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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

PQIs 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

- Global
- Strategic partners
search and information cost
bargaining cost (economies of
policing and enforcement cost
Higher risk suppliers are
strategically important need
for close relationships
Tier 2 Suppliers

-Standard products
search and information cost
bargaining cost
policing and enforcement cost
Lower risk
Tier 3 Suppliers

search and information cost
bargaining cost
policing and enforcement cost

Highest transaction cost
- Suppliers who can work fast
will become long-term strategic
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)
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 PQIs 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)
Supplier A B C
Choose supplier C

Important criteria:

Responsiveness rush order
Lower volume less emphasis on cost
Thank you for your attention.