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Supplier Mgt. Slide 1 © The Delos Partnership 2005 Supplier Relationship Management Module 8 – Supplier Performance & Benefits Tracking Supply Measures Supplier Management & Positioning Top 10 Supplier Assessment Programme SRM Workshop Agenda Integrated Benefits Tracking
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Supplier Mgt. Slide 2 © The Delos Partnership 2005 Supplier 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 Exploitable Exploitable Informal Approved Nuisance - Parasite Preferred Supplier Strategic Partner
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Supplier Mgt. Slide 3 © The Delos Partnership 2005 Supply & Procurement Measures Performance Measure Performance Measure Sales Profit and Growth Cost of Sales People Costs AssetsInventoryCreditors Perfect Customer Orders Lead Time Reduction RFTQ100%OTIF Supplier Schedule Achievement On Time New Products Total Net Value Delivered
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Supplier Mgt. Slide 4 © The Delos Partnership 2005 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
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Supplier Mgt. Slide 5 © The Delos Partnership 2005 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 Stages
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Supplier Mgt. Slide 6 © The Delos Partnership 2005 Positioning Supplier Managers Supplier Importance Current relationship Negotiation & Deal Status Current Communication Involvement levels Performance Measures Key Considerations
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Supplier Mgt. Slide 7 © The Delos Partnership 2005 Risk Ensure Supply Partner Value Partner Value Minimise Attention Minimise Attention Drive Savings Drive Savings Strategy Positioning
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Supplier Mgt. Slide 8 © The Delos Partnership 2005 Workshop What are the current current Supplier Assessment tools for the Top Suppliers and what needs to be done to ensure suppliers deliver improved Total Value?
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Supplier Mgt. Slide 9 © The Delos Partnership 2005 Typical Starting Point There is huge and unrecognised value in supplier performance assessment. Internal Customers and most internal functions have their favourite suppliers. Most suppliers have made value contributions and are proud of their performance. Most suppliers will be Silver Gilt or below. Senior Management commitment to supplier performance assessment is normally low and respective senior management may have only met at social events. The lack of user requirement specifications and internal team working can mean that overall supplier performance is not recognised and understood Internal resistance to the programme may occur
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Supplier Mgt. Slide 10 © The Delos Partnership 2005 Supplier 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 Management 2)Quality, Regulatory and H.S.E. 3)Cost (Price) 4)Delivery 5)Process and Service 6)Innovation 7)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.
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Supplier Mgt. Slide 11 © The Delos Partnership 2005 Supplier Ranking & Performance There 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 BRONZE BRONZE(New) SILVER SILVER(Development) SILVER GILT SILVER GILT(Approved) GOLD(Preferred) PLATINUM PLATINUM(Strategic) SUPPLIER ELIMINATION
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Supplier Mgt. Slide 12 © The Delos Partnership 2005 SUPPLIER PERFORMANCE & VALUE GAP ASSESSMENT Assessment Measure BronzeSilver Silver Gilt GoldPlatinumScore Risk Management Assessment Quality & HSE Performance Cost Performance Delivery Performance Process & Service Performance Innovation Performance Business Value & Net Total Value Delivered Bronze = New Supplier Silver = Development Supplier Silver Gilt = Approved Supplier Gold= Preferred Supplier Platinum= Strategic Supplier Assessment Measures
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Supplier Mgt. Slide 13 © The Delos Partnership 2005 Supplier Performance Assessment The assessment is based on the net total value delivered by the supplier in the past; Involves a discussion on where performance has improved, declined or remain static versus each total value element. Involves a joint definition and agreement to specified future value added goals that are directly part of the business vision, strategy and priority.
