Agency & Strategic Supplier Relationships

Supplier Relationships v Supplier Performance

2009-06-25T00:50:57Z

In a new posting today Supply & Demand Chain Executive reports the results of a recent survey of 223 procurement, supply chain and supplier relationship management executives across 15 industries and nine countries to understand how different organizations approach Supplier Relationship Management (SRM), and specifically the business case for change.

The key findings, included these:

* Almost two-thirds (62 percent) admitted that they did not have an accepted definition of SRM in their company

* When asked about the topics most commonly discussed at review meetings with key suppliers, performance and service issues topped the list, followed by cost reduction opportunities

* Business strategy and plans, new supplier products/services and value delivered came lower down the list, while customer performance — how easy the buying organization was to deal with — came last

Survey sponsor Alan Day, managing director of U.K.-based State of Flux said "Many organizations have confused Supplier Performance Management (SPM) with Supplier Relationship Management (SRM)".

Day highlighted that: "SPM is about getting what you have been promised in a contract, whereas SRM is about collaboratively driving value as part of a two-way relationship."

The findings indicated some of the issues managing SRM programs, eg:

* Nine out of 10 respondents to the survey said SRM would grow in importance, but a significant number of procurement functions were ill-equipped to manage it effectively

* Half admitted they were unable to measure the benefits, despite an intuitive belief that value was created through closer relations

* Fifty-seven per cent acknowledged that the time they spent on SRM was insufficient, 47 percent had not trained staff in relationship management skills

* 53 percent did not have designated teams or account managers in place to deal with key suppliers

However, the survey also identified some encouraging news:

* the survey found that 28 percent of those organizations that were able to measure the value of SRM said it amounted to more than 3 percent of the total annual spend with key suppliers.

* As well as joint cost savings, the main benefits were reduced supply risks, greater supply chain efficiency and improved quality

* Almost half (47 percent) of respondents also reported that their SRM programs had sponsorship from C-level or other top executives, rather than senior or middle managers — a key ingredient in ensuring that such initiatives become part of the organizational culture and way of operating

Day concludes: "We found some impressive examples of successful supplier relationship management in action.

The fact that more organizations are recognizing the value that can be gained from SRM and embracing a different approach to working with key suppliers is encouraging. The challenge now is to turn these pockets of excellence into practices that are replicated more widely."

Source: Supply & Demand Chain Executive, 24 June

P&G's unlikely match: Procurement and Marketing

2009-06-03T03:10:43Z

Procurement Blog by Procurement Leaders highlights Procter & Gamble's productive but apparently unusual relationship between Procurement and Marketing.

The Procurement Leaders Excellence Award provided a forum for Rick Hughes, head of global purchases at P&G to explain how the two business units work together to improve the return on their marketing and advertising investment.

P&G, the world's largest consumer goods company which spends $8b on marketing and advertising annually is of course heavily motivated to find ways to improve ROI.

But traditionally, purchasing and marketing have struggled to get along in some other companies.

"Marketing is different" is typically cited as the reason for marketing's resistance to efforts from purchasing for closer integration.

So how have P&G managed to get it so right?

Hughes promotes an agreed joint commitment to improving results, weekly meetings between himself and P&G's chief marketing officer and engaging advertising agencies in the process to identify and implement new systems to manage measurables and deliverables, as important to the successful relationship.

Source: Procurementblog May 21

UK Top Advertisers, 2009

2009-05-22T04:08:18Z

Marketing Magazine released their Top 100 UK Advertiserlist in March and discussed the state of the UK adverting market.

Key points of note, were:

While many brands have reduced their media spend others have taken advantage of the opportunity to drive their brands harder

Media spend analysis reveals an overall serious decline in the advertising market of 4.9% - particularly from August '08, which is forecast to continue in 2009

However, some advertisers bucked the trend and increased spend, including some in supermarkets, banks, online services and electrical goods

Brands to increase their spend, included: Unilever, Reckitt Benckiser and Kellog (FMCG); the government's COI; Lloyd's TSB, Hailfax and Barclays (banking); Asda, Waitrose, Tesco and Aldi (retail)

Cheaper ad rates comparable with recessionary prices of the 1980s and the trend for consumers to spend more time watching TV for entertainment are cited as opportunities for savvy marketers buy more for less

Source: Derek Groom (Decideware)

ProcureCon Indirect, Amsterdam

2009-05-07T04:06:11Z

I recently attended the ProcureCon Indirect conference held in Amsterdam April 28-29.

