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Q109 Revision Owner: Bill Lloyd

National Instruments' Supplier Scorecard Assessment Criteria

I. OVERVIEW ........................................................................................................................ 1 II. QUALITY ­ 30 points total ............................................................................................. 2 a. NCMR count (applicable only for ASICs, Electrical & Mechanical Distributors) ......... 2 b. DPPM (defective parts per million).................................................................................. 3 c. DPPM scoring brackets (commodity specific): ............................................................... 4 d. Supplier Corrective Action Request (SCAR) ................................................................... 5 III. SUPPLY ASSURANCE ­ 30 points total ....................................................................... 6 a. Formula for supply assurance in on-time delivery terms ................................................. 6 b. On ­ time delivery Scoring:.............................................................................................. 6 c. Lead Time formula ........................................................................................................... 6 d. Lead Time Scoring by commodity: .................................................................................. 7 e. VDL Scoring .................................................................................................................... 7 IV. TOTAL COST (3 part section) - 30 points total .............................................................. 8 a. Savings - 15% of total cost section ................................................................................. 8 b. Innovation/Flexibility ­ 10% of total cost section ........................................................... 8 c. Payment Terms ­ 5% of total cost section ....................................................................... 9 V. CUSTOMER SERVICE/SUPPORT ­ 10 points total ................................................... 10 a. Rating definition: NI Purchasing Personnel .................................................................. 10 b. Rating Definition: Non-NI Purchasing ......................................................................... 10

I. OVERVIEW

The NationaI Instruments (NI) Supplier Scorecard provides a quantitative and consistent process to measure supplier performance categories critical to our success. This process is designed to improve incoming material quality, reduce lead times, help achieve uninterrupted supply, enhance pricing competitiveness (lowest total cost of ownership) and improve customer service.

The Scorecard uses four main assessment criteria. These criteria provide the best gauge of product and service performance. The four criteria are Quality, Supply Assurance, Total Cost, and Customer Service and Support. These are broken down into categories totaling 100 points (Quality = 30, Supply Assurance = 30, Total Cost = 30, Customer Service/Support = 10.) Where "days" is used, the meaning is business days. Below is a description of each main assessment criterion:

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II. QUALITY ­ 30 points total

Q109 Revision Owner: Bill Lloyd

Quality is worth 30% of the total scorecard or 30 points total. The breakdown of these 30 quality points depends upon the commodity. For ASICs and electronic & hardware distributors, the 30 points is subdivided into three categories: NCMR count, Defective parts per million (DPPM) and SCAR occurrence/severity. For all other commodities, the 30 points is subdivided into two categories: Defective parts per million (DPPM) and SCAR occurrence/severity. The point breakdown can be summarized as follows: ASICs, Electronic & Hardware Distributors 5 15 10 Total 30 All other commodities Not scored 20 10 30

NCMR count DPPM SCAR occurrence/severity

a. NCMR count (applicable only for ASICs, Electrical & Mechanical Distributors) NCMR stands for Nonconforming Material Report. ASIC, Electrical & Mechanical distributors start out with a given 5 points in Quality and lose points based on the number of NCMRs. For each NCMR, a negative one (-1) point will be applied. This is typically a 5 point section but if a supplier has more than 5 NCMRs in one quarter, additional points will be taken from the other quality categories. See table below for example: NCMR Count 0 1 2 3 4 5 6 Etc. Points subtracted 0 (supplier scores 5 in this category) -1 (supplier scores 4 in this category) -2 (supplier scores 3 in this category) -3 (supplier scores 2 in this category -4 (supplier scores 1 in this category) -5 (supplier scores 0 in this category) -6 (0 points from the NCMR category plus taking 1 point from another quality category Etc.

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Q109 Revision Owner: Bill Lloyd

b. DPPM (defective parts per million)

The defect rate at the piece part level.

The calculation is:

quantity of parts rejected quantity of parts received

X 1,000,000

Rejects counted are identified within the reporting period, regardless of when the product was received. Multiple rejections can be recorded against one part. NI has established individual or like commodity DPPM brackets. "Bracket" means a table which details out the commodity, the DPPM ranges and the given points associated with a DPPM range. Refer to the next section for the specifics.

