Supply Management Handbook. 1. 2 Facilities Rest Rooms Smoking Breaks Lunch Telephones Timetable.

Supply Management Handbook

1. 2

Facilities

Rest Rooms

Smoking

Breaks

Lunch

Telephones

Timetable

AGENDA

Day 1

• Fundamentals of Supply Management Business Process

• Developing a Macro Plan

• Understanding Supply Market Analysis

• Reviewing Sourcing Strategy

• Designing a SESpa (Supplier Evaluation, Selection and Performance Appraisal) Framework

AGENDA

Day 2

• Building a Request for Information/Request for Quotation

• Corrective Action

• sesPA

• Supplier Account Management

1. 5

Workshop Objectives• Understand the basic concepts of the Supply Management Business

Process.

• Understand the importance of building effective Supply Management teams and critical points for project communication

• Develop a Macro Plan through Team Efforts

• Develop the SESpa framework based upon the Macro Plan

• Build an RFI (Request for Information)

• Learn how to plan and implement the supplier selection decisions

1. 7

Workshop Objectives• Recognize the processes and tools which will help to establish

long term supplier relations

• Determine how to work with suppliers in the joint development of new products and services to meet customer needs

• Determine how you can best contribute to the successful implementation of the tools and processes of the Supply Management Business Process

• Understand the Supplier Account Management process

• Understand how to apply the workshop concepts to your work.

Purchasing roles

• Purchasing roles can be broken down into 3 categories:– Transactional: Focused on issuing purchase orders, expediting.– Tactical: Focused on quoting and negotiating with specific suppliers.

Management of suppliers locally, also includes global sourcing & commodity management. Plant level focus

– Strategic: Considers commodity management, segmentation of suppliers, categorization of market & business risks, long term supplier agreements. Global sourcing and leveraging global suppliers across business units. Defines Sourcing and commodity strategies

1. 7

Stages of Supply Management

Incremental Benefit

Change inBehavioursRequired

SupplierOptimisation

Joint Product/Service

Development

+5% +10 - 20% +15 - 35%

STAGE ONE STAGE TWO STAGE THREE

Standardisation/ Simplification


SupplierOptimisation


Development

+5% +10 - 20% +15 - 35%


Standardisation/ Simplification

Incremental Benefit

Change inBehaviours

Required

LOCAL SM SOLUTION· CONVENTIONAL LEVERAGING WHAT

CURRENTLY EXISTS REDUCING SUPPLIERS SUCCESS IS SAVINGS

DRIVEN· PURCHASING IN ISOLATION

OF BUSINESS PROCESSES· COMMODITY NOT ACCOUNT

MANAGEMENT THINKING PRICE NOT COST

PROACTIVE NOT REACTIVE·CROSS BUSINESS TEAMS·LONG TERM ARRANGEMENTSFOCUS OF TOTAL COST OF

OWNERSHIP (SERVICE OR PARTS IN PRODUCTION CYCLE)

SHARED RISKS/AGREEMENTS·SHARED OUTCOMES·SHARED LEARNING·

FULL PARTNERSHIP LONG TERM VISION SHARED RISKS/AGREEMENTS LOWEST TOTAL COSTCAPITALIZE ON CORE

COMPETENCIESMUTUALLY AGREED

PERFORMANCE MATRIXSECURITY OF SUPPLYMUTUALLY BENEFICIALINTEGRATED SYSTEMS AND

BUSINESS PROCESSES

1. 9

Supply Management as a Business Process

SupplierSelection

Implementation Continuous improvement

Jointdevelopment

Project Management

Confirmsolution

Supply MarketAnalysis

Macro Planning

Build SESPA model

Request for Information

Define sourcingstrategy

Project Implementation

CorrectiveAction

Initiative Prioritisation

Process Certification

Corrective Action

sesPA CSF’sand KPI’s

Specificationprocess

SupplierSelection

Implementation

STEP I

STEP II STEP III STEP IV

Consistently applicable processes

Team management CommunicationsAccount management Improvement tools

1. 10

Focus of Workshop

• Macro Plan

• Supplier Evaluation and Selection

• RFI (Request for Information)

• Sourcing Strategy and SMA (Supply Market Analysis)

• Team Management

• Communications

• Improvement Tools

• Corrective Action

• sesPA (Performance Appraisal)

• Supplier Account Management

2. 2

Benefits of the Macro Plan• Applies discipline and structure to projects• Outlines the project’s objectives• Focuses on benefits• Identifies team members • Ensures any initiative is thoroughly researched and planned• Is used as a tracking tool to manage the project• Helps gain buy-in from Stakeholders and Sponsors• Communication tool within the broader SM and business

communities

2. 3

Macro Plan Process

1. Determine the need or opportunity2. Identify applicable team members and sponsors3. Solicit sponsor(s) support4. Form the project team5. Develop the Macro Plan (research for additional information if

necessary)6. Communicate Macro Plan to sponsors for buy-in and sign-off7. Begin the SESpa process

Communication & Team Management are the underpinning themes throughout the process.

