Supplier Relationship Management. ISM Philadelphia, Inc. September 12, 2013

Transcription

1 Supplier Relationship ISM Philadelphia, Inc. September 12, 2013

2 Why does Supplier matter Increased outsourcing of strategic services More complex relationships Consolidation of suppliers to leverage spend More money and quality at risk with each supplier More financial controls and compliance regulation More transparency and supplier accountability Implementing Strategic Sourcing processes Only 1 st step to sustained savings Increased emphasis on performance based contracts More tracking and measurement required

3 Reasons for supplier failure, each impacted by the sourcing and supplier management processes Other, 14% Unclear expectations, 23% Poor performance, 8% Poor governance, 13% Poor cultural fit, 5% Not mutually beneficial, 11% Poor Communication, 11% Misaligned interests, 15% Source: Outsourcing Center

4 Reasons for supplier failure, each impacted by the sourcing and supplier management processes Poor performance, 8% Other, 14% Unclear expectations, 23% Sourcing Process 54% Poor governance, 13% Poor Communication, 11% Misaligned interests, 15% Poor cultural fit, 5% Not mutually beneficial, 11% Source: Outsourcing Center

5 Reasons for supplier failure, each impacted by the sourcing and supplier management processes Poor performance, 8% Other, 14% Unclear expectations, 23% Sourcing Process 54% Supplier Process 32% Poor governance, 13% Poor Communication, 11% Misaligned interests, 15% Poor cultural fit, 5% Not mutually beneficial, 11% Source: Outsourcing Center

6 Strategic sourcing models focuses on pre contractual activities Phases Planning Pre bid Bid Selection Execution Post Execution Tasks Validate Engagement Form Conduct Market Assessment Develop Specifications Select Contract Type Tier Supplier Develop Business Case Identify/Qualify Suppliers Finalize Sourcing Plan Negotiate Terms & Conditions Develop Performance Plan Determine Baseline Spend Develop Sourcing Plan Solicit/Evaluate Bids Obtain Approvals Develop Relationship Plan Determine Business Objectives Negotiate/Select Supplier(s) Onboard Supplier Milestones Business Need RFP Creation Supplier Selection Contract Approval Initiate Services Participating Suppliers Review Proposals Change

7 Supplier focuses on post contractual activities Development Stratification Performance Governance & Organization Supplier Risk

8 Both philosophies are required to drive and maintain value to the organization Collaboration SAVINGS Contract Signed Performance 75% of sourcing savings can be lost within 18 months Sourcing Savings TIME Non Compliance & Leakage Strategic Sourcing Supplier Relationship

9 But we have to shift our mentality to long term management of the process and relationship with both parties Category Step 1 Sourcing Strategy Diagnose & Identify Baseline the commodity and define potential opportunities Validate / Execute Conduct detailed investigation of supply and demand side opportunities Implement The individual elements of the overall category sourcing strategy Step 2 Supplier/Contract Strategy Manage Manage the category and supplier including industry trends and SLA s Innovate Create win win relationships balancing cooperation and competition Execute Complete regular reviews of category program and supplier performance Execute Sourcing Strategy based on event occurrence Event-based Occurrence Continuously Managed

10 Is the term Strategic Partner overused and meaningless Strategic Partner Paradox Initial proposals fail to deliver on promises and projections We discuss long term contracts, yet insist on termination for convenience Suppliers bring incremental savings to the customer every year SOW s are written in extreme detail with desktop procedures Teams of people provide oversight

11 Consider these point to create relationships that can be effective for both parties 1. Aligned goals through incentives and pricing structure Pay for performance not actions 2. What is in it for WE, not ME Grow the pie Cooperation, not competition 3. Insight vs. Oversight Who is the expert in this process 4. Allow supplier innovation 5. Do your due diligence up front, not during the relationship 6. Contract for a long term relationship Increased Margins Increase Productivity Increased Quality Reduced Cost The Performance Equation