Definition of a model for continuous evaluation of supplier performance: case study from the automotive battery industry

Abstract

As in modern business world purchasing is increasingly perceived as a strategic function, firms are called to further develop their vendor management system (VMS). The extant literature highly testifies this trend, with a plethora of studies conducted on different purchasing processes in different industries. Surprisingly enough, the highly regulated automotive industry seems to have received less attention from scholars. In the last decades, industry standards played a crucial role in assisting automotive companies to achieve high levels of quality, efficiency, and risk mitigation. However, a radical transformation shaped by new trends such as autonomous cars, urban mobility, emerging markets, connectivity, and electrification is currently changing the automotive industry at a fast pace. In this context, the application of well-stablished industry standards poses additional challenges to companies operating in such evolving context.

The goal of this study was to investigate the relevant criteria adopted by manufacturing companies to evaluate the performance of current suppliers in the context of the rapidly growing automotive lithium-ion battery (LIB) industry. This study also unveiled the relative importance of the different performance criteria by examining the weights given to each criterion placed in a linear weighting model. The identified criteria were then used to design a performance evaluation system that could have been adopted by the case company that collaborated in this research.

This study was executed as a case study in collaboration with a case company operating in the fast-paced automotive LIB industry. To gather data, an extensive literature review including the automotive quality management standard IATF 16949:2016 was carried out. In addition, information from selected senior professionals within the case company was retrieved by conducting questionnaire surveys and semi-structured interviews.

The empirical findings of this study unveiled that quality, delivery and service, price/cost, and sustainability are the most relevant metrics for evaluating the performance of active suppliers in the automotive LIB industry. Furthermore, this study confirms the primary importance of quality and price/cost metrics, while it finds that the delivery and service performance of suppliers are less relevant than their performance in safety and sustainability. These findings underpin the well documented increasing importance of corporate social responsibility (CSR) as a key metric in purchasing and supply management (PSM), especially for supplier selection, supplier monitoring, and supplier development. This thesis also provided a framework to be used for the development of vendor ratings, as well as it defined a roadmap for the implementation of a system to evaluate the performance of suppliers. In particular, the developed vendor ratings were defined by applying the linear weighting model and the analytic hierarchy process (AHP).

Even though the defined roadmap could not be implemented within the scope of this study, its definition resulted to be particularly important for the case company, as it highlighted recommended short-term and long-term actions which were presented and discussed with the representatives of the company. Furthermore, the defined roadmap can be beneficial for the case company to meet the stringent requirements of IATF 16949:2016. Overall, the vendor ratings defined in this study offer interesting insights for future deployment and development of the supplier performance measurement.