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The 5 Best Supply Management Practices In Use Today
- 1. The Five Best Supply ManagementThe Five Best Supply Management Practices in Use TodayPractices in Use Today by F. Michael Babineaux, CPSM, C.P.M., A.P.P. President/CEO Babineaux Educational Services and Training, Inc. www.BESTraining.com 901.853.0539 For
- 2. Who Am I?Who Am I? • F. Michael “Mike” Babineaux – 40+ years Supply Management Experience – 30 year FedEx Veteran – Lifetime C.P.M. & A.P.P. – Recent CPSM – SCM Educator and Coach • Babineaux Educational Services and Training, Inc. • www.BESTraining.com • 901.853.0539
- 3. World Class Excellence --World Class Excellence -- Strategic ProcessesStrategic Processes Develop Commodity/ Purchase Family Strategies Establish and Leverage a World-Class Supply Base Establish Appropriate Strategic Alliances INTEGRATED AND ALIGNED Supplier Development and Quality Manage Costs Strategically Across the Supply Chain Integrate Suppliers into New Product & Service Development Integrate Suppliers into the Order Fulfillment Process
- 4. World Class Excellence --World Class Excellence -- EnablersEnablers Establish Globally Integrated and Aligned P&SC Strategies/Plans INTEGRATED AND ALIGNED Develop Organization and Teaming Strategies Deploy Globalization Develop Procurement and Supply Chain Measurements Develop and Implement Enabling IS/IT Systems Establish Human Resource Development/ Training
- 5. 12 World Class Supply12 World Class Supply Management PracticesManagement Practices Strategic Processes • Procurement Strategy Development • Supplier Integration • Leverage the Supply Base • Develop Strategic Alliances • Quality Management • Cost Management Enabler Processes • Strategic Goal Alignment • Teaming Strategies • Performance Measurement • Globalization • Information Systems Integration • Human Resource Development
- 6. 12 World Class Supply12 World Class Supply Management PracticesManagement Practices Strategic Processes • Procurement Strategy Development • Supplier Integration • Leverage the Supply Base • Develop Strategic Alliances • Quality Management • Cost Management Enabler Processes • Strategic Goal Alignment • Teaming Strategies • Performance Measurement • Globalization • Information Systems Integration • Human Resource Development
- 7. The Five BestThe Five Best 1. Strategic Goal Alignment 2. Procurement Strategy Development 3. Supplier Integration 4. Teaming Strategies 5. Performance Measurement
- 8. What happens when . . .What happens when . . . Supply Chain Strategy Internal Customer Strategy YouMisalignment Creates Confusion for
- 9. Strategic Goal AlignmentStrategic Goal Alignment "Strategic Performance Measurement for Purchasing and Supply,“ (A CAPS Research study in collaboration with McKinsey & Co) “Best-in-class companies align the strategy and objectives of the supply management organization with those of the rest of the organization."
- 10. Strategic Goal AlignmentStrategic Goal Alignment • Goal Alignment Concepts – Vertical Alignment • Business Vision & Mission – Low cost producer • Key Corporate Objectives – Reduce expenses • Supply Management Goals – Cost reduction • Individual/Management Performance Objectives – Cost Savings Vision Mission Objectives Goals IPO/MBO
- 11. Strategic Goal AlignmentStrategic Goal Alignment • Goal Alignment Concepts – Horizontally aligned • Strategic objectives of strategic business units • Strategic objectives of functional groups. – Conflict » Bulk buying discount vs. Inventory holding cost
- 12. Strategic Goal AlignmentStrategic Goal Alignment • Goal Alignment Concepts – Horizontally aligned • Stakeholder Alignment Process Evaluate Relationship Evaluate Levels of Alignment & Involvement Identify Stakeholder Groups Evaluate Importance
- 13. Strategic Goal AlignmentStrategic Goal Alignment • Goal Alignment Concepts – Horizontally aligned • Stakeholder Alignment Process Define Outcome Of Alignment Develop Alignment Strategies Implement Alignment Strategies Tract Results & Design Follow up Actions
- 14. Strategic Goal AlignmentStrategic Goal Alignment • Goal Alignment Concepts – Externally aligned • Customers and Suppliers
- 15. Visible top management direction and support Clearly defined strategy and goals Buy-in from key stakeholders Establishment of uniform metrics Implementation of cross-functional/ cross- organizational teams Internal and external education and training Information technology and systems support Elimination of functional barriers Customer focus Continuous communication and feedback throughout the supply chain Critical Success Factors toCritical Success Factors to Achieving AlignmentAchieving Alignment
- 16. Critical Success Factors to Achieving Alignment Rating (1=Poorly, 2=Below Avg, 3=Avg, 4=Above Avg and 5=Excellent)(1=Poorly, 2=Below Avg, 3=Avg, 4=Above Avg and 5=Excellent) Factor Rate • Visible top management direction and support ____ • Clearly defined strategy and goals ____ • Buy-in from key stakeholders ____ • Establishment of uniform metrics ____ • Implementation of cross-functional teams ____ • Internal and external education and training ____ • Information technology and systems support ____ • Elimination of functional barriers ____ • Customer focus ____ • Continuous communication and feedback ____ Total ____
- 17. Critical Success Factors to Achieving Alignment Weighting & Rating Factor Weight X Rate = ____ • Visible top management direction and support ____ _____ ____ • Clearly defined strategy and goals ____ _____ ____ • Buy-in from key stakeholders ____ _____ ___ • Establishment of uniform metrics ____ _____ ____ • Implementation of cross-functional teams ____ _____ ____ • Internal and external education and training ____ _____ ____ • Information technology and systems support ____ _____ ____ • Elimination of functional barriers ____ _____ ____ • Customer focus ____ _____ ____ • Continuous communication and feedback ____ _____ ____ Total 100 ____
- 18. Key PointKey Point ““If you’re not singing the sameIf you’re not singing the same song, you’re just making a bunchsong, you’re just making a bunch of noise and –of noise and – your performance will suffer”your performance will suffer”
- 19. The Best Supply ManagementThe Best Supply Management PracticesPractices 1. Strategic Goal Alignment 2. Procurement Strategy Development 3. Supplier Integration 4. Teaming Strategies 5. Performance Measurement
- 20. Procurement Strategy DevelopmentProcurement Strategy Development • Procurement Decision Tool – Market Complexity – Degree of Competition – Geographical Dispersion – Supplier Cooperation “Price concessions and collaboration”
- 21. Procurement Strategy DevelopmentProcurement Strategy Development • Procurement Decision Tool – Market Complexity – Impact on Business • Risk • Value “What happens if you don’t have it?”
