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Smarter Supplier Management – Improving Supplier Performance Through Better Collaboration and Monitoring
The document discusses the importance of effective supplier management for improving supplier performance through collaboration and monitoring. It highlights key elements such as supplier stratification, performance management processes, and governance structures that support supplier relationship management (SRM). The findings from Hackett research illustrate that companies with strong SRM practices become better customers to their key suppliers, resulting in improved supplier performance and risk management.
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Smarter Supplier Management – Improving Supplier Performance Through Better Collaboration and Monitoring
- 1. “Smarter Supplier Management”– Improving Supplier Performance through Better Collaboration and Monitoring © 2013 Ariba, Inc. All rights reserved. Speakers: Neil Campbell – Aviva Gilles Poirier - Solvay Moderator: Sundar Kamakshisundaram – Ariba, an SAP Company
- 2. #AribaLIVE Agenda • Introduction • PanelDiscussion • Key Takeaways • Q & A © 2013 Ariba, Inc. All rights reserved.2
- 3. #AribaLIVE Defining Supplier Management… ©2013 Ariba, Inc. All rights reserved.3 Supplier Portals Vendor Master Management Risk Management Diversity/Green/ Corporate Responsibility Registration & On-boarding Process Performance Management Supplier Management or SRM Supplier Discovery “Supplier Management” is multi- faceted and touches many aspects of Business Commerce • Supplier Information Management that unifies platform, process and supplier profiles across the company and keeps it current, complete and correct. • Highly usable web-based portal for suppliers to register and manage information collaboratively with customers • Supplier Performance Management capabilities including Process Workflow and approvals, Surveys and scorecards, flexible role based dashboards and customizable reports • A Robust technology platform that seamlessly integrates in-context Supplier info such as Parentage, Financials, Diversity and Sustainability to manage and mitigate Supply Risk • A unified Supplier Record merging data and process flows to third party systems and data sources
- 4. #AribaLIVE Supplier Management Processesfrom Hackett’s Perspective… Supplier Stratification Governance Supplier Performance Management Supplier Development and Collaboration How should supplier relationships be stratified based on strategic importance to prioritize resources and tailor management processes? How should supplier-facing staff be organized and internal collaboration and supplier interactions be conducted? How should supplier performance be managed across different supplier types and strata to maximize performance? How should capabilities of existing suppliers be developed to deliver continuous improvement and ongoing cost reduction? • Supplier Stratification Definition • Supplier Stratification Criteria • Supplier Stratification Process • Team Structure and Roles • Ongoing Governance • SRM Competency Management • Function KPI Development • Supplier Performance Target, KPI and Scorecard Definition • Ongoing Supplier Measurement. Includes Cost, Quality, Risk, etc. • Supplier Development Needs Definition • Supplier Development Program Definition • Ongoing Supplier Development “Key processes, definitions, tools, and roles to drive coordinated proactive management of suppliers across the business” Transactional Suppliers Strategic Enterprise Partners Strategic Suppliers Core Suppliers Transactional Suppliers Strategic Enterprise Partners Strategic Suppliers Core Suppliers Transactional Suppliers Strategic Enterprise Partners Strategic Suppliers Core Suppliers Transactional Suppliers Strategic Enterprise Partners Strategic Suppliers Core Suppliers Strategic Suppliers Basic Suppliers Core Suppliers Basic Suppliers Non-Preferred 80% Financial Value 20% Financial Value Strategic Company- Wide Partners Strategic Company- Wide Partners Operations Management Team Roles Executive Management Team Roles Business Office Roles Relationship Leads Roles Financial Performance Management Contract Management Communications Management Legal & Audit Support Relationship Management Lead Executive Sponsor Executive Sponsor Relationship Management Lead Risk Management Performance Management Customer