five best supply management practices in use today

The Five Best Supply Management

Practices in Use Today

by F. Michael Babineaux, CPSM, C.P.M., A.P.P.

President/CEO

Babineaux Educational Services and Training, Inc.

www.BESTraining.com

901.853.0539

http://www.bestraining.com/

Who Am I?

• F. Michael “Mike” Babineaux, CPSM, C.P.M.

– 40+ years Supply Management Experience

– 30 year FedEx Veteran

– SCM Educator and Trainer

• Babineaux Educational Services and Training, Inc.

• www.BESTraining.com

• 901.853.0539

http://www.bestraining.com/

Topic

The Five Best Supply

Management Practices in Use

Today

World Class Excellence --

Strategic Processes

Develop Commodity/

Purchase Family Strategies

Establish and Leverage a

World-Class Supply Base

Establish Appropriate

Strategic Alliances

INTEGRATED AND

ALIGNED

Supplier Development and Quality

Manage Costs Strategically Across the

Supply Chain

Integrate Suppliers into New Product &

Service Development

Integrate Suppliers into the Order Fulfillment

Process

World Class Excellence --

Enablers

EstablishGlobally Integrated and Aligned P&SC Strategies/Plans

INTEGRATED

AND ALIGNED

Develop Organization and Teaming

Strategies

Deploy

Globalization

Develop Procurement and

Supply Chain Measurements

Develop and Implement Enabling IS/IT

Systems

Establish Human Resource

Development/ Training

12 World Class Supply

Management Practices

Strategic Processes

• Procurement Strategy

Development

• Supplier Integration

• Leverage the Supply Base

• Develop Strategic

Alliances

• Quality Management

• Cost Management

Enabler Processes

• Strategic Goal Alignment

• Teaming Strategies

• Performance Measurement

• Globalization

• Information Systems

Integration

• Human Resource

Development

The Five Best

1. Strategic Goal Alignment

2. Procurement Strategy Development

3. Supplier Integration

4. Teaming Strategies

5. Performance Measurement

Strategic Goal Alignment

"Strategic Performance

Measurement for Purchasing and

Supply,“(A CAPS Research study in collaboration with

McKinsey & Co)

“Best-in-class companies align the strategy

and objectives of the supply management

organization with those of the rest of the

organization."

What happens when . . .

Supply Chain

Strategy

Company

Strategy

Internal

Customer

Strategy

YouMisalignment Creates Confusion for


• Goal Alignment Concepts

– Vertical Alignment

• Business Vision & Mission

– Low cost producer

• Key Corporate Objectives

– Reduce expenses

• Supply Management Goals

– Cost reduction

• Individual/Management

Performance Objectives

– Cost Savings

Vision

Mission

Objectives

Goals

IPO/MBO



– Vertically aligned

– Horizontally aligned

• Strategic objectives of strategic business units

• Strategic objectives of functional groups.

– Conflict

» Bulk buying discount vs. Inventory holding cost





• Stakeholder Alignment Process

Evaluate

Relationship

Evaluate

Levels of

Alignment &

Involvement

Identify

Stakeholder

Groups

Evaluate

Importance





• Stakeholder Alignment Process

Define

Outcome

Of

Alignment

Develop

Alignment

Strategies

Implement

Alignment

Strategies

Tract Results

& Design

Follow up

Actions





– Externally aligned

• Customers and Suppliers

Visible top management direction and support

Clearly defined strategy and goals

Buy-in from key stakeholders

Establishment of uniform metrics

Implementation of cross-functional/ cross-

organizational teams

Internal and external education and training

Information technology and systems support

Elimination of functional barriers

Customer focus

Continuous communication and feedback throughout

the supply chain

Critical Success Factors to

Achieving Alignment


Achieving Alignment

Rating Exercise

Factor Rate

• Visible top management direction and support ____

• Clearly defined strategy and goals ____

• Buy-in from key stakeholders ____

• Establishment of uniform metrics ____

• Implementation of cross-functional teams ____

• Internal and external education and training ____

• Information technology and systems support ____

• Elimination of functional barriers ____

• Customer focus ____

• Continuous communication and feedback ____


Achieving Alignment

Weighting and Rating

Factor Weight X Rate = ____

• Visible top management direction and support ____ _____ ____

• Clearly defined strategy and goals ____ _____ ____

• Buy-in from key stakeholders ____ _____ ____

• Establishment of uniform metrics ____ _____ ____

• Implementation of cross-functional teams ____ _____ ____

• Internal and external education and training ____ _____ ____

• Information technology and systems support ____ _____ ____

• Elimination of functional barriers ____ _____ ____

• Customer focus ____ _____ ____

• Continuous communication and feedback ____ _____ ____

Total 100 ____

Key Point

“If you’re not singing the same

song, you’re just making a bunch

of noise and –

your performance will suffer”