- 22. Procurement Strategy DevelopmentProcurement Strategy Development • Procurement Decision Tool – Market Complexity – Impact on Business – Prioritization • High to Low High High Low
- 23. Procurement Strategy DevelopmentProcurement Strategy Development • Procurement Decision Tool – Market Complexity – Impact on Business – Prioritization – Procurement Strategies • Routine • Bottleneck • Leverage • Strategic
- 24. Procurement Decision ToolProcurement Decision Tool Business Impact Marketplace Complexity Low High Low High Routine
- 25. Procurement Decision ToolProcurement Decision Tool Routine CharacteristicsRoutine Characteristics • Many capable suppliers • Fewer total dollars spent • Low priority items • May consume a disproportionate amount of time and dollars to acquire • Developed quality and technology • Able to move easily between suppliers--low switching costs Business Impact Marketplace Complexity Low High Low High StrategicLeverage Routine Bottleneck
- 26. Procurement Decision ToolProcurement Decision Tool Routine StrategyRoutine Strategy • Remove effort-transactions through low dollar purchase systems – Standardized contracts – p-cards • The primary goal is to minimize the procurement costs of these items. Business Impact Marketplace Complexity Low High Low High StrategicLeverage Routine Bottleneck
- 27. Procurement Decision ToolProcurement Decision Tool Business Impact Marketplace Complexity Low High Low High Routine Bottleneck
- 28. Procurement Decision ToolProcurement Decision Tool Bottleneck CharacteristicsBottleneck Characteristics • Small number of suppliers • Low to medium annual dollars • Customized specification and technology Business Impact Marketplace Complexity Low High Low High StrategicLeverage Routine Bottleneck
- 29. Procurement Decision ToolProcurement Decision Tool Bottleneck StrategyBottleneck Strategy • Focus on continuous supply – Reduce Custom specifications or technology – Purchase in quantity – Monitor Inventory closely – The relationship is important but, search for alternative suppliers Business Impact Marketplace Complexity Low High Low High StrategicLeverage Routine Bottleneck
- 30. Procurement Decision ToolProcurement Decision Tool Business Impact Marketplace Complexity Low High Low High Leverage Routine Bottleneck
- 31. Procurement Decision ToolProcurement Decision Tool Leverage CharacteristicsLeverage Characteristics • Greater number of suppliers • Medium to high annual dollars • Low risk to obtain, but major disruption • Multiple users • Developed quality and technology • Able to move easily between suppliers Business Impact Marketplace Complexity Low High Low High StrategicLeverage Routine Bottleneck
- 32. Procurement Decision ToolProcurement Decision Tool Leverage StrategyLeverage Strategy • Focus on volume – Leverage the organization’s volume to get lower prices – Combine user requirements – Form categories of items Business Impact Marketplace Complexity Low High Low High StrategicLeverage Routine Bottleneck
- 33. Procurement Decision ToolProcurement Decision Tool Business Impact Marketplace Complexity Low High Low High StrategicLeverage Routine Bottleneck
- 34. Procurement Decision ToolProcurement Decision Tool Strategic CharacteristicsStrategic Characteristics • Few capable suppliers • Product/services success critical • Unique or customized items • Unable to move between suppliers easily • Cost analysis yields high benefits • Unproven or undeveloped technology Business Impact Marketplace Complexity Low High Low High StrategicLeverage Routine Bottleneck
- 35. Procurement Decision ToolProcurement Decision Tool Strategic StrategyStrategic Strategy • Build Relationships – Collaborative or interdependent relationships (e.g. Strategic Alliances) Business Impact Marketplace Complexity Low High Low High StrategicLeverage Routine Bottleneck
- 36. Procurement Decision ToolProcurement Decision Tool Business Impact Marketplace Complexity Low High Low High StrategicLeverage Routine Bottleneck
- 37. Key PointKey Point ““If you use the same strategy toIf you use the same strategy to buy airplanes as you do to buybuy airplanes as you do to buy pencils,pencils, your performance will suffer”your performance will suffer”
- 38. The Best Supply ManagementThe Best Supply Management PracticesPractices 1. Strategic Goal Alignment 2. Procurement Strategy Development 3. Supplier Integration 4. Teaming Strategies 5. Performance Measurement
- 39. Supplier Integration in NewSupplier Integration in New Product/Service DevelopmentProduct/Service Development “Firms looking for ways to – – decrease concept to customer development time – improve quality – significantly reduce the cost of the resulting product are involving suppliers earlier in the design process.” “Best of the Best” by Aberdeen Research
- 40. Supplier IntegrationSupplier Integration • Early Supplier Involvement – Product/Service Life Cycle • Pre-commercialization • Introduction • Growth • Maturity • Decline
- 41. Supplier IntegrationSupplier Integration • Early Supplier Involvement – Manufacturing/Service Design Process • Use of Supplier expertise and experience
- 42. Supplier IntegrationSupplier Integration “Firms looking for ways to – – decrease concept to customer development time – improve quality – significantly reduce the cost of the resulting product are involving suppliers earlier in the design process.” “Best of the Best” by Aberdeen Research
- 43. Supplier IntegrationSupplier Integration • Early Supplier Involvement – Product/Service Development • Prototypes/Demonstrations • Replacement materials/alternative methods
- 44. Supplier IntegrationSupplier Integration • Early Supplier Involvement – Cost • Cost projections of a new product or service
- 45. Supplier IntegrationSupplier Integration • Early Supplier Involvement – Quality • Supplier knowledge of quality requirements
- 46. Supplier IntegrationSupplier Integration • Early Supplier Involvement – Technology • Influence final material/application selection
- 47. Supplier IntegrationSupplier Integration • Early Supplier Involvement – Design • Experience in serving a particular market
- 48. Supplier IntegrationSupplier Integration • Early Supplier Involvement – Co-Development • Sharing costs
- 49. Supplier IntegrationSupplier Integration • Early Supplier Involvement – Cycle Time • Through reduction in redundancies
- 50. Supplier IntegrationSupplier Integration • Early Supplier Involvement – Confidentiality Issues • Proper controls – Disclosure Parameters – Mutual Non-Disclosure Agreements – Dispute resolution clause
- 51. Key PointKey Point ““Suppliers know more aboutSuppliers know more about what you buy than you do, so ifwhat you buy than you do, so if you don’t use them, youryou don’t use them, your performance will suffer”performance will suffer”
- 52. The Best Supply ManagementThe Best Supply Management PracticesPractices 1. Strategic Goal Alignment 2. Procurement Strategy Development 3. Supplier Integration 4. Teaming Strategies 5. Performance Measurement
- 53. Teaming StrategiesTeaming Strategies • Procurement Project Teams • Cross-Functional Teams
- 54. An Action Plan for CreatingAn Action Plan for Creating Effective TeamsEffective Teams by Robert M. Monczka, Ph.D., C.P.M. andby Robert M. Monczka, Ph.D., C.P.M. and Robert J. Trent, Ph.D.Robert J. Trent, Ph.D. Studies by MSU reveals – 80% of Best-in-Class organizations emphasize the use of Supply Management Project teams.
- 55. Teaming StrategiesTeaming Strategies • Procurement Project Teams – Definition - The application of project knowledge, skills, tools and techniques to procurement project activities to meet customer requirements • A Beginning and an End
- 56. Teaming StrategiesTeaming Strategies • Procurement Project Team Stages – Initiation • Root Cause analysis • SWOT • Feasibility Analysis – Net Present Value – ROI • Business Case
- 57. Teaming StrategiesTeaming Strategies • Procurement Project Team Stages – Planning • Scope Development • Roles & Responsibilities • Project Plan Approval
- 58. Teaming StrategiesTeaming Strategies • Procurement Project Team Stages – Execution • Change Management
- 59. Why change initiatives failWhy change initiatives fail Inconsistencies between management words and deeds
- 61. Why change initiatives failWhy change initiatives fail Lack of system to evaluate change results
- 62. MessageMessage “You can’t manage what you don’t measure”
- 63. Why change initiatives failWhy change initiatives fail No change of reward systems
- 65. Why change initiatives failWhy change initiatives fail Unrealistic timelines
- 66. MessageMessage “Deadlines can be a challenge, but obtainable”
- 67. Why change initiatives failWhy change initiatives fail Lack of stakeholder Buy-In
- 69. Why change initiatives failWhy change initiatives fail Training is not enough
- 71. Teaming StrategiesTeaming Strategies • Procurement Project Team Stages – Monitoring & Control • Contract Management – Performance measurement – Risk Monitoring • Project Management Software – PERT & Gant Charts • Performance Reporting – Cost – Schedule
- 72. Teaming StrategiesTeaming Strategies • Procurement Project Team Stages – Closure • Process • Post Project Audit
- 73. Teaming StrategiesTeaming Strategies • Cross-Functional Teams – Purpose • To permit different viewpoints and perspectives
- 74. Teaming StrategiesTeaming Strategies • Cross-Functional Teams – Supply Management Roles • Leadership • Facilitation • Contributor
- 75. Teaming StrategiesTeaming Strategies • Cross-Functional Teams – Advantages/Disadvantages • Consensus Building • Group Think
- 76. Teaming StrategiesTeaming Strategies • Cross-Functional Teams – Organizational cultures • Traditional vs. Team • Skill Considerations • Personality Considerations • Leadership
- 77. Key PointKey Point ““Two heads are better than one,Two heads are better than one, so if you’re not including them inso if you’re not including them in the decisions, your performancethe decisions, your performance will suffer”will suffer”
- 78. The Best Supply ManagementThe Best Supply Management PracticesPractices 1. Strategic Goal Alignment 2. Procurement Strategy Development 3. Supplier Integration 4. Teaming Strategies 5. Performance Measurement
- 79. Performance MeasurementPerformance Measurement Aberdeen Benchmarking ResearchAberdeen Benchmarking Research • Best-in-Class companies are more than 2.5x more likely to use performance monitoring, management, and optimization solutions. • Best-in-Class companies are 1.67x more likely to use portals or dashboards for consolidating and reporting of performance data.
- 80. Performance MeasurementPerformance Measurement Department Staff Suppliers
- 81. Performance MeasurementPerformance Measurement • Department – Organizational Expectations • Objectives Congruence – Organization – Suppliers & Customers
- 82. Performance MeasurementPerformance Measurement • Department – Organizational Expectations • Scorecard – Quantitative – Qualitative
- 83. Performance MeasurementPerformance Measurement • Department – Reasons for Scorecard • Determine effectiveness – To objectives – Of department management • Measure improvement/deterioration • Provide Resources • Determine Value
- 84. Performance MeasurementPerformance Measurement • Staff – Issues • Objective Alignment – Vertical & Horizontal
- 85. Performance MeasurementPerformance Measurement • Staff – Issues • Success Criteria – Known in advance
- 86. Performance MeasurementPerformance Measurement • Staff – Issues • Appraisal Factors – Quantitative and Qualitative
- 87. Performance MeasurementPerformance Measurement • Staff – 360o Reviews • Users • Management • Peers • Suppliers • Others
- 88. Performance MeasurementPerformance Measurement • Staff – Feedback • Timely • Corrective actions • Individual Development Plans
- 89. Performance MeasurementPerformance Measurement • Suppliers – Scorecards • Qualitative measures • Quantitative measures • Price, Delivery & Quality (PDQ) • Other/specific
- 90. Performance MeasurementPerformance Measurement • Suppliers – Others/specific • Cycle/Lead time Reductions • Productivity Improvements • Flexibility and Responsiveness • e-Commence Capabilities • Innovation
- 91. Open Innovation: the next frontier inOpen Innovation: the next frontier in innovation managementinnovation management • "When developing new ideas, innovation leaders say they rely on their customers, business partners and competitors to supplement their own internal functions. • Companies that profess best practices in innovation produce nearly half of their innovations from ideas generated outside the company." Research Study by A.T. Kearney,
- 92. Key PointKey Point ““You can’t manage whatYou can’t manage what you don’t measure, so ifyou don’t measure, so if you’re not measuringyou’re not measuring performance . . .”performance . . .”
- 93. The Five BestThe Five Best 1. Strategic Goal Alignment 2. Procurement Strategy Development 3. Supplier Integration 4. Teaming Strategies 5. Performance Measurement
- 94. The Five Best Supply ManagementThe Five Best Supply Management Practices in Use TodayPractices in Use Today by F. Michael Babineaux, CPSM, C.P.M., A.P.P. President/CEO Babineaux Educational Services and Training, Inc. www.BESTraining.com 901.853.0539 For
Hinweis der Redaktion
- Concept of goal alignment Internal - Goal alignment is the concept of connecting individual department, function and employee efforts directly to the vision and mission of the organization. Attaining alignment requires that corporate strategy and its execution tie directly to individual goals and to the evaluation of performance in attainment of those goals. Ideally, everyone in the organization should be focused on the same vision for success. Goal alignment is a worthy pursuit, but it typically becomes more difficult to realize as the organization grows. Most organizations of any size experience some degree of goal conflict. Goal conflict may occur within an organization due to the complexity of the goal-setting process and the need to establish goals in all functions. For example, a supply management professional and engineer who are part of the same sourcing team may look at the problem differently given their respective goals. The engineer may argue for paying a higher price, since it will lead to improved reliability and, therefore, meet goals. Meanwhile, the supply management professional may argue for lower price, since there is a cost savings target on the particular commodity. Planning should be conducted in such a way as to minimize the potential amount of goal conflict. Ideally there should be alignment of an organization's internal and external goals. External - External goals relate to stakeholders outside the organization, including suppliers and customers. Supply management professionals must develop external (supply market) goals that support internal· goals. Mter establishing internal and external goals, the organization can proceed to focus on planning activities.
- Concept of goal alignment Internal - Goal alignment is the concept of connecting individual department, function and employee efforts directly to the vision and mission of the organization. Attaining alignment requires that corporate strategy and its execution tie directly to individual goals and to the evaluation of performance in attainment of those goals. Ideally, everyone in the organization should be focused on the same vision for success. Goal alignment is a worthy pursuit, but it typically becomes more difficult to realize as the organization grows. Most organizations of any size experience some degree of goal conflict. Goal conflict may occur within an organization due to the complexity of the goal-setting process and the need to establish goals in all functions. For example, a supply management professional and engineer who are part of the same sourcing team may look at the problem differently given their respective goals. The engineer may argue for paying a higher price, since it will lead to improved reliability and, therefore, meet goals. Meanwhile, the supply management professional may argue for lower price, since there is a cost savings target on the particular commodity. Planning should be conducted in such a way as to minimize the potential amount of goal conflict. Ideally there should be alignment of an organization's internal and external goals.
