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Mitigate Risks in Global Supply Chains through Supplier Collaboration

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Procurement executives, though continually challenged to maintain sustainable savings, face numerous challenges integrating supply risk management holistically into spend management. This is …

Procurement executives, though continually challenged to maintain sustainable savings, face numerous challenges integrating supply risk management holistically into spend management. This is especially true for organizations that have focused on reducing costs and limiting working capital levels as a response to difficult market conditions. Join this session to hear from leading experts and Ariba customers as they share how to leverage smarter supplier management and embark on a journey from being company-centric to being customer-centric and demand-driven using business networks.

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  • 1. #AribaLIVE Mitigating Global Supply Chain Risks through Smarter Supplier Management @ariba Speakers • Lutz Piechert – Forrester Research • Aurelie GOUBIN – The Albea Group Moderator • Sundar Kamakshisundaram – Ariba, an SAP Company
  • 2. Agenda • Introduction • Panel Presentations • Key Takeaways • Q & A © 2014 Ariba – an SAP company. All rights reserved.2
  • 3. The Panel Team © 2014 Ariba – an SAP company. All rights reserved. Speakers: • Lutz Piechert – Forrester • Aurelie GOUBIN – The Albea Group Moderator: Sundar Kamakshisundaram 3
  • 4. © 2014 Ariba, Inc. All rights reserved. Defining Supplier Management… Supplier Portals Vendor Master Management Risk Management Diversity/Green/ Corporate Responsibility Registration & On-boarding Process Performance Management Supplier Management or SRM Supplier Discovery “Supplier Management” is multi- faceted and touches many aspects of Business Commerce • Supplier Information Management that unifies platform, process and supplier profiles across the company and keeps it current, complete and correct. • Highly usable web-based portal for suppliers to register and manage information collaboratively with customers • Supplier Performance Management capabilities including Process Workflow and approvals, Surveys and scorecards, flexible role based dashboards and customizable reports • A Robust technology platform that seamlessly integrates in- context Supplier info such as Parentage, Financials, Diversity and Sustainability to manage and mitigate Supply Risk • A unified Supplier Record merging data and process flows to third party systems and data sources 4
  • 5. © 2014 Ariba, Inc. All rights reserved. Increasingly Complex Supply Chains Can Create Significant Risk Brand Damage Unsatisfied CustomersIncreased Costs Revenue Loss 5
  • 6. Many Sources of Supply Chain Risks © 2014 Ariba, Inc. All rights reserved. “Research from across 62 countries has revealed that 85% of organizations surveyed recorded at least one supply chain disruption in 2011. 40% of disruption originated below the immediate supplier.”- Business Continuity Institute, Nov. 2011 • Mergers & acquisitions • International sourcing • Commodity volatility • Capacity shortage and Growing lead times • Lack of available credit • Quality and sustainability • Tier 1 and 2 supplier performance  Price  Disruption  Brand 6 BOTTOM LINE: ELIMINATE WHAT YOU CAN. MANAGE THE REST!
  • 7. #AribaLIVE Mitigating Global Supply Chain Risks through Smarter Supplier Management Lutz Peichert Vice President and Principal Analyst Forrester Research
  • 8. Making Leaders Successful Every Day
  • 9. Finding Customer Advantage in Managing Vendor Risk Lutz Peichert Vice President and Principal Analyst
  • 10. What if you weren’t afraid of anything?
  • 11. © 2013 Forrester Research, Inc. Reproduction Prohibited 11 Agenda › Why being customer-obsessed means rethinking your vendor risk approach › A simple plan for using vendor risk to create customer advantage › Focus on risk treatment and become fearless
  • 12. © 2013 Forrester Research, Inc. Reproduction Prohibited 12 You need to become customer-obsessed Transform the customer experience Embrace the mobile mind shift Become a digital disruptor Age of the Customer Turn big data into business insights
  • 13. © 2013 Forrester Research, Inc. Reproduction Prohibited 13 Age of the customer changes how to approach vendor risk “Removing Bad” Approach Objective: reduce risk to “zero” Consider all risks negative Use one treatment for all risks Think about only internal stakeholders/business impact Key question: What can I do to avoid any risk? “Creating Good” Approach Objective: actively manage risk to business advantage Consider some risks positive Use multiple treatments Make customer-impact a key consideration Key question: How can I use risk to my advantage?
