Value Managed Relationships英文版).ppt

SheilaDubin ValueManagedRelationships December1998 Author 2 Aftercompletingthismodule youwillbeableto UnderstandVMRconceptandapplicationArticulatetypesofcostsavingsopportunitiescreatedbyVMRsUsetheBainframeworktoconductaVMRRefertorealexamplesofBain sVMRprocessandsuccess ValueManagedRelationshipsObjectives 3 VMRConceptVMRKeySuccessFactorsVMRSourcesOfValueBainVMRProcessExampleKeyTakeaways Agenda 4 AValueManagedRelationship VMR isafullpartnershipbetweenacustomerandasupplier Itsgoalistomaximizequalityandminimizetotalsystemcostsofdoingbusinessthroughcollaborativesharingofinformationandresources AVMRcreatesawin winrelationship VMRDefinition 5 Partnership TrueVMR ProcurementStrategies ValueManagedRelationship SoleSource VerticalIntegration CompetitiveBid Short termContract Spot Long termContract AVMRisoneprocurementstrategytomaximizecostsavingsandstrategicvalue WhatisaVMR 6 AValueManagedRelationshipcanexceedthevaluepotentialofbothverticalintegrationandtraditionallynegotiated arm slength transactions aconsolidationofpurchasestooneorfewsupplierswhoarecapableofmaintaininglongtermcompetitiveeconomics highqualityandefficientdeliveryparticipantsmustsharesinglegoalofachievinglowestindustrysystemscostsavingsshouldbesharedtoprovidemutualongoingincentivestoeliminateredundancies AVMR whenappropriate exceedsthevalueofallothertypesofrelationships HowDoesaVMRWork 7 Traditional ArmsLength Approach VerticalIntegration VMR VMRscanexceedthevalueofbothtraditionalcontractsaswellasverticalintegration StrategicPurchasingOptions 8 HighPotential High Low High Low Purchasingvolume relativetototalsuppliersales Value added engineeredlevel ProductredesignMaterialsubstitution ProductredesignMaterialsubstitutionVolumediscountSystemcostimprovement ModeratePotential VolumediscountSomesystemcost No Littleopportunity needtocluster VMRsaremostappropriatewherehighvolumeandsignificantvalueaddedoccurs Medium lowpotential WhereAreVMRsAppropriate 9 LargedollarpurchaseHighlevelofvalue addedcostinproductFragmentationacrossmanydivisionsandsuppliersClientrepresentssignificantpartofindustryoutputIndustrycompetitiveintensityhigh capacityutilizationdroppingconsolidationinprogressmanynewplantslookingforvolumehistoricalindustrypriceumbrellas VMRsaremosteffectiveinlargedollar highvalueaddedproducts InWhichCategoriesAreVMRsMostEffective 10 Consolidatevolumeinlong termpartnership Increasedpaceofinnovationleadstostrategicbenefitsforboth Ensurescontinuedsupplyforbuyerandcapacityutilizationforsupplier CommitmentandscalejustifiesjointinvestmentincostsavingsandR D technology Jointeffortsleadtosystem widebenefitsforboth Addedvalueleadstomorereasonstocollaborate AsuccessfulVMRwillcontinuetocreatevalueastherelationshipprogresses ValueCycle 11 VMRscreatevalueforthebuyer HigherqualityandfewerrejectsSuperiorservicePartnerinjointsystemcostreductionInnovationTechnologicalexpertisepackageperformanceimprovementsspecconsolidationproductredesignandmaterialssubstitutionPricingcommensuratewithlarger longervolumecommitmentsCommitmenttocontinuousimprovementofthepartnership ValueOfVMRs Buyer 12 VMRscreatevalueforsuppliers Largervolumesinfeweritemslongerrunlengthsandfewerset upshighercapacityutilizationlearningcurvebenefitsStablelongtermdemandSharinginbuyer sstrongcommitmenttofuturegrowthPartnerinjointsystemcostreductionResourcesandstabilitytoinvestintechnologyCommitmenttocontinuousimprovementofthepartnership ValueOfVMRs Supplier 13 VMRshaveaveraged15 to20 costsavings AverageRange BainExperienceinVMRs 14 Althoughthevaluemanagedrelationshipcanbesophisticatedandcomplex theresultsarequantifiableandsimple 