Satisfaction Management Escalation Management Operations Management Initiative Management Operations Management Team Roles Executive Management Team Roles Business Office Roles Relationship Leads Roles Financial Performance Management Contract Management Communications Management Legal & Audit Support Relationship Management Lead Executive Sponsor Executive Sponsor Relationship Management Lead Risk Management Performance Management Customer Satisfaction Management Escalation Management Operations Management Initiative Management Operations Management Team Roles Executive Management Team Roles Business Office Roles Relationship Leads Roles Financial Performance Management Contract Management Communications Management Legal & Audit Support Relationship Management Lead Executive Sponsor Executive Sponsor Relationship Management Lead Risk Management Performance Management Customer Satisfaction Management Escalation Management Operations Management Initiative Management Supplier Team Member Operations Management Team Roles Executive Management Team Roles Business Office Roles Relationship Leads Roles Financial Performance Management Contract Management Communications Management Legal & Audit Support Relationship Management Lead Executive Sponsor Executive Sponsor Relationship Management Lead Risk Management Performance Management Customer Satisfaction Management Escalation Management Operations Management Initiative Management Operations Management Team Roles Executive Management Team Roles Business Office Roles Relationship Leads Roles Financial Performance Management Contract Management Communications Management Legal & Audit Support Relationship Management Lead Executive Sponsor Executive Sponsor Relationship Management Lead Risk Management Performance Management Customer Satisfaction Management Escalation Management Operations Management Initiative Management Operations Management Team Roles Executive Management Team Roles Business Office Roles Relationship Leads Roles Financial Performance Management Contract Management Communications Management Legal & Audit Support Relationship Management Lead Executive Sponsor Executive Sponsor Relationship Management Lead Risk Management Performance Management Customer Satisfaction Management Escalation Management Operations Management Initiative Management Roles Operations Management Team Roles Executive Management Team Roles Business Office Roles Relationship Leads Roles Financial Performance Management Contract Management Communications Management Legal & Audit Support Relationship Management Lead Executive Sponsor Executive Sponsor Relationship Management Lead Risk Management Performance Management Customer Satisfaction Management Escalation Management Operations Management Company Supplier Company Supplier Company Company Supplier Company Supplier Company Supplier Initiative Management Company Supplier Company Supplier Company Supplier Company Supplier Company Supplier Company Supplier Supplier Operations Management Team Roles Executive Management Team Roles Business Office Roles Relationship Leads Roles Financial Performance Management Contract Management Communications Management Legal & Audit Support Relationship Management Lead Executive Sponsor Executive Sponsor Relationship Management Lead Risk Management Performance Management Customer Satisfaction Management Escalation Management Operations Management Company Supplier Company Supplier Company Company Supplier Company Supplier Company Supplier Initiative Management Company Supplier Company Supplier Company Supplier Company Supplier Company Supplier Company Supplier Supplier Company Team Member Supplier 1 Supplier 3 Supplier 2 JointJoint capabilitycapability investmentinvestment IntellectualIntellectual capitalcapital sharingsharing JointJoint processprocess improvementimprovement Systems &Systems & processprocess integrationintegration MultiMulti-- suppliersupplier collaborationcollaborationCapabilityCapability acquisitionacquisition by supplierby supplier ValueValue creationcreation opportunityopportunity JointJoint capabilitycapability investmentinvestment IntellectualIntellectual capitalcapital sharingsharing JointJoint processprocess improvementimprovement Systems &Systems & processprocess integrationintegration MultiMulti-- suppliersupplier collaborationcollaborationCapabilityCapability acquisitionacquisition by supplierby supplier ValueValue