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Creating Win-win Customer-Supplier PartnershipsProfessor Tom Vollmann© 2008 IMD International. Not to be used or reproduce...
The Classic “Lean” Approaches are Necessary but not Sufficient  Lean Manufacturing                           Lean Business...
The New Game: Win-win Customer-Supplier Partnerships  Actions                              Measures                       ...
The Customer Payoff                                                                                                 Experi...
The Supplier Payoffs are Just as Real!            Volume            Guaranteed capacity utilization            Sweat th...
It is Not Easy Procurement Needs to Come out of the Dark Ages   Classic Behavior           Today’s Best Practice          ...
So Does Sales   Classic Behavior           Today’s Best Practice                           Tomorrow’s Best Practice  - Com...
Partnerships are Highly Selective(Do not Beat Dead Horses!)                                                               ...
New Purchasing Realities      Make clear choices in supplier segments and the ways       in which you will work with them...
New Sales Realities             Sales / Marketing Must Reflect These New Realities          Define clear customer segment...
10 Golden Rules of Becoming an Attractive Customer            Be a demanding customer: challenge your suppliers but do no...
10 Golden Rules for Being an Attractive Supplier     1.  Execute flawlessly     2.  Tell the truth     3.  Select / choose...
Classic Barriers to True Partnership     What does your customer do that costs you money?     Are any of these familiar?  ...
Suppliers Create Problems as well     How about your suppliers?     And – would your customers say these things about you?...
The Joint Focus on Value / Cost      How can we reduce joint (chain) costs?      How can we increase joint value creatio...
The Rubik’s Cube of Customer-Supplier Partnerships                 WIN-WIN                          TRUST               MI...
Back-up Slides© IMD 2008     Creating Win-win Customer-Supplier Partnerships   17
Connecting the Marketplace to the Infrastructure: LeanManufacturing: Marketplace          Infrastructure      Marketplace ...
Evolving Objectives: Lean Business Unit: Marketplace       Infrastructure      Marketplace                     Bundles    ...
Pushing Further: Lean Corporation:  Marketplace        Infrastructure      Marketplace                      Bundles       ...
The Present Winning Combination: Lean  Partnerships: Marketplace     Infrastructure      Marketplace                      ...
Partnerships Imply Moving up the Value Chain,     Outsourcing and Changing Infrastructure                                C...
What is Needed?  Four Stages of Collaboration / Joint Efforts                 Strategic       Senior Management           ...
Classic Supply Chain Metrics are Grossly Inferior The Hierarchy of Supply Chain Metrics                                 De...
IT Systems are Another Barrier                        Customer                                                            ...
The Joint Efforts Stairstep to Partnership                                     Industry-Best                       Virtual...
Customer-Supplier Partnerships –   Maxims to Live by    Win-win is not hitting the other guy twice     If you win the rat ...
A Case Study of Breakthrough              Partnership Improvements© IMD 2008          Creating Win-win Customer-Supplier P...
The Firm used a Structured Approach to Improve Key     Relationships      The approach needed to go beyond facts - to    ...
A Structured Process Produced Tangible Results                           Analysis                            Workshop     ...
Several Counter-Intuitive Conclusions Were Obtained      Perception is more important than reality      At least 50% of ...
A Concrete Example Demonstrates the Process & Results  Company A and B            Business Relationship Before the Initiat...
A Collaborative Agenda Yields Major Pay-Offs   Win / Win  Early Involvement in the                                  Higher...
Collaboration Requires Major Joint Efforts© IMD 2008         Creating Win-win Customer-Supplier Partnerships   34
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Tulevaisuuden ostaja rakentaa kumppanuutta ja vaatii kilpailukykyä 18.9.2008 / Vollmann

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Tulevaisuuden ostaja rakentaa kumppanuutta ja vaatii kilpailukykyä 18.9.2008

Puhujat: Harri Jokinen, Juha-Pekka Anttila, Ismo Anttila, Sami Humala, Kaj Lindh, Mauri Heikintalo, Thomas E. Vollmann, Jari Osmala, Juha Vierros

Tilaisuuden videot: http://www.youtube.com/watch?v=B3HJe6nHJAQ , http://www.youtube.com/watch?v=LsjTlzLwgTI , http://www.youtube.com/watch?v=oZ_5jbXLZvM , http://www.youtube.com/watch?v=B4ourWI2q8w

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Transcript of "Tulevaisuuden ostaja rakentaa kumppanuutta ja vaatii kilpailukykyä 18.9.2008 / Vollmann"

  1. 1. Creating Win-win Customer-Supplier PartnershipsProfessor Tom Vollmann© 2008 IMD International. Not to be used or reproduced without permission.
