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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Manage The Business, Not Just The Supplier
• 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.
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A Shift In Approach…
ME
WE
• Finding a way to meet our
mutual needs
• It’s in the contract, now it’s
the supplier’s problem
• Work together to achieve
performance and
compensation goals
• Blame and punish the
supplier
• Unpleasant surprises
BECOMES
• Getting the supplier to meet
my needs
• Communicate the issues,
jointly find solutions
• Integrated planning and
communications
Manage the Business…Not Just the Supplier
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What Goes into “Governance”
Vested Governance Framework
The Vested framework incorporates four
elements:
1.
2.
3.
4.
Element 7: Relationship Management
Element 8: Transformation Management
Element 9: Exit Management
Element 10: Special Concerns and External
Requirements
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Element 7: Relationships Management
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
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Strategic Drift Disease
• 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
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New Sheriff In Town Syndrome
• 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 From McDonald’s Will Help Tell The Story…
Jim Skinner
CEO, Retired
McDonald’s
Source: Video: http://video.cnbc.com/gallery/?video=3000098271
Source: Photo: Courtesy of McDonald’s
Some videos are an excerpt
from an interview with Jim Skinner
for CNBC
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Ray Kroc’s Philosophy
“None of
us is as
good as
all of us.”
Ray Kroc
Founder
McDonald’s
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Source: http://www.biography.com/people/ray-kroc-9369349
The McDonald’s “System”
• 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
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Source: http://common3.csnimages.com/lf/49/hash/11311/5161408/1/Stool-International-Asian-Antique-Kids-Stool.jpg
Creating Value – Not Competing
Three Legged Stool
McDonald’s System’s First Philosophy
“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.”
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Source: http://common3.csnimages.com/lf/49/hash/11311/5161408/1/Stool-International-Asian-Antique-Kids-Stool.jpg
It’s Not Just Business….it’s Personal
Ed Sanchez
CEO
Lopez Foods
“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.”
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Self-Governance Is a Key
Ted Perlman
“My whole role in
life as a supplier is
not letting
McDonald’s
consciously make
a mistake.”
Chair of the Board
HAVI Global Solutions
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Source: http://www.havigroup.com/about-us#four_about
Doubling Beef Patty Production
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Focusing on Responsiveness
Who ran out
of chicken
during the
Asian Avian
Flu crisis?
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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
“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.”
Sustainability
In January
2013
McDonald’s
met its goal of
serving 100%
Marine
Stewardship
Council
certified fish.
Source: http://www.huffingtonpost.com/2013/01/24/mcdonalds-fish-sustainable_n_2542502.html
The Plan To Win Delivers
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Photos Source: The McDonald’s Revitalization: Getting Better, Not just Bigger
The System – A Real Winner
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Contact Me!
kvitasek@utk.edu
www.vestedway.com
Our next 3 day Executive
Education course is Nov 5-7
Register for our free Vested
Orientation online course
here
Kate Vitasek
Faculty, Univ. of Tennessee
Center for Executive Education
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Source: http://www.biography.com/people/ray-kroc-9369349
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