draft procedures for supplier development: the...

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DRAFT PROCEDURES FOR SUPPLIER DEVELOPMENT: THE CASE OF THE ELECTRIC POWER DISTRIBUTION COMPANY

Natália Vidigal de Souza Fluminense Federal University, LATEC Rua Passo da Pátria 156, sala 329-A - Bloco E CEP 24210-240, Niterói - RJ, Brazil E-mail: [email protected] PhD. Osvaldo Luiz Gonçalves Quelhas Corresponding Author Fluminense Federal University, LATEC Rua Passo da Pátria 156, sala 329-A - Bloco E CEP 24210-240, Niterói - RJ, Brazil E-mail: [email protected] D.Sc. Marcelo J. Meiriño Fluminense Federal University, LATEC Rua Passo da Pátria 156, sala 329-A - Bloco E CEP 24210-240, Niterói - RJ, Brazil E-mail: [email protected] D.Sc. Sergio Luiz Braga França Fluminense Federal University, LATEC Rua Passo da Pátria 156, sala 329-A - Bloco E CEP 24210-240, Niterói - RJ, Brazil E-mail: [email protected]

ABSTRACT This paper addresses the question of the lack in the Brazilian market of supplier development projects as a strategy for improving organizational performance. The core of the problem lies in the context of strategic management of the supply chain. To identify procedures for supplier development, case studies were conducted in an electric power distribution company and in a company providing management technologies for supplier development and for supply chain management. A field study was carried out based on visits and interviews with those responsible for supplier relationships. The company, of major multinational standing, is located in the metropolitan region of Rio de Janeiro. Based on the field research results and published literature, we have formulated recommended procedures for supplier development. Finally, the authors propose action: Development within the organizations of the necessary professional skills for supply chain management, establishment of cooperative relations between research canters and the organizations, and expansion of academic research in the strategic management area of the supply chain, with emphasis on supplier development. Keywords: Supply Chain Management; Supplier Development Management;

Production and Operating Systems 1. INTRODUCTION In a highly competitive environment, companies invest major efforts in increasing their market share to maximize profit. Fundamental to this process is Supply Chain Management. The result can be assessed in terms of maintenance of existing and acquisition of new customers, by offering them convenience, best pricing and guaranteed delivery of the product offered on schedule (RODRIGUES and SANTIN, 2004).

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According to Braga (2009), in some industries the costs attributed to suppliers represent approx. 60% to 70% of the annual cost of production, demonstrating their importance for achieving potential cost reductions and gaining a competitive edge. From the relationship between the supply chain links and customer contact with the supplier, a focal point emerges: the supplier development. Considering the high cost of studying and evaluating, the uncertainty of finding an alternative supplier, an option for organizations is to develop the suppliers with which they are already have a relationship, sharing skills to improve supply chain performance (Krause and Ellram, 1997). According to the study concluded by Krause (1999), the term "supplier development" is understood to refer to any "effort by the company in question to improve the performance of the supplier and/or to tailor his skills to meet the purchasing company's short and/or long-term needs". The purpose of the present article is to identify procedures for supplier development based on analysis of theoretical models and organizational practices. The key questions examined in this study are: What are the organizational concepts and practices associated with relationships between customers and suppliers? What are the organizational concepts and practices associated with supplier development? To answer these central questions to the study, and to attain the proposed goals, the following premise was put forward: That enhancement of the performance of Brazilian organizations requires the adoption of strategies focusing on supply chain management and relevant to supplier development. 1. Study Approach The study is composed of three main stages: In the first stage, the contextual and theoretical aspects are presented. Figure 1 illustrates the theoretical evolution of the study. This stage consists of an overview of the main organizational theories and practices. The second stage presents the field research conducted, including field observation, interviews and examination of documents provided by the organizations studied. Finally, we conducted an analysis of the organizational practices in order to formulate a set of procedures for the application of a new approach to supplier development, based on the anchor service company. Our conclusion will show the findings and new study recommendations. Below are described the research lines we adopted:

a) Excellence in Production – Major area of interest b) Method of Contemporary Production – Studies of factors affecting contemporary

production c) The Global Supply Chain – A study of transnational production chains. Pinpointing

excellence in customer-supplier relationships within the supply chain d) Excellence in a Supplier-Oriented Supply Chain – Formulation of procedures for

supplier development e) Supplier Development – Study of business cases and location of methodological

papers on supplier development. The triangulation approach was adopted by combining sources (Yin, 2001). Data were gathered from interviews (each of two and four hours duration) with the different players involved in the decision-making process in relation to supply chain management and supplier development, on-site visits for direct observation and analysis of internal company documents. The interviews began with the production managers, and then procurement and contract managers. They also included other professionals involved in the decision-making process relating to supplier selection and development. The interviews were conducted with the aid of a checklist of open questions. The purpose of the interview checklist was to understand the practices used for the development and selection of suppliers. The interview was based on questions related to the core study issues and to the research goal and premise. Considering the key roles played by the respondents in decision-