  • 14. © 2013 Forrester Research, Inc. Reproduction Prohibited 14 Customer-obsession mean you need to consider multiple kinds of supplier risk Forrester Research, October 2013 “Understanding Software Options For Managing Vendor Risk”
  • 15. © 2013 Forrester Research, Inc. Reproduction Prohibited 15 Each industry weighs those four risks differently › Examples: • Retail • Financial services • Oil/gas/utilities • Automotive
  • 16. Emerging suppliers complicate the risk picture › Start-ups often lack the sophistication and/or funds to properly secure data to client specifications › Access to validated financial data often isn’t available › Traditional definitions of financial viability don’t apply › If we reject a vendor because it is risky, the business user can overrule us and buy anyway
  • 17. © 2013 Forrester Research, Inc. Reproduction Prohibited 17 Your big suppliers aren’t inherently less risky, by the way… How well do you understand your suppliers’ supply chains? › Is there a reasonable chance that my supplier’s subcontractors could hurt my supplier’s viability? › What subcontractors does my supplier use? › Can the supplier validate that its subcontractors follow the same privacy/disaster recovery/compliance policies that it does? › How viable are those subcontractors?
  • 18. A simple plan… › Crystallize your suppliers’ overall risk with a risk index › Clarify your own risk tolerance › Track supplier-related risks based on their strategic importance to you › Create a treatment plan for every likely or critical risk
  • 19. Crystalize your suppliers‘ risk Financials Strategy Customer base News
  • 20. Clarify your own risk tolerance Financial Process and execution maturity ResourcesBusiness
  • 21. Match your supplier’s risk to your tolerance Vendor Risk Index 0 100 A B C D E ZF G Too risky Safe Client risk Tolerance index
  • 22. Track and TREAT vendor risk
  • 23. © 2013 Forrester Research, Inc. Reproduction Prohibited 23 Focus on risk treatment and become fearless! › As the Age of the Customer continues, rethink your vendor risk approach › Create a treatment plan to address any very likely or devastating risks › Use the treatment plan to collaborate with product/business execs and gain advantage with customers
  • 24. Thank you Lutz Peichert lpeichert@forrester.com
  • 25. #AribaLIVE Mitigate Risks in Global Supply Chains through Supplier Management Aurelie GOUBIN, Best Practices Procurement Manager, Albéa @SpeakerTwitterHandle © 2014 Ariba – an SAP company. All rights reserved. @ariba
  • 26. Agenda • Albéa Group  Who we are?  Albéa Procurement Organization  Albéa 2013’ Procurement Stakes • Manage Risks: why? • Albéa new way of managing suppliers:  Step 1: Get the data  Step 2: Involve other functions  Step 3: Report & Analyze  Step 4: Dig in Deeper  Step 5: Track & Develop • Conclusion – Take away • Questions © 2014 Ariba – an SAP company. All rights reserved.27
  • 27. © 2014 Ariba – an SAP company. All rights reserved.28 Group • 16 700 employees • 46 plants • 14 countries • Sales 2013: US $ 1,6 Billion Global leader in Beauty & Personal Care Packaging • Products portfolio based upon 4 core expertise  Tubes laminates, plastic tubes  Dispensing systems fragrance, lotion, foam, samplers  Cosmetic Rigid Packaging mascara, lipstick, lip gloss, jars  Beauty solutions, kitting, soft goods & promotional items
  • 28. Group Ambition • Be the best global packaging company in the eyes of our people, our customers and our shareholders Values • World-class partner • Speed to market • Quality through continuous improvement • Broad range of expertise and product innovation © 2014 Ariba – an SAP company. All rights reserved.29 • Some of our main customers
  • 29. © 2014 Ariba – an SAP company. All rights reserved.30 Procurement Organization • Central Procurement team – 2013/4  Global Lead Buyers per commodities  Regional Procurement Directors  Analysts & Ariba specialist • Local Procurement team  Buyers: implement strategies & run projects • Global spend US$ 1 Bil.  70% production items (raw materials, components, sub-contracting)  30% non-production items (energy, transportation, travel, etc.)  Global AND diversified Supply Base