  2. 2. The Classic “Lean” Approaches are Necessary but not Sufficient Lean Manufacturing Lean Business Unit Lean Corporation • Factory Focus • Business Unit Focus • Total Organization Focus • Lower Inventories • Beyond Manufacturing • Inter-Business Unit Synergies • Faster Throughput Times • Order Entry - Purchasing • Better Quality • Logistics - Logistics • Improved Capacity Utilization • After Sales Service - Warehousing (hubs) • Lower Costs • CRM / SRM • Regional/Global Buying • Flawless Execution • Customer Segmentation • Regional/Global Selling • Do it Right the First Time • Cross-functional Integration • Enterprise Metrics - Accounting • Inter-Business Unit - Human Resource Management - Planning - New Product Introduction - Coordination - Flawless Execution Basic MPC Systems ERP Systems Extended ERP Systems (evolution) (transformation) Measures Measures Measures Cost Profit Inventory Customer Market share PPM Satisfaction Earnings per share OTIFNE Cash to cash© IMD 2008 Creating Win-win Customer-Supplier Partnerships 2
  3. 3. The New Game: Win-win Customer-Supplier Partnerships Actions Measures Support • Inter-Company Focus • Overall Supply Chain Cost • Trust / Win-win • Joint New Process and Speed • Short Implementation Development • Partnership Capacity Firms • Supplier Networks Management • E-based B2B • Third Parties (Logistics) • Project Management Infrastructure • New Key Account • End Customer Delight Management • Win-win© IMD 2008 Creating Win-win Customer-Supplier Partnerships 3
  4. 4. The Customer Payoff Experience of a well- A benchmark comparison of programs to reduce incoming materials cost regarded U.S. manufacturing firm (Ford) Cumulative U.S. Producer Price Index 7.0% 7.56% 7.56% 7.1% Change in cost of all .7% 3.3% procured parts* Year 1 1/92 Year 2 1/92 .7% Year 3 -.2% 1/92 Year 4 1/92 Year 5 1/92 Year 6 1/92 Year 7 1/92 - -3.1% Results from Honda of America -7.9% program -16% -19% •Over 50% of total automobile cost •Source R. Dave Nelson, former VP Procurement, Honda of America© IMD 2008 Creating Win-win Customer-Supplier Partnerships 4
  5. 5. The Supplier Payoffs are Just as Real!  Volume  Guaranteed capacity utilization  Sweat the Assets  Reduce uncertainty  Develop industry best processes  Sell at high prices to Honda competitors  And then: – Manage network of sub-suppliers – Sweat their assets – Move up the value chain© IMD 2008 Creating Win-win Customer-Supplier Partnerships 5
  6. 6. It is Not Easy Procurement Needs to Come out of the Dark Ages Classic Behavior Today’s Best Practice Tomorrow’s Best Practice - Focus on price and - Focus on price (driven - Focus on TCO and assured supply by cost) Value/Cost - Customer is King - Enlightened thinking - Embedded Attraction attitude within senior philosophy - All suppliers managed management - Joint (pair) measurement equally - Sourcing –not supplier measurement - Classic cost becomes strategic - Segments within segments: performance - Clear supplier Super Supplier measurement segmentation Development - Sourcing is a - Advanced supplier - Buying bundles of goods decentralized tactical measurement and services, not just function - Central supplier commodities - Traditional buyers selection & coordination responsible For - Strategic buyers strategic commodities© IMD 2008 Creating Win-win Customer-Supplier Partnerships 6
  7. 7. So Does Sales Classic Behavior Today’s Best Practice Tomorrow’s Best Practice - Compete on price - Segment customer - Customer - Play commodity base partnerships games - Sell solutions - New approach to key - Meet periodic targets - Develop team selling account management - All customers - New metrics - Goal of increasing managed equally - Senior management selected accounts by 10x - Make unrealistic connections - Resource deployment to promises match 10x - Keep colleagues - Explicit governance away from customers© IMD 2008 Creating Win-win Customer-Supplier Partnerships 7
  8. 8. Partnerships are Highly Selective(Do not Beat Dead Horses!) Pairs of Aces Partnership Combative Collaborative© IMD 2008 Creating Win-win Customer-Supplier Partnerships 8
