VALUE BASED Game PROCUREMENT SEA M LESS IN TEG RA TIO N O F V A - - PDF document

SLIDE 1

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SEA M LESS IN TEG RA TIO N O F V A LUE BA SED P RO C UREM EN T IN O UR D IG ITA L W O RLD

VALUE BASED PROCUREMENT

Christopher Game

Vic e Pre side nt Pro c ure me nt – Sta da

Nove mbe r 2017

WHY CHALLENGE THE STATUS QUO ?

“in Italy for 30 years under the Borgias they had warfare, terror, murder, and bloodshed, but they produced Michelangelo, Leonardo da Vinci, and the Renaissance. In Switzerland they had brotherly love - they had 500 years of democracy and peace, and what did that produce? The cuckoo clock” *

* T he T hird Ma n 1949 ~ Ha rry L ime

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WHAT IS VALUE BASED PROCUREMENT ?

How br

• ad should we think?
• Pro c ure me nt is a do o r to the o utside wo rld, a po rta l to b e st pra c tic e

a c ro ss a wide ra ng e o f supplie r a nd b usine ss type s a nd a s suc h a g re a t wa y to ha rve st b e st pra c tic e . T he re is no sha me in c o pying wha t is b e ing do ne b e tte r e lse whe re .

• Be st pra c tic e ma y influe nc e in b o th c o st a nd e ffic ie nc y yo u sho uld

sho w no fe a r in de plo ying ne w mo de ls o r ha ving the c o ura g e to te st yo ur o wn.

• E

ve rything is a b usine ss c a se , b ut think b e yo nd c o st, think o f the impa c t o n b o th upstre a m a nd do wnstre a m func tio ns a nd b uild this into yo ur hypo the sis. T hink o f the e ntire e c o syste m in whic h pro c ure me nt o pe ra te s a nd the wa ys in whic h we influe nc e it? Pro duc t De ve lo pme nt, L a unc h, Pla nning , Ma nufa c turing , Ma ke o r Buy de c isio n ma king , supply c ha in, distrib utio n, lo g istic s, ma rke ting a nd e ve n dispo sa l

WHY MOVE TO A VALUE BASED MODEL ?

Whe r e do we star t ?

• Multiple I

te ra tio ns o f c a te g o ry ma na g e me nt a re de ple ting tra ditio na l ro ute s to sa ving

• Co nstra ine d e c o no mie s a re tig hte ning ma rg ins a nd inc re a sing b o tto m

line fo c us

• We use the te rm pa rtne r ve ry lo o se ly ~ Va lue b a se d pro c ure me nt

b uilds true pa rtne rships

• Mo ve a wa y fro m a dve rsa ria l ne g o tia tio n b a se d re la tio nships to

c o lla b o ra tive o ne s with e le me nts o f o pe n b o o k a nd inno va tio n ta rg e ts

• Va lue b a se d pro c ure me nt e ng a g e s us with the b usine ss a nd inte g ra te s

us into o ur upstre a m a nd do wnstre a m func tio ns I c o uld g ive yo u the te xt b o o k o n wha t a va lue b a se d Pro c ure me nt syste m is a ll a b o ut, b ut fo r this se ssio n I wo uld ra the r fo c us o n a ra ng e o f a c tivitie s tha t yo u c a n e mb a rk o n e ithe r sing ula rly o r to g e the r tha t will a c c e le ra te yo ur va lue jo urne y

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Lowest Purchase Price

Purchase Order

Total Acquisition Cost

FROM ADVERSARIAL TO TOTAL COST OF OWNERSHIP

Me ga $$$

Ma ny o rg a nisa tio ns la c k the c a pa b ility to tra c k to ta l c o st o f o wne rship, e ve n a t a supe rfic ia l le ve l. I t is impo rta nt to g e t yo ur he a d a ro und this !

AS A BASIS FOR TODAYS DISCUSSION

Co mmunic a tio ns F

• unda tio n

Supplie r De ve lo pme nt (Qua lity) I nno va tio n

VAL UE T I ME

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THE FOUNDATION

Ma turity T

• o ls

Inno c e nc e Awa re ne ss Unde rsta nding Co mpe te nc e E xc e lle nc e

• Sa ving s Ge ne ra tio n

a g a inst ta rg e ts

• Sa ving s Ge ne ra tio n

a g a inst b e nc hma rks

• Da ta a va ila bility
• Ma rke t Ana lysis
• Supplie r Ana lysis
• Oppo rtunity