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Supplier Mgt. Slide 14 © The Delos Partnership 2005 Supplier Relationship Management Strategic Critical Suppliers – Workshop Agenda
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Supplier Mgt. Slide 15 © The Delos Partnership 2005 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
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Supplier Mgt. Slide 16 © The Delos Partnership 2005 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 Purpose
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Supplier Mgt. Slide 17 © The Delos Partnership 2005 Focus is to get specific supplier to deliver all orders 100% OTIF Focus is to get specific supplier to deliver all orders 100% OTIF People Processes 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 & Breakdowns due to people, power and equipment No carrots & sticks (rewards & penalties) Materials Free Issue Order management Stores and Goods Receiving Upstream materials long / variable lead time Untrained, low capability, low commitment to value Sub Contracted Focus using Fishbone Tool
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Supplier Mgt. Slide 18 © The Delos Partnership 2005 Baseline Current Value
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Supplier Mgt. Slide 19 © The Delos Partnership 2005 Key Improvement Goals GoalSupplierValueHowWhen Improved Supply Assurance & RFTQ 100%OTIF Cost & Cash Planning and Cost Avoidance Supply Chain Improvement & Lead Time Reduction Net Value Improvement & innovation
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Supplier Mgt. Slide 20 © The Delos Partnership 2005 Define & Measure EducateImproveControl Define & Measure SRM – DMAIC Timeline
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Supplier Mgt. Slide 21 © The Delos Partnership 2005 Benefits Tracking Integrated Reporting of Supply Results Benefits Tracking Integrated Reporting of Supply Results
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Supplier Mgt. Slide 22 © The Delos Partnership 2005 Business Financials The Board, Executive Committee, Shareholders, Employees, Customers, Suppliers & Competitors are focused on business financial performance and outlook The Board, Executive Committee, Shareholders, Employees, Customers, Suppliers & Competitors are focused on business financial performance and outlook
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Supplier Mgt. Slide 23 © The Delos Partnership 2005 Supply Financials Stakeholders, Management, Supply Chain, Procurement and Suppliers are normally focussed on AQCSI (Supply Assurance, Quality, Costs, Service and Innovation), Cash (Assets, Payment, Inventory) & Response Times Stakeholders, Management, Supply Chain, Procurement and Suppliers are normally focussed on AQCSI (Supply Assurance, Quality, Costs, Service and Innovation), Cash (Assets, Payment, Inventory) & Response Times
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Supplier Mgt. Slide 24 © The Delos Partnership 2005 Reporting Timelines & Structures Procurement Relationship DailyWeeklyMonthlyQuarterly Senior Management Customer supply risk issues and immediate response if needed Brief informal overview Procurement Monthly Report Procurement Review Meeting Internal Customers & Stakeholders Customer supply risk issues. Customer claims or service issues Personal contact for two way update Relevant parts of the Procurement Monthly Report Review of KPI's and key issues Other key sister functions Customer supply risk issues. As and when required or if priority item needs resolution Relevant parts of the Procurement Monthly Report Review of KPI's and key issues Suppliers Customer supply risk issues and corrective actions. Weekly Performance Reports Transmission and review of performance and supply data Supplier Performance Assessment Meeting Procurement Team Customer supply risk issues, market information, visit and meeting reports Savings Log and Team Meetings Monitoring of results by supplier, by product vs. agreements and plan Performance appraisal - team and individual
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Supplier Mgt. Slide 25 © The Delos Partnership 2005 Quarterly Focus & Goals Quarterly focus documents should be produced for the complete procurement and supply chain team. Focus documents are an excellent way of ensuring team consensus and awareness of the overall business goals, overall functional goals and individual goals – all of which must be aligned. All quarterly goals – business, function and individual need to be S.M.A.R.T. All team members need to contribute to the quarterly focus followed by a commitment from all team members to write & share their smart goals.
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Supplier Mgt. Slide 26 © The Delos Partnership 2005 Smart Goal Definition Specific What is the specific goal? What is the benefit to the business? How can we measure the performance? Measurable How will the business measure the value of the goal? How will the business measure the volume of work? Achievable Achievable Does the business team/business support the goal? Can the goal be achieved with current resources? Realistic Is the goal realistic? Is there past experience in the business of this goal? Time limited How will progress be reviewed? What are the consequences if the goal deadline is missed?
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Supplier Mgt. Slide 27 © The Delos Partnership 2005 Results Tracking Cost Change is normally allocated against cost centres & monthly cost centre report and procurement report is produced. Stakeholders, customers, finance and procurement need to own the cost centre cost, results and performance change. A common results tracking system needs to be developed and agreed – tied into the business financials
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Supplier Mgt. Slide 28 © The Delos Partnership 2005 Results Tracking Key performance indicators show progress or deterioration versus the standard using overall total value, supplier and procurement performance change (i.e. not just price or quality) Cost avoidance must be against agreed market and competitor benchmarks. Performance and results need to be communicated on a monthly basis.
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Supplier Mgt. Slide 29 © The Delos Partnership 2005 Procurement Focus Examples Supply Assurance – Specific Quarterly Focus Areas Total Value plan – Specific Quarterly Focus Areas Improve purchasing processes – Specific Quarterly Focus
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Supplier Mgt. Slide 30 © The Delos Partnership 2005 Internal Benefits Tracking
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Supplier Mgt. Slide 31 © The Delos Partnership 2005 Category Total Value Plan
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Supplier Mgt. Slide 32 © The Delos Partnership 2005 Questions ?
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