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SRM Collaboration Strategies (6-25-08 DRAFT) 1
Supplier Relationship Management Supplier Engagement Strategies
Maria Velissariou6-25-08
FINAL DRAFT FOR JUDITH
SRM Collaboration Strategies (6-25-08 DRAFT) 2
SRM Mission
Enable Procurement, aligned with cross-functional stakeholders, to lead and facilitate supplier engagement strategies that drive profitable growth and margin enhancement for the BUs.
“Unleash supplier power to drive profitable growth”
Revenue must grow Profitable Growth
Costs must be reduced=
Determine that the thing can and shall be done, and then we shall find the way.
Abraham Lincoln
SRM Collaboration Strategies (6-25-08 DRAFT) 3
Total supplier power =
+ Best innovative ideas to deliver consumer and customer value
+ Maximum cost efficiencies without sacrificing quality
+ Speed to market
+ Supplier resources and capabilities
+ Preferred Customer status among suppliers
… and better positions Suppliers to grow their business by meeting Kraft’s needs
SRM creates …a sustained environment where Procurement engages suppliers and gains total value that enables profitable growth for Kraft.
SRM Collaboration Strategies (6-25-08 DRAFT) 4
How do we achieve Kraft = Preferred Customer?
SupplierElevate Kraft-supplier relationship to a collaborative or alliance status, which enables suppliers to achieve sustained business gains
• Growth in business size• Training / support from Kraft• “Badge” value among peers
KraftStrong SRM strategies position us to gain suppliers’ best ideas & resources first
• Delivering more total value • Driving profitable growth• Creating a competitive
advantage for Kraft as part of
SRM Collaboration Strategies (6-25-08 DRAFT) 5
Productivity entrenched in Kraft culture
Since 2004 SRM launch, we’ve made great strides …
50+ Supplier Challenges 200 ideas, 20+ launches (worldwide)
Supplier collaboration concept introduced in 2004
First Supplier Summit
2004 2005 2006 2007 - to date
Kickoff Alcan, Cargill Alliances
RSA Supplier Assessment tool
Brand Value Challenge
Growth metrics
1st Multi-supplier ChallengeSupplier
collaboration training
First Supplier Challenge showcase
Kraft SRM milestones from a business deliverables and organization standpoint
Open Innovation SRM roll outs(e.g. IM&S)
Collaboration launches
SRM Collaboration Strategies (6-25-08 DRAFT) 6
Health &
Wellness
Health &
Wellness
Growing CohortsGrowing CustomersGrowing Channels
Quick Meals
Premium
Snacks
SRM starts with the consumer or business need …
*Italy: Multi-supplier challenge idea (2008)
… and results in new ideas for Kraft
Sonoco 3Rs
Kenco footprint
Philly Gourmet Terrine*
SRM Collaboration Strategies (6-25-08 DRAFT) 7
Suppliers are helping us deliver innovations …
Supplier Challenge:
New super premium coffee launched with innovative consumer pack and in-store display in 6 months
R&D Innovation Day:
Supplier showcased new lid technology, used in personal health products, which ultimately becomes EZ Grip Maxwell House
External Manufacturing Innovation Session:
Utilized suppliers’ development resources, minimizing Kraft R&D support, to launch new line extension in 6 months
Supplier Collaboration:
Supplier helps Kraft develop new prebiotic fiber cereal, which is the category’s biggest new product launch for 2008
SRM Collaboration Strategies (6-25-08 DRAFT) 8
And suppliers are driving down costs, without compromising quality
Supplier Challenge: Supplier identifies innovative packaging solution that satisfies consumer’s easy-to-open and reclose needs while providing significant cost reductions projected at $5MM.
Service Solutions: Supplier suggests ways to reduce, reuse and recycle at Kraft facilities, which saves the environment and an estimated $5MM annually for better bottom-line brand value
Supplier Collaboration: Supplier worked closely with Banbury plant personnel and identified seven unique ideas to reduce energy on the freeze-dried process – saving $5MM or more across the coffee network
Supplier Expertise Optimized Inbound Shipping:
Supplier fills a long-standing internal capability gap to explore shipping efficiencies. Using the suppliers’ comprehensive system to control, manage and optimize inbound supply chain shipments saves $2.4MM annually
SRM Collaboration Strategies (6-25-08 DRAFT) 9
End to End
BUProcurement
Leads
BURDQ
Leads
Buyers RDQ / Open Innovation
Suppliers
SRM
Legal
BU
Direct communications, lead interface
Broad strategic communications
SRM Shared ServiceLinkages within Procurement and across functions will ensure effective supplier engagement and drive total business value
SRM Collaboration Strategies (6-25-08 DRAFT) 10
Continuing to follow the 80/20 rule: Focus on suppliers of highest potential
Alliance: Tailored and highly integrated business relationship between Kraft and the supplier that advances functional and technological challenges via co-development.
