Supplier Value
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Jahns, C., Moser, R. (2005). Supplier Value. How to Define and Integrate the Value of Your Suppliers. Working Paper from the Supply Management Institute's series Purchasing and Supply Management. Verlag Wissenschaft & Praxis. https://doi.org/10.3790/978-3-89644-331-1
Jahns, Christopher and Moser, Roger. Supplier Value: How to Define and Integrate the Value of Your Suppliers. Working Paper from the Supply Management Institute's series Purchasing and Supply Management. Verlag Wissenschaft & Praxis, 2005. Book. https://doi.org/10.3790/978-3-89644-331-1
Jahns, C and Moser, R (2005): Supplier Value: How to Define and Integrate the Value of Your Suppliers. Working Paper from the Supply Management Institute's series Purchasing and Supply Management, Verlag Wissenschaft & Praxis, [online] https://doi.org/10.3790/978-3-89644-331-1
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Supplier Value
How to Define and Integrate the Value of Your Suppliers. Working Paper from the Supply Management Institute's series Purchasing and Supply Management
Jahns, Christopher | Moser, Roger
(2005)
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Abstract
ArbeitsbuchZeigt interessierten Supply Managern, welche strategischen Potenziale in Lieferanten stecken können und wie sie diese am besten für ihr Unternehmen nutzbar machen.This book presents an integrated perspective on supplier value management. Senior Supply managers will learn about the different values of suppliers for a buying firm and how suppliers can be integrated. A special focus lies on rent & risk sharing and early supplier integration. Company examples support the understanding of the different concepts.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Content | I | ||
| 1 Supplier Value Management - An Integrated Approach | 1 | ||
| The growing interdependence between companies is an important sign of the changing competitive environment | 2 | ||
| Suppliers play different roles depending on the competition structures between companies | 3 | ||
| The supplier relationship focus is moving from the classical dimensions price, quality and time to innovation, flexibility and joint activities | 4 | ||
| What are the implications of these developments from a buying firm's perspective? | 5 | ||
| Defining supplier value: which values can a supplier deliver? | 6 | ||
| The supplier value consists of several different categories that the buying firm can realize together with its respective suppliers for specific commodities | 7 | ||
| The indicator level can either be measured based on the past performance (ex post perspective) or based on the future value potential (ex ante perspective) of a supplier | 8 | ||
| The supply strategy of the buying firm defines the values that the suppliers should deliver - a thorough analysis identifies the gaps and additional values | 9 | ||
| The supply strategy includes all relevant elements from corporate, business unit and functional level that help to define the supplier values needed | 10 | ||
| The required supplier value comes from the specific implications of the supply strategy. Depending on the supply strategy, the buying firm should look for suppliers that add the respective performance at a defined risk level | 11 | ||
| 2 Supplier Value Management - Study Results & Examples | 12 | ||
| The SMG Supply Management Navigator has been evaluated in a study with 180 responding companies from German-speaking countries in Europe | 13 | ||
| The rating of top management's priorities shows the importance of purchasing and the growing attention for value added activities with suppliers | 13 | ||
| The rating of supply management tasks shows the importance of supplier related activities within the purchasing & supply management function | 15 | ||
| Continuous improvements not only aim at cost and run-time reduction or quality improvements but also at the optimization of the interaction with the suppliers | 16 | ||
| Example: supplier assessment system at Sachs AG - the "mm-profile" | 17 | ||
| Example: the competes program at Robert Bosch GmbH focuses on the technical and economic empowerment of its suppliers | 18 | ||
| Example: the supplier assessment criteria at Robert Bosch GmbH differentiate between the future potential, the past performance and the current offer of a supplier | 19 | ||
| Example: the supplier assessment system at Siemens AG is mandatory for all suppliers covering 80% of the purchasing volume, future main suppliers and suppliers delivering strategic products and services for a business unit | 20 | ||
| Example: the Siemens AG has standardized its assessment concept companywide on the first two levels (categories & criteria) | 21 | ||
| Example: the Siemens AG assessment concept allows adaptation possibilities for each business unit on the sub-criteria level and for one main category - an accurate description of each sub-criteria allows a standardized assessment within the business units | 22 | ||
| Example: the supplier management at EADS is geared to generate and integrate supplier value - making EADS more competitive | 23 | ||
| Example: the EADS supplier assessment system contains 5 common assessment criteria and 4 supplier performance classes | 24 | ||
| Example: EADS evaluates its suppliers on corporate and business unit level. At corporate level, the different assessments are integrated in order to aain the overall performance of the supplier | 25 | ||
| Example: at EADS the achievements of the supplier influence the lonq-term relationship | 26 | ||
| Example: suppliers that have completed EADS' supplier performance development successfully are ready to offer more products and services | 27 | ||
| Example: the supplier relationship management at EADS differentiates standard suppliers, strategic suppliers and competitive partners | 28 | ||
| Example: at EADS, the roads towards excellence is rocky but worth it both for the buyer and the supplier | 29 | ||
| Example: the Supplier Evaluation Model (SEM) at Volvo tries to integrate different perspectives (example for module supplier). | 30 | ||
| 3 Supplier Value Integration - Rent & Risk Sharing | 31 | ||
| There exist many perceptions of supply risk | 32 | ||
| Supply risk has three basic sources: the buying firm, the suppliers and the supply market | 33 | ||
| 4 types of supply risk can be defined: strategy risk, sourcing risk, integration risk and performance risk | 35 | ||
| What are the key elements of supply risk at the different stages? | 36 | ||
| The strategy risk is about the wrong alignment of corporate and supply objectives with supplier capabilities | 37 | ||
| The sourcing risk lies in the core of the purchasing function | 38 | ||