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making about supplier selection and development, the relatively low number of respondents did not constitute a serious limitation on the validity of the findings, especially given that the results were based on three different information sources: Interviews, field research and identified theory. The study was based on the internal reports and documents of each organization. The interviewees participated in a verification process to validate the final conclusions and analysis (Bloor, 1997). The interviewees were allowed to review the results of the study, and to offer their assessments and feedback on the accuracy of the researchers' analysis. 2. The Customer-Supplier Relationship within the Production Chain According to Ching (1999), a supply chain is a set of consecutive stages "starting with the provision of raw materials by the suppliers, moving into production (...) and finishing with the distribution of end-products to the final customers". According Montella (2004), the traditional functions in a supply process are:

a) Supply – Procurement b) Processes – Processing c) Products – Marketing d) Sales – Consumers

Further, in the view of Montella (2004), mediating between the traditional functions are three levels of management, as follows:

a) Between Supply and Procurement – Materials Management b) Between Processes and Products – Product Management c) Between Products and Consumers – Market Management

To bring organizational skills and strategies up to date, it is vital to grasp the fact that product today does not only occur within the walls of the organization. Organizations understand that strategic integration of the supply chain components is a key condition for achieving superior products that meet the needs of customers. Ellram Krause (1997a) holds that, due to the uncertainty and high costs of locating new suppliers, organizations need to formulate diagnostic procedures for improving performance using existing suppliers. Consequently, it is essential to develop the customer-supplier relationship. Partnering with suppliers facilitates timely delivery of quality resources to support new product development (CRAWFORD, COX, 1991). According Keough (1994), when an organization attains higher performance levels, its next challenge is to help the suppliers reach meet standards. These levels include ongoing improvements in terms of cost, quality and response time. Kamaruzzamanet al (2013) describes the importance of the relationship between customers and suppliers in the supply chain. Suppliers base their strategy planning on the value attributed by the customer to the product or service: The amount the customer pays the supplier reflects the latter's perception of the quality of the product or component. This quality perception has many important facets for the customer: To differentiate between the products or components and raise their prices above the price paid for the basic product or service (commodity), the supplier assesses how each of his product or service features enhances the customer's view of it and modifies accordingly the value he attaches to his purchased item. This is detectable, for example, in reduced processing lead-time or increased profits. GELDERS et al (1994) expresses this relationship from the point of view of the value (price) that the customer agrees to pay for services or products:

VBP = Price of Basic Product (commodity) + VAD where: VBP = Price Based on Value VAD = Added Value Due to Differentiation (Value-Added Differentials)


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The added value due to differentiation that the customer agrees to pay for the services or products/components is expressed by:

VAD = [ (cost) + (profit) ] / ß ,

Where:

(cost) = Cost variation to the customer, depending on the product's quality features

(profit) = Variation in profit generated by customer due to increased market share or increase in price paid by the final customer ß = Customer cost/gain ratio. For example, the customer may "reward" the

supplier with 50% of his gain ( (cost) + (profit) ). In this case, ß = 2.

cost (supplier) = Variation in the supplier's processing lead-time due to effort invested in enhancing product or service quality with certain added features. The profit to the supplier will be determined by the expression:

profit = VBP - cost (supplier) where:

Profit (supplier) = Change in supplier profit The supplier's addition of quality product or service features enhances the process and the final results of the customer, adding value to the study and development of models and practices designed to improve supply chain management performance. The inclusion of the suppliers' development strategies can provide Brazilian companies with relevant and timely results when competition is intense productivity results need to be maximized.

2. PROCEDURES FOR SUPPLIER DEVELOPMENT: Concepts Identified in Published

Methodologies For Krause and Ellram (1997), and Marciel (2009), the main factor motivating companies to develop their suppliers is the market pressure that demands increasingly shorter product lifecycles, rapid changes in technology, continuous quality standard enhancement and costs reductions relative to competitors.