Ana lysis

• Stra te g y

Do c ume nte d

• Me tho ds De plo ye d
• Se nio rity o f T

e a m

• Ca pa b ility o f T

e a m

• Spe nd le ve ls
• Ro le Cla rity
• L

e ve ra g e d Purc ha sing po we r

• Optimize d supplie r

b a se

• Ca te g o riza tio n
• Sa ving s Ge ne ra tio n

a g a inst ta rg e ts

• Sa ving s Ge ne ra tio n

a g a inst b e nc hma rks

• Da ta a va ila bility
• Ma rke t Ana lysis
• Supplie r Ana lysis
• Oppo rtunity

Ana lysis

• Stra te g y

Do c ume nte d

• Me tho ds De plo ye d
• Se nio rity o f T

e a m

• Ca pa b ility o f T

e a m

• Spe nd le ve ls
• Ro le Cla rity
• E
• Pro c ure me nt
• Sa ving s Ge ne ra tio n

a g a inst ta rg e ts

• Sa ving s Ge ne ra tio n

a g a inst b e nc hma rks

• Da ta a va ila bility
• Ma rke t Ana lysis
• Supplie r Ana lysis
• Oppo rtunity

Ana lysis

• Stra te g y

Do c ume nte d

• Me tho ds De plo ye d
• Sa ving s Ge ne ra tio n

a g a inst ta rg e ts

• Sa ving s Ge ne ra tio n

a g a inst b e nc hma rks

• Da ta a va ila bility
• Ma rke t Ana lysis
• Sa ving s Ge ne ra tio n

a g a inst ta rg e ts

E ffo rt L

• w

Hig h

• One -o ff a ppro a c h to

Supplie rs – L e tte r

• Be nc hma rke d a ppro a c h

a nd Ne g o tia tio n

• L

e ve ra g e d Appro a c h

• Sho uld Co st a ppro a c h
• Re duc tio ns o ve r ye a rs in

re turn fo r lo ng e r te rm.

• E
• Auc tio n
• Supplie r Ra tio na liza tio n
• Inc e ntivize d c o ntra c ting
• L
• w Co st So urc ing /

Outso urc ing

• Supplie r Wo rksho ps –

Co lla b o ra tio n

• L

e a n Pro c ure me nt

• Ope n Inno va tio n
• Re duc tio ns o ve r

ye a rs in re turn fo r lo ng e r te rm.

• E
• Auc tio n
• Supplie r

Ra tio na liza tio n

• Inc e ntivize d

c o ntra c ting

• L
• w Co st So urc ing /

Outso urc ing

• Supplie r Wo rksho ps –

Co lla b o ra tio n

• L

e a n Pro c ure me nt

• Ope n Inno va tio n
• Supplie r

Ra tio na liza tio n

• Inc e ntivize d

c o ntra c ting

• L
• w Co st So urc ing /

Outso urc ing

• Supplie r Wo rksho ps –

Co lla b o ra tio n

• L

e a n Pro c ure me nt

• Ope n Inno va tio n
• Outso urc ing

L

• w Co st So urc ing
• Supplie r Wo rksho ps –

Co lla b o ra tio n

• L

e a n Pro c ure me nt

• Ope n Inno va tio n
• Ope n

Inno vatio n

Ac tivity Ba se d Ma turity Pro filing

THE FOUNDATION

Cr e ate a Cate gor y for Innovation / Pr

• c e ss Impr
• ve me nt

One o f the q uic ke st c ha ng e drive rs whic h I e mplo ye d wa s to c re a te c a te g o ry he a ds fo r no n-c o nve ntio na l c a te g o rie s………..

Innovation- I

e mplo ye d a n e ng ine e r with a n MBA, so me o ne with a n e xplo ring mind who kno ws o ur spe c ific industry b ut a lso ha s the c a pa b ility a nd de sire to disc o ve r ne w a nd b e tte r wa ys.

Pr

• c e ss Impr
• ve me nt –I

e mplo ye d a le a n / six sig ma g uru who ne w a little a b o ut pro c ure me nt a nd a lo t a b o ut pro c e ss impro ve me nt. He wo rke d o n impro ving the pro c ure me nt te a ms c a pa b ility in this a re a , he ld supplie r wo rksho ps a nd la unc he d a nd ma na g e d va lue re la te d pro je c ts / pro g ra ms, fo c using o n re duc ing imple me nta tio n time I a lso hire d a n e xpe rt knowle dge manage r……………….

