable standards of 3 (see Exhibits 2 and 3).  When Branco’s sales representative Rosie Roberts received the rating, she had called Jenny immediately as she was just as concerned.  They agreed that a meeting was necessary right away, and that IPC’s production manager, Kathleen White and Branco’s plant manager, Joe Jones, must attend.  They agreed to meet at IPC. 

Branco was the supplier of packing cartons for IPC’s abrasive products.  The packing cartons were an odd size, and required custom specifications.  As a result, it had been necessary for Branco to customise production operations to meet the unique requirements of IPC.  Branco, however, had become the only supplier of all custom packing cartons to IPC.  As a result, IPC could not source a custom product from a different supplier easily or quickly.  Branco delivered on a daily basis and its yearly sales to IPC amounted to approximately £400,000.  Custom work required a substantial commitment from both parties. The relationship of trust and certainty between IPC and Branco had taken a long time to solidify.  

Quality problems were costly for IPC.  A number of Branco’s orders had included defective carton flaps and edges.  Non-conformance problems such as this were typically not identified until a production run had started, and equipment stalls (stops) occurred.  Production used a fully automated line process, and a stall at one end resulted in a slow-down throughout.  Because the defective cartons would not affect the end product to the customer, IPC continued the run in order to meet customer deadlines.  However, the last Branco shipment of defective cartons resulted in a 30% production loss for an entire day’s (two shifts) production.  At full production, IPC ran 2000 cartons per hour, with three operators at £18/hour each. 

The meeting with Branco

Over the last few years, Jenny felt things had changed drastically in the industry.  At one time, as a buyer, she might have demanded that the supplier make changes “or else”.  This was no longer the case.  Jenny believed that in such a tight market you just don’t drop supplier and that relationships are everything.  In the meeting, Jenny felt it was essential that she impress upon Rosie and Joe that something had to change at Branco’s end, without confronting them.  

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