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Q109 Revision Owner: Bill Lloyd

c. DPPM scoring brackets (commodity specific):

Distribution, ASICS, Hardware

DPPM Score 0 - 400 401 - 800 801 - 1200 1201 - 1500 >1500 % 0.04% 0.08% 0.12% 0.15% >0.15% Points 15 12 10 5 0

Software, Print, Packaging, Labels

DPPM Score >0 - 500 501 - 1000 1001 - 1500 1501 - 2500 2501 - 5000 >5000 % 0.05% 0.10% 0.15% 0.25% 0.50% >.50% Points 20 17 15 10 5 0

PCBs

DPPM Score 0-1000 % 0.10% 0.25% 0.50% 0.75% 1.00% 1.15% >1.15% Points 20 17 15 10 5

1001-2500 2501-5000 7501 - 10000 >15000 5001-7500

10001-15000

3 0

Cables, Metals, Plastics

DPPM Score 0 - 2000 2001 - 4000 4001 ­ 7500 7501 - 10000 10001 ­ 15000 > 15000 % 0.20% 0.40% 0.75% 1.00% 1.15% >1.15% Points 20 17 15 10 5 0

Chassis & Backplanes

DPPM Score 0 - 4000 4001 - 7500 7501 ­ 10000 10001 - 20000 20001 ­ 25000 > 25000 % 0.40% 0.75% 1.00% 2.00% 2.50% >3.50% Points 20 17 15 10 5 0

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Q109 Revision Owner: Bill Lloyd

d. Supplier Corrective Action Request (SCAR)

SCARs can be issued to a supplier in several cases. Such cases include supplier fault NCMRs that impact NI manufacturing and/or NI customers. SCARs will be given a severity level based on impact: red = high, orange = medium, yellow = low/minor.

Factors that NI considers when assessing SCAR severity are as follows but not limited to: Parts require sorting Repeat occurrences of problem Reject quantity such that DPPM points go to 0 (zero.) NI production is disrupted (line down situation or significant rework) Previous Corrective Action was ineffective Customer request for Corrective Action NI product is placed on shipping hold Problem of a systemic nature Safety issue NI product is recalled

A supplier starts out with 10 given points in this category. A given SCAR deducts points from this 10 point bucket. It is possible to deduct points for SCARs beyond this 10 points. In that case, the points will be taken from another quality category. See table below for example: SCAR severity Red (high impact) Orange (medium impact) Yellow (lower impact) Points subtracted from 10 pt. starting point -9 -3 -1

Note 1: SCAR severity replaces the "penalty points" that were introduced in 2008. Note 2: A thorough 6 step root cause analysis and corrective action is required for all red and orange SCARs, including a Why Happened? and Why Escaped? Yellow rated SCARs only require a documented correction. The severity level and required fields will be shown on the NI Supplier Corrective Action form.

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Q109 Revision Owner: Bill Lloyd

III. SUPPLY ASSURANCE (3 part section) ­ 30 points total Supply Assurance is worth 30% of the total scorecard or 30 points total.

The percentage of line items actually received "on-time" as compared to the supplier's

a. Formula for supply assurance in on-time delivery terms

measured delivery date. "On-time" receipt is defined as delivery to NI's dock from seven days early to one day late. On time delivery as measured by Receipt Date compared to Oracle PO line "Need By Date," to determine a supplier's On Time Delivery performance. The calculation is: number of receipts delivered on time total number of shipments X 100 (rounded up at .5)

In the case of deliveries to multiple sites across NI (NIC, NIH for example), an average will be taken by supplier for each site and then a weighted average calculation will be used that takes into account the number of line items at each site. This section is weighted 15% of the total.

b. On ­ time delivery Scoring:

Criteria for all suppliers On ­Time Delivery

Data > 98% > 97% > 96% > 95% > 94% > 90% > 80% < 80% Score 15 14 13 12 10 5 2 0

c. Lead Time formula

The average lead-time (including transit time) for all items with a forecast greater than 0 and regularly purchased from the supplier. The section is weighted 10% of the total.