Using Force Field Analysis

Determine driving and restraining forces(Force Field Analysis)

Identify sponsor(s)/stakeholders

Identify ideal team members

2.4

2. 5

Example of a Force Field Analysis

Outdated technology

Need for growth

High costs of R&M

Customer Demand

New Service Offerings

Unproven technology

Disruption during Transition

High Investment Cost

New staff requirement

Last update relatively recent

Restraining ForcesDriving Forces

2. 6

Macro Plan Process

1. Determine the need or opportunity

2. Identify applicable team members and sponsors

3. Solicit sponsor(s) support

4. Form the project team

5. Develop the Macro Plan (research for additional information if necessary)

6. Communicate Macro Plan to sponsors for buy-in and sign-off

7. Begin the SESpa process


2. 7

Team Building

Communicator • facilitator, process oriented• gets people to talk, consensus building• excellent interpersonal skills• deals with conflict resolution

• prone to question and raises tough issues• can save team from making mistakes• encourages team to take risks

• very task oriented• may be the Subject Matter Expert• detail oriented, sets high performance standards

• goal oriented• gets group on track• sees big picture

Contributor

Collaborator

Challenger

2. 8

Macro Plan Template

TITLE

CURRENTSITUATION

OBJECTIVES

TIMING

BENEFITS

SIGN OFFS

PRODUCT AVL

STATUS

VOB

PROJECT TITLE :

abcdefg

Jan Feb Mar Apr May Jun July Aug Sep Oct

VALUE OF BUSINESS Annual spends by the business. Total annual spend in local currency, or converted to GBP or USD for global spend items

Position Project ManagerSign.Date

Existing and potential suppliers of the product/service required. If opportunities for alternative suppliers exist, it is important to identify all potential suppliers at this early stage.

a) Step by step milestones of the projectb) c) d) e) f)

Enter six to eight clear objectives. These are required to be achieved by the process. They should have measurable benefits which can be determined

Enter the potential risks and estimated cost of implementation if known. This can include the impact it would have on the business. Also include operation, project and business risks

Technical Authority Dept. ManagerProject Sponsor

OBJECTIVES CURRENT SITUATION

PLAN MILESTONES PROPOSED PLAN SCHEDULE ( For adjacent milestones)

BENEFITSRISKS / SHOW-STOPPERS

Volumes, Suppliers, Current Performance, Major Influences. Current volumes may be influenced by changes in customer demand, so it is important to understand if usage is likely to vary. Existing supplier(s)' performance, real and perceived must be u

AUTHORISATION

TEAM MEMBERS INITIALSINTERNAL & EXTERNAL RESOURCES REQUIREDPRODUCT AVAILABILITY

Measurable Benefits. It is necessary to enumerate benefits that can be anticipated if the project is carried through to a successful conclusion. It is likely that a number of benefits will be directly identifiable against the objectives

2. 9

Macro Plan Summary

1. Determine the need or opportunity

2. Identify applicable team members and sponsors

3. Solicit sponsor(s) support

4. Form the project team

5. Develop the Macro Plan (research for additional information if necessary)

6. Communicate Macro Plan to sponsors for buy-in and sign-off

7. Begin the SESpa process


Purpose of SESPASupplier Evaluation, Selection, Performance appraisal

To provide guidelines for:•Evaluating and selecting new suppliers, and appraising the ongoing

performance of selected suppliers:

•SESPA templates here can be used for non traditional sourcing

projects.

•Each facility must have process for evaluating, selecting and

measuring supplier performance for suppliers related to production

•This is a basic ISO requirement

What is SESPA?

• SESPA is two tools in one.

• SESPA provides transparency and objectivity to the selection of suppliers and a

measurement tool in the supplier performance management process.

• SESPA is Supply Management principles ordered into logical process steps.

• SESPA is a generic process providing a consistent approach to supplier selection and

evaluation

SESPA is…

• A business driven transparent evaluation and selection of suppliers that is objective (less subjective)

• Facilitates quality assessment and risk management

• Performance management and Ongoing improvement – gap identification (actual vs. expectations/ promise)

• A basis for reliable and objective communication

• Supply base optimisation

•The deselecting of suppliers not meeting the agreed needs / criteria

•Shortlist of suppliers to consider for selection

•A means to qualify suppliers for “approved supplier list”

1 Does the choice of supplier have a significant bearing on IMA Does the choice of supplier have a significant bearing on IMA s Safety performance?s Safety performance?

– Consideration to be made by the sourcing team or Supply Management.

– Where uncertain should be referred to SHEQ

2 New product or supplier with the potential to grow to >$100,000 New product or supplier with the potential to grow to >$100,000 annual spend within the next 24 months?annual spend within the next 24 months?

– When only one supplier exists may be worthwhile to conduct SESPA to assist with negotiation and performance

3 Is there a commercial or Business risk with a possible financial impact > Is there a commercial or Business risk with a possible financial impact > $100K of selecting the wrong supplier?$100K of selecting the wrong supplier?