The Best Supply Management

Practices






Procurement Strategy Development

• Procurement Decision Tool

– Market Complexity

– Degree of Competition

– Geographical Dispersion

– Supplier Cooperation

“Price concessions and

collaboration”




– Impact on Business

• Risk

• Value

“What happens if you don’t have it?”




– Impact on Business

– Prioritization

• High to Low

High

High

Low

Procurement Decision Tool

Business

Impact

Marketplace Complexity

Low

High

LowHigh

Routine

Procurement Decision ToolRoutine Quadrant Characteristics

• Many capable suppliers

• Fewer total dollars spent

• Low priority items

• May consume a disproportionate amount of time and

dollars to acquire

• Developed quality and technology

• Able to move easily between suppliers--low

switching costs

Business

Impact


Low

High

Low High

StrategicLeverage

Routine Bottleneck

Procurement Decision ToolRoutine Quadrant Strategy

• Focus - Removing transaction

effort

– Standardized contracts

– p-cards

• The primary goal

– Minimize the procurement costs of

these items.

Business

Impact


Low

High

Low High

StrategicLeverage

Routine Bottleneck


Business

Impact


Low

High

LowHigh

Routine Bottleneck

Procurement Decision ToolBottleneck Quadrant Characteristics

• Small number of suppliers

• Low to medium annual dollars

• Customized specification and technology

Business

Impact


Low

High

Low High

StrategicLeverage

Routine Bottleneck

Procurement Decision ToolBottleneck Quadrant Strategy

• Focus on continuous supply

– Reduce Custom specifications

or technology

– Purchase in quantity

– Monitor Inventory closely

– The relationship is important but, search

for alternative suppliers

Business

Impact


Low

High

Low High

StrategicLeverage

Routine Bottleneck


Business

Impact


Low

High

LowHigh

Leverage

Routine Bottleneck

Procurement Decision ToolLeverage Quadrant Characteristics

• Greater number of suppliers

• Medium to high annual dollars

• Low risk to obtain, but major disruption

• Multiple users

• Developed quality and technology

• Able to move easily between suppliers

Business

Impact


Low

High

Low High

StrategicLeverage

Routine Bottleneck

Procurement Decision ToolLeverage Quadrant Strategy

• Focus on volume

– Leverage the organization’s

volume to get lower prices

– Combine user requirements

– Form categories of items

Business

Impact


Low

High

Low High

StrategicLeverage

Routine Bottleneck


Business

Impact


Low

High

LowHigh

StrategicLeverage

Routine Bottleneck

Procurement Decision ToolStrategic Quadrant Characteristics

• Few capable suppliers

• Product/services success critical

• Unique or customized items

• Unable to move between suppliers easily

• Cost analysis yields high benefits

• Unproven or undeveloped technology

Business

Impact


Low

High

Low High

StrategicLeverage

Routine Bottleneck

Procurement Decision ToolStrategic Quadrant Strategy

• Focus on Building Relationships

– Collaborative or

interdependent relationships

(e.g. Strategic Alliances)

Business

Impact


Low

High

Low High

StrategicLeverage

Routine Bottleneck


Business

Impact


Low

High

Low High

StrategicLeverage

Routine Bottleneck

Key Point“If you use the same strategy to

buy airplanes as you do to buy

pencils,

your performance will suffer”


