SOURCING EXCELLENCE. To be innovative, you need innovative suppliers (Loewe CEO)

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1 SOURCING EXCELLENCE To be innovative, you need innovative suppliers (Loewe CEO) Sourcing & logistics would remain the darkest continent of business - the least exploited area of business for competitive advantage (Peter Drucker) Morten Munkgaard Møller - 1

darkest continent of business - the least exploited area of

2 Hvem er jeg? Kommerciel Baggrund DILF, Procurement Practice, Director LEGO System A/S, Global Procurement, Director Arla Foods amba, Global Procurement, Process Manager Bang & Olufsen A/S, Global Procurement, Project Manager IBM, trainee Akademisk Baggrund Aalborg University, Center for Industrial Prod., Associate Professor Aarhus School of Business, Part-time Associate Professor Aarhus University, Assistant Professor 2001 Stanford University Ph.D in Supply Chain Management M.Sc., Aarhus School of Business Morten Munkgaard Møller - 2

Procurement, Process Manager 2003-1998 Bang & Olufsen A/S, Global Procurement, Project Manager 1996-1998 IBM, trainee Akademisk Baggrund 2010- Aalborg

Sourcing Excellence - Research Group Morten Munkgaard Møller John Johansen Chris Ellegaard Lars Mikkelsen CORE TEAM Associate Professor Anders Peder Lysholm Hansen Professor Nina Lidegaard

3 Sourcing Excellence - Research Group Morten Munkgaard Møller John Johansen Chris Ellegaard Lars Mikkelsen CORE TEAM Associate Professor Anders Peder Lysholm Hansen Professor Nina Lidegaard External, Professor Ulla Normann Christensen External, Associate Professor Linda Nhu Larsen ASSOCIATED TEAM?? Ph.D-student Ph.D-student Ph.D-student Ph.D-student Morten Munkgaard Møller - 3

Lidegaard External, Professor Ulla Normann Christensen External, Associate Professor Linda Nhu

4 Background I where we came from.. - The growing role & importance of procurement and sourcing Value added 100% 20% Internal task dominates the organization 0% External task dominates the organization 80% 1930s 1970s 1990s 2000s 2010s 1940s-1960s Logistics 1970s Purchasing as an administrative function 1980s Purchasing as supply chain management 1990s Supply Management & Strategic Decision Making 2000s Outsourcing & LCC sourcing 2010s Sourcing Excellence & Strategic Purchasing Morten Munkgaard Møller - 4

External task dominates the organization 80% 1930s 1970s 1990s 2000s 2010s 1940s-1960s Logistics 1970s Purchasing as an

Background II why focus on procurement? Highly leveragable One of the fastest ways of improving the bottom line Cost reduction by 10% can double the profitability!

margin is the ratio of its bottom-line profits to its total revenues The way average cost are 10% The way cost are adressed As is, one dollar saved is in fact much more than a dollar on the bottom

5 Background II why focus on procurement? Highly leveragable One of the fastest ways of improving the bottom line Cost reduction by 10% can double the profitability!!! But The impact of procurement can be even more powerful when the context of enterprise profit margins are introduced 50% 15% 25% An enterprise s profit margin, or more specifically, its net profit margin is the ratio of its bottom-line profits to its total revenues The way average cost are 10% The way cost are adressed As is, one dollar saved is in fact much more than a dollar on the bottom line Below figure represents the average sales volume needed to generate a bottom-line impact (or profit) of $10 million Below figure represents the average sales volume needed to generate a bottom-line impact (or profit) of $10 million. It is an interesting exercise for CPOs to take their delivered savings (actual or targeted) and evaluate the in the context of their employer s actual profit margin This may help inform executives as to the relative value of investments made in procurement Morten Munkgaard Møller - 5

6 Background I+II where we come from.. - The growing role & importance of procurement and sourcing 60% A B A Transactional: Very low strategic significance 50% Degree of leverage by Procurement activities PROFIT MARGINS 40% 30% 20% 10% Software Service Pharmaceuticals Oil & Gas Retail B C Cyclical: Low/medium strategic significance Operational: Medium/High strategic significance 5% 0% C Telecom Computer Manufacturing Automotive D D Critical: Very High strategic significance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % of SPEND OUTSOURCED Degree of outsourcing Source: Cox, 2008 Morten Munkgaard Møller - 6

Procurement activities PROFIT MARGINS 40% 30% 20% 10% Software Service Pharmaceuticals Oil & Gas Retail B C Cyclical: Low/medium strategic significance

7 HD-uddannelsen I Strategisk Indkøb og Sourcing. Morten Munkgaard Møller - 7

8 HD-Uddannelsen (Danfoss version) Graduate Diploma Main theme Educational Period: Course Agenda: Main Topics covered: Main models, concepts & theories used: DAY 1: DAY 2: DAY 3: DAY 4: DAY 5: Role & Organisation Category Management Supplier Management Business Negotiation Sourcing of Technology Date: XX Time: Development of the Procurement function Where do we come from? Main theories within Procurement Organization of the Procurement Function Performance Mgmt. Background of Procurements new & increased role in the company Roles & responsibilities of Procurement Organisation & Performance Mgmt. within Procurement The concept of Value Two main drivers behind the evolution of procurement Procurements strategic contribution Models of organisation Date: XX Time: The concept of Category Management Reverse Marketing the purchaser as sales Categorizing goods & services Supplier Preferencing Sourcing Levers Category Strategy Origins of Category Management (CM) CM in industrial firms Challenges with CM Stakeholder Mgmt How to create an Category Strategy Spend & Market Analysis Krajljic s Portolio Model Stakeholder Mgmt. Models Supplier Preferencing The Purchasing chessboard Date: XX Time: SRM versus CRM Different modes of Supplier Relationship Management Supplier Development and/or exit Supplier attractiveness Competition for supplier resources Supplier Relationship Management Supplier Development Supplier Attractiveness Segmenting suppliers Differentiated supplier approaches Bensaous Portfolio Model Network Theory Resource-based view Contingency theory Date: XX Time: On-stage & off-stage negotiation Interest vs. positions ABC of negotiations The strategy ladder The importance of preparation Exercises The negotiation process Preparation At the table Communication strategy Personality Profiles and their consequences Johari-model Interest vs. positions Win-win or? Prisoners Dilemma Preparation tools & techniques Date: XX Time: Sourcing of Technology, R&D & capabilities Supplier involvement in New Product Development Different types of early involvement Challenges in NPD & supplier involvement Different types of involvement in NPD Sourcing of R&D compared to Production Case: Sourcing of Technology at B&O Capability Portfolio Models The NPD-process Møller s Portfolio model Supplier involvement in NPD Competence development Morten Munkgaard Møller - 8

Main theories within Procurement Organization of the Procurement Function Performance Mgmt.

9 Evaluering fra andet hold HD-uddannelsen Morten Munkgaard Møller - 9

10 Spørgsmål Morten Munkgaard Møller - 10

The Customer Relationship Management Process

The Customer Relationship Management Process E d u c a t i n g t h e W o r l d s B e s t A i r F o r c e Slide 1 The Supply Chain Management Processes Information Flow Supply Chain Management Processes