Supplier Selection at Kerneos, Inc. Of the three vendors that Kerneos, Inc. currently uses, which vendor performed best? Which vendor should be replaced? Your recommendation should be supported by the average score, the weighted score, and the total weighted score of each vendor.
CARE 11. SUPER SELECTION AT K OS, INC Case 11 are supplied by either direct shipment from the plant or through a network of remote distribution centers. Supplier Selection at Kerneos, Inc. Ling Li, Erika Marsillact, and Ted Kosiek Introduction Kerneos, Inc. is the kerneos SA subsidiary in the United States. Although headquartered in Paris, France, Kerneos SA has six man- ufacturing plants, one in the United States, two in the UK, two in France, and one in China. Its manufacturing facilities produce a wide range of cements based on alumina content. The lower alumina con tent cements, such as Fondu and Secar 41, are produced in a fusion process at two plants located in France: Dunkirk and Marseille. The higher alumina content cements, such as Secar 71 and Secar 80, are produced via a sintering process at plants in France, China, the UK, and the U.S. Located in Chesapeake, Virginia, Kerneos, Inc. produces both high- and low-range calcium aluminute cements (see Exhibit 11-1). The high-range cements are produced in a sintering kiln located on the plant premises, while the low-range cements are produced by grinding low-range cement clinkers that are received from sis- ter plants in France. The Chesapeake plant is capable of producing approximately 30,000 tons of high-range cements through the kiln process and 70,000 tons of low-range cements through the grinding process. Kerneos, Inc. supplies cements to customers throughout the Americas, including the U.S., Canada, Mexico, and Brazil Customers Exhibit 11-1 Location of Kerneos, Inc., USA In the past, Kerneos' supply chain strategy was largely based on a push approach: Le., the plant was supplied with as much raw material as possible, and then the final products were pushed into the distribu tion network without consideration of demand. The plant would oper- ate until all of the outside warehouses and onsite storage capacity ww. Alled and would then shut down. The plant would remain closed unt inventory levels dictated the need to restart. Recently, the compan modified its supply chain strategy through two measures: (1) introdu ing new IT tools to better enable distribution and sales demand to liv with production planning, and (ii) putting more emphasis on worki capital Old Dominion University, Norfolk, Virginia, USA: LLidodu.edu Old Dominion University, Norfolk, Virginia, USA; emarsill@odu edu Kemeos, Inc., Chesapeake, Virginia, USA: Tkosi001@odu.edu 124 CASE 11. SUPPLER SELECTION AT RENCO, IN 127 126 THE SUPPLY CHAIN MANAGEMENT CASEBOOK Upstream Supply Chain for High-Range Cements the ratings, the Purchasing Manager decides which suppliers should be offered a new contract and which ones should be replaced. The Purchasing Manager has collected three ratings for each vendor, using the rating criteria listed in Table 11-1. A total of nine surveys for the past year have been collected and are presented in Table 11-2. The Purchasing Manager would like you to compute the average score, the weighted score, and the total weighted score for each vendor Table 11-1 Supplier Evaluation Criteria Welghted In order to manufacture the high-range cements, Kerneos has to procure various raw materials. These raw material needs include metallurgical grade alumina, and quicklime, along with other raw materials. The procurement of the alumina is centrally handled by the Purchasing department at the corporate office in Paris. This is done to leverage the alumina requirements of all of the sintering plants within the company. Contracts are negotiated with the major alumina suppliers throughout the world, and Kereos, Inc. has input as to the suppliers' annual requirements. The aluminn is shipped in a bulkwes. sel and the material is transported to Elizabeth River Terminals (a subsidiary of Kinder Morgan) located in Chesapeake, Virginia. The material is unloaded into bulk tank trunks, and trucks haul the mate- rial to the Kerneos site 1.5 miles away (see Exhibit 11-1). The akominn is then blown into a silo in preparation for the sintering process Average Score Weight 388 388 58 8 Criterion Quality Quality problem statisties Quality stability Quality reliability Delivery Delivery states Comply with periods Length of term Service Failasam Capacity of meeting emergency requests After sales service Price Quotation Competitive pricing Payment term The Procurement of Quicklime The procurement of the quicklime is handled and purchased locally by the Purchasing Manager at Kerneos, Ine. The Purchasing Manager receives input from the Production Manager regarding the quantity of quicklime needed for its annual production. The Purchas- ing Manager then negotiates contracts with at least two suppliers to ensure adequate supplies. The quicklime is trucked to the plant in bulk trucks and pumped off into a silo in preparation for the inter ing process. Other raw materials arrive in bulk railcars, and are then pumped into silos. The company uses a list of four major criteria to evaluate suppli. ers each year: quality, delivery, service, and price. The detailed sub- criteria appear in Table 11-1. At the end of each year, the Purchasing Manager forms a committee of five people to evaluate the three ven- dors with which Kerneos, Inc. contracted in the past year. Based on Q10 on 012 Total Weighted Seore Table 11-2 Supplier Survey Data 128 Vendor 1 Scores Rater I Rater Rater 3 Vendor 2 Scores Rater 1 Rater 2 Rater 3 Vendor 3 Seores Rater 1 Rater 2 Ratera C Criterion Quality Q1 Q2 Q3 Delivery Q4 Quality problem statistics Quality stability Quality reliability oto G THE SUPPLY CHAIN MANAGEMENT CASEBOOK 05 Delivery statistics Comply with periods Length of term GO G 06 Service Q7 92 - OS Enthusiasm