Five Best Supply Management Practices in use Today
1. The Five Best Supply Management
Practices in Use Today
by F. Michael Babineaux, CPSM, C.P.M., A.P.P.
President/CEO
Babineaux Educational Services and Training, Inc.
www.BESTraining.com
901.853.0539
2. Who Am I?
• F. Michael “Mike” Babineaux, CPSM, C.P.M.
– 40+ years Supply Management Experience
– 30 year FedEx Veteran
– SCM Educator and Trainer
• Babineaux Educational Services and Training, Inc.
• www.BESTraining.com
• 901.853.0539
3. Topic
The Five Best Supply
Management Practices in Use
Today
4. World Class Excellence --
Strategic Processes
Establish Establish Integrate
and Leverage a Appropriate Suppliers into
World-Class Strategic New Product &
Supply Base Service
Alliances Development
Develop
Commodity/
INTEGRATED AND
Purchase Family
Strategies ALIGNED
Manage Costs Integrate
Supplier Suppliers into
Strategically the Order
Development
Across the Fulfillment
and Quality
Supply Chain Process
5. World Class Excellence --
Enablers
Develop
Organization Deploy
and Teaming Globalization
Strategies
Establish INTEGRATED Develop
Globally Integrated Procurement and
and Aligned P&SC
Strategies/Plans
AND ALIGNED Supply Chain
Measurements
Establish Develop
Human Resource and Implement
Development/ Enabling IS/IT
Training Systems
6. 12 World Class Supply
Management Practices
Strategic Processes Enabler Processes
• Procurement Strategy • Strategic Goal Alignment
Development • Teaming Strategies
• Supplier Integration • Performance Measurement
• Leverage the Supply Base • Globalization
• Develop Strategic • Information Systems
Alliances Integration
• Quality Management • Human Resource
• Cost Management Development
7. 12 World Class Supply
Management Practices
Strategic Processes Enabler Processes
• Procurement Strategy • Strategic Goal Alignment
Development • Teaming Strategies
• Supplier Integration • Performance Measurement
• Leverage the Supply Base • Globalization
• Develop Strategic • Information Systems
Alliances Integration
• Quality Management • Human Resource
• Cost Management Development
8. The Five Best
1. Strategic Goal Alignment
2. Procurement Strategy Development
3. Supplier Integration
4. Teaming Strategies
5. Performance Measurement
9. The Five Best
1. Strategic Goal Alignment
2. Procurement Strategy Development
3. Supplier Integration
4. Teaming Strategies
5. Performance Measurement
10. Strategic Goal Alignment
"Strategic
Performance
Measurement for Purchasing and
Supply,“
(A CAPS Research study in collaboration with
McKinsey & Co)
“Best-in-class companies align the strategy
and objectives of the supply management
organization with those of the rest of the
organization."
11. What happens when . . .
Company
Strategy
Internal Supply Chain
Customer Strategy
Strategy
Misalignment Creates Confusion for You
17. Critical Success Factors to
Achieving Alignment
Visible top management direction and support
Clearly defined strategy and goals
Buy-in from key stakeholders
Establishment of uniform metrics
Implementation of cross-functional/ cross-
organizational teams
Internal and external education and training
Information technology and systems support
Elimination of functional barriers
Customer focus
Continuous communication and feedback throughout
the supply chain
18. Critical Success Factors to
Achieving Alignment
Rating Exercise
Factor Rate
• Visible top management direction and support ____
• Clearly defined strategy and goals ____
• Buy-in from key stakeholders ____
• Establishment of uniform metrics ____
• Implementation of cross-functional teams ____
• Internal and external education and training ____
• Information technology and systems support ____
• Elimination of functional barriers ____
• Customer focus ____
• Continuous communication and feedback ____
19. Critical Success Factors to
Achieving Alignment
Weighting and Rating
Factor Weight X Rate = ____
• Visible top management direction and support ____ _____ ____
• Clearly defined strategy and goals ____ _____ ____
• Buy-in from key stakeholders ____ _____ ____
• Establishment of uniform metrics ____ _____ ____
• Implementation of cross-functional teams ____ _____ ____
• Internal and external education and training ____ _____ ____
• Information technology and systems support ____ _____ ____
• Elimination of functional barriers ____ _____ ____
• Customer focus ____ _____ ____
• Continuous communication and feedback ____ _____ ____
Total 100 ____
20. Key Point
“If you’re not singing the same
song, you’re just making a bunch
of noise and –
your performance will suffer”
21. The Best Supply Management
Practices
1. Strategic Goal Alignment
2. Procurement Strategy Development
3. Supplier Integration
4. Teaming Strategies
5. Performance Measurement
22. Procurement Strategy Development
• Procurement Decision Tool
– Market Complexity
– Degree of Competition
– Geographical Dispersion
– Supplier Cooperation
“Price concessions and
collaboration”
23. Procurement Strategy Development
• Procurement Decision Tool
– Market Complexity
– Impact on Business
• Risk
• Value
“What happens if you
don’t have it?”
