Managing Monopolies
and
Single Source Suppliers
Associate Trainer
Anil Joshi
NEVI Purspective
www.Purspective.com
Director
ITIDA International
www.ITIDA.nl
[email protected]
0651150293
Ok, who is NEVI Purspective
Offices worldwide
Offices to be opened
in 2013
Offices in The Netherlands, UK (London), Austria (Vienna) PR China (Shanghai)
and Brasil (Sao Paolo)
100 % subsidiary of the Dutch Purchasing Management Association
International Customers
Service Providers
FMCG & Retail
Pharma &
Chemical
Electronics & Production
THE NETHERLANDS | CHINA | BRASIL | AUSTRIA | THE UNITED KINGDOM
3
And… who is Anil Joshi
Services
•  Keynote speaker
•  Change manager
•  Trainer
•  Conference facilitator
•  Executive coach
•  Talent scout
•  ….
Themes
•  Strategy
•  Leadership
•  Relationship management
•  Category strategy
•  Account management
•  Negotiations
•  Customer days
•  Supplier days
•  ….
A privilege to support clients in 26 countries
Even when you do nothing
Do it with INTENSITY
Some opening thoughts
“Monopolies are inherently dysfunctional because innovation is
stifled. Eventually other forces will destroy a monopoly, just as
railroad and steel monopolies were destroyed.”
Robert Porter Lynch (2005)
Future success factors
Source: Prof. R. Monczka/AT Kearney
Value in relationship management
Phase 2
Phase 3
Management Support
High
Phase 4
Competitive
Value Chain
Product/
20%
Service/
Cost
Process
10%
Price
5%
Low
Low
Competency of Purchasing
High
Cost Advantages
Phase 1
What is a monopoly?
What is a single source?
Is there a difference?
Level of involvement with supplier/customer
Simple
Complex
Relationship Development Model
Value generation
based
Collaborative
‘We are business
partners!’
Co-operative
‘We need
eachother’
Single deal
based
‘Transactional
‘When the price
is right!’
Where are
you ...?
Competitive
‘When I win, you
lose!
Transactional
Collaborative
Nature of supplier/customer relationship
Adapted from: Malcolm McDonald, Cranfield Univeristy
Attractivity is essential
Suppliers are Rational, max. Economic Value
•  To whom we bring innovation:
–  To those who can benefit more…
–  …and are not too hard on negotiations
•  Suppliers estimate value for customers:
–  Sometimes they do not know how
…but people working in suppliers are human
•  We tend to do business with people that we like…
How do your suppliers view you?
OR
Kraljic-model & Bensaou-model
Kraljic (1983, Harvard Business Review)
Bensaou (1999, Sloan Management Review)
Drivers of dependency
Buyer dependency
-  Effort (‘trouble and expense’) needed to
switch suppliers for certain commodities
-  Extent to which there are enough potential
suppliers to ensure competition with the
current supplier in the long run
-  Availability of alternative sources of supply
(short-term)
-  Amount of relationship specific investments
by Buyer (tangible (e.g. facilities) as well as
intangible (e.g. knowledge of each other’s
company and dedicated persons)
investments)
Supplier dependency
-  Amount of relationship specific investments
by the supplier (tangible (e.g. facilities) as
well as intangible (e.g. knowledge of each
other’s company and dedicated persons)
investments)
-  The extent to which the supplier would face a
financial crisis if the buyer would withdraw its
business
-  Percentage of supplier’s total revenues sold
to the buyer
-  Total business volume of the business
relationship (in mln euro)
-  Percentage of commodity requirements
procured from a particular supplier
Gulati & Sytch (2007, Administrative Science Quarterly)
Portfolio Management
KERN
• Gezonde positie
• Verbeter de eigen winst
VERWAARLOOSBAAR
•  ‘Mismatch’
•  Accepteer korte termijn
•  Verander van
leverancier
ONTWIKKELING
• Leveranciers-ontwikkeling
methodes
• Moedig
deelname aan
Relatieve
kosten
EXPLOITEERBAAR
• Ongunstige relatie
• Bekijk de
machtsverhoudingen
• Overweeg andere
bronnen
Relatieve omzet
Evalueer de impact van de leverancier op uw strategie ontwikkeling
EXPLOITEERBAAR
• Gemiddeld risico
• Houd de
prijsontwikkeling in de
gaten
• Zoek alternatieven
KERN
• Sterke positie
• Behoud relatie
• Bied andere
mogelijkheden aan
VERWAARLOOSBAAR
• Mogelijke ‘mismatch’
• Passieve relatie
• Zoek alternatieve
leverancier
ONTWIKKELING
• Veel interesse van
leverancier
• Zorg voor ‘incentives’
• Ontwikkel wederzijdse
afhankelijkheid
EXPLOITEERBAAR
• Voorzichtig
• Ontwikkel wederzijdse
afhankelijkheid
• Zoek competitie
KERN
• Goede ‘match’
• Potentiële lange
termijnsrelatie
NUISANCE
• Zeer hoog risico
• Zoek competitie
• Verhoog
aantrekkelijkheid
ONTWIKKELING
• Potentiële ‘match’
• Werk nauw samen om
de business te
ontwikkelen
Aantrekkelijkheid van u als klant
Leverancier
risico
EXPLOITEERBAAR
• Gemiddeld
kostenrisico
• Houd prijs en service
