*Formula:*

Supplier RPPM (rejected parts per million) is calculated on the basis of the amount of rejected parts versus the total amount of parts received in a given fiscal month. This computation is then normalized to replicate a continuous basis of one million units received.

**7**

*Supplier Evaluation and Selection in Automobile Industry*

accepted and has been charged to the supplier.

**PPMeq** for a period is calculated as shown in Eq. (1)

The Supplier's score for this example has 12 points.

(combined total of 51 points out of 60 possible).

should be applied following corrective actions.

it comes under rework.

what corrective action will be taken in future.

PPMeq <sup>=</sup> Nrej <sup>+</sup> Nrew <sup>+</sup> Nrej <sup>951</sup> <sup>+</sup> 0.5Ndew <sup>+</sup> 0.5Nconc <sup>+</sup> 5.0Nrej at F.A. \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ NTotal

The agreement on PPM values does not signify a quality level accepted by Customer. All purchasing parts which are recognized as defective basically not be

where Nrej is the total inspection and line rejected quantity; Nrew is the total inspection and line quantity reworked; Ndev at F.A., is the total no. of quantity accepted under variation (inspection and line); Nconc is the total no. of quantity accepted under concession (inspection and line); Nrej at F.A., is the total no. of quantity rejected at Final Assembly; NTotal is the total no. of quantity received; and

**Example:** A supplier ships 100,000 parts to a plant, of those 7 are found to be

From table it clear that, maximum score has been assigned to minimum rejected part per million and so on. Following are the minimum requirements from the suppliers end during the inspection of their submitted lot for acceptance to the OEMs. **Minimum expectations:** it is expected that the minimum score should be 85%,

**Corrective actions:** those suppliers who cannot meet the minimum expectation

1.**First month:** announcement letters has been sent to Suppliers for giving justification regarding not meeting minimum score, reason for the same and

2.**Second consecutive month:** a second announcement letter has been sent

3.**Third consecutive month:** if the problem is not solved in first and second notice then purchase manager either visited or called meeting with supplier to discuss performance. Within this period, suppliers may be on probation.

stating that failing to meet minimum score and why. A corrective action plan is

• **Rejection:** any parts that not meeting customer specifications has rejected.

• **Rework:** if doing any minor correction on part, it becomes fit for use then

• **Deviation:** any supplied part whose critical dimensions or material specifi-

• **Concession:** when approval of product development has not taken for the minor repair that are not specified in the drawing and which does not affect

• **Segregation:** division of accepted/rejected parts, done with permission of

cations cannot be reworked/repaired is termed as deviation.

the product quality, it is termed as concession.

QA personnel of that area, is known as segregation.

The scorecard calculation will be (7/100,000) × 1,000,000 = 70 RPPM'S.

Nrej 951 is the total Quantity rejected on movement 951 for scrap at our end.

**Table 1** shows parts per million ranges and their respective scores.

X 1000000 (1)

*DOI: http://dx.doi.org/10.5772/intechopen.84383*

non-conforming.

required.

	- Auto Sector-wise PPMeq
	- Plant-wise PPMeq
	- Supplier-wise PPMeq
	- Supplier Part-wise PPMeq

*Supplier Evaluation and Selection in Automobile Industry DOI: http://dx.doi.org/10.5772/intechopen.84383*

*Industrial Engineering*

Manufacturers).

*Initial supplier evaluation and selection.*

**Figure 1.**

*Formula:*

million units received.

• PPMeq can be calculated as: ○ Auto Sector-wise PPMeq

○ Supplier Part-wise PPMeq

○ Plant-wise PPMeq ○ Supplier-wise PPMeq

Supplier selection is based on a relative assessment using an exploratory case study approach which is generally used in most of the OEMs (Original Equipment

PPMeq is a pointer for inward part quality by monitoring the performance of inward parts during on-going production, once parts is handed over by Component Development Materials Management (CDMM) to Supplier Quality Assurance (SQA) and procured by Supply Chain Management (SCM). This guideline sets the procedure of calculating the PPM Equivalent (PPMeq) and declaring non-conforming parts in the supplier deliveries. The suppliers' performance has assessed by the index PPM which has based only on rejection of parts at receiving stage and on line. But this index did not reflect the performance of the suppliers whose parts has mostly reworked on lines, the parts for which deviations/concessions were sought. Also much effort has been put in for segregating parts if any non-conformity has found in a lot. Some supplier parts also get rejected at the final assembly stage due to which the whole assembly faces rejection. To capture the effect of all the above

Supplier RPPM (rejected parts per million) is calculated on the basis of the amount of rejected parts versus the total amount of parts received in a given fiscal month. This computation is then normalized to replicate a continuous basis of one

**2. Supplier evaluation and selection in auto industry**

**2.1 Rejected parts per million (PPM) level**

conditions, a new index PPMeq has been formed.

