1.

In reference to the Avion Inc case study, identify and summarize the reasons it is

important for a firm to evaluate its suppliers. 

Avion, Inc., Procurement Managers sat and reviewed a troubling performance report

concerning a key supplier, Foster Technologies. The report detailed poor performance on

material quality and on-time delivery; though when they visit the plant before awarding the

contract they knew about their size production. Instead the problems were due to the poor

communication from inside their operations, the Avion Material Managers to the increased the

demand 4000 units and decreased delivery times to 10 days, this was not part of the original

contract and the worst situation it was Foster Technologies Production Manager tried to

contact them because they couldn’t meet their demand.

It is necessary to evaluate supplier along the project process to mitigate risks, reduce costs, and

drive the overall supply chain performance. The following statement are some of the benefits:

Align the best interest for both parties. It is a matchmaking relationship where each

requirement has to be meet by the supplier. Timeline and deliverables of the project, quality.

The problem in Avion Inc., case was the continuity of keeping evaluating their supplier, they

evaluated their supplier prior signing the contract (MindTools, 2019)

Detect and address weaknesses in supplier performance. It is necessary to create a reliable

quantitative measurement system to find out what needs to be improved, and which

appropriate method is better to solve or give an alternative solution (MindTools, 2019)

1|Page
Evaluation as Incentive. It can act as an incentive for the supplier to implement new

procedures that they can present during the evaluation, it is a way to push to supplier to

continue improving and keeping it constantly focussed on the need to ensure that its data is

current updated.

Ongoing supplier’s relationship with the best interest of both parties aligned, suggestions for

development for the both sides implemented, with mutual respect, unfortunately the

communication got diminish by the lack of interest and feedback from Avion’s Material Group.

Foster Technologies Production Manager tried to communicated several time with memos and

calls, but he didn’t get any response (MindTools, 2019).

2. Identify and describe an effective supplier evaluation method the firm in the Avion Inc

case study could have used to evaluate its supplier. Explain why your selected supplier

evaluation method would work for said firm. 

The Weighted Point Method, should had worked, the problem occurred because Avion’s

requirement changed suddenly, so their classification of attributes and importance level too, if

they had evaluated with this new parameters Foster Technologies would have failed and would

have not been the key supplier for their process.

I would have better used the Analytical Hierarchy Process (AHP); because the three key

applications of the analytic hierarchy process work better in a changing situation. AHP is about:

 Comparing, ranking ideas against each other to work out the most suitable for the goal

 Ranking initiatives to see which has the most value

 Comparing, workspaces or solution alternatives for the best option (Cole,2020)

2|Page
3. Define performance measurement and explain the role of performance measurement

in managing supply chain activities. Describe the methods used to measure performance.

Exemplify this performance measurement definition, role, and description in reference to the

Avion Inc. case study.

Performance measurement deals with quantitative indicators company’s put in place to track

the progress against their own team or supplier’s strategy. Managing supply chain activities

requires leadership in a team, either by department or a specific group in this case a Cross-

functional team from different areas, they meet on regular basis and discuss the results of the

week and compare with previous scores of the month and year. then the team should discuss

the actions they’re going to take to improve the results and determine the projects changes.

For Avion Inc case, the leadership of the program should had been able to say we are behind in

this performance and who is/ was responsible for this measure? Accountability for procedures,

initiatives are important so the Supply chain team and Foster Technologies aligned around

these results and make some changes to reach the annual objectives (Miyake, 2020).

3 Methods of measure performance:

Graphic rating scales.  rate an employee’s relative performance in specific areas. Scales are

often used to rate behavioral elements, such as "understands job tasks" or "participates in

decision-making (Mayhew, 2019)

3|Page
 360-degree feedback. (Ranking) This well-named system takes into account the feedback,

opinions and assessments of an employee’s performance from the circle of people in the

company with whom they work. It can include co-workers, supervisors and others. As you

evaluate the input from many sources, you can note positive and negative similarities and

trends. You can also identify areas that may need additional measurements and support.

Ranking lends itself to create a very competitive work environment (Mayhew, 2019).

