Strategy Process Slide 1 © The Delos Partnership 2005 Supplier Relationship Management Module 6 –...
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Transcript of Strategy Process Slide 1 © The Delos Partnership 2005 Supplier Relationship Management Module 6 –...
Strategy Process Slide 1 © The Delos Partnership 2005
Supplier Relationship ManagementSupplier Relationship ManagementModule 6 – Supply Strategy
• Marketing & Sourcing Strategy• Leverage Opportunities• IP Management• Standardisation• e Commerce / e Auction
Strategy Process Slide 2 © The Delos Partnership 2005
• Put together negotiation plans & channels.
• Ensure that the channel plans have been thoroughly prepared.
• Ensure a CDA is in place so that there is no market leakage of information.
• Analyse & evaluate completed RFQ’s
• Use/modify evaluation criteria
• Get key stakeholder input
• Discuss and develop needs and wants.
• Discuss and agree the different Negotiation roles & styles.
• Create the negotiation
team (never alone!! and typically 3-4 people)
• Decide on negotiation team roles.
• Supplier Selection
• Legal Supply and Service level agreement and Total value plan,
• Performance Measures
• Supplier and relationship management
• Communicate of results on a need to know basis.
Plan the Plan the Channels Channels
& new & new
AgreementAgreement
Plan the Plan the Channels Channels
& new & new
AgreementAgreement
DevelopDevelopNegotiation Negotiation
StrategyStrategy
DevelopDevelopNegotiation Negotiation
StrategyStrategy
Post Post NegotiationNegotiation
ActionsActions
Post Post NegotiationNegotiation
ActionsActions
DevelopDevelopNegotiationNegotiation
GoalsGoals
DevelopDevelopNegotiationNegotiation
GoalsGoals
Negotiate / Select the SuppliersNegotiate / Select the Suppliers
© The Delos Partnership 2005
Customer
Needs
Supply Side Value
Sourcing
Transactions
OrderPlacing
OrderNegotiation
Sourcing
Supplier RelationshipManagement
Sourcing Value AddSourcing Value Add
© The Delos Partnership 2005
The Bow-Tie RelationshipThe Bow-Tie Relationship
Supplier Sales Person Buyer
Supplier
• Management• Sales• Marketing• Operations• R&D • Supply Chain • Procurement
Customer
• Management• Sales• Marketing• Operations• R&D • Supply Chain • Procurement
© The Delos Partnership 2005
The Diamond RelationshipThe Diamond Relationship
• Management• Sales• Marketing• Operations• R&D • Supply Chain • Procurement
• Management• Sales• Marketing• Operations• R&D • Supply Chain • Procurement
Key Account Management
© The Delos Partnership 2005
Strategic FocusStrategic Focus
Relationship Management
Joint Development
Senior
Relationships
Joint Ventures
Supply Chain
Integration
Global AccountManagement
Customer
Service Joint Mark
eting
Strategy Process Slide 7 © The Delos Partnership 2005
Leveragepower of suppliers
MarketLeverage
Threat ofNew
Suppliers
Substituteproducts
or services
Business
& Competitive Environment
Porter’s Five Competitive ForcesPorter’s Five Competitive Forces
Strategy Process Slide 8 © The Delos Partnership 2005
Brand Management Brand Management
Marketing champion the brand, and determine product and price strategy.• Innovation pricing• Market skimming pricing strategy• Price elasticity [revenue versus volume]
Differentiated brands are premium priced – some relates to innovation cost.• Marketing preserve “brand equity”• Create Market segments – same product: different price
"Price is a function of perceived value and emotion". "Price is a function of perceived value and emotion". The heart is 50x more electrical and 1000x more The heart is 50x more electrical and 1000x more
electromagnetic than the brain. electromagnetic than the brain. (e.g. Coca Cola, Virgin)(e.g. Coca Cola, Virgin)
"Price is a function of perceived value and emotion". "Price is a function of perceived value and emotion". The heart is 50x more electrical and 1000x more The heart is 50x more electrical and 1000x more
electromagnetic than the brain. electromagnetic than the brain. (e.g. Coca Cola, Virgin)(e.g. Coca Cola, Virgin)
Strategy Process Slide 9 © The Delos Partnership 2005
Sales Penetration & Exploitation Sales Penetration & Exploitation
• Look to exploit the lack of internal communication and integrated supplier strategies
• Gain knowledge through telesales and engaging the over-communicators.