– Risk assessment made by the team or Supply Management through:– What could go wrong versus the probability of it occurring– Ref: risk guidelines for SESPA (see Appendix 1)

When to Use SESpa

Does the choice ofsupplier have a

significant bearing onBO C's Safetyperform ance?

No

New product or supplier w ith thepotentia l to grow to >£250,000

annual spend w ith in the next 24m onths

Is there a com m ercia l orBusiness risk w ith a

possib le financia l im pact >£100K of selecting the

wrong supplier?

Still uncerta in?

Yes

Yes

No

Yes

No

No End

YesRefer to Supply

M anagem entYes

No

See next slide

When to Use SESpa

4 You also need to use SESpa in the following circumstancesYou also need to use SESpa in the following circumstances::

• The supplier is chosen by more than one person, e.g. in a cross functional situation where SM is not the sole decision maker

• There is disagreement or potential disagreement over the supplier selection decision, and SESPA is then used as an objective decision maker

• Further advantages may result from the choice of supplier (i.e. it is not just the lowest bid), and there is a need to balance various aspects

• When there is a special need to show objectivity (e.g. Pension Fund advisors etc.,)

Supplier Evaluation and Selection Process (SESpa)

1. Determine business needs for a given supply opportunity

2. Identify attributes suppliers must exhibit to allow IMA to satisfy each business need

3. Decide indicators for each attribute

4. Match attributes to a standard set of seven generic characteristics

5. Weight attributes for the purpose of supplier selectionagree scoring definitions

6. Use Indicators to word unambiguous questions for supplierscompile Request for information

7. Score suppliers against their demonstrated ability in each attribute

8. Issue RFQ to short listed suppliers

9. Negotiate, confirm selection, and agree final contract terms

3.5

Process links

SourcingStrategy

SESpa process

Request for InformationRequest for Quotation


2.1

Process links


SourcingStrategy

SESpa

RFI

SESpa scoring

SESPA

2.2

Supply Market Analysis

POTENTIAL SUPPLIERS

INDUSTRY

ENVIRONMENT

2.3

S

POTENTIAL SUPPLIERS

INDUSTRY

S

E

P T

STEP Analysis

SSocial : socio/cultural issues

with a potential supplier impact

Technological : potential changes/advances in the supplier market

Economic : economic issues in the supplier country

Political : political issues, including legislation, regulations

T

E

P

2.7

Competitive Forces Questions1. Potential entrants: how strong is the threat of new entrants who

can overcome barriers to entry?

2. Substitute products: how strong is the threat of substitutes from outside?

3. Customers: how strong is customer bargaining power?

4. Suppliers: how strong is supplier bargaining power?

5. Industry competition: how intense is the competition?

2.8

Substitute products

Substitute products

CustomersCustomers

Industry competition

Potential entrants

Potential entrants

SuppliersSuppliers

2.9


POTENTIAL SUPPLIERS

INDUSTRY

ENVIRONMENT

Assessing a Potential Supplier

• Generic strategy model

• Value chain model

• Assessment of products/services

• Growth strategy matrix

• Strategic development policy

2.10

2.11

Generic Strategies

Cost leadership Differentiation

Cost leadership Differentiation

Competitive advantage

Co

mp

etit

ive

sco

pe

Broad target

Narrow target

Primary activities

Su

pp

ort

ac

tivi

ties

Inbound logistics Operations

MARGINM

ARGIN

Infrastructure

Human resource management

Technology development

Procurement

Outbound logistics

Marketing andsales Service

Value Chain Model

Value Questions

• Does the supplier do something which competitors don’t offer?

• Are they better at something than their competition?

• Is it something we (the customer) desire?

2.13

Growth/Market Share Matrix

HIGH

Market growth

rate

HIGH

Relative market share

2.15

Growth Strategy MatrixM

arke

t

Product

Existing

New

Existing New

Market penetration Product development

Market extension Diversification

2.16


POTENTIAL SUPPLIERS

INDUSTRY

ENVIRONMENT

2.17

Analysing the Outputs

Strengths Weaknesses

Opportunities Threats

2.18

Supply Market Analysis Summary

• The external environment• The industry itself• Potential suppliers

•Generic strategy model•Value chain model•Assessment of products/services•Growth strategy matrix•Strategic development policy

Process linksSupply Market

AnalysisSourcingStrategy

SESpa

RFI

SESpa scoring

Two Stage Approach

Assess impact of product or service on profitability

Review Supply Market Analysis, SESpa and RFI outputs

1. Select ideal sourcing strategy

1. Select ideal sourcing strategy

2. Assess feasibility2. Assess feasibility

3.1

Range of Sourcing Strategies

• Adversarial leverage

• Preferred supplier(s)

• Single sourcing partnership

• Network sourcing

• Joint venture/strategic alliances

• Merger/acquisition/organic growth

3.2

Trends in SM Strategies

local multi-sourcing

adversarial ‘beat them round the head’

global sourcing with fewer suppliers

co-operation, partnership

3.3

Degree of Control

• Adversarial leverage

• Preferred supplier(s)

