Have You Hugged Your Supplier Today?
The Benefits as a PREFERRED CUSTOMER
Presented to ISM-San Antonio, April 26, 2012
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2011, Supply Chain Education, Inc.

Kick Off Question
The first person to run up to me and give me the correct answer will win a:
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2011, Supply Chain Education, Inc.

Kick Off Question
What major event happened in the year 2000?
A) The world as we knew it came to an end.
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2011, Supply Chain Education, Inc.

Kick Off Question
What major event happened in the year 2000?
A) The world as we knew it came to an end.
B) The San Antonio Spurs beat the Dallas Mavericks in the NBA Championship.
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©
2011, Supply Chain Education, Inc.

Kick Off Question
What major event happened in the year 2000?
A) The world as we knew it came to an end.
B) The San Antonio Spurs beat the Dallas Mavericks in the NBA Championship.
C) Bobby Thomas turned 10 years old.
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©
2011, Supply Chain Education, Inc.

Kick Off Question
What major event happened in the year 2000?
A) The world as we knew it came to an end.
B) The San Antonio Spurs beat the Dallas Mavericks in the NBA Championship.
C) Bobby Thomas turned 10 years old.
D) This presentation was made at the 85th NAPM
International Conference in New Orleans.
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©
2011, Supply Chain Education, Inc.

Kick Off Question
What major event happened in the year 2000?
A) The world as we knew it came to an end.
B) The San Antonio Spurs beat the Dallas Mavericks in the NBA Championship.
C) Bobby Thomas turned 10 years old.
D) This presentation was made at the 85th NAPM
International Conference in New Orleans.
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©
2011, Supply Chain Education, Inc.

The Preferred Customer
The Three Key Objectives
OBJ1: Understand The True Meaning Of A:
PREFERRED CUSTOMER
OBJ2: Describe The Benefits Of Giving, In A
Give-And-Take Relationship
OBJ3: Ascertain The Damage From A
Take Only Philosophy
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©
2011, Supply Chain Education, Inc.

The Preferred Customer
The Three Key Objectives
OBJ1: Understand The True Meaning Of A:
PREFERRED CUSTOMER
OBJ2: Describe The Benefits Of Giving, In A
Give-And-Take Relationship
OBJ3: Ascertain The Damage From A
Take Only Philosophy
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2011, Supply Chain Education, Inc.

The Preferred Customer
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2011, Supply Chain Education, Inc.

The Preferred Customer
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2011, Supply Chain Education, Inc.

The Preferred Customer
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2011, Supply Chain Education, Inc.

The Preferred Customer
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2011, Supply Chain Education, Inc.

1. Cost Increase Passers Vs. Cost Cutters
2. Order Terms And Conditions Are Ignored
3. Minimal To Zero Sales Visits
4. Procurement Is Bypassed In Favor Of Other
Departments
5. Lack Of Management Support
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2011, Supply Chain Education, Inc.

6. An Unresponsive Customer Service Staff
7. Customer Treated According To Sales $
8.
Emphasis On “Use As Is”
9. No Innovation
10. Their QA Department Is Your QA Department
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2011, Supply Chain Education, Inc.

1.
C ost Increase Passers Vs. Cost Cutters
2.
O rder Terms And Conditions Are Ignored
3.
M inimal To Zero Sales Visits
4.
P rocurement Is Bypassed In Favor Of Other Departments
5.
L ack Of Management Support
6.
A n Unresponsive Customer Service Staff
7.
C ustomer Treated According To Sales $
8.
E mphasis On “Use As Is”
9. N o Innovation
10.
T heir QA dept. Is Your QA dept.
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2011, Supply Chain Education, Inc.

You are the Supply Manager for Sugar Daddy Candies w/ sales of $5B to all the major candy stores in the world.
You are primarily known for your chocolate product lines: including the X, Y, Z exclusives:
X-Cessive - Oprah Winfrey Rich Nougat
Y-Watchit - Jerry Springer Nut Cluster
Z-Rotalnt - Brittney Spears Imitation Pieces
For the last 100 years, your sole source supplier:
Roturteethout has had a 100% on time delivery record.
Over the last year, it has dropped to 50%. Does this mean that you are no longer a PREFERRED CUSTOMER?
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2011, Supply Chain Education, Inc.

