Consumers Energy Supplier Relationship Management  •  Cheryong Electric
Q3 2024 • Aug 28, 2024
Quarterly Business Review • Q3 2024
Cheryong Electric — Executive Summary
Consumers Energy SRM Program • August 28, 2024 • Confidential
Quality Score
3.64
●Meets
▼ from 5.00 Q2
On-Time Delivery
95%
●Exceeds
Q3 final
KPI Score
89.1
●Meets
Q3 final · weighted composite
Quarterly Spend
$7.1M
Q3 Complete (Jul–Sep)
(exp. $6.9M) ▲
Q3 Deliveries
670
Q3 Complete
(exp. 700) ▼
Overall Rating
Meets
●Q3 2024
Q3 2024

Cheryong is meeting expectations across all measured areas in Q3 2024.

  • Delivery: 670 of 700 projected units delivered (95.7%), no PO final dates exceeded.
  • Quality: Score of 3.64 meets threshold; 3 NCRs YTD (severity score 62), one open under active remediation.
  • KPIs: All 6 meeting or exceeding thresholds — composite score 89.1.
  • Compliance: All invoices paid within Net 30; no contractual remedies triggered; one warranty claim in remediation.
  • Improvement programs remain active and on track through Q4.

Distribution Transformer Status

■Approving Cheryong drawings for 1ph & 3ph to support 2025 orders as demand shifts to pad mounts

■Awarded transformer for solar project

Current & Potential Risks

■Rate case outcome

■Low usage pad mounts / demand visibility

Strategic Planning 2025+

■CE expecting to increase underground miles 2025–2028, driving increased 1ph & 3ph usage

Exhibit 1 — SRM Performance by Topic
Topic
Takeaway(s)
Topic
Takeaway(s)
Quality
●Meets

■Q3 Score – 3.64

■1 new reported NCR (July)

■NCR incident rate remains low by CE standards

Delivery / Lead Time
●Exceeds

■95% on-time delivery YTD — exceeds the 90% performance floor; no PO final dates surpassed

■2,258 units delivered YTD vs. 2,300 projected (98.2%); Q3 delivered 670 of 700 (95.7%) with some SKUs split across months

KPI's
●Meets

■Composite KPI score of 89.1 — all 6 KPI's meeting or exceeding thresholds across PO Acknowledgement, Delivery Acknowledgement, Invoice Accuracy, NCR Closure Rate, Lead Time Adherence, and Forecast Accuracy

■NCR Closure Rate (67%) remains the only KPI below exceeds threshold — all others at or above 95%

VBR / Spend
●At Risk

■YTD spend of $20.3M through September — projected year-end $27.2M, crossing into Tier 2 ($25M threshold) in Q4

■Estimated total rebate at current trajectory: ~$147K — tracking $0.4M below original budget of $27.6M

Contractual Compliance
●Meets

■All Q1–Q3 invoices submitted and paid within Net 30 terms — no disputes or late payments; invoice accuracy 96% YTD

■Performance guarantees met: OTD at 95% (floor 90%), quality score 3.64 (floor 3.5), YTD NCR score 62 (cap 75) — no contractual remedies triggered

■One active warranty claim (UG TRF Jul 2024) — Cheryong has accepted responsibility and is coordinating replacement

Continuous Improvement
●In Progress

■Status of any recent continuous improvements that have been shared / implemented with CE (if applicable)

Source: Consumers Energy SRM data, August 2024
Rating Key
●Exceeds Meeting / exceeding expectations
●Meets Meeting expectations with some areas of improvement
●Fails Expectations not being met — requires immediate attention
●In Progress Area being actively monitored or improved
Quality • Q3 2024
NCR Tracking & Quality Score
Score = Severity × Occurrence × Detection, normalized to 0–5 scale (5 = no NCRs)
Exhibit 2A — Quality Score by Quarter (0–5 Scale)
Q3 2024 — Quality Score
3.64
Q2 2024 — Quality Score
5.00
Q1 2024 — Quality Score
4.48
YTD NCR Count
3
YTD NCR Score
62
Severity-weighted

Overall, Cheryong's quality performance has met expectations and is in the top quartile of quality performance for CE's transformer vendors. NCR response has been exemplary — complete documentation provided, best response rate, and most thorough remediation steps among CE suppliers.

