Metalcraft Case Study - Purchasing and Supply Management

SCLM 439: Purchasing and Supply Management

Group Assignment: METALCRAFT Case Study

• Team members:

1. Company background

Metalcraft was established in 1967 and the company supplied automobile parts to the largest vehicle manufacturers in the world. It had nearly 80,000 employees in 27 countries. Metalcraft designed and manufactured various automotive products such as glass, chassis systems, climate control systems, instrument panels or powertrain control systems. In 2001, the revenue ($12.8 billion) and net income ($30 million) of Metalcraft were impressive. Recently, the company has a hard decision to choose suitable supplier for the rubber vent hose production.

1. Automotive Industry: Industry trend

The automotive parts industry provided the original parts used in new vehicles and replacement parts and add-on accessories for the aftermarket. Furthermore, the automobile supply chain includes four levels which are:

• OEMs (Ex: Ford, GM, Toyota) assemble parts from the tier 1s to produce a finished car.
• TIER 1: Like Metalcraft, deliver finished components to the OEMs.
• TIER 2: Convert raw materials into basic components.
• TIER 3: Supply raw material for tier 2

3. Metalcraft’s Problem:

The automobile industry had developed in both size and complexity, which leaded to the more requirements for automotive industry, especially, zero defects. As a biggest Tier 1, Metalcraft had to deliver millions of components to different countries around the world. Moreover, it had to consider various aspects to achieve zero defects such as quality problems, on-time delivery, certifications, and warranty costs.

• Metalcraft must create a scorecard for analyzing multiple suppliers. Additionally, Metalcraft wanted to improve the system in order to make it useful for all users to choose correct supplier.

4. Introduce Scorecard:

4.1 Supplier Selecting Process:

• Presents a set of basic requirements for the component, including cost, weight and performance targets.
• Develops a design and engineering drawing for the new component.
• Forwards the drawing to supplier for testing.
• Prepares the final and detailed drawing and forwards it to the buyer.
• The buyer distributes copies to several preferred suppliers and issues a request for quote (RFQ).
• Suppliers submit their quotes.
• The buyer evaluates quotes based on several criteria and makes sourcing decision.

4.2 Quality control process

• Setting limits for physical and performance characteristics that impact the part’s functionally or appearance.
• Determines methods to evaluate these characteristics.
• Prepare a “Control Plan”, illustrating how the quality checks would be performed.
• Reviews and approves the Control Plan before the production starts.
• Implements the Control Plan and records the results on a control chart.

4.3 Scorecard:

Supplier Scorecard is one of the tools used to evaluate supplier performance. It allows businesses to proactively monitor and analyze the performance of existing vendors. Also, the scorecard is a streamlined, consistent process, which provides visibility of suppliers’ performance and capabilities. In addition, it helps to identify issues related to vendors earlier and the information can be shared across the organization (Trade Interchange, n.d.).

The scorecard classified the supplier performance metrics into quality, timing and delivery. Since Metallcraft demanded zero defects from their suppliers and it wanted to avoid delivery delays, these metrics seemed to be reasonable. Also, based on the metrics, suppliers were categorized into Green, Yellow and Red groups, and each color indicated the degree to which Metalcraft recommended sourcing future projects.

In terms of quality, it comprised of three areas, namely overall quality, launch quality rejects (QRs) and defect rates. For the overall quality, points were given for various aspects. The QRs detailed the number of problems that were reported in the production process. It also separated launch problems from the normal production issues. As for the defect rates, which were measured in parts per million (PPM), the scorecard classified defects as fit or function rejects or not to print rejects. In addition to this, the quality section allows both Metalcraft and its suppliers to recognize and resolve problems as well as to prevent a recurrence.

For timing, Metalcarft used this section to track the suppliers’ ability to meet the deadline for the certification of new components.

The third metric in the scorecard is delivery which monitors the ability of suppliers to deliver components on time. For this particular metric, Metalcraft often set the production schedule at least one week in advance. The metrics of scorecard were updated on a monthly basic, which guarantee the accuracy of the information.

These metrics helped Metalcraft to cross out suppliers that did not perform very well and ensure the quality as well as the time management of the company.

5. Scorecard for different users:

Metalcraft’s scorecard was known as the best in the market; however, the system could miss some required information for different type of users. In order to improve the old model, the company should consider the users’ opinion about scorecard.

6. Recommendation:

Metalcraft’s scorecard is the best compared to others, however, to be perfect the system should add some elements: