Restaurant Function Pricing Fill in Form by hlq11916


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									   MIM 524
Global Sourcing
   Class Six
Supplier Performance and
Relationship Management
 Dave Hoover’s Purchasing Axioms

A Firm Has The Suppliers It Deserves
A Supplier Will Only Be As Good As It Has To Be
The Best Way To Get More From Suppliers Is To
  Ask For It
 Source Management

Selection Process
  Commodity Study
  Commodity and Supplier
  Supplier Analysis
  Supply Base Reduction
  Supplier Performance and
   Relationship Management
The initials TQRDCEB stand for:

Kropf, W. C. & Russell, P. L. (N.D.). Hewlett-Packard's Packaging Supplier Evaluation
   Process and Criteria. Retrieved May 24, 2009 from:
 Performance Appraisal
 Supplier Report Cards

Establish Performance Standards
   Goals and Metrics
Provide Decision Making Data
   Awards & Allocations
Compare and Evaluate
   Ranking & Rating
Develop Feedback Procedures
   Supplier Business Reviews (SBR’s)
Corrective Action as Necessary
   SCAR – Supplier Corrective Action Request
 Measuring Supplier Performance

Cost to Target
On Time Delivery
Problem Resolution
Productivity Improvement (Total
Their Supplier Management
Progress Toward Certification
Other Important Criteria
 Measuring Buyer Performance
Forecast Accurately
Share Information
Minimize Rush Orders and Schedule Changes
Focus on Total Cost - Not Price
Pay Bills On Time
Manage Supplier Relationships
Contractual Protection and Liabilities
Supplier Management/Performance
Other Important Criteria
 Buyer/Supplier Relationships

Establishment and Maintenance of
  Business Relationships
   In Writing
Business Communication
 Purchasing Tools and Buyer/Supplier
Reverse Auctions
Early Supplier Involvement (ESI)
   Benchmarking is the process of assessing your
     position against best in class
Continuous Improvement
   Continuous Improvement is the process of
     ongoing improvement in all categories of
     supplier management
World class firms have institutionalized both
 International Supplier Performance

Additional Supplier Performance Issues?
   Supply Chain accountability
   Currency Risk
   Governmental Policy Changes
Additional Supplier Relationship Management
   Executive Engagement - Alliance
   Day to day – micro feedback
When Do You Need to Change
 SCOR Metrics
 Supply Chain Reliability/Flexibility

On-Time Delivery       Percentage
Lead Time              Days
Fill Rate              Percentage
Perfect Order          Percentage
SC Response Time       Days
Upside Prod’n Flex     Days or Percentage
Liability              Custom Vs Standard %
 SCOR Metrics
 Expenses, Asset Utilization
SCM Costs              Percentage
Warranty Costs         Percentage
Value Add/Employee     Dollars
Inv Days of Supply     Days
Cash-to-Cash           Days
Inventory Turns        Turnover Ratio
Cost Management
When It Comes to Cost Management, Every Technique
   Cost Management Methodologies
 Methods                      What is it?                                      Benefit

                An analytical technique to estimate             Use as a basis in driving cost reduction at
   1.Should-    suppliers’ cost of goods/services, which is     pricing negotiation & managing cost to
                to use in negotiations and with internal        achieve cost saving
                customers / stakeholders
                 A process that systematically gather data       To identify relative cost position and
    2.Cost       on other companies’ cost & strategies via       industry best practices showing the
 Benchmarking    surveys, &/or telecons to identify relative     most potential to save $, use them to
                 position & opportunities for improvement        achieve BIC pricing and practice

                The interval of price re-negotiations,         Systemically conduct frequent i.e.
                determined by assessing factors, i.e. market   quarterly pricing negotiations proved to
3.Negotiation   conditions, internal customer, cost            deliver better cost reduction results vs.
 Frequency      requirements, # of suppliers…                  those negotiate less

                A process to reduce total # of suppliers       Reduce a company’s overall supplier chain
 4.Supplier     thru. qualifying & contracting w.              management spends by “5%-15% or more”
   Chain        integrated/global strategic suppliers to       over time & help to focus on the areas of
Consolidation   consolidate supply chain                       greatest opp.*
                                                                               (*McKinsey & Company).

                A technique using contracting language         Ensure we will not pay more than the
   5.Not to     requires that supplier "not to exceed"         NTE, in the meantime, neg. frequently for
   Exceed       certain price for the time period & make       lower prices to get additional cost
Pricing (NTE)   a commitment to decrease its pricing by        saving (w. cost curve in place)
                % over time
Cost Management Methodologies
Methods                     What it is?                                      Benefit

                 A techniques that negotiate cost             As currency devaluating renegotiation
6.Optimizing     reductions &/or avoiding price               may realize additional cost savings
 Exchange        increases as exchange rate                   due to new exchange rate
   Rate          fluctuations

                A pricing model - a supplier agrees           Keep lower and competitive cost
  7.Meets       contractually to reduce its price to match    * It is intended for only “Selective
                                                              Application” when the proper requirements
Comp Pricing    any valid alt. price proposal from other
                                                              are met, not a 100 % applicable BKM!
                supplier for “like Items”.

               A negotiated, documented discount term        Standard discount term is 2%, 10, net 45.
 8.Discount    on the purchase price of a                    It could result significant savings that
               product/service, in exchange for early        impact to Profit & Lose, and Gross
               payment of the invoice                        Margin if executed properly
                Sourcing products/services from/in low       Focusing on material, labor, burden or
                cost geo to maximize cost advantage          operation cost drive lower cost on
9.Use of low    while minimizing risk in                     products/services than those of high cost
 cost geos      availability/quality.                        geo w. fair availability/quality.

               A online tool/sys. - suppliers. are invited   Streamline cost reduction negotiation and
               to bid online interactively during a          award business based on lowest total cost
 10.Internet   scheduled time period - All bids/data are     analysis. Eliminate human factors,
 Negotiation   anonymous, remain confidential & secure       fax/paper/email…
Cost Management Methodologies
 Methods                     What is it?                                      Benefit
                 Contracting language specify MFC, for          Supplier will reimburse for any price
   11. MFC       like parts w/ similar specifications, w/ 3rd   discrepancies w. all audit costs if
   Pricing       party audit rights to ensure lowest price      discrepancies are discovered. Thus may
                 obtained for products/services                 ensure us getting lowest pricing.

                An approach that Component Vendor               Ensure lower and/or competitive
                agrees to provide us “Contract Pricing”         pricing.* It is intended for only
 12.Pass Thru   to CEM, which address price delta               “Selective Application” when the proper
    Pricing     between ours & CEMs’                            requirements are met, not a 100 %
                                                                applicable BKM!
                Contracting pricing effective date for          Achieve cost saving by applying new
  13.Price      products order placed or delivered – if         lower negotiated price right away or
                new price is lower, apply for all material      delaying to apply new higher price – only
                received at dock/WIP after the effective        apply new higher price with PO placed
                date                                            after effective date
                 Change the product’s design or                 Less expensive designs w. the same
                 something. about the product to make it        form/function/quality earlier in design
14.Design for    cheaper to manufacture, assemble, or           process w. lower-cost alternative parts or
    Cost         use cheaper components as to reduce            materials could save mls $
                 the costs
                 AKA “Price Masking”: Component
                 Vendor negotiates a price with CEM (>          Cost saving through “Rebate”
 15.Rebates      Intel Contract Pricing), “rebates” the
                 delta between negotiated price & Intel
                 Contract Price to Intel
Cost Management Expectation
  Meet pricing targets
 Quarterly cost reduction (as appropriate by commodity
     Cost reduction will happen in the first month of every new
     No volume based pricing
 Expect Supplier to come up with new ideas to drive down total
     Material sourcing localization to save freight, tax…ie. PKG
     If you see potential excess materials, try to use Cross-site
        leveling process
     Blended AML suppliers recommendation for lower costs
     Bottle-neck improvement proposal to improve beat-rate
     Any suggestions from the buyers side to improve, ie,
        business process
     Standardization Opportunities
Design for Supply Chain
High Level Problem
Cost pressures will continue and there is a need for
  a different focus in driving cost out of the total
  supply chain.
Think “Design for Supply Chain”
What are the costs that come into play beyond the
  traditional unit costs we focus on today?
   Need to challenge the metrics for success…
What waste is out their in the supply chain and
  what factors are driving them?
Some Elements of Design for
Supply Chain
Product Design
     Common/Unique Parts
     Size/Dimensions/Weight of products
     Integration across the supply chain
Material Flow
     Planning (Bull Whip effect)
     Mfg. Locations
     Process and Overhead
Buying Bulk Volume of widgets
   Volume Discount
   Extra Inventory of widgets (inventory carrying
   Metrics today – say get the lowest Unit cost VS
     lowest total cost
Freight Optimization
   Component allocation across entire outsourcing
     factory network
   Each factory has some suppliers in their
     immediate location
   Current process – drive allocation across each
     component supplier and each factory resulting in
     “cris crossing” freight to the different
     geographical locations
How do you encourage improved
performance from your supply
Gain Sharing
Reward and Recognition
  Tie performance to award of business
  Via scorecards, other?
Training and Process Improvement
  Supplier Training
  Six Sigma/Lean
Process & Cont. Improvement
Supplier Training Classes
Statistical Process Control
7 Step Problem Solving
Second Tier Supplier
  Qualification Process
Cycle Time Reduction
Lean/Six Sigma
Quality Tool Training
    Benchmarks                                                Six Sigma Impact
                      1,000,000               Tax Advice
                                              (phone in)                      Order Write-up
                                                                                 Doctor Prescription Writing
         Defects per Million

                                10,000                                                Restaurant Bills

                                               Average                                    Manufacturing
                                                                                                    Medical Devices

                                          1             3                 4              5               6            7
                                                                      Sigma Level
                                         The higher the sigma, the lower the defects
Source: Six Sigma: A Breakthrough Strategy, Quality Progress, May 1998.
              Cycle Time Reduction Chart

                                                                                                                                           Making Pancakes
Pumping Gas

               200                                                         500
               150                                                         350
               100                                                         250
               50                                                          100
                0                                                            0
                     Operation Inspection Transport   Delay   File Store         Operation   Inspection   Transport   Delay   File Store
eProcurement Tools
eSupplier Report Card (eSRC)

What is it?
   Automation of and increased compliance to the Supplier Ranking
      and Rating Spec via a web-based tool

Why is it considered innovative?
   Accelerates and automates the overall SRC process
   Promotes sharing of BKMs (i.e. eSRC templates, questions, etc.)
      within and/or across teams & orgs
   Extends the SRC process to more suppliers & allows input from
      more stakeholders
   Drives spec compliance without requiring detailed knowledge or
      understanding of the SR&R spec
B@DT                What are they
         is a web-based library and        ?
point of access to Matls info related
to Planning, Organization,
Execution, and Monitoring (ie,
“POEM” model)

                                               Knowledge Compass           is a web–
                                               based tool that captures info needed
                                               for the operation of the organization
                                               and supports ongoing exchange of
                                               information between users and
                                               designated experts
KC + B@DT in combination           provide seamless user access to:
A library of critical info needed to operate Materials
A community of experts to respond to questions on application/interpretation of biz
processes and other key operations.
        Online Negotiations (formerly eAuctions)

An online negotiation capability, allowing real-time bidding by multiple
suppliers, within a singular negotiation forum, that utilizes strategy and
the Internet to achieve cycle time reduction and the lowest total cost.

Innovative features:

Uses Internet technology to create a virtual dynamic marketplace
environment, providing real-time bidding info to suppliers on their
position relative to the competition. Bids/ RFQ’s were previously a
manual process, generally executed through e-mail or snail-mail
Online Negotiations
Buyer’s Perspective

                      Source : Freemarkets
Intel Example of
leveraging the Web
Intel® WebSuite

                       Intel® WebSuite is comprised of
                          several key applications:

                     Intel® Web PO:     Suppliers view POs and PO
                        status on the Web at any time
                     Intel® Web Invoice:     Eliminates paper
                        invoices and auto-processes payments
                     Intel® ASN:   Suppliers can send information
                        about shipments to Intel employees
                     Intel® Payment Tracker: Find invoice
                        payment status online
                     eForecast: Suppliers receive forecast signals
                        and provide responses on the Web at any

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