om - 3 – supplier relationship

8/8/2019 OM - 3 – Supplier Relationship

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Operations Management

3- Supplier Relationship

Denis Stalder2009/ 20010



2

The context

Historical Market evolution

Demand

Offer

1975 20001950

Customer Client

Product to sellProduct to sell Product then sellProduct then sell Sell then productSell then product



3

Focus on the main process

R & D

Pr d cti n

Sale

L gi tic

Maintenance

General

ervice

S b

c ntracting Acc ntancy

P rcha ing

H man Re rce

Finance

Added Val e Externalizati n



4

Transfer from salaries to purchases

P rcha ing am nt increa e



5

A great variety

BOM Purchases

± Raw materials

± Standard Components ± Specific Components

General services

± Furniture

± Intellectual services

± Technical services

Projects



6

Fit to the strategy

Financial impact on margin

± All purchase discount increases the

profit

Securitization

± The contract lower the supplier risk

Increase the productivity ± Better organization of the

administration process



28 novembre 2010Denis Stalder November2007

7

Three Process

Order

Reception

Billing

Daily

Procurement

Specifications

Supplier

Price

Needs

Selection

Negotiation

Weekly

Purchasing

Companys

strategy

Purchasing

Policy

Purchasing

Marketing

Monthly

Management



Sourcing : RFI

28/11/2010Deni Stalder 8

Purchasing

Strategy Supplier

selection

Criteria:-Size

-Machines

-References

-ISO certif.

-Export

-Innovation

-Low cost

RFI

Request for

information

RFI

Request for

information

RFI

Request for

information

RFI

Request for

information

RFI

Request forinformation

RFIFilled in

RFI

Request for

information

RFI

Request for

information

RFI

Filled In

RFI Elaboration

Supplier Selection

Short List



Sourcing : RFQ


Need

Specification Supplier

selectionCriteria:

-Performance

-Quality

-Service

-Price & Cost

RFQ

Request for

Quotation

RFI

Request for

information

RFI

Request for

information

RFI

Request for

information

RFI

Request forinformation

SuppliersProposal

RFQ Elaboration

Supplier Selection

RFI

Request for

information

RFI

Request for

information

Suppliers

Proposal

Short List



Inquiry process

RFI = Request for Information ± Name, address, activity

± Number of employees, Turn over

± Quality standards, Exportations

± Process, Equipments

Inquiry ± Technical specification

± Contract project

Supplier proposals

Selection ± Define criteria

± Evaluate each supplier proposal

± Negotiation

± Make a decision



Electronic puchasing

processes


Supplier

selection

Needs

definition

Price Inquiry NegotiationOder Delivery

- Payment

e- rcing Market place Rever e a cti n e-pr c rement



E-sourcing

RFI management ± Suppliers professional database

± RFI design: criteria file template

± RFI automatic broadcast (e-mail, fax, )

± RFI answer management

± Comparison tables / short list

selection

RFQ management ± RFQ template design

± Proposal management

± Comparison matrix28/11/2010Deni Stalder 12



Market Places

To facilitate contacts

± Directory of suppliers

± Tender publication

Vertical / Horizontal

± Vertical = one sector (automotive, electronic )

± Horizontal = Office supplies, Computers

Transactional / Collaborative ± Transactional = To conclude a transaction

± Collaborative = To exchange information




Reverse auction

The purchaser send a RFQ

The suppliers issue a

proposal

Web meeting

± Purchaser

± Several suppliers

The Lowest the winner


Pr ject de ign

Req e t f r Q tati n

AU TION- Invitati n

- nnecti n

- A cti n pening

- Neg tiati n

- Analy i / Re lt p blicati n

- Tran acti n

ONTR A T



Some Web sites

Buying-Partner

DoubleTrade

Econia Goodax

FreeMarkets

Portum France

Synerdeal

Trade-Match



Negotiation

Definition

The Negotiation is a process to manage

disagreement in the purpose to satisfycontractually the needs



17

Prepare the negotiation

Prepare questions to ask

List the subjects to be negotiated

Define Objectives to be met

Think about arguments to use

Foresee potential concessions

Imagine the negotiation progress

Write this elements on a table



18

Prepare the negotiation

S bject t

be

neg tiated

S pplie

r

pr p a

l

Objectiv

e

Acceptabl

e val e

Arg ment Orde

r

Re l

t



19

Negotiation dialog

Rigid statements

Relations based on power

No transparency

Suspicion

Offensive or defensive

strategies

Favorable issue for oneself

Common objective focus

Relations based on

influence

Problem clarification

Confident climate

Open mind

Everybody accepted deal

Competition Cooperation



Select a strategy

1- Avoid Negotiation Steer clear of negotiation altogether.

