Driving Value from Relationships with Suppliers 2016 LinkedIn Version
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Transcript of Driving Value from Relationships with Suppliers 2016 LinkedIn Version
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DRIVING VALUE FROM RELATIONSHIPS WITH YOUR IT SUPPLIERS
CHRIS CLIFFE
DIRECTOR - CJC PROCUREMENT LTD
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Content
• What does…Contract Management meanSupplier Relationship Management mean
• Where do you start?Two ‘simple’, but essential ‘procurement’ techniques to apply
• Application for the ‘procurement’ process
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Contract Management• Making sure the supplier performs the service you expected
• Or simply - Getting what you paid for!
• Measurement of metrics – SLAs, KPIs, Performance Stats
• Negotiating the terms and conditions and ensuring compliance
• Extensions, annual price / performance reviews
• Making sure you deliver what you promised
• Supplier maintaining their ‘supplier of choice’ status
• Incumbent suppliers only – constrained to existing contracted suppliers
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Supplier Relationship Management• Exploring opportunities beyond the contract basics
• Beyond the stats and metrics, is the intended outcome being delivered?
• Not constrained to incumbent suppliers or current contracts – think whole market
• Connecting supplier(s) with your business vision
• Getting more value than you paid for! Designing value in! Think about the future
• Focus on being the ‘Customer of Choice’ with supplier(s)
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5
Contract Management
Supplier Relationship Management
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CM vs SRM – 2 Questions1. Should ALL contracts be managed?
Yes……but the key is doing so appropriately
2. Should you manage ALL supplier relationships?
Yes……but that doesn’t mean activity with every supplier
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How do you drive value from relationships with your IT suppliers?
Appropriate tactics
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Portfolio Analysis
• Portfolio Analysis is a powerful strategic procurement tool that identifies appropriate strategic options and tactical actions based on two of the most critical aspects of a supply market:
• Market difficulty/risk
• Value/profit impact relative to total market/company
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High
Low
HighLowRelative Spend/
Profit Impact
MarketDifficulty/
Risk
High
Low
HighLowRelative Spend/
Profit Impact
Critical
Low spend
High market difficulty/Risk
Critical
Low spend
High market difficulty/Risk
Strategic
High spend
High market difficulty/Risk
Strategic
High spend
High market difficulty/Risk
Acquisition
Low spend
Low market difficulty/Risk
Acquisition
Low spend
Low market difficulty/Risk
Leverage
High spend
Low market difficulty/Risk
Leverage
High spend
Low market difficulty/Risk
MarketDifficulty/
Risk
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Portfolio Analysis – How to do it…
Step 1 – Segment your portfolio of contracts / suppliers
Step 2 – Challenge your current practices and thinkingLook Inwards at your organisationLook Outward at the market
Step 3 – Identify appropriate strategies and techniques
Step 4 – Develop a targeted action plan
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Supplier Preferencing• Supplier Preferencing is a powerful strategic procurement tool
that identifies the potential opinions which the suppliers hold of your organisation. This is done against two dimensions:
• Account attractiveness - determined by how the supplier perceives the account to their future business plans
• Relative value of business - determined by the financial importance you represent to your supplier’s revenues
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Account Attractiveness• Are you a good payer?
• Are you easy to do business with?
• Do you provide a reliable forecast of demand?
• Are you disruptive to the supplier?
• Do you help the supplier?
• Who & how regularly do you talk to within the supplier?
• Are your values aligned – company & personal?
• Future sales pipeline!
13
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Relative Value of Business
• What percentage of the supplier’s turnover does your spend represent?
• Rule of thumb, anything over 1% is ‘significant’
• Is this increasing over time, stable, or declining?
• Ask / Discuss with the supplier!
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So, I have some ‘Strategic’ spend and a supplier that thinks I’m a ‘Nuisance’...…Bad times!
• Strategic spend / Core customer? Good times!
• Acquisition spend / Core customer? Annoying!!!
• Sit back. Relax. I’m now going to present 16 slides of detail about each combination of Portfolio Analysis quadrant compared to each Supplier Preferencing quadrant and provide a lengthy list of procurement tactics for each possible scenario you may encounter…
…No, I’m not, but contact me if you’re interested and I’ll send you some resources
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Developing a targeted action plan
• Think about your current challenges
• What are you short / medium / long term objectives
• Where are your quick wins, where are your biggest opportunities
• What resources have you got available to you – time, people in IT and from your Procurement teams
• Which of your suppliers would you invite to a round table conversation about your IT Strategy tomorrow?
• Don’t focus solely on £££ Focus on Value
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Application for the procurement process?
“I need [X]. How long will the procurement take?”
“I need it tomorrow. Do we HAVE to OJEU this?”
“Can’t we just use a Framework Agreement?”
The appropriate answer can only be – “It depends”
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Application for the procurement process?• Acquisition spend?
• So long as it’s legal…• P Cards / G-Cloud / Framework Catalogues• Lightest touch, infrequent CM and ‘no’ SRM• Annual review meetings, no contact with Senior staff
• Leverage spend?
• Frequent, simple tenders• 1-3 year contracts• CM focusses on compliance and SRM focussed on keeping switching options open.• Quarterly reviews, polite introductions to Senior staff?
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Application for the procurement process?• Critical Spend?
• Traditional framework competitions or OJEU (Open / Restricted)• 3-5 year contracts
• CM and SRM approach needs to be balanced• Assuring supply• Exploring options to change power
• Collaborate / Aggregate• Change the spec / avoid the need
• Monthly meetings, Quarterly reviews, strong connections to Senior staff?
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Application for the procurement process?• Strategic spend?
• OJEU processes more likely (Restricted / CPwN / CD)• Significant market engagement prior to procurement• Proper supplier engagement during the process• Long term 5+ year contracts
• Full CM and full SRM - Weekly operational reviews, Monthly Contract reviews, ‘frequent’ engagement between Senior staff of both sides
• Focus on a partnership spirit, whilst keeping channels open with other suppliers. Source the ‘market’ for opportunities for continuous improvement / innovation
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Summary• CM is simply getting what you paid for, from your existing
suppliers - Is the supplier the ‘Supplier of Choice?’
• SRM is getting more value from the market, not just from current suppliers – Are you the ‘Customer of Choice’?
• Portfolio Analysis is a fantastic tool to use to segment and challenge and test your current situation
• Supplier Preferencing is an enlightening tool to make you think about what your suppliers think of you
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Conclusion
• Analysing the ‘portfolio’ of spend and thinking about your suppliers ‘preferences’, provides a framework for determining procurement tactics and strategies.
• Understanding the procurement tactics in this way enables you to apply the appropriate approach and mix of CM and SRM
• APPROPRIATE procurement tactics are the key to driving value from your IT suppliers
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