Braga (2009) cites some supplier development activities. In most cases, a formal evaluation is made of the supplier alongside the customer's technical and strategic requirements, and feedback on the evaluation itself. Finally, we identify the demand for increased performance from the supplier as indicated in the evaluation. Five theoretical procedures were identified in the professional literature on supplier development. Below we have detailed the structural dynamics of procedures for supplier development: I) Neumann and Ribeiro (2004); Kalinin, Baguinski and Costa (2008); Braga (2009) and

Krause (1998) a) Supplier Development Stage:

Supplier Prioritization Matrix, Questionnaires for Identification of Critical Categories, Evaluation of Design Alternatives, and so on. The research was based on the ScienceDirect and Google Scholar online journal directories. Neumann and Ribeiro (2004) conducted a study on a company in the agricultural machinery sector – a highly competitive environment. It should also be noted that this methodology is generic and applicable regardless of whether the purchaser's goal is to make immediate changes in the supplier's operations to reduce problems or to increase the


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supplier's ability adapt independently. Table 1 identifies the phases of this procedure:

Table 1: Methodlogy of Neumann and Ribeiro Source: Neumann and Ribeiro (2004) Table 2 shows the supplier development procedure applied by Kalnin, Baguinski and Costa (2008) at the Jost Brazil Automotive Systems Company. In this case, the company sought to establish business relations with trusted suppliers. Since the main needs identified related to product quality and delivery efficiency, the focus was on cost reduction and the quest for continuous improvement.

Table 2: Methodology of Kalnin, Baguinski and Costa Source: Kalnin, Baguinski and Costa (2008)

It can be seen from Table 3, that the procedures proposed by Braga (2009) did not target development of new suppliers or of current strategic capabilities.

Table 3: Braga Procedures Source: Braga (2009)

Item Phases

1 Identify the need for improvement;

2 Establish project objectives;

3 Set the duration of the project;

4 Defne the form of project financing;

5 Define the information to be disponilizadas by the company;

6 Define the form of evaluation of tenders submitted by suppliers;

7 Define how to evaluate the results after intervention from suppliers;

8 Choice of suppliers that participate in the project;

9 Identify the profile of each supplier;

10 Subscribe suppliers.

stage Application

Critical supplier;

Involve responsible strategic target supplier;

Exposing the reality of the acquiring company and the target supplier;

Continuous Improvement Training Team Integration (MCI);

Identify opportunities for improvement;

Filter data;

Set an action plan based on the data output of the previous stage;

Submit proposal for improvements to strategic levels;

Implement proposed actions;

Collect and compare results obtained with the proposed objectives;

Show Results.

define

(1)

Train

(2)

Identify

(3)

Plan

(4)

Implement

(5)

Measure

(6)

Item Phases

1 Identify the relative importance of products / services;

2 Measurement and identification of suppliers of the candidates;

3 Identification of the area of interest;

4 Risk analysis;

5 Definition supplier of projects to be implemented.


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Muller (2009) studied the case of a vehicle manufacturer, who was already developing a car and decided to change the supplier for the rear drum brake. The company's purchasing department extended this initiative to other areas involving the development of a new supplier, but the corporate approach to supplier selection predated the production of the vehicle. So, in this case, a phased set of procedures was drawn up (see 7 phases listed in Table 4) to achieve the goal of obtaining a qualified supplier as quickly as possible.

Table 4: Muller Procedures Source: Muller (2009) Based on the studies of Seiyama (2012) and Krause (1998), a procedure was applied to the cosmetics company, Natura, which was generic in character, enabling it to be flexibly applied in a variety of different types of organization.

Table 5: Sediyama and Krause Procedures Sources: Krause (1998); Sediyama (2012) Supplier Development Stages We present here the methodological resources (tools) based on organizational management technology that which constitute the stages of supplier development. The tools presented in this topic are present in all of the procedures identified in relevant professional studies.

Supplier Prioritization Matrix In order to quantify the impact of the supplier on the customer's organization, a matrix has been formulated identifying a set of supplier characteristics. Fernandes (2008) proposes a comparative matrix of volume, opportunity and risk, as shown in Table 6.

Item Phases

1 Levatamento the requirements of the brake drum design;

2 Evaluation of technical proposals from potential suppliers;

3 Virtual Simulations and analyzes;

4 Field trials to evaluate vehicle performance;

5 Testing laboratories;

6 Design based on failure mode and effects analysis;

7 Field trials for evaluation of durability in vehicles.

Item Phases

1 Identification of critical inputs;

2 idenificação critical suppliers;

3 formation of cross-functional teams;

4 Initiate communication with the managers of the suppliers;

5 Mobilize resources and implement the improvement effort;

6 Develop performance metrics and improvement agreements;

7 Identify opportunities and likelihood of improvement;

8 Identification of critical areas for improved performance and gain competitive

9 rewards and recognition;

10 Establish continuous improvement activities.


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Table 6: Supplier Prioritization Matrix Source: Fernandes (2008) Checklist for Analysis of Critical Supplier Attributes

There are two sources indicated for compilation of a checklist:

The first is the set of National Quality Award Requirements (FNQ 2013).

