PQI: MANAGEMENT OF SUPPLIERS
Taiwan-based memory manufacturer Power Quotient International Co. Ltd (“PQI”) had an established system for selecting, assessing and managing suppliers. A scoring system that assessed suppliers in areas ranging from technical expertise to service quality and responsiveness made it easy for the management to spot suppliers’ strengths and weaknesses and to decide whether to keep a supplier at arm’s length or to cultivate a strong relationship with the supplier. PQI had just completed its biannual evaluation of suppliers, several of which required further investigation. These suppliers received only average scores despite strong performance both technically and commercially. Meanwhile, PQI’s management wondered whether sharing its assessment results openly with suppliers might help to improve its relationships with them.
The Memory Industry
Memory in electronic devices stored data on integrated circuits using semiconductor technology. Different types of memory were used for different applications. Random access memory (“RAM”) was a type of volatile memory, meaning that data stored on RAM would be lost after the power to a device was switched off, and was used mostly in computing applications. The two types of RAM were static RAM (“SRAM”) and dynamic RAM (“DRAM”). SRAM was commonly used for cache memory, while DRAM was used in computing applications. Flash memory was used mostly in communication and consumer devices such as mobile phones, digital cameras, media players and digital video cameras because of its ability to retain data even when the device was powered off. Within the category of flash memory, NOR memory, which was named after the data mapping technology (Not OR),was used mostly for storing small amounts of executable code for computing devices; and NAND memory, which was named after the data mapping technology (Not AND), was used for bulk storage of data in portable USB flash drives, memory cards and solid-state drives.
Advances in technology and increased competition had led to increased commoditisation of memory products, and memory was one of the most volatile segments in the semiconductor Grace Loo prepared this case under the supervision of Professor Neale O’Connor for class discussion. This case is not intended to show effective or ineffective handling of decision or business processes. © 2011 by The Asia Case Research Centre, The University of Hong Kong. No part of this publication may be reproduced or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise (including the internet)—without the permission of The University of Hong Kong. Ref. 10/481C
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PQI: Management of Suppliers
industry, subject to wild swings in demand and price. Between 2005 and 2007, increasing demand led memory manufacturers to expand production capacity, but the ripple effect of the US mortgage crisis had led to a drop in consumer demand and a dramatic fall in the price of DRAM by 2008. One billion unsold DRAM chips translated to a loss of almost US$10 billion for the industry worldwide, and many producers sold them below cost in order to survive. Nonetheless, the memory industry was expected to rebound in 2010 with the increasing popularity of wireless communications devices and with continuous demand for consumer and computing devices driving its growth.1 Apple was one of the largest consumers of flash memory in the world,2 and the popularity of its iPods and iPhones was expected to continue to drive the demand for flash memory, compounded by increased adoption of other smartphones. Research analysts predicted global revenues for the memory industry in 2010 to grow to US$57 billion, up 28% from the previous year.3
Established in 1997, PQI was a Taiwan-based electronics company that had...
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