The mood of the meeting was quite sombre given the economic environment.

Not surprisingly, therefore a good deal of the discussion focused on cost cutting and even optimising the structure of corporate Purchasing Departments. Some striking takeouts from the conference:-

Notwithstanding the need to reduce costs, a recurring theme within the conference was how best to handle suppliers. Here one speaker noted that up to two-thirds of the growth of his company was attributable to ideas generated by suppliers. So the goal is to optimise value rather than just drive down costs

To help optimise value, delegates were asked to review their practices when dealing with suppliers. New thinking suggests that suppliers should be thought of as part of a “cluster” comprising suppliers, the client organisations and consumers. All need to feed off and learn from each other.

Indirect expenditure can often exceed that of direct, especially for companies that have a significant services or maintenance business, or with high marketing expenditure.

Marketing and advertising can be the largest single item of expenditure for some companies yet Purchasing is often excluded. (We wonder if this is still true in the USA?) Delegates were urged to get involved in these areas.

Where functions and operations are fragmented within companies, Purchasing has the opportunity to take overall ownership. This is most effective if stakeholder buy-in can be secured.

Indirect is different to direct purchasing in may ways, not least because much more time is required for internal stakeholder engagement. So indirect managers require strong expertise with “soft skills”. Generally indirect purchasing tends to be more complicated.

The economic downturn and resulting need for savings has led many companies to rethink the structure of their global Purchasing arrangements. There appears to have been much discussion about global vs local (the merits of a globally centralised Purchasing function versus a more localised and devolved approach). This dilemma seems to be being resolved on a case-by-case basis in which responsibility goes hand in hand with accountability. Accountability ensures that the Purchasing function ends up at the optimum point within organisations.

Author: Derek Groom (Decideware)

ANA Financial Management Conference 2009

2009-04-23T16:35:35Z

The 2009 ANA Financial Management Conference held in Phoenix this week was excellent.

Around 350 procurement, operations, finance, marketing, agency and vendor executives were there to hear the latest in marketing effectiveness and efficiency.

Our new whitepaper on 360-degree evaluations was included in the attendee pack.

This paper was also featured in this month's edition of The Advertiser magazine. See the link, here:

http://www.theadvertisermagazine.com/content/current_issue.php

For anyone who would like a copy, please feel free to email blog@decideware.com and we can email you a PDF file.

I have included the notes from the Decideware Twitter stream (http://twitter.com.decideware) below as some of the key points that were raised over the 2 days. I have highlighted the ones that I found most interesting.

P&G discussing new agency model. Brand Agency Leader. ANA conference about 23 hours ago from TwitterFon
Pfizer Scope of Works. Simple and focussed on the outcomes. ANA conference 3:48 PM Apr 21st from TwitterFon
Dial. You can make $1 look like $10 with great creative and skillful placement. ANA conference 12:40 PM Apr 21st from TwitterFon
Go Tom Finneran from the AAAAs!!! Formal Evaluations are the most underused resource. ANA conference 12:01 PM Apr 21st from TwitterFon
Credit issues are affecting production. Clients need to fix it. ANA conference 11:53 AM Apr 21st from TwitterFon
Alma from Microsoft: procurement can act as the objective third party in agency evaluations. ANA conference 11:35 AM Apr 21st from TwitterFon
Our whitepaper on 360's gets a mention from the stage. ANA conference 11:25 AM Apr 21st from TwitterFon
Incentive Comp is not penetrating. It's all about the metrics. ANA conference 11:10 AM Apr 21st from TwitterFon
A-B believe in More precise, More persuasive. ANA conference 10:08 AM Apr 21st from TwitterFon
A-B @ ANA / when blessed with resources you will spend it 9:40 AM Apr 21st from TwitterFon
Eat Big Fish sounds interesting Challenger Brand book. Method recommend. ANA conference 9:20 AM Apr 21st from TwitterFon
Method is amazing. Classic San Francisco innovation. Design thinking + Business Thinking. ANA conference 9:14 AM Apr 21st from TwitterFon
In a recession target even more tightly to enhance margins. ANA Conference 8:41 AM Apr 21st from TwitterFon
Coke Value-based Compensation. Not quite sure how it differs from traditional Incentive Compensation? ANA conference 6:55 PM Apr 20th from web
Are the top end marketing websites over-engineered? Would it be better to go "silver" rather than "gold"? ANA conference 2:05 PM Apr 20th from TwitterFon
Great brands are built around an ideal. What do we do to add value to someone elses life. ANA conference 12:46 PM Apr 20th from TwitterFon
Reid Hoffman from LinkedIn at ANA conference. "Use the context"!!! 10:37 AM Apr 20th from TwitterFon

Author: Richard Benyon (Decideware)

Performance Management & Procurement Mastery

2009-03-31T01:51:00Z

Please forgive us this week for purely providing two exerpts from a fascinating survey done recently by Accenture. Because of the slightly longer post we thought it better just to let you read!!!