2- Competitive strategy

Aggressively achieve our goals through competitive negotiation.

3- Compromising strategy Compromising by realizing some of our needs and some of the needs

of our counterparty.

4- Collaborative strategy Satisfy all our needs and all the needs of our counterparty by taking a

cooperative negotiation approach




Negotiation strategy



22

Purchasing contract

C ompanies Identification

Preamble

Technical Specification

Price

Delivery time & Transportation

Quality Payment

Warranty



STRA

TEGICA

NA

LYSIS



Marketing tools

Analogies & antagonisms

Risk & profit matrix

Partnership



Analogies & antagonisms

Marketing tools

± Assess Customer relationship

± Risk = Customer risk (not to paid)

± Profit = Sale Cost

Purchasing Marketing

± Supplier relationship

± Risk = Supplier Risk (not delivered)

± Profit = Savings



26

Risks-Profits matrix

Pr ofit

Ri k

Str ong

Low

Low Str ong

Securitization

Catalog Profits

Partnership



27

Catalog area

Characteristics:

± Low Risks and Profits

± Products : Multiple sources, Substitutionproducts de, Low consumption value

Strategy : Resources minimization

Tactics :

± Shorter administration flow, delegation,number of orders and suppliers reduction,low inventories, standardization



28

Profit area

Characteristics

± Low Risks, Strong Profit

± Products : Multiple sources, Substitutionproducts, High consumption value, Highdiscount potential

Strategy : Strength relationship

Tactics :

± Spot purchases, Bidding, Market andtechnology survey, Purchasing tools...



29

Securitization area

Characteristics

± Strong Risks, Low Profit

± Products : Few sources, Few substitution

products, Low discount potential, Sales ortechnical risks

Strategy : Supply security

Tactics

± Long term relationship, survey, Make or Buy



30

Partnership area

Characteristics

± Strong Risks, Strong Profit

± Product = Functions

Strategy : Supply permanence andimportant profits

Tactics

± Partnership



31

Partnership setup

Define strategic objectives

Check supplier motivation

Design the project Develop strong personal relations

Use conflict and problem resolution

methods Reciprocal style adaptation



32

Purchasing policy

Negotiation parameters

Negotiation typologies

Purchasing family segmentation

Building a policy



33

Negotiation parameters

Time

± Short term / Long term

Frequency ± Punctual, regular, partnership

Repartition

± Unique, Multi-source

Purchasing Value

± Low, High



34

Negotiation typologies

Open inquiries for each order

Inquiries limited to selected suppliers

Multi source contracts

Unique source contract

Imposed suppliers

Sourcing



35

Open inquiries for each order

Needs written on a specification

Inquire (all) potentials suppliers (known)

Advantage Drawback

-Competition, price-Wide information

-Equity

-Time consuming-Low engagement

-No economy of scale



36

Inquiries limited to selected suppliers

Suppliers homologation for a family of

products

Inquire all these suppliers for each order

Advantage Drawback

- Competition, price

-Technical security

-following up

-Time consuming

-Low engagement

-No economy of

scale



37

Multi source contracts

Reliable forecast

Needs gathering, repartition

Annual negotiation : Fixed or indexed price

Advantage Drawback

- Stabilized prices

- Supply Security

- Economy of scale

- Less negotiation

- Long term

engagement

- Minimum of

quantity

- Good visibility of

forecast



38

Unique source contract

Forecast, needs gathering

Several supplier inquiry

Only one supplier contract

Advantage Drawback

- Stabilized prices

- Economy of scale

- Less negotiation

- More competition

- Long term engagement

-Unsecured supply- Good visibility of

forecast



39

Imposed suppliers

Imposed by :

± Technology

± Tools

± Customer

Partnership negotiation

Price decomposition

Supplier progress management



40

Sourcing

Advantage / Drawback

Global cost

Homologation Repartition to change

Actual supplier elimination



41

Global Cost

Suppliers inquiries, meetings, homologations

Specific tools, developments

Actual purchasing price (on the bill)

Packing & Packaging costs

Transportation, Installation, Handling costs

Financial costs (terms of payment,Inventories )

Training & setup assistance cost

Spare parts and maintenance cost

Wastes, scraps, packaging recycling



42

Purchasing family segmentation

Raw material

Standard components

Specific components Sub-contracting

General services

General supply Investment, Project



43

ABC Method

80% of p rcha ing amount i made of 20% part familie

amillie mount otal % umulated

Raw materiel 6 . % %

tandard component 0 2 .6% 80%pecific component 6 8. % 8 %

ub-contracting 2 .2% %

r oject . % %

eneral er ice 8 2.2% %eneral uppl 0.8% 00%

6

cla = 0% - 80% B cla = 80% - 95% cla = 95% - 100%

om - 3 – supplier relationship

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