  9. 9. New Purchasing Realities  Make clear choices in supplier segments and the ways in which you will work with them  Understand the need for big changes and joint work to achieve win-wins  Change the objectives, measures and benchmarks  Change mind sets and perceptions  Do not be naïve as to “partnerships”  Do not underestimate the leadership requirements  Recognize that each partnership is unique© IMD 2008 Creating Win-win Customer-Supplier Partnerships 9
  10. 10. New Sales Realities Sales / Marketing Must Reflect These New Realities  Define clear customer segments: Make choices!  Sell as customers wish to buy  Leading edge customers will consolidate (¾ x ¾)  Select key accounts (10X = minimum) and deploy resources accordingly  Fewer purchasing agents / fewer sales people (others instead)  Negotiation more periodic – less continuous  New systems / logistics linkages  Make difficult personnel changes© IMD 2008 Creating Win-win Customer-Supplier Partnerships 10
  11. 11. 10 Golden Rules of Becoming an Attractive Customer  Be a demanding customer: challenge your suppliers but do not crush them  Determine which suppliers are important  Recognize – explicitly – that attraction is two edged  Increase the comfort level of the supplier  Help the supplier properly evaluate their expected payoffs  Manage the misalignment  Manage the perceptions  Understand and manage how the supplier allocates resources and ideas  Help your suppliers leverage the learning  Sell the opportunities in your company to the supplier© IMD 2008 Creating Win-win Customer-Supplier Partnerships 11
  12. 12. 10 Golden Rules for Being an Attractive Supplier 1. Execute flawlessly 2. Tell the truth 3. Select / choose / segment 4. Don’t beat dead horses 5. Encourage selected customers to be interested in more than prices 6. Work to create joint metrics 7. Create awareness in your company of special customer relationships 8. Be very open as to intellectual property issues 9. Expect misalignment 10. Be ready to accept all challenges© IMD 2008 Creating Win-win Customer-Supplier Partnerships 12
  13. 13. Classic Barriers to True Partnership What does your customer do that costs you money? Are any of these familiar?  They do not pay invoices according to contractual terms and this issue is worse near the end of their financial reporting periods  They deliberately overestimate demand to be sure that you will make enough – and to negotiate lower prices  They specify unnecessarily tight delivery time windows  They continually revise their plans  They blame all problems on you© IMD 2008 Creating Win-win Customer-Supplier Partnerships 13
  14. 14. Suppliers Create Problems as well How about your suppliers? And – would your customers say these things about you?  They ship products known to be inferior – especially when supplies are tight  They push inventory on me as a customer  They make promises they know they cannot keep  They overcharge for services not explicitly in the contract  They are not proactive in suggesting improvements© IMD 2008 Creating Win-win Customer-Supplier Partnerships 14
  15. 15. The Joint Focus on Value / Cost  How can we reduce joint (chain) costs?  How can we increase joint value creation?  How can we jointly bring new products to market sooner?  How can we rapidly respond to changing market conditions?  How can we reduce contractual and other bureaucratic relationships?  How can we develop ways to jointly “sweat” the most capital intensive assets?© IMD 2008 Creating Win-win Customer-Supplier Partnerships 15
  16. 16. The Rubik’s Cube of Customer-Supplier Partnerships WIN-WIN TRUST MISALIGNMENT STRATEGY© IMD 2008 Creating Win-win Customer-Supplier Partnerships 16
  17. 17. Back-up Slides© IMD 2008 Creating Win-win Customer-Supplier Partnerships 17
  18. 18. Connecting the Marketplace to the Infrastructure: LeanManufacturing: Marketplace Infrastructure Marketplace Bundles Working Infrastructure • Local • Products • Functional • MRP • Price based • Minimum service • Job shop • SPC • Minimum loyalty • Credit ? • Cellular • Product / manufacturing ? Job order costing Strategy Actions Measures • Faster • Basic scheduling • OTIFNE • Better • TQM • PPM • Cheaper • Head count reduction • Inventory turns • Cost© IMD 2008 Creating Win-win Customer-Supplier Partnerships 18