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THE FOUNDATION

1 T r anspar e nc y to fac ilitate ope n book c osting, highe r le ve ls of e asily ac c e ssible mar ke t knowle dge , c le an she e ting … … .Quic k and Simple appr

• ac h

Re se ar c h func tion for diffic ult to ac quir e data 3 Soc ial ne twor king as a knowle dge manage me nt tool… … ..the futur e of knowle dge manage me nt, c ontain it whe r e it give s you a c ompe titive advantage . 2 Pe r sonalize d c ommodity page s for e ac h sour c ing / pur c hasing pr

• fe ssional with ke y c ommoditie s whic h ar

e por tfolio r e le vant, inte r ne t ale r ts and me ssaging. Re fr e she s on star t-up.

We Don’t Know what we don’t Know

Cre a te Re fe re nc e T

• o ls

4 Cr e ate r e fe r e nc e tools both as a c ate gor y guide r

• lle d up into a

manual and a spe nd c ube basis. Ke e p fr e sh. Allow ac c e ss for ke y busine ss par tne r

• s. Don’t for

ge t har d c opie s whe r e r e le vant

THE FOUNDATION

Inc e ntivize value add ac tivity Conve ntional Pr ic e $100

I nc e ntivize d Po rtio n

++$ Po te ntia l Upside Inc e ntivize d Volume +++ Vol

• I

nc e ntivize o n Vo lume o r Pric e o r b o th

• E

nsure tha t upside is c o ve re d b y the va lue o f the impro ve me nt 2X+

• Ha ve fle xib ility a ro und wha t yo u inc e ntivize a ro und, pro c e ss

impro ve me nt, inno va tio n, spe e d, c o -de ve lo pme nt a re a ll va lue a dd

• Yo u ma y inc e ntivize fo r se ve ra l diffe re nt e le me nts…..Qua lity, HSE

e tc .

• T

a ke c a re no t to o ve r-pe na lize

• - $
• - Vol

Pa ying to sa ve so unds c o unte r intuitive ………

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QUALITY

• Do n’ t g e t hung up o n the no tio n tha t Pro c ure me nt is the fa c e to the

supplie r – le a rn to sha re with o the r func tio ns………………..

• Yo u c o uld ha ve a Supply Qua lity Assura nc e pe rso nne l inte g ra te d into

yo ur so urc ing func tio n with re po rting re spo nsib ility to so urc ing .

• L

e ts c a ll this te a m SQA o r Supplie r Qua lity Assura nc e …….re spo nsib le fo r Supplie r de ve lo pme nt, Pro c e ss impro ve me nt a nd L e a n a c tivity, Cha ng e c o ntro l, Audit pre pa ra tio n e tc . T he SQA pe rso nne l will b e c o me yo ur inte g ra l fa c e to the Supplie r…..b ut the ir skillse t will fa c ilita te a ne w le ve l o f e ng a g e me nt.

• T

he inc re a se d kno wle dg e g e ne ra te d b y b e ing inte g ra te d with supplie rs will he lp drive pro c e ss impro ve me nt a nd c o st re duc tio n a c tivitie s, a nd with a lig nme nt o f stra te g ie s a nd pro c e sse s

• Pe rfo rm o ppo rtunity a na lysis in c o njunc tio n with risk a na lysis a c ro ss yo ur

to p pa rtne rs a nd de plo y yo ur SQA pe rso nne l a c c o rding ly T hink a b o ut sha ring a udit lo a ds, mo ve fro m po lic ing to pa rtne ring

COMMUNICATIONS

F

• r supplie rs who e mb a rk o n this jo urne y with yo u, yo u will ne e d to g o the

e xtra mile o n c o mmunic a tio ns to ke e p b o th the m a nd yo ur o wn b usine ss pa rtne rs e ng a g e d : I use d fo ur ste ps to do this

• 1. Po rta l……….yo u ma y a lre a dy ha ve a po rta l, if so sha ke it up,

se e whe the r it c a n b e simplifie d, a nd a b o ve a ll pe rso na lize it to the spe c ific supplie r in te rms o f da shb o a rds a nd pe rfo rma nc e

• 2. T

re a t the supplie rs o n this jo urne y diffe re ntly to the re st, b ring the m to g e the r o nc e a ye a r, re c o g nize the m, ha ve a uniq ue a nd c o mmo n the me a nd ne wsle tte r. E ng a g e a ll the wa y up to C le ve l. T he te rm pa rtne r is ra re ly use d in the true se nse .

• 3. Po rtho le – this wa s a g re a t wa y to le a rn fro m the supplie r
• 4. Cre a te a n App………….it is a lo t mo re c o st e ffe c tive tha n yo u

wo uld think a nd a g a in c a n b e drive n with ta rg e te d invita tio n, this wo rks we ll fo r inte rna l e ng a g e me nt a s we ll.

