© the delos partnership 2005 dairygold workshop supplier relationship management

© The Delos Partnership 2005

Dairygold WorkshopDairygold WorkshopSupplier Relationship Management


Supplier TypesSupplier Types

No trust between supplier and buyer

Closely guarded information on both sides

• Buyer dictates price and service parameters• Threat of pulling business

• Buyer views suppliers sales representative as friend• Rarely any professional negotiation

• Long rewarding relationship• Genuine commitment, but not tied to any specifics

• Small supplier gets paid what he needs to remain profitable

• Supplier is viewed as integral part of buyer’s business• Relationship includes technical, operational and sales

people• Supplier is viewed as resource to gain competitive

advantage• Long term commitment

Enemy Enemy

ExploitableExploitable

InformalInformal

Approved Approved

Nuisance - ParasiteNuisance - Parasite

Preferred SupplierPreferred Supplier

Strategic PartnerStrategic Partner


Supply & Procurement MeasuresSupply & Procurement Measures

Performance MeasurePerformance Measure Sales Profit Sales Profit and Growthand Growth

Cost of Cost of SalesSales

People People CostsCosts AssetsAssets InventoryInventory CreditorsCreditors

Perfect Customer Orders

Lead Time Reduction

RFTQ100%OTIF

Supplier Schedule Achievement

On Time New Products

Total Net Value Delivered


Role of a Supplier Manager Role of a Supplier Manager

The supplier manager has overall responsibility for a supplier relationship• “Owns” the relationship on behalf of the customer organisation• Is a catalyst which enables the two organisations to work together• Regularly monitors the contact between the two organisations• Reports to Senior Management

He or she ensures that communications are effective and efficient• Manages initial discussions and assists in drawing up contracts• Is kept fully aware of communications & can be involved in negotiations & deals• Is the conduit and prime contact • Arranges and facilitates meetings and events

Can be dedicated to one strategic partner and/or Product Category • High involvement: one supplier manager for one supplier• Low involvement: One supplier manager for several suppliers


Identifies new value

opportunities

Defines the project and measures improvement

potential

Confirms resource requirements and

organisation Create project

with stage- gates and

milestones

Removes Roadblocks

for the project team

Measures the value delivered and communicates

progress

Implementation

Builds the relationship

Supplier Manager StagesSupplier Manager Stages


Positioning Supplier ManagersPositioning Supplier Managers

Supplier Importance

Current relationship

Negotiation & Deal Status

Current Communication

Involvement levels

Performance Measures

Key Considerations

© The Delos Partnership 2005The Delos Partnership Procurement Masterclass

CR

ITIC

AL

ITY

TOTAL ANNUAL COST

HIGH

LOW

CRITICAL / HIGH COST

NON CRITICAL / LOW COST

CRITICAL / LOW COST

LOW HIGH

STRATEGICSTRATEGICCRITICAL CRITICAL

NUISANCENUISANCE LEVERAGELEVERAGE

NON CRITICAL / HIGH COST

Positioning MatrixPositioning Matrix


Risk

© The Delos Partnership 2005The Delos Partnership Procurement Masterclass

CR

ITIC

AL

ITY

TOTAL ANNUAL COST

HIGH

LOW

CRITICAL / HIGH COST

NON CRITICAL / LOW COST

CRITICAL / LOW COST

LOW HIGH

STRATEGICSTRATEGICCRITICAL CRITICAL

NUISANCENUISANCE LEVERAGELEVERAGE

NON CRITICAL / HIGH COST

Positioning MatrixPositioning Matrix

EnsureSupplyEnsureSupply

Partner Value

Partner Value

MinimiseAttentionMinimiseAttention

DriveSavings

DriveSavings

Strategy PositioningStrategy Positioning


WorkshopWorkshop

What are the current Supplier Assessment tools What are the current Supplier Assessment tools for the Top Customers and what needs to be for the Top Customers and what needs to be done to ensure customers receive improved done to ensure customers receive improved Total Value?Total Value?


Supplier Performance AssessmentSupplier Performance Assessment

Supplier Performance Assessment is a formal supply side management programme that continuously and quantitatively assesses the performance of suppliers against seven performance elements

1) Risk Management2) Quality, Regulatory and H.S.E.3) Cost (Price)4) Delivery 5) Process and Service6) Innovation7) Business Value and Net Total Value (€).

Its purpose is to provide a channel through which suppliers performance is professionally assessed and their best ideas are captured.