The Preferred Customer
http://www.youtube.com/watch?v=FGfplQ1FUFs
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2011, Supply Chain Education, Inc.

The Preferred Customer
A Key Preferred Customer Tool:
To develop a best-in-class standard by which to measure your supplier(s) and to quantify and weight each standard according the importance to your firm and to form the basis of the rating category.
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2011, Supply Chain Education, Inc.

QA
Management
Financial
Delivery
Pricing
PERFORMANCE
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2011, Supply Chain Education, Inc.
PROCESS

Key Benchmarking Questions
–
1. Does your supplier have a formal system in place?
2. Is SPC part of their system?
3. Is there evidence of continuous improvement?
4. Does the supplier set quality objectives with metrics?
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Key Benchmarking Questions
–
1. Does your supplier have a formal business plan?
2.
What is your supplier’s Mission Statement?
3.
Does the supplier’s management possess good skills?
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2011, Supply Chain Education, Inc.

Key Benchmarking Questions
–
1. Does the supplier conduct annual financial audits?
2. Is your supplier willing to share key financial data?
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2011, Supply Chain Education, Inc.

Key Benchmarking Questions
–
1. Is your supplier aware of your delivery goals?
2. Does your supplier support delivery changes?
3. Are acknowledgements timely and accurate?
4. Are there joint plans for lead-time reduction?
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2011, Supply Chain Education, Inc.

Key Benchmarking Questions
–
1. Can your supplier reduce/control its operating costs?
2. Are processes in place to manage their suppliers?
3. Do they possess knowledge of industry trends?
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2011, Supply Chain Education, Inc.

The Preferred Customer
A Key Preferred Customer Tool:
To develop a best-in-class standard by which to measure your supplier(s) and to quantify and weight each standard according the importance to your firm and to form the basis of the rating category.
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2011, Supply Chain Education, Inc.

1.
Force Majeure
2.
Comity
3. Patents
4. Copyrights
5. Restraint Of Trade/ Anti-trust
6.
Assignability
7.
Indemnification
8.
Limitation of Liability
9.
Waiver of Consequential Damages
10. Reservation of Right
11. Termination
12. Warranty
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2011, Supply Chain Education, Inc.

The Preferred Customer
Cost Reduction Goals
“Supplier agrees to provide customer with total annual cost reductions of ___ % under this agreement. Cost reductions will be measured on the total value of products purchased under the agreement on an annual basis. If supplier does not provide the agreed cost reduction percentage in a given year, supplier will rebate the amount of the shortfall to the customer within 45 days after the applicable year. The parties will share cost reductions in excess of ___% equally, as described below.”
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The Preferred Customer
Pre-
Qualified
Partners
Approved Preferred
Certifiable Certified
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2011, Supply Chain Education, Inc.

The Preferred Customer
The Three Key Objectives
OBJ1: Understand The True Meaning Of A:
PREFERRED CUSTOMER
OBJ2: Describe The Benefits Of Giving, In A
Give-And-Take Relationship
OBJ3: Ascertain The Damage From A
Take Only Philosophy
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2011, Supply Chain Education, Inc.

The Preferred Customer
What are the benefits of establishing and maintaining good supplier relationships?
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The Preferred Customer
BIC
Suppliers
Improved
SCM
Six Optimization
Benefits
Reduced
Risk
Pursue
Value-Add
Leverage
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2011, Supply Chain Education, Inc.
Lower
TCO

Conduct supplier surveys
The Preferred Customer
Provide suppliers training
Encourage
Confidentiality
Pay suppliers on time
Enhance two-way communication
Periodic top management meetings
Ensure suppliers understand your customer functions
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2011, Supply Chain Education, Inc.
Treat suppliers equally

Three Types of Supplier Relationships
Low value, price type purchases
Longer commitment, blanket order
Long Term agreement , VMI/VOI
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2011, Supply Chain Education, Inc.

The Preferred Customer
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2011, Supply Chain Education, Inc.

1. Ford = Fix or repair daily
2. Ford = Found on the road dead
3. Ford = A Preferred Customer http://info.detnews.com/video/index.cfm?id=1189
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©
2011, Supply Chain Education, Inc.

