Mitigating Global Supply Chain Risks through Smarter Supplier Management

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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 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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  • To win in the age of the customer companies must focus on four market imperatives:- Transform the customer experienceEmbrace the mobile mind shiftBecome a digital disruptorTurn big data into business insightsASK: How do you see these market imperatives impacting you and your business?DISCUSSIONNOTE: For detailed talking points & examples, please visit https://docs.google.com/a/forrester.com/document/d/1T-kbYKZD1_41cZWJm9haYnPCemGuIhTsPKq2kj4zJH8/edit
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  • My colleague Lutz Peichert is building this risk index right now, and I’ve shamelessly taken his slides here to give you a sneak peek at his model so you can adapt it for your own risk assessments.
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  • Mitigating Global Supply Chain Risks through Smarter Supplier Management

    1. 1. Mitigating Global Supply Chain Risks through Smarter Supplier Management Speakers • Christine F. Ross – Forrester Research • Jamie Ashford – The American Red Cross • Doug Cloutier – Cabot Materials Moderator • Sundar Kamakshisundaram – Ariba, an SAP Company #AribaLIVE @ariba
    2. 2. Agenda • • • • 2 Introduction Panel Presentations Key Takeaways Q&A © 2014 Ariba – an SAP company. All rights reserved.
    3. 3. The Panel Team Speakers: • Christine Ferrusi Ross – Forrester • Jamie Alford – The American Red Cross • Doug Cloutier – Cabot Materials Moderator: Sundar Kamakshisundaram 3 © 2014 Ariba – an SAP company. All rights reserved.
    4. 4. Defining Supplier Management… “Supplier Management” is multi- faceted and Registration & On-boarding Process Supplier Discovery touches many aspects of Business Commerce Supplier Portals Supplier Management or SRM Vendor Master Management Risk Management © 2014 Ariba, Inc. All rights reserved. Performance Management Diversity/Green/ Corporate Responsibility • 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 incontext 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
    5. 5. Increasingly Complex Supply Chains Can Create Significant Risk Brand Damage Increased Costs 5 © 2014 Ariba, Inc. All rights reserved. Revenue Loss Unsatisfied Customers
    6. 6. Many Sources of Supply Chain Risks  Price  Disruption  Brand • • • • • • • 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 “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 6 © 2014 Ariba, Inc. All rights reserved.
    7. 7. The Risk Most Important to You Depends on Your Function and Industry Brand Disruption Price Brand CEO High Tech CPO Manufacturing CRO COO Price Financial Serv CFO Disruption Retail / CPG BOTTOM LINE: ELIMINATE WHAT YOU CAN. MANAGE THE REST! 7 © 2014 Ariba, Inc. All rights reserved.
    8. 8. Mitigating Global Supply Chain Risks through Smarter Supplier Management Christine Ferrusi Ross, Vice President and Principal Analyst #AribaLIVE
    9. 9. Making Leaders Successful Every Day
    10. 10. Finding Customer Advantage in Managing Vendor Risk Christine Ferrusi Ross, Vice President and Principal Analyst
    11. 11. What if you weren‟t afraid of anything?
    12. 12. 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 © 2013 Forrester Research, Inc. Reproduction Prohibited 12
    13. 13. You need to become customer-obsessed Transform the customer experience Embrace the mobile mind shift Age of the Customer Turn big data into business insights © 2013 Forrester Research, Inc. Reproduction Prohibited Become a digital disruptor 13
    14. 14. Age of the customer changes how to approach vendor risk “Removing Bad” Approach “Creating Good” Approach Objective: reduce risk to “zero” Objective: actively manage risk to business advantage Consider all risks negative Consider some risks positive Use one treatment for all risks Use multiple treatments Think about only internal stakeholders/business impact Make customer-impact a key consideration Key question: What can I do to avoid any risk? © 2013 Forrester Research, Inc. Reproduction Prohibited Key question: How can I use risk to my advantage? 14
    15. 15. Customer-obsession mean you need to consider multiple kinds of supplier risk Forrester Research, October 2013 “Understanding Software Options For Managing Vendor Risk” © 2013 Forrester Research, Inc. Reproduction Prohibited 15
    16. 16. Each industry weighs those four risks differently › Examples: • Retail • Financial services • Oil/gas/utilities • Automotive © 2013 Forrester Research, Inc. Reproduction Prohibited 16
    17. 17. 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
    18. 18. 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? © 2013 Forrester Research, Inc. Reproduction Prohibited 18
    19. 19. 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
    20. 20. Crystalize your suppliers„ risk Financials News Strategy Customer base
    21. 21. Clarify your own risk tolerance Financial Process and execution maturity Business Resources
    22. 22. Match your supplier‟s risk to your tolerance Client risk Tolerance index Too risky Safe Vendor Risk Index 0 A B C D F E G Z 100
    23. 23. Track and TREAT vendor risk
    24. 24. 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 © 2013 Forrester Research, Inc. Reproduction Prohibited 24
    25. 25. Thank you Christine Ferrusi Ross +1 617.613.6124 cross@forrester.com
    26. 26. Mitigating Global Supply Chain Risks through Smarter Supplier Management Jamie Alford, MScPM American Red Cross #AribaLIVE
    27. 27. American Red Cross The American Red Cross prevents and alleviates human suffering in the face of emergencies by mobilizing the power of volunteers and the generosity of donors. Vision: The American Red Cross, through its strong network of volunteers, donors and partners, is always there in times of need. We aspire to turn compassion into action so that... ...all people affected by disaster across the country and around the world receive care, shelter and hope; ...our communities are ready and prepared for disasters; ...everyone in our country has access to safe, lifesaving blood and blood products; ...all members of our armed services and their families find support and comfort whenever needed; and ...in an emergency, there are always trained individuals nearby, ready to use their Red Cross skills to save lives. © 2014 Ariba, Inc. All rights reserved.