The second is a checklist proposed by Mesquita and Santoro (2004), focusing on a production management company.

The two questionnaires can be used alongside each other to produce a more complete analysis of the supplier. Evaluation of Alternatives

Almeida and Moura (2005), and Kraljic (1983), identify strategic importance in the analysis of alternatives in the choice of suppliers. The acquisition of supplies depends on the strategic importance attributed to purchasing (in terms of value added by product line, the percentage of raw materials in the total cost and the impact on profitability) and on the complexity of the supply market (defined by scarcity of supply, the pace of technology and materials replacement, entry barriers and conditions of monopoly or oligopoly). Boer (1998) and the work of Abramczuk (2001) present a decision model (Table 7) shows that the supply under internal and external perspective. The internal perspective refers to the strategic importance of the supply to achieve the required corporate result and the external perspective refers to the supply risk that the supplier represents in the supply market.

Table 7: Portfolio Acquisition Matrix Source: Boer (1998), citation in Abramczuck (2001)

Low Volume Purchases High Volume cart

Bottleneck items Strategic items

Difficult to replace; Strategically Important;

Monopoly markets; Difficult to replace;

High Barriers to Entry; Lack of Alternative Providers;

Geographic situation or Critical

Policy.

Important in the general context of

purchases of the company.

Non-Critical Items Alavancáveis items

Suitable availability; Suitable availability;

Standardized specification; Availability of Alternative Providers;

Possible replacement. Standardized Precificações;

Possible replacement.

Great

Opportunity and

High Risk

Low and Low

Risk Opportunity

low buy buy buy

average buy buy buy

high do buy buy

high average low

Font: BOER (1998), citation in ABRAMCZUK (2001)

Strategic

importance to

the company

Supply risks


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Following this procedure, Almeida and Moura (2005) concluded that there are important, recommended criteria (Mason - Jones and Towill, 1999) for determining the strategic importance of supply to the organization, including:

• Total funds (actual or estimated) invested in the object • Percentage of project cost or of the corporate business budget accounted for by

object • Value added by the object to the supply chain • Impact of the object on the supply chain quality • Impact of the object on business quality • Impact of the object on business growth

In order to define the supply risks it is appropriate to take the following factors into account (Porter, 1989; ARNOLD, 2000):

• Availability of supply in the supplier market • Number of potential suppliers available • Cost of replacing one supplier with another • Pursuit of competition • Supply expertise • Cost of migration of the current supply arrangement with a possible replacement

This analysis leads us to the conclusion that the decision to purchase or produce involves a multidimensional system in which there is interdependence of supplier questions and contractual issues. The choice of supplier, together with the associated contractual bond, involves criteria which may be economic, financial, logistic, technical and strategic (PANIZOLLO, 1998). So, once the available choice of suppliers has been determined, the contractual terms to be established by the company will progress from open market negotiations to cooperation, coordination or collaboration.

3. Field Research: Electric Power Distribution Company (Company X) and Government Organization for Provision of Management Technologies for Small and Micro Businesses (Organization Y) The selection criteria were not defined on the basis of probabilistic reasoning. They were determined by their compliance with criteria, such as: Size (scope), location in a major market (Rio de Janeiro) and positioning (multinational organization). A government organization that provides management technologies for small and micro enterprises also trains and supports the consolidation of supply chain management for large companies. The organizations that were the target of the study agreed to describe in detail their relationships with the supply chain and the management procedures they employ or provide to other organizations. 3.1 Company X From our contact with Company X we were able to learn about supplier development practices. It is a corporate prerequisite that its supplier be suitably qualified. To ensure that this is the case, Company X defines procedures for local suppliers, which are displayed in the supplier section of its website. Once the procedures are fulfilled and the supplier's compliance with them confirm by audit, he is entitled to be listed in the RePro Suppliers registry (www.achilles.com/Brazil), thus gains eligibility, every year for three years, to participate in all planned tenders relating to his product family. In addition to this area of qualification, there is a program for already qualified suppliers, called INPAR (Quality Index Partnership). This program performs quarterly strategic performance monitoring of service providers, based on the indicators defined by the program, as shown in Table 8.