  19. 19. Evolving Objectives: Lean Business Unit: Marketplace Infrastructure Marketplace Bundles Working Infrastructure • Regional / global • Products + logistics • Business unit • ERP • Market segments • Services • Functional integration • CRM • Solutions selling • NPD • Process focus • Software packages Strategy Actions Measures • Financial • Sales force • Business unit • Customer lock-on specialization profitability • Leverage • Supply base • Customer satisfaction from interaction rationalization • Cash to cash cycle • Transaction simplification© IMD 2008 Creating Win-win Customer-Supplier Partnerships 19
  20. 20. Pushing Further: Lean Corporation: Marketplace Infrastructure Marketplace Bundles Working Infrastructure • Global customers • Consolidated / • Cross organizational • Extended ERP ? • “Local jewels” tailored • Outsourcing • Modular systems • Key account • Value chain • 3rd party logistics • Middleware linkages management positioning • Standardization / rationalization Strategy Actions Measures • Growth • Regional / local • Market share • Brand leverage buying • Enterprise profitability • Concentration • Serving global • Earnings per share customers • Redefine logistics / distribution© IMD 2008 Creating Win-win Customer-Supplier Partnerships 20
  21. 21. The Present Winning Combination: Lean Partnerships: Marketplace Infrastructure Marketplace Bundles Working Infrastructure • Extended focus • Simplicity • Cross company • Modularity • Partnerships • Complexity • Dyads • E-based systems • Sourcing units as required • Fast implementation • Flexible integration vs. selling units • Upstream orchestration Strategy Actions Measures • Customer / supplier • Joint (we not they) • Overall supply chain lock-on • Exchange of cost and speed • Continual prisoners • Partnership capacity enhancement • Cross company BPR management • Leverage learning • End customer delight • Win-win© IMD 2008 Creating Win-win Customer-Supplier Partnerships 21
  22. 22. Partnerships Imply Moving up the Value Chain, Outsourcing and Changing Infrastructure CUSTOMER Move up the value chain New positioning Original positioning SUPPLIER New positioning Original positioning TRANSFER OF CAPABILITIES CUSTOMER HAS TO LEARN WITH WIN-WIN APPROACH Extend Lean Across Company Boundaries© IMD 2008 Creating Win-win Customer-Supplier Partnerships 22
  23. 23. What is Needed? Four Stages of Collaboration / Joint Efforts Strategic Senior Management Senior Management Alignment Strategic Planning Strategic Planning Design Marketing Value/cost Procurement Design Total Cost Accounting Accounting Industrial Engineering Industrial Engineering of Ownership Systems Design Systems Design Logistics Sales Flawless Scheduling Quality Execution Manufacturing Manufacturing Quality Supplier Customer© IMD 2008 Creating Win-win Customer-Supplier Partnerships 23
  24. 24. Classic Supply Chain Metrics are Grossly Inferior The Hierarchy of Supply Chain Metrics Demand Forecast Top Tier Accuracy Assess Perfect SCM Order Cost Mid Tier Cash-to-Cash Diagnose Accounts Inventory Accounts Payable Total Receivable Supplier Supplier RM Purch Dir Mtl On-Time Quality Inventory Costs CostsGround Delivery Correct Level Prod Perfect Cost Plant WIP & FG Order Sched Order Detail Utilization Inventory Cycle Time Variance Detail Source: AMR Benchmark Analytix Material reprinted with permission from Supply Chain Management Review (www.scmr.com) © IMD 2008 Creating Win-win Customer-Supplier Partnerships 24
  25. 25. IT Systems are Another Barrier Customer Supplier Manufacturing Finance Raw Materials Purchasing Sales Manufacturing Finished Finance Goods Plan Stock Outflow Evaluate Projected Manufacturing Forecast Forecast (X) Balance (X) Evaluate Propose Plan (confirm) Replenishment Manufacturing Replenishment (X) (X) Create Consignment Pick Ship Stock Order (VMI) Receive Goods Issue to Create (X) Create Plan Create (X) Manufacturing Sales Order Invoice (X) Manufacturing Purchase Order Update VMI Reconcile Reconcile Inventory Inventory Pay Invoice© IMD 2008 Creating Win-win Customer-Supplier Partnerships 25
