To fully exploit and create an analytics culture will require an approach that leverages third party solutions. Most innovation is driven today by small to medium sized organizations. To be fully able to drive innovation, procurement must serve as a key component in driving this change.

1. LEVERAGING
SUPPLIER
INNOVATION

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Welcome to the webinar

3. Rob Handfield
Executive Director of the Supply Chain Resource Co-Operative
Bank of America University Distinguished Professor of Supply
Chain Management

4. Agenda
The Pressure to Innovate
What we know about supplier-led innovation
What we don’t know about how to make it work
Learning from the Best: 5 Key Questions To Ask Yourself
Looking Forward

5. Supply Chain Trends
Future Supply Chain Trends - Importance

6. Procurement is at an inflection
point where the old “bag of tricks”
no longer works. Opportunity for
savings through leveraging of spend
have been depleted?
Analytics represents the next wave
of opportunity.
Supply chain innovation is on the
horizon.
A new set of procurement tools enabled by analytical innovation is required!
INFLECTION POINT
The Emerging Role of Procurement

7. Degree of Supplier Influence Degree of Buying Company Influence

8. Successful Partner Integration Significantly Improves
Partnership Outcome
SELF REPORTED RESULTS
INTEGRATION IMPROVEMENT:
+ 11% Cost
+ 20% Cycle Time
+ 42% New Product Development Time
+ 14% Quality Improvement
+ 40% Technology Access
Reported performance improvement results from selected companies:
Quality: 0 to 52% annual improvement (25 firms)
Cost: 0 to 47% annual dollar cost reduction (21 firms)
Cycle Time: 0 to 191% annual improvement in cycle time (20 firms)

9. Difference between Most Successful and Least Successful
Partnership Projects
Most vs. least successful cases of supplier integration
Cost
Quality
Delivery
Cycle Time
Highly correlated success factors include:
Supplier participation on buying companies team
Direct cross-functional inter-company communication
Design team’s consensus on project goals
Top management commitment to integration by both buyer and supplier
Clarity of metrics, performance targets and their joint development
Most Successful
-15.0%
+40.0%
-13.5%
-25.0%
Least Successful
+5.0%
-7.5%
+0.0%
+30.0%
*Medians

10. What You Might be Thinking Right Now…
How do I get my suppliers to innovate?
Which suppliers should I approach?
How do I get people in my organization to buy-in to this?

11. Question 1: Do we have an approach for identifying
potential suppliers for innovation?
Aligned Strategic Focus Demonstrated Record
of Performance

12. Finding New Suppliers Who Can Drive Innovation
Sourcing portal
Supplier intelligence database
Significant driver in improving
Intel’s market velocity and product
development process

13. Supply base segmentation is fundamental
200 Suppliers account for ~ 40% of R&M spend
1000 Suppliers account for ~ 80% of R&M spend
4000 Suppliers account for ~ 90% of R&M spend
Tier 1 - Strategic Alliances/ Partnerships
Tier 2 - Sector Critical Relationships
Tier 3 - Sector/Local Relationships
Tier 4 - Transactional Relationships
No. of Suppliers
Relationship Characteristics
Criticality of supply – the supplier can “shut-down”
our business
Critical to our competitive advantage and growth
Complexity of governance
Leadership sponsorship
Collaborative relationships
Overlapping agendas
Cost transparency & audit ability
Frequency of performance reviews
Longer term contracts

14. It likely takes more than P2P to deliver
base value from complex agreements,
and incremental value is available
throughout the SPM journey.
Management - Enhanced Value Adding <2.5%
Management - Performance Value Adding <2.5%
Management - Assurance & Compliance
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15. Question 2: Do we value, measure, and reward
suppliers who are innovators?
Product Development and
Process Innovation

16. Creating aligned partnerships in the supply base
Drove collaboration between competing suppliers
Developed a new CDMA chipset to compete with Qualcomm
Established a new approach to collaborative development

17. Actively supporting the process of idea generation
P&G “Connect and Innovate” Approach
Global Sourcing Principles
Best Total Value
Honest, Ethical and Fair Dealings
Externally Linked Supply Solutions
Competition and Collaboration
Supplier Incumbency

18. Q3: How well do we know our suppliers’ production
capabilities and capacity?
Process Agility and
Continuous Improvement

19. Working with suppliers to support innovation
“Process Consulting” approach
Willingness to commit to difficult physical product specifications and appearance
Perseverance in meeting challenging customer demands determined the long-term
partnerships

20. Open Communication and Information Sharing
Supplier Relationship Manager: Single point of contact (like an account executive
on the sales side) coordinates the relationship, semi-annual senior meetings, and
on-going planning and coordination.

21. Q4: Do suppliers have the capability to take
on challenging goals and targets?
Performance Management Strategic Cost Management

22. Innovation in Pipeline Industry

23. Union Gas Strategic Alignment
Alliance Partnership

24. Foothills Drilling – Suncor Relationship Guidelines
1. Create a continuous work environment
to stimulate operational excellence.
2. Become the preferred customer through
efficiency and high trust.
3. Target the best people and empower
decision making.
4. Recognize what is important to the
service companies and their people.
5. Negotiate rather than bid. Work with the
service companies as equals with an
equal voice.
6. Totally share business plans, scheduling
and problems.
7. Create a shared influence environment
to help create group ownership, interest
and motivation.

25. Foothills Drilling Process - BEFORE and AFTER
Before After Partnering

26. Q5: Do we promote trust through our actions with
suppliers?
Strategic Fit and Compatability Integrity and Transparency

27. Bringing it All Together:
Evolution of the Integrated Partner Concept
SRM = Ability to achieve higher orders of value
Continual improvement in TCO
Continuity of supply in tight markets
Risk mitigation
Deep supply market intelligence
Innovation in product and process
A result of Supplier Performance Management
and Market Sector Strategy

28. Aligned Strategic Focus: Leadership Support
Supplier conferences in America, Europe and Asia,
used to bring together engineering, marketing,
and purchasing
Supplier Awards – CPO spends ½ day at each
supplier’s location to present
Supplier of the Year
Quality of the Year
CI Award
Above and Beyond Award
Top 50 suppliers executives visit
HQ and meet CEO and C-Suite
to ensure alignment at the top

29. The John Deere Strategy 2014-2018
Every Business, Every Region, Every One of Us Can Make a Difference
Partner Advisory Council Strategic Intent
Create an environment where philosophies and best
practices are leveraged amongst Partner Organizations
Create a format by which Deere Strategies, Initiatives,
Goals, Expectations and Results are communicated to
Partner organisations
Create an structure for maximizing Deere Partner
Alignment in the area of Product Development, Quality,
Delivery/Asset Management and Cost
Create a two-way communication framework by which
opportunities/challenges are identified, communicated
and resolved in a timely and efficient manner
Source: Dan Kettler presentation, Jan 2014.

30. Summary – What it Takes to Drive Supplier-Led Innovation
Integrity, transparency,
and leadership support
Improved
communication,
information sharing
and trust
Performance metrics
focused on common
goals and commercial
outcomes
Strategic fit and aligned
focus to drive cost
savings and innovation

31. Q&A