creationcreation opportunityopportunity Supplier Scorecard Functional Area / Category: Site: Scorecard Date: Status Definition Supplier Representatives: Good Meets or exceeds performance target Fair Does not meet performance target; acceptable variance; improvement needed Company Representatives: Poor Unacceptable variance from performance targets; action required Invalid Invalid percentage data has been entered into the cell KPI KPI Wt. Metric Metric Wt. Metric Total Data Source Score Range Accept- able Range Last Yr Last Qtr Last Mo Today One Qtr Trend Metric Score KPI Score On time delivery percentage 50% tbd 0 - 100 ≤ 80 81 - 89 ≥ 90 90 80 85 90 h 9.0 Delivery conformance 50% 100% tbd 0 - 100 ≤ 80 81 - 89 ≥ 90 80 78 85 95 h 9.5 9.3 Additional available capacity 56% tbd 0 - 100 ≤ 80 80 - 89 ≥ 90 50 75 80 90 h 9.0 Financial stress 33% tbd 0 - 60 ≤ 48 49 - 53 ≥ 54 40 54 58 50 i 8.3 Credit score 11% 100% tbd 0 - 20 ≤ 16 17 ≥ 18 15 16 17 18 h 9.0 8.8 Rejection rate 26% tbd 0 - 100 ≤ 80 81 - 89 ≥ 90 70 75 80 90 h 9.0 Weighted non-comformance rate / CAR 26% tbd 0 - 100 ≤ 80 81 - 89 ≥ 90 80 83 85 91 h 9.1 Process chage 16% tbd 0 - 60 ≤ 48 49 - 53 ≥ 54 40 45 50 60 h 10.0 Audit rating 16% tbd 0 - 60 ≤ 48 49 - 53 ≥ 54 30 35 40 42 h 7.0 Auidt response time 16% 100% tbd 0 - 60 ≤ 48 49 - 53 ≥ 54 40 43 45 56 h 9.3 8.9 Response to standard request 9% tbd 0 - 100 ≤ 80 81 - 89 ≥ 90 60 70 80 91 h 9.1 Response to emergency request 9% tbd 0 - 100 ≤ 80 81 - 89 ≥ 90 90 80 70 60 i 6.0 Communication about potential problems 9% tbd 0 - 100 ≤ 80 81 - 89 ≥ 90 70 75 76 78 h 7.8 Flexibility to change 9% tbd 0 - 100 ≤ 80 81 - 89 ≥ 90 80 85 85 91 h 9.1 Customer services 9% tbd 0 - 100 ≤ 80 81 - 89 ≥ 90 70 75 80 85 h 8.5 Efficiency in providing information 9% tbd 0 - 100 ≤ 80 81 - 89 ≥ 90 90 80 70 60 i 6.0 Local support efficiency 9% tbd 0 - 100 ≤ 80 81 - 89 ≥ 90 75 80 85 91 h 9.1 Production lead-times 9% tbd 0 - 100 ≤ 80 81 - 89 ≥ 90 90 80 70 60 i 6.0 Competitiveness of Production lead-times 9% tbd 0 - 100 ≤ 80 81 - 89 ≥ 90 75 80 85 90 h 9.0 Stability of lead-times 9% tbd 0 - 100 ≤ 80 81 - 89 ≥ 90 75 80 80 80 g 8.0 Compliance with quoted lead- times 9% 100% tbd 0 - 100 ≤ 80 81 - 89 ≥ 90 75 80 85 90 h 9.0 8.0 Performance Targets Unaccept- able Range Target KPIs Metrics Assurance ofSupply- Delivery Assuranceof Supply- Environment/ Business 15% 15% Quality 25% Services 15% Comments Performance Trend Supplier Score (Scale of 1-10) Supplier Name SRM Lead: Account Manager: Supplier Contact:
- 5. #AribaLIVE Practical Success Factorsof SRM Adopters Organization Process Metrics • Strong governance structure with champions for the program in each area; engagement with internal audit for program adherence and support. • Understanding the SRM process, having a framework; a culture of collaboration in the organization. • Active support from upper management, internally and externally. • Regular steering committee reviews. • A mandatory external accreditation program aimed at upskilling capabilities. • Vendor risk management profiles for key supplier relationships. • Consistency of SRM approach, with strategic relationships effectively managed via use of best- practice tools. • Supplier recognition program, including supplier awards. • Joint strategic supplier technology roadmapping. • Use of a scorecards as measurement and feedback mechanisms. • Measuring cost-avoidance. • One-page scorecards. • Clear metrics that are actively managed with the contracts. • Supplier scorecards track performance and progress of initiatives. Source: Hackett Research: 2012 SRM Study
- 6. #AribaLIVE The Value Contributionfrom Supplier Management Is Clear… Source: Hackett Research: 2012 SRM Study
- 7. #AribaLIVE Ultimately, Top PerformersAre Better Customers to Their Key Suppliers 4% 38% 46% 12% 0% 20% 30% 50% 1=We are definitely NOT a customer of choice 2=We're a good customer in a few areas 3=We're a good customer overall, but still have a few opportunities 4=We're a very good customer, especially with critical suppliers Peer Group Top Performer Relative to your competitors, to what extent do you feel that you are a "customer of choice" for suppliers in critical spend categories? Source: Hackett Research: 2012 SRM Study
- 8. #AribaLIVE Agenda • Introduction • PanelDiscussion • Key Takeaways • Q & A © 2013 Ariba, Inc. All rights reserved.8