24. Procurement Strategy Development
• Procurement Decision Tool
– Market Complexity
– Impact on Business
– Prioritization
• High to Low
High
Low High
26. Procurement Decision Tool
Routine Quadrant Characteristics
High
Strategic
• Many capable suppliers Business
Impact
Leverage
Routine Bottleneck
• Fewer total dollars spent Low
Low Marketplace Complexity High
• Low priority items
• May consume a disproportionate amount of time and
dollars to acquire
• Developed quality and technology
• Able to move easily between suppliers--low
switching costs
27. Procurement Decision Tool
Routine Quadrant Strategy
High
Leverage Strategic
• Focus - Removing transaction Business
Impact
Routine Bottleneck
effort Low
Low Marketplace Complexity High
– Standardized contracts
– p-cards
• The primary goal
– Minimize the procurement costs of
these items.
28. Procurement Decision Tool
High
Business
Impact
Routine Bottleneck
Low
Marketplace Complexity High
Low
29. Procurement Decision Tool
Bottleneck Quadrant Characteristics
High
Strategic
• Small number of suppliers Business
Impact
Leverage
Routine Bottleneck
• Low to medium annual dollars Low
Low Marketplace Complexity High
• Customized specification and technology
30. Procurement Decision Tool
Bottleneck Quadrant Strategy
High
Leverage Strategic
• Focus on continuous supply Business
Impact
Routine Bottleneck
– Reduce Custom specifications Low
Low Marketplace Complexity High
or technology
– Purchase in quantity
– Monitor Inventory closely
– The relationship is important but, search
for alternative suppliers
31. Procurement Decision Tool
High
Leverage
Business
Impact
Routine Bottleneck
Low
Marketplace Complexity High
Low
32. Procurement Decision Tool
Leverage Quadrant Characteristics
High
Leverage Strategic
• Greater number of suppliers Business
Impact
Routine Bottleneck
• Medium to high annual dollars Low
Low Marketplace Complexity High
• Low risk to obtain, but major disruption
• Multiple users
• Developed quality and technology
• Able to move easily between suppliers
33. Procurement Decision Tool
Leverage Quadrant Strategy
High
Strategic
• Focus on volume Business
Impact
Leverage
Routine Bottleneck
– Leverage the organization’s Low
Low Marketplace Complexity High
volume to get lower prices
– Combine user requirements
– Form categories of items
34. Procurement Decision Tool
High
Leverage Strategic
Business
Impact
Routine Bottleneck
Low
Marketplace Complexity High
Low
35. Procurement Decision Tool
Strategic Quadrant Characteristics
High
Leverage Strategic
• Few capable suppliers Business
Impact
Routine Bottleneck
• Product/services success critical Low
Low Marketplace Complexity High
• Unique or customized items
• Unable to move between suppliers easily
• Cost analysis yields high benefits
• Unproven or undeveloped technology
36. Procurement Decision Tool
Strategic Quadrant Strategy
High
Strategic
• Focus on Building Relationships Business
Impact
Leverage
Routine Bottleneck
– Collaborative or Low
Low Marketplace Complexity High
interdependent relationships
(e.g. Strategic Alliances)
37. Procurement Decision Tool
High Leverage Strategic
Business
Impact
Low
Routine Bottleneck
Low Marketplace Complexity High
38. Key Point
“If you use the same strategy to
buy airplanes as you do to buy
pencils,
your performance will suffer”
39. The Best Supply Management
Practices
1. Strategic Goal Alignment
2. Procurement Strategy Development
3. Supplier Integration
4. Teaming Strategies
5. Performance Measurement
40. Supplier Integration in New
Product/Service Development
“Firms looking for ways to –
– decrease concept to customer
development time
– improve quality
– significantly reduce the cost of the
resulting product
are involving suppliers earlier in the design
process.” “Best of the Best” by Aberdeen Research
41. Supplier Integration in New
Product/Service Development
• Early Supplier Involvement
– Manufacturing/Service Design Process
• Use of Supplier expertise and experience
42. Supplier Integration in New
Product/Service Development
• Early Supplier Involvement
– Manufacturing/Service Design Process
– Product/Service Development
• Prototypes/Demonstrations
