Transforming Supplier Performance Management

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1 Transforming Supplier Performance Management Chris Kidd 20 th March 2014

2 Overview Introduction Why do SPM? Transforming the process The SPM process in reality Summary

3 What s the point of SPM? Value creation & Risk management 80% of our costs 50% of our workforce 30% of our HSE incidents

4 Transforming the process Supply Chain Model MRO A B C D E F G H I J Distributor A Distributor G Distributor J

5 Transforming the process Prerequisites Willing suppliers Right people & behaviours Continuous Improvement Senior Management Commitment Resource Buy-in from different stakeholders Be clear - what is the value of SPM to your organisation?

6 Transforming the process The Approach Where did we start from? Timescales for transformation Segment suppliers & focus on the high value Establish KPIs and agree with all stakeholders The process and QPR schedule Migration to electronic system

7 Transforming the process Migration to e-system Key Performance Indicators (KPIs) KPI Definitions & Targets Value Objective Area (Delete / Update as required) Value Objective KPI Is this KPI Mandatory or Optional? KPI Type (How will the final calculated KPI result be displayed?) Data Elements for KPI Data Element Type Calculation Method (How will this data Example: On-Time Deliveries, Total Example: KPI = # of ontime deliveries / total element be captured/ Deliveries deliveries * 100 displayed?) Data Element Response Provided By: Respondent Name - Required for Each Element (Can be a different person or the same person depending on the requirement for the KPI. User must be listed in table on Supplier & Users Tab) Frequency of Measurement (if not montly / quarterly please specify in which quarters / months it will be measured i.e. Q1 Only) Target & Range for RAG Example: RED: 0 AMBER: >0, <2 GREEN: >=2 Attachment Required to Support the Response? What is the document that needs to be attached to Support the Response? Are Comments Required to Support the Response? What is the question that needs to be asked to support Support the Response to the KPI? Number of HSSE incidents Whole Number Jeffrey Rijpkema Green = Zero HSSE Incidents Number of HSSE incidents Mandatory Whole Number N/A Quarterly Red > 0 No Attachment Required Nature of the incident? (if value is > 1) Value of invoices past due date Currency Jeffrey Rijpkema Green = Zero Quality & Efficiency Invoice Process Adherence Value of invoices past due date Mandatory Decimal Number N/A Quarterly Red > 0 No Attachment Optional Number of non-conformances Whole Number Jeffrey Rijpkema Green = Zero Quality & Efficiency Product Quality Number of non-conformances Mandatory Whole Number N/A Quarterly Red > 0 Optional Copy of the non conformance Optional Number of instances where paperwork was incorrect Whole Number Jeffrey Rijpkema Green = Zero Quality & Efficiency Delivery Compliance Correct paperwork for delivery not and CofC Mandatory Whole Number N/A Quarterly Red > 0 No Attachment Optional Number of Complaints Whole Number Jeffrey Rijpkema Green = Zero Quality & Efficiency Service Delivery Number of Complaints Mandatory Whole Number N/A Quarterly Red > 0 No Attachment Optional Delivery Delivery Schedule Adherence? On time in full deliveries vs requested date/po Mandatory Percentage Total number deliveries Whole Number Jeffrey Rijpkema Red < 70% Number of deliveries on time/total number Number of deliveries on time in full Whole Number Quarterly Amber > 70%, <95% deliveries*100 Green > 95% Required List of Pos with requested delivery date, confirmed delivery date and date of delivery Optional Delivery Delivery Schedule Adherence? On time in full deliveries vs agreed date Mandatory Percentage Total number deliveries Whole Number Jeffrey Rijpkema Red < 70% Number of deliveries on time in full against Number of deliveries on time agains agreed date/total Whole Number Quarterly Amber > 70%, <98% agreed date number deliveries*100 Green > 98% Required List of Pos with requested delivery date, confirmed delivery date and date of delivery Optional Value Objective Area Cost Efficiency Number of non-contract orders Mandatory Whole Number Number of non-contract orders Whole Number Jeffrey Rijpkema Red > 50 N/A Quarterly Amber <50, > 20 Green < 20 Cost Efficiency Value per order Mandatory Currency Cost Cost Optimisation Additional freight cost Mandatory Decimal Number Total spend Currency Jeffrey Rijpkema Total spend/number of orders Value Objective KPI Number of orders Whole Number Quarterly No Attachment Optional Value of additional freight cost (Delete / Update as Currency Jeffrey Rijpkema Green = Zero Amber > 0 N/A Quarterly No Attachment Optional required) HSSE Incidents Number of HSSE incidents Quality & Efficiency Invoice Process Adherence Value of invoices past due date Quality & Efficiency Product Quality Number of non-conformances Quality & Efficiency Delivery Compliance Correct paperwork for delivery not and CofC Quality & Efficiency Service Delivery Number of Complaints Delivery Delivery Schedule Adherence? On time in full deliveries vs requested date/po Delivery Delivery Schedule Adherence? On time in full deliveries vs agreed date Cost Efficiency Number of non-contract orders Cost Efficiency Value per order Cost Cost Optimisation Additional freight cost

8 % of Deliveries Received On Time in Full Number of Off Contract Orders Transforming the process Case study Valve distributor Valves Delivery Performance Valves Off Contract Orders 100% 80 98% 70 96% 60 94% 92% 90% Performance Target % 10 86% Q Q Q Q Q Q Q Q Q Q Q4 2014

9 Transforming the process Challenges & Barriers Demonstrating immediate benefit to the supplier. Training & educating suppliers on the process and systems. Buy-in from internal stakeholders site procurement & end user engagement e.g. agreeing KPIs, attendance. Finding time for ourselves and the supplier to manage the process effectively (particularly using a manual process) Migrating a large number of suppliers in a short time frame proved to be a constraint on the system. Quantifying the tangible benefits performance management.

10 The SPM Process in Reality With time the process drives itself Honest discussion with suppliers Open approach from both sides Good forum for end users to discuss real issues with suppliers Commitment for action and improvement Requires real time, effort and budget Benefits are real and tangible Suppliers love it!

11 Summary There is potentially huge value to your organisation. Don t underestimate the effort required from all parties. Risk management tool. Don t let it substitute day to day management. All a question of ROI & deriving value for end users.

12 Questions

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