Performance management systems

Answer

Introduction

Performance management systems are based on the strategic elements of a company that stem from the organizational vision or mission statements and which articulate the values and objectives of the organization (Pulakos, 2009).

 The purpose of supplier performance assessment is to gauge the effectiveness of the company’s supply chain basing it on the effectiveness of the suppliers to deliver their orders without causing or interfering with the other functions of the management process. Performance assessment evaluates the ability of the suppliers to deliver their orders and supplies in a way that optimizes the company’s revenue generation (Hillgren & Cheatham, 2000).

The major use of supplier performance is to indicate the performance of the supplier progressively. In case of issues or problems with the suppliers, the performance record of the supplier can be tracked to the period that the issue started and the interventions measures that were taken can be effectively evaluated and their effects analyzed (Murphy & Cleveland, 1995). The case of Branco reflects the importance of supplier assessment as APC can effectively track the ratings of Branco from the second quarter when the ratings started to decline. It also shows that the ratings of Branco are still dropping largely because no effort has been taken to address the quality control issues that have been raised by APC (Johnson, Leenders & Flynn, 2011).

Supplier assessment provides the management with the right tool to make decisions. The case of Branco would eventually lead APC to establish a constant team to inspect all the shipment that is being delivered to the plant as the risk of losing almost 30% of the total production in a day is slightly much more than any company can tolerate. The losses can be attributed directly to Branco’s inability to implement the advice of the APC quality control department that conducts the non-conformance quality reports. The last assessment indicated that 20% of all shipment to APC from Branco is nonconforming. The company has not taken any effort to address the issue.

2. Branco is one of the major suppliers of APC with an annual turnover of €500,000 from APC. It’s a major supplier to APC considering that ineffectiveness of its products can cause substantial losses to the company. Branco must have passed all the rigorous supplier selection procedures that APC has instituted to vet all the potential suppliers. To be awarded a contract by APC the supplier has to pass all the vetting procedures in order to be awarded the supply contracts. The rating of Branco was above 3.5 in quarter 1 before retrogressing to 2.5 in the last quarter.

The problems with Branco stem from ineffective quality control department or a complete lack of quality control department. The supply of substandard products that included the supply of defective cartons resulted in a huge loss to APC. The quality department of APC failed to identify the problem hence the substandard product stalled a section of the automated packaging machine that resulted in the losses at APC  (Johnson, Leenders & Flynn, 2011).

Branco delivers its products daily to APC and it is only on a few occasions that its products have caused some problems to the company. However, the most disturbing issue is the failing trend of its rating by APC.

The assessment of Branco indicates that the company still has a long way to improve its products however it is still marginally strong on the supply and delivery of other products. Its overall rating currently is 2.83, that is, it is below the recommended average of 3.

The quality of the products meet the minimum standard rating of 3 however the rating of the manufacturing processes as illustrated in exhibit 2bindicaes that the data samples collected and the processes involved in quality control at Branco are below the standard rating of 3 as they have been rated at 2. Delivery schedules and quantities supplied are rated at 4 while the paper work and the shipment conditions of the product are also rated at the same rate of 4.

The most depressing issue is that only a little effort is being made to address the continuous queries and quality issues being raised by APC in fact there is no improvement that has been registered to address the lot size reductions while the cost and lead time of the deliveries continue to increase. APC has rated its continuous improvement effort at 3 while its improvement records have been rated at 0 that is about 20% of all its shipment is still nonconforming  (Johnson, Leenders & Flynn, 2011).

3. Supplier performance system can be effectively managed through a competitive performance management system. A good performance management system for supplier performance can be improved through creation of open and supportive relationship with the suppliers to create trust and confidence in the company. APC can engage Branco in continuous but informal performance conversations to identify and address productively all performance issues that the company is facing. APC can also develop a quick feedback system with an effective method of reacting and addressing all the issues affecting the suppliers promptly (Creative Metrics, 2008).

The issues with Branco should have discussed right from quarter 3 as illustrated in exhibit 3, when there was a huge drop in performance rating (from approximately 3.7 to 3.25) between  quarter 2 and 3  (Johnson, Leenders & Flynn, 2011). The sudden drop in rating should have prompted the management to investigate and address the cause of the decrease in rating (Hillgren & Cheatham, 2000).

The supply of cartons with wrong sizes should have been addressed by establishing an effective quality control section that is charged solely with the responsibility of inspecting the quality of all the products supplied to the company. Losses that stem from the supply of wrong products would be minimal as an effective control system would weed out all the wrong materials that have been supplied to the company. The non-conformance Action Report by the company’s control department remains on paper only. The company needs an effective evaluation system that should address all the issues raised by the department and the actions taken re-evaluated to establish their effectiveness. Non-performance of the supplier should lead to other corrective actions that may institute the identification of other strategic suppliers in case of failure of the incumbent suppliers (Creative Metrics, 2008).

The company should also develop a competitive supplier selection procedure. The first factor is to ensure that suppliers who compromise on quality of products supplied should not be awarded any contracts. The price, delivery and service factors should also be considered. Other factors like financial strength, reputation and geographical location should also be considered. But the most critical factor is the quality of the product. Branco has on several occasions caused APC to incur losses occasioned by the supply of substandard goods. APC should critically evaluate the ability of Branco to supply the right products and also examine the factors that have lowered its rating to almost 2.75 (below the minimum 3 required) (Johnson, Leenders & Flynn, 2011).