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Transcript of Supplier Mgt. Slide 1 © The Delos Partnership 2005 Supplier Relationship Management Module 8 –...
Supplier Mgt. Slide 1 © The Delos Partnership 2005
Supplier Relationship Management Supplier Relationship Management Module 8 – Supplier Performance & Benefits Tracking
• Supply Measures • Supplier Management & Positioning• Top 10 Supplier Assessment Programme• SRM Workshop Agenda• Integrated Benefits Tracking
Supplier Mgt. Slide 2 © The Delos Partnership 2005
Supplier TypesSupplier TypesNo trust between supplier and buyer Closely guarded information on both sides
• Buyer dictates price and service parameters• Threat of pulling business
• Buyer views suppliers sales representative as friend• Rarely any professional negotiation
• Long rewarding relationship• Genuine commitment, but not tied to any specifics
• Small supplier gets paid what he needs to remain profitable
• Supplier is viewed as integral part of buyer’s business• Relationship includes technical, operational and sales
people• Supplier is viewed as resource to gain competitive
advantage• Long term commitment
Enemy Enemy
ExploitableExploitable
InformalInformal
Approved Approved
Nuisance - ParasiteNuisance - Parasite
Preferred SupplierPreferred Supplier
Strategic PartnerStrategic Partner
Supplier Mgt. Slide 3 © The Delos Partnership 2005
Supply & Procurement MeasuresSupply & Procurement Measures
Performance MeasurePerformance Measure Sales Profit Sales Profit and Growthand Growth
Cost of Cost of SalesSales
People People CostsCosts AssetsAssets InventoryInventory CreditorsCreditors
Perfect Customer Orders Lead Time Reduction RFTQ100%OTIF Supplier Schedule Achievement On Time New Products Total Net Value Delivered
Supplier Mgt. Slide 4 © The Delos Partnership 2005
Role of a Supplier Manager Role of a Supplier Manager The supplier manager has overall responsibility for a supplier relationship
• “Owns” the relationship on behalf of the customer organisation• Is a catalyst which enables the two organisations to work together• Regularly monitors the contact between the two organisations• Reports to Senior Management
He or she ensures that communications are effective and efficient• Manages initial discussions and assists in drawing up contracts• Is kept fully aware of communications & can be involved in negotiations & deals• Is the conduit and prime contact • Arranges and facilitates meetings and events
Can be dedicated to one strategic partner and/or Product Category • High involvement: one supplier manager for one supplier• Low involvement: One supplier manager for several suppliers
Supplier Mgt. Slide 5 © The Delos Partnership 2005
Identifies new value
opportunities
Defines the project and measures improvement
potential
Confirms resource requirements and
organisation Create project
with stage- gates and
milestones
Removes Roadblocks
for the project team
Measures the value delivered and communicates
progress
Implementation
Builds the relationship
Supplier Manager StagesSupplier Manager Stages
Supplier Mgt. Slide 6 © The Delos Partnership 2005
Positioning Supplier ManagersPositioning Supplier Managers
Supplier Importance
Current relationship
Negotiation & Deal Status
Current Communication
Involvement levels
Performance Measures
Key Considerations
© The Delos Partnership 2005The Delos Partnership Procurement Masterclass
CR
ITIC
ALIT
Y
TOTAL ANNUAL COST
HIGH
LOW
CRITICAL / HIGH COST
NON CRITICAL / LOW COST
CRITICAL / LOW COST
LOW HIGH
STRATEGICSTRATEGICCRITICAL CRITICAL
NUISANCENUISANCE LEVERAGELEVERAGE
NON CRITICAL / HIGH COST
Positioning MatrixPositioning Matrix
Supplier Mgt. Slide 7 © The Delos Partnership 2005
Risk
© The Delos Partnership 2005The Delos Partnership Procurement Masterclass
CR
ITIC
ALIT
Y
TOTAL ANNUAL COST
HIGH
LOW
CRITICAL / HIGH COST
NON CRITICAL / LOW COST
CRITICAL / LOW COST
LOW HIGH
STRATEGICSTRATEGICCRITICAL CRITICAL
NUISANCENUISANCE LEVERAGELEVERAGE
NON CRITICAL / HIGH COST
Positioning MatrixPositioning Matrix
EnsureSupply
Partner Value
MinimiseAttention
DriveSavings
Strategy PositioningStrategy Positioning
Supplier Mgt. Slide 8 © The Delos Partnership 2005
WorkshopWorkshop
What are the current current Supplier What are the current current Supplier Assessment tools for the Top Suppliers and Assessment tools for the Top Suppliers and what needs to be done to ensure suppliers what needs to be done to ensure suppliers deliver improved Total Value?deliver improved Total Value?
