Question

Veroxide Group
The Veroxide Group (VG) manufacture a range of pharmaceutical products, namely,
prescription drugs and human vaccines. VG have their headquarters in Berne, Switzerland, a
research and development unit in Stockholm (Sweden) and manufacturing sites in Leeds
(England), Pretoria (South Africa) and Berne. In the past year, R&D spending rose 3.9%,
equivalent to 17.3% of core business sales. There are a number of potential new products in
the pipeline but “Zentonex” is widely anticipated to receive regulatory approval in six
months’ time. VG plan to make “Zentonex” in their Pretoria location.
VG have located their production buying operation in Leeds, but it may be noted that the
R&D unit have their own buying function. There is little contact between the two buying
functions, mainly because the R&D Director insists that he is the custodian of his budget.
When a drug goes into mass production, much larger quantities of feedback are required.
When “Zentonex” enters production, one of the feedstock items is “Onolun”, a special
chemical. To meet the forecasted production scheme, 2 tonnes will be required every three
months. This chemical has been supplied to VG by Gardners Ltd. who produce it in their
Birmingham (England) manufacturing plant. Gardeners have been a regular supplier to the
R&D unit for five years and have impeccable delivery and quality performance. Gardeners
have three competitors located in Brazil, Canada and France.
Anne Fortescue, the VG Buying Director, commissioned a report on Gardner’s ability to
manufacture and supply “Onolun”. The significant extracts from the report are:
“Buying [at Gardner] is done by an untrained buyer who takes instructions from the plant
director and buying is an unsophisticated operation. It would require [Gardner to contract]
three key suppliers to provide stock for “Onolun” at the quantities required and to the quality
standards.
The quality management [at Gardner] is excellent and we have complete confidence in this
aspect.
It became evident that Gardner will need to invest £500,000 in new plant and equipment.
They have not planned this expenditure and would need to extend their bank overdraft to fund
the purchase. The lead time to purchase, install and commission the new facility would be 18
weeks. The Chief Engineer would take accountability for the project, including procurement.
The feedback is that shelf life [of Onolun] is restricted (7 weeks), and so the supply chain and
inventory management will be critical. The person accountable for this [at Gardner] is the
Stores manager. This causes us serious concern and is identified as a major risk.
If VG sign a contract with Gardner’s, there will have to be a commitment to supplier
development. This is our key recommendation.”

Questions

Congratulations, the supplier development project fulfilled its purpose and Gardner Ltd is now a qualified supplier. However, there is a need to control that they keep performing on these new improved level. Key Performance Indicators (KPI´s) can be used for this purpose. Hence, find business- and environmental performance measures to measure Gardner Ltd.´s performance.

Answer 1

Business and Environmental performance measures (GARDNER’S Ltd Performance)

The main key performance indicators are : quality management, time management, cost control, delivery strategies and policies.

Measuring is the process to burgeon the growth and to improve the sustainability and survival of business. Measurement process can minimize the bottle necks in the system.

Environmental measures consists

• Waste management
• eco friendly policies
• Consumption of water and raw material
• Renewable resources
• Legal compliances with respect to environmental law
• Managing effluents
• Waste cost management
• Compliance certificates from government etc.

Business and environmental performance measures to evaluate the supplier performance are : on the part of business :

• Supplier reputation
• Quality standards maintained by supplier
• Performance review of supplier from competitors
• Due diligence of supplier, purchase policies
• Delivery options
• Awards and rewards
• Supplier by laws.
• Transparency
• Governance