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Shoaib Shahzad (MBA) (1915922)

University Canada West
OPMT 620: Operations Management
Proff. Mazyar Zahedi-Seresht
May 21, 2021
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Abstract

This case study presents the strategic performance measurements of suppliers at HTC. It is best
known for developing smartphones and tablets that operate efficiently on Android and Windows
Mobile platforms, eventually contributing to the formation of a worldwide network of close
relationships with component suppliers. Also, HTC is a co-founding member of the Open
Handset Alliance, a community of handset manufacturers, and mobile networks devoted to the
advancement of the Android mobile operating system, after initially focusing on Windows
Mobile smartphones. The objective of this study is to address all the queries related to the
strategic supplier management policies of HTC such as supplier selection, supplier monitoring
with a scorecard, issues surrounding the scorecard. However, the company included over 1,000
suppliers, and keeping track of them has been important in maintaining that the company's
products accomplished consumer needs through innovation and creativity. Further, the paper
focused on the supplier management process necessitated extensive team participation in
supplier development and evaluation. It offered a good forum for the teams to evaluate suppliers
on a regular basis in different areas. The research concluded that undoubtedly, HTC is the
company's most ambitious attempt to become the industry leader in smartphones. The research
was carefully analyzed to learn more about the success of supplier performance leading to the
customer satisfaction. However, from different viewpoints, this research stresses the importance
of considering an intervention strategy that illustrates or reveals the key problems with each of
these suppliers as the company willingly strives to accelerate their allocations in the future as
their performance strengthens.
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1. What should be done with suppliers receiving B Grade? Should they be dropped or
should HTC work with them to improve their grades?

During the evaluation, HTC’s suppliers include Supplier A with an ‘A’ grade, has been with
HTC for about seven years, and is the company's longest-serving battery component supplier,
with consistent achievements over the previous three months. On the other hand, Suppliers B, C,
and D, all obtained B grades.

Even though supplier B's quality maintaining performance has deteriorated throughout the
last three months because of the changes they have made in their delivery processes. On the
other hand, Supplier C, had made progress in terms of delivering high-quality materials, services,
and technology, although the performance chart had dropped in terms of achieving cost and
delivery targets. Likewise, Supplier D scored a ‘B’ grade as well, despite struggling to maintain
quality and instead reduced the delivery performance. Their output in the areas of expense,
technology, and operation, on either hand, remained consistent. While, supplier E, made some
development in improving of providing high-quality materials at competitive prices while
remaining consistent in areas such as distribution, technology, and operation. Supplier E received
a ‘C’ grade because it is new and scored lower overall in each segment than suppliers B, C, and
D.

According to HTC's strategic plan, the vendor team should pay a visit to the B-graded
suppliers to assess their work processes and identify the areas that need to be strengthened.
While the HTC vendor team may provide direct assistance to their suppliers in certain cases, but
some issues should be handled solely by the suppliers themselves. For example, in the instance
of supplier B, their output has been hindered because of a financial crisis brought about by two
factors: a legal scandal and overspending on the construction of a new factory. In this situation,
HTC's vendor team is unable to provide any advice or suggestions to the supplier because doing
so might result in more negative consequences for both entities. Additionally, the HTC vendor
team is only responsible for tracking and improving performance by providing input on
production processes and helping their suppliers in the engineering domain; therefore, their
participation in business strategies is limited to component supplying only.
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Moreover, when supplier B only produces 20% of HTC's battery orders, this indicates that
this supplier has been underperforming, and because B has been dealing with financial issues
over the past 6 months, thus according to HTC's policies, suppliers whose performance does not
improve in 3 months are reconsidered to be dropped or continued to work with the company.

The representatives from procurement, quality and engineering, R&D, and component
engineering will perform an audit of each candidate's quality system, manufacturing process,
financial condition, and manufacturing capability and resources once a list of candidates had
been compiled. If an applicant passed the audit, members of the technical team, including the
quality assurance team and the component engine, were brought in to support. However, just
because this supplier has been with HTC for three years, it may suggest that they have performed
consistently on HTC's standards.

2. For each supplier, should orders be increased or decreased?

HTC does not accept relatively short-term suppliers, instead, they seek suppliers that are both
competitive and ongoing in terms of product pricing, technology, efficiency, distribution, and
delivery. As previously discussed, Supplier E is a beginner but still exhibited strong performance
over the last three months. Even if they obtained a lower grade than the other suppliers, however,
this supplier may be a high-performing supplier for HTC if given adequate assistance, advice,
and attention, as we can see that they have been improving in some areas while remaining
constant than others. But HTC should communicate with them in order to help them boost their
grades further.