Transactional: One-time exchanges.
Collaborative: Cooperative business relationship between Kraft and the supplier that allows the supplier to develop for Kraft ownable product and/or supply chain solutions.
ALLIANCE
RELATIONSHIP
TRANSACTIONAL RELATIONSHIP
CO
LL
AB
OR
AT
IVE
Co
mp
atib
iliti
es
Economic Value Drivers
SRM Collaboration Strategies (6-25-08 DRAFT) 11
Primary role:Leading and enabling organizational change
• Idea leadership – Idea leader of SRM best industry practices
• Communications – Agent of change to maximize supplier engagement– Driver of SRM communication internally and externally with suppliers to draw the best ideas
and resources– Main Procurement link with stakeholders, such as RDQ/OI
• Business alignment – Enabler of aligning the best of supplier expertise with the Kraft business and corporate
priorities to get joint value creation
• Community of practice – Owner and custodian of tools, best practices and training worldwide
• Recognition – Driver of internal and supplier recognition and awards
SRM Collaboration Strategies (6-25-08 DRAFT) 12
Currently … We’re in a position of high potential
High understanding
of supplier collaboration
Collaborating with Suppliers
Not Collaborating with Suppliers
Innovators & early
adopters
Laggards High potential
Low understanding of supplier collaboration
Natural instincts
SRM Collaboration Strategies (6-25-08 DRAFT) 13
However, supplier consolidation is causing a shift from a buyers’ to a sellers’ market
Kraft competing for best supplier resources and ideas
Innovations
Production capacity
Productivity
More than 75% of companies give access to Preferred Customers of vital resources: production capacity, product/service innovations, productivity.― Corporate Executive Board Procurement Council, March 2007
SRM Collaboration Strategies (6-25-08 DRAFT) 14
Leaders are embracing Open Innovation & Strategic Alliances
Suppliers report delivering an average of 49% more value to their most collaborative key customers compared to their least collaborative key customers.
Vantage Partners
New Trends are emerging …
1. From Strategic Alliances to Alliance Strategies
2. Balance global partnerships with local executions
3. Ecosystems the blueprint for future collaborations
SRM Collaboration Strategies (6-25-08 DRAFT) 15
Commodities and Sustainability:Major external forces of industry transformation
• Escalating commodity prices
• Sustainability, the new transnational societal and industry phenomenon of the ’00s – like the Quality movement in the ’80
• Supply Chain efficiencies at the heart of cost management
More than ever cross-functional integration of strategies and supplier partnerships are imperative
SRM Collaboration Strategies (6-25-08 DRAFT) 16
How do we accelerate adoption of supplier engagement strategies for profitable growth?
SRM Collaboration Strategies (6-25-08 DRAFT) 17
Promote/refine existing tools and develop new efficacious approaches to maximize efficiency of SRM.
NEW VALUE CREATION
TOOLS
Engage the business and Shared Services to connect supplier expertise with business needs. Migrate from ad hoc tactical projects to aligned strategies.
BU GOAL ALIGNMENT
COMMUNICATIONS
Promote internally and externally the urgent need of SRM strategies as a means to enable innovation and margin enhancement.
Engage Shared Services to leverage SRM to drive corporate priorities, such as sustainability, beyond brand- driven initiatives.
SRM EXPANSION
Over the Strat Plan timeframe …
Four strategies will poise supplier engagement to help drive profitable growth
We will connect world-leading supplier expertise and resources with our business priorities in a framework that builds relationships and creates win-win gains.
SRM Collaboration Strategies (6-25-08 DRAFT) 18
1. Align SRM with BU Strat Plans Support Procurement BU leads to identify BU priorities and
create SRM plans Promote an optimized supplier network in line with BU
innovation funnel Longer term, champion Supplier Portfolio Management
(SPM)
2. Strengthen cross-functional alignment with key stakeholders Enable Procurement BU leads and buyers to maximize
SRM value to the BUs Act as the primary Procurement contact with RDQ / OI
3. Establish approach for Kraft – Supplier Joint Value Creation Joint goals and metrics Roles and responsibilities Resources
Engage the business and Shared Services to connect supplier expertise with business needs. Migrate from ad hoc tactical projects to aligned strategies.