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Table 8: Supplier Prioritization Source: ÍNPAR Manual (2009)

The INPAR criteria include customer and worker satisfaction, security, business management and sustainability. Company X uses the parameter requirements of the National Quality Award (PNQ) to develop its strategy. In 2010, based on the assessment results, the partners began to draw up a management report on its companies for submission of their contract managers' action plans. Company X, provides auditing/consultancy services to assist companies in addressing their principle opportunities for improvement. This is the main area of benefit, recognized by suppliers. In addition, the company recognizes best-practice suppliers, who recorded the best quarterly results, and manages the annual, national award to suppliers who achieved the best performance during the past year. 3.2 Organization Y Organization Y develops and furnishes training in production supply chain management technologies for supplier development. Its operations are promoted in the market as a "productive linkage strategy". They feature a long-term, mutually attractive cooperative relationship between small and large enterprises throughout the value chain. The "Project Cycle of the Productive Chain" ( Organization Y) is described in the following points:

a. Institutional Articulation; b. Dealing with large companies; c. Structure of Governance; d. Mobilization of small business; e. Contacts; f. Operational planning; g. Implementation of the plan; h. Verification effort and result; i. Review and improvement plan.

Etapas indicator Weighting

(Commercial Dept.)

Weighting

(Administrative)

climate Labour 9% 10%

values 3% 5%

turnover 3% 5%

Assessment of 5% 5%

Frequency Rate 5% 5%

Severity Rate 5% 5%

Penalty for 5% 5%

IPAL 5% 0%

Annual Safety Plan 5% 5%

Management report 10% 10%

Degree of risk 5% 5%

labor demand 4% 4%

SERASA / Other 3% 3%

Tax and financial audit 3% 3%

Satisfaction index 3% 3%

Search index for the 10% 10%

Reviewed by the hired 10% 10%

innovation 2% 2%

Socio-environmental

responsibility

5% 5%

Improve the

skills and

employee

satisfaction;

Improve

customer

satisfaction and

contract

services;

Managing

partners

Reduce rates of

work-related

injuries;

Conduct social

impact and

respect for the

environment

programs.


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Phase A: Institutional Articulation This step is performed to connect organizations strategically oriented towards the development of productive linkage between large and small businesses, and active participation in project planning and implementation. Then, an initial link is established between the main players for preliminary design proposals to be channeled towards large companies with the potential to participate in the projects. Phase B: Negotiation with Major Companies The aim of this phase is to establish contact with large procurement or supply companies whose corporate policies are in line with the productive linkage strategy of the project, and who are interested in developing small businesses or in training and qualifying small, local enterprises in their supply chains. The basis business principles are agreed at meetings held with the participation of representatives of the large companies/institutions. The most important products of this phase are: a preliminary project structure with a description that defines the expected future situation at the end of the project, the main activities to be developed, and a legal instrument (contract or agreement) signed between the large companies and institutions. Phase C: Structure of Governance This topic aims to create an executive team to carry out functions including the following: coordination of activities, observation of deadlines, assignment of tasks and responsibilities, motivation and commitment. The framework of assignments of parties involved and the organizational structure are designed in a participatory manner. The definition of project governance model is broad, covering the implementation, coordination and continuity of the productive chain. Phase D: Mobilization of Small Businesses This stage determines the commencement of location and mobilization of small potential partner businesses. The process of canvassing the participation of small businesses requires a continuous effort on the part of the partner institutions and large companies. The large concerns issue invitations to the smaller companies to join the project, demonstrating their interest in developing a local supply base. Phase E: Contract Conclusion This phase includes the negotiation and establishment of commitments between institutions, large companies and small business enterprises, to carry out the project. The parties agree to the established governance framework, confirm the appointment of a person to assume responsibility for project management, and execution of action and liaison with partners. Finally, in accordance with the results of this phase, all parties append their signature to the project development agreement. Phase F: Operational Planning At this stage, the project structure is validated with the indicators for initiation of project management. A project plan is prepared to include definition of the project activities and timetables. Phase G: Implementation Plan In this phase, diagnostics are performed on the small businesses, and then short-term and long-term plans are drawn up. The short term plans include projected estimates for up to 6 months of project activity, and focus on reducing any existing routine problems in relations between the large and small companies. The purpose is to generate short-term indicators to increase the motivation of the participants. The long term plans are established to cover a project period of between 6 and 18 months, so the focus is on implementation of management models to enhance the managerial culture of the company in the pursuit of quality and excellence.

