Global Supplier Performance Rating Program

Transcription

1 Global Supplier Performance Rating Program Gardner Denver Inc, 1800 Gardner Expressway Quincy, IL Published July 2006

2 GARDNER DENVER INC GLOBAL SUPPLIER PERFORMANCE RATING PROGRAM The purpose of this document is to ensure consistency and accuracy among all Gardner Denver Inc. locations in implementing and utilizing a standard supplier performance-rating program as a means of developing our global supplier base. It has been our intent to keep the program simple and to the point, yet dynamic to meet the changing needs of our global market place. The program provides our buyers and suppliers with information to help determine where improvement is needed and for well-earned positive feedback to our suppliers. Our global supply chain goals have changed in response to our highly competitive environment. New product development, reduced cycle time, lean manufacturing, supply chain management, electronic commerce, and lower prices have been driving the market place. As we attempt to retain our leadership and meet our customers expectations, we recognize that our rating tools must also change to reflect these new goals. At least once a year, every supplier will be evaluated based upon the strategic needs of our company, which will dictate the criteria used, and the degree of formality. For the majority of our suppliers, this will consist of a yearly evaluation based upon the objective criteria of quality and delivery. In addition, each Purchasing Department may select a group of strategic suppliers as determined by their special requirements, products produced, and purchase spend to evaluate quarterly on the criteria of quality, delivery, service and total cost. For our suppliers which have the minimum acceptable rating of 90% or better, no further action will be required. Unacceptable performing suppliers will be placed on probation and will require the submission of a corrective action plan to improve their performance or may be eliminated. This global supplier performance program is based upon the four criteria of quality, delivery, service and price. There are different commodity weightings to reflect greater emphasis where needed. The trend line analysis allows buyers and suppliers to benchmark the progress made in continuous improvement. Finally, we have established a goal of working with only approved suppliers in good standing based upon our formal supplier rating program. We fully expect to reward our Best of Class suppliers with additional business through new projects and/or consolidation of our supplier base. Our supplier performance rating program is designed to allow our buyers to work much closer with our best suppliers to develop a strong business relationship and continually improve overall performance for both companies. We promise to complete this task on a timely basis to better reflect the events of the period being rated and share our evaluations with our suppliers. The following pages contain our latest version of the Gardner Denver Inc. Global Supplier Performance Rating Program. We invite you to join us in becoming a Best of Class Supplier.

3 BASIC SUPPLIER RATING PROGRAM At least once a year, every supplier will be evaluated on the two objective criteria of quality and delivery. To remain an approved supplier to any Gardner Denver Inc facility, the supplier must achieve an overall minimum rating of 90%. For the majority of our suppliers, no further action will be required for an acceptable performance supplier. Unacceptable performance may dictate a more formal plan to improve or elimination by the appropriate buyer. Each of the criteria carries a weighting based on a 100% scoring system as follows: Quality - 50% Delivery - 50% STRATEGIC SUPPLIER RATING PROGRAM Each purchasing department may select a group of strategic suppliers as determined by their special requirements, critical nature, products produced, and purchase spend. These strategic suppliers will be evaluated at least once a year; however, they can be rated more frequently depending on need. Each performance rating will be provided to these strategic suppliers. The criteria used to rate these suppliers are quality, delivery, service and cost. Each of the criteria carries a weighting based on a 100% scoring system as follows: Quality - 35% Delivery - 20% Cost - 25% Service - 20% Total = 100% The final overall rating will indicate into which category each supplier falls. This will enable each purchasing department to compare performance and develop a strategy to continually improve as well as reward our best suppliers. SUPPLIER RATING SCORING % (Gold) - Best of Class Quality, delivery, service and price are exemplary. A true supplier partner and deserves additional business % (Blue) - Excellent Systems are in place that meet our criteria and demonstrate excellent performance in their operations. Shows evidence of constantly improving their systems and performance % (Green) - Acceptable Effective systems and operations are in place that meet our criteria but need minor improvements. Improvements are planned and are being implemented.

4 80-90% (Yellow) - Conditional Major improvements are required. Areas needing improvements are documented, but implementation plans are still needed. New business should not be awarded to a yellow supplier. Under 80% (Red) - Unacceptable Critical deficiencies exist in their systems and operations and there is no evidence of a commitment to improve. Need to replace immediately. EVALUATION OF CRITERIA Below is an explanation as to how each of the criteria (Quality, Deliver, Service, Total Cost) will be evaluated: 1. Quality - 35 % (Weighting) Objective data a. Responsibility: Quality Assurance b. Criteria: The number of receipts as compared to acceptable lots and/or quantity accepted. c. Scoring: *98% or better lots/qty/ppm accepted (Gold) *95-98% lots/qty/ppm accepted (Blue) *90-95% lots/qty/ppm accepted (Green) *80-90% or better lots/qty/ppm accepted (Yellow) *Less than 80% lots/qty/ppm accepted (Red) d. Example: A score of 95 x 35% (weight) = points for quality 2. Delivery - 20% (Weighting) Objective data a. Responsibility: Production Control b. Criteria: On time delivery is based upon allowable limits of three (3) days early and zero (0) days late using a five (5) day work week. c. Scoring: *98% or better of shipments on time (Gold) *95-98% of shipments on time (Blue) *90-95% of shipments on time (Green) *80-90% of shipments on time (Yellow) *Less than 80% of shipments on time (Red) d. Example: A score of 95 x 20% (weight) = 19 points for delivery 3. Service - 20% (Weighting) - Subjective a. Responsibility: Purchasing, Engineering, Production Control, QA b. Categories for evaluation: 1. Communications (Response to requests, purchase order feedback, etc.) - Planner. 2. Scheduling flexibility - Planner