The Art of Procurement Mastery By Gregory Spray -- Supply Chain Management Review, 1/1/2009

Now more than ever, procurement leaders have enormous responsibilities on their shoulders. Not only are they expected to drive even larger cuts in costs of goods sold but they are under fierce pressure to make every business process as efficient as it can possibly be.

Last summer, even before the Institute for Supply Management's PMI index reached lows not seen for 26 years, Accenture advised that procurement chiefs needed to prepare for downturn in the right ways.¹ Speaking to the Procurement Leaders Network, an Accenture colleague noted that many companies were falling back on the same traditional cost-cutting practices, with just a handful viewing the downturn as an opportunity to radically rethink their activities and their strategies. Among the best practices:

Using the downturn to snap up top talent, applying business analytics to develop sharper insights, and collaborating closely with suppliers to drive product innovation. Now, with the benefit of recent research, we would add another best practice: Effective outsourcing.

Collectively, those practices comprise what Accenture calls "procurement mastery"—the collection of purchasing traits exhibited by the roughly 10 percent of companies that consistently outperform their peers or, in other words, that consistently attain high performance.

So what does it mean to achieve mastery in the various dimensions of the procurement function? How many companies have achieved procurement mastery and what effect has it had on their business performance? And has the trend toward greater reliance on outsourcing providers affected the strategies and operations of corporate procurement? Those are a few of the key questions that drove an Accenture research initiative that included survey results from more than 600 procurement executives from Europe, Asia and North America, as well as detailed analysis of more than 200 of those responses.

This article uses the survey's results to examine the performance gap between the procurement masters and their industry peers and to explore the factors that create and sustain that gap.

4. More Assertive Supplier Relationship Management

The disparities between procurement masters and low performers were readily apparent when our analysis compared supplier relationship management capabilities. (See Exhibit 3.)

In fact, the size of the gap alone suggests that supplier relationship management is a leading practice in itself—that the intelligent, assertive practice of supplier relationship management is a tell-tale for high performance through procurement. As previous Accenture research has shown, there is a tangible prize for supplier relationship management leaders: They achieve 5 percent savings from both sourcing and post-contract activities against total procurement operating spend, compared to 3 percent savings for the remaining survey respondents. Masters also realize a threefold increase in benefits. Looking closely at four of the most striking differences, masters excel by using a supply-base segmentation strategy that aligns approaches and types of relationships with specific supply markets and supplier characteristics—including relevant strengths and weaknesses, product complexities and geographies.

It is this proficiency that supports other capabilities, such as forging deeper relationships with key suppliers, establishing long-term partnering agreements, and even developing joint operations based on knowledge sharing, seamless processes and mutually beneficial product improvements. Procurement executives with whom we have spoken clearly point to the need for deepening relationships with suppliers. The traditional "us vs. them" mentality between a company and its suppliers stands today as a serious impediment to procurement transformation—and is, emphatically, not typical of the mindsets of the procurement masters.

Changing the mindset at the heart of supplier relationships is not easily done in many cases, however. It will take time. Kevin Smith, who runs the indirect procurement organization for mobile electronics and transportation systems company Delphi, notes that many organizations are now in a difficult situation as they approach suppliers with a collaborative mindset, asking them to work together to create business value. "Now that companies have wrung out all the price concessions they can from their suppliers, they say they want to collaborate. But, with some justification, suppliers don't trust their buyers."
Procurement masters can look to outsourcing to help get better performance from—and forge better relationships with—their suppliers. Often an outsourcing buyer has a more comparative, multi-client view of how a supplier's performance stacks up in terms of pricing, technology, delivery, and reliability. This knowledge can lead to more realistic expectations (and a more realistic action plan) on the part of a supplier.

