Effective Supplier Relationship Management
 

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Effective Supplier Relationship Management Presentation Transcript

  • 1. Effective Supplier Relationship Management Effective Supplier Relationship Management Peter Smith October 2nd 2013 Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 2. Effective Supplier Relationship Management Part 1 – Introduction The Real World Sourcing Series is a series of sessions covering hot topics for procurement professionals. The Real World Sourcing Series is promoted and supported by BravoSolution, and developed by Peter Smith (Spend Matters) and Guy Allen (Real World Sourcing Limited). Peter Smith started his procurement career with Mars Confectionery, then was CPO for Dun & Bradstreet Europe, the Department of Social Security and the NatWest Group. He is now a consultant, author, non-executive director and editor of the Spend Matters website. He was President of CIPS in 2002/3. Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 3. Effective Supplier Relationship Management Agenda 1. 2. 3. 4. What is Supplier Management? Why Is It Important? In Depth Look at a Real SRM Programme Some Other Case Studies Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 4. Effective Supplier Relationship Management Contract Management is maximizing the returns achieved from individual contracts you have with Suppliers. Supplier Management is everything you do with suppliers and in your supply market, not related to a specific contract Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 5. Effective Supplier Relationship Management Market management Planning & ownership Resources SRM Administration GOOD PRACTICE Supplier development Contract and Supplier Management Relationships Contract development Delivery Risk Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Payment Real World Sourcing
  • 6. Effective Supplier Relationship Management Market management Planning & ownership Resources SRM Supplier Management Administration GOOD PRACTICE Supplier development Relationships Contract development Delivery Risk Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Good Supplier Management Will Cover These Aspects Payment Real World Sourcing
  • 7. Effective Supplier Relationship Management Develop, implement and embed category management Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6 Stage 7 Define scope and category structure Understand internal requirements & stakeholders Understand market and suppliers Develop category strategy and plan Select supplier(s) Implement contracts Contract and supplier management Iterative process Supplier Contract Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 8. Effective Supplier Relationship Management Supplier Management Supplier Contract 1 Supplier Contract 3 Supplier Contract 2 Supplier Contract 1 Year 1 Year 2 Year 3 Year 4 Time Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 9. Effective Supplier Relationship Management Why is it important? Efficiency Risk Opportunity Supplier Motivation Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 10. Effective Supplier Relationship Management ‘Companies Don’t Compete, Supply Chains Do’ Bob Monzcka Michigan State University Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 11. Effective Supplier Relationship Management Task 1 Who should own the relationship with a key supplier? Is it procurement? Discuss.... Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 12. Effective Supplier Relationship Management Commercial Director Service Delivery CEO Operations Director Finance Director No single right answer BUT Supplier relationships need to be managed and roles defined Solution Architect IT Director Purchasing Alliances Manager 12 Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 13. Effective Supplier Relationship Management Key Components of A Successful Supplier Management Programme • • • • • • Leadership Clear Objectives Key Stakeholder Support Tenacity and Commitment Willingness to Engage in a 2 Way Dialogue Communication Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 14. Effective Supplier Relationship Management 14 Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 15. Fujitsu • Design, build and manage clients’ IT systems:  Applications  Datacentres  Networks  Workgroups • Provide, develop and improve client’s Business Processes  HR  Procurement  Data Capture and Print Management  Document Management • Through a choice of relationships:  Consultancy  IT Projects  Managed Services  Outsourcing 15 © Fujitsu Services 2006 Moving Procurement Forward • Where the role is:  Prime Integrator  Partner  IT Sub-contractor • In chosen markets:  Central Government & Defence  Local Government & Health  Private sector • Throughout Europe & the World