Supplier Mgt. Slide 9 © The Delos Partnership 2005
Typical Starting PointTypical Starting Point• There is huge and unrecognised value in supplier performance assessment.
• Internal Customers and most internal functions have their favourite suppliers.
• Most suppliers have made value contributions and are proud of their performance.
• Most suppliers will be Silver Gilt or below.
• Senior Management commitment to supplier performance assessment is normally low and respective senior management may have only met at social events.
• The lack of user requirement specifications and internal team working can mean that overall supplier performance is not recognised and understood
• Internal resistance to the programme may occur
Supplier Mgt. Slide 10 © The Delos Partnership 2005
Supplier Performance AssessmentSupplier Performance AssessmentSupplier Performance Assessment is a formal supply side management programme that continuously and quantitatively assesses the performance of suppliers against seven performance elements
1) Risk Management2) Quality, Regulatory and H.S.E.3) Cost (Price)4) Delivery 5) Process and Service6) Innovation7) Business Value and Net Total Value (€).
Its purpose is to provide a channel through which suppliers performance is professionally assessed and their best ideas are captured.
Supplier Mgt. Slide 11 © The Delos Partnership 2005
Supplier Ranking & PerformanceSupplier Ranking & PerformanceThere are five levels of Supplier
Performance is assessed against seven elements for all five levels
The level or ranking is based on the net total value delivered
Suppliers might be eliminated from any level
BRONZEBRONZE(New)(New)
SILVER SILVER (Development)(Development)
SILVER GILTSILVER GILT(Approved)(Approved)
GOLDGOLD(Preferred)(Preferred)
PLATINUM PLATINUM (Strategic)(Strategic)
SUPPLIERELIMINATION
Supplier Mgt. Slide 12 © The Delos Partnership 2005
SUPPLIER PERFORMANCE & VALUE GAP ASSESSMENT
Assessment Measure Assessment Measure BronzeBronze SilverSilver Silver GiltSilver Gilt Gold Gold PlatinumPlatinum ScoreScoreRisk Management Assessment
Quality & HSE Performance
Cost Performance
Delivery Performance
Process & Service Performance
Innovation Performance
Business Value & Net Total Value Delivered
Bronze = New SupplierSilver = Development SupplierSilver Gilt = Approved SupplierGold = Preferred Supplier Platinum = Strategic Supplier
Assessment MeasuresAssessment Measures
Supplier Mgt. Slide 13 © The Delos Partnership 2005
Supplier Performance AssessmentSupplier Performance Assessment
• The assessment is based on the net total value delivered by the supplier in the past;
• Involves a discussion on where performance has improved, declined or remain static versus each total value element.
• Involves a joint definition and agreement to specified future value added goals that are directly part of the business vision, strategy and priority.
Supplier Mgt. Slide 14 © The Delos Partnership 2005
Supplier Relationship Management Supplier Relationship Management Strategic Critical Suppliers – Workshop AgendaStrategic Critical Suppliers – Workshop Agenda
Supplier Mgt. Slide 15 © The Delos Partnership 2005
Workshop Scope Workshop Scope
Used for Strategic / Critical Suppliers to;• Reduce & Manage Risk
• Assure Supply
• Increase Joint Value
• Improve Relationships Current Performance Assessment
Supply Assurance
Joint Total Value Improvement
SRM Workshop
Relationship Improvement
Supplier Mgt. Slide 16 © The Delos Partnership 2005
• Review Supplier’s and current joint Supply Chain and map out the new process with the clear focus to achieve efficiency improvements.
• To gain full confidence in each others ability to deliver on new established process by defining and agreeing joint KPIs and reporting.