| The management of the integration risk is a real challenge both for the buyer and the supplier | 39 | ||
| The management of the performance risk is an on-going business of the supply management function | 40 | ||
| Supply risk management is based on four possible actions and on a four step process | 41 | ||
| Step 1: The identification of the possible risks along the supply chain needs a inter-company, cross-functional approach | 42 | ||
| Step 2: The classification of the different supply risks shows the position in the supply risk portfolio, the current status of the action taken and the supply chain entities mainly responsible | 43 | ||
| Step 2: The analysis of the identified supply risks - probability of occurrence and impact consequences - supports the determination of necessary actions | 44 | ||
| Step 3: The definition of the necessary actions for each supply risk is based on the supply risk portfolio and the supply risk strategy | 45 | ||
| Step 4: The implementation of a supply risk management and supply risk controlling system needs the commitment of the top management | 46 | ||
| Rent-sharing always goes with risk-sharing since "there is no such thing as a free lunch" in today's business environment | 47 | ||
| Rent & risk-sharing are critical issues for buyers and suppliers in today's business environment | 48 | ||
| The development of a rent & risk-sharing initiative requires a lot of time and resources | 49 | ||
| Step 1: The build-up of a measurement system is the basis of every rent & risk-sharing collaboration between buyers and suppliers | 50 | ||
| Step 2: The definition of included/excluded products and services forces the supplier and the buyer to thoroughly analyze the activities discussed and to learn more about the significant processes | 51 | ||
| Step 3: Supplier's experience based on historical data from the buyer or other companies provides a useful tool to analyze the buyer's current processes and to define baselines | 52 | ||
| Step 4: Agreement on measurement responsibility for costs and benefits, on detailed rent & risk-sharing and on dispute resolution mechanisms | 53 | ||
| Step 5: The initiation of the rent & risk-sharing plan needs careful buy-in of the buyer's and supplier's employees | 54 | ||
| Most suppliers are more than willing to share the benefits, but have a less clear understanding and willingness to share the risks of new product/process development efforts | 55 | ||
| Suppliers are often willing to share benefits and to take risks if they can recognize the buyer's own commitment | 56 | ||
| Example: EADS' global business perspectives require sharing of end consumer market opportunities and risks with its suppliers. | 57 | ||
| Example: EADS' enhanced risk and revenue sharing approach requires a flowdown of risks and opportunities from the end consumer to the first supplier throughout the whole supply chain | 58 | ||
| 4 Supplier Value Integration - Early Supplier Involvement | 59 | ||
| Early supplier involvement is a specific approach to integrate supplier value | 60 | ||
| The potential benefits and risks of early supplier involvement are manifold | 61 | ||
| Early supplier involvement can focus on product as well as on process development/improvement at different early involvement stages | 62 | ||
| The early supplier involvement execution process can start at any early involvement stage | 63 | ||
| Successful early supplier involvement has some prerequisites | 64 | ||
| ! In focus: A formulated and detailed supply strategy is the starting point for all supplier related activities | 66 | ||
| ! In focus: an established and preferred supplier base supports the necessary trust building and communication | 67 | ||
| The supplier involvement portfolio should provide support for setting priorities with regard to the involvement of suppliers in a new product development project | 68 | ||
| The supplier involvement portfolio is a practice oriented method to define the involvement intensity of the suppliers | 69 | ||
| Depending on the position in the supplier portfolio, the buying firm can follow the early supplier involvement execution process | 70 | ||
| Supplier involvement portfolio: the normative strategies for arm's-length and routine development projects | 71 | ||
| Supplier involvement portfolio: the normative strategies for strategic and critical development projects | 72 | ||
| The role of the supplier is mainly defined by the supplier involvement portfolio | 73 | ||
| Target setting is a critical part of the early supplier involvement process | 74 | ||
| The information sharing process determines much of the overall supplier involvement success | 75 | ||
| Realize the possible supplier value and prevent the "not invented here” syndrome | 76 | ||
| Performance measures should be aimed at identifying the true value added of the extensive effort of integrating suppliers | 77 | ||
| Example: early supplier involvement at EADS means high responsibility of the supplier for risks and rewards | 78 | ||
| You need to know where you are in order to improve! The early supplier involvement maturity grid supports you in defining your current position | 79 | ||
| The many methods & techniques that support successful early supplier involvement into new product/process development can be divided in organizational integration, group integration and communication enablers | 80 | ||
| There exist many methods & techniques supporting successful early supplier involvement into new product/process development | 81 | ||
| There exist many methods & techniques supporting successful early supplier involvement into new product/process development | 82 | ||
| ! Special focus on trust: trust development processes imply a wrong connotation since trust is an effect and results from many causes | 83 | ||
| Supplier coordination and supplier development are useful methods to develop a trusting relationship between supplier and buyer | 84 | ||
| Successful early supplier involvement depends on some specific factors | 85 | ||
| What does surprisingly not affect the success of early supplier involvement? | 86 | ||
| How can a buying firm reduce development and product costs? | 87 | ||
| How can a buying firm improve product and process quality? | 88 | ||
| How can a buying firm shorten concept-to-consumer cycle times? | 89 | ||
| How can the buying firm use its suppliers to become more attractive to customers? | 90 | ||
| Demands on a buying firm successfully involving suppliers | 91 | ||
| A organizational framework for a successful early supplier involvement | 92 | ||
| Summary: supplier value assessment and integration as a strategic supply management task | 93 | ||
| References | 94 |