  • 16. Effective Supplier Relationship Management Fujitsu – Situation 2006 • • • • Dedicated Supplier Relationship Managers Unmeasured Disconnected from the rest of Procurement Managers going native with Suppliers Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 17. Effective Supplier Relationship Management The Case for Change • • • • Real sense that not leveraging the market Suppliers were dividing and conquering Competitors seemed to do it better than Fujitsu Identified opportunity to drive mutual benefit Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 18. Effective Supplier Relationship Management Supplier Management Programme Year 1 • • • • • Programme launch Segmentation of supply base Basic measurement consolidated Internal supplier satisfaction surveys Comparison of performance across sectors and accounts Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 19. Supplier Management Programme - Scoring Mechanism Effective Supplier Relationship Management Weighted Scorecard Average 40% Corporate Social Responsibility Assessment Profiler 25% Business Continuity Assessment Finance / Commercial assessment 35% Final Score > 80%? Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 20. Effective Supplier Relationship Management Strategic Alliances 2-6 Partners Tier 1 Suppliers Tier 2 Tier 3 15-30 Premier Suppliers 15-30 200 The rest * Premier suppliers are those that are scorecarded and eligible to participate in the Supplier Management Programme with the prospect of FS Gold Accreditation. The candidate suppliers are selected by the cross company Supplier Relationship Management Board. Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 21. Effective Supplier Relationship Management Supplier Management Programme Year 2 • Supplier Relationship Management Board Launched • Representatives from all functions • Clear decision making authority and responsibilities • SRMB Met Four times a Year • Meeting 1 – Agreed Premiers Suppliers, Agreed Key factors • Meeting 2 – Monitored On-going Performance of Suppliers • Meeting 3 – Identify ‘failing’ suppliers and agree action plan • Meeting 4 – Agree Suppliers that will be awarded ‘Gold’ status for next year • Supplier Awards • All Suppliers achieving Gold invited to Awards Dinner Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 22. Effective Supplier Relationship Management Supplier Management Programme Year 3 Supplier ‘Rewards’ • Internal Publicity • Quarterly Briefings • Access to Key Decision Makers • Opportunity to demonstrate capabilities to key decision makers Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 23. Effective Supplier Relationship Management Outcomes • Brought Procurement firmly into the relationship • Gave a platform from which to talk about poor performance (and a consequence for failing to address it) • Introduced performance competition amongst suppliers • Suppliers responded to the Programme – made the Supplier Account Directors heroes • Fantastic exposure for Procurement Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 24. Effective Supplier Relationship Management Nokia - 3rd Party Supplier failure • Supplier incident in Albuquerque, New Mexico. • Nokia and Ericsson both were supplied from the factory • Owned and operated by Philips • Caused the flow of chips to suddenly stop • With mobile phone sales booming around the world, neither Nokia or Ericsson could afford to wait! Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 25. Effective Supplier Relationship Management Ericsson • Cost to Group estimated at $400 million • Market share fell 3% to 9% of market • Withdrew from Handset market January 2001, outsourcing business to Flexitron in Singapore. (Loss making handset division later re-formed as new joint venture Sony-Ericsson in Oct 2001) • Jan 01 - share price 50% below price at time of fire Nokia • Production targets met • Market share increased by 3% to 30% (exactly Ericsson’s share) • Jan 01 - share price 15% below price at time of fire Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 26. Effective Supplier Relationship Management • Rexam manufacture 54 billion drink cans a year • Their Supplier Management Programme has run for 10 years • Primarily focused on improving quality and developing supplier capability • Full support of senior management including CEO Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 27. Effective Supplier Relationship Management Outcomes • Shared enthusiasm with Supply Base • Shared innovation programmes • Suppliers seen as an enabler to Rexam’s move into value add products • 83% improvement in quality over 10 years Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 28. Effective Supplier Relationship Management Task 2 Below are some recent supply chain issues. How could better Supplier Management have mitigated or avoided these situations: • Horsemeat in consumer food products • Cost over-runs for the winter Olympics in Russia • Or alternatively think of an issue in your own organization Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 29. Effective Supplier Relationship Management Final Thoughts • Procurement cannot own the relationship, but they can help to structure it • It takes leadership, communication, a clear set of objectives, and tenacity • One size does not fit all • A successful programme delivers benefits for your organization and will be a great platform for Procurement recognition Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 30. Effective Supplier Relationship Management Real World Sourcing Scholarship • 10,000AED towards any procurement based training • Go to www.strategicsourcing.ae with the URL you will receive tomorrow by email • Complete the quiz programme • Answer as many questions right as possible • The winner will be announced at the end of the series! Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing
  • 31. Effective Supplier Relationship Management THANK YOU! Please feel free to contact psmith@spendmatters.com or guyallen@realworldsourcing.com Spend Matters UK/Europe ©ALL RIGHTS RESERVED - Confidential Real World Sourcing