BUSINESS GOAL ALIGNMENT
SRM Collaboration Strategies (6-25-08 DRAFT) 19
SRM EXPANSION
Engage Shared Services to leverage SRM to drive corporate priorities, such as sustainability, beyond brand-driven initiatives.
1. Continue to expand SRM application in new areas beyond brand-driven initiatives
Sustainability
Commodities
IM&S (e.g. MES, Transportation)
2. Proactively engage suppliers in helping us achieve specific goals (e.g., Sustainability pilots)
3. Adapt SRM approach and methodologies as needed per business and/or region
SRM Collaboration Strategies (6-25-08 DRAFT) 20
1. Behaviors and culture Assess spectrum of mindsets to SRM Uncover perceived barriers/accelerators to success via
auditing internally and with suppliers Step up communications to drive adoption & effectiveness
2. Community of Practice Share SRM best practices with world-wide Procurement
community Model best practices through peer-to-peer case study
endorsements/testimonials
3. Training Procurement Training Academy: Migrate Procurement staff
through understanding “the what” and “the how” Support suppliers navigate Kraft
4. Communications Internal cross-functional; Intranet workzone External (Suppliers, Media/Industry); Extranet
5. Incent behavior Reward and recognition internally and for suppliers Goals / MAPS alignment
Promote internally and externally the urgent need of SRM strategies as a means to enable innovation and margin enhancement.
COMMUNICATIONS
You communicate, you communicate, and then you communicate some more. Consistency, simplicity and repositioning are what it’s all about. -- Jack Welch
SRM Collaboration Strategies (6-25-08 DRAFT) 21
Promote/refine existing tools and develop new efficacious approaches to maximize efficiency of SRM.
NEW VALUE CREATION
TOOLS
1. Toolkit management
Refine existing tools– Supplier Collaboration – Supplier Segmentation (RSA) – Supplier Challenges (single and multi-)– Innovation Days (with RDQ/OI)– Supplier evaluation tools (e.g. Clareo Index)– Simplified contractual agreements and forms – MOR/PDR Procurement inputs (exploratory &
development)
Introduce new tools– SRM metrics– Joint Value Creation (jointly with OI)– Benchmarking (jointly with OI)– Supplier Ecosystem as part of
2. “One-stop shop” library and helpline Centralize all tools and communications on the Intranet
3. Continued education Stay abreast with academia and industry
SRM Collaboration Strategies (6-25-08 DRAFT) 22
Ensuring we’re in-step with industry best practice
• Gaining executive reinforcement
• Creating common language, goals and metrics
• Developing alliance manager leadership competencies and credentials
• Focus on hard and soft enablers, measures and cultivating relationships
• Aligning with ’09 BU Strat Plans
Kraft
Align with corporate & business strategies 1
Balance the “what” & how”• The right business arrangement & working relationship
• Ends Metrics and Means Metrics• Eliminating and Embracing Differences
• Enabling formal systems and collaborative behavior• Managing external partners and internal stakeholders
5
Appoint Alliance Manager & ensure governance4
Share goals, metrics & language3
Secure executive endorsement 2
5 Supplier Collaboration Imperatives
SRM Collaboration Strategies (6-25-08 DRAFT) 23
2008 2009 2010
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
SRM Strat Plan
Contract simplification
Supplier Challenge optimization Next generation Supplier Challenge
Joint Value Creation / Metrics Ecosystem
SRM Training Academy
Updated Intranet
Revamped Intranet
Extranet
Community of Practice (quarterly)
SRM mindset mapping Rewards & Recgn
Supplier Excellence Awards
Supplier Summit
Alignment with BU/Corp growth / sustainability priorities
Pilot optimal supplier network
Optimal supplier network Supplier Portfolio Management
Alignment with BU/Corp Cost priorities
IM&S (MES and Transport) supplier segmentation
Multiple Supplier Challenges
Driv
e d
ow
n c
ost
sR
ew
ireR
efr
am
eE
xplo
it sa
les
Supplier engagement roadmap
SRM Collaboration Strategies (6-25-08 DRAFT) 24
SRM will provide regional focus based on individual needs
NA Enable SRM penetration within Procurement
SRM alignment with regional business strategies
Tools and best practices
Training Academy