100 ofvolumewithonesupplierforthreeyearsUpfrontpricereductionof7 Guaranteed9 8 recurrentsavingswithinthreeyearsCost basedindexedpricingovertime50 50savingssharingPenaltiesandinspectionsbuilt inEtc VMRSampleAgreement 15 VMRConceptVMRKeySuccessFactorsVMRSourcesOfValueBainVMRProcessExampleKeyTakeaways Agenda 16 Overonehalfofexistingpartnershipsdonotmeetexpectations Thisrealityincreasestheneedtounderstandandfocusonthekeysuccessfactors PartnershipsExpectations 17 Strategy organizationandprocessmustbeinplaceinordertoensureVMRsuccess Clarityofandagreementonstrategyandgoals Strategy Appropriatelevelofinvolvementinandacrossorganizations Organization Detailedandstructuredprocessforidentifyingandimplementingopportunities Process KeySuccessFactors 18 Longtermrelationshipsfocusedontotalvaluearecriticalstrategicissuesthatmustbeclearlyarticulated VMRspursuedonlywhereappropriateTruesupplierpartnershipslong termrelationshipswithoneorfewsuppliersrelationshipsatallorganizationallevelsextensivetwo wayinformationsharingsharingofallsavingswillingtoaddressinherentrisksFocusontotalvalue chain notinputpricesuppliersselectedbasedonlong termtotalvalueopportunitiesidentifiedandcapturedacrossentiresupplychain KeySuccessFactors Strategy 19 Involvementandcooperationacrosstheorganizationiscriticaltosuccess Seniormanagementdirectinvolvementandongoinginterest supportCross functionalinvolvementinscheduling logistics designanddevelopmentImplementationdrivenat grassroots levelClearprocess champions Formalizedstructureandprocesstoperpetuatepartnership KeySuccessFactors Organization 20 Adetailedprocessmustbeinplacetomaximizevalueandensureongoingopportunityidentification UpfrontidentificationofopportunitiesanduniquevalueeachpartneroffersDocumentedexistenceofsignificantuntappedsystemscostvalueRigorousandfact basedsupplierselectionExtensiveconsensusbuildingSystemsandstructurestoperpetuateprocess KeySuccessFactors Process 21 Scopeofpartnershiplimitednotwin win Focusonpriceinsteadoftotalvaluesupplierselectionbasedonpricefailuretoconsidertotalsystemassourceofsavings Chosenstrategyinappropriateforpurchasecategory Aninappropriatestrategycanprohibitawin winrelationship ReasonsforPartialSuccess Strategy 22 Partialsuccesscanbecausedbyseniororlineorganizationalinadequacies ReasonsforPartialSuccess Organization 23 Lackofinternalandexternalconsensusbuilding Lackof relentlesspursuit Supplierselectionnotrigorousandfact based Technicalopportunitiesnotidentifiedupfront Lackofsystemsandstructurestoperpetuatetheprocess Anincompleteprocesscanalsocauselimitedsuccess ReasonsforPartialSuccess Process 24 ToachievesuccessfulVMRs thereareseveralareasofpotentialobstaclestowatchoutfor Benefitsarevagueandunqualifiedno fullpotential economicsanalysishasbeendevelopedforbothparties ProcessChallenges AssumptionsaremadebysuppliersthatVMRsareaone timetrick CommunicationChallenges Watchouts Concernsaboutsharingexpenseandproductinformation Sufficientcommunicationofthebenefitsofchangethroughoutbothorganizations Thereisalackofunderstandingandcommitmenttochangingthewaybusinessisdone BenefitsoftheVMRaresplitinalop sidedmanner SKUproliferation Noongoingvaluerealizationagendahasbeencreatedand ornoVMRchampionsareempoweredtoact Organizationalbarriers e g multi divisionalcompanies Watchouts 25 VMRConceptVMRKeySuccessFactorsVMRSourcesOfValueBainVMRProcessExampleKeyTakeaways Agenda 26 ImprovedqualityduetoreducedvariabilityImprovedcommunicationsLongercommitmentsallowforlongerrunlengthsPurchasingeconomies AstrongVMRcancapturethevalueinherentinverticalintegrationwhileallowingtheclienttofocusbothcapitalandmanagementresourcesonitsprimarybusiness