5 3. Accurate quantities and documentation, and proper packaging, etc. - Planner 4. NCMR s, RFQ s, Document Reviews, general requests, invoice accuracy, and communication - Purchasing 5. Technical support and responsiveness - Engineering & QA c. Grading: Each of the above categories will be graded equally. The buyer can request input informally from engineering, QA, and planning or may request a formal rating input as an option weighing each departmental input equally. d. Scoring: *98-100% if service is exemplary. A true supplier partner and deserves additional business. *95-98% if service is excellent. Usually provide timely responses and seldom needs reminding. Shows evidence of constantly improving their systems and performance. *90-95% if service is acceptable. Needs reminders and expediting. Need to go back for clarification. Improvements are planned and are being implemented. *80-90% if service is conditional. Major improvements are required. *Less than 80% if service is unacceptable. Critical deficiencies exist and there is no evidence of a commitment to improve. Need to replace immediately. e. Example: (1) Purchasing 90 (2) Engineering & QA 100 (3) PC 95 Raw Score = 285 Raw score divided by 3 = 95 Score of 95 x 20% (weight) = 19 points for service 4. Total Cost - 25% (Weighting) - Subjective a. Responsibility: Purchasing b. Categories for evaluation: (1) Stability (No price increases during rating period) (2) As compared to market environment and competitiveness (3) Cost reduction and/or containment programs (Value engineering, value analysis, terms, price, etc.) c. Grading: Each of the above categories will be graded equally and the weighted grade will be based on the raw average. d. Scoring: *98-100% if no price increases during the period; is always the lowest price supplier; has an active program to reduce costs. *95-98% if prices remain under the planned PPV; normally w/in 5% of the lowest supplier; tries to keep costs down by suggesting process improvements or substitute materials or location. *90-95% if prices remain +/- planned PPV; normally falls within the average supplier prices; at least yearly makes suggestion to reduce cost.

6 *80-90% if prices increase over 5% for the year; normally is in the highest 25% of suppliers; makes no attempt to reduce costs or prices. *Less than 80% if prices increase over 10% for the year; normally is the highest supplier; never makes cost/price reduction suggestions. Need to replace immediately. e. Example, (1) Stability 100 (2) Market competitiveness 100 (3) Cost reduction 95 Raw Score = 295 Raw score divided by 3 = 98 Score of 98 x 25% (Weight) = Total Global Supplier Performance Rating The final rating is based upon the sum of each of the above criteria. For example, Quality Delivery Service Cost Final Rating = Based upon a final rating score of 95.75, this supplier would be classified as an acceptable supplier (BLUE). CORRECTIVE ACTION PLAN (SCAR) Any supplier receiving a performance rating of less than 90% will be issued a SCAR with instructions to prepare and present an action plan correcting their areas of deficiency. Based upon this plan, the buyer will accept and close out the SCAR, work together on an acceptable solution, or send it back for clarification or revision. Failure to submit an acceptable correction plan will result in a minimum service rating of 80 in the following period. The purchasing department will develop a quarterly (yearly) strategy for those suppliers with an unacceptable performance rating. CORPORATE SUPPLIER RATING Once a year, the Corporate Commodity Manager will develop a composite supplier performance rating from the individual facility ratings for mutual suppliers. This will emphasize the need for suppliers to provide the same quality of performance to all our plants regardless of size. Our goal is to develop a worldwide sourcing ability for all our locations. The composite rating will be a mathematical average of the overall rating by each supplier by each Gardner Denver Inc. location. It should be noted that all Gardner Denver Inc. locations under this program utilize the same supplier rating guidelines.

7 Example: Gardner Denver Inc Location Supplier #1 Rating Supplier #2 Rating Plant 1 98% 85% Plant 2 96% 80% Plant 3 93% 90% Total 96% (BLUE) 85%(YELLOW) In this example, the overall corporate rating for supplier #1 is 96% (EXCELLENT) and 85% (UNACCEPTABLE) for supplier #2. Needless to say, excellent corporate suppliers will be provided opportunities for additional business. TREND ANALYSIS The trend analysis is a tool which can be utilized to compare the performance trends for the current year with previous years. This trend will be utilized to evaluate our supplier s continuous improvement progress and evaluate our own supplier development strategies. An improving trend line certainly will be considered in a favorable light with regard to our supplier reduction strategy and awarding additional business. AWARD PROGRAM Each purchasing department will reward their best suppliers by providing plaques for their Best of Class suppliers and certificates for their excellent suppliers every year. It is encouraged that the buyer present the Best of Class award during a visit to the supplier s location at least once in a five year period. 1. Best of Class suppliers are those suppliers that achieve an overall yearly rating of 98% or better (GOLD). In addition to an individual award, Best of Class suppliers may be recognized by being named on our master plaque hanging in our plant, purchasing dept, or corporate lobby. These suppliers will be given every opportunity to expand their business with us through new projects and supplier reduction efforts. 2. Excellent supplier certificates will be awarded to those suppliers achieving an overall yearly rating of 95-98% (BLUE). These suppliers will be given every opportunity to expand their business with us through new projects and supplier reduction efforts. STRATEGY MEETING An integral element in our Supplier Performance Rating program is the follow-up and subsequent strategies co-developed by our buyers and suppliers to continually improve each supplier s rating in future years. The purchasing department will develop a quarterly (yearly) strategy for those suppliers with an unacceptable performance rating which may result in replacement if significant improvements are not realized. It is hoped that all of our suppliers review these ratings with their people and Gardner Denver Inc. so everyone understands their rating and takes the necessary steps to improve and/or reward their performance.