The calculation is:

Sum of all Supplier lead-times (includes transit time) Number of part numbers purchased from Supplier

(rounded down at .5)

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Q109 Revision Owner: Bill Lloyd

In the case of deliveries to multiple sites across NI (NIC, NIH for example), an average will be taken by supplier for each site and then a weighted average calculation will be used that takes into account the number of line items at each site.

d. Lead Time Scoring by commodity:

Following is the ranges of lead times by commodity, categorized in ranges of actual Lead Time performance for that commodity (less than average, average, and better than average). The unit of measure is business days. GCM's have the discretion to select the specific score within the point range based on supplier performance.

Performance Range: Points: Distribution ASIC's Software & Print Hardware, Packaging Labels Metal (Extrusion, Sheet metal) Diecast, Plastics PCB's Cables Complex Assemblies

Below Average 0-4 >11 >66 >9 >10 >15 >35 >45 >40 >60 >80

Average 5-7 6-10 52-65 3-8 6-10 11-15 16-35 21-45 31-40 41-60 51-80

Above Average 8-10 0-5 0-51 0-2 0-5 0-10 0-15 0-20 0-30 0-40 0-50

e. VDL (Vendor Discrepancy Listing) Scoring

The number of VDL's (Receiving discrepancy) which a supplier causes (as noted per the VDL responsibility of "Supplier") will be accounted for, compared to the number of line items Received, as a percentage. The section is weighted 5% of the total. VDL's % of lines received Points < .75% .75 ­ .99 1.0- 1.49 1.5 5 points 3 1 0

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IV. TOTAL COST (3 part section) - 30 points total

Total Cost is worth 30% of the total scorecard or 30 points total.

a. Savings - 15% of total cost section

Annually, each GCM will set the Savings Expectation by supplier depending on the supplier's ability to provide Savings. Savings point allocation:

Savings/Cost Avoidance Performance Exceeded expectations Met expectations Below expectations Points: 9-15 8 0-7

b. Innovation/Flexibility ­ 10% of total cost section

Measure of a supplier's flexibility, innovation and overall ease of doing business. This section is fairly subjective and will rely heavily on the GCM's overall experience and judgment. An example of being flexible: Supplier working with NI to take back excess material and find alternate sales channels for this product An example of innovation: Supplier providing analysis and recommendations on how often their parts should be bought annually, in order to optimize buy cycles for both the supplier and NI ­ resulting in decreased costs for both companies Innovation/Flexibility point allocation:

Savings/Cost Avoidance Performance Exceeded expectations Met expectations Below expectations Points: 8-10 4-7 0-3

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c. Payment Terms ­ 5% of total cost section

This section rewards suppliers who give discounts based on early payment of invoices. Payment Term point allocation: Using the variables a, b, c where a = % discount off of invoice b = the window of days for which the invoice must be paid c = what the payment terms revert back to if NI does not meet the discount window a/b net c is the convention used in the table below

Description 2/10 net 30 1.5/10 net 30 1/10 net 30 .5/10 net 30 0 discount, Net 45 or greater 0 discount, Net 30 Points: 5 4 3 2 1 0

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V. CUSTOMER SERVICE/SUPPORT ­ 10 points total

Note: This portion of the Scorecard is only exercised in Q1 and Q3 quarters.

Q109 Revision Owner: Bill Lloyd

Customer Service/Support is worth 10% of the total scorecard or 10 points total.

a. Rating definition: NI Purchasing Personnel

The average of ratings on a scale of 1 to 5 given by the appropriate NI Purchasing personnel to specific questions relating to customer service and support. Different commodity areas have different surveys. The section is

weighted at 5%.

b. Rating Definition: Non-NI Purchasing

The average of ratings on a scale of 1 to 5 given by appropriate non-NI Purchasing personnel to specific questions relating to customer service and support. Different commodity areas have different surveys. The section is

weighted at 5%.

c. Service/Support formula:

The calculation is:

Sum of all rating scores Total number of ratings received

(rounded)

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