• Single sourcing partnership

• Network sourcing

• Joint venture/strategic alliances

• Merger/acquisition/organic growth

LOW

HIGH

DEGREE OF CONTROL

3.4

Impact on Profitability

Adversarial leverage

Preferred supplier(s)

Single sourcing partnership

Network sourcing

Joint venture/strategic alliances

Merger/acquisition/organic growth

3.5

LOW

HIGH

impact on profitability

LOW

HIGH

required degree of control over

supply

3.6

Assessing Impact on Profitability

1. How big is the opportunity for cost advantage?

2. How much does the product contribute to sustainable differentiation?

3. How much does the product contribute to customer perceived value?

4. How big is the opportunity for future advantages to grow from this product?

5. How high is the cost of administering provision of the product?

6. What is the likelihood of product failure, how severe is the financial consequence?

Impact on Profitability




Network sourcing



LOW

HIGH


3.7

3.8

RFIRFI

‘Optimal’ Sourcing Strategy - taking account of supply market and

supplier constraints(stage 2)

‘Optimal’ Sourcing Strategy - taking account of supply market and

supplier constraints(stage 2)

SESpaSelecting the suppliers to support

the sourcing strategy

SESpaSelecting the suppliers to support

the sourcing strategy

‘Ideal’ Sourcing Strategy(stage 1)

‘Ideal’ Sourcing Strategy(stage 1)

SESpaSESpa Supply Market Analysis


Degree of Control

3.9




Network sourcing



LOW

HIGH

DEGREE OF CONTROL

Impact on ProfitabilityAdversarial leverage



Network sourcing



LOW

HIGH

LOW

HIGH


required degree of control over

supply

Sourcing Strategies and the associated Segmentation Tools

• Portfolio Analysis • This is a powerful strategic sourcing tool that helps segment products into different areas by looking at

the market difficulty (e.g. how competitive it is) and the value of expenditure on each item. This allows you to select the most effective methods to apply which will maximise the control and management of key commodities. The information it provides allows time to be better organised and resources used in a manner that will maximise benefit. Other benefits are that it is an excellent tool for gaining management support for change, it encourages strategic thinking and analysis to reduce cost, add value and minimise risk, and it facilitates cost reduction identification and action planning. It provides some ‘science’ to the task of segmenting vast portfolios of commodities.

• Supplier Preferencing • The Portfolio Analysis reviews the relationship from the buyers’ point of view whereas Supplier

Preferencing looks at the relationship from the suppliers’ point of view. Often the two tools are used in conjunction to fully map and understand the associated risks of the buyer / seller relationship. It looks at how attractive the customer account is to a supplier and the relative value of the business to them as the supplier.

• • •

Sourcing Strategies and the associated Segmentation Tools

• Supplier Management Behaviour• Approaches to relationships will vary depending on the difficulty of the market that the buyer is

operating in and, either, the anticipated duration of the relationship or probability of re-engagement. This matrix aims to help buyers understand what type of relationship would be most applicable to variations in those circumstances. Relationship segmentation is a critical element when planning a supplier management programme, as resources and time needs to be appropriately allocated by both parties.

• • Benefit Achievement Analysis• The Benefit Achievement Analysis attempts to help the buyer identify cost saving and other benefit

opportunities that can be implemented and have a high impact on the business. The idea being that the buyer can then identify any projects that have the potential to deliver quick savings to the business and carry those out before other, more difficult projects.

Segmentation StrategiesCritical

Low annual spend and few potential suppliers Suppliers hold the balance of power Goal: Reduce risk, proactively look for strategies that would place

you in another quadrant SM Sourcing Strategy : Network Sourcing Often overlooked due to low level of spend in a difficult marketplace. If there are a lack of suppliers available it is essential to ensure the firm chooses the right supplier. Find reasons why the dominant supplier would damage you last. Potential Strategy: increase leveraging opportunities by bundling goods / services into an attractive package and sourcing with a single supplier.

Strategic High annual spend and few potential suppliers Goal: Maximise profit and minimise risk SM Sourcing Strategy : Single Sourcing Agreement The buyer is attractive to suppliers due to the level of spend but the marketplace is very difficult to buy in, therefore the buyer needs to protect the company from supplier power. Potential Strategy: aim to protect the firm from supplier power by building long term relationships through supplier development programmes. Discover unique value-adds that the supplier ‘needs’ from the customer – become ‘special’. High consideration for Joint Venture to minimize risk. Your own competitors in the market may have the same potential strategy

Simplify Low annual spend and many potential suppliers Goal: Drive out complexity and minimise costs SM Sourcing Strategy : Network Sourcing Often where most expenditure can be found and where ‘quick wins’ can be achieved. Buyers should look to minimise costs in the acquisition process. Potential Strategy: e-procurement – improves management & execution of low value, high volume transactions. Online catalogues ensure user compliance to chosen supplier, which means less maverick buying and fewer suppliers on the system. Kanban, Vendor managed inventory program

