1. What is causing Brancos performance to decline?

2. What do you recommend that Maggie do about the situation and why?

On Thursday, October 5, Maggie Agnelli, the packag- Action Report" completed by the plant operator closest to ing purchasing manager for APC's European division in the problem. The sales representative was required to return, Utrecht, the Netherlands, wondered what she should say in by email a standard "Feedback Form" to acknowledge the the next day's meeting with the plant manager of Branco, problem and explain how it was to be solved. a custom packaging supplier. In the last three quarters, Supplier deviations from standard, as reported on the Branco's quality performance rating had shown a steady Nonconformance Action Report, were also forwarded decline. Maggie believed it was essential to get the plant to each purchasing manager. The supply assistant commanager's cooperation to avoid future problems. piled these forms, together with information collected on a number of other supplier performance criteria, such as APC accuracy of the quantity delivered, shipments on time, APC, a diversified international manufacturing organization and accuracy of paperwork (see Exhibit 1). Each quarter, headquartered in the United States, offered a wide range of each purchasing manager used the information collected products to both industrial and consumer markets. Its Utrecht to compute a "Supplier Performance Rating." Suppliers plant employed approximately 400 people. European sales were all rated on the same scoring criteria. were 150 million a year and the company had a long-_ The criteria and scoring system implemented by APC standing track record of successful business performance. (Europe) had been developed by the headquarters supply Each division operated within a set of corporate guide- group in North America several years earlier and reflected lines and was responsible for its own financial performance. the key aspects of supplier performance deemed to be imQUALITY CONTROL the scoring criteria so that they were fully aware of how they each supplier and APC's plant was crucial to avoid produc- The rating criteria included three categories: quality, tion slowdowns. Contact was maintained directly between delivery, and continuous performance, with quality acplant personnel and sales representatives. When a problem in counting for the largest portion-50 percent of the total the manufacturing plant arose due to the supplier's product, rating. Within each category was a list of items. Each item the appropriate sales representative was immediately noti- was scored according to the supplier's provision of that fied by email via a standard form called "Nonconformance item, on a scale from 0 to 4 . Scores were then weighted EXHIBIT 1 Supplier Performance Scoring Criteria EXHIBIT 1 Supplier Performance Scoring Criteria (Continued) EXHIBIT 2 Branco Performance Rating July 1-September 30 EXHIBIT 3 Branco's Performance Rating (July 1- September 30) cartons were odd sizes and required custom specifications. the customer, the plant continued the run in order to meet Custom packaging was required for special orders, pro- customer deadlines. However, the last Branco shipment motion, and unique customer requirements. Many orders of defective packing cartons resulted in a 30 percent proinvolved small lots and specifications changed frequently. duction loss for an entire day's (two shifts) production. At As a result, it had been necessary for Branco to custom- full production, the plant ran 2,000 cartons per hour, with ize production operations to meet the unique requirements three operators at 28 per hour each. of APC. Branco had become the only supplier of all custom packing cartons to APC (Europe). Therefore, Maggie THE MEETING WITH BRANCO could not source a custom product from a different supplier easily or quickly. Branco delivered on a daily basis and its Over the last few years, Maggie felt things had changed yearly sales to APC (Europe) amounted to about 500,000. drastically in the industry. At one time, as a purchaser, she Custom work required a substantial commitment from both might have demanded that the supplier make changes "or parties. The relationship of trust between APC (Europe) else." This was no longer the case. Maggie reflected, "In and Branco had taken eight years to solidify. such a tight market, you just don't drop suppliers. RelaQuality problems were costly for APC (Europe). A tionships are everything." number of Branco's orders had included defective car- In the meeting scheduled for the next day, Maggie felt tons due to overlapping flaps. Nonconformance problems it was essential that she impress upon Hil and Ruael her such as this were typically not identified until a produc- desire to continue a strong relationship. Yet she would tion run had started, and equipment stalls occurred. Pro- somehow have to convince Ruael that something had duction used a fully automated line process, and a stall to change at his end, without confronting him. Maggie at one end resulted in a slowdown throughout. Because wondered, "What should my agenda be for this meeting? the defective cartons would not affect the end product to What should I say