developing a supplier scorecard - term paper
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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