Five Best Supply Management Practices in use Today
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Five Best Supply Management Practices in use Today Presentation Transcript

  • 1. The Five Best Supply Management Practices in Use Today by F. Michael Babineaux, CPSM, C.P.M., A.P.P. President/CEO Babineaux Educational Services and Training, Inc. www.BESTraining.com 901.853.0539
  • 2. Who Am I?• F. Michael “Mike” Babineaux, CPSM, C.P.M. – 40+ years Supply Management Experience – 30 year FedEx Veteran – SCM Educator and Trainer • Babineaux Educational Services and Training, Inc. • www.BESTraining.com • 901.853.0539
  • 3. Topic The Five Best SupplyManagement Practices in Use Today
  • 4. World Class Excellence -- Strategic Processes Establish Establish Integrate and Leverage a Appropriate Suppliers into World-Class Strategic New Product & Supply Base Service Alliances Development Develop Commodity/ INTEGRATED ANDPurchase Family Strategies ALIGNED Manage Costs Integrate Supplier Suppliers into Strategically the Order Development Across the Fulfillment and Quality Supply Chain Process
  • 5. World Class Excellence -- Enablers Develop Organization Deploy and Teaming Globalization Strategies Establish INTEGRATED DevelopGlobally Integrated Procurement andand Aligned P&SC Strategies/Plans AND ALIGNED Supply Chain Measurements Establish Develop Human Resource and Implement Development/ Enabling IS/IT Training Systems
  • 6. 12 World Class Supply Management Practices Strategic Processes Enabler Processes• Procurement Strategy • Strategic Goal Alignment Development • Teaming Strategies• Supplier Integration • Performance Measurement• Leverage the Supply Base • Globalization• Develop Strategic • Information Systems Alliances Integration• Quality Management • Human Resource• Cost Management Development
  • 7. 12 World Class Supply Management Practices Strategic Processes Enabler Processes• Procurement Strategy • Strategic Goal Alignment Development • Teaming Strategies• Supplier Integration • Performance Measurement• Leverage the Supply Base • Globalization• Develop Strategic • Information Systems Alliances Integration• Quality Management • Human Resource• Cost Management Development
  • 8. The Five Best1. Strategic Goal Alignment2. Procurement Strategy Development3. Supplier Integration4. Teaming Strategies5. Performance Measurement
  • 9. The Five Best1. Strategic Goal Alignment2. Procurement Strategy Development3. Supplier Integration4. Teaming Strategies5. Performance Measurement
  • 10. Strategic Goal Alignment "Strategic Performance Measurement for Purchasing and Supply,“ (A CAPS Research study in collaboration with McKinsey & Co)“Best-in-class companies align the strategyand objectives of the supply managementorganization with those of the rest of theorganization."
  • 11. What happens when . . .CompanyStrategy Internal Supply Chain Customer Strategy Strategy Misalignment Creates Confusion for You
  • 12. Strategic Goal Alignment• Goal Alignment Concepts – Vertical Alignment Vision • Business Vision & Mission – Low cost producer Mission • Key Corporate Objectives – Reduce expenses • Supply Management Goals Objectives – Cost reduction • Individual/Management Goals Performance Objectives – Cost Savings IPO/MBO
  • 13. Strategic Goal Alignment• Goal Alignment Concepts – Vertically aligned – Horizontally aligned • Strategic objectives of strategic business units • Strategic objectives of functional groups. – Conflict » Bulk buying discount vs. Inventory holding cost
  • 14. Strategic Goal Alignment• Goal Alignment Concepts – Vertically aligned – Horizontally aligned • Stakeholder Alignment Process Evaluate Identify Levels of Stakeholder Evaluate Evaluate Alignment & Groups Importance Relationship Involvement