- 9. #AribaLIVE The Panel Team Speakers:Neil Campbell, Aviva Gilles Poirier , Solvay © 2013 Ariba, Inc. All rights reserved.9 Moderator : Sundar Kamakshisundaram, Sr. Director – Solutions Marketing, Ariba, Inc
- 10. Presentation title here00.00.00 page 10 Smarter Supplier Management Improving Supplier Performance through Better Collaboration and Monitoring Neil Campbell AVIVA Procurement
- 11. Aviva • Largest insurerin the UK*. • Strong businesses in selected international markets. • Life, general and health insurance. Provider of asset management services. • Circa 30,000 employees. • 34 million customers globally. • £23bn gross written premiums. • £29bn paid out in claims and benefits due in 2012. • £311bn total funds under management. • 300 years of heritage • * Based on aggregate 2011 UK life and pensions sales (PVNBP) and general insurance gross written premiums
- 12. Aviva Procurement • GroupProcurement Indirect 3rd party expenditure Main categories of spend include - I.T hw/sw, Marketing, Consultancy Global annual expenditure £2.2bn. (60% UK). • Supply Chain Procurement Direct expenditure to service insurance claims White goods, motor repair network, trade and legal services, £1.1 bn annual expenditure Diverse Supply Chains and market conditions. Common Procurement processes employed across teams.
- 13. Supplier Management inAviva • Supplier Management programme initiated in UK, January 2011. (Other markets now following). • Programme objectives – Manage our most important suppliers with the appropriate level of rigour. – Deliver a consistent and auditable approach to supplier and contract management. – Establish clear accountability and ownership of suppliers. – Improve Supplier Management capability. – Utilise technology to drive adoption, collaboration and quality data metrics. Programme supported at Executive Level. Group Procurement Policy governs Business Unit responsibility.
- 14. Manage our mostimportant suppliers • Suppliers categorised based on risk metrics and annual expenditure. • Midpoint (£) set to ensure top 80% of spend covered PLUS all high risk and Business Critical arrangements. • Minimum level of rigour based on Supplier Classification (A, B, C). • Classification dictates task frequency and mandatory nature. • Any supplier classified as A or B forms part of our managed supply. • Same exercise carried out at a contract level. Interlinked activity. Supplier segmentationContract
- 15. Consistent and Auditableapproach (1) SPM project structure Managed Supplier Contract Management 1 Contract Management 2 Contract Management 3 Performance Management ACW SPMProjects
- 16. Consistent and auditableapproach (2) • Process framework embedded across all Supply and Contract Classifications. • Rigour and frequency determined by A, B or C rating. • Process driven through Ariba SPM to ensure compliance and collaboration. • Consistent internal approach and Supplier experience on contract management tasks.
- 17. Clear accountability andownership Contract/Supplier Owners Daily engagement ► Identify and own Supplier Risks. 250 Suppliers in scope. ► Day to day management of suppliers ► Ensure mandatory tasks are completed and compliance to standard UK Business Areas ► Business Area Co-ordination of Policy Compliance ► Validation & QA (Evidence/challenge) ► Business Area Risk ownership Business Units BU Procurement Policy Owner ► Chair of BU Supplier Management Forum (quarterly) ► Oversight and challenge of aggregated supplier risk across the Business Unit ► Provide assurance on the Policy implementation and compliance across the Business Unit UK Region UK Procurement Policy Owner ► Chair of UK Supplier Management Forum (quarterly) ► Oversight and challenge of aggregated supplier risk across the UK ► Overview of capability across the UK Group ► Group Procurement Policy Owner
- 18. Improve Supplier Managementcapability Skills, awareness and development • Process familiarisation and Ariba system training • Formalisation of Supplier Management as a career family • Shared capability framework for supply management disciplines • Increased access to shared L&D resources • Change Forum Supporting Resources • Ariba Knowledge Projects and local Intranet sites host supporting tools • User and Process support - proactive guidance to contract and supplier managers • Shared Learning groups Upwards of 350 people involved in Supplier Management Activities. Collaboration and access to common tools and resources is essential.
