Q1:
HTC should Continue working with B grade vendors, as vendor management has a system of giving 80%
of order to the suppliers which perform well (A grade) while those which are not performing too good (B
grades) htc could give them 20% orders and see if their performance increases they can increase the
order quota. The B grade suppliers are B, C and D. There issue related to each of the B graders but have
been working with HTC for long time.
Supplier B has a decline in quality performance but has improved in delivery performance and is working
with HTC for three years. So, HTC should continue working with Supplier B and see if its performance
increases then HTC can increase its quota for supplier B.
Supplier C improve the quality performance but decreased in delivery and cost performance. C has been
working with HTC for 1.5 years. HTC should give small quality of orders as its currently 15%. C may
improve in cost and delivery performance then the orders can be increased.
Supplier D has declined in quality and delivery performance so the orders quota should be decreased
and see if D improves. If improvement is seen in supplier D then orders can be increased otherwise
orders should be limited.
Q2: For each supplier, should orders be increased or decreased, discuss with reference to each supplier?
As HTC vendor management stated that if a supplier has the best performance, then the highest number
of orders are given to that supplier. Next a supplier which is underperforming then orders are given to
that supplier but in lower quantity.
Supplier A:
Supplier A is in the A grade it has a score of 87 which is highest among the competitors. It has shown
consistent performance and is working with HTC for 7 years ( longest relationship with a supplier). This
supplier has been performing best and is consistent. It is supplying 50% of battery orders to HTC. If these
orders are increased then it will not be bad for HTC as this supplier will prove itself worthy once again
even if orders are increased. So, orders for supplier A should be increased.
Supplier B:
This supplier is in the B grade with a score between 80-79 (Jan-March). The score is decreasing a little.
The quality performance of supplier B is decreasing while delivery performance is improving. The reason
for these issues is the financial problems faced by this supplier. Since B and HTC are partners for 3 years
and still working with each other, HTC should decrease orders for this supplier a little bit and see if the
performance continue to decline or improves. For the time being orders should be decreased.
Supplier C:
Supplier C has a consistent score of 80 for the past three months and this score places C in B grade. This
supplier has improved quality performance but decreased cost and delivery performance. Since C has
introduce a new technology for improving quality its cost has increased. But HTC and supplier C are
working together to solve the cost issue and C is outsourcing its delivery system. So, it looks like C can
improve in cost and delivery too. So, orders for C should be increased.
Supplier D:
Supplier D has a score of 75-77-74 in the past three months. It has shown consistent performance. D is
spun off from the parent company recently and is working on to become fully independent. So, it will a
little time for D to improve and start working with its full efficiency. So, for the time being orders should
be decreased and when this supplier shows better performance then orders can be increased.
Supplier E:
E is a newcomer with finance backing from a big company. Its performance is low (65-68-69) but is likely
to improve with time as the other supplier also had low scores when they were new. E has the capability
to improve and achieve grade A. So, orders should be increased for supplier E.
Q:3 What other consideration should be considered while allocating orders in future?
Finance status of suppliers can also be considered. As seen supplier B has financial problems which
caused low performance. Financial problems can cause supply issues.
Location of supplier should also be among a factor before allocating orders. The company can easily
monitor the supplier if it is in reach.
HTC should consider the environmental policies of their suppliers. This will allow them to work with
suppliers who are environmentally conscious, and also avoid negative publicity associated with suppliers
that are constantly polluting.
The company should also consider if supply has outsourced delivery or not. As, it depends on this factor
that the inventory should be kept low or high.
Rating the management teams of the suppliers can also be considers. Bad management team could
cause problems for HTC if they are not competent. A bad relationship between labor and management
could also hurt quality and delivery times.
Q4. How TCO can be deciding factor in order increase or decrease decision, discuss?
As quoted by KH “In reality, we look at each product’s special needs to choose its suppliers It is not
always necessary that higher score gets larger amount of order,”. So this means that HTC will consider
many kinds of aspects to do allocation decisions. There are different results between considering total
cost of ownership and other factors. For example, HTC wants to keep inventory levels low which needs
good relationships with its suppliers and quick delivery. Before allocation, HTC must consider inventory
level not just consider cost or performance. That will reduce carrying and redundancy costs.