  • 15. Strategic Goal Alignment• Goal Alignment Concepts – Vertically aligned – Horizontally aligned • Stakeholder Alignment Process Define Tract Results Develop Implement Outcome & Design Alignment Alignment Of Follow up Strategies Strategies Alignment Actions
  • 16. Strategic Goal Alignment• Goal Alignment Concepts – Vertically aligned – Horizontally aligned – Externally aligned • Customers and Suppliers
  • 17. Critical Success Factors to Achieving Alignment Visible top management direction and support Clearly defined strategy and goals Buy-in from key stakeholders Establishment of uniform metrics Implementation of cross-functional/ cross- organizational teams Internal and external education and training Information technology and systems support Elimination of functional barriers Customer focus Continuous communication and feedback throughout the supply chain
  • 18. Critical Success Factors to Achieving Alignment Rating Exercise Factor Rate• Visible top management direction and support ____• Clearly defined strategy and goals ____• Buy-in from key stakeholders ____• Establishment of uniform metrics ____• Implementation of cross-functional teams ____• Internal and external education and training ____• Information technology and systems support ____• Elimination of functional barriers ____• Customer focus ____• Continuous communication and feedback ____
  • 19. Critical Success Factors to Achieving Alignment Weighting and Rating Factor Weight X Rate = ____• Visible top management direction and support ____ _____ ____• Clearly defined strategy and goals ____ _____ ____• Buy-in from key stakeholders ____ _____ ____• Establishment of uniform metrics ____ _____ ____• Implementation of cross-functional teams ____ _____ ____• Internal and external education and training ____ _____ ____• Information technology and systems support ____ _____ ____• Elimination of functional barriers ____ _____ ____• Customer focus ____ _____ ____• Continuous communication and feedback ____ _____ ____ Total 100 ____
  • 20. Key Point “If you’re not singing the samesong, you’re just making a bunch of noise and – your performance will suffer”
  • 21. The Best Supply Management Practices1. Strategic Goal Alignment2. Procurement Strategy Development3. Supplier Integration4. Teaming Strategies5. Performance Measurement
  • 22. Procurement Strategy Development• Procurement Decision Tool – Market Complexity – Degree of Competition – Geographical Dispersion – Supplier Cooperation “Price concessions and collaboration”
  • 23. Procurement Strategy Development• Procurement Decision Tool – Market Complexity – Impact on Business • Risk • Value “What happens if you don’t have it?”
  • 24. Procurement Strategy Development• Procurement Decision Tool – Market Complexity – Impact on Business – Prioritization • High to LowHighLow High
  • 25. Procurement Decision Tool HighBusiness Impact Routine Low Marketplace Complexity High Low
  • 26. Procurement Decision Tool Routine Quadrant Characteristics High Strategic• Many capable suppliers Business Impact Leverage Routine Bottleneck• Fewer total dollars spent Low Low Marketplace Complexity High• Low priority items• May consume a disproportionate amount of time and dollars to acquire• Developed quality and technology• Able to move easily between suppliers--low switching costs
  • 27. Procurement Decision Tool Routine Quadrant Strategy High Leverage Strategic• Focus - Removing transaction Business Impact Routine Bottleneck effort Low Low Marketplace Complexity High – Standardized contracts – p-cards• The primary goal – Minimize the procurement costs of these items.