EU Share learnings / best practices on optimal supplier network in line with innovation funnels
EEMA Enable SRM penetration within Procurement
SRM alignment with regional business strategies
Tools and best practices
Training Academy
LA Tools and best practices
Training Academy
AP Tools and best practices
Training Academy
Tool adaptation to regional needs
Global SRM Expansion to Corporate Initiatives
Communication Strategies
Tools, Best Practices, Training Academy
Strengthen links with cross-functional stakeholders
SRM Collaboration Strategies (6-25-08 DRAFT) 25
SRM EXPANSION COMMUNICATIONSNEW VALUE CREATION
TOOLS BUSINESS GOAL
ALIGNMENT
Develop “One-stop shop library” and helpline
Instruments of Growth
Drive ExtraordinaryScale
Masters of Service
Lead toolkit roll out and facilitate adaptations as needed
Enable Tool kit optimization Introduce next generation of
tools Support contract
simplification Drive continued education Explore Ecosystem
Launch SRM Procurement Training Academy
Lead Community of Practice
Revamp SRM intranet
Develop Supplier Extranet
Step up Internal & External Communications
Drive behaviors and culture Incent behavior (internally & with
suppliers)
Strengthen cross-functional alignment
Maximize SRM value to BUs Primary contact with RDQ,
linkage with E2E
Promote an optimized supplier network against BU innovation funnel
Champion Supplier Portfolio Mgmt
Align with BU Strat Plans Establish approach for Kraft-
Supplier Joint Value Creation (goals, metrics etc)
Expand SRM application in IM&S
Expand SRM application in Sustainability & Commodities
Adapt approach/ methodologies to regional needs
SRM strategies deliver against the three Procurement priorities …
SRM Collaboration Strategies (6-25-08 DRAFT) 26
How can supplier engagement help the business accelerate the drive for profitable growth?
New ideas SRM can engage suppliers’ best innovative ideas to deliver against your consumer and business growth priorities
Cost efficiencies SRM can maximize supplier cost efficiencies without sacrificing quality
Gain speed to marketSRM can deliver ideas faster than traditional approaches
Sustainability solutionsSRM can leverage supply chains to deliver against sustainability goals
How can you help?
Share business priorities with SRM
Work with RDQ to identify technology enablers
Work with Procurement to link priorities with supplier capabilities and identify collaboration strategies
Share with suppliers our needs and invite their ideas for win-win gain
More resources SRM can leverage supplier resources and capabilities
SRM Collaboration Strategies (6-25-08 DRAFT) 27
How can supplier engagement help Procurement enable profitable growth?
Align with business strategies Leverage communications & training to
create behavior & culture Learn more about new value creation
tools and how to apply How can you help?
Get clarity and alignment with BUs on goals
Put collaboration and alliance strategies in place
Share with suppliers our goals and establish deliverables. Look for win-win opportunities
Communicate progress regularly and reinforce Kraft’s commitment
SRM Collaboration Strategies (6-25-08 DRAFT) 28
How can SRM help Kraft and Suppliers attain win-win relationships
Help key suppliers navigate Kraft Reinforce the behavioral changes to enable SRM Help Procurement communicate the Kraft
message externally
How can you help?
Buyers bring to life SRM with suppliers
Agreement team establishes streamline contract process
Executive support for fair and reasonable sustained relationship with suppliers
SRM Collaboration Strategies (6-25-08 DRAFT) 29
In summary,
SRM Supplier Engagement Strategies …
• Connects world-leading supplier expertise and resources with our business priorities in a framework that builds relationships and creates win-win gains
• Over the three year strat plan, our SRM approach will help us earn “Preferred Customer” status among suppliers to get their best ideas first
• We’re committed to four strategies to drive the change in culture and mindset within Kraft
• We’ll begin by aligning our supplier networks with the business priorities
• It’s the right thing to do, and it starts with you!
What can you do to unleash supplier power to drive profitable growth for Kraft?
