PQI: Management of suppliers

Global Sourcing and Supply Chain Management

Group N° 6:

Pranav Goyal
Patricia Guht
Michaela Novotna
Margarida Tenente
Case overview
The memory industry

Power Quontient International Co. Ldt (PQI):

 Taiwan-based electronics company, specialized in memory manufacturing

 Established in 1997

 2008: PQI was ranked the 10th largest supplier in DRAM modules, flash cards and
USB flash drives in the world

 Manufacturing plants in Taiwan and Suzhou in China

 Subsidiaries in the US, Netherlands, Japan, Korea, Hong Kong and China – more than
900 employees around the world

 PQI’s purchasing department is divided into general purchasers (70 people) and
strategic purchasers (20 people)

 Suppliers are classified within “Tier 1”, “Tier 2” and “Tier 3” groups
.
Classification of suppliers
Transaction costs and risk

Transaction costs Risk

Tier 1 Suppliers ↑ search and information cost
↓ bargaining cost (economies of
- Global scale)
- Strategic partners ↓ policing and enforcement cost
Tier 2 Suppliers ↓ search and information cost
↓ bargaining cost
-Regional ↑ policing and enforcement cost
-Standard products
Tier 3 Suppliers ↑ search and information cost
↓ bargaining cost
-Local ↑ policing and enforcement cost
-Low-end/structural
components Highest transaction cost
• Higher risk → suppliers are
strategically important → need
for close relationships
• Lower risk
• Responsiveness
- Suppliers who can work fast
will become long-term strategic
partners
• Protection of IP
Analysis of the biannual score sheets

 Multiple „tier 3“ suppliers who were strong in technical and commercial

performance received average scores

 PQI had not reviewed its supplier evaluation process

.

The evaluation TODAY:

 The analysis is the sum of points for each criteria

 Same criteria for all suppliers

 Possible trade off between being fast and responsive

vs. cost effective (lower prices)
.
Recommendations

Assign different weights to each criteria according to the importance

of the criteria to PQI – more quantitative approach

Group the criteria into different categories

→ specific to the suppliers´ business:

 Cost: 5-6,
 Responsiveness: 9-13,
 Good Relationship with customer: 14-16,
 Quality control: 17-19 & 7
 Technological capacity: 20, 8, 1-4.

Attribute average points in those categories

Based on the importance for PQI, a decision on suppliers can be taken

Sharing of results with suppliers
The impact on management

Results should be shown and discussed with suppliers

 Sharing develops two-way mutually beneficial relationships

 Reduces risk and suppliers realize new value

 Motivates suppliers to work in the direction of PQI’s ultimate strategy

 Expands the scope of interaction with key suppliers

 Would help supplier know about the expectations of the PQI

.
Choosing a supplier using established method with
weights for grouped criteria

Order involves die casting →Tier 3 suppliers (standardized process)

Important criteria:

Responsiveness – rush order

Lower volume – less emphasis on cost

Supplier A B C

Score

Choose supplier C
Thank you for your attention.