- Concept of goal alignment Internal - Goal alignment is the concept of connecting individual department, function and employee efforts directly to the vision and mission of the organization. Attaining alignment requires that corporate strategy and its execution tie directly to individual goals and to the evaluation of performance in attainment of those goals. Ideally, everyone in the organization should be focused on the same vision for success. Goal alignment is a worthy pursuit, but it typically becomes more difficult to realize as the organization grows. Most organizations of any size experience some degree of goal conflict. Goal conflict may occur within an organization due to the complexity of the goal-setting process and the need to establish goals in all functions. For example, a supply management professional and engineer who are part of the same sourcing team may look at the problem differently given their respective goals. The engineer may argue for paying a higher price, since it will lead to improved reliability and, therefore, meet goals. Meanwhile, the supply management professional may argue for lower price, since there is a cost savings target on the particular commodity. Planning should be conducted in such a way as to minimize the potential amount of goal conflict. Ideally there should be alignment of an organization's internal and external goals.
- Concept of goal alignment Internal - Goal alignment is the concept of connecting individual department, function and employee efforts directly to the vision and mission of the organization. Attaining alignment requires that corporate strategy and its execution tie directly to individual goals and to the evaluation of performance in attainment of those goals. Ideally, everyone in the organization should be focused on the same vision for success. Goal alignment is a worthy pursuit, but it typically becomes more difficult to realize as the organization grows. Most organizations of any size experience some degree of goal conflict. Goal conflict may occur within an organization due to the complexity of the goal-setting process and the need to establish goals in all functions. For example, a supply management professional and engineer who are part of the same sourcing team may look at the problem differently given their respective goals. The engineer may argue for paying a higher price, since it will lead to improved reliability and, therefore, meet goals. Meanwhile, the supply management professional may argue for lower price, since there is a cost savings target on the particular commodity. Planning should be conducted in such a way as to minimize the potential amount of goal conflict. Ideally there should be alignment of an organization's internal and external goals.
- Concept of goal alignment External - External goals relate to stakeholders outside the organization, including suppliers and customers. Supply management professionals must develop external (supply market) goals that support internal· goals. Mter establishing internal and external goals, the organization can proceed to focus on planning activities.
- Opportunity assessment - Each supply market will vary in its complexity. Supply management professionals should evaluate each market in terms of the degree of 1) competition, 2) geographical dispersion, and 3) cooperation from suppliers. As a result, opportunities for collaboration and pricing concessions should be evident.
- Opportunity assessment - Each supply market will vary in its complexity. Supply management professionals should evaluate each market in terms of risk and value
- Prioritization - Purchased items or services will vary in their impact on the business. Peter Kraljic developed a two-by-two portfolio matrix to help supply management professionals develop an appropriate sourcing strategy for items or services purchased, based on profit impact (low to high) and supply risk (low to high). Items are categorized as strategic, routine, bottleneck and leverage.
- Routine/non-critical components –Low Business Impact and low marketplace complexity. Bottleneck - Bottleneck items are low-value, high-risk products with customized specifications and technologies. Items in this category are generally purchased in larger quantities. Inventory levels are monitored more closely to avoid interruptions to supply. The relationship with the supplier is important to the buying organization but supply professionals will search for alternative suppliers to avoid the risk of supply interruptions.Leverage buy - Leverage components: Leveraged items are those that have "a large number of suppliers who are all capable of supplying the same product, and the dollars spent are significant." These items are relatively low risk to obtain, yet have a major effect on the organization’s competitiveness. The dominant strategy is to leverage the organization’s volume to get lower prices Strategic - Strategic components have a high risk of-supply and high importance-to-competitiveness items. There are only a few suppliers, or perhaps only one, that have the technical capability and capacity to meet the buying organization's needs, so it is difficult to switch suppliers. Expenditures for strategic items also generally are high, and require supply strategies that reduce costs and ensure continuity of supply. These items are generally managed through closer win/win partnership-type relationships.
- These items have little effect on the organization's competitiveness and profitability.
- They can be easily standardized, are highly substitutable, and thus are purchased using simple contracts or p-cards. P-cards are multipurpose bank cards with predetermined organization-set policies and procedures that eliminate the traditional requisition/purchase order process. The primary goal is to minimize the procurement costs of these items.
- Routine/non-critical components –Low Business Impact and low marketplace complexity. Bottleneck - Bottleneck items are low-value, high-risk products with customized specifications and technologies. Items in this category are generally purchased in larger quantities. Inventory levels are monitored more closely to avoid interruptions to supply. The relationship with the supplier is important to the buying organization but supply professionals will search for alternative suppliers to avoid the risk of supply interruptions.Leverage buy - Leverage components: Leveraged items are those that have "a large number of suppliers who are all capable of supplying the same product, and the dollars spent are significant." These items are relatively low risk to obtain, yet have a major effect on the organization’s competitiveness. The dominant strategy is to leverage the organization’s volume to get lower prices Strategic - Strategic components have a high risk of-supply and high importance-to-competitiveness items. There are only a few suppliers, or perhaps only one, that have the technical capability and capacity to meet the buying organization's needs, so it is difficult to switch suppliers. Expenditures for strategic items also generally are high, and require supply strategies that reduce costs and ensure continuity of supply. These items are generally managed through closer win/win partnership-type relationships.
- Bottleneck - Bottleneck items are low-value, high-risk products with customized specifications and technologies.
- Routine/non-critical components –Low Business Impact and low marketplace complexity. Bottleneck - Bottleneck items are low-value, high-risk products with customized specifications and technologies. Items in this category are generally purchased in larger quantities. Inventory levels are monitored more closely to avoid interruptions to supply. The relationship with the supplier is important to the buying organization but supply professionals will search for alternative suppliers to avoid the risk of supply interruptions.Leverage buy - Leverage components: Leveraged items are those that have "a large number of suppliers who are all capable of supplying the same product, and the dollars spent are significant." These items are relatively low risk to obtain, yet have a major effect on the organization’s competitiveness. The dominant strategy is to leverage the organization’s volume to get lower prices Strategic - Strategic components have a high risk of-supply and high importance-to-competitiveness items. There are only a few suppliers, or perhaps only one, that have the technical capability and capacity to meet the buying organization's needs, so it is difficult to switch suppliers. Expenditures for strategic items also generally are high, and require supply strategies that reduce costs and ensure continuity of supply. These items are generally managed through closer win/win partnership-type relationships.
- Leverage buy - Leverage components: Leveraged items are those that have "a large number of suppliers who are all capable of supplying the same product, and the dollars spent are significant." These items are relatively low risk to obtain, yet have a major effect on the organization’s competitiveness.
- The dominant strategy is to leverage the organization’s volume to get lower prices
- Routine/non-critical components –Low Business Impact and low marketplace complexity. Bottleneck - Bottleneck items are low-value, high-risk products with customized specifications and technologies. Items in this category are generally purchased in larger quantities. Inventory levels are monitored more closely to avoid interruptions to supply. The relationship with the supplier is important to the buying organization but supply professionals will search for alternative suppliers to avoid the risk of supply interruptions.Leverage buy - Leverage components: Leveraged items are those that have "a large number of suppliers who are all capable of supplying the same product, and the dollars spent are significant." These items are relatively low risk to obtain, yet have a major effect on the organization’s competitiveness. The dominant strategy is to leverage the organization’s volume to get lower prices Strategic - Strategic components have a high risk of-supply and high importance-to-competitiveness items. There are only a few suppliers, or perhaps only one, that have the technical capability and capacity to meet the buying organization's needs, so it is difficult to switch suppliers. Expenditures for strategic items also generally are high, and require supply strategies that reduce costs and ensure continuity of supply. These items are generally managed through closer win/win partnership-type relationships.
- Strategic - Strategic components have a high risk of-supply and high importance-to-competitiveness items. There are only a few suppliers, or perhaps only one, that have the technical capability and capacity to meet the buying organization's needs, so it is difficult to switch suppliers. Expenditures for strategic items also generally are high, and require supply strategies that reduce costs and ensure continuity of supply.
- Strategic - These items are generally managed through closer win/win partnership-type relationships.
- Routine/non-critical components –Low Business Impact and low marketplace complexity. Bottleneck - Bottleneck items are low-value, high-risk products with customized specifications and technologies. Items in this category are generally purchased in larger quantities. Inventory levels are monitored more closely to avoid interruptions to supply. The relationship with the supplier is important to the buying organization but supply professionals will search for alternative suppliers to avoid the risk of supply interruptions.Leverage buy - Leverage components: Leveraged items are those that have "a large number of suppliers who are all capable of supplying the same product, and the dollars spent are significant." These items are relatively low risk to obtain, yet have a major effect on the organization’s competitiveness. The dominant strategy is to leverage the organization’s volume to get lower prices Strategic - Strategic components have a high risk of-supply and high importance-to-competitiveness items. There are only a few suppliers, or perhaps only one, that have the technical capability and capacity to meet the buying organization's needs, so it is difficult to switch suppliers. Expenditures for strategic items also generally are high, and require supply strategies that reduce costs and ensure continuity of supply. These items are generally managed through closer win/win partnership-type relationships.
- Product/Service Life Cycle – There are a number of ways suppliers can be actively involved during each stage of the life cycle of a product or service. The life cycle consists of five stages or phases: Pre-commercialization – suppliers may contribute by developing component specs, recommending parts, new technologies or processes or by co-developing Introduction – Suppliers can proactively monitor quality and correct problems before they reach the customer, adjust production and delivery schedules based on actual demand and collaborate with supply management to make changes as necessary Growth – Supply management may share forecast data with its suppliers to ensure continuity of supply Maturity – Suppliers might manage inventory Decline – Suppliers may offer lower-cost solutions or parts to substitute for the initial product or service
- Early supplier involvement (ESI) is a practice that brings together one or more suppliers with the organization's product or service design team early in the product development process. The objective is to use the supplier's expertise and experience in developing a product or service specification that enables effective and efficient manufacturability, assembly and! or delivery. The following are areas in which early supplier involvement (ESI) can have a particularly beneficial effect on the supply management process: Manufacturing process - Knowledge of both the supplier's and the customer's manufacturing procedures is important to the development of the most effective process to produce a product. Supply management professionals and suppliers working together can eliminate many cost redundancies. The supply management organization has a greater opportunity to come up with cost efficiencies if it understands the supplier's processes. Significant time and money can be saved if the supplier is "on the team" early in the development of the manufacturing process. Product or service development/implementation - Suppliers can be of assistance in early product development by providing prototypes, models or preproduction samples for testing and/or use in the customer's product development cycle. Suppliers can be equally helpful in the implementation of a new or changing service. Good communication and feedback between the customer and the supplier are important if early product or service development efforts are to provide maximum value.
- Early supplier involvement (ESI) is a practice that brings together one or more suppliers with the organization's product or service design team early in the product development process. The objective is to use the supplier's expertise and experience in developing a product or service specification that enables effective and efficient manufacturability, assembly and! or delivery. The following are areas in which early supplier involvement (ESI) can have a particularly beneficial effect on the supply management process: Manufacturing process - Knowledge of both the supplier's and the customer's manufacturing procedures is important to the development of the most effective process to produce a product. Supply management professionals and suppliers working together can eliminate many cost redundancies. The supply management organization has a greater opportunity to come up with cost efficiencies if it understands the supplier's processes. Significant time and money can be saved if the supplier is "on the team" early in the development of the manufacturing process. Product or service development/implementation - Suppliers can be of assistance in early product development by providing prototypes, models or preproduction samples for testing and/or use in the customer's product development cycle. Suppliers can be equally helpful in the implementation of a new or changing service. Good communication and feedback between the customer and the supplier are important if early product or service development efforts are to provide maximum value.
- Cost - Suppliers can provide useful insight into the costs of manufacturing a product or providing a service and realistic assessments of what the product or service development will entail before the product or service is introduced into the market or procured by the supply management organization. Having cost projections on a new product or service from a supplier can keep an organization from making expensive errors in judgment, and enhance the decision-making ability of the buying organization. Quality - Early involvement of suppliers in the development of specifications for products and processes will help to reduce the costs of quality of a product or service. Suppliers can help with the development of quality requirements that will serve the customer in the most effective manner. If suppliers are made aware of a customer's needs, they can prepare their organizations to satisfy those needs through human resource development and training, process development and capability studies, and equipment acquisition. Quality is the result of preplanning and preparation. Suppliers that have knowledge of quality requirements can eliminate problems that lead to rejections or rework at later stages.
- Cost - Suppliers can provide useful insight into the costs of manufacturing a product or providing a service and realistic assessments of what the product or service development will entail before the product or service is introduced into the market or procured by the supply management organization. Having cost projections on a new product or service from a supplier can keep an organization from making expensive errors in judgment, and enhance the decision-making ability of the buying organization. Quality - Early involvement of suppliers in the development of specifications for products and processes will help to reduce the costs of quality of a product or service. Suppliers can help with the development of quality requirements that will serve the customer in the most effective manner. If suppliers are made aware of a customer's needs, they can prepare their organizations to satisfy those needs through human resource development and training, process development and capability studies, and equipment acquisition. Quality is the result of preplanning and preparation. Suppliers that have knowledge of quality requirements can eliminate problems that lead to rejections or rework at later stages.
- Technology - Supplier expertise in the technology arena can be helpful to a design person and will increase the chances of producing a quality and cost-effective product early in the design-marketing cycle. Supplier technological understanding may influence final material selection and many other areas, especially when the designer does not have a broad knowledge of technological advances occurring in the marketplace. Supply management can assist in the transfer of information by bringing together an organization's technical staff with the supplier's technologically qualified personnel. However, such exchanges can take place only if the supplier believes there is a chance to develop future business. Early in the process, supply management and the internal design stakeholders' group should choose a group of suppliers with which they are willing to work. Supply management professionals must understand that suppliers share information on advances in technology and related intelligence on a selected basis. Design - Suppliers can provide key elements to a product design, based on their experience in serving a particular market. Supply management professionals who have long-term relationships with suppliers can often have their designers seek the advice of suppliers, with the understanding that the supplier's technology and designs must be protected. Usually a nondisclosure agreement (NDA) is signed by both parties to ensure confidentiality. Also, it is important that the supplier have a reasonable opportunity to gain business from this activity.
