Customer-Supplier Partnerships. Presented by: Sherry R. Gordon, President Value Chain Group LLC

Transcription

1 Customer-Supplier Partnerships Presented by: Sherry R. Gordon, President Value Chain Group LLC 4/10/2015

2 Agenda The business case for customersupplier partnerships Are you ready to partner? The business process Choosing potential supplier partners Relationship management tools Components of successful partnering 2

3 Definitions Supplier Partnership: A commitment over an extended time to work together to the mutual benefit of both parties, sharing relevant information and the risks and rewards of the relationship. These relationships require a clear understanding of expectations, open communication and information exchange, mutual trust and a common direction for the future. -- Institute for Supply Management Customer-Supplier Partnership: An extended relationship between buyers and sellers based on confidence, credibility and mutual benefit. -- Council of Supply Chain Management Professionals 3

4 Why Partner With Suppliers? Qualitative and quantitative benefits: Cost savings Value Operating efficiencies 4

5 Customer-Supplier Partnerships Are Important One business entity: Fails financially every 3 seconds Files for bankruptcy every 8 minutes Changes control every 15 minutes Source: Dun & Bradstreet Customer-supplier partnership relationships are an important way to obtain valuable insights and provide mutual opportunity to take action and avoid risk 5

6 But First. Get your own house in order. before entering into partnerships Be part of the solution, not part of the problem 6

7 Partnership Readiness Customers cause many problems with suppliers: inadequate specifications poor planning sloppy communication changing requirements too much dependence Managing and working with suppliers - requires a cross-functional approach and is not just the job of Purchasing 7

8 Skills needed Communications Joint problem-solving and continuous improvement skills Conflict management Scope and commitment management 8

9 Customer, heal thyself Before undertaking supplier partnerships, look at your internal practices: Do you practice what you preach? (Lean, continuous improvement, Six Sigma?) Are you easy to do business with? Requirements forecasts - shared regularly, accurate and reliable? Schedule/volume changes demanded in less than supplier lead times? Documentation and specifications up-todate and readily available? WIFM? 9

10 Customer-Supplier Relationships Disappointment Create low-value deal Under-invest in relationship Short-term focus Create valuable options Improve relationship Improve communication Confirm suspicions or perceptions Restrict information flow React without understanding Develop mutual trust and understanding Share information Doom Loop Success Loop 10

11 Supplier s View of Customers 1. Focus on short-term, easily quantifiable savings 2. Lack of internal alignment at the customer 3. Lack of clarity about needs and priorities of the customer 4. Late involvement of suppliers 5. Lack of respect for supplier expertise 6. Unwillingness to make long-term commitments 7. Overly rigid RFPs and bidding process 8. Use of one-sided contract language 9. Not enough access to senior management 10.Limited access to personnel outside of procurement Source: Vantage Partners 11

12 The Customer of Choice Pays its suppliers on time Is willing to pay for best value over lowest price Treats suppliers as valued business partners Customer of Choice Is fair, ethical, and respectful Is open to supplier ideas Gives access to customer executives Has an efficient decision-making process 12

13 How Customers See Suppliers 1. Focus on short-term revenue and margin by supplier executives 2. Unwillingness to enter at-risk arrangements 3. Lack of internal coordination 4. Internal focus on short-term sales instead of building long-term partnerships 5. Not offering enough transparency 6. Supplier-sided contract language 7. Using information about customers as negotiation leverage 8. Making unrealistic commitments to win business 13

14 What Do Customers Really Want? 1. Cost supplier spend is both the largest single source of cost and largest opportunity for cost reduction and profitability 2. Quality supplier quality impacts the quality of products and services 3. Time/Responsiveness very dependent upon supplier responsiveness and cycle times 4. Technology in new product development, innovation, and in adoption of IT to enable efficient supplier operations 14

15 The Supplier of Choice Offers the best value for the money Provides a quality product or service Is responsive to customer requests and expectations Supplier of Choice Is reliable Is willing to go the extra mile Is likeable and easy to deal with Is willing to improve 15

16 Partnership Business Process Segmentation Assess Fit for Partnership Define Strategy Create Partnership Develop Joint Plans Manage Partnership 16

17 Customer-Supplier Partnerships Supplier relationships segmented based on strategic importance to prioritize resources and adapt management processes Supplier Segmentation & Partner Identification Governance Structured crossfunctional model to maximize collaboration and effectively manage relationships Joint review meetings to review, manage, and maximize performance Joint Performance Management Working Collaboratively Engage in joint planning, problem solving, & improvement projects; shared knowledge, & supplier development 17

18 Segment The Supply Base For Potential Partners Spend Level 18

19 Segmentation For Partnering Commodity High spend Low switching costs Multiple sources of supply Short lead times Low complexity/items on shelf Low item costs High volume Standard Low spend Low switching costs Multiple sources of supply Short lead times Standard, on shelf items Low item cost Variable volumes Strategic High spend High item or service cost High switching costs Few sources of supply Long lead times Critical performance characteristics Variable volumes Bottleneck/Leverage Low/medium spend High switching costs Limited sources/niche market Typically long lead times Technically complex Med/high item costs Low volume Source: Diane Bueler, Watlow Electric Mfg Co, ISM Conference 19

