supply base rationalization

Supply Base Rationalization

Bob Liu, C.P.M.

Managing Director, CSCS International

Founder, www.scm-blog.com

http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html

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Agenda

From Purchasing to Supply Management


Pitfalls


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Purchasing was the last place to stay

Purchasing was the last place to stay before a person was let to go.– Prof. John Pearson, W.P. Carey School of Business, Arizona State University


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As Suppliers Become Important, so does Purchasing

Outsourcing increases the reliance on suppliers and the importance of purchasing

来源： AT Kearney, The New Procurement Mandate, 2001

More CEOs expect purchasing to add value More companies outsource design and manufacturing


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Supply ManagementPurchasing

Reactive, Fragmented and Internal Focused

PO Transactions Price and OTD focused Administrative, not business partners Supplier oriented

Proactive, Centralized and Market Driven

Supplier relationship Total cost of ownership Strategic resource, business partner Demand management oriented


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It’s Also a Culture Change

来源： Ron Nussle, Jr., President, ICR Group

采购

供应管理

· 围着订单转· 低价中标· Order Placers, not Business

Partners· Arms Length Relationship

· 围绕供应商· 确保供货· 供应商指标系统· 短期关系· 初步纳入供应商到新产品开发

· 长期关系· 供应商绩效更上层楼· 不单单是订单，而且是商业伙伴· 更复杂的关系，例如J V、供应商早期介入等

战略采购

生产阶段

新产品开发

战略采购

“Hunter” Model

“Shepherd” Model

Supply Management

Purchasing

Strategic Sourcing

Supplier managementSupply continuityKPIShort term relationshipSome supplier involvement into NPI

Long term relationshipSupplier developmentRelationships, not only ordersJV, alliance, ESI


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Case Study: EPC Becomes PEpC at Fluor

来源： Larry Jackson, VP, Strategic Sourcing at Fluor Corporation, 38th ECC Conference

Engineering

Procurement

Construction


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ISM Introduced New Certification Program

CPSM is focuses on Supply Management

Certified Purchasing

Manager

Certified Purchasing and Supply

Management

2008


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Supply Base Requires “Population Control”


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Supply Base Rationalization – A Journey in North America

～ 1970sCompetitive bidding

Many sources

～ 1990sSupply Base

Reduction

～ 2000sRationalization

Average Cost Savings 9% ！

Great savings achieved through supply base rationalization


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Why So Many Suppliers? Not the Fault of Financial Crises

The rocks have always been there. They pop up when tide goes away


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Why So Many Suppliers – Deere’s Gloves

6 suppliers424 kinds of gloves

Same glove,different suppliers,

different prices

Before

1 supplier24 kinds of gloves

50% reduction in price

After

Decentralized Purchasing

is the Root Cause

Dave NelsonFormer CPO at John Deere


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Why So Many Suppliers – Motorola’s Batteries

60 cell phone models

>100 types of batteries

5 batteries

New cell phone design can only pick one of 5

“市面上的每种（摩托罗拉）手机都有一种不同的电池。电池的复杂度简直是不可思议。光库存一项就要了我们的命。” – 特蕾莎 . 梅提（ Teresa Metty ） , 前摩托罗拉首席采购官

Design proliferation

increases complexity

Before After


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Be a Problem Solver, not a Policy Maker

VS

Supply base rationalization requires problem solving


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Supplier Evaluation Criteria

Infrastructure soundness

Operations efficiency

Cost competitiveness

People, Technology and Process are fundamental to supplier performance


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Supplier Categorization at BP

Supplier categorization is critical supply management

来源： Christina De Luca ， BP Plc ， VP， R&M Procurement, ELP Forum 2006.


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No of Suppliers

Supp

lier’s

Impo

rtanc

e Inc

reas

es

4CustomerSupplier

3

Increased Supplier Performance

2"Long Term Agreements”

Standardized LongTerm Agreement (LTA),1-2 yr term + evergreen

1

0

Long Term Agreements

Supplier Improvement

Five Steps to Rationalize Supply Base

Source ： Ron Nussle, Jr. ICR Group


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Integrate Suppliers into Product Flow, Info Flow and Cash Flow

供

应

商

客

户

客

户

供

应

商

产品流

资金流

信息流

产品流

资金流

信息流

Supply chain is about product flow, info flow and cash flow.Suppliers play a critical role in these flows

Product Flow

Information Flow

Cash Flow

Product Flow

Information Flow

Cash Flow

Custom

er

Custom

er

Supplier

Supplier


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“Seamless” Supply Chain

图片来源： http://blogs.mkhalid.com

Without suppliers’ support, seamless supply chain is impossible

Pitfalls in Supply Base Rationalization


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Supply Base Rationalization is not a One Way Street

图片来源： http://niltimbadia.blogspot.com/

Reasons to Add New Suppliers

New product New technology New market Monopoly Existing suppliers exit the sector Existing suppliers can’t catch up

Supply base rationalization is a Two Way street


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Performance Management Sustains Results from Rationalization

Supply base rationalization achieves one time effort Performance management ensures ongoing results

Christina De Luca, Chief Procurement Officer, Refining and Marketing, BP plc

Time

Supply base rationalized

Performance Deteriorates Performance

Management Introduced

Performance sustains


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Be Proactive in Supply Base Rationalization

Good doctors cure a deadly sick patient Excellent doctors cure before the illness is out of control Outstanding doctors cure even before the illness is perceived

来源：时代光华马丽

Take preventive actions, just like any outstanding doctors do


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Don’t be Addictive to Exiting Suppliers

The Desire to Exit Suppliers Get rid of the bad boy They deserve it Show my strength Immediate results

The Costs of Exiting Suppliers Hurt by suppliers in desperate No time for supplier selection for NPI New problems become chronicle, a vicious

circle

“今日不雨，明日不雨，必有死蚌”

对该淘汰的供应商，今年不给新生意，明年不给新生意，防止新生意流失，随着旧产品的下市、现有项目的完成，该淘汰的就自然淘汰，该整合的就自然整合。 No

Ensuring new businesses go to preferred suppliers is a better approach

to rationalizing supplier base


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Rationalization is a Long Process

Supplier rationalization is similar to changing tires for a racing car. A great supply base is just like a Ferrari: It’s not designed

and built overnight. It takes years to perfect every detail


(v3)Slide 28

All supply base rationalization starts like this

来源： Ron Nussle, Jr. ICR Group

Thank You

Bob Liu, C.P.M.

Managing Director, CSCS International

Founder, www.scm-blog.com

[email protected]

supply base rationalization

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