  • 30. © 2014 Ariba – an SAP company. All rights reserved.31 Procurement – 2013’ Stakes • Increase of the supplier base complexity with important growth of suppliers in emerging markets  Over 15 000 suppliers worldwide  Quality & Supply Chain assurance, cultural differences, time zone, etc. • Cosmetic Industry European and American regulations to be followed by suppliers • Continue growth of Albéa & tensed economic situation lead to higher pressure on prices & cost down
  • 31. WHY SPEND RESOURCES ON SUPPLIER RISKS MANAGEMENT WHEN OUR MAIN BUSINESS OBJECTIVES ARE COST SAVINGS AND SHORT-TERMS PROJECTS? © 2014 Ariba – an SAP company. All rights reserved.32
  • 32. Manage Risks Not a luxury but a necessity • Best in class process would be to 1. Identify the risks: economical, financial, industrial, legal, business 2. Identify the impact: Critical, High, Low 3. Define roadmap prioritizing actions © 2014 Ariba – an SAP company. All rights reserved.33 • Why?  Increase of Customers’ pressure  Tighten legislations  Difficult economic situation  Market restructuration - decrease of potential sources (suppliers/materials) • … in the “real life”  Lack of resources to implement & follow up process  Lack of time – solving emergencies and Achieving budgets
  • 33. Albéa New way of managing Suppliers • Supplier Information management initiated in Q2 2013  Wave 1: 250 suppliers  Wave 2: Factories Top 10 suppliers • Supplier Performance management initiated in Q1 2014  Wave 1: 20 suppliers • Objectives:  Enhance collaboration among the different company’s function and with the suppliers  Improve communication & actions efficiencies (limited number of contacts)  Common & Global tool to Select suppliers monitor performance  Improve suppliers overall performance by monitoring and following up in a systematic way © 2014 Ariba – an SAP company. All rights reserved.34 Supplier selection
  • 34. Supplier management Step 1: Get the data Start simple ! Who are they? • A basic of the procurement process:  Request for information (RFI)  Converted into Albéa Supplier Profile Questionnaire (SPQ)  Sent to all our existing suppliers  Sent to any new/potential suppliers • Questionnaire:  Built together with Procurement, Quality, Supply Chain, Regulatory affairs, Legal  Includes a scoring system  Mandatory for suppliers to meet buyers & access sourcing events © 2014 Ariba – an SAP company. All rights reserved.35
  • 35. © 2014 Ariba – an SAP company. All rights reserved.36 Buyers questions only: Type of supplier? Our objectives? Need for specifics treatments? Financial key data: Revenue? EBITDA? Ask for a range to lower the fear from suppliers Quality: List of certificates? Supply Chain: Suppliers List of processes & KPIs? EHS: From Regulatory affairs: Are the suppliers compliant with regional/global legislations? Sustainability & Legal: Are the supplier compliant with Albéa Policy? Supplier management Step 2: Involve other functions
  • 36. Follow up ! © 2014 Ariba – an SAP company. All rights reserved.37 • Reporting available in users’ dashboard  Fact based  Ease the analysis  Rank suppliers • Internal & Global process defined to take actions for low-scored suppliers Supplier management Step 3: Report & Analyze
  • 37. Enlarge ! © 2014 Ariba – an SAP company. All rights reserved.38 • Supplier « Deeper » questionnaire  Sent by Procurement team on the initiative of Sustainability / Procurement managers  Objectives: – More detailed evaluation of potential « risky » suppliers – Validate the need of lunching an on site social audits Empower buyers Highlight risks via Questionnaires & follow up Supplier management Step 4: Dig in deeper
  • 38. © 2014 Ariba – an SAP company. All rights reserved.39 Continuous improvements ! • Supplier performance Management – more than a « simple » performance assessment • Target: Strategic suppliers • Different Scorecards / Survey depending on commodities • Joined efforts to build Survey & KPIs  Internal seminar of 2 days  Procurement, Quality, Supply Chain, Regulatory affairs, Sustainability  Scoring system Supplier management Step 5: Track & Develop