Leverage High annual spend and many potential suppliers Buyer holds the balance of power Goal: Maximise profit SM Sourcing Strategy : Adversarial Leverage The buyer is in the strongest position and should look to gain maximum benefit from leveraging opportunities. Watch suppliers try to move you from this quadrant to ‘strategic’ by their ‘differentiating’ themselves Potential strategy: use competition to the full and play the market. Use competitive tendering to achieve best price and only award short-term contracts. Kanban, Vendor managed inventory program

Portfolio Analysis

LOW EXPENDITURE High

Hig

h

Ma

rke

t Diffic

ulty

L

ow

Segmentation StrategiesDevelopmental

Low annual spend but attractive account The supplier wants to nurture the customer by trying to expand the business, seek new opportunities and offer pro-active service levels. Buyer Response for each quadrant of the Portfolio Analysis Strategic – potential match, work with the supplier to develop business Critical – potential risk, look for areas of mutual dependency, create risk mitigation Leverage – good opportunity, encourage the supplier & look for areas of mutual dependency Simplify – good match, maintain relationship & offer other opportunities including testimonials to third parties

Core High annual spend and very attractive account The supplier will want to look after the customer, they will fight to keep the account and offer high level of service and responsibilities. Buyer Response for each quadrant of the Portfolio Analysis Strategic – good match, potential long term relationship, executive involvement Critical – good match, build & maintain long term relationship Leverage – good situation, encourage the supplier, push for cost benefits Simplify – good match, maintain relationship, offer other opportunities

Nuisance Low annual spend and unattractive account The supplier gives the customer low attention & is happy to lose such customers Buyer Response for each quadrant of the Portfolio Analysis Strategic – very high risk, change supplier &/or try to increase value-add attractiveness of the account Critical – high risk, change supplier &/or offer incentives Leverage – long term problem, leave short term, change supplier in long term Simplify – potential problem, seek easy alternatives

Exploitable High annual spend but account considered unattractive The supplier will drive for lowest cost-to-serve best practice, seek short term advantage & may even risk losing the customer Buyer Response for each quadrant of the Portfolio Analysis Strategic – be careful, seek competition, raise mutual need, find value-add to drive up attraction Critical – moderate risk, change supplier, monitor price & service trends Leverage – adversarial relationship, check power balance, seek competition Simplify – high risk, monitor closely, increase attraction, know your choices, seek alternatives

Supplier Preferencing

Low Relative Value of Business to the Supplier High

Hig

h A

ttractiv

en

ess o

f the A

cco

un

t L

ow

Segmentation Strategies

Principled Limited possibility of long relationship forming or re-engaging the

supplier and few potential suppliers SM Sourcing Strategy : Preferred Supplier(s) Although the buyer is not in the strong position he is in when there are several suppliers he is still likely to focus on gaining maximum benefit from any leverage opportunities. A mixture of persuasion and negotiating skills will be the key to achieving maximum value rather than competition.

Collaborative High possibility that a long relationship will form or that the supplier

will be re-engaged and few potential suppliers SM Sourcing Strategy : Single Sourcing Agreement E.G. Level 1 suppliers (high spend, highly critical). Evaluate the potential benefits of moving the supplier to Stage 3 of the S-Curve This is the area where you are most likely to find a company’s ‘strategic’ partners and suppliers that have been granted preferred status. Here the relationships will move towards a much more collaborative, partnership approach for a long term. Both parties spend significant time in building the original links

Exploitative Limited possibility of a long relationship forming or re-engaging the

supplier and many potential suppliers SM Sourcing Strategy : Adversarial Leverage This is the area where we find the most basic supply relationships, where the focus is based on gaining the maximum hard benefit from any leverage opportunities. Competition is used to the full and the buyer plays the market to obtain the best price, suppliers are changed frequently. The relationship tends to be more adversarial with no desire or need for long term agreements between the two parties.

Demanding High possibility that a long relationship will form or that the supplier

will be re-engaged and many potential suppliers SM Sourcing Strategy : Preferred Supplier (s) Competition still plays a dominant role in the relationship, although the buyer will be more open to developing the relationship rather than changing supplier frequently. Competition is used to track the market and allow the buyer to change supplier if the current supplier does not perform as required. This can lead to the need for a number of validated or preferred suppliers to be available to the company.

Supplier Management Behaviours

Hig

h

M

ark

et D

ifficu

lty

Lo

w

Low Anticipated duration of relationship or probability of re-engagement High

Segmentation Strategies

Category A - Gems High financial return and easy to implement These are, naturally, the first to be pursued. They offer high impact benefits that can be implemented within 12 months without detrimental impact to medium or long-term strategies. The potential high financial impact of these projects means it is often beneficial to create specific teams, focused on the delivery of these benefits.