Practices






Supplier Integration in New

Product/Service Development

“Firms looking for ways to –

– decrease concept to customer

development time

– improve quality

– significantly reduce the cost of the

resulting product

are involving suppliers earlier in the design

process.” “Best of the Best” by Aberdeen Research



• Early Supplier Involvement

– Manufacturing/Service Design Process

• Use of Supplier expertise and experience




– Manufacturing/Service Design Process

– Product/Service Development

• Prototypes/Demonstrations

• Replacement materials/alternative methods




– Manufacturing/Service Process


– Cost

• Cost projections of a new product or service






– Cost

– Quality

• Supplier knowledge of

quality requirements






– Cost

– Quality

– Technology

• Influence final

material/application

selection






– Cost

– Quality

– Technology

– Design

• Experience in serving a

particular market






– Cost

– Quality

– Technology

– Design

– Co-Development

• Sharing costs






– Cost

– Quality

– Technology

– Design

– Co-Development

– Cycle Time

• Through reduction in

redundancies




– Confidentiality Issues

• Proper controls

– Disclosure Parameters

– MN-DAs

– Dispute resolution

clause




– Confidentiality Issues

– Product/Service Life Cycle

• Pre-commercialization

• Introduction

• Growth

• Maturity

• Decline

Key Point

“Suppliers know more about

what you buy than you do, so if

you don’t use them, your

performance will suffer”


Practices






An Action Plan for Creating

Effective Teamsby Robert M. Monczka, Ph.D., C.P.M. and

Robert J. Trent, Ph.D.

Studies by MSU reveals

– 80% of Best-in-Class organizations

emphasize the use of Supply Management

Project teams.

Teaming Strategies

• Procurement Project Teams

• Cross-Functional Teams

Teaming Strategies

• Procurement Project Teams

– Definition - The application of project knowledge,

skills, tools and techniques to procurement

project activities to meet customer requirements

Teaming Strategies

• Procurement Project Team Stages– Initiation

• Root Cause analysis

• SWOT

• Feasibility Analysis– Net Present Value

– ROI

• Business Case

Teaming Strategies

• Procurement Project Team Stages– Planning

• Scope Development

• Roles & Responsibilities

• Project Plan Approval

Teaming Strategies

• Procurement Project Team Stages– Execution

• Change Management

Teaming Strategies

• Procurement Project Team Stages– Monitoring & Control

• Contract Management

– Performance measurement

– Risk Monitoring

• Project Management Software

– PERT & Gant Charts

• Performance Reporting

– Cost

– Schedule

Teaming Strategies

• Procurement Project Team Stages– Closure

• Process

• Post Project Audit

Teaming Strategies

• Cross-Functional Teams– Purpose

• To permit different viewpoints and perspectives

Teaming Strategies


– Supply Management Roles

• Leadership

• Facilitation

• Contributor

Teaming Strategies



– Advantages/Disadvantages

• Consensus Building

• Group Think

Teaming Strategies



– Advantages/Disadvantages

– Organizational cultures

• Traditional vs. Team

• Skill Considerations

• Personality Considerations

• Leadership

Key Point

“Two heads are better than one,

so if you’re not including them in

the decisions, your performance

will suffer”


Practices






Performance MeasurementAberdeen Benchmarking Research

• Best-in-Class companies are more than 2.5x more likely to use performance monitoring, management, and optimization solutions.

• Best-in-Class companies are 1.67x more likely to use portals or dashboards for consolidating and reporting of performance data.

Performance Measurement

Department Staff Suppliers


• Department

– Organizational Expectations

• Objectives Congruence

– Organization

– Suppliers & Customers


• Department

– Organizational Expectations

• Objectives Congruence

• Scorecard

– Quantitative

– Qualitative


• Department

– Reasons for Scorecard

• Determine effectiveness

– To objectives

– To department management

• Measure improvement/deterioration

• Provide Resources

• Determine Value


• Staff

– Issues

• Objective Alignment

– Vertical & Horizontal

• Success Criteria

– Known in advance

• Appraisal Factors

– Quantitative

– Qualitative


• Staff

– Issues

– 360o Reviews

• Users

• Management

• Peers

• Suppliers

• Others


• Staff

– Issues

– 360o Reviews

– Feedback

• Timely

• Corrective actions

• Individual Development Plans


• Suppliers

– Scorecards

• Qualitative measures

• Quantitative measures

• Price, Delivery & Quality (PDQ)

• Other/specific


• Suppliers

– Scorecards

– Others/specific

• Cycle/Lead time Reductions

• Productivity Improvements

• Flexibility and Responsiveness

• e-Commence Capabilities

• Innovation

Key Point

“You can’t manage what

you don’t measure, so if

you’re not measuring

performance . . .”

The Five Best Supply

Management Practices in Use

Today






Thanks for your Time and

Attention

five best supply management practices in use today

Business

supply management organization

alignedsupplier development

corporate strategy

class companies

aligneddevelop organization

use todayby

individual goals

michael babineaux