goed in de gaten
• Verander van leverancier
VERWAARLOOSBAAR
• Hoog service risico
• Verander van
leverancier
• Zorg voor drijfveren
KERN
• Goede ‘match’
• Intensiveer relatie
• Behoud lange termijn
relatie
ONTWIKKELING
• Potentieel risico
• Ontwikkel wederzijdse
afhankelijkheid
• Zorg voor drijfveren
hoog
Belang voor de eigen organisatie
Routine-Hefboom-Bottleneck-Strategisch
Gedifferentieerde Leveranciers Relaties
Voorkeur
Partner
•  Gebruik de aantrekkelijkheid /
waarde matrix om het belang van
beide organisaties te bepalen
•  Betrek gedifferentieerde leveranciers
relaties in je artikel groep strategie
Beperkte
Commercieel Collaboratie
laag
•  Een partner relatie vereist
gezamenlijke inspanningen en
opbrengsten
hoog
Belang voor de leverancier
Verwaarloos-Exploiteer-Ontwikkeling-Kern
Supplier Relationship Behavior differ …
• 
• 
• 
• 
• 
• 
• 
• 
• 
• 
• 
Information sharing / communication
Alignment of goals
Engineering / user involvement
Supplier Involvement
Purchasing focus
Strategic Cost Management
Joint process mapping
Performance metrics
Joint problem solving
Buyer / supplier commitment
Time frame
Use this questionnaire…
Supplier Relationships Behavior Questionnaire
In order to fill out below questionnaire we kindly ask you to keep in mind a specific
business relationship. The other party could either be one where you believe a close
relationship already exists or one where you believe it is important to your business
and where you should perhaps “improve this relationship”.
There are two steps in this exercise.
1. Score the eleven questions for the relationship you are focusing on during this
training. Be honest with yourself and don’t indulge in ‘wishful thinking’.
2. Collect the answers and use the results to determine the intensity of the
relationship.
STEP 1:
Answer the eleven questions below for the relationship you have in mind. Again we
stress, be honest and don’t indulge in wishful thinking. For each question, select the
answer (a, b, c or d) which most accurately describes the actual status of your
selected relationship.
1. Information sharing/communication:
a Fully integrated (systems, schedules, inventory, EDI, etc.)
b Co-operative on selected issues
c Co-operative and inclusive of budget objectives
d Limited, usually one way; specific to requirements
2. Alignment of goals:
a Cost/Profit goals emerging
b Total alignment; strategic planning coordinated
c Alignment of goals and philosophy
d Occasionally coordinated: capability to meet specific needs
3. Engineering/user involvement:
a Ongoing team member, involved in total process
b Requirements definition/specs; ad hoc team player
c Design team member, dissolves after implementation
d Systematic/continuous
4. Supplier involvement:
a Ongoing team member, involved in total process
b Reactive; negotiated price and T & C
c Systematic/continuous
d Design team member, dissolves after implementation
5. Purchasing focus:
a Ad hoc team leader; commercial input, design team member facilitates
coordinated implementation
b Assure timely supply
c Systematic/continuous
d Ongoing team member, involved in total process
6. Strategic cost management:
a Cost drivers of sub-processes understood
b Total system cost quantified and cost drivers determined
c Price comparison may include elements of quality and service
d Supply/value chain cost drivers of sub-processes managed
7. Joint process mapping:
a None to limited
b Supply value chain processes evaluated and optimized
c Detailed mapping of joint processes eliminate duplication
d Customer/supplier processes mapped to eliminate non-value add
8. Performance metrics:
a Business decisions driven by ongoing review of measures
b Measures for cost profitability, quality; reactive performance
c Subjective, limited
d Measures for cost, profitability, quality exist with B-I-C targets
9. Joint problem solving:
a Suppliers solve problems to gain or maintain acceptance; minimum input to
customer problems
b Pro-active ongoing approach to mutual problem solving
c Equal responsibility for problem solving
d Fact-based solving of mutual problems
10. Buyer/supplier commitment:
a Single source or very limited supply base
b Several suppliers, some restriction; limited suppliers, some quality ranking
c Multiple suppliers
d Committed to single source of very limited supply base
11. Time frame:
a Spot buy, usually </= 1 year
b Open ended
c > 1 year < 3 years
d Per ongoing reviews
STEP 2:
Collect the previous answers and circle per question your answer (a, b, c or d). Be
careful and note that the order of the answers varies for each line in the table.
Determine the relationship intensity profile by connecting the circles and count the
number of answers you gave in each column.