Category B – Extra Effort High financial return but more difficult to implement Normally tackled after all the projects from the ‘gem’ quadrant have been completed or start as those projects are being finalised. Often found in this section are those projects that may be considered ‘untouchable’. The impact may be high and they may be easy to implement but the need to persuade senior management to allow it to progress is a problem and forces the project into the ‘extra effort’ quadrant. Change management techniques are key to success, due to the perceived ‘untouchable’ nature of these projects.

Category C – Quick Wins Easy to implement but low financial return Often pursued early on. Although the benefit they offer is not high impact the ease with which it can be achieved means they can still be attractive projects to carry out. A note on this section would be to ensure that pursuing projects in this area does not take resource away from the higher impact categories, particularly those that fall in the ‘gem’ quadrant. Often the focus of a designated individual rather than a full cross-functional team.

Category D - Caution Difficult to implement and low financial return. Although these ideas may be difficult to implement on the current project the benefit may apply to future programmes so make sure the idea is shared with the relevant personnel responsible. May want to consider modifying the idea before finally categorising in this box. Always ‘test’ the reasons given as to why a project is placed in this quadrant to see if it is real or just an emotion or unjustified pre-conception.

Benefit Achievement Analysis

Hig

h

Po

ten

tial B

us

ine

ss

Imp

ac

t

Lo

w

Easy Ease Of Implementation Hard



2. Identify attributes suppliers must exhibit to allow BOC to satisfy each business need




6. Use Indicators to word unambiguous questions for supplierscompile RFI




Company Business needs

INTERNAL What do you need to supportyour operational or functional effectiveness?

EXTERNAL What do you need to satisfy your customers and/or give you market advantage?

3.7

Business needs

What does the XYZ company need?

what does the business need to operate effectively and satisfy customers?

don’t confuse company’s needs with supplier solutions

3.8

Attributes and indicators

Attributes

Indicators

Competencies the supplier must deliver to satisfy the identified business needs

What can you look at to tell whether the supplier can deliver each attribute?

Note: indicators can be either qualitative or quantitative

3.5.1

The SESPA hierarchy

The business needs

Supplier attributes

Performance indicators

What do you need to support your operational or functional effectiveness? Or what do you need to

satisfy your customers and/or give you market advantage?

Competencies the supplier must deliver to satisfy the identified business needs.

What can you look at to tell whether the supplier can deliver each attribute?

3.5.2

The macro organization level

Two levels of business needs

The strategic objectives of the business

The opportunity level

Specific needs directly related to the opportunity being examined

3.5.3

A strategic objective is to increase profit

THE MACRO ORGANISATION LEVEL

Reduce costs Increase revenue

Increase pricesIncrease capacity utilization

Improve repeat business Attract new customers

Outsource advertising to an agencyTHE OPPORTUNITY LEVEL



2. Identify attributes suppliers must exhibit to allow BOC to satisfy each business need




6. Use Indicators to word unambiguous questions for supplierscompile RFI




3.13

Seven generic characteristics•Commercial•Product quality•Delivery/Cycle time•Responsiveness•Technology•Safety/environment•Business management

3.14

Calculating attribute weightings

For each attribute:

Number of dots x 100 ÷ Total number of dots distributed

4.6

RFI/RFQ

RFI Information for supplier to show whether they satisfy each SESpa attribute and indicator

RFQ Supplier prices to provide the product or service which BOC wants

4.7

RFI questions check

For each attribute and indicator:

• Will the instruction(s) or question(s) elicit a response that will enable you to assess whether the indicator is satisfied?

• Is the wording of the instruction(s) or question(s) precise and unambiguous?

4.8

RFI communications

• What information do you need about suppliers?

• What information do suppliers need in order to answer your questions?

4.9

RFI contacts• Issue pre-qualification questionnaire

• Meet potential supplier and issue RFI

• Further discussions for clarification

• Receive RFI responses

• On-site validation of supplier processes

• Meetings/presentations by shortlisted suppliers

• Issue RFQ

• Receive RFQ responses

4.10

Request for Quotation (RFQ)

• Equipment unit price• Equipment life expectancy• Residual values/buy back• Finance options• Maintenance costs• Future pricing• Flexible pricing• Raw materials risks• Salaries

4.11

SESpa scoring rules

• Team members to agree scoring system

• If you don’t have sufficient knowledge about an attribute yourself, don’t score it.

Scoring guidelines5 Best practice, effectiveness proven

4 In place, effective and proven

3 Recently implemented, some success can be proven

2 Recently implemented, some success can be anticipated

1 In place, but ineffective or unproven

0 Not in place, or incompetent

4.12

4.13

Is there a big variation?

1. Did you understand the attribute definition?

2. Did you understand the scoring system?

3. What information made you score it this way?

4.14

Recommending a supplier

Recommended supplier

Reason for choice

Areas of weakness / improvement opportunities

4.15

Implementing the Solution and Building the relationship

If the supplier does not satisfy all your requirements

If you have identified areas of opportunity

Agree a Corrective Action Plan

Agree a Continuous Improvement Plan

4.17

RFI and SESpa Summary

• SESpa is a systematic process for selecting the best supplier to support business needs

• Supply Market Analysis helps to assess attributes through a longer term perspective

• Sourcing Strategy helps you decide the most appropriate relationship with the supplier to support business needs.