• Penetrate poor security and easy site access
• Use switchboard, networks, direct calls to locate key influencers & decision makers
• Try to avoid Procurement involvement until as late as possible
Strategy Process Slide 10 © The Delos Partnership 2005
Penetration & AccessPenetration & Access
Board & CEO
R&D EngineeringSales
& MarketingBusiness
DevelopmentQuality Business Centre
I.T. Legal Finance
Direct
into
funct
ional
Direct
into
funct
ional
head or team m
embers
head or team m
embers
Top DownTop Down
Bottom UpBottom Up
How can P
urchasin
g main
tain
How can P
urchasin
g main
tain
levera
ge giv
en wid
espre
ad
levera
ge giv
en wid
espre
ad
penetratio
n and a
ccess
?
penetratio
n and a
ccess
?
Strategy Process Slide 11 © The Delos Partnership 2005
StrategicCritical
(Risk & Value)
Commoditisation & Leverage
ConflictSupplier tries toextract premium
pricing and controls
Conflict exploits
relationshipand tries to
commoditise a specialty
Leverage or Alignment?Leverage or Alignment?
PerfectAlignment
Strategy Process Slide 12 © The Delos Partnership 2005
DOGS PROBLEM CHILDREN
CASH COWS STARS
PR
OD
UC
T V
OLU
ME
PR
OD
UC
T V
OLU
ME
PRODUCT PROFITPRODUCT PROFIT
Leveraging Product TypesLeveraging Product Types
KeyKeyLeverageLeverage
TypeType
KeyKeyLeverageLeverage
TypeType
Strategy Process Slide 13 © The Delos Partnership 2005TIME (CAN BE MONTHS)TIME (CAN BE MONTHS)
0%
PR
OD
UC
T M
AR
KET S
HA
RE
PR
OD
UC
T M
AR
KET S
HA
RE
LAUNCHLAUNCH GROWTHGROWTH STAGNATIONSTAGNATION DECAYDECAY
1990’s1990’s
2000’s2000’s
50% INNOVATION INNOVATION
Leveraging Product Life Leveraging Product Life CyclesCycles
KeyKeyLeverageLeverage
TimeTime
KeyKeyLeverageLeverage
TimeTime
Strategy Process Slide 14 © The Delos Partnership 2005
Leveraging the Supply SideLeveraging the Supply Side
Bargaining Power & LeverageBargaining Power & Leverage
Su
pp
ly S
ide V
alu
e d
elivery
(£)
Su
pp
ly S
ide V
alu
e d
elivery
(£)
• Standard Costing • Pricing, Market Structures & Agreements• Managing Supplier Procurement Costs • Collaborative vs. Confrontational Leverage• Supplier Development – Value Stream & Lean• Managing Supplier Development Plans• Supplier Performance Assessment
Strategy Process Slide 15 © The Delos Partnership 2005
The Competitive Box
Known / Unknown suppliers operating in traditional
value add ways with the cosmetics
customer base and competing for market share
CustomersCustomers
Conventional valuepropositions
New New Supplier Supplier
New Business New Business ModelModel
SuperiSuperioror
valuevalue
SuperiSuperioror
valuevalue
Three ChoicesThree Choices
Strategy Process Slide 16 © The Delos Partnership 2005
Intellectual Property ManagementIntellectual Property Management
• Adequate protection for Customer and Internal I.P. • Controlled supplier access to sensitive projects, parts
of the plant etc• CDA from the beginning• Joint Development Agreement with specifically named
project members• Joint Exploitation Agreement• Potential licence fees and royalty income from all joint
supplier inventions
Strategy Process Slide 17 © The Delos Partnership 2005
This is the second customer who has talked to me about this great new product opportunity and shared their expert knowledge.I'll even try to get a photo of the product from them..,
This is the second customer who has talked to me about this great new product opportunity and shared their expert knowledge.I'll even try to get a photo of the product from them..,
I have a problem here in . Let me talk to you all about it, and what I am doing with other suppliers.
Intellectual Property ManagementIntellectual Property Management
Strategy Process Slide 18 © The Delos Partnership 2005
" I think I've got something that could really help . We've just invented it and filed for a patent...
" I think I've got something that could really help . We've just invented it and filed for a patent...
Patentin the name of thesupplier
Patentin the name of thesupplier
That’s really good; it is just
like we wanted. I did not realise
that you had got a patent on it
though ! Could I have a sample
and price?
