Supplier Value.

Name: Supplier Value. | How to Define and Integrate the Value of Your Suppliers. Working Paper from the Supply Management Institute's series Purchasing and Supply Management.
Brand: Verlag Wissenschaft & Praxis
Price: 79.9 EUR
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How to Define and Integrate the Value of Your Suppliers. Working Paper from the Supply Management Institute's series Purchasing and Supply Management.

Christopher Jahns Roger Moser(Autor*in)

Verlag Wissenschaft & Praxis

1. Auflage

Erschienen am 2. April 2023

VI, 95 Seiten

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Intro
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1 Supplier Value Management - An Integrated Approach
The growing interdependence between companies is an important sign of the changing competitive environment
Suppliers play different roles depending on the competition structures between companies
The supplier relationship focus is moving from the classical dimensions price, quality and time to innovation, flexibility and joint activities
What are the implications of these developments from a buying firm's perspective?
Defining supplier value: which values can a supplier deliver?
The supplier value consists of several different categories that the buying firm can realize together with its respective suppliers for specific commodities
The indicator level can either be measured based on the past performance (ex post perspective) or based on the future value potential (ex ante perspective) of a supplier
The supply strategy of the buying firm defines the values that the suppliers should deliver - a thorough analysis identifies the gaps and additional values
The supply strategy includes all relevant elements from corporate, business unit and functional level that help to define the supplier values needed
The required supplier value comes from the specific implications of the supply strategy. Depending on the supply strategy, the buying firm should look for suppliers that add the respective performance at a defined risk level
2 Supplier Value Management - Study Results & Examples
The SMG Supply Management Navigator has been evaluated in a study with 180 responding companies from German-speaking countries in Europe
The rating of top management's priorities shows the importance of purchasing and the growing attention for value added activities with suppliers
The rating of supply management tasks shows the importance of supplier related activities within the purchasing & supply management function
Continuous improvements not only aim at cost and run-time reduction or quality improvements but also at the optimization of the interaction with the suppliers
Example: supplier assessment system at Sachs AG - the "mm-profile
Example: the competes program at Robert Bosch GmbH focuses on the technical and economic empowerment of its suppliers
Example: the supplier assessment criteria at Robert Bosch GmbH differentiate between the future potential, the past performance and the current offer of a supplier
Example: the supplier assessment system at Siemens AG is mandatory for all suppliers covering 80% of the purchasing volume, future main suppliers and suppliers delivering strategic products and services for a business unit
Example: the Siemens AG has standardized its assessment concept companywide on the first two levels (categories & criteria)
Example: the Siemens AG assessment concept allows adaptation possibilities for each business unit on the sub-criteria level and for one main category - an accurate description of each sub-criteria allows a standardized assessment within the business units
Example: the supplier management at EADS is geared to generate and integrate supplier value - making EADS more competitive
Example: the EADS supplier assessment system contains 5 common assessment criteria and 4 supplier performance classes
Example: EADS evaluates its suppliers on corporate and business unit level. At corporate level, the different assessments are integrated in order to aain the overall performance of the supplier
Example: at EADS the achievements of the supplier influence the lonq-term relationship
Example: suppliers that have completed EADS' supplier performance development successfully are ready to offer more products and services
Example: the supplier relationship management at EADS differentiates standard suppliers, strategic suppliers and competitive partners
Example: at EADS, the roads towards excellence is rocky but worth it both for the buyer and the supplier
Example: the Supplier Evaluation Model (SEM) at Volvo tries to integrate different perspectives (example for module supplier).
3 Supplier Value Integration - Rent & Risk Sharing
There exist many perceptions of supply risk
Supply risk has three basic sources: the buying firm, the suppliers and the supply market
4 types of supply risk can be defined: strategy risk, sourcing risk, integration risk and performance risk
What are the key elements of supply risk at the different stages?
The strategy risk is about the wrong alignment of corporate and supply objectives with supplier capabilities
The sourcing risk lies in the core of the purchasing function
The management of the integration risk is a real challenge both for the buyer and the supplier
The management of the performance risk is an on-going business of the supply management function
Supply risk management is based on four possible actions and on a four step process
Step 1: The identification of the possible risks along the supply chain needs a inter-company, cross-functional approach