ExampleSourcesofValue PrimarySourcesofValue Volume ScaleEconomies ValueEngineeringandQualityImprovement SystemCostReduction Technologyandcapabilitysharingtocreatelowestcost highestvalueproductJointdeterminationofpotentialfor materialsubstitutionreductionofmaterialcontentstandardizationofmaterials Jointidentificationofredundant duplicateprocesses e g qualitycontrolorderprocessingtransportationengineeringmanagementfunctionsimprovedinventorycontrolCrosscompanylogisticssharingoftransportationanddistributionoperations e g leveragedbackhaulopportunities shareddeliveryruns EstimatePercentofTotalValueCreated 25 50 25 SourcesofValue 1of2 27 Valueengineeringandsystemscostreductionaremostdifficulttoimplementandrequirethemostseniorinvolvment SourceofValue Methodology DifficultyofImplementation SeniorManagementInvolvement Anopendialogueregardingproductdesignbeginstooptimizedesign costtrade offs Valueengineeringandqualityimprovement Buyerandsupplierjointlyexaminecurrentmethodsofinteractionandbegintoeliminateredundancies Systemscostreduction Consolidationofsuppliersallowsthebuyertonegotiateforshareofincrementalprofit Volume scaleeconomics SourcesofValue 2of2 28 Disguisedexample Increaseof3 2times 6 ProfitImprovement RelevantPlantCapacityUtilization IncrementalMarginImpact Increasingasupplier sutilizationby22 hada6 profitimpact Volume ScaleEconomies Example 29 NewDesigns IndexedQuality IndexedCost Valueengineeringidentifiedthreenewproductoptionsthatincreasedqualityandreducedcost ProtypesdevelopedjointlywithsupplierDisguisedexample ValueEngineering Example 30 Supplier Customer JointQualityControl Customer Directtopackagingoperations QCinspectionpersonnel InthisexampleofsystemscostVMR thesupplierandBainclienteliminatedredundancyandsaved40 ofqualitycontrolcosts Topackagingoperations OngoingFeedbacktoVendor SystemsCosts Example 31 Overall thisclientachieveda19 costreductionthroughtheVMRexampleshown SummaryofCostSavings Example 32 Volume pricesavingsandsomelevelofvalueengineering qualitybenefitsarerealizedveryearlyintherelationshipAdditionalvalueengineeringsavingsandsystemcostreductionsaremorelikelytocomelater BainexperiencehasfoundthatthevaluefromVMRisdevelopedoverseveralyears YearsintoVMR Valueengineeringandqualityimprovement Systemcostreduction Volume priceeffect TypicalTiming 33 VMRConceptVMRKeySuccessFactorsVMRSourcesOfValueBainVMRProcessExampleKeyTakeaways Agenda 34 IdentifyVMROpportunities UnderstandIndustryCostStructure SelectVMRCandidates ObtainTopManagementCommitment IdentifySpecificCostReductionOpportunities ImplementVMROpportunities TrackVMRSavings SelectproductsforVMRbasedonpurchasingvolumeandvalue added Analyzeindustryeconomicstodevelopsavingshypotheses AnalyzesupplierstoselectbestVMRcandidates Ensureseniormanagementofclientandsupplierarefullycommitted Conductanalysistoprovehypothesesandquantifysavingsopportunities Formalizerelationshipandimplementopportunities Trackprogressofsavingsandrelationships VMRProcess 35 IdentifyVMROpportunities UnderstandIndustryCostStructure SelectVMRCandidates ObtainTopManagementCommitment IdentifySpecificCostReductionOpportunities ImplementVMROpportunities TrackVMRSavings VMRProcess 36 ThismatrixwillhelpyouprioritizewhichopportunitiesaremostappropriateforaVMR No LittleOpportunity needtocluster High Low Low High PurchasingVolume RelativetoTotalSupplierSales Value Added EngineeredLevel ProductredesignMaterialsubstitutionVolumediscountSystemcostimprovement VolumediscountSomesystemcost ProductredesignMaterialsubstitution Moderatepotential Highpotential Medium lowpotential PurchasingCategoryPriority 