Management by Objectives (MBO). This is a process whereby employees and managers

form objectives together. They jointly determine individual objectives, how they align with

company goals, and how performance will be measured and evaluated. MBO gives

employees a clear understanding of what’s expected and allows them to participate in the

process, which may foster better communication and increase motivation (Mayhew, 2019).

Performance role of participants in the case of Avion, Inc. Rating Scale from 1-10 1= Poor

Performance and 10= Outstanding Performance

Senior Executives. Score 6. Set up cross-functional teams to ensure proper production control

and communication and main role is to establish a strong framework and better approach for

the supply chain process: organization, technology, relationships and visibility (Betterteam,

2019)

Purchasing Team. Score 5. They procure goods and services designed to meet operational

needs while providing the highest possible value. They established procurement policies and

procedures to ensure their organization operates with integrity in the marketplace (Betterteam

2019)

4|Page
Material Manager. Score 5. are responsible for managing inventory and purchasing procedures of raw

materials and other supplies within a company possess excellent organizational skills and have a deep

understanding of forecasting and budgeting (Betterteam, 2019).

Production Manager. Score 7.  Plans, coordinate and control manufacturing processes so that

products are delivered on time and within budget and meet the required quality standards

(Betterteam, 2019). (Foster Technology).

4. Define outsourcing. Describe and evaluate the effectiveness of two different make-or-

buy decisions encountered across the Avion Inc. supply chain in the case study. 

Outsourcing is a practice in which a company hires a third-party to perform tasks, handle

operations or provide services for the company. The third-party provider, arranges for its own

workers or computer systems to perform the tasks or services either on site at the hiring

company's own facilities or at external locations (Rouse, 2020).

Make or buy is a valid consideration in any cost reduction or product improvement program.

Make-or-buy decisions also occur at the operational level. These considerations that favor

making a part in-house:

Cost considerations (less expensive to make the part), Desire to integrate plant operation,

Productive use of excess plant capacity to help absorb fixed overhead, need to exert direct

control over production and/or quality, Better quality control, Design secrecy is required to

protect proprietary technology, Unreliable suppliers, no competent suppliers, Desire to

maintain a stable workforce (in periods of declining sales) (Inman, 2020).

5|Page
Factors that may influence firms to buy a part externally include:

 Lack of expertise, Suppliers' research and specialized know-how exceeds that of the

buyer, Cost considerations (less expensive to buy the item), Small-volume requirements,

Limited production facilities or insufficient capacity, Desire to maintain a multiple-source

policy, Indirect managerial control considerations, Procurement and inventory

considerations, Brand preference, Item not essential to the firm's strategy

(Inman, 2020).

 The quantitative component requires cost analysis to determine which alternative is

more cost effective. This cost analysis can be performed by looking at the cost to buy

the component versus the cost to produce the component, which allows us to make a

decision based on an analysis of unavoidable costs. For example, the costs to produce

will include direct materials, direct labor, variable overhead, and fixed overhead. If the

business chooses to buy the component instead, the avoidable costs will go away but

unavoidable costs will remain and would need to be considered as part of the cost to

buy the component. The results of the quantitative analysis may be sufficient to make a

determination based on the approach that is more cost-effective. At times, the

qualitative analysis addresses any concerns a company cannot measure specifically

(Kenton, 2020).

Avion Inc. two different make or buy decisions encountered in this case study

1. The delays are hurting their ability to get their product to their customers.

6|Page
2. Considering supplier quality is a factor, which plays an important role for injecting

quality into the supply chain

Without the Cost Analysis, it would be better to Avion to start producing rest of the units,

instead of having poor quality in their products and long lead times.

5. Avion wants to reduce its lead times on its purchased materials and components. How

is outsourcing currently impacting their lead times? 

Outsourcing is extremely good and it should have work for Avion, because they’ve chosen a

domestic supplier, means shorter, less complex delivery routes and removes a substantial part

of paperwork, use of approved components and processes suitable for local markets, but the

key element to address lead time issues is building up a rapport with suppliers by sharing sales

derived data with suppliers.