• 5. F
• c us o n the use r e xpe rie nc e .

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INNOVATION

E nd to E nd Value Str e am analysis and Mapping

• Pro c ure me nt L

e d

• F
• c us o n b ig wa ste s, do no t

g e t distra c te d

• Hig h E

ne rg y / L

• ud / F

un

• I

nvo lve a ll le ve ls

• Cre a te pro je c t te a ms

a nd g o ve rna nc e o n the spo t

• Ma na g e the pro g ra m
• K

e e p it simple

• Use simple te mpla te s
• Cre a te a c o mms’ pla n
• L

e a de rship suppo rt, a dd sta tus

• Cre a te a ‘ pro duc t te a m’ ide ntity
• Jo in the F

unc tio na l do ts, fa c ilita te the ne two rk

• T
• ta l E

nd to E nd fro m De ve lo pme nt thro ug h to Supplie rs, L

• g istic s,

Ma nufa c turing e tc .

• Ma p in the mo rning , ide ntify pro c e ss / va lue impro ve me nts a ro und

the se

INNOVATION

Innovation Por thole

Ideas Suggestions Requests Connections G roans Proposals Innovation Complaints

• Cre a te a me c ha nism for

supplie rs to re a c h you

• Ke e p it simple , simple

e a sy to find te mpla te tha t c a n be dra g g e d into a porthole or simila r

• E

nsure tha t this is re sponsibly ma na g e d a nd tha t follow- ups a re done a nd a ny issue s c lose d off

• You c a n ma ke this a s

wide or a s na rrow a s you like , inc luding othe r func tiona lity outside of innova tion

• L
• c a te it in e a sy to find

we bpa g e s / tools

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COMMUNICATION

Dr iving Value with a Por tal Visibility & T r anspar e nc y

• F

ull de mand visibility

• E

na ble ne w Va lue Add Busine ss Sc e nar ios e .g VMI

• Str

e amline Busine ss Pr

• c e sse s
• Inc r

e ase Pur c hasing e ffic ie nc y

Supplie r Dashboar d

• E

nable mutual value by inc e ntivize d c ontr ac ting

• KPIs
• Cr

e ate a c ompe titive e nvir

• nme nt
• E

xc lusive Club

Innovation Pla tform

• Ac c e le ra te

Innovation thr

• ugh e ffe c tive

Supplie r c ollabor ation

• E

valuation and follow up of Supplie r ide as (the por thole )

• Nothing is off of

the table

Knowle dge Manage me nt

• Spe c ific a tion
• Ne ws
• Improve 3rd par

ty c ommunic ation

• E

asy ac c e ss

• Pr

ior ity hie r ar c hy

INNOVATION

T e ar Down Wor kshops

Do no t think tha t this do e s no t a pply to yo ur industry, I ha ve use d it in ma ny g uise s fro m drug de live ry de vic e s thro ug h to pa c ka g ing a nd g e a rb o xe s.

• I

nvo lve se nio r ma na g e me nt, F ina nc e , R&D pro duc tio n ma na g e rs a nd

• pe ra to rs , supply c ha in, a c a de mia if re le va nt
• I

f po ssib le te a r do wn yo ur c o mpe tito rs pro duc t a lo ng side yo urs

• Sta rt fro m the re ta il sta te (inc lude the pa c ka g ing )
• Be c re a tive , do no t ig no re supply c ha in a nd ma rke ting
• Unde rsta nd yo ur wa rra nty / c usto me r fe e db a c k upfro nt
• I

nvo lve yo ur supplie rs whe re re le va nt

• K

e e p it struc ture d

• Pro fe ssio na l fa c ilita tio n
• Ca pture o ppo rtunitie s

a nd o wne rship

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INNOVATION

Range F inding

• Po te ntia lly the b ig g e st sing le impa c t o n yo ur

b o tto m line …Cha lle ng e yo ur sta tus q uo

• Wo rks b e st with e sta b lishe d ve ndo rs
• Cho o se a ra ng e o r b a ske t o f pro duc ts within

a supplie rs c a pa b ility

• Cre a te a wa r ro o m with g o o d fa c ilitie s
• I

nvo lve K e y De c isio n ma ke rs pre fe ra b ly C L e ve l who will ma ke it ha ppe n ra the r tha n a sk if it c a n ha ppe n

• Go o pe n b o o k / think ma ke o r b uy
• L

e t the supplie r unde rsta nd wha t he / she c a n po te ntia lly do b e tte r tha n yo ur o rg .

