relationship continuity management how do you maintain supplier relationships 1
TRANSCRIPT
Relationship Continuity Management
How Do You Maintain SupplIer Relationships
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Today’s State Of Supplier Relationships
Copyright 2000 by Supply Chain Technology News and Penton Media Inc. Used with permission.
“It’s the next level of real-time vendor relations. But we’re still beta testing.”
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Vested Is A Methodology
Five Rules 10 Contract Elements
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The 5 Rules Of Vested
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Governance is One of the Five Rules
We codified their success into a methodology based on Five Rules
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• Supplier Relationship Management (SRM)
– SRM is the practice of creating mechanisms to increase the
efficiency and effectiveness of how a company manages its suppliers
• Some SRM efforts are designed to build deeper relationships
that foster improved collaboration and innovation.
• However, SRM techniques alone is not best practice and
inadequate in Vested relationships.
• We suggest that you deploy SRM practices with a unique
spin by putting on your what’s-in-it-for-we (WIIFWe) hat, and
develop processes for jointly managing the business, not just
managing the supplier.
Manage The Business, Not Just The Supplier
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A Shift In Approach…
• Getting the supplier to meet my needs
• It’s in the contract, now it’s the supplier’s problem
• Blame and punish the supplier
• Unpleasant surprises
• Finding a way to meet our mutual needs
• Work together to achieve performance and compensation goals
• Communicate the issues, jointly find solutions
• Integrated planning and communications
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Manage the Business…Not Just the Supplier
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What Goes into “Governance”
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The Vested framework incorporates four elements:
1. Element 7: Relationship Management
2. Element 8: Transformation Management
3. Element 9: Exit Management
4. Element 10: Special Concerns and External Requirements
Vested Governance Framework
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The Relationship Management element of your agreement should contain six key components, each serving a different function
1. Create a tiered management structure
2. Establish separate roles service delivery, transformation, and commercial management
3. Establish peer-to-peer communications protocols
4. Develop a communications cadence, tempo, or rhythm
5. Develop a process to maintain continuity of resources
6. Establish a performance management program
Element 7: Relationships Management
Strategic Drift Disease
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• Strategic drift occurs when buyers and suppliers don’t work to maintain their relationship and/or work to update strategic priorities
• Typically happens after a first generation outsourcing deal has been successful– QBRs begin to slip to bi-annual or annual– Suppliers loose sight of priorities and as such begin to not
be proactive in driving solutions to problems or connecting new solutions to new priorities
• Typically results in buying company thinking the supplier is not proactive – and seeking new suppliers when in reality they already have a good supplier
New Sheriff In Town Syndrome
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• The New Sheriff in Town often occurs when a new leader joins the buying company and wants to shake things up
• Classic example is from GM– Randy Mott – CIO of GM– Made the decision to in-source 90% of the IT work.– HP, which won GM’s Supplier of the Year award in
2010 and 2011 for its “dedication and loyalty” will stand to lose more than $1 billion in revenue and hundreds of key employees
http://www.vestedway.com/ailment-11-new-sheriff-in-town-syndrome/
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We Studied Some Of The World’s Best….
• P&G (Real Estate/Facilities Management)
• Microsoft (BPO)
• McDonald’s (Supply Chain)
• U.S. Dept. of Energy (Environmental Services)
• State of Minnesota Dept. of Transportation (Construction)
• Integrated Management Services (Staffing)
• Diversey (IT)
• Water for People (non-profit NGO support in developing countries)
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Jim Skinner
CEO, Retired
McDonald’s
Jim Skinner From McDonald’s Will Help Tell The Story…
Some videos are an excerpt from an interview with Jim Skinner for CNBC
Source: Video: http://video.cnbc.com/gallery/?video=3000098271Source: Photo: Courtesy of McDonald’s
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Ray Kroc
Founder
McDonald’s
Ray Kroc’s Philosophy
“None of us is as good as all of us.”
Source: http://www.biography.com/people/ray-kroc-9369349
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• Founder Ray Kroc based the McDonald’s philosophy on that of a three-legged stool
• Each leg represents a member in the System
– McDonald’s Corporation
– Suppliers
– Franchisees/Owner-Operators
• For one to prosper, each leg must prosper
The McDonald’s “System”
Source: http://common3.csnimages.com/lf/49/hash/11311/5161408/1/Stool-International-Asian-Antique-Kids-Stool.jpg
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“Everyone understands they are trying to create wealth for all three legs of the stool. As they “grow the pie,” there is more for all.”
Creating Value – Not Competing
Three Legged StoolMcDonald’s System’s First Philosophy
Source: http://common3.csnimages.com/lf/49/hash/11311/5161408/1/Stool-International-Asian-Antique-Kids-Stool.jpg
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“McDonald’s wants the relationship with the person. If
a person is assigned to the account – it is constant. To McDonald’s – suppliers are
part of the planning and execution of their Plan to Win.
It’s not just business – it’s personal and they want to see the person that is helping them
succeed or fail.”
It’s Not Just Business….it’s Personal
Ed SanchezCEO
Lopez Foods
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Ted Perlman
Chair of the Board
HAVI Global Solutions
Self-Governance Is a Key
“My whole role in life as a supplier is not letting McDonald’s consciously make a mistake.”
Source: http://www.havigroup.com/about-us#four_about
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Doubling Beef Patty Production
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Who ran out of chicken during the Asian Avian Flu crisis?
Focusing on Responsiveness
“McDonald’s... [is] far more rigorous in
checking for bacteria and dangerous
pathogens. They test the ground beef they buy five to 10 times more often than the
USDA tests beef made for schools during a typical production day.”
Safety
Peter Eisler, Blake Morrison, and Anthony DeBarros
“Fast-food standards for meat top those for school lunches” Dec 9th, 2009
Source: http://usatoday30.usatoday.com/news/education/2009-12-08-school-lunch-standards_N.htm
In January 2013
McDonald’s met its goal of serving 100%
Marine Stewardship
Council certified fish.
Sustainability
Source: http://www.huffingtonpost.com/2013/01/24/mcdonalds-fish-sustainable_n_2542502.html
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The Plan To Win Delivers
Photos Source: The McDonald’s Revitalization: Getting Better, Not just Bigger
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The System – A Real Winner
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Kate Vitasek
Faculty, Univ. of Tennessee
Center for Executive Education
Contact Me!
www.vestedway.com
Our next 3 day Executive Education course is Nov 5-7
Register for our free Vested Orientation online course here
Source: http://www.biography.com/people/ray-kroc-9369349
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