Increase the order frequency, it was discovered larger orders are typically associated with lower

prices, the additional inventory management. A total cost analysis is necessary to determine if

there truly is a savings. The solution might, consider ordering smaller quantities more

frequently to help reduce lead times and carrying costs (Sharman J, 2019)

If they would have provided a Sales Forecast things would have been different; but The

Material Group didn’t let the supplier know when to expect reorders based on actual sales

data, so they would anticipate their needs and speed up the fulfillment process; so Foster

Technology would have approached the Purchasing Team to re-evaluate the contract demands.

(Sharman, J. 2019).

7|Page
The Material Group should have used the vendor managed inventory (VMI) or Vendor-owned

Inventory (VOI) programmes (Bush, 2019).

Customize Supplier. Customized solution by reducing supply chain complexity, for example,

Outsourcing might coordinate multiple vendors and purchase orders and rely on a supplier that

specializes in their industry, they might be using standard components and streamlining

processes and information flows. The supplier should be able to collaborate with your designers

to determine if any tweaks can be made to the design to accommodate a standard component

without compromising the performance or quality of the finished product.

6. What components did Avion miss in their supplier site evaluation? List and describe

two (2) evaluation methods Avion could have applied to evaluate the supplier site that would

addressed missed supplier components you identified. 

Although Production Capacity was measured as indicator it was clear from the beginning that

Foster Technologies could not scale production in response Avion’s production cycles if they

decided to increase their demand. What Avion failed to do?

Ensure that the right staff members are participating in the evaluation. If you need to evaluate

the performance of a Level 1 supplier, for example, you need the Chief Financial officer, the QA

Manager and Production Manager to be involved, as well as senior members of the

procurement department (Feldsine, 2020).

Risk factor Reviewing performance metrics such as overall delays, average response time, and

corrective actions would have helped to develop a reliable quantitative assessment of the risks

8|Page
posed by a particular supplier (Feldsine, 2020). It would have given an alert, if they had used a

Risk Assessment Matrix Table.

Communication. The lack of competency of the Procurement team as they were unaware of

such important changes in volume and delivery time required for operation though they had

the problem with the flow of material for a long period of time. It seems that their internal

software for supply chain was not sharing that information and either between team members

of the company (Feldsine, 2020).

It would have been better if a Quality Function Deployment and Selection Index should have

been used to select their supplier.

I would have used QFD because it is a structured method that uses the seven management and

planning tools to identify and prioritize customers’ expectations quickly and effectively.

Those 7 tools are: Affinity diagram, Interrelation diagram, 3 diagram, Matrix diagram and data

analysis, Arrow diagram and Process decision program chart they are use in the Quality

Assurance Programs with the Research and Development Projects.

A more complex method; but extremely efficient is the Selection Index where the attributes of

suppliers are first of all identified. The interrelationships among various identified attributes

and their degree is also established. Based on the degree of interrelationships, a structure

called sustainable supplier selection attributes is synthesized in a graph. This leads to the

development of an index called sustainable supplier selection index. Various potential suppliers

9|Page
are analyzed from sustainability perspective and thus the best supplier can be selected (Snha,

2018).

Another solution for addressing areas of improvement with a supplier- before it would have

became a problem for the organization is the creation of Supplier development program (SDP)

is a strategic alternative that manufacturers adopt to make their supply base competent and

thereby improve their supply management performance, knowing that this approach is a one to

one basis close relationship, Avion’s Purchasing team would had demanded a selection of

trustworthy digital solutions to keep themselves intregrated to the production process and

their suppliers.

7. Describe three purchasing ratios that Avion could have tracked for Foster Technologies to

evaluate the performance of a supply chain.