Exhibit 2A cont. — Quality Score Trend
Quality Score Target 5.0
Exhibit 2B — YTD NCR Severity Breakdown
Each bar = NCR score (Severity × Occurrence × Detection)
UG TRF — Defective at Installation 36
Jul 2024 • Open Remediation S×O×D = 4×3×3
OH TRF — Incomplete Packing List 18
Feb 2024 • Closed 3/5/24 S×O×D = 3×2×3
Internal Components Pull-Out 8
Feb 2024 • Open Remediation S×O×D = 2×2×2
Max possible = 125 (S5 × O5 × D5) YTD Total: 62
Exhibit 2C — YTD Quality NCR Metrics by Month
NCR Cumulative Score (left) NCR Count (right)
Exhibit 2D — NCR Log (All Active & Historical)
PeriodDescriptionOpenedScoreStatus
* Quality Score = avg NCR score for quarter, normalized 0–5. Sub-scores: Severity × Occurrence × Detection. • YTD NCR cumulative score: 62
Delivery • Q3 2024
Delivery Performance
Monthly unit delivery actuals • 2024 YTD through August
On-Time Delivery
95%
Est. · >95% Exceeds · 90–95% Meets
Q3 Deliveries
670
of 700
Q2 Deliveries
681
of 800
Q1 Deliveries
907
of 1,000
Deliveries YTD vs. Projected
2,258
vs. 2,300
98.2% of projected

YTD deliveries total 2,258 units against a projected 2,300 (98.2%). On-time delivery is 95% — no PO final dates have been exceeded, though some SKUs have experienced split deliveries across months. Q3 is tracking below quarterly targets with 670 of 700 projected units delivered in Q3. Q4 is on schedule with no current indicators of risk to the remaining order book.

Exhibit 3A — Quarterly Deliveries: Actual vs. Projected
By Quarter
Actual Exceeds (>90%) Meets (80–90%) Fails (<80%)
Cumulative
Actual Projected
Exhibit 3B — Monthly Delivery Actuals (Units)
Actual Projected
Note: Projected values are estimates pending formal baseline agreement with Cheryong.
Exhibit 3C — Q3 Deliveries by SKU
SKUQtyForecastActual
Exhibit 3D — Q4 Upcoming Deliveries
SKUQtyForecastActual
KPI's • Q3 2024
Key Metrics
Methodology and baselines to be finalized with Cheryong. Current values are estimates pending formal tracking implementation.
Composite KPI Score — Weighted Performance Index
Composite Score
89.1
● Meets
Weight Distribution
Lead Time Adherence 25% 100%
NCR Corrective Action 25% 67%
Invoice Accuracy 15% 96%
Forecast Accuracy 15% 82%
PO Acknowledgement 10% 98%
Delivery Acknowledgement 10% 100%
Thresholds
> 90 — Exceeds
80–90 — Meets
< 80 — Fails
Score = ∑ (KPI value × weight)
KPI 1
PO Acknowledgement Rate
98%
target: 95%
% of POs acknowledged complete within 48 hrs. Price, quantity, part number, lead time all confirmed.
KPI 2
Delivery Acknowledgement Rate
100%
target: 100%
% of deliveries with complete documentation, safe packaging, and proper labeling per CE standards.
KPI 3
Invoice Accuracy Rate
96%
target: 98%
% of invoices matching PO price, quantity, and terms with no corrections required. Est. based on YTD billing.
KPI 4
NCR Corrective Action Closure
67%
target: 90%
% of open NCRs with corrective action plan submitted and accepted within 30 days. 2 of 3 YTD NCRs in remediation.
KPI 5
Lead Time Adherence
100%
target: 95%
% of orders delivered within the lead time quoted at time of PO. No overruns recorded YTD 2024.
KPI 6
Forecast Accuracy
82%
target: 90%
% accuracy of Cheryong's weekly production forecast vs. actual units shipped. Improving — weekly reports initiated Q3.
Custom / Jointly Developed KPIs

CE may enlist Cheryong's support in adapting KPIs used with other customers. Use the Define KPI button to add new metrics.

