Original Date: 11/12/2001
Revision Date: 01/18/2007
Information : Supplier Management System
The Supplier Management System was implemented by Frontier Electronic Systems to collect and maintain delivery and quality performance information for its suppliers. This process enables real-time visibility by the company, monitors supplier deficiencies, and provides feedback to suppliers about their performance.
Previously, Frontier Electronic Systems (FES) maintained separate Microsoft Excel spreadsheets for each of its suppliers. The objective was to track delivery and performance levels by rating suppliers on a scale of 1 to 100, based on on-time/late deliveries and accepted/rejected lots. As materials were received, technicians entered the purchase order number and delivery information into the supplier’s spreadsheet. Each line item counted as one lot. Points were deducted for each day a delivery was late, with a maximum of five points. For defective materials, suppliers would lose an additional five points for each rejected lot. If materials were delivered on-time or early, one point was added. Although this system provided some valuable information on supplier performance, it produced inconsistencies on how points were added and/or deducted. One flaw in the system resulted in suppliers restarting near the top of the scale after they had bottomed out at a zero rating. Many suppliers were good performers, but the system might portray them as poor performers. Suppliers were not informed of their rating and most were unaware of the system. In addition, no differentiation was made between Group I suppliers (those that manufacture/supply products to FES customers’ build-to drawings and specifications) and Group II suppliers (those that primarily supply off-the-shelf products). This difference is important because late deliveries from Group I suppliers are sometimes the result of drawing changes introduced by FES or its customers. In 1998, FES implemented the Supplier Management System to address these issues.
The Supplier Management System utilizes on-time delivery performance data generated by the Deltek purchasing and accounting system. The database which FES uses to track Incoming Deficient Material Reports is also used to monitor supplier deficiencies. This data is collected quarterly, and suppliers are formally provided feedback about their performance levels during the reporting period. For Group I suppliers, performance reports are sent on a quarterly basis and identify the supplier’s on-time delivery rate and quality deficiencies. These suppliers also receive information on their customer service support to FES, including any positive contribution the supplier made during the reporting period. This information is collected from FES Quality, Program, and Procurement personnel who used the supplier during the reporting period. For Group II suppliers, performance reports are sent twice a year and identify the supplier’s on-time delivery rate and quality deficiencies. At this time, if applicable, FES requests these suppliers to make changes to their processes/practices in order to achieve performance improvements.
Since implementing the Supplier Management System, FES reduced its total number of suppliers from 400 to 200. The reduction was based on the combined effort of eliminating seldom-used/poor performing suppliers and helping the good performing suppliers enhance their overall supplier support. The Supplier Management System has increased on-time deliveries from 71% to 96%, and reduced quality deficiencies from 17% to 4% in 2005.
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