All Rights Reserved - Sarmento Silva, C.P.M. Development of Channel Partners “Critical Supplier...
-
Upload
alexandrina-holt -
Category
Documents
-
view
216 -
download
1
Transcript of All Rights Reserved - Sarmento Silva, C.P.M. Development of Channel Partners “Critical Supplier...
All Rights Reserved - Sarmento Silva, C.P.M.
Development of Channel Partners
“Critical Supplier Issues-
Moving Toward Enterprise Spend Management”
2004 Northeast Supply Chain Conference
September 21, 2004
Supply Chain People, Process & Technology
“What’s Missing”
Purchasing Professionals
Suppliers
• Strategic Commodities• Sourcing the Best Suppliers• Building Relationships• Understanding Contracting• Transition through Enterprise Spend
Management (ESM)
STRATEGIC COMMODITIES
• Conduct spend diagnostic
• Validate Commodities
• Drive opportunity capture initiatives
–Perform high-level spend analysis
– Identify strategic sourcing opportunity areas
–Define scope of each initiative
–Lay out preliminary cost savings ideas
–Estimate savings potential
–Generate, validate and prioritize potential cost savings ideas
–Develop implementation plan around agreed upon ideas and syndicate with relevant stakeholders
–Develop Strategic Sourcing Initiatives
–Develop tracking and reporting mechanisms
–Build hard savings estimates into budgets
STRATEGIC COMMODITIESH
igh
L
ow
Po
ten
tia
l s
av
ing
s*
Easy Hard
Ease of capture**
CSOs
Line Equipment
Consulting
Consumer
advertising
Professional
promotions
Investigator
payments
CROs
Travel
Meetings
Computer hardware
Electric
Fleet
Maintenance and repair
Legal services
HR
Freight
Contractors
Special media
Journal ads
Sample Commodity Charting
MRO
Direct Materials
Purchasing Professionals
Suppliers
• Strategic Commodities• Sourcing the Best Suppliers• Building Relationships• Understanding Contracting• Transition through Enterprise Spend
Management (ESM)
Supply Chain People, Process & Technology
“What’s Missing”
STRATEGIC SOURCING INITIATIVES
• Create a Strategic Sourcing Team within the Purchasing Organization to facilitate and lead
• Utilize cross functional teams to create “Buy In”
• Approve additional Purchasing staff to maintain organization’s ability to maintain infrastructure support while working to drive other on-going cost savings efforts
• Allow budget dollars for team initiative needs such as contractors, market consultants, temp labor, etc.
ORGANIZATIONAL DESIGN
STRATEGIC SOURCING INITIATIVES
• Maintain manageable number of high impact teams at any one time
• Allow time for initiative planning
• Drive identified opportunities
• Continue to drive other on-going efforts around smaller opportunities in parallel to major initiatives
• Focus on identifying and capturing quick hits first
• Provide periodic status reports to executive management
PROCESS PRINCIPLES
STRATEGIC SOURCING INITIATIVES
SAMPLE WORKPLAN
Phase 1
Define analysis/scope
Establish team
Conduct initial analysis
Develop cost saving action plans
Develop cost tracking/ reporting system
Phase 2 Phase 3 Phase 4 Phase 5
• Define specific categories (segments) for analysis (within defined scope)
• Define basic team structure, objectives and responsibilities
• Identify specific team members
• Identify and secure potential additional resources
• Generate potential cost saving ideas
• Establish baseline spend and savings targets
• Identify initial data requirements and collect initial data
• Substantiate cost saving ideas and savings estimates
• Prioritize ideas
• Gather additional data to resolve issues
• Develop implementation plans around agreed upon ideas as well as contingency plans
• Develop procedure for measuring actual savings vs. baseline over time
• Establish formal system to report actual savings vs. target
6–8 weeks
STRATEGIC SOURCING INITIATIVES
GUIDING PRINCIPALS
Objectives • Identify and realize significant savings for individual spend category
• Train broad cross-section of internal customers in best-practice purchasing methodology
Milestones • 6-8 weeks per team for cost savings idea identification • Several weeks/months thereafter for implementation and realization
Approach • Teams facilitated by full time experienced staff from purchasing organization
Resources • Typically 4 - 6 part time members per category team (coaches, internal customers, finance)
Role of teams • Generate, analyze, and commit to cost savings opportunities
Role of internal customers
• Identify team members for each initiative• Provide access to data, opportunity identification, and sequence
STRATEGIC SOURCING INITIATIVES
• Sufficient participation and buy-in from internal customers
• Senior management support to promote idea generation, drive implementation, and capture budget savings
• Appropriate timing and sequencing of initiatives to reinforce sense of urgency
• Early syndication of strategic sourcing team mandate • Savings not at the expense of quality of service
• “Outside the box” idea generation
• Emphasis on achieving compliance
KEYS TO SUCCESS
Purchasing Professionals
Suppliers
• Strategic Commodities• Sourcing the Best Suppliers• Building Relationships• Understanding Contracting• Transition through Enterprise Spend
Management (ESM)
Supply Chain People, Process & Technology
“What’s Missing”
Building RelationsBuilding a strong relationship with critical suppliers is the greatest challenge for Supply Chain professionals.
