metalcraft inc case study
DESCRIPTION
Supply Chain ManagementTRANSCRIPT
CASE STUDY
CGN SUPPLY CHAIN MANAGEMENT
METALCRAFT INC
TARAB SYED AHMED 2010A36
DIVYA CHADHA 2010A60
SHUBHANGA PRASAD 2010B19
SAMIRA VEMPARALA 2010B32
TARUN VIR SINGH BANGA 2010B41
KUNAL SINGH 2010C43
AESHA MARU 2010C60
ABOUT THE COMPANY
Tier 1 supplier of automotive parts to large automakers
84 plants, 1 million incoming components per plant per day
Financials 2001 - Revenue : USD 12.8 Billion Net Income : USD 30 million
Automakers
• OEM
• After market
Tier 1 - Metalcraft
• Assemble component into modules
Tier 2 - Phillips
• Convert raw materials into basic automotive components
Tier 3 – supply raw materials
INDUSTRY & METALCRAFT
Sector - Market cap USD 39.2 billion
Metalcraft – Market cap USD 2.8 billion
Major Industry Problem - Cost of defects
Warranty costs total per vehicle > Average profit per vehicle
Metalcraft’s cost – quality problems, delay in parts delivery, warranty costs
Metalcraft Quality control - Scorecard
CASE SITUATION
Who - Rubber Vent Hose Vendor?
Caltek Inc
ElectropartsInc
AutopartsInc
Mark Mueller
Commodity Purchasing
Agent
Mark Letcher
Corporate Supplier
Development Manager
Darell Bonds
Product Engineer
Ellie Smith
Quality Supervisor
METALCRAFT’S SOURCING PROCESS
What is right
• Considers Basic Cost, Weight and Performance targets of the product
• Prototype development capabilities
• Evaluation of Quotes based on:
• Cost Analysis
• Tooling Analysis
• Capacity Requirements
• Program Timing Constraints
What more?
• Financial Health –Transparency of finances
• Expertise – Investments in R&D
• Operational Effectiveness in terms of:
• Responsiveness
• Inclusion of TQC, 6σ, JIT• Customer Service Index
QUALITY CONTROL PROCESS
1
• Determination of Physical & Performance Characteristics
2• Determination of method to evaluate these
characteristics
3• Preparation of Control Plan
4 • Review & Approve Control Plan
5• Quality Checks & Recording Results on Control Chart
QUALITY RATING SYSTEM
Quality System Status
QOS/BOS Status
PPAP LevelPPAP
Slippage
PPM Performance QR PerformanceSignificant Quality
Event
METALCRAFT’S SUPPLIER SCORECARD
WHY
• To be successful Tier 1 automotive components supplier – Zero Defect Rate
• Single, worldwide reference point on Supplier performance
HOW
• Rating suppliers on three dimensions
• Quality
• Timing
• Delivery
• Continuous evaluation of supplier performance
• Not based on single audits
INPUTS
• Electronic Orders from EDI system
• Contact Information
• Quality System Information
PROCESS
• Calculates PPM and Trendline
• Calculates Supplier Quality Ratings
• Calculates PSW Slippage
OUTPUTS
• Consolidated Contact Information
• Quality and Delivery Results by Individual Plants
• Sourcing Recommendation
OPERATIONS OF SUPPLIER SCORECARD
SUPPLIER SCORECARD
Overall Quality Rating
• F (different aspects of quality & performance)
Launch Quality Rejects
• Problems reported in the production startup phase
• Separated launch problems from normal production
Defect Rates
• Measured in PPM
• Classified fit or function rejects
Meeting Timelines
• For certification of new components
PPAP
• Important to ensure Low volume and High volume products meet requirements
• New parts meeting all specifications
PSW
• Components can be used on vehicles for sale
Quality Timing Delivery
Delay in Deliveries induces
• Rescheduling Costs
• Overtime Production Costs
• Expidited delivery costs
Delivery Performance Rating
• Supplier Communication system
• Up to Schedule Shipping
• Problem resolution and prevention
• Overshipment
• Record Maintenance
• Other Performance
USE OF SCORECARD
Buyers
Supplier selection responsibility
Cost and quality implications
Limited information sourcing
Scorecard -Objective metrics,
constricted supplier base
Plant Quality Engineers
Ensures high quality and defect free parts
Indentify recurring defects from
historical data
Address QRs across all plants
Identify and directly contact problem
suppliers
SD engineers
Technical assistance to suppliers
Helped evaluate and identify attention
areas
Learnt about problems after
significant
Suppliers
Helped guide internal movement
Monitor health of relationship with
Metalcraft
Strengthen competitive position
PROBLEM: WHICH SUPPLIER TO SELECT?
• 1. Correct Metrics
• 2. Metrics accurately reflecting information
[A] Standardize Scorecard:
[B] Use of Scorecard by all stakeholders (Product engineer)
Solution
PROPOSALS
1• Scorecard should have detailed data & query
functions – Data by product line
2
• Updation of performance rating should be done statistically
• Negotiation should have no role
3
• Reduce incentive for buyer to buy at lowest cost
• Define minimum level of quality and increase incentive for same
Which supplier is better ? (Outlier)
4
• Standardize strategy for one time spike
• Exclude one-time event (but capture in notes)
Variation in PPM
Metalcraft Supplier Scorecard - Summary
CALTEK INC
Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
2000 2001 2001 2001 2001 2001 2001 2001 2001 2001 2001 2001
Total PPM 640 5165 409 1 696 3 1100 208 77 1 1328 355
Parts Received
(000)42628 55092 61751 67496 62243 66158 45859 46704 66487 41958 56535 56021
5• Exhibit 5: Huge variation in PPM
• Keep standards constants for reasonable time
QRS Points
Quality Performance Data
PPM Performance Points
0 25
1 to 60 20 to 15
61 to 200 15 to 10
201 to 500 10 to 0
> 500 0
6• Continuous Basis for QRS Points
Cost Analysis
Lowest Landed Cost
Currency Impact
Productivity History
Long Term Agreement
Tooling Analysis
Hard Tooling cost
Soft Tooling Cost
Capacity Requirements
Program Timing Constraints
Quality Performance
Delivery Performance
Restructuring Scorecard
Buyer Supplier Development Engineer
Product Engineer Manufacturing Plant Representative
Sourcing Team
DECISION
Risk Associated For Mark with the decision
• Less Critical Component
• Only Visual Quality Check
• Price offered is low
• Not much impact on his incentives
Scorecard - not fully reliable
• Huge fluctuation in PPM values
• Plant rated red even though it has 0 defects in the last 11 months
• Once identified, Company is improving the metrics
Design Capability
• Industry shifting to High end Products
• Future Partnership Prospects
CALTEK –WHY?
Supplier Relationship Management
Stages
Contractual Relationship
Check the Quality and try to improve the vendors
Vendors as partners
THANK YOU
TARAB SYED AHMED 2010A36
DIVYA CHADHA 2010A60
SHUBHANGA PRASAD 2010B19
SAMIRA VEMPARALA 2010B32
TARUN VIR SINGH BANGA 2010B41
KUNAL SINGH 2010C43
AESHA MARU 2010C60