SUPPLIERS CORE CAPABILITIES AND STRATEGIES FOR SUSTAINABILITY AND GROWTH UNIT 4 INTRODUCTION Supplier base is diverse Local global Specialized general Etc. TOP COMPANIES Table 4.1 Table 4.2 Table 4.3 OVERVIEW OF VENDORS AND INTERMEDIARIES Sole supplier Sole accountability Governance easier Risk SQ may be low since 1 provider cannot be best in all dimensions Best of breed Many suppliers; act as head contractor Is low-risk Panel A preferred list of suppliers who constantly bid against each other; each one has own strengths Good for app dev, hw purch, & consulting Prime contractor One head contractor (accountable) with a network of other suppliers (specialties and/or geographic areas) OFFSHORE INTERMEDIATION Offer a range of services Major funtions Mitigation of cultural disparities Mitigation of cognitive distance Comprehensive preparation of the client for an offshoring venture Facilitating and managing the ongoing relationship between client and offshore vendor Consultants: Deloitte and TPI are just a few Legal firms: .. CORE CAPABILITIES OF SUPPLIERS Levina and Ross 2003: 1.Client-specific capabilities 1.Relational routines and resources that align the vendors practices and processes to the clients goals 2.Process capabilities 1.Task delivery routines and resources that accomplish software design, development, and execution 3.HR capabilities 1.Recruitment, training, and mentoring 2.Designing jobs to broaden skills sets 3.Good performance appraisal and compensation systems 12 KEY SUPPLIER CAPABILITIES 1.Leadership 2.Business mgmt 3.Domain expertise 4.Behavior mgmt 5.Sourcing 6.Process improvement 7.Technology exploitation 8.Program mgmt 9.Customer development 10.Planning and contracting 11.Org design 12.Governance 3 KEY COMPETENCIES The 12 core capabilities can be leveraged into three key competencies Relationship Competency Delivery competency Transformation competency Planning and contracting Organizational design Process improvement Technology exploitation Goverance Behavior mgmt Sourcing Cust. dev Leadership Pgm Mgmt Business mgmt Domain expertise 8 KEY LESSONS RE: SUPPLIERS CAPABILITIES 1.Client has bargaining power in supplier selection/negotiation 2.Customers need to focus on suppliers competencies and capabilities (rather than amt of resources) 3.Choosing right supplier configuration is important 4.Clients should examine suppliers capabilities and competencies in relation to business context (dont always need the best) 5.CEOs must understand that deals excessively favoring client are not LT viable 6.While tendering is most common and effective strategy in choosing suppliers, joint decisions including CEO, business execs, and IT mgrs are most effective 7.Communication and transparency during negotiations 8.Client CEO has two roles: 1.Select right supplier at right price 2.Contributing to dev of relationship and ensuring proper staffing of vendor WHAT SUPPLIERS SAY ABOUT CLIENTS LACITY AND WILLCOCKS, 2011 Are you a desirable client? Prestige of client Size of proposed deal Potential for additional revenue Good profit margins Opportunity to enter new markets Opportunity for knowledge transfer Clients risk profile THE CLIENTS O/S LEARNING CURVE Phase 1: Hype and Fear Phase 2: Pilots Phase 3: Relationships Mature Phase 4: Institutionalized/reinvented