  • 28. Procurement Decision Tool HighBusiness Impact Routine Bottleneck Low Marketplace Complexity High Low
  • 29. Procurement Decision Tool Bottleneck Quadrant Characteristics High Strategic• Small number of suppliers Business Impact Leverage Routine Bottleneck• Low to medium annual dollars Low Low Marketplace Complexity High• Customized specification and technology
  • 30. Procurement Decision Tool Bottleneck Quadrant Strategy High Leverage Strategic• Focus on continuous supply Business Impact Routine Bottleneck – Reduce Custom specifications Low Low Marketplace Complexity High or technology – Purchase in quantity – Monitor Inventory closely – The relationship is important but, search for alternative suppliers
  • 31. Procurement Decision Tool High LeverageBusiness Impact Routine Bottleneck Low Marketplace Complexity High Low
  • 32. Procurement Decision Tool Leverage Quadrant Characteristics High Leverage Strategic• Greater number of suppliers Business Impact Routine Bottleneck• Medium to high annual dollars Low Low Marketplace Complexity High• Low risk to obtain, but major disruption• Multiple users• Developed quality and technology• Able to move easily between suppliers
  • 33. Procurement Decision Tool Leverage Quadrant Strategy High Strategic• Focus on volume Business Impact Leverage Routine Bottleneck – Leverage the organization’s Low Low Marketplace Complexity High volume to get lower prices – Combine user requirements – Form categories of items
  • 34. Procurement Decision Tool High Leverage StrategicBusiness Impact Routine Bottleneck Low Marketplace Complexity High Low
  • 35. Procurement Decision Tool Strategic Quadrant Characteristics High Leverage Strategic• Few capable suppliers Business Impact Routine Bottleneck• Product/services success critical Low Low Marketplace Complexity High• Unique or customized items• Unable to move between suppliers easily• Cost analysis yields high benefits• Unproven or undeveloped technology
  • 36. Procurement Decision Tool Strategic Quadrant Strategy High Strategic• Focus on Building Relationships Business Impact Leverage Routine Bottleneck – Collaborative or Low Low Marketplace Complexity High interdependent relationships (e.g. Strategic Alliances)
  • 37. Procurement Decision Tool High Leverage StrategicBusiness Impact Low Routine Bottleneck Low Marketplace Complexity High
  • 38. Key Point“If you use the same strategy to buy airplanes as you do to buy pencils, your performance will suffer”
  • 39. The Best Supply Management Practices1. Strategic Goal Alignment2. Procurement Strategy Development3. Supplier Integration4. Teaming Strategies5. Performance Measurement
  • 40. Supplier Integration in New Product/Service Development“Firms looking for ways to – – decrease concept to customer development time – improve quality – significantly reduce the cost of the resulting productare involving suppliers earlier in the designprocess.” “Best of the Best” by Aberdeen Research
  • 41. Supplier Integration in New Product/Service Development• Early Supplier Involvement – Manufacturing/Service Design Process • Use of Supplier expertise and experience
  • 42. Supplier Integration in New Product/Service Development• Early Supplier Involvement – Manufacturing/Service Design Process – Product/Service Development • Prototypes/Demonstrations • Replacement materials/alternative methods
  • 43. Supplier Integration in New Product/Service Development• Early Supplier Involvement – Manufacturing/Service Process – Product/Service Development – Cost • Cost projections of a new product or service
  • 44. Supplier Integration in New Product/Service Development• Early Supplier Involvement – Manufacturing/Service Process – Product/Service Development – Cost – Quality • Supplier knowledge of quality requirements
  • 45. Supplier Integration in New Product/Service Development• Early Supplier Involvement – Manufacturing/Service Process – Product/Service Development – Cost – Quality – Technology • Influence final material/application selection
  • 46. Supplier Integration in New Product/Service Development• Early Supplier Involvement – Manufacturing/Service Process – Product/Service Development – Cost – Quality – Technology – Design • Experience in serving a particular market
  • 47. Supplier Integration in New Product/Service Development• Early Supplier Involvement – Manufacturing/Service Process – Product/Service Development – Cost – Quality – Technology – Design – Co-Development • Sharing costs
  • 48. Supplier Integration in New Product/Service Development• Early Supplier Involvement – Manufacturing/Service Process – Product/Service Development – Cost – Quality – Technology – Design – Co-Development – Cycle Time • Through reduction in redundancies
  • 49. Supplier Integration in New Product/Service Development• Early Supplier Involvement – Confidentiality Issues • Proper controls – Disclosure Parameters – MN-DAs – Dispute resolution clause
  • 50. Supplier Integration in New Product/Service Development• Early Supplier Involvement – Confidentiality Issues – Product/Service Life Cycle • Pre-commercialization • Introduction • Growth • Maturity • Decline
  • 51. Key Point “Suppliers know more aboutwhat you buy than you do, so if you don’t use them, your performance will suffer”
  • 52. The Best Supply Management Practices1. Strategic Goal Alignment2. Procurement Strategy Development3. Supplier Integration4. Teaming Strategies5. Performance Measurement
  • 53. An Action Plan for Creating Effective Teams by Robert M. Monczka, Ph.D., C.P.M. and Robert J. Trent, Ph.D. Studies by MSU reveals – 80% of Best-in-Class organizations emphasize the use of Supply Management Project teams.