Intellectual Property ManagementIntellectual Property Management
Strategy Process Slide 19 © The Delos Partnership 2005
They will pay top dollar for my product but I'll give a discount which they will value. There are other development projects I want to exploit
They will pay top dollar for my product but I'll give a discount which they will value. There are other development projects I want to exploit
Intellectual Property ManagementIntellectual Property Management
Strategy Process Slide 20 © The Delos Partnership 2005
Standardisation & RationalisationStandardisation & Rationalisation
Many companies suffer from the "cost of complexity" – historic specifications – obsolescent specifications.
This in turn can lead to expensive set-up costs
Strategy Process Slide 21 © The Delos Partnership 2005
StandardisationStandardisation
• 80 % of the cost is built into the product at the design stage
• If designers do not build in commonality and standard products/components then costs increase
Strategy Process Slide 22 © The Delos Partnership 2005
Specials vs. CommoditySpecials vs. Commodity
What you think is special may not be special
Suppliers will try and create “special” to extract value
Suppliers will try and sell to your people and force you to specify “special”
You try and create “commodities” but they will want “specials”
Strategy Process Slide 23 © The Delos Partnership 2005
Current Supplier StrategyCurrent Supplier Strategy
Strategy Process Slide 24 © The Delos Partnership 2005
““Negotiation” Choices Negotiation” Choices
• Over the phone
• Buy “On Line” – Sellers Catalogue
• Buy “On Line” – Buyers Catalogue
• E Commerce – Auctions, e Tenders, Portals
Indirect Channel
Direct Channel
OR
Face to Face – Negotiation
Strategy Process Slide 25 © The Delos Partnership 2005
Negotiation – Negotiation – e e Commerce Commerce
e Commerce Definition
e – Tools
Tool Comparison table
Reverse Auction - Positives and Negatives
Logistics and Freight example
Strategy Process Slide 26 © The Delos Partnership 2005
ee–Commerce Definitions –Commerce Definitions
• Use of the Internet, ERP or online tools in order to source products and services across global markets. market
• A Sourcing tactic, technique and tool and not a strategy
• Covers applications such as reverse auctions, electronic tenders and purchasing portals
Strategy Process Slide 27 © The Delos Partnership 2005
Reverse Auctions• Live and interactive bidding online that makes use of ceiling prices & bid
increments so that business finally goes to the lowest bidder
Electronic Sourcing & Tenders • Uses the traditional tender process against an RFQ but makes use of
the Internet to manage projects and obtain quotations. Far more effective than traditional paper methods.
Portals• Internet / Intranet / Extranet site (portal) where user needs are
positioned and supplier bids & information is electronically managed as part of the Business Sourcing process.
ee-Tools -Tools
Strategy Process Slide 28 © The Delos Partnership 2005
Market FactorMarket Factor Reverse Reverse AuctionAuction TenderTender NegotiationNegotiation
Supplier Relationship Leverage Strategic/Critical Critical
Supply Demand Balance Long Balanced Short
Type Commodity Speciality Special
Approvals Many Few One or Two
Globality Global Site to Global Regional
Large Business Turnover Widely Used Common Increasingly rare
Product Approval Easy Difficult Hard
Pricing Control Buyers Favour Neutral Sellers
e Tool Applications e Tool Applications
Strategy Process Slide 29 © The Delos Partnership 2005
• Efficient (no lunch & lingo)
• Global Reach
• Aggressive bidding
• Transparent
• Transactionally efficient
e Auction – Positives e Auction – Positives
Strategy Process Slide 30 © The Delos Partnership 2005
– Requires Preparation
– Can be Costly (ROI)
– Need to integrate / involve IT and ERP
– Education and training (Buyers and Suppliers)
– Set Up time (people, ceiling prices & communication timings, bid size decreases, lot sizes, auction duration & overtime periods, single or nested, visibility & transparency)
– Final Allocation of business (Goes to the lowest price bidder you may not like)
e Auction Negativese Auction Negatives
Strategy Process Slide 31 © The Delos Partnership 2005
e Auction Providerse Auction Providers
- Procuri- Freemarkets (Ariba)- Trading Partners- Utilyx - PwC- JSI- E-Three- Hedgehog
Strategy Process Slide 32 © The Delos Partnership 2005
Logistics and Freight (Sea, Road, Couriers) is a good category for reverse auctions.
• Overcapacity leading to constant downward price pressure
• Significant options to destinations
• Many well qualified suppliers
• Non Strategic Supplier relationships
• Easy to assemble specifications and benchmarks
Logistics Example Logistics Example