**6**

The agreement on PPM values does not signify a quality level accepted by Customer. All purchasing parts which are recognized as defective basically not be accepted and has been charged to the supplier.

**PPMeq** for a period is calculated as shown in Eq. (1)

expected and has been charged to the amplifier.

\*\*PPMeq\*\* for a period is calculated as shown in Eq. (1)

$$\text{PPMeq} = \frac{\text{N}\_{\text{ref}} + \text{N}\_{\text{rev}} + \text{N}\_{\text{ref}} \text{951} + 0.5 \text{N}\_{\text{dev}} + 0.5 \text{N}\_{\text{conc}} + 5.0 \text{N}\_{\text{ref} \text{at} \text{FA}}}{\text{N}\_{\text{Total}}} \text{ X 100000000} \tag{1}$$

where Nrej is the total inspection and line rejected quantity; Nrew is the total inspection and line quantity reworked; Ndev at F.A., is the total no. of quantity accepted under variation (inspection and line); Nconc is the total no. of quantity accepted under concession (inspection and line); Nrej at F.A., is the total no. of quantity rejected at Final Assembly; NTotal is the total no. of quantity received; and Nrej 951 is the total Quantity rejected on movement 951 for scrap at our end.

**Example:** A supplier ships 100,000 parts to a plant, of those 7 are found to be non-conforming.

The scorecard calculation will be (7/100,000) × 1,000,000 = 70 RPPM'S. The Supplier's score for this example has 12 points.

**Table 1** shows parts per million ranges and their respective scores.

From table it clear that, maximum score has been assigned to minimum rejected part per million and so on. Following are the minimum requirements from the suppliers end during the inspection of their submitted lot for acceptance to the OEMs.

**Minimum expectations:** it is expected that the minimum score should be 85%, (combined total of 51 points out of 60 possible).

**Corrective actions:** those suppliers who cannot meet the minimum expectation should be applied following corrective actions.

	- **Rejection:** any parts that not meeting customer specifications has rejected.
	- **Rework:** if doing any minor correction on part, it becomes fit for use then it comes under rework.
	- **Deviation:** any supplied part whose critical dimensions or material specifications cannot be reworked/repaired is termed as deviation.
	- **Concession:** when approval of product development has not taken for the minor repair that are not specified in the drawing and which does not affect the product quality, it is termed as concession.
	- **Segregation:** division of accepted/rejected parts, done with permission of QA personnel of that area, is known as segregation.

• **Rejection at final assembly:** due to supplier part if final assembly gets rejected, then it comes under rejection at final assembly.

To simplify communication and wherever technically practical and feasible, only one target value should be agreed for each product family delivered by suppliers or if possible for all products delivered.

General rules to declare Non-conforming parts:



**9**

*Supplier Evaluation and Selection in Automobile Industry*

• **Delivery:** to meet expected dates as per delivery date.

• **Quality:** it is calculated in parts per million defective (PPM)

• **Payment terms:** after delivery it may be within 3 to 6 month

The purpose of the Scorecard is to communicate key supplier performance metrics that align with business objectives. The program rewards suppliers based on data, serves as a foundation for continuous improvement, and assists with future

• **Lead time:** time required in between placing order and receiving material.

• **Productivity savings:** suppliers' assistance in helping to meet our productivity

It benefits purchaser and supplier to achieve the benefits, sharing information

*DOI: http://dx.doi.org/10.5772/intechopen.84383*

Supplier rating system based on:

To select a group of critical suppliers.

• Visibly stated performance opportunity

• Data is available to measure performance

• Quicker associations with our suppliers

• Better accepting of overall performance

**Supplier scorecard point system:**

rewarded by new business opportunities.

**Supplier performance levels:**

shown in **Table 2**.

by developing them.

• Superior in general competitiveness in the market

• Visibly communicated performance opportunity to supplier network

Every month suppliers receive performance score based on following areas as

**Level 1:** supplier having 71 points or above is referred as world class and will be

**Level 2:** supplier having ongoing score 51–70 points performing acceptable level but at the same time assurance team should work to lift them to level 1 performance

Supplier is ranked depending upon their ongoing performance:

• Business association get improved

**Organization's reimbursement:**

by establishing open communication. **Supplier reimbursement:**

• Enhance communication

**2.2 Scorecard**

sourcing decisions.

goals

**Span:**

**Benefits:**

**Table 1.** *PPM ranges and their scores.*