  26. 26. The Joint Efforts Stairstep to Partnership Industry-Best Virtual Supplier Organisation Dominant Competitive infrastructure advantage New Bundles of Goods / True Partnership Joint Value Services Relationship Creation Leverage Building Customer Logistics / new perceived Transaction competencies value Cost Joint Cost Reduction Reduction Margin Chain cost maintenance Economies Projects Consolidated of Scale Exchange of Prisoners Purchasing Volume based Purchase price cost reduction Traditional Purchasing - Sales© IMD 2008 Creating Win-win Customer-Supplier Partnerships 26
  27. 27. Customer-Supplier Partnerships – Maxims to Live by Win-win is not hitting the other guy twice If you win the rat race you are still a rat! Partnership is too often proposed to suppliers, when what results is nonsense. Never choose stupid partners! If you own a dog and you wish to own a cat, no amount of kicking the dog will accomplish your objective. Putting lipstick on a pig doesn’t improve its looks. If you are in the commodity business – you deserve it: Obtaining a contract for a supply chain partnership is about as useful as a marriage license for achieving a happy married life. It is better to be approximately right than exactly wrong!© IMD 2008 Creating Win-win Customer-Supplier Partnerships 27
  28. 28. A Case Study of Breakthrough Partnership Improvements© IMD 2008 Creating Win-win Customer-Supplier Partnerships 28
  29. 29. The Firm used a Structured Approach to Improve Key Relationships  The approach needed to go beyond facts - to perceptions and opinions  A third party brought “the good, the bad and the ugly” to the table, through a proven methodology  The defined process led to sorting out the key issues and created tangible action plans for improvement  The intervention approach had a tightly defined time table© IMD 2008 Creating Win-win Customer-Supplier Partnerships 29
  30. 30. A Structured Process Produced Tangible Results Analysis Workshop Execution Interviews & Surveys 2 Day Workshop Implementation • Understand current •Findings from •Champions & Steering environment, attitudes, analysis presented committee monitoring OBJECTIVES perceptions and discussed dyad development • Mapping interaction •Identification of •Execution of action and social networks improvement areas plans • Assessing the current •Development of •Implementation of level of attractivity detailed action plans attractivity metrics • Identifying key •Develoment of •“5000 Mile check” workshop challenges attractivity metrics© IMD 2008 Creating Win-win Customer-Supplier Partnerships 30
  31. 31. Several Counter-Intuitive Conclusions Were Obtained  Perception is more important than reality  At least 50% of problems were typically due to the customer  Alignment and perceptions varied within the firms  Alignment is even more divergent between firms  Misalignment had to be recognized and managed  Classic confrontation was replaced by collaboration© IMD 2008 Creating Win-win Customer-Supplier Partnerships 31
  32. 32. A Concrete Example Demonstrates the Process & Results Company A and B Business Relationship Before the Initiative Commercial • Single or multi-location enquires • No standard for commercial requirements • Variation of quantities • Variation of demands • Cost, quality and delivery difficulties • No economies of scale Result • Higher inventories • Planning difficulties • Conflict and misunderstanding Technical • Customer driven specifications – no standard • Minimised chance to standardise • Minimised chance to optimise • “Over” specified© IMD 2008 Creating Win-win Customer-Supplier Partnerships 32
  33. 33. A Collaborative Agenda Yields Major Pay-Offs Win / Win Early Involvement in the Higher standardisation and technical specification of the lower costs Customer project Long term supply agreements Economies of scale; reduction in on the basis of catalogue time to market and working solutions capital General terms and conditions Reduction of administrative costs and conflict potential Clear commitment to a Long term trust partnership by openness and fairness© IMD 2008 Creating Win-win Customer-Supplier Partnerships 33
  34. 34. Collaboration Requires Major Joint Efforts© IMD 2008 Creating Win-win Customer-Supplier Partnerships 34
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