Metalcraft

Objective and Scope:

As a leading Tier 1 supplier in the production of automotive parts and components, Metalcraft will need to decide how to maintain a competitive position in the marketplace with an aim for zero defects. There are improvements to be made by management, such as, restructured compensation packages, increased promotion of supplier relationship management, and various process improvements. Metalcraft can also improve their scorecard with a better scoring system, standardization and several other design changes. The recommendations provided in this analysis will help to improve Metalcraft’s sourcing decisions, improve employee satisfaction, and strengthen their supplier relationships, therefore, improving quality levels and reducing costs.

Recommendations:

Recommendation #1: Metalcraft’s management should better align business policies and

processes with organizational goals

Recommendation #2: Metalcraft should implement a weighted-point measurement

technique to evaluate supplier performance

Recommendation #3: Metalcraft should redesign the scorecard in various ways so that it

is consistent and creates more competition between suppliers

Analysis:

Recommendation #1: Metalcraft’s management should better align business policies and processes with organizational goals

Compensation Packages

Metalcraft’s main objective is defined by their customers as achieving zero defects, and in order for them to achieve this goal, there are a few changes management will need to make within their business processes. The first area of concern for management is the mismatch between buyer compensation and organizational goals. Metalcraft’s goal is to obtain products with zero defects, and in order to do this, buyers need to select suppliers who are consistent in their supply of quality products. Currently, Metalcraft’s buyer’s compensation package is set based on the percentage of price reductions negotiated and final price relative to targets set by the program management team. Having this compensation package does not motivate the buyers to pick suppliers who will provide quality products, but instead limits their focus to cost only objectives. Compensation packages should instead be set up as a fixed salary, with potential bonuses for price negotiations. This will allow buyers to focus on supplier quality as well as cost. Setting up compensation in this way will also encourage employees to provide feedback on the process, which will further improve their ability to pick suppliers who are qualified. Buyers are further encouraged to work with other functional areas, such as engineering, marketing, procurement, and operations. This will provide early insight into product specifications and needs, and support early sourcing of suppliers according to company needs to ensure quality products can be obtained.

Supplier Relationship Management

The second area of concern that needs to be addressed by management is the lack of focus on supplier relationship management. Management can address this issue in a few ways. The first way management should promote supplier relationship management is by reducing the amount of turnover in their buying positions. Constantly rotating staff hinders their ability to foster value-adding relationships with certain suppliers. Rotating staff also reduces the amount of buyers with expert knowledge in certain areas, which will also make zero defects harder to obtain and decrease strategic relationship building experiences among Metalcraft and suppliers.

Facilitating early supplier involvement and building supplier relationships will also help Metalcraft discover problems with quality before arrival. Updating company policies to work with suppliers and encourage prevention instead of detection of defects will put them on track to reach their goals of zero defects. This can further be achieved by increasing transparency among supplier and buyer relationships with implementation a supplier feedback process into their evaluation routine.

Process Changes

The first process change management can improve for buyers is to define minimum levels of quality. With many internal customers involved in sourcing activities, as mentioned in the case, there can be disagreements among parties with supplier performance expectations and selection. This can be avoided by setting minimum quality standards that buyers are forced to stick to and eliminate the risk of selecting suppliers based