37 BecausetheVMRprocessislengthyandtimeconsuming qualitativeissuesmustalsobeevaluatedinselectingwheretoimplementaVMR SuppliersandclientorganizationsmustbewillingtoworkcloselytogethercommitmanagementtimeandeffortprioritizesuccessofVMRTopmanagementofsupplierandclientmusthaveauthoritytocoverfullscopeofVMRBalanceamountofcostsavingswithlevelofsensitivityassociatedwithproductcategory PurchasingCategorySelection 38 IdentifyVMROpportunities UnderstandIndustryCostStructure SelectVMRCandidates ObtainTopManagementCommitment IdentifySpecificCostReductionOpportunities ImplementVMROpportunities TrackVMRSavings VMRProcess 39 UnderstandingtheindustrystructurevalidatesopportunitiesthatwereidentifiedinthefirstVMRprocessstep HowsuitableisthismarketanditscompetitivedynamicsforaVMR Howimportantistheclientasacustomerinthisindustry Whatdrivesthiscoststructure Howfragmentedistheindustry Whatistheutilizationofeachplayer UnderstandIndustryStructure 40 IdentifyVMROpportunities UnderstandIndustryCostStructure SelectVMRCandidates ObtainTopManagementCommitment IdentifySpecificCostReductionOpportunities ImplementVMROpportunities TrackVMRSavings VMRProcess 41 VMRpartnersmustbeabletoperformintherelationshipandbeawillingpartner PotentialforlowcostpositionStrongtechnology qualityNewproductdevelopmenttrackrecordAdequatefinancialresources LongTermWinners CapabilityandWillingnesstoDevelopaPartnership ImportantcategoryforsupplierClientimportanttosupplierPartnershipswithothersuppliersScaletohandlevolumeParentcompanysupport IdealPartners SupplierPrioritization 42 Initialanalysisofthesuppliermustbeconductedtodeterminepotentialforbeingalong termwinnerandcapability willingnesstodevelopapartnership ExampleAnalyses SizeandmarketshareStrategyProfitabilityCashflowQualityphilosophyandimplementationTechnologyapplicationImportanceofclient sbusinesstosupplier InitialSupplierEvaluation 43 TofurtherdeterminewhetheraspecificsupplierisagoodVMRcandidate evaluatethevendoronavarietyofcriteria QualityofService SupplierCommitment MagnitudeofCostReductionPotential Long TermLeadershipPotential Product delivery systemsGeographiccoverage Dedication dependenceInterestinVMR SystemseconomicsFlexibilityofapproachCredibilityofplan resources TechnologyScaleFinancial SupplierEvaluation 44 PartnershipDevelopmentProcess IdentifyVMROpportunities UnderstandIndustryCostStructure SelectVMRCandidates ObtainTopManagementCommitment IdentifySpecificCostReductionOpportunities ImplementVMROpportunities TrackVMRSavings VMRProcess 45 Implementation Setuppartnershipmanagementstructureandrollout Negotiations Shareaggregateresponses SupplierProposalsAnalysis Receiveresponses InitialContactwithSuppliers Describeproposedrelationship Selectionofsupplier s Comparativeanalysis Elicitsuppliers attitudesonapartnershipwiththeclient Trainstafftomanageprocess expandtootherareas IdentificationofBDPandsystemcostreductiontargets Follow upwithplanttours qualitychecks etc Handovercategorystrategyandvolumeexpectations Theoptimalpartnershipdevelopmentprocessisexplicitandclearlyarticulated PartnershipDevelopmentProcess 46 NumberofSuppliers Oligopoly Giant s andMany Fragmented SoleSource Giant s andFew 15 30 15 30 2 5 2 5 1 SupplierConcentration 80 to6 8suppliersRestwith10 20suppliers 80 to1or2suppliersRestwith15 30suppliers Evenlyamongsuppliers 80 to1or2suppliersRestwith1 4suppliers 100 to1supplier LongtermcompetitivebidsShorttermcompetitivebids VMRLongtermcompetitivebidsShorttermcompetitivebids VMRLongtermcompetitivebidsShorttermcompetitivebids VMRLongtermcompetitivebidsShorttermcompetitivebids VMRLongtermcompetitivebids PotentialRelationshipOptions