• Request for Information enables you to assess each supplier against required attributes

• Request for Quotation provides you with details of supplier prices

Implementation StrategiesBig Bang - total immediate switch

orPilot scheme - small trial before full

implementationor

Staggered changeover - gradual start-up new/close down oldor

Parallel running - run both services at full capacity for a period

5.6

Sources of Risk

5.7

Project and project team

Operations, stakeholders affected

Environment

Triggers for Corrective Action

Any unforeseen problem

SESpa -

sesPA -

6.1

supplier not able to meet required standard in one or more attributes

supplier failing to meet required standard in one or more attributes

Corrective Action Process

1 Identification and description of problem2 Assignment of appropriate responsibility and

resource3 Investigation to identify root cause of problem4 Implementation of short term action(s) to contain

problem5 Implementation of long term action(s) to prevent

recurrence6 Verification of corrective action(s) effectiveness

6.2

Identification and Description of Problem

Describe the problem clearly and quantify it

Determine the extent of the problem

Assess the seriousness of the problem

6.3

Seriousness of Problem

MINOR . . . . . . unlikely to cause customer dissatisfaction

MAJOR . . . . . . will cause customer dissatisfaction or loss to BOC

CRITICAL . . . . . .could be a health, safety or environmental hazard, or major loss to BOC

6.4

Corrective Action Process

1 Identification and description of problem2 Assignment of appropriate responsibility and

resource3 Investigation to identify root cause of problem4 Implementation of short term action(s) to contain

problem5 Implementation of long term action(s) to prevent

recurrence6 Verification of corrective action(s) effectiveness

6.2

Planning Verification

What?What?

Where?Where?

When?When?

Who?Who?

How?How?

Corrective Action Process1. Identification and description of problem

2. Assignment of appropriate responsibility and resource

3. Investigation to identify root cause of problem

4. Implementation of short term action(s) to contain problem

5. Implementation of long term action(s) to prevent recurrence

6. Verification of corrective action(s) effectiveness

6.7

Supplier Performance Management

Other tools include:• SLA / KPI monitoring, reporting and action• Written supplier performance improvement plan• Strategic partnership initiatives• Scheduled progress and business review meetings• Supplier account management process• User complaint reporting process• SHEQ audit• Contract management• SCAR (supplier correction action )

The sesPA (supplier performance appraisal) process is a tool in the overall supplier performance management process.

sesPA - Performance Appraisal•Provides ongoing monitoring & measurement of supplier’s performance

•Regular agreed reviews

•Key component of Supplier Account Management

•Where possible utilises the same categories & attributes as those used in the original SESpa

•The identification of both leading and lagging indicators to determine performance

•Results are shared with the suppliers

•Provides the opportunity for the continuous improvement & corrective action loop

The key steps are...

Complete supplier

performance evaluation

document

Collate responsesCompile a supplier

feedback summary

document

Hold a supplier

meeting and

present the

results

Agree performance

improvement

• ar

eas• tar

gets• d

ates• responsible

person

Compile an action

improvement plan

Monitor action plan

Review Performance

sesPA - Performance Appraisal

Planning to Obtain Evidence

Identify an attribute

Decide indicator(s) for attribute

What data is needed?What is the source of the data?Who is responsible for providing it?

7.3

Positive vs. Negative Measures

Positive focus Negative focus Success rate On-time deliveries Quality performance Response time Time slot performance Deliveries within agreed

Lead Time

Error rate Late deliveries Defects Missed calls Missed time slots Lead time failures

7.4

Leading vs. Lagging

Leading indicator Lagging indicator used during or prior to

an event

monitors and controls the process

assists prevention

Proactive

measure after the event

demonstrates if the process is working

used for reporting purposes

Reactive

7.5

Examples

Lagging Leading Accident statistics Incident frequency

7.6

In Full On Time Variance to dispatch schedule order/invoice accuracy vehicle breakdown frequency

Appraisal score 360o peer assessment

Supply savings achieved Active projects : total projects current success rate

Days of stock Variance in supply lead time Forecast accuracy MRP changes as % total MRP

Measurement Cycle

7.7

Agreement with the supplier

1. Decide what measures are needed

2. Agree which ones are practical

7. Develop joint actions to improve the process

6. Review performance together

3. Agree formats keeping them simple and consistent

5. Agree goals or targets for key measures

4. Agree review period with supplier

sesPA Process

1. Review business needs, attributes

2. Review contract performance measures

3. Agree what you want to measure, how you will measure

4. Obtain hard evidence of performance

5. Pinpoint deficiencies and improvement opportunities

6. Work with supplier to plan improvements

7.9

Share Results with Supplier

Preparation: What information will you give the supplier in

advance of a meeting?