Action Tracker • Q3–Q4 2024
Actions & Next Steps
Owners, status, and estimated completion dates
Updates
Additions
Exhibit 4 — Action Item Register
CategoryActionOwnerStatusEst. DateComments
Performance Feedback • YTD 2024
Supplier Assessment
Overall Rating: Exceeded Expectations across all measured areas
CE Assessment — Achievements
    CE Assessment — Areas for Improvement
      Cheryong's Assessment of Consumers Energy (YTD) — To Be Completed by Cheryong
      Achievements
      Areas of Improvement
      Contractual Compliance • Future Section
      Contract Adherence
      To be activated once pilot parameters are finalized (6–12 month timeline)
      Contract Sections — Under Development
      Section 1
      Payment Terms
      ■Net 30 payment terms per master supply agreement
      ■All Q1–Q3 invoices submitted and paid within terms — no outstanding disputes or late payments as of August 2024
      ■Invoice accuracy rate estimated at 96% YTD — two invoices required minor correction related to unit count discrepancies
      Section 2
      Warranty
      ■Standard 1-year warranty on all distribution transformers from date of installation
      ■One active warranty claim: UG TRF defective unit (NCR Jul 2024, score 36) — Cheryong has accepted responsibility and is coordinating replacement
      ■All other delivered units within warranty with no additional field failures reported
      Section 3
      Performance Guarantees
      ■On-time delivery floor: 90% — Cheryong tracking at 94% (Meets)
      ■Quality score floor: 3.5/5.0 per quarter — Q3 score 3.64 is above floor; trending down from Q2 peak of 5.00
      ■YTD NCR score cap of 75 has not been breached — current score is 62
      ■No contractual remedies triggered to date
      Section 4
      Other Contract Terms
      ■VBR Tier 1 rebate triggers at 2,500 units YTD — currently at 2,098 (84% of threshold); unlikely to trigger without significant Q4 acceleration
      ■Confidentiality and IP provisions in place for all approved drawings and technical specifications
      ■Annual contract review scheduled for Q1 2025
      Continuous Improvement • Future Section
      Innovation & Process Enhancement
      Structured tracking of supplier-initiated improvements and joint innovation initiatives
      Recent / Proposed Initiatives
      Planned Actions & Milestones
      Volume-Based Rebate • 2024
      VBR Tracker
      Distribution Transformer Annual Rebate Schedule — Cheryong Electric
      Spend
      Rebate
      YTD Spend
      $20.3M
      Through Sep 2024
      Projected Year-End
      $27.2M
      (–$0.4M vs. budget)
      Original Budget (EOY)
      $27.6M
      12 × $2.3M/mo
      Projected Total Rebate
      ~$147K
      T1 $125K + T2 $22K
      Original Projected Rebate (EOY)
      ~$151K
      T1 $125K + T2 $26K
      YTD vs. Tier Thresholds
      YTD Actual
      $20.3M
      $27.2M
      YTD Budget
      $20.0M
      $27.6M
      Tier 1
      $0–$25M · 0.50%
      Tier 2
      $25–$50M · 1.00%
      Tier 3
      $50–$100M · 1.50%
      YTD Actual YTD Budget EOY marker

      Through September, Cheryong has spent $20.3M — now projected to reach $27.2M by year-end, crossing Tier 2 ($25M) in Q4. YTD spend is tracking $0.4M below the original budget of $27.6M. To unlock the Tier 2 rebate (1.00%), remaining monthly spend would need to average $1.65M above current pace ($3.15M/mo vs. $1.5M forecast). Estimated total rebate at current trajectory is ~$147K (T1 $125K + T2 $22K), close to the original projected $151K.

      Spend Progress & Monthly Trend
      YTD vs. Tier Thresholds
      Rebate Schedule
      TierSpend RangeRateStatus
      T1$0–$25M0.50%■ Achieved
      T2$25M–$50M1.00%■ On Track
      T3$50M–$100M1.50%Not 2024
      Monthly Spend — Actual & Projected
      Actual Projected
      Live Data Input
      Update Dashboard Data
      Changes propagate immediately to charts and KPI cards across all sections
      Quality — Update Data
      Score colors auto-apply: green ≥4.5, amber 3.5–4.49, red <3.5
      Delivery — Update Data
      Supplemental KPIs — Update Values
      Quarterly Summary
      QuarterQuality ScoreDeliveriesNCRsNCR ScoreRating
      Q1 20244.4890700Exceeded
      Q2 20245.00681226Met
      Q3 20243.64510*136Partial
      Q4 2024————Pending
      * Q3 deliveries as of August 16, 2024