Module 2

Key to successful partnerships: Shared vision and objectives

-Both partners must share the same vision and have objectives that are not only clear but mutually agreeable. -The focus must move beyond tactical issues and toward a more strategic path to corporate success.

Basic Manufacturer's Goals

-Expand market reach -Enhance brand value -Minimize costs to serve -Enhance economies of scale.

Basic Distributor's Goals

-Maximize inventory turnover (means profit: the right speed of turnover maximizes profit for companies) -Maximize margins -Enhance economies of scope

Inventory Performance Metrics

-Total level of distributor's inventory -Shelf or floor space devoted to inventory (relative to competitors) -Breakdown by specific SKU in units and dollar value -Condition of inventory & facility -Amount of old stock and efforts to move it -Adequacy of inventory control and record keeping system.

Total Cost of Ownership elements

1. Acquisition costs: selling price and transportation costs & administrative costs of evaluating suppliers, expediting orders, and correcting errors in shipments or delivery. 2. Personnel costs: financing, storage, inspection, taxes, insurance, and other internal handling costs. 3. Usage costs: ongoing use of the purchased product such as installation, employee training, user labor, and field repair, as well as product replacement and disposal costs.

Five key points of an SRM system

1. Automation: handles routine transactions 2. Integration: spans multiple departments, processes, and software applications 3. Visibility: of information and process flows 4. Collaboration: through information sharing 5. Optimization: of processes and decision making

Important Relationship Binders

1. Commitment & top management support: commitment must start at the highest management level. 2. Information sharing: formal and informal lines of communication set up to facilitate free flow of information; confidentiality. 3. Talent-based & technology-based capabilities 4. Change management

Typically used performance metrics

1. Cost/price: competitive price & availability of cost breakdowns 2. Quality: zero defects, fit for use, ISO 9000 3. Delivery: fast, reliable/on time 4. Responsiveness & flexibility: to customers and changing situations 5. Environment: ISO 14000 6. Technology: superior product/service design 7. Business metrics: reputation, information sharing, attitudes, sales performance. 8. Total cost of Ownership: all costs associated w/ acquisition, use, & maintenance of a good

Top 5 support programs most highly correlated to distributor profitability

1. Marketing research 2. Warranties & guarantees 3. Drop-shipping arrangements 4. Point-of-sales materials 5. Sales forecasts

Relationship building process focuses on two things

1. Personal relationships 2. Culture of managing constant change & continuous improvement

Supplier Evaluation and Certification: Weighted-Criteria Evaluation System

1. Select the key dimensions of performance mutually acceptable to both distributor and supplier 2. Assign performance weights to each of the dimensions. 3. Collect supplier performance data (0-100) 4. Multiply performance data by importance weight and sum overall score. 5. Classify vendors based on their overall score: Unacceptable, Conditional, Certified, & Preferred. 6. Audit and perform ongoing certification review

Percentage of failed outsourcing supplier relationships

50%

ISO 14000 Standards

A family of standards for environmental management. -The benefits include reduced energy consumption, environmental liability, waste and pollution, and improved community goodwill.

Supplier Partnerships Definition

A mutual commitment over an extended time to work together to the mutual benefit of both parties, sharing relevant information and the risks and rewards of the relationship.

ISO 9000 Standards

A series of management and quality standards in design, development, production, installation, and service. -U.S. companies wanting to sell in the global market seek ISO 9000 certification.

Key to successful partnerships: Trust

Building Trust: with trust, partners are more willing to work together, find compromise solutions to problems, work toward achieving long-term benefits for both parties, and, in short, go the extra mile.

A shared vision and objectives are...

Communicated, often written, measurable, achievable, accepted and agreed upon formally. -Think of this as a prenuptial agreement with written expectations, policies and penalties.

What can be achieved from strong supplier relationships?

Competitive corporate performance

Why supplier relationships fail most?

Complacency: self-satisfaction especially when accompanied by unawareness of actual dangers or deficiencies.

Dimensions of trust

Likeable, competent, dependable (most important dimension), customer oriented, honest.

Supplier Evaluation

Measures related to quality, cost, delivery, and flexibility are used to evaluate suppliers. -Metrics should be: understandable, easy to measure, and focused on real value-added results. -A multi-criteria approach is best to measure performance.

Lack of shared benefits

One of the 9 reasons given for failure of alliances Example: Sam's asking/demanding lower prices from vendors.

Supplier Relationship Management Software

SRM software improves profits and reduces costs.