Meeting: What will be the aims of the meeting?

What will be the content?

Performance ManagementGood performance

• Celebrate successes• Communicate success• Demonstrate improvements

with facts and benefits• Agree new targets and goals• Build the relationship• Move the relationship up the

‘S’ curve

7.11

Poor performance

• Involve all the relevant people

• Obtain hard facts about the concern

• Try to plan and agree the cause of the problem

• Set milestones and targets for corrective action

• Spell out the consequences of failing to meet targets

• Get everyone’s agreement to actions to be taken

Appraisal Summary examples….

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Timeliness in resolving customer servicesissues

Manner in which customer service issueshandled

Information provided in resolving service issues

Ability to assist in cases of emergency

Business knowledge

Responsiveness to request for information

On site support performance

Oct-03

Oct-02

Sep-02

Year on Year Comparison

Overall Summary for Supplier Evaluation

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

R1

R2

R3

R4

D1

D2

D3

PQ1

PQ2

PQ3

PQ4

PQ5

PQ6

BM1

BM2

BM3

BM4

BM5

T1

T2

T3

T4Importance

Performance

Performance v importance

Appraisal Summary examples (2)

Supplier Action Plan

Improvement Plan• Finding Suitable Hotels

– 2004 Hotel Program finalized and rates included in GDS for agent accessibility.

– Work with American Express card representative to compare data and ensure we're managing all of BOC's hotel spend according to the hotel program.

BOC:

– Hotel program communicated to BOC travelers and information available on BOC's website.

• Finding Suitable Fares– Review of current contracts and recurrent training on

fares. Continue to monitor calls to ensure preferred carriers being offered

BOC: Advise travelers of the available options and contract details.

• Finding Routes: Same as above

• Availability of Agents: – Addition of international Team leader and continue to

Monitor staffing • Geographical Knowledge:

– Continue associate education

• Responsiveness to information: – Track inquiries and respond w/in 24 hours

• Business Knowledge / Meeting: NA• Ability to assist in Emergency:

– Amex to ensure that EnRoute department has all BOC pertinent information ie contacts, contracts etc.,

75%71%Information in resolving Service Issues

79%71%Manner of Customer Service Handling

72%72%Timeliness of Service Issue Resolution

68%72%Ability to assist in Emergency

78%56%Business Knowledge/ Meeting Planning

80%62%Responsiveness to Information Request

72%72%Knowledge of BOC Travel Requirements

78%64%Geographical Knowledge

80%66%Availability of Agents

81%74%Responsiveness in Call Return

78%69%In Finding Routes

71%68%Finding suitable fares [cost]

77%65%Finding Suitable hotels, [cost]

ArrangerTravelerCategory

sesPA Process

1. Review business needs, attributes

2. Review contract performance measures

3. Agree what you want to measure, how you will measure

4. Obtain hard evidence of performance

5. Pinpoint deficiencies and improvement opportunities

6. Work with supplier to plan improvements

7.9

SESPA

7.17

Appraisal

Best in ClassService, Quality & Total Cost

Teamwork

ReviewProcess

Accountability

Process Measures

Business needs

Supplier Evaluation Selection

Performance Appraisal

Macro Plan

Supply Market Analysis, Sourcing

Strategy

RFI/RFQ Selection

NegotiationAgreement

THE SUPPLIER ACCOUNT MANAGER

11

22

Supplier Account Manager - Job Goals

To ensure that the supplier maintains contracted standards of performance

To ensure that the supplier is making a significant contribution to overall business improvements

8.2


8.3

Incremental Benefit

Change inBehaviorsRequired

SupplierOptimization


Development


Standardization/ Simplification

Goals and Processes

To ensure that the supplier maintains contracted standards of performance

To ensure that the supplier is making a significant contribution to overall business improvements

8.5

sesPA process

Strategic plan

ProcessesGoals

11

22

Inputs to Strategic Plan

Your LOB or BU strategy and objectives

Supply market analysis

8.6

Strategic Plan

1. Agree objectives

2. Define CSFs, KPIs and targets

3. Determine resources needed

4. Communicate the plan

5. Implement the plan

6. Deliver the benefits

8.7

Definitions

Objective . . . . .

8.8

Should be linked directly to company’s business objective and should define the contribution that the SAM relationship will make to achieving the business objective. It should be S.M.A.R.T.

Critical Success . . . . . Factors (CSFs)

Tangible deliverables, without which the objective will not be achieved

Key Performance . . . . . Indicators (KPIs)

The measurables that define whether the CSF has been achieved

Strategic Plan

1. Agree objectives

2. Define CSFs, KPIs and targets

3. Determine resources needed

4. Communicate the plan

5. Implement the plan

6. Deliver the benefits

8.7

Supply Management Handbook. 1. 2 Facilities Rest Rooms Smoking Breaks Lunch Telephones Timetable.

Documents

Transcript of Supply Management Handbook. 1. 2 Facilities Rest Rooms Smoking Breaks Lunch Telephones Timetable.