20 Supplier Segmentation Review top 10-20% of spend Direct Indirect Strategic product or service High dependence Critical to the business Sole source Single source Alignment Service, quality, responsive ness issues Risk factors Difficulty of switching 20

21 Stratification Tiers and Logic Value Creation & ROI # Varies by Category Supplier Criteria The Vital Few Strategic Core Definition Most strategic suppliers with whom the organization will develop long-term strategic partnerships to drive joint value Medium to long-term relationships that deliver significant value with active management and opportunistic investment Bottom 60-80% of Supply Base Value Short-term transactional relationships with suppliers that meet basic performance needs Exit

22 Assess Fit for Partnership Evaluate suppliers immediate performance and long-term potential in areas such as: Quality Management commitment to excellence Cost competitiveness Innovation and technology strength Service and flexibility Employee climate Financial strength/excellence Site visit Customer, supplier and mutual responsibilities 22

23 Partnership Governance Role of the Procurement or Supply Management function and other functions Segmentation criteria Number of customer-supplier partnerships Alignment criteria Joint review meetings frequency and topics discussed Information shared with supplier partners Parameters for creating joint plans, tracking joint performance, and progress reporting Defined process for capturing supplier ideas and ensure that the right people evaluate them for commercial viability/sustainability 23

24 Customer-Supplier Alignment Shared vision Joint goals and objectives Supplier values the relationship to the same degree Business ethics are aligned Supplier committed to the same standards of excellence Win-win 24

25 Working Collaboratively Joint problem solving Joint planning Joint improvement projects Shared risk and reward Shared knowledge Access to knowledge and intelligence 25

26 Partnering Tools Supplier segmentation Customer/supplier perception surveys Supplier account plans & alliance charter Performance scorecards Improvement charters Structured meeting templates Benefits tracking tool 26

27 Scorecards Shared KPIs (examples): Quality of the relationship Customer-supplier satisfaction Responsiveness Partnership health Continuous improvement Customer-supplier focus Source: 27

28 360 Reviews Supplier satisfaction survey 1. To what extent are we meeting your expectations? 2. To what extent do we communicate our performance expectations to you? 3. To what extent do we treat you as a valued partner? 4. To what extent do we provide you with the information that you need in order to give us a quote or pricing? 5. To what extent do you want to participate in the product or service design process? 6. Is there any type of technical assistance that you would like us to provide? 7. Is there any training that you would like us to provide? 8. Is the feedback we provide to you adequate? 9. How frequently would you like us to provide you with feedback? 10. To what extent do we provide you with clear technical information? 11. To what extent do we give you adequate lead time to provide us with products or services? 12. How accurate are our forecast to you? 13. To what extent do we conduct our relationship with you in a professional manner? 14. To what extent do you believe that we treat you fairly? 15. To what extent are we responsive to your needs? 16. How easy are we to deal with as a customer? 28

29 Customer-Supplier Reviews 5 Minutes - Introductions from internal team and suppliers 20 Minutes Activity Review - Total Quarterly Spend by location, type of product/service, etc. - Trending report quarter over quarter and year over year 35 Minutes Scorecards Review - Customer responses to the buyer survey (internal stakeholder satisfaction) - Supplier responses to the RFI supplier feedback 20 Minutes Additional Opportunities Discussion - Incremental Value / New Offerings - Addressing Issues / Concerns action plan 10 Minutes Next Steps and Q&A Source: Wolters Kluwer 29

30 Supplier development Contract = getting what you pay for Supplier development = improving what you pay for Good suppliers are made, not born Capabilities of partnership suppliers may need to be developed to deliver continuous improvement and proactive value generation 30

31 Supplier Development Activities Developing additional supplier capabilities Supplier audits/business assessments Supplier continuous improvement Joint product development teams Joint continuous improvement Customer-supplier alignment Cost savings projects Supplier certification Value analysis teams Process mapping Supplier training Co-location 31

32 Partnership Paradigm Shift Typical Relationship Meet our needs Customer calls all the shots Assign blame for problems and invoke penalties Customer decides on all performance metrics Negotiations adversarial Infrequent communications Decisions one-sided Partnership Meet both our needs Joint input on decision Fix the problem, not the blame Some metrics jointly developed and shared Negotiations collaborative and solve problems Frequent communications Integrated planning 32

33 Partnering Adds Value to Relationships Reduces Costs: Compliance monitoring costs Transaction costs of working together Damaging or costly surprises Switching costs Problems spotted early before incurring costs Increases Value: Improved leveraging of assets and capabilities Low-cost, high value trade-offs 33

34 Components of Successful Partnering Proactive Performance People Trust Focus Mutual financial benefit 34

35 Thank You Presented by: Sherry R. Gordon President, Value Chain Group LLC 35

36 PW315 36