• Review of Supplier’s internal Supply Chain risk analysis and agree on strategy to minimise exposure of supply
Supplier Workshop PurposeSupplier Workshop Purpose
Supplier Mgt. Slide 17 © The Delos Partnership 2005
Focus is to get Focus is to get specific supplier specific supplier
to deliver all to deliver all orders orders
100% OTIF100% OTIF
PeopleProcesses
Poor communication& unreliable promises
Supplier lack of goals
Manufacturing Material
Order Placement
Supplier Projected Requirements
Machine Availability(Make our orders a top priority) Obsolete, Spoiled, Out of date, Non availability
Not to spec
Stoppages & Breakdownsdue to people, power and equipment
No carrots & sticks(rewards& penalties)
Materials Free Issue
Ordermanagement
Stores and Goods Receiving
Upstream materials long / variable lead time
Untrained, low capability, low commitment to value
Sub Contracted
Focus using Fishbone ToolFocus using Fishbone Tool
Supplier Mgt. Slide 18 © The Delos Partnership 2005
Baseline Current ValueBaseline Current Value
GOALS
PROJECT EXAMPLESImportance Weighting
Equipment Calibration ¤ ¤ ▲ ¡Cost of Incoming Raw Material Inspection
Cost of non - compliance to RFTQ
Outbound Delivery Charges (Target 75% reduction)
Courier Costs
Reduction in Warehouse space
RF or Electronic Barcoding Project
Qua
lity
Ass
uran
ceLo
gist
ics
Cost Focus Areas Potential Conflicts
Cost Avoidance
Procurement Unit Cost Reduction
Improve Materials
Usage
Overhead Cost Reduction
(Non-People)
Personnel Cost
Reduction
Perfect Customer
Order
Customer Quality
Product or Regulatory Compliance
Supplier Mgt. Slide 19 © The Delos Partnership 2005
Key Improvement GoalsKey Improvement Goals
GoalGoal Supplier Supplier Value Value HowHow WhenWhenImproved Supply Assurance & RFTQ 100%OTIF
Cost & Cash Planning and Cost Avoidance
Supply Chain Improvement & Lead Time Reduction
Net Value Improvement & innovation
Supplier Mgt. Slide 20 © The Delos Partnership 2005
Define &
Measure
Educate
Improve
Control Define &
Measure
SRM – DMAIC TimelineSRM – DMAIC Timeline
Supplier Mgt. Slide 21 © The Delos Partnership 2005
Benefits Tracking Benefits Tracking Integrated Reporting of Supply ResultsIntegrated Reporting of Supply Results
Supplier Mgt. Slide 22 © The Delos Partnership 2005
Business FinancialsBusiness Financials
The Board, Executive The Board, Executive Committee, Shareholders, Committee, Shareholders, Employees, Customers, Employees, Customers, Suppliers & Competitors Suppliers & Competitors are focused on business are focused on business financial performance financial performance and outlookand outlook
Supplier Mgt. Slide 23 © The Delos Partnership 2005
Supply FinancialsSupply Financials
Stakeholders, Management, Stakeholders, Management, Supply Chain, Supply Chain, Procurement and Suppliers Procurement and Suppliers are normally focussed on are normally focussed on AQCSI (Supply Assurance, AQCSI (Supply Assurance, Quality, Costs, Service and Quality, Costs, Service and Innovation), Cash (Assets, Innovation), Cash (Assets, Payment, Inventory) & Payment, Inventory) & Response TimesResponse Times
Supplier Mgt. Slide 24 © The Delos Partnership 2005
Reporting Timelines & StructuresReporting Timelines & Structures
Procurement Procurement RelationshipRelationship DailyDaily WeeklyWeekly Monthly Monthly QuarterlyQuarterly
Senior ManagementCustomer supply risk issues and immediate response if needed
Brief informal overview
Procurement Monthly Report
Procurement Review Meeting
Internal Customers & Stakeholders
Customer supply risk issues. Customer claims or service issues
Personal contact for two way update
Relevant parts of the Procurement Monthly Report
Review of KPI's and key issues
Other key sister functions
Customer supply risk issues.
As and when required or if priority item needs resolution
Relevant parts of the Procurement Monthly Report
Review of KPI's and key issues
SuppliersCustomer supply risk issues and corrective actions.
Weekly Performance Reports
Transmission and review of performance
and supply data
Supplier Performance Assessment Meeting
Procurement Team Customer supply risk issues, market information, visit and meeting reports
Savings Log and Team Meetings
Monitoring of results by supplier, by product vs. agreements and plan
Performance appraisal - team and individual
Supplier Mgt. Slide 25 © The Delos Partnership 2005
Quarterly Focus & Goals Quarterly Focus & Goals
• Quarterly focus documents should be produced for the complete procurement and supply chain team.