- Technology - Supplier expertise in the technology arena can be helpful to a design person and will increase the chances of producing a quality and cost-effective product early in the design-marketing cycle. Supplier technological understanding may influence final material selection and many other areas, especially when the designer does not have a broad knowledge of technological advances occurring in the marketplace. Supply management can assist in the transfer of information by bringing together an organization's technical staff with the supplier's technologically qualified personnel. However, such exchanges can take place only if the supplier believes there is a chance to develop future business. Early in the process, supply management and the internal design stakeholders' group should choose a group of suppliers with which they are willing to work. Supply management professionals must understand that suppliers share information on advances in technology and related intelligence on a selected basis. Design - Suppliers can provide key elements to a product design, based on their experience in serving a particular market. Supply management professionals who have long-term relationships with suppliers can often have their designers seek the advice of suppliers, with the understanding that the supplier's technology and designs must be protected. Usually a nondisclosure agreement (NDA) is signed by both parties to ensure confidentiality. Also, it is important that the supplier have a reasonable opportunity to gain business from this activity.
- Product co-development - Using suppliers in the codevelopment of a product or service provides for a sharing of development costs. This normally implies that there is a formal agreement regarding future business that may result from the development. This agreement can take many forms. For example, the organization can pay the supplier for the development costs, pay a royalty on each item sold or guarantee future business. Co-development spreads the risk to more than one organization. It implies that the rewards will be shared. Often this is the only way that a supplier will share proprietary technology. Cycle time - Total cycle time can be reduced by the early development of relationships with suppliers. These relationships can assist with the elimination of redundancies in product development, manufacturing and distribution processes. These relationships can assist in the introduction of new or changing services. Once the product, process or service are in place, the cycle required to provide the ultimate customer with the desired product can be improved continuously.
- Product co-development - Using suppliers in the codevelopment of a product or service provides for a sharing of development costs. This normally implies that there is a formal agreement regarding future business that may result from the development. This agreement can take many forms. For example, the organization can pay the supplier for the development costs, pay a royalty on each item sold or guarantee future business. Co-development spreads the risk to more than one organization. It implies that the rewards will be shared. Often this is the only way that a supplier will share proprietary technology. Cycle time - Total cycle time can be reduced by the early development of relationships with suppliers. These relationships can assist with the elimination of redundancies in product development, manufacturing and distribution processes. These relationships can assist in the introduction of new or changing services. Once the product, process or service are in place, the cycle required to provide the ultimate customer with the desired product can be improved continuously.
- Confidentiality issues - Confidential information may take a variety of forms, such as bids, supplier proposals, pricing, drawings, designs, strategies, wage and salary information, software programs or scientific formulas. The supply management professional should ensure that information about one supplier is never given to another supplier unless laws and regulations require that the information be made public - as in the case of public procurement. The other internal participants in the procurement process may not be aware of the need for confidentiality. Therefore, it is supply management's responsibility to ensure that proper controls are established to protect information. Parameters for disclosure - When an organization and a supplier are developing a new product or service, it is important to create an agreement in advance that specifies when and under what conditions the information developed may be released to others. Product development model - Many organizations are concerned with protecting their intellectual property. The safest way to avoid problems is to not allow access to trade secrets or other proprietary information. Production plan -- It is common for organizations to share production plans with suppliers. The supplier should regard the production plan as confidential. It is appropriate to use a confidentiality or non-disclosure agreement that includes a section describing the supply management professional's commitment to the schedule. Legal implications - When using non-disclosure agreements, "proprietary information" must be carefully defined. If it is too broad, the supplier or supply management professional may not want to sign the agreement, and it may be difficult to enforce. If it is too narrow, the supply management professional or supplier risks exposing and losing important data. Try to be specific. The definition usually will state that publicly available or generic information is not proprietary. The supply management professional might want to include a dispute resolution clause, in the event problems arise about what data is proprietary.
- Purpose of teams - Cross-functional teams are dynamic mechanisms to achieve clear, worthwhile and compelling goals that demand joint and diverse input for success. Through teaming, an organization leverages its resources and takes advantage of internal expertise. Teaming permits different viewpoints and perspectives to contribute to decision-making. Teams can be project or process oriented.
- Supply management and project management are integrally related. Supply management is defined as the identification, acquisition, access, positioning, management of resources and related capabilities the organization needs or potentially needs, in the attainment of its strategic objectives. Project management, on the other hand, is defined as the application of knowledge, skills, tools and techniques to project activities to meet project requirements. (PMI, 2004.) Thus, project management can be considered as a method or approach for conducting many of the supply management activities. Supply management and project management can be viewed from two perspectives. First, supply management activities are typically executed as projects. For example, the supply management department of a high-tech computer organization may be faced with establishing a second source of supply for a critical commodity, material or service. This supply management activity, establishing a second source of supply, may be treated as a project within the organization, and the use of project management processes will be instrumental in the success of this effort. Second, many projects managed by an organization typically require some extent of supply management activities, such as sourcing in support of a larger enterprise-wide project. For example, this same computer organization may have received a contract to develop a unique laptop for the Department of Defense to be used in battlefield operations. The fulfillment of the contract requirements will be considered a major project, which includes some supply management activities, such as the negotiation and award of subcontracts for various subcomponents or subsystems of the laptop computer. Given these two perspectives, supply management and project management continue to be closely related. Regardless of the perspective one takes on project management, all project life cycle activities typically fall into one of the five project management process groups
- Project initiation - These processes are related to defining and authorizing the project or project phase. (PMI, 2004.) For supply management activities, project initiation processes typically focus on needs identification or problem definition, which involves determining project feasibility, proposing a project solution and obtaining project approval and authorization. Root cause analysis - This process includes conducting root cause analyses to define the problem that the project will solve or identify the needs for which the project will provide a solution. These analyses include the following: Strength, weaknesses, opportunity, threats (SWOT) analysis - SWOT analysis is a strategic planning approach to assessing an organization‘s strengths, weaknesses, opportunities and threats. See Tasks l-F-l, 2-A-l, 2-C-2 and 3-A-=2 for additional discussions on SWOT analysis. Project feasibility analysis -This is a preliminary analysis to determine the feasibility of a proposed project in order to be approved. One area of the feasibility analysis would include the financial evaluation of the proposed project using such tools as net present value, internal rate of return and payback period calculations.
- Project planning - These processes define project objectives and plan the course required to obtain the project's scope and objectives. For supply management related projects such as major procurement actions, project planning involves supply management activities such as procurement planning and solicitation planning. Scope development -The requirement or scope of a project is a description of the work to be accomplished in the project. It describes the nature and extent of the project and outlines the conditions under which the work is to be performed. Statement of work (SOW) -The SOW is that part of the solicitation documents that describes that part of the project that will be accomplished by the supplier. The SOW generally indicates the type, level and quality of service, as well as the time schedule required. Project team roles and responsibilities - Based on the SOW and the related work breakdown structure, the project team must be assigned specific roles and responsibilities for performing the project. Project plan approval process – Involves the approval of all projects to include the project budget, schedule and performance requirements. Establishes the project baseline, in terms of cost, schedule and performance objectives. The base line then will be used to measure actual project progress against project planned estimates.
