CE v5.6
First step is to get a basic understanding of your supply environment
1. Understand & Segment the Supply Environment
1.1. Defining Relational Types
• Typical characteristics and type mapping
• Consolidate spend • Rationalise numbers of suppliers
CE v5.6
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1. Understand & Segment the Supply Environment
• Price Impact of Tiering • TAC savings • Service Improvements • Risk Management Conduct Cost to Benefits Analysis
• Tier
CE v5.6
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In determining the most appropriate relationship type, the buying organisation must consider a number of dimensions
• Risk to the Business • Proportion of expenditure • Administrative Demand
Rationalise Supplier Base • Consolidation of spend • Maintenance of competition • Management of Risk Determine 1st Tier Suppliers
1.6 Rationalizeng tiering opportunities it is important to follow a methodical stepped approached
Profile Supply Base • Spend Profile • Supplier Profile • Future Spend Trends • TAC profiling Determine Criticality of Supplied Item
1. Understand & Segment the Supply Environment
Internal Dimension
• Criticality to product • Criticality to business operation
External Dimension
Risk
• Number of suppliers • M&A pattern • Technology / redundancy • Typical account sizes • Size of market / turnover • Level of spend importance in market • Technology capability • Demands of servicing account • Cost volatility - price cycles • Raw material cost volatility • Technology impacts - life cycles • Market drivers • Varying service provisions • Global/regional/national coverage • Quality of provision
• Criticality to the Business • Market Positioning • Value Add services • Future Requirements
Define Synergies between supply groups • Product synergies • Usage • Design • Processes
• Internal and external consideration factors: – Spend – Cost – Cycle – Service – Risk • Characteristics, factors and examples of relational types
• What is the importance to my business? • What is the demand made on my business? • How important is my business to the supplier? • How does the current and future supply market look like? • Questionnaire
Hig h Account Attractiveness
Development Nurture Expand business Seek opportunities Give low attention Lose without pain Nuisance
Core Cosset Defend vigorously Expand if possible Move Exploit commercially Risk losing Exploitable High
Collaborative Value Management (CVM) Toolkit
Overview on key elements of end-to-end Collaborative Value Management (CVM)
For reference: Supplier Handbook 1. Understand & Segment the Supply Environment 1.1 Defining Relational Types 1.2 Relational Considerations 1.3 Qualifying Relational Type 1.5 Relational Type Characteristics 1.6 Rationalise Supply base 1.7 Define Roles and Responsibilities Based on Segmentation Output 2. Assess and Set Objectives 2.1 Determining objectives 2.2. Quality & Cost Mgt 2.3 Delivery Mgt 2.4 Develop Supplier’s scorecard 3. Communicate & Drive Performance Improvement 3.1 Team Dynamics & Set-up 3.2 Communication mgt 3.3 Driving Continuous Improvement 4. Drive Supplier Integration & Collaboration 4.1 Degrees of Integration 4.2 Application of Approaches 4.3 Supplier Associations 4.4 CVM
Get a basic understanding of your supply environment
Descritpion
Work with business partners to select the most appropriate supplier segmentation model and classify suppliers based on their ability to support business objectives. Classify suppliers into different segments based on their importance in driving core business objective
1.6 Rationalize the Supply Base
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One step which has become a common feature in the sourcing environment is supplier tiering
Supplier Tiering
1. Understand & Segment the Supply Environment
Process Overview
Routine
Move Ensure supply continuity Bottleneck
a) Identify key strategic objectives for your organisation & targeted suppliers to align your segmentation model so that your assessment and segmentation of suppliers aligns with the goals of the organization. b) Select the segmentation model that best categorizes suppliers according to their ability to perform on the dominant business objective . c) Once the overall segmentation approach has been determined, select the underlying assessment criteria that will be used to assess supplier placement in the model.