• Focus documents are an excellent way of ensuring team consensus and awareness of the overall business goals, overall functional goals and individual goals – all of which must be aligned.
• All quarterly goals – business, function and individual need to be S.M.A.R.T.
• All team members need to contribute to the quarterly focus followed by a commitment from all team members to write & share their smart goals.
Supplier Mgt. Slide 26 © The Delos Partnership 2005
Smart Goal Definition Smart Goal Definition
SpecificSpecificWhat is the specific goal?What is the benefit to the business?How can we measure the performance?
MeasurableMeasurable How will the business measure the value of the goal? How will the business measure the volume of work?
AchievableAchievable Does the business team/business support the goal? Can the goal be achieved with current resources?
RealisticRealistic Is the goal realistic?Is there past experience in the business of this goal?
Time limitedTime limited How will progress be reviewed? What are the consequences if the goal deadline is missed?
Supplier Mgt. Slide 27 © The Delos Partnership 2005
Results Tracking Results Tracking
• Cost Change is normally allocated against cost centres & monthly cost centre report and procurement report is produced.
• Stakeholders, customers, finance and procurement need to own the cost centre cost, results and performance change.
• A common results tracking system needs to be developed and agreed – tied into the business financials
Supplier Mgt. Slide 28 © The Delos Partnership 2005
Results Tracking Results Tracking
• Key performance indicators show progress or deterioration versus the standard using overall total value, supplier and procurement performance change (i.e. not just price or quality)
• Cost avoidance must be against agreed market and competitor benchmarks.
• Performance and results need to be communicated on a monthly basis.
Supplier Mgt. Slide 29 © The Delos Partnership 2005
Procurement Focus ExamplesProcurement Focus Examples
• Supply Assurance – Specific Quarterly Focus Areas
• Total Value plan – Specific Quarterly Focus Areas
• Improve purchasing processes – Specific Quarterly Focus
Supplier Mgt. Slide 30 © The Delos Partnership 2005
Internal Benefits TrackingInternal Benefits Tracking
Procurement Person Responsible
Date Supplier Name Order Value Product or Service Description
31Dec04 Baseline (Index)
New 2005 Deal (Index) Value Change (%)
Procurement Value Change
(£)
Less Inventory Adjustment (£)
Net Procurement Value Impact (£)
Net Procurement Value Impact (%)
Jan-05 Delos £500,000 Concentration on Delos as a supplier 100.0 95.0 -5.0 £25,000 £0 £25,000 -5.0%Jan-05 Supplier B £40,000 100.0 100.0 0.0 £0 £0 £0 0.0%Jan-05 Supplier C £100,000 100.0 95.0 -5.0 £5,000 £0 £5,000 5.0%Total £640,000 £30,000 £0 £30,000 4.7%
Jan-05 Supplier D £400,000 Price increase of 7% from Supplier D 100.0 107.0 7.0 -£28,000 £14,452 -£13,548 3.4%Jan-05 Supplier E £750,000 Product E Price Increase of 5% incurred from 21Jan04 - No stock 100.0 105.0 5.0 -£12,097 £0 -£12,097 1.6%Jan-05 Supplier F £200,000 Did not deliver Product F OTIF causing production delays 100.0 100.0 0.0 -£20,000 £0 -£20,000 10.0%Total £1,350,000 -£60,097 £14,452 -£45,645 -3.4%
£1,990,000 -£30,097 £14,452 -£15,645 -0.8%
Jan-05 Supplier A £500,000 01Jan04 increase of 2.5% avoided 100.0 97.5 -2.5 £12,500 £0 £12,500 2.5%Jan-05 100.0 -100.0 £0 £0 £0Jan-05 100.0 -100.0 £0 £0 £0
£500,000 £12,500 £12,500 2.5%
Cost Avoidance
Cost Avoidance Total
DELOS PROCUREMENT - TOTAL VALUE PLAN (+20% GOAL)
Value Creation
Value Destruction
Net Value Delivered
Supplier Mgt. Slide 31 © The Delos Partnership 2005
Category Total Value PlanCategory Total Value Plan
€ 0 € 20,000 € 40,000 € 60,000 € 80,000
MonthlyGoal
MonthlyActual
No of New ProductsNo of SuppliersCash ImprovementCost ImprovementPrice ReductionsPrice Increases
Supplier Mgt. Slide 32 © The Delos Partnership 2005
Questions ?Questions ?