  • 39. A simple process © 2014 Ariba – an SAP company. All rights reserved.40 3 Phases: Plan / Monitor / Review Set of documents associated to tasks to support Buyers analysis Recurring process: Quarter / Semi- Annual / Yearly Different surveys depending on the stakeholders (internal only) • Risk & Commercial • Supply Chain • Quality 1 Scorecard Supplier management Step 5: Track & Develop
  • 40. Collaboration… © 2014 Ariba – an SAP company. All rights reserved.41 Team composed of: • Procurement Management • Global Lead buyers • Global Suppliers Quality Manager • Global / Local Sustainability Team • Local Buyers – Respond to the Cial & Risks survey • Local Quality – Respond to the Quality Survey • Local Supply Chain – Respond to the SC Survey • Others Supplier management Step 5: Track & Develop
  • 41. Surveys © 2014 Ariba – an SAP company. All rights reserved.42 #1 #2 #3 Supplier management Step 5: Track & Develop
  • 42. Risks types: • Tooling • Force majeur • Quality failure • Financial • Supply Chain A simple evaluation system: • What is the impact : 0 to 20 (minor to catastrophic) • What is the likelihood: 1 to 5 (rare to certain) Risk = Impact x likelihood Survey – Zoom on Supply Chain Risks Management © 2014 Ariba – an SAP company. All rights reserved.43 Supplier management Step 5: Track & Develop
  • 43. Scorecard © 2014 Ariba – an SAP company. All rights reserved.44 Score easily accessible depending on pre- defined weight Different sources: Report / Survey Alerts when score below target Supplier management Step 5: Track & Develop
  • 44. Report & Evaluate the trend © 2014 Ariba – an SAP company. All rights reserved.45 Sustainability Innovation & Technology Albéa Account management Commercial Supply Chain risks management Quality Supply Chain Meaningful reporting available in Public Report Reports & Scorecard presented to: 1. SPM Project Team 2. Suppliers Suppliers are then asked to provide Albéa an action plan when improvement is needed Supplier management Step 5: Track & Develop
  • 45. Supplier Performance Management : summary • Global & simple process • Offers tangible data • Formalized suppliers’ responsibilities © 2014 Ariba – an SAP company. All rights reserved.46 Empower buyers Promote internal collaboration – 360° view Prevent risks through regular & systematic assessment Supplier management Step 5: Track & Develop
  • 46. Conclusion • Ariba to improve – Questionnaire  Multiple questionnaire depending on suppliers / activities  Double scoring system – Measure of Sustainability = 1 score – Measure of Financial information = another score? • Ariba to improve - Scorecard  Create link between Supplier Profile Questionnaire & Scorecard  manual input  Weighting system depending on participants  Develop Formula’s type KPIs  Possibility to attach documents in Scorecards : get details of why this scoring (beyond the surveys) © 2014 Ariba – an SAP company. All rights reserved.47
  • 47. Conclusion – Take away 1. Set up SIMPLE Tools: 1. SPQ from classic RFI 2. Sent it to all your suppliers © 2014 Ariba – an SAP company. All rights reserved.48 2. Automatize controls: 1. Create Reports available for a large community 2. Rank vendors with pre-defined scoring system 4. Regularly Communicate: 1. Invite Stakeholders as members of your processes 2. Set up clear schedules for review Simple – fast – paper less Enable organizations to Prevent & Mitigate risks 3. Develop tools & processes: 1. Surveys & Scorecards to a limited number of suppliers 2. Improve processes
  • 48. • Questions © 2014 Ariba – an SAP company. All rights reserved.49
  • 49. Summary and Key Takeaways © 2014 Ariba, Inc. All rights reserved. Determine Supplier Segmentation Model Pilot specific categories and/or supplier tiers Build Collaborative Relationships and Obtain Executive Sponsorships Use technology as an Enabler Measure and plan for continuous improvement ACCELERATE SAVINGS, IMPROVE COMPLIANCE & MITIGATE RISK!
  • 50. Thank you Q A& Contact information: Sundar Kamakshisundaram Sr. Director – Global Solutions Marketing E: sundar.kamak@sap.com 51
  • 51. Please Complete Session Survey Locate Session 52 Click Surveys Button Select Breakout Survey Rate Session Thank you for joining us © 2014 Ariba – an SAP company. All rights reserved.