with service Capacity of meeting emergency After sale service O o * Price Q10 011 Quotation Competitive power of price Payment term 5 W O Q12 CARE 11. SUPER SELECTION AT K OS, INC Case 11 are supplied by either direct shipment from the plant or through a network of remote distribution centers. Supplier Selection at Kerneos, Inc. Ling Li, Erika Marsillact, and Ted Kosiek Introduction Kerneos, Inc. is the kerneos SA subsidiary in the United States. Although headquartered in Paris, France, Kerneos SA has six man- ufacturing plants, one in the United States, two in the UK, two in France, and one in China. Its manufacturing facilities produce a wide range of cements based on alumina content. The lower alumina con tent cements, such as Fondu and Secar 41, are produced in a fusion process at two plants located in France: Dunkirk and Marseille. The higher alumina content cements, such as Secar 71 and Secar 80, are produced via a sintering process at plants in France, China, the UK, and the U.S. Located in Chesapeake, Virginia, Kerneos, Inc. produces both high- and low-range calcium aluminute cements (see Exhibit 11-1). The high-range cements are produced in a sintering kiln located on the plant premises, while the low-range cements are produced by grinding low-range cement clinkers that are received from sis- ter plants in France. The Chesapeake plant is capable of producing approximately 30,000 tons of high-range cements through the kiln process and 70,000 tons of low-range cements through the grinding process. Kerneos, Inc. supplies cements to customers throughout the Americas, including the U.S., Canada, Mexico, and Brazil Customers Exhibit 11-1 Location of Kerneos, Inc., USA In the past, Kerneos' supply chain strategy was largely based on a push approach: Le., the plant was supplied with as much raw material as possible, and then the final products were pushed into the distribu tion network without consideration of demand. The plant would oper- ate until all of the outside warehouses and onsite storage capacity ww. Alled and would then shut down. The plant would remain closed unt inventory levels dictated the need to restart. Recently, the compan modified its supply chain strategy through two measures: (1) introdu ing new IT tools to better enable distribution and sales demand to liv with production planning, and (ii) putting more emphasis on worki capital Old Dominion University, Norfolk, Virginia, USA: LLidodu.edu Old Dominion University, Norfolk, Virginia, USA; emarsill@odu edu Kemeos, Inc., Chesapeake, Virginia, USA: Tkosi001@odu.edu 124 CASE 11. SUPPLER SELECTION AT RENCO, IN 127 126 THE SUPPLY CHAIN MANAGEMENT CASEBOOK Upstream Supply Chain for High-Range Cements the ratings, the Purchasing Manager decides which suppliers should be offered a new contract and which ones should be replaced. The Purchasing Manager has collected three ratings for each vendor, using the rating criteria listed in Table 11-1. A total of nine surveys for the past year have been collected and are presented in Table 11-2. The Purchasing Manager would like you to compute the average score, the weighted score, and the total weighted score for each vendor Table 11-1 Supplier Evaluation Criteria Welghted In order to manufacture the high-range cements, Kerneos has to procure various raw materials. These raw material needs include metallurgical grade alumina, and quicklime, along with other raw materials. The procurement of the alumina is centrally handled by the Purchasing department at the corporate office in Paris. This is done to leverage the alumina requirements of all of the sintering plants within the company. Contracts are negotiated with the major alumina suppliers throughout the world, and Kereos, Inc. has input as to the suppliers' annual requirements. The aluminn is shipped in a bulkwes. sel and the material is transported to Elizabeth River Terminals (a subsidiary of Kinder Morgan) located in Chesapeake, Virginia. The material is unloaded into bulk tank trunks, and trucks haul the mate- rial to the Kerneos site 1.5 miles away (see Exhibit 11-1). The akominn is then blown into a silo in preparation for the sintering process Average Score Weight 388 388 58 8 Criterion Quality Quality problem statisties Quality stability Quality reliability Delivery Delivery states Comply with periods Length of term Service Failasam Capacity of meeting emergency requests After sales service Price Quotation Competitive pricing Payment term The Procurement of Quicklime The procurement of the quicklime is handled and purchased locally by the Purchasing Manager at Kerneos, Ine. The Purchasing Manager receives input from the Production Manager regarding the quantity of quicklime needed for its annual production. The Purchas- ing Manager then negotiates contracts with at least two suppliers to ensure adequate supplies. The quicklime is trucked to the plant in bulk trucks and pumped off into a silo in preparation for the inter ing process. Other raw materials arrive in bulk railcars, and are then pumped into silos. The company uses a list of four major criteria to evaluate suppli. ers each year: quality, delivery, service, and price. The detailed sub- criteria appear in Table 11-1. At the end of each year, the Purchasing Manager forms a committee of five people to evaluate the three ven- dors with which Kerneos, Inc. contracted in the past year. Based on Q10 on 012 Total Weighted Seore Table 11-2 Supplier Survey Data 128 Vendor 1 Scores Rater I Rater Rater 3 Vendor 2 Scores Rater 1 Rater 2 Rater 3 Vendor 3 Seores Rater 1 Rater 2 Ratera C Criterion Quality Q1 Q2 Q3 Delivery Q4 Quality problem statistics Quality stability Quality reliability oto G THE SUPPLY CHAIN MANAGEMENT CASEBOOK 05 Delivery statistics Comply with periods Length of term GO G 06 Service Q7 92 - OS Enthusiasm with service Capacity of meeting emergency After sale service O o * Price Q10 011 Quotation Competitive power of price Payment term 5 W O Q12