Element
Commercial
Supplier
d
Limited
Collaboration
b
Preferred Supplier
Supplier Partnership
c
a
d
a
c
b
Engineering/user
involvement
Supplier involvement
b
c
a
d
b
d
a
c
Purchasing focus
b
a
d
c
Strategic cost
management
Joint process mapping
c
b
a
d
a
c
d
b
Performance metrics
c
b
d
a
Joint problem solving
a
d
b
c
Buyer/supplier
commitment
Time frame
c
b
a
d
a
c
d
b
Information sharing /
communication
Alignment of goals
Total of column
Supplier Account Plan – de basis
Supplier Account Plan – de basis
SUPPLIER ACCOUNT BUSINESS PLAN
for (SUPPLIER NAME)
Supplier/Client Logo
Here
[CORPORATE ADDRESS]
Table of Contents
Table of Contents ...................................................................... 2
Document Objective ................................................................. 3
Account Profile ......................................................................... 3
Value Proposition ..................................................................... 7
Submitted by:
Account Strategy ...................................................................... 8
Account Plan ............................................................................. 9
Supplier Account Manager
Name of Supplier Account Management Team
Your Logo Here
[Date]
[Company Name] Confidential
File: Name of Supplier Account Team Strategic Account Business Plan.doc
Date Published: [mm/dd/yy]
[Company Name] Confidential
© Itida International BV Anil Joshi Email: [email protected] Web: www.ITIDA.nl
© Itida International BV Anil Joshi Email: [email protected] Web: www.ITIDA.nl
Page 2
6/28/2012
Stakeholder engagement plan
Is there anything missing?
Attractivity building blocks
•  Expected Economic Value
•  Increasing comfort level of supplier
•  Managing the misalignment
•  Managing the perceptions
Document
Supplier Relationship Management
Assessments
Module 14768
THE NETHERLANDS | CHINA | BRASIL | AUSTRIA | THE UNITED KINGDOM
Attractivity Building Blocks
EXPECTED VALUE
COMFORT
INCREASED VOLUME
TOTAL COSTS
INNOVATION
TRUST
COMMUNICATION
TRANSPARENCY
ALIGNMENT
STRUCTURE
STRATEGY
PERCEPTIONS
ATTITUDE
OPERATIONS
INTEGRATION
JOINT PROGRAMS
CONTINUITY
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Assessment
In order to assess the attractivity of your organization as a
customer for this supplier:
-  Indicate for each of the subelements of each building block the
impact on your attractivity. For each subelement some
examples are given to support the thinking process
-  Discuss these findings in your team and define an attractivity
score for each building block
-  Determine the overall level of attractivity of your organization
as a customer for this supplier and note the top 10 reasons
that support your findings
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Expected Value
•  Increased Volume
– 
– 
– 
– 
– 
New markets
High volumes
Long term commitments
Sole supplier
Margin
•  Total Costs
–  Joint improvement plans
–  TCO knowledge
–  Optimised supply chain
•  Innovation
– 
– 
– 
– 
– 
– 
Access to technology/knowledge
Willingness to share
Alignment of roadmaps
Joint development
ESI
Risk sharing
THE NETHERLANDS | CHINA | BRASIL | AUSTRIA | THE UNITED KINGDOM
EXPECTED VALUE
INCREASED VOLUME
TOTAL COSTS
INNOVATION
Comfort
COMFORT
•  Trust
– 
– 
– 
– 
– 
Ethical behaviour
Knowledge sharing
Previous experiences
Not inclined to rebid
Prepared to listen
•  Communication
– 
– 
– 
– 
– 
Cross-organizational & cross-functional teams
Open communication
Structured communication
Open for feedback
Atmosphere in communication
•  Transparency
–  Clear communication matrix
–  Strategic Alignment
–  Alignment of roadmaps
THE NETHERLANDS | CHINA | BRASIL | AUSTRIA | THE UNITED KINGDOM
TRUST
COMMUNICATION
TRANSPARENCY
Alignment
ALIGNMENT
•  Strategy
– 
– 
– 
– 
Alignment of vision
Alignment on size and ambitions
Top level commitment
Shared end-users
•  Perceptions
–  Existing biases / misperceptions
–  Feedback based on facts
•  Attitude
– 
– 
– 
– 
Power balance
Professional attitude
Payment attitude
Win-win relationship as focus
•  Operations
–  Joint operational controls
–  Use of existing systems
THE NETHERLANDS | CHINA | BRASIL | AUSTRIA | THE UNITED KINGDOM
STRATEGY
PERCEPTIONS
ATTITUDE
OPERATIONS
Structure
STRUCTURE
•  Integration
–  Integration in Order Fulfillment process
–  Integration in Product Creation process
•  Joint Programs
– 
– 
– 
– 
Development programs
Marketing programs
Supply Chain optimization programs
Cost reduction
•  Continuity
–  Structural communication platforms
–  Crossfunctional teams
THE NETHERLANDS | CHINA | BRASIL | AUSTRIA | THE UNITED KINGDOM
INTEGRATION
JOINT PROGRAMS
CONTINUITY
Assesment Conclusion
-  Agree on your attractiveness as a customer for this supplier
-  Determine the strategy (collaborate vs compete)
-  Align vision and discuss follow-up
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Summarizing the approach and tools
• 
• 
• 
• 
• 
• 
Assess the type of relationship
Where should it go?
Assess dependency
Differentiated approach to supplier
Supplier account plan
Attractivity building blocks
– 
analysis / workshop
•  Profiling
•  Follow through
Thank You
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