Managing Supplier Quality: Integrated Devices II

Bill Edwards is a quality engineer assigned to the Injected Molding Commodity Team at Integrated Devices, which is responsible for evaluating, selecting, and negotiating agreements with corporate-wide plastic injected molding suppliers. Each commodity team is also responsible for improving material and service quality that Integrated Devices receives from its suppliers. Bill’s role after supplier selection involves working directly with suppliers who require training or technical assistance concerning quality control and quality improvement. The company spends about 70 percent of each sales dollar on purchased goods and services, so suppliers have a major impact on financial performance and product quality.

Bill is currently helping a supplier implement statistical process control (SPC). As part of this effort, the supplier collected the following data (as presented in Exhibit 1).

CASE REQUIREMENTS

1.Calculate the upper and lower control limits for the X bar and R chart given the data in Exhibit 1.

2.When developing statistical process control charts, why do we calculate two separate charts?

3.Why should firms practice Statistical Process Control?

4.What information does a Statistical Process Control chart tell the operator? What information does the chart not tell the operator?

  1. Was this supplier ready to begin statistical process control charting? Is this process capable?

Exhibit 1

Data for Statistical Process Control Chart

Part Name: Clip

Part Number: MD3487222

Sample Frequency:Every two hours

Sample Size:Five pieces

Design Specification:.60 +/- .20 MM

Date / 3-4 / 3-5 / 3-6 / 3-7
Time / 9:00 / 11:00 / 1:00 / 3:00 / 9:00 / 11:00 / 1:00 / 3:00 / 9:00 / 11:00 / 1:00 / 3:00 / 9:00 / 11:00 / 1:00 / 3:00
Item 1 / .55 / .65 / .65 / .50 / .60 / .50 / .65 / .50 / .55 / .50 / .70 / .75 / .60 / .55 / .80 / .65
Item 2 / .60 / .75 / .70 / .60 / .65 / .65 / .70 / .60 / .70 / .60 / .65 / .65 / .60 / .60 / .70 / .70
Item 3 / .55 / .65 / .70 / .60 / .55 / .65 / .55 / .70 / .75 / .50 / .82 / .75 / .65 / .75 / .70 / .65
Item 4 / .55 / .75 / .60 / .65 / .75 / .75 / .65 / .65 / .75 / .70 / .40 / .55 / .65 / .65 / .65 / .70
Item 5 / .75 / .55 / .65 / .55 / .70 / .60 / .60 / .65 / .65 / .55 / .70 / .60 / .60 / .50 / .75 / .55
Sum
Average (X bar)
Range (R)

Express Delivery Service

Your manager, the Director of supply management at Express Delivery Service, has come to you regarding your company's sourcing strategy for a high volume critical electronic component that is used in a majority of your company’s vehicles. Many different suppliers have the capability to produce the component. In the past, your firm has used competitive bidding, but has typically relied on three different suppliers. The suppliers ratings are as follows:

CheapoBestExcel

Price/unit$2.30$2.50$2.60

Quality99%98.5%1000 PPM

Delivery95% on-time99% on-time 98% on-time

Order Cycle time2 weeks3 weeks24 hours

Assignment:

  1. Respond to your manager’s request by discussing the critical factors that you should consider when deciding whether to single source or multiple source this critical item.
  1. Provide your recommendation for awarding this contract using a formal weighted point supplier evaluation tool that you have developed.
  1. What other factors might a buyer or buying team consider when evaluating the worthiness of these potential suppliers?

Sourcing and Commodity/Purchase Family Strategy Development

Emily Smith sat in her office staring out the window. As director of corporate procurement for United Express, a company specializing in overnight package delivery, she was responsible for all supply management strategies and issues that affected the company. Emily had just left a staff meeting with Bernie Nickels, the vice president of supply chain management.

The vice president opened the meeting by comparing the supply management group to the marketing group, a comparison that did not evoke a pleasant response among the supply managers present. Bernie said that he had just spent an entire day with the vice president of marketing in a strategy alignment meeting. During this meeting it became evident how seriously and creatively marketing took its responsibility for developing customer-focused marketing strategies. Bernie said it was “embarrassing” when it was his turn to outline current and future sourcing strategies, which he said paled in comparison to the marketing strategies. The staff assembled at this meeting soon realized that Bernie was not about to suffer this embarrassment alone. In the words of one staff member, Bernie “really read us the riot act.”

Bernie argued that the sourcing strategies developed at United Express were not consistent (and sometimes were outright conflicting!) For example, the vice president said that while one group wants a partnership with a supplier, another group is out “beating suppliers over the head for a lower price.” Another group wants a single source contract at the same time a second group insists on maintaining more than one supplier for every purchased item. An animated discussion of long vs. short-term contracting finally sent Bernie looking for aspirin. Finally, Bernie concluded the meeting by saying:

“The bottom line is that we need to get our act together. Each supply group is off doing its own thing while reinventing the wheel every time we have a purchase requirement. We are not consistent. We are not developing strategies that align with what this company must do to be successful. We operate in our own little world, and from where I sit, that world doesn’t command much respect around this corporation. Emily, I want you and your people to address these issues right away.”

Emily was troubled by the vice president’s comments, particularly his concern that United Express pursued widely divergent sourcing strategies. While admitting to herself that sourcing groups sometimes developed strategies that appeared inconsistent (particularly to suppliers), wasn’t it possible that some of these groups were responding rationally to the demands placed on them by each sourcing decision? As she thought about this question, however, it became evident that United Express would benefit from a purchasing/commodity strategy development process or framework that would guide the strategy development groups. This process must be robust enough so that all sourcing groups could use it. It was also evident to Emily that United Express required a tool or approach for segmenting purchase requirements. She felt that segmenting purchase requirements would require each group to develop a strategy that was a reasonable response to that purchase requirement. Should United Express really be buying low dollar office supplies the same way it buys high dollar aircraft parts?

Assignment:

  1. Develop a multi-step strategy development process or framework that provides consistency and structure to the development of United Express’s purchasing/sourcing strategies.

2.Develop and discuss a portfolio matrix approach that requires users to segment purchase requirements according to variables that you determine are important. Be sure to identify where this segmentation tool fits within the strategy development framework.