    28. 28. The Starting Point • • • 2007 – 2009 Strategic Sourcing Organization implemented 2009 – 2011 – Search began for an end-to-end Supply Chain Management System May 2012 – ReQuest, the Red Cross Ariba solution was implemented! © 2014 Ariba, Inc. All rights reserved.
    29. 29. Ariba Solutions Deployed • • Ariba Solutions Implementation was a rapid deployment to the NHQ, Chapters, Disaster, In-Kind and non-regulated Biomedical lines of business. The roll-out moved us from paper to online ordering overnight. Full Suite of solutions: Supplier Information Procure to Pay Sourcing Professional Contract Compliance Contract Professional Integration of solutions to current data sets (Oracle, data warehouse, etc…) Order Management Process changes necessary to implement solutions Supplier Performance Management Supplier Enablement Spend Visibility 29 © 2014 Ariba, Inc. All rights reserved.
    30. 30. The Numbers • • • • • 30 1.3 billion = Sourceable spend 85 - 90% = Spend under Management 7,500 Suppliers 350 Suppliers Enabled to-Date 25 Catalogs are Live © 2014 Ariba, Inc. All rights reserved.
    31. 31. Supplier Performance Management • • • The Supplier Performance Management (SPM) provides the Red Cross with the ability to proactively manage its supplier base, while mitigating the associated supplier risk. Its particular focus is on those suppliers that are critical to the day-to-day operations of the Red Cross. By utilizing the Ariba Supplier Performance Management module within Ariba, the program can easily track and manage all aspects of supplier management, as well as maintaining scorecards and required supplier documentation including the newly developed supplier risk deliverables. Partnering with each Line of Business (LOB) SPM: 1. 2. 3. 4. 5. 31 Addresses current audit requirements for managing suppliers Enables the Red Cross to better manage supplier risk Leverage spend categorizations and the reporting capabilities of Ariba Define, track and associate scorecards and metrics to supplier profiles Support the Supplier Diversity Program reporting requirements © 2014 Ariba, Inc. All rights reserved.
    32. 32. Supplier Risk Deliverables SUPPLIER TIERING & RISK DELIVERABLES TIER 1* TIER 2* u Business Critical Supplier Registration or Registration Refresh X X X Financial Viability & Risk Rating Score (FVRR) X X Insurance Certificates X X X Diversity Certifications, if applicable X X X Business Resiliency/Continuity Plan X X Scorecards X X Diversity Spend Metrics X X Others TBD 32 Strategic Tier 3 Everyone else X © 2014 Ariba, Inc. All rights reserved. X
    33. 33. BLUE SKY - Supplier Management • Oracle = System of Record for all suppliers • New Suppliers desiring to do business with Red Cross register in Ariba. • ARC Eform utilized for supplier set up in Oracle. • Customer Administrator approves Eform after verifying supplier does not already • • 33 exist in Oracle or Ariba. Oracle Integration will feed (nightly) Ariba downstream (Procure-to-Pay), thus creating partitioned suppliers which will be utilized for contract terms and PRs. Supplier available for selection in Contract Terms and PRs (both in-flight and new). © 2014 Ariba, Inc. All rights reserved.