- 19. Utilise technology todrive adoption
- 20. Utilise technology todrive adoption (1) Ariba SPM - Conditions, Ownership and Templates Contract Classification entered at set-up stage. Additional conditions based on other fields. Individual templates for Supplier and Contract management activity Supplier Owners clearly defined
- 21. Utilise technology todrive adoption (2) Recurring phases, Tasks, owners, dates, surveys
- 22. Utilise technology todrive adoption (3) Task reporting and compliance • Compliance reports delivered directly to dashboards and inbox • Hierarchical reporting employed so we can see task completeness at an Organisational, functional, category and individual level • Quarterly compliance activity in place
- 23. Utilisation of AribaSPM (4) SPM Surveys • 4 surveys within the Supplier and Contract Management process Supplier Vulnerability Customer Perception of Supplier Service Contract Vulnerability Supplier 360 • Stakeholders and suppliers complete Surveys in line with classification frequency • Action plans formulated based on results • Aggregation is possible at Supplier, Business Unit, Commodity, Team level • Performance over time can be tracked
- 24. Example Survey output1: Supplier Risk over time
- 25. Example Survey Output2: Supplier grading per risk activity
- 26. Summary / Lessonslearned • On-going programme. v3 of our framework and templates o Increase in consistency, capability, documentation and approach. o Steady increase in compliance to task and activities. o General trend shows reduction in supplier / contract risk. o Continue to refine and embed in UK and other markets. • Lessons learned o Senior sponsorship and mandate is vital. o Supply arrangements must be classified correctly or resource challenges arise. o Collaboration brings challenge around resource, accountability and capability. o Ownership of tasks and projects needs to be clear. o Learning curve on Ariba software, be prepared to support users. o Process must be agile. Ensure appropriate change mechanisms in place.
- 28. “Smarter Supplier Management”– Improving Supplier Performance through Better Collaboration and Monitoring Gilles Poirier e-Sourcing Manager Procurement & Supply Chain Excellence Function © 2013 Ariba, Inc. All rights reserved.
- 29. #AribaLIVE Topics • Introduction • SupplierManagement at Solvay Solvay Purchasing Process Managing Supplier Performance SRM core values SRM, what is coming next? • Where are the best in class? © 2013 Ariba, Inc. All rights reserved.29
- 30. #AribaLIVE Solvay Company Overview A150-year old company Consumer chemicals Advanced materials Performance chemicals Functional polymers Corporate & business services 2012 Net sales • 12.4 billions EUR • 111 sites in 55 countries • 29100 collaborators
- 31. #AribaLIVE Solvay Purchasing Process 1.Define Customer needs & Analyse market 2. Define purchasing strategy & source 3. Negotiate & Contract 4. Manage supplier performance 5. Manage System Performance
- 32. #AribaLIVE Manage Supplier Performance(SRM) Continuously improve the supplier performance to create value for the Solvay Group 1. Manage supplier non conformance Buyer: Drive & follow-up supplier non conformance & assessments If relevant manage the non conformance corrective action Internal customer: Identify & communicate non conformance Performance & Quality: Provide guidance on the non conformance management process Consolidate reports (templates and process) 2. Manage the improvement of supplier performance (KPIs) Buyer: Lead supplier evaluation, construct & monitor supplier action plans Internal customer: Provide feed back on supplier performance Performance & quality: Provide guidance on the supplier performance management process Consolidate report
- 33. #AribaLIVE Supplier Performance • Provideinnovative products and services • Contribute to reduce time to market • Use IT tools (Ariba modules…) • Purchasing contributes to innovation, growth of business and margin
- 34. #AribaLIVE Solvay Ariba KeyFigures after 4 years - - - - Ariba sourcing • 270 full projects m850 EUR, savings about 6% • RFP • RFI • Auctions - 71 (in Bulgaria) • 50 buyers currently using the tool (15%) • Last 12 months (311 events) RFI - 31 RFP - 226 Auctions - 54 Contract management • More than 1000 contracts • Purchasing families Energy Raw Materials TG / TS Facility Management General Expenses Intellectual services Logistics, packaging • Future 2013/2014 140/200/300 licences Adoption growth (WW) expected full deployment within 2-year Use of SIPM module ISO 9000 certification (end 2013)