• Give a c c e ss to func tio ns a c ro ss yo ur b usine ss
• Sig n the me mo ra ndum o f a g re e me nt the re

a nd the n

• Cha sing the b ig numb e r drive s the urg e nc y

$15M $120M $40M

INNOVATION

Range F inding

Ra ng e F inding is a pro c e ss whe re b y to b ring to g e the r the le a de rship o f yo ur c o mpa ny a nd a c ho se n pa rtne r a nd ha ve b o th g o o pe n b o o k o n a ra ng e

• f pro duc t to se e whe re o ppo rtunitie s c a n b e drive n.

A g o o d de a l o f pre pa ra tio n unde rsta nding c a pa b ilitie s a nd c a pa c itie s ne e ds to pre c e de the e ve nt, with the b a sic unde rsta nding tha t a g re e me nt sho uld b e re a c he d o n c o nc lusio n o f the e ve nt T he e ve nt sho uld b e he ld in a we ll a ppo inte d ‘ wa r ro o m’ with c a ll o n a nyo ne within yo ur c o mpa ny re q uire d to suppo rt o r c la rify the de ta ile d disc ussio ns. F re q ue nt b re a ks with c a lls ho me fo r the ve ndo r sho uld b e e nc o ura g e d to c re a te b a la nc e . I ha ve he ld the se whe re the y ha ve la ste d se ve ra l da ys. T he y a re hig h pro file , hig h e ne rg y a nd re sults a re g ro upe d a s ‘ g o ’ pro je c ts, ‘ furthe r inve stig a tio n’

• r ‘ no g o ’ .

T he le a de rship sig ns up to the ‘ g o ’ pro je c ts o n c o nc lusio n o f the e ve nt

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INNOVATION

Innovation as a Cate gor y ??

• T

he Supply po rtho le

• T

ra de Sho w tra wling

• Pub lic a tio ns
• I

nno va tio n Bo a rd o r simila r me c ha nism

• I

nno va tio n wo rksho ps to va rio us le ve ls o f inc lusivity

• Supplie r
• Ac a de mia
• I

nte rna l

• Co mb ina tio n
• A c a te g o ry ma na g e r
• Sa ving s ta rg e ts
• An inno va tio n b udg e t

INNOVATION

Innovation as a Cate gor y ??

• I

nno va tio n a s a c a te g o ry wo rks o n se ve ra l le ve ls………c re a te a inno va tio n c a te g o ry ma na g e r who :

• Will lo o k inte rna lly a t wha t yo u ha ve misse d, study o ld pro je c ts to

re a sse ss c urre nt via b ility…….b a la nc e d a g a inst life c yc le

• Co nne c t with a c a de mia a nd c re a te visib ility a nd a c o nduit fo r

disc o ve ry into yo ur o rg a niza tio n, ho st le c ture s a nd wo rksho ps fo r yo ur re le va nt func tio ns - Arra ng e a nd ho st inno va tio n wo rksho ps with supplie rs, a c a de mia o r b o th

• L
• o k into yo ur supplie r b a se fo r ne w de ve lo pme nts re le va nt to

yo ur b usine ss a nd e nsure tha t yo u ha ve b o th a c c e ss a nd e xc lusivity whe re re le va nt

• Ho st te a rdo wn e xe rc ise s fo r yo ur b usine ss
• L
• o k fo r pro c e ss impro ve me nt o ppo rtunitie s using ne w

te c hno lo g y

• Cre a te a n inno va tio n b o a rd a nd se c ure pro je c t funding fo r tho se

pro je c ts c ho se n

• Ma na g e a n inno va tio n ‘ po rtho le ’

SLIDE 11

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SUMMARY-

T he F ive things that you c an do rig ht now: 1. Value Inc e ntivize d c ontr ac ting 2. Pr

• duc t base d E

nd to E nd value str e am mapping and a na lysis 3. T e ar

• down wor

kshops 4. Supplie r innovation wor kshops and e ve nts 5. Range F inding T he Suppor t Syste m that you c an build in the longe r te r m:

• Cre a te Ca te g o rie s/ c a te g o ry

ma na g e rs fo r inno va tio n a nd pro c e ss impro ve me nt

• Ac tivity b a se d ma turity

pro filing

• K

no wle dg e Ma na g e me nt c a pa b ility & syste m

• A SQA te a m do ing supplie r

de ve lo pme nt

• Supplie r Va lue Po rta l / Po rtho le

fo r ide a g e ne ra tio n

• Cre a te a n App, inwa rd a nd
• utwa rd fa c ing

Que stio ns ? Stra ig ht fro m the Ho rse s Mo uth