Step 2: The classification of the different supply risks shows the position in the supply risk portfolio, the current status of the action taken and the supply chain entities mainly responsible
Step 2: The analysis of the identified supply risks - probability of occurrence and impact consequences - supports the determination of necessary actions
Step 3: The definition of the necessary actions for each supply risk is based on the supply risk portfolio and the supply risk strategy
Step 4: The implementation of a supply risk management and supply risk controlling system needs the commitment of the top management
Rent-sharing always goes with risk-sharing since "there is no such thing as a free lunch" in today's business environment
Rent & risk-sharing are critical issues for buyers and suppliers in today's business environment
The development of a rent & risk-sharing initiative requires a lot of time and resources
Step 1: The build-up of a measurement system is the basis of every rent & risk-sharing collaboration between buyers and suppliers
Step 2: The definition of included/excluded products and services forces the supplier and the buyer to thoroughly analyze the activities discussed and to learn more about the significant processes
Step 3: Supplier's experience based on historical data from the buyer or other companies provides a useful tool to analyze the buyer's current processes and to define baselines
Step 4: Agreement on measurement responsibility for costs and benefits, on detailed rent & risk-sharing and on dispute resolution mechanisms
Step 5: The initiation of the rent & risk-sharing plan needs careful buy-in of the buyer's and supplier's employees
Most suppliers are more than willing to share the benefits, but have a less clear understanding and willingness to share the risks of new product/process development efforts
Suppliers are often willing to share benefits and to take risks if they can recognize the buyer's own commitment
Example: EADS' global business perspectives require sharing of end consumer market opportunities and risks with its suppliers.
Example: EADS' enhanced risk and revenue sharing approach requires a flowdown of risks and opportunities from the end consumer to the first supplier throughout the whole supply chain
4 Supplier Value Integration - Early Supplier Involvement
Early supplier involvement is a specific approach to integrate supplier value
The potential benefits and risks of early supplier involvement are manifold
Early supplier involvement can focus on product as well as on process development/improvement at different early involvement stages
The early supplier involvement execution process can start at any early involvement stage
Successful early supplier involvement has some prerequisites
! In focus: A formulated and detailed supply strategy is the starting point for all supplier related activities
! In focus: an established and preferred supplier base supports the necessary trust building and communication
The supplier involvement portfolio should provide support for setting priorities with regard to the involvement of suppliers in a new product development project
The supplier involvement portfolio is a practice oriented method to define the involvement intensity of the suppliers
Depending on the position in the supplier portfolio, the buying firm can follow the early supplier involvement execution process
Supplier involvement portfolio: the normative strategies for arm's-length and routine development projects
Supplier involvement portfolio: the normative strategies for strategic and critical development projects
The role of the supplier is mainly defined by the supplier involvement portfolio
Target setting is a critical part of the early supplier involvement process
The information sharing process determines much of the overall supplier involvement success
Realize the possible supplier value and prevent the "not invented here" syndrome
Performance measures should be aimed at identifying the true value added of the extensive effort of integrating suppliers
Example: early supplier involvement at EADS means high responsibility of the supplier for risks and rewards
You need to know where you are in order to improve! The early supplier involvement maturity grid supports you in defining your current position
The many methods & techniques that support successful early supplier involvement into new product/process development can be divided in organizational integration, group integration and communication enablers
There exist many methods & techniques supporting successful early supplier involvement into new product/process development
There exist many methods & techniques supporting successful early supplier involvement into new product/process development
! Special focus on trust: trust development processes imply a wrong connotation since trust is an effect and results from many causes
Supplier coordination and supplier development are useful methods to develop a trusting relationship between supplier and buyer
Successful early supplier involvement depends on some specific factors
What does surprisingly not affect the success of early supplier involvement?
How can a buying firm reduce development and product costs?
How can a buying firm improve product and process quality?
How can a buying firm shorten concept-to-consumer cycle times?
How can the buying firm use its suppliers to become more attractive to customers?
Demands on a buying firm successfully involving suppliers
A organizational framework for a successful early supplier involvement
Summary: supplier value assessment and integration as a strategic supply management task
References

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