http://www.businessdictionary.com/definition/governance.html


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This stage deals with the implementation of the activities defined in the project plan and defines the mechanisms that will be deployed to manage them. Phase H: Verification of Effort and Results At this stage, the indicators of performance, stress, physical achievement, quality, productivity and financial execution of the project are measured. This is consolidated in a report evaluating the processes and outcomes. Phase I: Review and Enhancement of the Plan Analysis of the results and impact of the project and identification of corrective and/or preventive action to leverage new performance standards for new cycles. The sustainability of the results achieved and the project itself can be assured only if the users and beneficiaries are prepared to operate and manage the benefits obtained. 4. PROPOSED SUPPLIER DEVELOPMENT PROCEDURES This step aims to compare the practices employed by Company X, by Organization Y and formulated from the review of existing professional literature. An analysis of this comparison is performed. The comparison enables the formulation of a set of procedures, which is the purpose of this article. This structure is summarized in Figure 1.

Figure 1: Structure of Market X Theory Analysis Source: author (2013) First, the comparison is performed of the studied procedures – five taken from the literature review and two created by Company X and Organization Y. By studying the methodology behind each procedure, it was possible to identify the macro steps: Initial Formal Commitment, Mapping, Diagnostic Analysis, Executive, and Evaluation. These are the steps most commonly employed. To complete the table, the case where action is indicated is shown as "Number 1" and cases where no explicit action is indicated appears as "Number 2". The result of this comparison is shown in Table 9.


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Table 9: Comparison of Supplier Development Methodologies Source: author (2013) 4.2 Analysis of Studied Methodologies In this topic, Table 10 summarizes the main focus of the methodology studied, related criticism of the studied process and any restriction of its use. Table 9 is intended to correlate the position of the company that develops the supplier with the selection of the most appropriate corporate strategy procedures.

contains 2 1 2 1 1 1 1

main

Activity

Meeting with

suppliers

considered

critical

Validation of

the proposed

vendor

chosen

Meeting with

suppliers

considered

critical

Enrollment

in the

program

INPAR

Contract signed

between large

companies and

Sebrae

contains 1 1 1 2 1 2 1

main

Activity

Identify which

generated the

need for

improvements

in the supply

chain

Exposing

providers

reality both

the company

itself and the

supplier

Identify items

that should

receive special

attention or any

changes in

supply with

significant

impact on the

operations of

the acquiring

company

1 Identification

of critical inputs

and after the

critical

suppliers.

Competency

Matrix (EPP)

and Opportunity

Matrix (EG)

contains 2 1 1 2 1 1 1

main

Activity

Improvement

Continues

Integration

team

identifies

opportunities

for

improvement

Examine the

technical

capability,

quality, on-time

delivery, cost

reduction,

capacity

management,

A cross-

functional team

identifies critical

areas of supplier

Completing

the

questionnair

e with the

scores for

each

criterion

Diagnoses the

current state of

small business

by completing a

questionnaire

Planejamento contains 1 1 1 2 1 1 1

main

Activity

Definition:

Supplier's

Proposal;

Duration of

the project;

Form of

project

financing;

Availability of

information;

Method of

assessing

results.

Definition of

an action plan

with

information on

the diagnosis

and

presentation

of the project

proposal for

the strategic

levels

Through the

viability of

projects;

strategic

importance of

the changes,

the impact on

the business;

percentage of

costs to be

divided;

Check with the

supplier

improvement

opportunities

through

feasibility,

available

resources and

time needed to

carry on the

project, and

potential return

on investment.

Schedule

with plans of

action to

reverse the

criteria not

scored

Specific plan for

every Small

business

contains 1 1 2 1 2 1 1

main

Activity

Visits and

meetings

Visits or

reports

Performing

technical

tests and

simulations

auditing Training,

Technical

Workshops and

Consultancies

contains 2 1 2 2 1 1 1

main

Activity

Compare the

results

obtained with

the proposed

objectives and

Reward and

recognition for

the achievement

of objectives

quarterly

recognition

Finalistics and

Intermediate

Indicators

Execução

Avaliação

Compromisso

Formal Inicial

Ampla Sebrae

Mapeamento

Diagnóstico

Stage

Neumann e

Ribeiro

(2003)

Kalnin,

Baguinski

e Costa

(2008) Braga (2009) Muller (2009)

Krause (1998)

apud

Sediyame

(2012)


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Table 10: Analysis of the Supplier Development Methodologies Source: author (2013) 5. PROPOSED PROCEDURES The proposed procedures serve the purpose of this article. For its composition, use was made of the macro steps that are the structural criteria for supplier development.

