digital disruption and procurement: next generation ... · impact on sourcing and portfolio...
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Digital disruption and procurement:
Next Generation Supplier Management
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BravoSolution | NZ Support Partner
Iain Livingstone
Procurement Manager
n3 Limited
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Strategic Procurement Technology Platform
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What is Supplier Value Management?
Supplier relationship management (SRM or SVM) is the discipline of strategically planning for, and managing, all interactions
with third party organizations that supply goods and/or services to an organization in order to maximize the value of those
interactions. In practice, SVM entails creating closer, more collaborative relationships with key suppliers in order to uncover
and realize new value and reduce risk. http://en.wikipedia.org/wiki/Supplier_relationship_management
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“SRM is about reducing the total cost of
doing business with each of your key
suppliers.” – Boeing
SRM involves more that reducing the prices relative to the PPI, it is also about lowering
the total cost of ownership and increasing value to the buying organization – Feller,
Shunk & Callerman
Aspects, Goals, Drivers, Models, & Expectations
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Demand Drivers & Areas of Benefit
SRM
SLM
SVM
SPM
Corporate
Social
Responsibility
(CSR / CR)
Resource &
Maturity
Management
Total Supplier
Cost
(TSC / TCO)
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Demand Drivers & Areas of Benefit
• Formal, legal, public constraints & requirements
• Shareholder and market value
• Environmental & ecological responsibility
• Responsibility for economic resources
• Responsibility for employees
• Health & safety
• Expectations of citizenship / population
• Supply chain, beyond Tier-1
Corporate Social Responsibility
SRM
SLM
SPM
CSR / CR
Resource
Maturity
TSC / TCO
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SRM
SLM
SPM
CSR / CR
Resource
Maturity
TSC / TCO
Demand Drivers & Areas of Benefit
• Performance management
• Sourcing Selection
• Total Cost of Ownership (TCO)
• Entire value chain consideration
• E-2-E optimization
• Assurance of Supply
• Quality\Improvement methods
• Root cause elimination
• Innovation
Total Supplier Cost (TSC)
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SRM
SLM
SPM
CSR / CR
Resource
Maturity
TSC / TCO
Demand Drivers & Areas of Benefit
own supplierorganization organization
interactions
Communication
Relationship
Activities
Technology / Tool
Strategic
Decisions
• Coverage number of suppliers
• Supplier segmentation & guidelines
• Categories under management
• Compliance reporting
• Process standards
• External resource management
• Industry 4.0, Value Network, Megatrends
Resource & Maturity Management
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Organizational Goals?
• “Establish and implement a company-wide standardized
methodology”
• “Attain global transparency on spend, supplier
performance, supplier profiles”
• “Assure cross-functional and cross-organizational
alignment on supplier performance with
impact on sourcing and portfolio decisions”
• “Define targets with category/supplier managers and
corresponding action plans”
• “Improve supplier performance to drive cost reduction and
result”
• “Mitigate supplier and supply chain risks”
• “Build lasting and strategic relationships with
(important) suppliers”
• “Professionally manage the interface to the supplier –
consistent framework on
performance feedback and communication”
• “Ensure compliance and keep inline with contract,
negotiated price, bonus”
• “Fulfil regulatory constraints, auditing expectations
and certification needs”
• “Have continuity plans in place and handle supplier
replacements”
• “Ensure business principles, quality standards and
corporate responsibility”
• “Dramatically increase supply base performance and
compliance visibility”
• “Improve spend savings through improved performance”
• “Having a supplier dossier at hand and all
information centralized in one supplier database”
• “Retain and fully realize negotiated savings”
• “Improve the competitive edge in the field of procurement”
• …….
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Strategic Suppliers• Strategic or Critical
• Preferred or Advanced
Core Suppliers• Medium spend
• Regional important
Base suppliers• Local suppliers
• Small spend
Generic segment Logic
Dedicated logic
considering e.g.
• Distinctiveness
• Collaboration
• Specification
H
L
L H
Su
pp
ly&
ma
rke
t
constr
ain
ts
Business Impact
Supplier SegmentsTypically 30-
100 suppliers
company-
wide
Where To Get Started?
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• Supplier Segmentation / Portfolio / Classification
• Supplier Survey / Database / Dossier / 360 view
• Supplier Qualification
• Supplier Evaluation / Performance Management
• Supplier Development / Improvement
• Supplier Risk Management
• Sourcing and Optimization
• Contract Lifecycle Management
• Analytics
Common Technology Elements
Supplier
Qualification
Supplier
Evaluation
Supplier
Development
SVM
Relationship
Mgnt.
Risk Mgnt.
Segmentation
Classification
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Calculation of Benefit (Value, Return)
Improvement Potential x Addressable Spend= Benefit
Perf
orm
an
ce C
ost
Qu
ali
ty
Su
sta
inab
ilit
y
To measure the quantitative return to
an organization we recommend that
our clients capture the expected
improvement in the following
dimensions and multiple it against the
amount of spend to be impacted by the
changes:
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Addressable spend
Current
statusTarget
Increased
by
Applicability
addressable
spend
Saving
PotentialTraditional savings
Optimized savings
with
BravoSolution
Real savings
(absolute)
Relative on
spend
Onboarding and Qualification 25% 85% 60% 85% 0.3% 237,788$ 808,478$ 570,690$ 0.15%
Performance Management 20% 65% 45% 80% 0.5% 298,400$ 969,800$ 671,400$ 0.18%
Supplier Development 25% 80% 55% 30% 1.0% 279,750$ 895,200$ 615,450$ 0.17%
Supplier Database / 360 20% 85% 65% 100% 0.1% 74,600$ 317,050$ 242,450$ 0.07%
Risk and Contingency Management 10% 65% 55% 85% 0.3% 95,115$ 618,248$ 523,133$ 0.14%
Corrective Action 45% 80% 35% 80% 1.5% 2,014,200$ 3,580,800$ 1,566,600$ 0.42%Working Processes, Reactions, Delighters etc. 30% 80% 50% included in above calculation
$2,999,853 $7,189,575
BravoSolution added return $4,189,723
% of total spend 0.80% 1.93% 1.12%
$373,000,000
Effective Supplier Value Management (SVM)
Customer
Provided
Bravo
Customer
Experience
Research:
State
of Flux
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Plan & Manage Supplier Interactions
Maximizing Value through Strong Supplier Relationships enabled through
Digital Disruption & Innovative Technology
Value Chain and Shareholder Value Improvement
Determine Strategy Beyond Cost
Expand Procurement Contribution & Value
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Announcing | BravoAdvantage 17
Questions?
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Thank Youhttp://bravosolution.com.au/contact/