    34. 34. BLUE SKY- Supplier Management Common Supplier Upstream Oracle E-Form The System of Truth Daily, Oracle suppliers are loaded into ReQuest. This process runs each evening or it can be run on demand when a supplier must be set up quickly (usually reserved for suppliers associated with Disaster Operations). © 2014 Ariba, Inc. All rights reserved. Common Suppliers are utilized in the modules: 1-to-1 Relationship Common Supplier Downstream • • • • • Supplier Management Sourcing Professional Contract Professional Supplier Performance Management Spend Visibility Partitioned Suppliers are utilized in the module: Partitioned Supplier • Procure to Pay (P2P) • Contract Compliance 1-to-Many Relationship Supplier Location Supplier Location (Ordering Location) (Ordering Location) 1-to-1 Relationship Remittance Location Remittance Location (Remittance Location) (Remittance Location) Fact: Every Partitioned Supplier has a Common Supplier (the converse of this statement is not true)
    35. 35. Gray Sky - Disaster Sandy • • • • • • 35 Oracle = Still System of Record for all suppliers Requestor creates PR. Procurement receives PR and submits ARC Eform. Customer administrator approves Eform and pushes to Oracle. Oracle feeds Ariba downstream via a manual push into Oracle rather than waiting for the nightly feed thus creating the partitioned supplier. Supplier available for selection in Contract Terms and PRs (both in-flight and new). © 2014 Ariba, Inc. All rights reserved.
    36. 36. Mitigating Global Supply Chain Risks through Smarter Supplier Management Doug Cloutier – Cabot Materials #AribaLIVE
    37. 37. About Cabot  NYSE: CBT since 1968  Founded 1882  Global performance materials company  43 manufacturing sites in 21 countries   Core technical competencies in fine particles and surface modification FY2013 sales: $3.5 B MARCH 2014 / SUPPLIER INFORMATION AND PERFORMANCE MANAGEMENT / CONFIDENTIAL / NOT FOR REDISTRIBUTION 37
    38. 38. Global Overview manufacturing sites affiliates regional headquarters 43 manufacturing sites in 21 countries, all with local management teams – serviced by one purchasing team, managed centrally, with a globally distributed team. Sales by Region Asia Americas Europe, Middle East & Africa Spend by Region 35% 35% 34% 39% 30% 27% MARCH 2014 / SUPPLIER INFORMATION AND PERFORMANCE MANAGEMENT / CONFIDENTIAL / NOT FOR REDISTRIBUTION 38
    39. 39. MARCH 2014 / SUPPLIER INFORMATION AND PERFORMANCE MANAGEMENT / CONFIDENTIAL / NOT FOR REDISTRIBUTION 39
    40. 40. Cabot’s Purchasing Tools Evolution Supplier Contact Info Savings Database Contract Archive / Approvals Supplier Feedback Competitive Bidding (BVA) SH&E JDE  Global processes and systems in place with one global ERP instance but…  Pre-Qualifications  Trade Extensions Dec 2012 Manual information exchange with suppliers   SUPPLIER HIDDEN SUPPLIER HIDDEN No data integration between purchasing management systems No direct supplier interaction from within tools Substantial email and phone call volumes to maintain supplier data SH&E contractor prequalification process performed over email and fax with written documents and hard copies of certificates MARCH 2014 / SUPPLIER INFORMATION AND PERFORMANCE MANAGEMENT / CONFIDENTIAL / NOT FOR REDISTRIBUTION 40
    41. 41. Purchasing Tools Evolution Supplier Contact Info Savings Database Competitive Bidding (BVA) SH&E JDE Manual information exchange with suppliers Supplier Feedback Savings Tracking Contract Approvals & Archive Pre-Qualifications Dec 2012 JDE Contract Archive / Approvals Competitive Bidding (BVA) Key Supplier Information Sourcing Trade Extensions eCatalogs and eRequisitions Supplier Feedback Order Acknowledgement and Receipt Tracking Supplier Scorecards SH&E Pre-Qualifications Supplier Information Management / Portal Trade Extensions (Complex Tenders Only) Dec 2014 MARCH 2014 / SUPPLIER INFORMATION AND PERFORMANCE MANAGEMENT / CONFIDENTIAL / NOT FOR REDISTRIBUTION 41
    42. 42. Supplier Onboarding Strategy and SIPM Rollout  July 2012 – Project start of our initial Ariba implementation      December 2012 – SIPM Go-Live    Questionnaires and surveys full go live - English, French, Dutch, German & Italian March 2014    North America full go-live for SIPM South America, Europe and Asia – Top 5 suppliers each for supplier quality scorecards March 2013 – Europe Go-Live   Training and data design to build our Ariba foundation for expansion to sourcing, contracts and P2O SIPM – Supplier scorecards for top mission critical suppliers SIPM – Maintain critical insurance and safety information for all contractors working onsite at Cabot facilities SIPM – Key supplier information management for all managed suppliers Asia launches in English, Chinese and Japanese South America launches in English, Spanish and Portuguese Today – 1,200 suppliers managed in Ariba servicing mix of SH&E and Performance Requirements 5 MARCH 2014 / PRESENTATION TITLE / CONFIDENTIAL / NOT FOR REDISTRIBUTION 42
