Explain the role of performance measurement in managing supply chain activities.

Students are to read the following Case Study and answer the 10 questions accompanying the same.
Guidelines on what to include:
This very integrative case should stress some key points clearly to the student:
Communication with suppliers is perhaps even more critical after contracts are signed
Changes in volumes and other requirements can alter the assumptions in the original negotiation and cause significant problems
Buyers and sellers need to be proactive as demand and markets change
Supplier switching costs are often very high, making the quality of the initial supplier evaluation and selection decision critical
A natural tendency exists with many buyers to blame suppliers at the first sign of a problem, even when the buyer contributes to or even causes the problem Being a good customer entails certain responsibilities, such as treating the supplier ethically, communicating frequently, and working together to prevent or solve problems Please read and follow the instructions below carefully: ________________________________________________________________________
Word-count: As a guide approx. 250 words per question, Total 2500 words ±10%.
(excluding figures, tables, diagrams, appendices etc) Spacing: 1.5 Material: An appropriate range of referenced material, using the Harvard Referencing style. Marks: 40% of the final course mark
Submission: Soft copy submitted via moodle.
Deadline: Monday 31st October @ 5pm
Format: Report to be written in essay format, be fully Harvard referenced and presented in 12-point font (Calibri, Arial or Times New Roman)
Marking Criteria: Each question carries 10 marks each
Avion, Inc.
Susan Dey and Bill Mifflin, procurement managers at Avion, Inc. sat across from each other and reviewed a troubling performance report concerning a key supplier, Foster Technologies. The report detailed the deteriorating performance of Foster Technologies in the areas of material quality and on-time delivery.
Susan: I don’t believe what I am seeing. This supplier was clearly a star when we performed our supplier visits before awarding the contract for the new Amrod product line.
Bill: I’m not pleased. I was on the team that performed the audit and site visit. Foster’s management was so smooth–they indicated they could meet all our requirements. I feel like we’ve been mislead by this supplier.
Susan: Didn’t you look at their processes and quality systems?
Bill: Sure we did. Everything checked out fine. But now every other shipment has some problem and the delays are hurting our ability to get our product to our customers. What really struck us about this supplier was how innovative they were. Foster’s biggest drawback was their size–they lacked some depth at key manufacturing engineering positions. Maybe that’s why they are having problems. It could be that someone has left the company.
Susan: We are going to have to address these problems quickly.
Bill: I’ll tell you what I am going to recommend. We should begin immediately to look for another supplier. I never was a fan of these single source contracts. They leave us open to too much risk.
Susan: But won’t that take a long time?
Bill: Sure. We’ll have to perform another supplier search with team visits. New tooling could really cost, too. This could take months.
Susan: Has anyone talked with the supplier about these problems?
Bill: Kevin went over personally today and talked with the production manager. He didn’t have much time to explain, but he indicated on the phone that Foster’s production manager said we should accept responsibility for a good part of the problems that are occurring!
Susan: Why should we? I think they are just trying to shift the blame for their poor performance.
At this point, Kevin O’Donnell, another procurement manager, entered the room.
Bill: Kevin, glad you’re here. We were just discussing how Foster is trying to blame us for their problems. I think we should dump them fast!
Kevin: Yeah, well, I’ve got news for you two. I think Foster’s production manager is correct. I think I would be frustrated with us, too!
Susan: What are you talking about?
Kevin: I spent a good part of the day over at Foster and learned some interesting things. For example, do either of you remember what we told Foster the monthly volume requirements for the product would be?
Bill: I remember exactly. The volumes were projected to be 2500 units a month. So what’s the problem?
Kevin: We need to talk with our production group more often. The monthly volumes are now over 4000 units a month! And not only that, our production group now wants material within ten days of a material release rather than two weeks. We have also been changing the final material release quantities right up to the last minute before delivery.
Bill: Uh oh. I remember on our site visit that the most their production system could handle was 3500 units a month. And two-week lead times was about as low as they could go.
Susan: But why didn’t they inform us that these changes were causing problems? They still have some explaining to do.
Kevin: Apparently they tried. What did your team tell this supplier about communicating with us after you finished negotiating the contract?
Bill: We said that any operational problems or issues have to go through our materials management people. The team was responsible for evaluating and selecting the supplier, and then negotiating the agreement.
Kevin: Foster’s production manager produced a log detailing seven memos and letters outlining the impact of our production and scheduling changes on their operation. He also called us several times with no response. Each of these inquiries received little attention on the part of materials group. I’m not sure how fond Foster is of us as a customer. I think they are anxious for this contract to wind down so they can dump us!
Susan: What do we do now?
Answer the following questions thoroughly:
What parts of the supply chain are most closely involved with the situation in this case? What is the responsibility of each part in order to maintain a smooth flow of material?
What initially appears to be the problem? What really is the problem(s) in this case?
How easy is it to switch suppliers? What could complicate a firm’s ability to switch to a new supplier?
What does it mean to get to the root cause of a problem?
What does it mean to be a good customer? Why does a buying firm want to be perceived by a supplier as a good customer? Provide specific examples of what a firm must do to be a good customer.
Explain the role of performance measurement in managing supply chain activities.
Why can changes within a supply chain disrupt the normal flow of goods and services?
Why might Avion want to reduce the lead times on its purchased materials and components?
Why do firms single source contracts?
Develop an action plan for Avion that addresses the issues presented in this case. Be prepared to explain fully your recommendations.