Suppliers need to be handled with the same “care and feeding” you give to customers …
Building Relations
… but suppliers need to understand that the Pharmaceutical Industry has changed and that today we all face ‘shark infested waters.’
Building Relations
Because suppliers faces similar challenges in technology and process changes, Supply Chain staff should help suppliers understand the benefits and impacts of being the “Best of the Best” through ...
Aligned Objectives Teamwork
Building RelationsPharmaceuticals faces the challenge of slowing “top line” sales.
… to focus on controlling the bottom line.
In the past top line sales drove revenue and profit but now these market pressures has driven the industry…
Revenue
Spend
Profit
Building Relations
Benefits for Suppliers: Increased sales and establishment
of strategic relationship due to leveraged volume spending
Improved customer satisfaction due to improved product and process visibility
Improved market share within customer’s organization due to reduction in maverick spending
Process efficiencies through use of electronic transactions
WIIFM
Supply Chain Professionals must focus suppliers attentions on the Benefits of working together.
Building Relations
The bottom line is that suppliers want to perform beyond our expectations because they understand the benefits of working to become a valued partner in our individual supply chains.
Purchasing Professionals
Suppliers
• Strategic Commodities• Sourcing the Best Suppliers• Building Relationships• Understanding Contracting• Transition through Enterprise Spend
Management (ESM)
Supply Chain People, Process & Technology
“What’s Missing”
Understanding Contracts
Teamwork
A critical piece of the puzzle is building the contracts that organize, define and and clarify how we will do business with our suppliers.
Understanding Contracts
Good contracts are more than words on a piece of paper … …more than drawings, diagrams, and legal terms … … more than prices or signatures.
Contracts define the working relationship between us and our suppliers.
They should also define the relationship of our suppliers with their suppliers.
… and so on.
True Supply Chain
Understanding Contracts
Good contracts mean all parts …
… going in the same direction
SpecificationsTerms and conditionsPricingLogistics and Inventory
Master AgreementsStatements of WorkOutline AgreementsIntellectual Property
DeliverablesService LevelsWarranties and GuarantiesRemediation or Termination
Strategic Tactical Transactional
Understanding Contracts
Cross Functional Review
A critical component of contracting is thorough cross functional review especially utilizing:
FinanceLegalSafety, Health & EnvironmentQuality ManagementEngineeringManufacturingInformation Services
Understanding Contracts
Good contracting saves time …
… and time is money
• Strategic Commodities• Sourcing the Best Suppliers• Building Relationships• Understanding Contracting• Transition through Enterprise Spend
Management (ESM)
Purchasing Professionals
Suppliers
Supply Chain People, Process & Technology
“What’s Missing”
“Enterprise Spend Management”
Business Challenges
“Spend data is too time consuming to compile, and often there isn’t enough data or available data is not accurate.”
“The sourcing process takes too long to complete…I am swamped with paper forms and spreadsheets, and analyzing vendor responses is like comparing apples to oranges.”
“Everyone does his/her own purchasing… no one knows we have preferred suppliers and negotiated contracts.”
“The requisition transaction is complicated and not everyone has access to the ERP system.”
“Invoices are sent to the requesters who keep them for weeks, even months. Our suppliers are upset that they are not getting paid on time and the AP department has no visibility to the outstanding payables.”
“Enterprise Spend Management”
Aligned Strategy• Strategic Supplier Partnerships• Global Leverage• Business Strategy Development
Optimized Organization• Continuous Learning• Cross-Functional Involvement• Global Organization
Coordinated Processes• Strategic Sourcing Process• Process Efficiency• Supplier Process Linkage
Enabling Technology• ERP Leverage• Efficient Data Exchange• Data Collection and Analysis
Measured Results• Balanced Scorecard• Total Cost of Ownership Measurement• Transaction Volume Metrics
Aligned Strategy
Measured
Results
Enabling Technology
Optimized Organization
Coordinated Processes
“Enterprise Spend Management”
The objective of spend management is to focus on spend for sustainable savings:
• “Spend-centric" focus — systematically aligning the organization's mission, resources, and processes around effectively managing spend
• Implement closed-loop management processes that deliver continuous feedback by capturing spend data and supporting best practice spend management strategies
• Enable companies to constantly measure and improve their results — so they can find the savings, get the savings, and keep the savings on an ongoing basis
Spend Management Solutions include:
Data Warehousing & Analysis Solution
Electronic Sourcing Solution Electronic Procurement Solutions
including: eBuying, eContracts, and eInvoicing platforms
“Enterprise Spend Management”
A Key Priority
Pharmaceutical organizations must recognize the Pharmaceutical organizations must recognize the opportunity to drive business value and process opportunity to drive business value and process efficiencies in its procurement operations.efficiencies in its procurement operations.