- Project execution - The processes discussed in this section integrate people and resources to carry out the project effort. For supply management activities such as procurement and contracting, project execution involves implementing the supply management plans developed during project planning. This can involve executing the solicitation and source selection phase of the procurement process. Change management - Change management as defined in the ISM Glossary involves making changes in a planned or systematic fashion through the use of methods, models and practices common to the multidisciplinary body of knowledge surrounding the task of managing planned or unplanned change. Change management involves managing the changes that occur during the project, and administering the contract with the contractor. Changes to the initial project plan and baseline (cost, schedule and performance) objectives
- Project monitoring and control These processes measure and monitor the project effort in order to identity variances from the project plan so that corrective actions can be implemented. (PMI, 2004.) This involves the contract administration phase of the procurement process. . Performance measurement tools - Earned value management, schedule analysis and budget analysis are used to measure the contractor's performance. Schedule analysis compares planned schedule with actual schedule status. The results of schedule analysis include a determination of schedule variance. Triple constraints (cost, schedule and performance) -The triple constraints of cost, schedule and performance are the parameters of the project objectives that must be managed by the project team. (PMBOK, 2004.) The project status is based on the project baseline, specifically the cost, schedule and performance requirements of the project. The cost, schedule and performance requirements constitute the triple constraints of any project.
- Project closure - processes formalize the acceptance of the project effort, either a product or service, and bring the project to an end. (pMI,2004.) For supply management activities such as procurement and contracting, project closing involves formally closing the project activities related to the contract, and documenting the project and contract flies to reflect the project results. This involves conducting contract closeout activities. Contract closeout processes - Contract closeout is the process of verifying that all administrative matters are concluded on a contract that is otherwise physically complete. (Garrett and Rendon, 2005.) This process includes: Property dispositions process - Projects may involve the use of property and equipment from other organizations. Project closure activities include the disposition of project property in accordance with organizational or contractual requirements. Final product/service acceptance - Final product/service acceptance includes the buying organization's processes and documentation related to the receipt and final acceptance of the contractor's products and services, as specified in the contract. Final payment process - Final payment process includes the buying organization's processes and documentation related to executing the final payment for the contractor’s products and services, as specific in the seller’s invoice and the contract Post project audit procedure – A project audit is typically conducted to assess the completed project in terms of methods, procedures, records, properties, budget, actual costs and contractor performance.
- Purpose of teams - Cross-functional teams are dynamic mechanisms to achieve clear, worthwhile and compelling goals that demand joint and diverse input for success. Through teaming, an organization leverages its resources and takes advantage of internal expertise. Teaming permits different viewpoints and perspectives to contribute to decision-making. Teams can be project or process oriented.
- Role of supply management in teams - Given the wide array of skills that supply management professionals possess, the range of their team participation may include sourcing, commodity, quality, outsourcing, revenue enhancement, inventory, technology planning and the very important function of participation on new product or service development teams. The exact nature of supply management input will vary depending on the team's charter. For example, supply management usually plays a leadership role on sourcing teams, while its role may be that of contributing team member in other situations. Regardless of the role, supply management is responsible for sharing its market and financial expertise to complement the talents of other team participants. Specific roles for supply management professionals might include the following: Leadership -As supply management becomes more widely recognized as a strategic function, it will be increasingly expected to take a leadership role in finding ways to make the organization more competitive through cycle time reduction, application of supply chain management practices and quality improvement. The supply management function becomes a leader in an organization when it is called upon to exercise its expertise in important business decisions and important corporate acquisition process stages. Facilitation - According to Teaming by Design: Real Teams for Real People (MeIntosh- Fletcher, D., 1996), cross-functional team facilitation has the following six aspects or steps: organizing the team, assessing team requirements, understanding team support roles, working together, balancing diversity and running team meetings. Supply management professionals who are responsible for facilitating teams should become familiar with these subjects.
- Teamwork has the advantage of bringing together the major functions of an organization that have a vested interest in the team’s goals. Through a team, members' talents and expertise are combined to achieve increased quality, reduced costs and optimized organizational objectives. The team mechanism ensures some degree of input equity - that all members may contribute to solving the challenge that confronts the group. Byproducts of input equity are reduced cross-functional friction, shared ownership and a stronger sense of unity of purpose. Consensus building -Any team endeavor may be expected to reveal a diversity of ideas, motivations and expectations. To achieve consensus requires clear thinking and defined methods of determining consensus. These should be addressed and agreed upon by team members. Groupthink – When group members attempt to avoid the discomforts of critical and original thinking, this is group think. It arises out of a wish to minimize conflict and criticism, even when the conflict and criticism would be constructive and beneficial. Individuals may engage in group think because they want to avoid being embarrassed or embarrassing or angering others.
- Organizational cultures must adjust to allow for the energy and dynamics of high-performance, self-managed and progressive teams. A stodgy and traditional culture is not likely to allow teams the independence and autonomy required to grapple effectively with key issues. Some teams have a more or less permanent place in the organization, while others are more temporary or ad hoc in nature. Successful teams require a defined purpose and time frame, complementary team members (in such areas as personalities and skills), a leader and specific outcome measures. If these ingredients are missing, lackluster performance should be expected
- One of the major functions of management is to evaluate and control the performance of an activity. The leadership evaluates overall performance of the function, individuals and suppliers in conjunction with each person in supply management, internal customers and suppliers. Creating meaningful measurements, collecting data and communicating results is often difficult because there is no one set or collection of metrics that works for all organizations. Organizational expectations of supply management Congruence with organizational objectives - Supply management's objectives need to be consistent with the organization's mission statement, strategy and objectives; therefore the metrics by which it is measured also must be consistent. The decisions that supply management makes must contribute to creating competitive advantage for the organization, and it should be measured on the results of those decisions. Congruence with supplier and customer objectives - Supply management's objectives must be directed at improving its internal customers' ability to meet their objectives with the ultimate goal of satisfying the needs of the organization's external customers.
- Scorecard -A scorecard is a performance measurement and management document that records the ratings from a performance evaluation process. It can be used to show how supply management meets its objectives and its customers' objectives. The scorecard should contain both quantitative and qualitative measures or metrics that compare goals and objectives to actual performance. At each updating, results should be reviewed with internal customers to celebrate joint successes and determine how to make improvements
- To determine departmental effectiveness in meeting organizational needs - Once the organizational mission is understood, the supply management professional can relate this information to the ability to perform tasks that, when combined, ultimately meet goals and establish benchmarks to measure the impact of the department's efforts. Fortunately, cost reduction, value analysis and minimization of liabilities and administrative costs, make justification of supply management's "added value" and contribution to organizational objectives possible to document in many cases. To determine the effectiveness of department management - The factors that the supply management professional may wish to measure include the capabilities of personnel, the soundness of the organizational structure, the scope of each job, the departmental plans, policies and procedures. To measure improvement/deterioration - Measurement provides early warning signals of deterioration of performance. This allows managers to take corrective action. To provide incentives for improvement - Individuals and groups respond to the criteria by which they are measured. Well-established and accepted performance criteria generally provide an objective means of measurement of continuous improvement. To determine resources needed for improvement - Given the past performance by the supply management function and the goals for the future, the supply management professional can develop estimates for future resource requirements, such as training, technology and staff. To determine if value is added to the process Many activities have been done for years simply because they were never examined for improvement. Today, most areas of the organization are subject to analysis to reduce or eliminate activities that no longer add value to the internal customer or the supplier.