Arangeofsupplierconfigurationoptions shouldbeevaluated SupplierConfigurationAlternatives 47 People Isseniormanagementcommittedtomakingthiswork Haveallorganizational cultural andskillchangesbeenaddressedAretheincentivesappropriatetoensureemployeecommitment OperationalExecution Whatisthegovernancestructure Howisprogressmonitored Howwillroadblocksberesolved Isthereopensharingofrequiredinformation CanalltheinformationsystemschangesbeidentifiedandspecifiedHowwillswitchdisruptionsbeminimized PartnerSelection Whatistheoptimalnumberofsuppliers Dowereallyunderstandsupplier scurrentandfuturecostposition Hasthesupplierscreenincludednon costparameters Hasthesuppliermadearealisticcommitment Isthesuppliercommittedtodeliveringontheagreement Value IsthistherightinputtotargetforaVMR industrytrackrecordproportionofbuyercoststructureDoesthebenefitoutweightherisks switchingcostsbuyerleverageWhereisthevalue Stages1 2and3shortvs long termIsthevaluerealizable potentialhurdlesandroadblocks EachoftheseissuesshouldbeconsideredinevaluatingaVMR ChecklistforSuccessfulExecution 48 IdentifyVMROpportunities UnderstandIndustryCostStructure SelectVMRCandidates ObtainTopManagementCommitment IdentifySpecificCostReductionOpportunities ImplementVMROpportunities TrackVMRSavings VMRProcess 49 Ameaningfultrackingmechanismmustbeputinplaceacrossmultiplevariablestoensureongoingresults SavingsproductcostsystemscostRelationshipstatusTimingofsavingsmilestoneachievementsIndustrychangesinindustrydynamicsintroductionofnewtechnology etc Tracking 50 VMRConceptVMRKeySuccessFactorsVMRSourcesOfValueBainVMRProcessExampleKeyTakeaways Agenda 51 Clientislargeconglomerateproducing15majorproductlinesCurrentrelationshipwithsuppliersistraditionalandsomewhatadversarialattimesAlldataandvendorshavebeendisguised howeverthisisanactualBainclientandcaseProductAiscalledwidgetsthroughouttheexamplewidgetSKUsarecalledred blueandgreen Context VMRExample 52 IdentifyVMROpportunities UnderstandIndustryCostStructure SelectVMRCandidates ObtainTopManagementCommitment IdentifySpecificCostReductionOpportunities ImplementVMROpportunities TrackVMRSavings VMRProcess 53 UponevaluationofABC sproductpurchases ProductAisthemostattractiveVMRopportunity ABCPurchasedProducts ABCCompanyPurchasingCategoryPriority 54 ProductcategoryAhasthemostsupplierandclientsupport ProductExecutiveCommitment CorporateWillingnesstoProductChange Ranking SupplierCommitment SupplierCooperation ProductCategory PurchasingCategorySelection 55 IdentifyVMROpportunities UnderstandIndustryCostStructure SelectVMRCandidates ObtainTopManagementCommitment IdentifySpecificCostReductionOpportunities ImplementVMROpportunities TrackVMRSavings VMRProcess 56 MarketTrends MarketOverview 1 5Bcustomwidgetmarket7 industrygrowthrateHighlyfragmentedmarketlargest15vendorscomprise60 Supplierstendtowardsmaterialsspecializationsecondarymaterialsoftenoutsourced Customer SupplierRelationships Industry wide closeretailer supplierpartnershipsarenotcommonHowever allsupplierssurveyedhavehadsomepartnershipexperienceexamplesinclude volumedrivenpricediscountsjointR D productdesigneliminationofduplicateprocesses Suppliertrendsconsolidationmovementtoone stopshopsprovisionofadditionalservicesCustomertrendsstrongpricefocusshort termcontractcommitmentsmovementtomulti materialfixtures SupplierEconomics Variablecostsrepresent66 oftotalsuppliercostsRawmaterialscostsrepresent40 oftotalsupplier scostsCustomsuppliersachieve5 EBITmarginsonaverage butsignificantrangesexistsSupplierssurveyedreinvest5 ofannualrevenuesOpportunityexistsforoperationalimprovementoperationsarenothighlyautomatednotful