Strategic Supplier Management
David DUFOUR
The European Institute of Purchasing Management
French Geneva Campus - Site d’Archamps - F-74160 Archamps - +33 (0)450 31 56 78 - www.eipm.org
About Strategic Supplier Management
a definition?
“A deep relationship in which parties co-operate for Mutual
benefit to create added value”
Strategic Supplier
Management brings:
Competitive Advantage
Core Competence
Value creation to the
company
© EIPM 2013
Attributes:
• Mutual need
• Common objectives
• Joint flexibility
Elements:
• Cross-functional multilevel
commitment and co-operation
• Mutual high trust
• Synchronized processes
• Open communication
Objectives
Strategic Supplier Management objectives will
generally focus on the opportunities to provide,
enhance, and/or improve the following:
1. Business Growth
2. Supply Chain / Logistical / Operational Efficiencies
3. Supply security / flexibility
4. Cost competitiveness
5. Innovation
6. Sustainability
Strategic Supplier Management relationship will focus to
Maximize Value Creation
What is expected then?
Define the needs to satisfaction
Access to right resources
Innovate
Reliability and performance
Flexibility and customization
V =
€
Cost Savings
Risks
Synergies between the
regions
Global teams to optimize TCO
Benefits of Strategic
Supplier Management
Being the preferred customer of a supplier
results in better value creation:
– speed up new product development
– time to market
– lead times and quality
– allocation of resources and capacity
– response time and proactivity
– commercial conditions, service and after sales
– know-how and innovation sharing
– risk sharing
– security of supply
…less stress
Material Group Purchasing Strategy
The Kraljic approach
High
Importance of purchasing
(needs)
II
IV
Leverage segments
Strategic segments
I
III
Non critical segments
Bottleneck segments
Criteria:
Risk factor
From ABC Criticality &
Spend analysis
Low
Annual spend
Low
High
Difficulty of
the supply
market
Criteria:
Market structure (monopoly, etc…), size of suppliers,
From PORTER’s
analysis
available market capacity, entry barriers,
switching costs and complexity, buyer’s relative size …
Change your Company Culture
How do you treat your suppliers?
« There are customers we have to work with
And few ones we like to work with !
Guess who gets the best value from us?»
from a Sales Director
How do your suppliers see YOU?
An example for measuring
« customer attractiveness »
Buyer-Supplier Working Relations Index (WRI)
–
Planning Perspectives Inc.
Adversarial
Limited & Questionable
Less
Relationship
Communication
Help
Partnership
Open & Honest
Much
A lot
Obstacle/Hindrance
Little
Smaller
Profit Opportunity
Greater
Attractiveness counter-examples
The following are scores came from a survey of tier one suppliers conducted
by Planning Perspectives of Birmingham, Mich.
Trust Leve
Trust Level
2003
2005
General Motors
2.12
1.14
Ford Motor Co.
2.21
1.57
DaimlerChrysler AG
2.26
1.96
Nissan
2.63
2.98
Honda
3.32
3.75
Toyota
3.40
4.15
(Scale 1-to 5 (5 the highest)
«This 2005 study shows that suppliers are continuing
to shift capital investment and R&D
funds to their Japanese customers and
decreasing investments in the US Big Three»
J.W Henke, Jr. PhD Planning Perspective, Inc.
GOOD TO VERY GOOD
AVERAGE
BAD TO VERY BAD
Quality of the Relationship
Attractiveness – the evolution of
automotive industry
WRI Index North America
Comments from Suppliers
• In my opinion [Ford] seems to send its people to ‘hate school’
so that they learn how to hate suppliers. The company is
extremely confrontational. After dealing with Ford, I decided
not to buy its cars.
– Senior Executive, supplier to Ford, October 2002
• Toyota helped us dramatically improve our production
system. We started by making one component, and as we
improved, Toyota rewarded us with orders with more
components. Toyota is our best customer.
– Senior executive, supplier to Ford, GM, Chrysler, and Toyota, July
2001.
Source: Liker & Choi, "Building a deep supplier
relationships," Harvard Business Review, 2004
… another example of
missleading relationships
• Mother Nature strikes Phillips Semiconductor plant
– Fire stroke and water used in fire exhaustion destroyed or
contaminated almost all the silicon stock in factory
– Phillips semicondictor plant went down for months
Ericsson
Phillips
What would you do?
Nokia
Nokia
• Nokia detected unexpected delays within 3 days and contacted
Phillips
• Phillips told Nokia production expected to stop for one week
but audit revealed severe damages
– Nokia increased monitoring from weekly to daily
– Nokia changed product design to use chips from other suppliers and
ask them to commit on volumes (one out of 5 components impossible
to get from
– Nokia pressured Phillips to get full allocation from Phillips for this
component from other plants
OVERALL NO DISRUPTION AT NOKIA
ERICSSON
• Phillips informed Ericsson within 3 days but Ericsson didn’t
follow the incident
• 5 weeks after the fire, Ericsson realized the criticality of the
situation
• Too late to grab capacity from Phillips or other suppliers and no
backup solutions (no stock)
OVERALL 400 M$ direct losses (partly covered by
insurances) and 1,7 B$ indirect losses
Ericsson decides to exit Cell Phone business
Thank you for your attention!
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