May 9 th, 2016 Supplier Relationship Management Kurt Albertson Principal, Procurement Advisory

© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group Procurement Benchmark-2011 Objectives  What is the importance of supplier performance management?  What does a formal supplier relationship management framework look like?  Question: Who is responsible within the State of GA for managing supplier performance?

© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The objectives for Supplier Relationship Management are dependent of the vision of Procurement What dimensions of SRM performance for key suppliers would you like to improve? (% of responses – multiple responses allowed) “Agility” as antidote to Risk Compliance focused

© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Driving innovation with key suppliers is done at the higher segments of Procurement’s value proposition Supply Assurance Price Total Cost of Ownership Demand Management Value Mgmt. SRM Evolution Procurement Value Supplier qualification, operational reviews, etc. Contract monitoring Collaborative cost reduction Collaborative planning, demand shaping, “customer of choice” focus Strategic relationship mgmt., support for innovation and growth enablement Supplier Scorecards

© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group Procurement Benchmark-2011 Unfortunately today, Customer-facing CRM processes are generally more mature than supplier-facing ones High Low Supplier satisfaction surveys Supplier [account] mgmt. Supplier discovery Supplier contract management Supply analytics/ intelligence Sourcing execution Category mgmt. Self-service supplier portal Supplier help desk Supplier’s supplier Supplier innovation Maturity StrategizeInnovateSell/BuyAttractFulfillServe/Support Customer satisfaction surveys Self-service customer portal Sales force automation/ quotation mgmt. Customer analytics/intelligence Customer contract management e-marketing Customer help desk Customer account mgmt. Customer account mgmt. Customers’ customer Channel mgmt. Supplier-facingCustomer-facing Source: The Hackett Group

© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. There are three key components of an SRM process along with supporting system functionality Performance Management SRM Governance Supplier Stratification SRM Definition & Best Practices SRM Systems Georgia now offers a Contract Management/Administration class

© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. An SRM program can yield significant benefits ● Provide consistent expectations and clear contacts for suppliers ● Maximize effectiveness and overall capabilities of strategic supplier relationships ● Improve supplier performance by holding suppliers and buyers accountable ● Reduce relationship risk through improved visibility and management ● Expand the level of information sharing and trust between buyer and strategic suppliers ● Recognize publically superior performance of high-performing suppliers ● Improve efficiency of SRM processes ● Develop a consistent organizational approach for managing suppliers and improve manageability through common practices and tools

© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. SRM Top performers will have higher value contribution from SRM than Sourcing in 3 years Total monetary value delivered from SRM processes as a percentage of total spend CurrentlyThree Years Sourcing Savings: 3.37%4.13%3.60%5.00% “As global sourcing finance head, I monitor the financial performance impact of global sourcing on top and bottom line. Of the overall benefit pie, we are now starting to see shift toward higher cost avoidance contributions compared to P&L savings. We are just kicking off a more centrally driven SRM program. I think that not only will a robust SRM program drive the next wave of savings…”

© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Supplier Stratification provides clear guidelines for defining, prioritizing, and allocating resources to supplier management Performance Management SRM Governance Supplier Stratification SRM Definition and Best Practices SRM Systems Supplier Stratification Definition Supplier Stratification Expectations Supplier Stratification Execution Systems Strategy SRM Model Definition Teams, Roles and Competencies Definition Ongoing Governance Management SRM Adoption Management Performance Management Definition Performance Management Tool Development Ongoing Supplier Performance Management Systems Management Best Practices

© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group Procurement Benchmark-2011 Typical supplier classification hierarchy Tactical Important Critical Strategic Supplier characteristics Percent of active suppliers Supplier classes % 0.5-3% 2.5-7% 89-97% 80% spend 20% spend Source: The Hackett Group, 2012 Strategic in nature; high impact to business Critical to achieving long-term goals Require significant resources Key to category operations Potential incremental value from developing ongoing relationships Difficult to replace Short-term relationships More commodity-centric Largely cost/delivery-driven Short-term, one-off, transactional relationships

© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Supplier segmentation criteria should be aligned with objectives of Supplier Relationship Management program Please select the segmentation criteria that you formally use in your supplier segmentation/tiering criteria? (% of respondents – multiple selection allowed)

© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. SRM expectations by tier TiersExpectations Strategic Company-Wide Partners Dedicated cross-functional account team Formal joint objective and goal planning process Active joint identification of opportunities to expand relationship across the Company Aggressive pursuit of joint value opportunities Executive-to-executive relationships Formal multi-level governance process Experienced Supplier Relationship Managers Strategic Suppliers Dedicated account team with cross-functional participation Active joint identification of opportunities to expand relationship within Function Aggressive pursuit of joint value opportunities within Function Formal multi-level governance process Experienced Supplier Relationship Managers Core SuppliersFormal account management process Communication of objective to suppliers Formal governance process Limited supplier relationship management investment Basic SuppliersGovernance process consists of ad hoc escalations Interaction limited to operational and transactional events Limited plans for future business Require re-approval annually

© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. SRM Governance provides the tools and structure required consistently manage supplier relationships Performance Management SRM Governance Supplier Stratification SRM Definition and Best Practices SRM Systems Supplier Stratification Definition Supplier Stratification Expectations Supplier Stratification Execution Systems Strategy SRM Model Definition Teams, Roles and Competencies Definition Ongoing Governance Management SRM Adoption Management Performance Management Definition Performance Management Tool Development Ongoing Supplier Performance Management Systems Management Best Practices

© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. SRM governance model: Core team is critical Operational Management Executive Leadership Business Office Sales Management Contracts Management Financial Performance Mgmt Legal and Audit Support Delivery Management Project Management Transition Management Performance Management Supplier Risk Management Supplier Development Executive Sponsor Technology Management SRM Core Team Escalation Management Operational Management Lead Sourcing LeadSRM Lead Support Leadership Communications Management Functional Group Personnel Corporate Procurement Personnel Other Supporting Functions Either GP or Client Personnel Either CP or FG Personnel

© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Performance Management provides the structure to maximize supplier performance and drive continuous improvement Performance Management SRM Governance Supplier Stratification SRM Definition and Best Practices SRM Systems Supplier Stratification Definition Supplier Stratification Expectations Supplier Stratification Execution Systems Strategy SRM Model Definition Teams, Roles and Competencies Definition Ongoing Governance Management SRM Adoption Management Performance Management Definition Performance Management Tool Development Ongoing Supplier Performance Management Systems Management Best Practices

© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Contact Information The Hackett Group Suite N Perimeter Center West Atlanta, GA Phone: Martin House 5 Martin Lane London EC4R 0DP Phone: Torhaus Westhafen Speicherstrasse Frankfurt am Main, Germany Phone: , rue de Port Mahon Paris, France Phone: Strawinskylaan 3051G, 1077 ZX Amsterdam, The Netherlands Phone: Kurt Albertson Associate Principal, Procurement Advisory Phone: HACKETT