Its purpose is to provide a channel through which suppliers performance is professionally assessed and their best ideas are captured.


Supplier Ranking & PerformanceSupplier Ranking & PerformanceThere are five levels of Supplier

Performance is assessed against seven elements for all five levels

The level or ranking is based on the net total value delivered

Suppliers might be eliminated from any level

BRONZEBRONZE(New)(New)

SILVER SILVER (Development)(Development)

SILVER GILTSILVER GILT(Approved)(Approved)

GOLDGOLD(Preferred)(Preferred)

PLATINUM PLATINUM (Strategic)(Strategic)

SUPPLIERELIMINATION


SUPPLIER PERFORMANCE & VALUE GAP ASSESSMENT

Assessment Measure Assessment Measure BronzeBronze SilverSilver Silver GiltSilver Gilt Gold Gold PlatinumPlatinum ScoreScore

Risk Management Assessment

Quality & HSE Performance

Cost Performance

Delivery Performance

Process & Service Performance

Innovation Performance

Business Value & Net Total Value Delivered

Bronze = New SupplierSilver = Development SupplierSilver Gilt = Approved SupplierGold = Preferred Supplier Platinum = Strategic Supplier

Assessment MeasuresAssessment Measures


Supplier Relationship Management Supplier Relationship Management Strategic Critical Suppliers – Workshop Strategic Critical Suppliers – Workshop AgendaAgenda


Workshop Scope Workshop Scope

Used for Strategic / Critical Suppliers to;• Reduce & Manage Risk

• Assure Supply

• Increase Joint Value

• Improve Relationships Current Performance Assessment

Supply Assurance

Joint Total Value Improvement

SRM Workshop

Relationship Improvement


• Review Supplier’s and current joint Supply Chain and map out the new process with the clear focus to achieve efficiency improvements.

• To gain full confidence in each others ability to deliver on new established process by defining and agreeing joint KPIs and reporting.

• Review of Supplier’s internal Supply Chain risk analysis and agree on strategy to minimise exposure of supply

Supplier Workshop PurposeSupplier Workshop Purpose


Focus is to get Focus is to get specific supplier specific supplier

to deliver all to deliver all orders orders

100% OTIF100% OTIF

Focus is to get Focus is to get specific supplier specific supplier

to deliver all to deliver all orders orders

100% OTIF100% OTIF

PeopleProcesses

Poor communication& unreliable promises

Supplier lack of goals

Manufacturing Material

Order Placement

Supplier Projected Requirements

Machine Availability(Make our orders a top priority) Obsolete, Spoiled, Out of date, Non availability

Not to spec

Stoppages & Breakdownsdue to people, power and equipment

No carrots & sticks(rewards& penalties)

Materials Free Issue

Ordermanagement

Stores and Goods Receiving

Upstream materials long / variable lead time

Untrained, low capability, low commitment to value

Sub Contracted

Focus using Fishbone ToolFocus using Fishbone Tool


Key Improvement GoalsKey Improvement Goals

GoalGoal Supplier Supplier Value Value HowHow WhenWhen

Improved Supply Assurance & RFTQ 100%OTIF

Cost & Cash Planning and Cost Avoidance

Supply Chain Improvement & Lead Time Reduction

Net Value Improvement & innovation


Define &

Measure

Educate

Improve

Control Define &

Measure

SRM – DMAIC TimelineSRM – DMAIC Timeline


Business PrioritiesBusiness Priorities

The Board, Executive The Board, Executive Committee, Shareholders, Committee, Shareholders, Employees, Customers, Employees, Customers, Suppliers & Competitors are Suppliers & Competitors are focused on business focused on business financial performance and financial performance and outlookoutlook


Supply PrioritiesSupply Priorities

Stakeholders, Management, Stakeholders, Management, Supply Chain, Supply Chain, Procurement and Suppliers Procurement and Suppliers are normally focussed on are normally focussed on AQCSI (Supply Assurance, AQCSI (Supply Assurance, Quality, Costs, Service and Quality, Costs, Service and Innovation), Cash (Assets, Innovation), Cash (Assets, Payment, Inventory) & Payment, Inventory) & Response TimesResponse Times

© the delos partnership 2005 dairygold workshop supplier relationship management

Documents

levels of supplier performance

supplier relationshipowns

profitable supplier

specificssmall supplier

performance of suppliers

suppliers performance

net total value

improved total value