SUPPLIER’S 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 vendor’s practices and processes to the client’s goals

2.Process capabilities1. Task delivery routines and resources that accomplish

software design, development, and execution

3.HR capabilities1. Recruitment, training, and mentoring2. Designing jobs to broaden skills sets3. Good performance appraisal and compensation

systems

12 KEY SUPPLIER CAPABILITIES

1. Leadership2. Business mgmt3. Domain expertise4. Behavior mgmt5. Sourcing6. Process improvement7. Technology exploitation8. Program mgmt9. Customer development10.Planning and contracting11.Org design12.Governance

3 KEY COMPETENCIES

• The 12 core capabilities can be leveraged into three key competencies

Relationship Competency

Delivery competency Transformation

competency

Planning and contractingOrganizational design

Process improvementTechnology exploitation

Goverance

Behavior mgmtSourcing

Cust. dev

LeadershipPgm Mgmt

Business mgmtDomain expertise

8 KEY LESSONS RE: SUPPLIER’S CAPABILITIES

1. Client has bargaining power in supplier selection/negotiation2. Customers need to focus on supplier’s competencies and

capabilities (rather than amt of resources)3. Choosing right supplier configuration is important4. Clients should examine supplier’s capabilities and competencies in

relation to business context (don’t always need the best)5. CEOs must understand that deals excessively favoring client are not

LT viable6. 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 negotiations8. Client CEO has two roles:

1. Select right supplier at right price2. Contributing to dev of relationship and ensuring proper staffing of vendor

WHAT SUPPLIERS SAY ABOUT CLIENTSLACITY 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• Client’s risk profile

THE CLIENTS O/S LEARNING CURVE

Phase 1:Hype and Fear

Phase 2:Pilots

Phase 3:Relationships Mature

Phase 4:Institutionalized/reinvented