Commit to achieve expense reduction goals in delivering value through spend management.
Spend management becomes a key priority.
Drive initiatives with targeted benefits.
Develop projects to drive value through spend management processes, tools and techniques.
Pharmaceutical organizations must recognize the Pharmaceutical organizations must recognize the opportunity to drive business value and process opportunity to drive business value and process efficiencies in its procurement operations.efficiencies in its procurement operations.
Commit to achieve expense reduction goals in delivering value through spend management.
Spend management becomes a key priority.
Drive initiatives with targeted benefits.
Develop projects to drive value through spend management processes, tools and techniques.
“Enterprise Spend Management”
Traditional Purchasing:• Time intensive, paper based
transactions• Transaction processing,
tactical focus• Limited time & focus on
supplier management• Limited competitive
landscape • Lack of visibility to
negotiated contracts and preferred suppliers
• Maverick spending• Lack of spend data, limited
spend analysis
Spend Management:• Electronic transactions, intuitive
user interfaces• Reduced purchasing intervention • Reduced cycle time in sourcing
activities• Increased time and focus on spend
and supplier management• Full visibility to contracts and
preferred suppliers• Reduction of maverick spending• Improved spend data capture and
reporting capabilities
Improved spend leverageImproved process effectivenessIncreased purchasing savings
“Enterprise Spend Management”
• To be successful in spend management, an organization must recognize the change impacts to various groups of stakeholders.
• Two groups of stakeholders that will experience significant changes in the area of spend management are suppliers and purchasing professionals.
Lessons LearnedLessons Learned
Potential Impacts to Suppliers: Technical requirements to participate and support new technology
Adoption of new processes to support new technology Training of personnel to perform new roles and responsibilities
Less competitive, non-strategic suppliers may not retain/gain business with existing customers
Benefits for Suppliers: Increased sales and establishment of strategic
relationship due to leveraged volume spending Improved customer satisfaction due to improved
product and process visibility Improved market share within customer’s
organization due to reduction in maverick spending
Process efficiencies through use of electronic transactions
New Technology• Training on the use of new technology enablers• Technical support to ensure uptake• Monitor usage and performance to ensure
successful implementation
New Processes• Early and active involvement in design of to-be
processes• Communication and training of process changes• Establishment of supportive policies
New Roles & Responsibilities• Clear role and responsibility definition• Communication and training of new activities and
tasks• Supportive structure to ensure smooth transition
New Technology• Training on the use of new technology enablers• Technical support to ensure uptake• Monitor usage and performance to ensure
successful implementation
New Processes• Early and active involvement in design of to-be
processes• Communication and training of process changes• Establishment of supportive policies
New Roles & Responsibilities• Clear role and responsibility definition• Communication and training of new activities and
tasks• Supportive structure to ensure smooth transition
Purchasing professionals face a number of challenges to achieving spend Purchasing professionals face a number of challenges to achieving spend management capabilities.management capabilities.
“Enterprise Spend Management”
“Enterprise Spend Management”
Enterprise Spend Management creates greater business visibility and speeds reaction time by creating a centralized data model and rapid enablement of best practices across a corporation.
“Enterprise Spend Management”
For the next generation of Supply Chain excellence, ‘Managing Spend’ is not optional; deciding how intelligently you will do it is the only issue at hand. Executives must create a culture of fiscal discipline and back that up with an enterprise spending management system that enables every employee to participate in keeping their own companies competitive. Do this and you create a legacy of increasing value in the long term while providing solid and impressive results in the short term.
Sarmento Silva, C.P.M., is a 25-year career Purchasing Professional, currently serving AstraZeneca Pharmaceuticals as Director, Purchasing System Development and Re-engineering on assignment as Leader for their current mySAP ERP and Ariba Buyer implementation project. AstraZeneca is a Global leader in the Pharmaceuticals industry whose 2002 sales totaled more than $8 Billion in the US. Prior to coming to AstraZeneca, Mr. Silva was Global Manager of Packaging and Printing for Rubbermaid© Corporation. He is a Life Certified Purchasing Manager carrying the certification since 1984. He has been an active member of the Institute for Supply Management (formerly NAPM) since 1980 and has served at every level of the organization including National Vice Chairman for Membership Activities. He currently serves on the Editorial Review Board for “Inside Supply Management” ISM’s signature Magazine. He has a BA in Communications and a MBA in Marketing. In 1993 he was awarded the Distinguished Service Award from the Western New England Purchasing Management Association, Massachusetts House and Senate and received a citation from the Governor’s office for statewide excellence.
About our Speaker