    43. 43. Performance Management Process Supplier/Contractor SH&E Pre-Qualifications  Cabot’s largest use thus far of SIPM   Critical review of insurance, safety history and contractor SH&E programs by Cabot’s SH&E teams before a supplier is allowed to work on site. Requires renewal every 1, 2 or 3 years depending on risk associated with work performed. Process overview:       Onboard a supplier to Ariba SIPM either by self-registration link or by manual invite. Send a custom Ariba survey to the supplier through the supplier workspace Use the survey interface to track responses and gather additional information Retrieve results from completed survey and transform into Cabot internal survey for the SH&E managers to review and send through Ariba to Cabot SH&E managers Cabot SH&E managers approved, leave comments and rank the risk to determine recurrence timing for next renewal of certification Cabot purchasing sets a task reminder in workspace to indicate when renewal is required 5 MARCH 2014 / PRESENTATION TITLE / CONFIDENTIAL / NOT FOR REDISTRIBUTION 43
    44. 44. Process Walk Through SH&E Surveys within SIPM Contractor Name Contractor Name Contractor Name Contractor Name Contractor Name MARCH 2014 / SUPPLIER INFORMATION AND PERFORMANCE MANAGEMENT / CONFIDENTIAL / NOT FOR REDISTRIBUTION 44
    45. 45. Process Walk Through SH&E Surveys within SIPM MARCH 2014 / SUPPLIER INFORMATION AND PERFORMANCE MANAGEMENT / CONFIDENTIAL / NOT FOR REDISTRIBUTION 45
    46. 46. Process Walk Through SH&E Surveys within SIPM Contractor Name Contractor Name Contractor Name Contractor Name Co ntr ac tor Contractor Name Na m Contra e ctor Contractor Name Name MARCH 2014 / SUPPLIER INFORMATION AND PERFORMANCE MANAGEMENT / CONFIDENTIAL / NOT FOR REDISTRIBUTION 46
    47. 47. Performance Management Process Scorecards  Global supplier quality management organization  1 global leader  3 regional supplier quality managers  Initial rollout was 5 scorecards per regional supplier quality manager  Expanded to 5 scorecards per sub region in 2013  In 2014 suppliers selected for scorecards in Ariba by critical risk ranking    A, B or C ranking determined by type of equipment or service delivered by supplier B level ranking can be moved up to A based on additional internal justification All ‘A’ level suppliers will receive scorecards from within Ariba  Type of goods/service will determine if data is pulled and reviewed quarterly, bi-annually or annually 5 MARCH 2014 / PRESENTATION TITLE / CONFIDENTIAL / NOT FOR REDISTRIBUTION 47
    48. 48. Lessons Learned  Scope and planning is key when designing your process  Cabot Legal was already “in” Ariba as a contracts user  Supplier information management transition does not happen on its own  The concept of “load all your suppliers into Ariba in 2013” simply did not work  SIPM was “additional work” on the purchasing teams…..  You need a burning issue to motivate and excite the purchasing organization      SH&E qualification process was challenging and manual Ariba automated and provided a way to organize the process Scorecard process was loosely managed if it even existed and was manual Ariba centralized, standardized and helped to automate the process Do not underestimate the need for power users, trainers and the time to develop a process that works 5 MARCH 2014 / PRESENTATION TITLE / CONFIDENTIAL / NOT FOR REDISTRIBUTION 48
    49. 49. Future Strategy and Rollouts   We are in the process of fully rolling out our SIPM foundation in Asia and South America In 2014 our internal competitive bidding documentation, contract review/approval processes and savings tracking will all go-live in Ariba globally    More reasons for supplier creation and management in Ariba Supplier risk ranking for scorecard usage has begun and we are anticipating significant scorecard usage in 2014 across our supply base We are linking results of our internal supplier complaint system into our scorecard fact tables  We are linking core JDE transaction order data into scorecard fact tables  We are preparing our P2O enablement and initial go-live in 2014 5 MARCH 2014 / PRESENTATION TITLE / CONFIDENTIAL / NOT FOR REDISTRIBUTION 49
    50. 50. Summary and Key Takeaways Build Collaborative Relationships and Obtain Executive Sponsorships Determine Supplier Segmentation Model Pilot specific categories and/or supplier tiers Use technology as an Enabler Measure and plan for continuous improvement ACCELERATE SAVINGS, IMPROVE COMPLIANCE & MITIGATE RISK! © 2014 Ariba, Inc. All rights reserved.
    51. 51. Thank you Q& A Contact information: Sundar Kamakshisundaram Sr. Director – Global Solutions Marketing E: sundar.kamak@sap.com 51

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