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 Supply
Management 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 AND
Purchase 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 Develop
Globally Integrated Procurement and
and 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 Best
1. Strategic Goal Alignment
2. Procurement Strategy Development
3. Supplier Integration
4. Teaming Strategies
5. Performance Measurement

9. The Five Best
1. Strategic Goal Alignment
2. Procurement Strategy Development
3. Supplier Integration
4. Teaming Strategies
5. 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 strategy
and objectives of the supply management
organization with those of the rest of the
organization."

11. What happens when . . .
Company
Strategy
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 same
song, you’re just making a bunch
of noise and –
your performance will suffer”

21. The Best Supply Management
Practices
1. Strategic Goal Alignment
2. Procurement Strategy Development
3. Supplier Integration
4. Teaming Strategies
5. 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 Low
High
Low High

25. Procurement Decision Tool
High
Business
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
High
Business
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
Leverage
Business
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 Strategic
Business
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 Strategic
Business
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
Practices
1. Strategic Goal Alignment
2. Procurement Strategy Development
3. Supplier Integration
4. Teaming Strategies
5. 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 product
are involving suppliers earlier in the design
process.” “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 about
what you buy than you do, so if
you don’t use them, your
performance will suffer”

52. The Best Supply Management
Practices
1. Strategic Goal Alignment
2. Procurement Strategy Development
3. Supplier Integration
4. Teaming Strategies
5. 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 in
the decisions, your performance
will suffer”

66. The Best Supply Management
Practices
1. Strategic Goal Alignment
2. Procurement Strategy Development
3. Supplier Integration
4. Teaming Strategies
5. 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 Measurement
Department 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 what
you don’t measure, so if
you’re not measuring
performance . . .”

78. The Five Best Supply
Management Practices in Use
Today
1. Strategic Goal Alignment
2. Procurement Strategy Development
3. Supplier Integration
4. Teaming Strategies
5. Performance Measurement

79. Thanks for your Time and
Attention