SRM Collaboration Strategies (6-25-08 DRAFT) 30
Supplier Relationship Management Supplier Engagement Strategies
Maria Velissariou6-25-08
DRAFT
SRM Collaboration Strategies (6-25-08 DRAFT) 31
APPENDIX
SRM Collaboration Strategies (6-25-08 DRAFT) 32
Chocolate Growth Platform & Supplier Network Example
Surprising flavours
Fresh & Authentique
Emotional Packaging and Formats
Act Responsible
Nutrit, improvem.
Portion control
Calorie reduction
Mental wellbeing
Mess free eating Convenience Portion size
Existing Suppliers Type
Huthamaki PackPremium flow pack
Reclosable technology
Easy opening technolgy
Tate & Lyle IngredientsNatural flavors
Barry C. Raw MatCocoa specialities
Sustainable Cocoa
Theobromine fractionates
Friesland Food CommodityEncapsulation technology Fat replacer
Brandt EMEHollow figure technology
Cargill CommodityCocoa specialities
Sustainable Cocoa Fat reduction
Südzucker IngredientsSugar replacer
Random TechnolgyInline printing
New Suppliers
National StarchSugar replacer
NovozymesSpec. Enzymes
BayerSchwartau Dried fruit
Growth Platform
Consumer Need
Premiumize Health and Wellbeing Snacking
SRM Collaboration Strategies (6-5-08 DRAFT) 33
Protect ideasfor Kraft
• Further develop firewalls to protect Kraft innovations
• Link ABU strategies with IP strategies with contract executions
• IP, exclusivity & innovation development agreements
• “First in market”
Develop collaboration strategies
• Engage suppliers to deliver solutions at reduced time to market
• Select / recommend suppliers and most effective ways to engage them
• Build Strategic Alliances to advance functional & technological challenges (co-development)
• Foster collaborative partnerships to deliver "ownable" product / supply chain solutions
• Build matrix displaying Growth Platform needs vs. supplier capabilities
• Systematically screen for new suppliers and technologies
Link capabilities to Growth Platforms
• Re-assess supplier base with focus on innovation capabilities for Growth Platforms
Fully understand Supplier Innovation Capabilities
SRM enables an optimized supplier network, aligned with BU innovation funnels
• Understand Growth Platforms & underlying consumer needs
UnderstandGrowth Platforms
SRM Collaboration Strategies (6-25-08 DRAFT) 34
SRM will champion Supplier Portfolio Management to integrate with BU priorities. Adopt BU pilot model.
Plan Explore Negotiate Form Manage Evolve
Individual SupplierCollaboration or Alliance
SPM = an instrument of growth and scale
Business Portfolio RESULTSSTRATEGY
New Alliances/
Collaborations
Exit / Restructure
OptimizeSPM
Idea
l
To
day
Skills and mindset
Alliance knowledge/ value added
OrganizationStructure/Governance
Organizational Enablers
-- Vantage Partners
SRM Collaboration Strategies (6-25-08 DRAFT) 35
SRM intranet workzone
SRM Collaboration Strategies (6-25-08 DRAFT) 36
What’s an ecosystem?An effective network of interdependent relationships that enables Kraft to deliver more total value to the market than its competitors with less effective relationships
What ecosystem will do for Kraft (barriers to competition or
expansion to new territories
Sustainability
Connected ti kraft and each other (show Kraft vulnerabilities)
Suppliers
Others (e.g., Entrepreneurs)
Peers/competition
Academia
Customers
Public Opinion / Lobbies
CommodityGrowers / Producers
Government & Regulatory
KRAFT
CONSUMERS
A strong ecosystem can help Kraft enable expansion into new areas and create barriers to competition
Customer responsive
Consumer centric
Trusted partner
Com
mun
ities
of i
nnov
atio
n
Industry focused excellence
Inclusive
Interdependent
SRM Collaboration Strategies (6-25-08 DRAFT) 37
… and it continues to gain momentum
My job is to find productivity advantages
I’m creating new value for Kraft by engaging suppliers more collaboratively to enable their expertise to bring solutions to our business needs
I know new value creation is critical to Kraft’s growth, and the company wants to work with suppliers differently. I’m just not sure what that really means for my job.
I think changing the way we work with suppliers is important, but I don’t know how to apply that to my job.
I feel I can make a real contribution to Kraft by working with my suppliers differently. I’m going to try to do this.
KNOW KNOW KNOW THINK THINK THINK FEEL FEEL FEEL DO DO DO
Kraft spectrum
We’re building on management reinforcement, role modeling, and expansion across and deeper in the organization