From the theoretical content and organizational practices presented in this article, together with the interviews conducted with managers, suppliers and experts from Company X and Organization Y, it is possible to propose procedures for improving supply chain management, with a focus on supplier development. As detailed below:

a. Convincing top management of the Company; b. Indentify prospective suppliers to be developed; c. Align expectation with suppliers; d. Feasibilty study; e. Choose the potential suppliers; f. Perform diagnostics business; g. Formalize the proposal; h. Follow the development; i. Evaluete the results

Step 1: Convincing Top Corporate Management: This will constitute a change in the broad vision of the corporate management in that, instead of waiting for a newly recruited supplier to qualify, the supplier will be a partner in this mission. This can be seen in the case study of Organization Y. Step 2: Identifying a Potential Supplier to be Developed: This step aims to locate the preferred supplier, the most complete methodology is that of Braga(2009). As at the Xpossui Company of in the INPAR program, which is aligned with the company's strategies, a measurement parameter for suppliers is generated. The rating issued by the INPAR program enables identification of suppliers who meet the company's average minimum requirement and its comparison with the prioritization matrix used by Fernandes (2008). Step 3: Aligning Expectations with the Suppliers: This step involves the search for new suppliers with the capacity to expand their services and entry into discussion with those who are already providers of such services in order to explain the supplier development process.

Focus Planning for

project

Supplier

relationship

Precision in

the choice of

Project

Execution

Supplier

relationship

Result of the

development

Project Execution

Review All the

planning is

done by the

contractor

without

contact with

the supplier

Lack of

monitoring

proposed actions

Not

established a

way of

monitoring

the

implementati

on

Attention on

the

development

of the

product and

not the

vendor

Lack of

monitoring

proposed

actions

The support

provider for

project

execution

Does not identify

with the anchor

what are the main

problems it

Restriction Existing

methodology

for suppliers

Have staff

available to

improve

continuous

integration

There was a

restriction

identifies

high-impact

Methodologi

es for a

specific

product

Existing

methodology for

suppliers

Provider need to

have resources

available

Having anchor

company spending

money

Empresa X

Organization

YStage

Neumann

e Ribeiro

Kalnin,

Baguinski e

Costa Braga Muller

Sediyame

Krause


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Step 4: Conducting Corporate Diagnostic Analysis: The step covers implementation of the questionnaire to identify the problems of each eligible supplier for participation in the process. The parameters of the questionnaire will serve as the Mosque and Santoro Checklist (2004) for the production area, and must be supplemented by the relevant requirements indicated by Company X, on its website, for each supplier group. Step 5: Selecting the Potential Supplier: Based on the completed questionnaire, an initial budgetary framework can be prepared for each supplier's project. Then, using the Pareto analysis, budgets are prioritized and an Impact Effort X matrix is prepared to analyze the cost benefit and select a potential supplier. Step 6: Studying the Feasibility: Based on the preliminary budgetary estimate, a more detailed budget plan is prepared, taking into account the turnaround time, technical feasibility and environmental impact. A comparison is made of possible scenarios acquiring the activity of the target supplier, continuing the status quo, using a new supplier without developing him or developing the existing supplier. Step 7: Formalizing the Proposal: In line with the supplier budgets, a proposal is prepared to commit the supplier to deadlines, costs, impact and knowledge. Then, the proposal is signed with the selected supplier. If some factor arises that presents an obstacle to the project procedure, then a return is necessary either to step 5 or to step 6, depending on the nature of the obstacle. Step 8: Monitoring Development: Project implementation is monitored through participation in a series of meetings, technical visits and the issue of reports addressing the defined supply chain management performance indicators. Step 9: Evaluating the Results: The results are evaluated by a process of comparison of set objectives with action taken, and checking the supplier's results in the next version of the INPAR Program. The procedures incorporate the recommendations of Neumman and Ribeiro (2003) and of Braga (2009) for implementing a supplier development program, as indicated in Table 11:

Table 11: Critical X Practice Success Factors Source: author (2013)

Critical Success Factors Practices

Using the classification of INPAR

Program;

Hold meetings to explain the program and

participation is voluntary.

Lack of competence on the basis of

the supplier's employees to implement

solutions

Verification of the technical viability of the

supplier.

Prioritization of the supplier with best

value;

Definition of time for return on investment;

Definition of the form of project financing,

what each party will bear the expense.

Consolidation of gains

Indicators of partial and final results

performance.

Relationship transparency through a

participatory planning.