What Clients Want from Agencies

2009-02-14T18:28:44Z

As reported in AdWeek recently, a new study from search consultants Reardon Smith Whittaker adds to the body of knowledge about what clients most want from their agencies.

After polling 184 marketing clients from companies including AT&T, Dunkin' Brands, Merck, MetLife and Revlon these findings were tabled:

Choosing an Agency

The top-ranked reasons for choosing an agency, were:

1. Having an understanding of their marketplace

2. Grasping the company's strategic direction, and The Creative Work (tied for 2nd place)

3. Offering something new and fresh

Launching Agency Review

The top-ranked reasons respondents cited for launching agency reviews, were:

1. Unhappiness with their agency's thinking, 46%

2. Dissatisfaction with creative work, 40%

3. Not being proactive enough, 38%

Marketing Tactics

The top ranked marketing tactics sought by clients, were:

1. Online marketing, 69%

2. Buzz marketing, 58%

3. Experiential efforts, 53%

4. Search engine marketing, 52%

5. Mobile marketing, 25%

Managing service with 360's

2009-02-14T17:11:30Z

It seems that with spring just around the corner, 360-degree evaluations are in the air!

A recent article "Services spend management: Find your inner salesperson" By David Hannon -- Purchasing, 2/12/2009, has this excellent advice from Dean Edwards, CPO at one of the US's largest health providers, Kaiser Permanente.

To get a clearer picture of the service provider's performance, Edwards recommends doing 360 evaluations where procurement serves as the middleman, getting the opinions of both the internal stakeholders and the services providers. Why? "Well in our separate surveys and interviews, we'd hear gripes and complaints from each side but when we all got in the room together it was a gigantic lovefest," he laughs. "So by using surveys and the 360 evaluations we were able to call out the issues at hand and solve them rather than let them fester. That helped drive performance and the relationships."

Dean's insight into the power of collecting feedback prior to meeting is on the money. It is vital to have the issues raised in a formal process. If they are not, often in a face-to-face environment people are reticent to bring them up, for fear they may add friction to the relationship. It is also vital to give the supplier/agency a voice in the room - and 360-feedback provides this.

We have a new whitepaper specifically on 360-evaluations which will be released next month. It will explore not only the upside, but also how to avoid some of the potential pitfalls. Please contact us on blog@decideware.com if you would like a copy when it is released.

I have also included a list below from the same article, provided by Robin Jackson (Chairman of ADR International) definitely one of the the leading global purchasing consulting firms. I urge that these categories of spend should be strong candidates for performing 360-degree evaluations with your organization.

The seven most difficult services spend areas to manage

IT
Consulting
Legal
Marketing
Utilities
Travel
Fleet

Author: Richard Benyon (Decideware)

Our Whitepaper Needs You!

2009-01-31T22:00:25Z

We are in the process of writing a new paper on 360-degree Feedback / Client Scorecards (i.e. where a supplier or agency provides feedback to the client) and are seeking any input you can provide.

If you currently use this as part of your evaluation / performance management program we would love to hear your experiences, tips and traps.

We have been speaking with our client base (all of whom conduct 360's) along with compiling leading research from the supplier evaluation arena, ANA research, as well as Human Resources experience in their 360 feedback programs.

Please feel free to add your comments to this article or email me Richard Benyon at blog@decideware.com with any inputs you can share.

What do we want to happen???

2009-01-27T00:38:00Z

In a recent article on Supply & Demand Chain Executive titled Seven Steps to Next-generation Supplier Performance Management, Ron Dimon and Simon Tucker ask 4 key questions that provide an excellent summary of the thrust of Supplier Performance Management. They say...

To do this, you must be able to rigorously answer these questions: "What do we want to happen with suppliers, and how do we want it to happen?" and "What actually happened, and why did it happen?"

What I like about this statement is the way that they first lead with the future ('what do you want to happen') and then use the past ('what actually happened') a substantiation.

Scorecards and evaluations can very easily get bogged down in recriminations about historical performance. To avoid this it is vital to elevate the discussion to look at ACTIONS.

Certainly these actions need to be based on what has happened, so by no means are we discounting the need to review historical performance. However, we need to keep a clear focus on Development Activities that arise from the identified issues...and both parties need to contribute to these actions to ensure that future expectations are met.

This gives to dialogue a far more constructive tone and guides the participants to future success, rather than wallowing in historical issues.

Author: Richard Benyon (Decideware)