- 35. #AribaLIVE SRM • Cost reduction,Risk management, Value creation • Promote binomial buyer/prescriber • Develop the suppliers’ capacity • Sharing risks and profits with suppliers
- 36. #AribaLIVE Innovation and Collaborationin Purchasing • Purchasing function is open on the outside • The collaboration is a main change in purchasing • Purchases electronisation • The purchasing function is a complex set of business, relationships and tools • Earn more by spending more (purchasing performance) • The majority of professional buyers do not see the potential of new information systems
- 37. #AribaLIVE Buyers’ Skills • Functionsbuyer project, transverse buyer or purchase coordinator will greatly expand when product buyers or buyers per country will decrease • New Buyers skills: creativity, relational quality, capacity to collaborate • Buyers should consider collaboration internally and externally as a major strategic issue
- 38. #AribaLIVE SRM Core Values •Core values Trust Competitiveness Growth • Supplier categories Standard, Preferred (strategic) • Innovation and collaboration are seen as key levers for long-term growth
- 39. #AribaLIVE Open Innovation Champions Thankyou for your attention
- 40. 40 Summary and KeyTakeaways 40 • Solidify sponsorship of internal champions and executives • Design a collaborative relationship methodology to improve supplier management • Determine Supplier Segmentation Model (i.e. strategic, key, transactional) • Pilot specific categories and/or supplier tiers • Use technology as an enabler to understand supplier performance and risk Manage all aspects of supplier information and performance on a single integrated technology platform Gain complete visibility into supplier information, performance, and risk Provide suppliers a single web-based portal to share information to many buying organizations • Measure the success of the SRM methodology and plan for continuous improvement © 2013 Ariba, Inc. All rights reserved.
- 41. Questions? Contact info: Sundar Kamakshisundaram:sundar@ariba.com © 2013 Ariba, Inc. All rights reserved. 41
- 42. #AribaLIVE © 2013 Ariba,Inc. All rights reserved.42 Please Complete Session Survey Find Session in Schedule Click Choose one Rate Session Thank you for joining us Click Survey and Select Breakout Session Survey
Editor's Notes
- #7 In the next three years, SRM is predicted to overtake sourcing in overall value contribution (savings from the program as a % of spend).For every $1B in annual spend, top-performing organizations can expect to reduce costs by 2.48% or $24.8M through SRM investments. On average, this adds up to $1.1M in savings per strategic supplier. Top performers are turning to strategic suppliers to bring continuous improvement ideas to the table, leveraging lessons learned from pockets of excellence in areas like IT vendor management.
- #13 Group Procurement has responsibility for Indirect Procurement operations in all markets.Supported by a global Procurement policy.Supply chain Procurement operates inter –market, main GI spend is in UK. Supply chain - 192 contracts + motor networkKey message: commonality of procurement processes and policy across all markets. Differing levels of maturity but progressing towards consistent adoption.
- #14 Without Executive focus achieving group wide supplier management would not happen.AVIVA “did Supplier management” pre 2011 however, this was not consistent. Pockets of good, bad and no practice existed.Key challenge is around identifying who owns the supplier and making them accountable.In shared areas challenge around who should own and sometimes more prevalent, who does not!In Aviva, the UK is the most mature market in terms of Procurement. Other markets starting out not just in SPM but in Procurement in general.
- #15 Generic segmentation model however important to focus resource on the correct areas.Arcs used to eliminate borderline cases.
- #17 Slide is somewhat repetition, show for context and how segmentation leads to task frequency and move on.
- #22 discuss recurrences, start dates, due dates, statusesExplain how we report off of the due date and owner fields
- #27 Support needed from Ariba reporting improvements, roadmap delivery etc…..