  • 54. Teaming Strategies• Procurement Project Teams• Cross-Functional Teams
  • 55. Teaming Strategies• Procurement Project Teams – Definition - The application of project knowledge, skills, tools and techniques to procurement project activities to meet customer requirements
  • 56. Teaming Strategies• Procurement Project Team Stages – Initiation • Root Cause analysis • SWOT • Feasibility Analysis – Net Present Value – ROI • Business Case
  • 57. Teaming Strategies• Procurement Project Team Stages – Planning • Scope Development • Roles & Responsibilities • Project Plan Approval
  • 58. Teaming Strategies• Procurement Project Team Stages – Execution • Change Management
  • 59. Teaming Strategies• Procurement Project Team Stages – Monitoring & Control • Contract Management – Performance measurement – Risk Monitoring • Project Management Software – PERT & Gant Charts • Performance Reporting – Cost – Schedule
  • 60. Teaming Strategies• Procurement Project Team Stages – Closure • Process • Post Project Audit
  • 61. Teaming Strategies• Cross-Functional Teams – Purpose • To permit different viewpoints and perspectives
  • 62. Teaming Strategies• Cross-Functional Teams – Purpose – Supply Management Roles • Leadership • Facilitation • Contributor
  • 63. Teaming Strategies• Cross-Functional Teams – Purpose – Supply Management Roles – Advantages/Disadvantages • Consensus Building • Group Think
  • 64. Teaming Strategies• Cross-Functional Teams – Purpose – Supply Management Roles – Advantages/Disadvantages – Organizational cultures • Traditional vs. Team • Skill Considerations • Personality Considerations • Leadership
  • 65. Key Point“Two heads are better than one,so if you’re not including them inthe decisions, your performance will suffer”
  • 66. The Best Supply Management Practices1. Strategic Goal Alignment2. Procurement Strategy Development3. Supplier Integration4. Teaming Strategies5. Performance Measurement
  • 67. Performance Measurement Aberdeen Benchmarking Research• Best-in-Class companies are more than 2.5x more likely to use performance monitoring, management, and optimization solutions.• Best-in-Class companies are 1.67x more likely to use portals or dashboards for consolidating and reporting of performance data.
  • 68. Performance MeasurementDepartment Staff Suppliers
  • 69. Performance Measurement • Department – Organizational Expectations • Objectives Congruence – Organization – Suppliers & Customers
  • 70. Performance Measurement • Department – Organizational Expectations • Objectives Congruence • Scorecard – Quantitative – Qualitative
  • 71. Performance Measurement • Department – Reasons for Scorecard • Determine effectiveness – To objectives – To department management • Measure improvement/deterioration • Provide Resources • Determine Value
  • 72. Performance Measurement• Staff – Issues • Objective Alignment – Vertical & Horizontal • Success Criteria – Known in advance • Appraisal Factors – Quantitative – Qualitative
  • 73. Performance Measurement• Staff – Issues – 360o Reviews • Users • Management • Peers • Suppliers • Others
  • 74. Performance Measurement• Staff – Issues – 360o Reviews – Feedback • Timely • Corrective actions • Individual Development Plans
  • 75. Performance Measurement• Suppliers – Scorecards • Qualitative measures • Quantitative measures • Price, Delivery & Quality (PDQ) • Other/specific
  • 76. Performance Measurement• Suppliers – Scorecards – Others/specific • Cycle/Lead time Reductions • Productivity Improvements • Flexibility and Responsiveness • e-Commence Capabilities • Innovation
  • 77. Key Point“You can’t manage whatyou don’t measure, so if you’re not measuring performance . . .”
  • 78. The Five Best SupplyManagement Practices in Use Today1. Strategic Goal Alignment2. Procurement Strategy Development3. Supplier Integration4. Teaming Strategies5. Performance Measurement
  • 79. Thanks for your Time and Attention