Meeting suppliers aiming to strengthen

bonds of trust between companies,

disseminate and reward good practice.

Inappropriate choice of program

participants and lack of motivation

Unwillingness to invest

Provider does not trust the purchasing

company


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6. CONCLUSION AND SUGGESTIONS FOR FURTHER RESEARCH The present study was performed with a limited number of companies, and despite their representative validity at regional level and the regularity of the results, it can be inferred that their market behavior is inconsistent with the corresponding theoretical models. So, a gap was noted between the theory and practice of this research study. The stated purpose of this article is to identify procedures for supplier development based on the analysis of theoretical models and organizational practices.

The questions that guided this research were: What are the organizational concepts and practices associated with relationships between customers and suppliers? What are the organization nal concepts and practices that relate to supplier development?

A review of relevant professional literature, a case study and analysis of available documents enabled the research questions to be answered and the goal of this article to be achieved.

To answer the central research questions and achieve the proposed objective, 3 hypotheses were proposed: Hypothesis 1 (Training): Companies do not have personnel qualified in supplier development or trained in the use of models to analyze their supply chain relationships or to provide decision support for selecting and developing suppliers. Hypothesis 2 (Adaptation): The available analysis models are not adapted to the needs of the companies and their use is insufficiently widespread. Hypothesis 3 (Relevance): There is the perception that the theoretical supply chain and supplier development relationship models are not enough to increase management awareness about their relevance. The professional literature review, analysis of the documentation of organizations studied, and review of the data and information collected in interviews and field visits, reveal the root causes of some of the difficulties encountered in developing suppliers in Brazil:

Long geographical distances between suppliers and buyers.

Concentrated supply of services and products, leaving many customers without options (oligopolies).

High degree of vertical integration in many industries due in part to the concentration referred to above (raises the prices of intermediate goods) and partly due to the lack of available suppliers to installations in many industrial sectors.

Sectors such as vehicle manufacturing and electronics are served by a single supplier. This leads to a high vulnerability of production in the event of an interruption in the supply.

Issues of qualification and supplier development: There is poor dissemination of methods and procedures to support supplier development.

The customer-supplier relationship in the industry is of fundamental importance for the partners when both are seeking excellence in their business. The proposed model favors and clarifies such relationships by helping the customer to make decisions that reward the efforts of "partners" and facilitating the recruitment of reliable and quality suppliers.


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Supplier selection involves criteria based not only on cost. There are also relevant supplier characteristics that are essential: Economic and financial status, quality organization, process, materials and production control, control of nonconforming materials, equipment monitoring and maintenance; sales and services, business commitment, strategic planning, and more. To aid decision-making by multiple criteria the adoption of the Activity-Based Costing (ABC) goal programming model is recommended. Thus, by adopting a multi-criteria approach, the supplier selection decision is enriched and also becomes more realistic, since, in practice, there are few and very specific situations where important decisions can be made based on a single criterion. One of the goals of this study, beyond surveying all the relevant theories and practices, is to identify ways of propagating the use of models for supplier development. The core of the difficulty identified in field research of creating organizational awareness of the importance of supplier development is the insecurity of the interviewed professionals in developing strategies and proposing specifically oriented projects. The response to this uncertainty is professional training. To motivate a professional person to take appropriate initiatives, other than the pressure on him to produce results, it is important for him to receive training in the areas of production chain management. Beyond technical knowledge, he needs to acquire the skills that will ensure success in this initiative. The cooperation between academia and corporate management should contribute both to the enhancement of the production chain management procedures existing in the market and to the provision of relevant research opportunities and, consequently, the generation of new knowledge. Within the highly competitive environment of the current study, with the scarcity of quality suppliers and the end-customer's demand for high quality, companies must seek alternatives to assist them in achieving their goals, one of which is profit. The main result detected by the existing methodology was the discovery of a rich diversity of research conducted in this field. However, a major lack was also found of relevant studies relating to large service company scenarios, since the majority of such work focuses on an understanding of the manufacturing environment. Already present in the empirical study was the possibility to add to the existing body of academic research, new information gathered through the activities of Organization Y, who are working with companies to sensitize private organizations to investment in supply chain management, including the development of suppliers. Finally, a suggested area for new study would be the application of the procedures to a supplier development methodology framework with the aim of demonstrating its performance results in supply chain management. The recommendation is that such a study be conducted in the service sector to avoid the need for major changes, and within a large company to ensure its validity both academically and in the marketplace. REFERENCES ABRAMCZUK, A. A. Os relacionamentos na cadeia de suprimento sob o paradigma da

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