However, as the performances and quality of supplier C progresses, which is certainly

reasonable as compared to the costs of manufacturing high-quality goods. However, expenses
such as manufacturing, material, and operational expenses incurred on the materials can be
lowered. As a result, HTC should also coordinate with them and gradually improve them for
another three months after responding appropriately. The performance of Supplier D improved in
the second month but declined in the third. The deterioration in their quality and delivery
processes indicates that they are having difficulty dealing with HTC's abrupt changes in
specifications or orders, which can be replicated by working more closely with HTC's
engineering team as well as reliable correspondence will robust the opportunities for HTC to
continue working with them for another three months.
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Therefore, considering their increase in productivity and performance over the last three
months, HTC should consider giving more orders to supplier E and cancelling some orders from
D. Within the last three months, there has been very little variation in transition for supplier, and
D had to restructure and reconfigure the organization to operate as a separate company because
of the deflection.

3. What other considerations may affect future allocations of orders with five
suppliers?

HTC's supplier management team should consider the length of each supplier's relationship
with HTC, such as its financial health, and its research and development capability in addition to
the use of the scorecard system to evaluate the five suppliers. Similarly, when deciding on order
allocation and whether to drop or endorse suppliers that are not listed in the situation, there are
two factors to consider.

Inventory control is the first thing to consider (related to management techniques such as
Just-In-Time delivery). To save money on storage and redundancy, HTC might try to keep
inventory low. To hold inventory levels down, HTC relies on long-term suppliers. HTC can only
do this by working with suppliers with whom it has a strong working relationship and
maintaining such a relationship with suppliers can necessitate sacrificing short-term financial
benefits. However, Inventory became one option for a buyer to retain flexibility while lowering
holdup costs, but this flexibility comes with additional holding and redundancy costs. If demand
surpassed than the HTC's order, the company would encourage suppliers to supply more or find
new suppliers to fill the void. Similarly, HTC's contracts did not provide any pricing information
for orders. This was done to give HTC the flexibility to ask suppliers to reduce their production
or material costs as required.

Secondly, since B has been struggling with financial problems for the past six months,
suppliers whose performance does not improve in three months are reconsidered to be dropped
or began operating with the company, according to HTC's policies. However, just because this
supplier has been with HTC for three years does not mean they have satisfied HTC's
expectations consistently. However, based on the information provided by the company, we
cannot predict the result of the legal scandal they are embroiled in, nor can we tell what kind of
scandal it is. As a consequence, when allocating orders in the future, the supplier B should be re-
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considered and should be replaced with other supplier(s), if possible. There are companies who
have been severely affected by either getting directly involved in a legal scandal or because of
working, partnering, or dealing with a company who has been accused for as such. Whenever
there is a litigation against a company, the share prices of the involved company have
experienced a significant drop while the ones working closely with them are accounted also for
working with them and have a responsibility which affects their share prices also (IG, 2018).

The most significant metric is quality, compensated for 35% of the total ranking. The second
highest factor was cost, which accounted for 30% of the total. HTC demanded that
manufacturers reduce the cost of different products on a regular basis. Delivery, technology, and
answer each accounted for 20%, 8%, and 7% of the total, respectively. HTC made future order
allocation decisions based on the outcome of the scorecard. Moreover, the data from the
scorecards was obtained on a monthly basis. The supplier management team would then hold a
market analysis meeting every quarter to examine the patterns of the previous three months to
decide whether to place a supplier on a watch list (in which case they would negotiate with the
supplier if the supplier was considered important) or to stop buying from them.
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Conclusion

The study concludes that the important asset of HTC suppliers is directly related to the
company’s performance and willingness towards innovation and productivity. However, this
case study is to provide readers and researchers with a more in-depth insight at the smartphone’s
revolution, as well as to help them understand and learn from the tactics that each company has
chosen to employ, and to evaluate the thoughts on the entire development process as HTC relied
on strategic suppliers for key components like integrated circuits, memory chips, and display
screens. Therefore, the supplier selection and adherence to monitoring were primarily used to
handle these routine component suppliers. At last, HTC adheres to strict strategic policies in
general, with a particular focus on factors other than those captured in each supplier's scorecard.
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References

IG. (2018, November 1). Top 10 biggest corporate scandals and how they affected share prices.
Retrieved from ig.com: https://www.ig.com/en/news-and-trade-ideas/top-10-biggest-
corporate-scandals-and-how-they-affected-share-pr-181101