15.8 End-of-Topic Case: Le Measurables

Francois Laurent sat down in front of his desk, befuddled by the latest reports from the company’s quality assurance department. Lemieux Space SA was among France’s leading aerospace and defense manufacturers and was a vital Airbus supplier. As their components went into some of Airbus’s leading products for both civil and military applications, quality was paramount. And Lemieux had been very successful and was a six-time winner of top supplier for Airbus in the last 15 years.

Its top-notch quality had also delivered great shareholder value: high factory yield resulted in exceptionally low material waste and inventory. As its working capital was not tied up in excess inventory and machine capacity, Lemieux was able to commit industry-leading research intensity to drive innovation. This virtuous cycle had allowed Lemieux to further expand into Asia and win a recent supply contract with the upstart Comac C919 airliner designed and manufactured by the Commercial Aircraft Corporation of China.

Complacency or Something More?

Francois flipped through the quality assurance report. While its yield remained a leader in industry, it had been on a downward trend over the last three quarters. While its EU segment remained somewhat steady, Lemieux’s primary quality issues were coming from its newly established Chinese subsidiary. As the company’s chief supply chain officer, Francois was tasked with ensuring that Lemieux’s reputation for quality was maintained regardless of in which part of the world it operated.

Although Lemieux had factories and service sites globally, its supply chain was mostly regionalized. Over 80% of components supplied to each Lemieux site came directly from local suppliers. To control quality, Lemieux buyers applied the same stringent supplier scorecard to all suppliers around the globe. Their main goal was that all suppliers of the same component would be perfectly interchangeable, thereby both localizing their supply chain and diversifying their supply base at the same time.

As Francois flipped through different supplier scorecards, he noticed that Lemieux’s suppliers for its service sites located in Southern China had seen their scores decreasing over the same time period. Based mostly out of Vietnam and Thailand, the suppliers for these sites were qualified using ISO certification for quality assessment. While these suppliers maintained their ISO certifications, their compliance with internal quality standards had dropped.

Normally, company buyers would investigate changes to quality in depth. In this case, however, investigative efforts were hindered by two things: First, language barriers and cultural differences resulted in fairly low relational ratings. Second, these suppliers maintained their ISO certifications despite diminished compliance ratings.

Different Options

On the one hand, Francois could begin awarding contracts to suppliers in other regions close to Lemieux’s South China facilities. However, that would substantially increase logistical complexities due to varying lead times. On the other hand, he was not ready to give up on their suppliers in Vietnam and Thailand.

As Francois readies a meeting with Lemieux buyers as well as a group of representatives from key Vietnam and Thailand suppliers, he would like to get your input.

Questions

1. What do you think about Lemieux’s supplier scorecard, especially the Quality criteria?

   • Is there anything that the sub-criteria are not capturing?

   • Is ISO standard necessarily the most appropriate standard for quality assessment beyond internal benchmarks?

2. How can Lemieux leverage its supply base to improve SE Asia (Mainland) supplier performance?

3. Do you think there are any missing elements in Lemieux’s supplier scorecard that could better explain quality deviations?

4. How would you implement a supplier improvement program?