• Replacement materials/alternative methods
43. Supplier Integration in New
Product/Service Development
• Early Supplier Involvement
– Manufacturing/Service Process
– Product/Service Development
– Cost
• Cost projections of a new product or service
44. Supplier Integration in New
Product/Service Development
• Early Supplier Involvement
– Manufacturing/Service Process
– Product/Service Development
– Cost
– Quality
• Supplier knowledge of
quality requirements
45. Supplier Integration in New
Product/Service Development
• Early Supplier Involvement
– Manufacturing/Service Process
– Product/Service Development
– Cost
– Quality
– Technology
• Influence final
material/application
selection
46. Supplier Integration in New
Product/Service Development
• Early Supplier Involvement
– Manufacturing/Service Process
– Product/Service Development
– Cost
– Quality
– Technology
– Design
• Experience in serving a
particular market
47. Supplier Integration in New
Product/Service Development
• Early Supplier Involvement
– Manufacturing/Service Process
– Product/Service Development
– Cost
– Quality
– Technology
– Design
– Co-Development
• Sharing costs
48. Supplier Integration in New
Product/Service Development
• Early Supplier Involvement
– Manufacturing/Service Process
– Product/Service Development
– Cost
– Quality
– Technology
– Design
– Co-Development
– Cycle Time
• Through reduction in
redundancies
49. Supplier Integration in New
Product/Service Development
• Early Supplier Involvement
– Confidentiality Issues
• Proper controls
– Disclosure Parameters
– MN-DAs
– Dispute resolution
clause
50. Supplier Integration in New
Product/Service Development
• Early Supplier Involvement
– Confidentiality Issues
– Product/Service Life Cycle
• Pre-commercialization
• Introduction
• Growth
• Maturity
• Decline
51. Key Point
“Suppliers know more about
what you buy than you do, so if
you don’t use them, your
performance will suffer”
52. The Best Supply Management
Practices
1. Strategic Goal Alignment
2. Procurement Strategy Development
3. Supplier Integration
4. Teaming Strategies
5. Performance Measurement
53. An Action Plan for Creating
Effective Teams
by Robert M. Monczka, Ph.D., C.P.M. and
Robert J. Trent, Ph.D.
Studies by MSU reveals
– 80% of Best-in-Class organizations
emphasize the use of Supply Management
Project teams.
55. Teaming Strategies
• Procurement Project Teams
– Definition - The application of project knowledge,
skills, tools and techniques to procurement
project activities to meet customer requirements
56. Teaming Strategies
• Procurement Project Team Stages
– Initiation
• Root Cause analysis
• SWOT
• Feasibility Analysis
– Net Present Value
– ROI
• Business Case
57. Teaming Strategies
• Procurement Project Team Stages
– Planning
• Scope Development
• Roles & Responsibilities
• Project Plan Approval
64. Teaming Strategies
• Cross-Functional Teams
– Purpose
– Supply Management Roles
– Advantages/Disadvantages
– Organizational cultures
• Traditional vs. Team
• Skill Considerations
• Personality Considerations
• Leadership
65. Key Point
“Two heads are better than one,
so if you’re not including them in
the decisions, your performance
will suffer”
66. The Best Supply Management
Practices
1. Strategic Goal Alignment
2. Procurement Strategy Development
3. Supplier Integration
4. Teaming Strategies
5. Performance Measurement
67. Performance Measurement
Aberdeen Benchmarking Research
• Best-in-Class companies are more than 2.5x more likely to use
performance monitoring, management, and optimization
solutions.
• Best-in-Class companies are 1.67x more likely to use portals or
dashboards for consolidating and reporting of performance
data.
71. Performance Measurement
• Department
– Reasons for Scorecard
• Determine effectiveness
– To objectives
– To department management
• Measure improvement/deterioration
• Provide Resources
• Determine Value
77. Key Point
“You can’t manage what
you don’t measure, so if
you’re not measuring
performance . . .”
78. The Five Best Supply
Management Practices in Use
Today
1. Strategic Goal Alignment
2. Procurement Strategy Development
3. Supplier Integration
4. Teaming Strategies
5. Performance Measurement