The activity ratio is a measure of how quickly work moves through a process. It is simply the

sum of the process times divided by the total lead time, it is a good gauge of how much time

work is sitting idle in a value stream. As a result, it is a solid measure of flow in the process. The

higher the ratio, the better the flow (Velaction, 2020)

A popular method of assessing purchasing effectiveness is to review

Inventory Turnover (Raw material) = Annual consumption/ Average inventory

Inventory turnover is a ratio showing how many times a company has sold and replaced

inventory during a given period (Carlson, 2019)

An efficiently run company would want to synchronize its sales and inventory levels as much as

possible. Too little inventory means lost sales, while too much inventory means tied-up capital

10 | P a g e
for inventory that’s not selling fast enough. The inventory turnover ratio—especially when compared

to historical periods, or to the same ratio from the company’s peers or competition—can tell a lot about

the effectiveness of the company’s sales and purchasing teams (Carlson, 2019).

Finally, I would have used a Liquidity ratio because, they are metrics that speak of a

company’s capacity to cover its short obligations as soon as they are due. Specifically, these

numbers show how many times over short-term liabilities can be paid using the business’ cash

or any other assets. Higher liquidity ratios are generally safer as far as a company’s ability to

settle its current liabilities is concerned. The Average Inventory Period refers to a financial

ratio used to compute the average number of days a company takes before they sell all their

current stock of inventory (SF, 2019) and because in a business everyone needs to be paid, I

would have used Accounts Payable Turnover Ratio quantify the rate at which a company pays

off its suppliers.

11 | P a g e
REFERENCES:

Bush, J (2020). How to address the challenge of long lead times? Electronic specifier. Retrieved
from: https://electronicspecifier.com/indusries/production/ how-to-address-the-challenge- of-
long-lead-times

Cole, Z (2020) What is the Analytic Hierarchy Process? Erwin the data governance company.
Retrieved from: https://erwin.com/blog/what-is-the-analytic-hierarchy-process/

Feldsine, C (2020) 5 Factors to Consider when Conducting Suppliers Evaluation. Thomas for
Industry. Retrieved from: https://www.thomasnet.com/articles/procurement/conducting-a-
supplier-evaluation/

Inman, A.R. (2020). Make or Buy Decisions. Encyclopedia of Management. Retrieved from:

https://www.referenceforbusiness.com/management/Log-Mar/Make-or-Buy-Decisions.html

Miyake, D (2020) Performance Measurement vs Performance Management. Clear Point

Strategy. Retrieved from: https://clearpointstrategy.com/performance-measurement-vs-
performance-management/

Mayhew, R (2019). The Three types of Methods used to Measure Performance. Small Business
Chronicles. Retrieved from: https://smallbusiness.chron.com/three-types-methods-used-measure-
performance-23612.html

MindTools (2019). Carter’s 10 C’s of Supplier Evaluation. Improving your Supply Chain Management.
Retrieved from: https://www.mindtools.com/pages/article/10-cs.htm

Principles of Accounting: Evaluate and Determine Whether to Make or Buy a Component. V Retrieved
from: https://opentextbc.ca/principlesofaccountingv2openstax/chapter/evaluate-and-determine-
whether-to-make-or-buy-a-component/

Rouse, M (2020). Outsourcing. Techtarget Network. Retrieved from:

https://searchcio.techtarget.com/definition/outsourcing

Sihna, A; Ankush, A(2018). Development of sustainable supplier selection index for new product
development using multi criteria decision making. Journal of Cleaner Production Vol. 197:1587-
159 Retrieved from:

12 | P a g e
https://www.researchgate.net/publication/326002559_Development_of_sustainable_supplier_
selection_index_for_new_product_development_using_multi_criteria_decision_making

Sharman, J (2019). 8 Ways to Reduce Supply Chain Lead Times. The Conduit. Retrieved from:
https://www.mcl.bz/blog/ways-to-reduce-supply-chain-lead-times

SF (2019) Liquidity Ratios. Retrieved from: https://studyfinance.com/financial-ratios/liquidity-

ratios/

https://insightsolutionsglobal.com/effective-supplier-assessment-and-evaluation-why-is-it-
important/

Velaction (2020) Activity Ratio. Retrieved from: https://www.velaction.com/activity-

ratio/#:~:text=It%20is%20simply%20the%20sum%20of%20the%20process,result%2C%20it
%20is%20a%20solid%20measure%20of%20flow.

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.686.918&rep=rep1&type=pdf

13 | P a g e