The Preferred Customer
The Three Key Objectives
OBJ1: Understand The True Meaning Of A:
PREFERRED CUSTOMER
OBJ2: Describe The Benefits Of Giving, In A
Give-And-Take Relationship
OBJ3: Ascertain The Damage From A
Take Only Philosophy
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©
2011, Supply Chain Education, Inc.

The Preferred Customer
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2011, Supply Chain Education, Inc.

Six Negative Relationship
Factors
1. Demanding more than the relationship should cover.
2. Always berating your supplier(s).
3. Micro-managing the customer-supplier relationship.
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2011, Supply Chain Education, Inc.

Six Negative Relationship
Factors
4. Arguing w/ every criticism/feedback of you as customer.
5. Giving “lip service only” to the contract.
6. Entertaining “Sharp Practices” with your supplier.
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The Top Ten Reasons To Become
A Preferred Customer
10. Your supplier will promote your company to the business world as one who displays both fairness and high ethical principles.
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2011, Supply Chain Education, Inc.

The Top Ten Reasons To Become
A Preferred Customer
10. Your supplier will promote your company to the business world as one who displays both fairness and high ethical principles.
9. In our changing business marketplace, if your supplier should also become your customer, then you have strengthened the relationship for future growth.
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2011, Supply Chain Education, Inc.

The Top Ten Reasons To Become
A Preferred Customer
8. As your relationship continues and grows, you will eliminate or minimize the costs of trying to locate replacement sources of supply.
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2011, Supply Chain Education, Inc.

The Top Ten Reasons To Become
A Preferred Customer
8. As your relationship continues and grows, you will eliminate or minimize the costs of trying to locate replacement sources of supply.
7. By saving the time in trying to find replacement sources of supply, you can now focus on other strategic projects.
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2011, Supply Chain Education, Inc.

The Top Ten Reasons To Become
A Preferred Customer
6. Your partnered supplier(s) will be willing to share new ideas & new opportunities with its key customer – you (innovation).
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The Top Ten Reasons To Become
A Preferred Customer
6. Your partnered supplier(s) will be willing to share new ideas & new opportunities with its key customer – you (innovation).
5. By utilizing good buyer-supplier relationships, your company will have an edge over the competition who may still be practicing the
“Lopez” approach.
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2011, Supply Chain Education, Inc.

The Top Ten Reasons To Become
A Preferred Customer
4. With contract clauses such as: “50/50” share, your supplier now has incentive & will/should make improvements.
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The Top Ten Reasons To Become
A Preferred Customer
4. With contract clauses such as: “50/50” share, your supplier now has incentive & will/should make improvements.
3. Since your relationships are positive, this could lead to a lower stress level with happier SM employees.
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The Top Ten Reasons To Become
A Preferred Customer
2. Since their supplier relationships are positive, this should also lead to a lower stress level with happier supplier employees.
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The Top Ten Reasons To Become
A Preferred Customer
2. Since their supplier relationships are positive, this should also lead to a lower stress level with happier supplier employees.
1. As your supplier works to assist you, its:
PREFERRED CUSTOMER, in reducing the costs of purchases, this goes straight to the:
BOTTOM LINE!!!!
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2011, Supply Chain Education, Inc.

The Preferred Customer
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2011, Supply Chain Education, Inc.

Meet the Presenter:
Patrick S. Woods, CPSM,CPSD,C.P.M.,CPIM
Phone: 972-333-9376, E-mail: patwoods@supplychaineducation.com
Web: www.supplychaineducation.com
Patrick (Pat) S. Woods is President of Supply Chain Education, founded ten years ago, to provide professional development in supply chain and materials management. He has spent the past 15 years in the employ of such corporations as Colt Industries, Intergraph, Emerson Electric and EDS. He has held key positions from materials expeditor to buyer/planner to supply chain manager to training director.
Pat is a CPSM , CPSD and C.P.M. through ISM and is Certified in Production and
Inventory Management (CPIM) though APICS -The Association for Operations
Management.
In addition to his own clients, Pat is a national trainer for both and travels the U.S. presenting credentialing programs and workshops for the membership. Pat was the 2009-2010 President of ISM-Dallas.
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2011, Supply Chain Education, Inc.