Stern Aerospace It had been approximately three months since Ryan Berry started at Stern Aerospace (Stern) as the new manager of inventory control and material scheduling. During the management meeting held the second week of each month, Ryan reported key metrics for the supply chain group, including inventory turns, purchasing cost reduc tion initiatives, and supplier performance. Two weeks prior, at the September 14 meeting, Jessica Frisch, qual- ity control manager, commented: \"Supplier scorecard data is provided at each meeting, and for the most part, everything always looks fine. However, I know that we have ongoing quality and delivery problems with some of our suppliers. It is time to evaluate our supplier scorecard and decide if changes are needed.\" Jeff Wilson, division president, nodded as he responded to Jessica's comment: \"Our sales are continuing to grow, and I want to closely monitor the performance of our supply chain and our sup pliers. We can't afford any problems. Ryan, I know you just arrived a couple of months ago, but I would like you to take a fresh look at our supplier scorecard and give us your feedback and recommendations regarding potential changes at the October meeting." As Ryan sat in his office on October 2, he reflected on the conversation from midSeptember. The next management meeting was two weeks away, and he needed to finalize his recommendations for the division's supplier scorecard. STERN AEROSPACE Located in Minneapolis, Minnesota, Stern was leading sup plier of hydraulic power generation and uid distribution components and systems for the military and commercial aerospace sectors. Its products included standard and higher pressure enginedriven pumps, motordriven generators, hydraulic thrust reverser and landing gear actuators, hydrau lic power transfer units, fluid control components and sys tems, and a broad range of uid distribution components, such as tubing, fittings and couplings. The 150,000square foot facility included manufacturing operations, engineer- ing, and customer service. Total revenues were $50 million, and Stern was owned by Stern International, a Fortune 500 company with revenues of SIS billion. Stern International supplied systems to customers in a wide range of diversied industrial and aerospace markets. Supply Chain Ryan managed a staff of 11 people, with responsibility for purchasing, material control, scheduling, shipping and receiving, and applications engineering. Stern spent approximately $18 million in the most recent fiscal year on suppliers, including direct (e.g., production parts) and indirect (e.g., ofce supplies) categories. The top 16 suppliers accounted for approximately 70 percent of EXHIBIT 1 Current Supplier Scorecard System Supplier: Scorecard Target Key Performance Indicator Target Maximum Area (KPI) Weight Score Points Quality Fit for purpose UT UT 4 Compliant to specifications 40% Delivery In full On time 40% 4 Secureo damage OUT WWA Responsiveness To RFQs To issues after PO is placed 20% 2total purchases. Major spend categories were castings, extrusions, electronics and electrical components, fas- teners. and machining. Dan, along with his two buyers, were responsible for sourcing and coordinating supplier deliveries. The current supplier scorecard had been set-up by Ryan's predecessor and measured supplier performance on a monthly basis in three areas: quality. delivery. and responsiveness (Exhibit 1). Quality and delivery were weighted 40 percent each, and responsiveness represented 20 percent of the total supplier rating. A total of It] points were allotted within each of the three areas. For example, ve points each were allotted for \"fit for purpose" and \"compliant to specifications" in the quality section. A monthly score of nine out of H] in quality would there- fore translate into a rating of 36 percent out of M] percent. Exhibit 2 provides the scorecard for Stem's top 16 suppli- ers for June to August. Ryan described how the supplier data was collected and how the scorecard was used: "The supplier score- card measures are mainly subjective with the exception of 'compliance to specification' in the quality section. Historically, purchasing has lacked the discipline to moni tor and maintain supplier delivery performance reporting in our ERP system. so we could not provide objective data. As a result. delivery performance scores were based on the buyers' perceptions. Similarly. the 'responsiveness' rating was completely subjective. with most suppliers receiving a perfect score. Scorecard data was not communicated to suppliers. and the quality department determined if there was reasonable cause to initiate a meeting with a supplier based on poor perfomtance.\" THE NEW SCORECARD The new supplier scorecard developed by Ryan would measure two areas, delivery performance. and confor- mance to specifications, split equally [Exhibit 3). Ryan planned to have the buyers use Stern's ERP system to track ontime shipping performance for all supplier orders. Each purchase order gave suppliers a five-day delivery window, and any deliveries late, early, andr'or not matching the order quantity would be deemed non- conforming. Ryan conu'nented: \"The new scorecard will track delivery performance for all shipments. including both direct and indirect purchases. This sends the mes- sage to the buyers and all of our suppliers for an accu rate and up-to-date delivery scheduleno exceptions. We need to be able to use and trust the data in our system. I use zero days late to reiterate the message to suppliers that they need to hit delivery dates. and even one day late is not acceptable. The buyers have been instructed to train suppliers to commit to dates they can hit. and not to be late. I have used this strategy in the past, and it sends the right message." Quality performance would be tracked by receiving inspection and be measured by the percentage of parts meeting specifications. The data would also be entered in the ERP system. Ryan planned to send the scorecard monthly to the top to suppliers tracked under the current scorecard. Grades. ranging from \"A" to \"D\" would be assigned for both delivery and quality performance. along with a compos ite grade {Exhibit 3). Suppliers could request the backup information if desired. EXHIBIT 3 Proposed Supplier Scorecard: Martin Foundry Supplier: Martin Foundry Month: September Points This month Overall Score Reviewed by: Richard Ramsden 92% B Supplier contact: Osman Peters This Month This Month Metric Weight A B C D (%) (score) On-time delivery (%) 50% 90-100% 75-89.9% 60-74.9% 98% 95-97.9% 90-94.9%