- When evaluating employees, care must be taken to objectively measure their contributions to the organization’s goals. In addition to quantitative measures, subjective factors such as employee behaviors can also be taken into consideration for the overall evaluation Align employee objectives to organizational goals - It is the supply management professional's responsibility to ensure that each of the employee objectives supports the organizational goals. Determine criteria for success - Supply management departments must identify how they can contribute to the organization's objectives, and then develop measurements that will move the function in a direction that will reinforce those objectives. Determine appraisal factors -There are many factors which go into the appraisal/ assessment of employees. A starting point would be the essential functions of the job. Given the significant responsibilities and impact to business, quantitative as well as qualitative factors should be considered when assessing the contribution of supply management professionals. Quantitative factors - Quantitative factors are those performance elements that can be measured numerically, such as cost, quality and delivery performance. Qualitative factors - Qualitative factors are those performance elements that are more subjective to measure, such as teamwork, creativity, responsiveness to change and customer focus. When considering these factors, care should be taken to apply solid judgment in the overall assessment.
- When evaluating employees, care must be taken to objectively measure their contributions to the organization’s goals. In addition to quantitative measures, subjective factors such as employee behaviors can also be taken into consideration for the overall evaluation Align employee objectives to organizational goals - It is the supply management professional's responsibility to ensure that each of the employee objectives supports the organizational goals. Determine criteria for success - Supply management departments must identify how they can contribute to the organization's objectives, and then develop measurements that will move the function in a direction that will reinforce those objectives. Determine appraisal factors -There are many factors which go into the appraisal/ assessment of employees. A starting point would be the essential functions of the job. Given the significant responsibilities and impact to business, quantitative as well as qualitative factors should be considered when assessing the contribution of supply management professionals. Quantitative factors - Quantitative factors are those performance elements that can be measured numerically, such as cost, quality and delivery performance. Qualitative factors - Qualitative factors are those performance elements that are more subjective to measure, such as teamwork, creativity, responsiveness to change and customer focus. When considering these factors, care should be taken to apply solid judgment in the overall assessment.
- When evaluating employees, care must be taken to objectively measure their contributions to the organization’s goals. In addition to quantitative measures, subjective factors such as employee behaviors can also be taken into consideration for the overall evaluation Align employee objectives to organizational goals - It is the supply management professional's responsibility to ensure that each of the employee objectives supports the organizational goals. Determine criteria for success - Supply management departments must identify how they can contribute to the organization's objectives, and then develop measurements that will move the function in a direction that will reinforce those objectives. Determine appraisal factors -There are many factors which go into the appraisal/ assessment of employees. A starting point would be the essential functions of the job. Given the significant responsibilities and impact to business, quantitative as well as qualitative factors should be considered when assessing the contribution of supply management professionals. Quantitative factors - Quantitative factors are those performance elements that can be measured numerically, such as cost, quality and delivery performance. Qualitative factors - Qualitative factors are those performance elements that are more subjective to measure, such as teamwork, creativity, responsiveness to change and customer focus. When considering these factors, care should be taken to apply solid judgment in the overall assessment.
- Conduct interviews/provide feedback - One of the most critical processes of evaluating supply management employees is to provide effective feedback to employees. In addition, it is important that the supply management professional provide input to the employee on how they can improve their overall contribution to the organization. Equally important is for the employee to listen openly to suggested improvements so that continued improvements can be made by the employee and subsequently by the organization. As part of this process, effective two-way communication is vital. Clear, open and honest dialogue in a non-confrontational and non-defensive manner is essential. Sources of feedback - Input from multiple sources on employee contributions is an important element of properly assessing their contributions to the organization. Valuable input will be gained through direct interaction and review of the supply management professional's results. Since the perception of employee's contribution and behavior can be different among managers, peers, clients and suppliers, seeking input from multiple sources can allow for a more effective assessment. Team and/or peer input -Team and/or peer input are often the most valuable as this group has daily interaction with each other. They experience daily the contributions from their peers and knowledge of how they handle the ongoing challenges and opportunities. Self assessment - Self assessments can be done by the supply management professional or as an organization. Periodic reviews of processes and results can also provide valuable input. In addition to allowing for immediate corrective actions to a process, if necessary, it is one source of input for the employee's effectiveness. Internal customer input - Internal customer input allows the supply management professional to assess how responsive the employee is to the client's needs and how dearly the requirements are understood.
- Conduct interviews/provide feedback - One of the most critical processes of evaluating supply management employees is to provide effective feedback to employees. In addition, it is important that the supply management professional provide input to the employee on how they can improve their overall contribution to the organization. Equally important is for the employee to listen openly to suggested improvements so that continued improvements can be made by the employee and subsequently by the organization. As part of this process, effective two-way communication is vital. Clear, open and honest dialogue in a non-confrontational and non-defensive manner is essential. Sources of feedback - Input from multiple sources on employee contributions is an important element of properly assessing their contributions to the organization. Valuable input will be gained through direct interaction and review of the supply management professional's results. Since the perception of employee's contribution and behavior can be different among managers, peers, clients and suppliers, seeking input from multiple sources can allow for a more effective assessment. Team and/or peer input -Team and/or peer input are often the most valuable as this group has daily interaction with each other. They experience daily the contributions from their peers and knowledge of how they handle the ongoing challenges and opportunities. Self assessment - Self assessments can be done by the supply management professional or as an organization. Periodic reviews of processes and results can also provide valuable input. In addition to allowing for immediate corrective actions to a process, if necessary, it is one source of input for the employee's effectiveness. Internal customer input - Internal customer input allows the supply management professional to assess how responsive the employee is to the client's needs and how dearly the requirements are understood.
- Cycle/lead time - Because it dictates the level of inventory that an organization must carry or alternatively the degree to which it must place orders in advance. Cycle/lead time relates directly to the supplier's flexibility and responsiveness. Productivity - Productivity, defined as the ratio of inputs to outputs, is a key measure of process efficiency. Increasing productivity indicates an active continuous improvement philosophy. Decreasing productivity indicates major problems and a degrading process. In the case of services, the supplier should have the ability to understand its own capacity and productivity, that is, what is their potential to absorb additional work through hiring and overtime. Flexibility - Flexibility is usually defined in manufacturing as the percentage increase in production that a supplier can achieve given a certain notice (such as four weeks). Flexibility is important in highly variable markets and in markets that are driven by events (for example, seasonal or defense industries). A similar concept applies to service provision, however, the supply management professional must be aware of the supplier's ability to be flexible given the resource constraints of the supplier. Electronic capabilities - EDI is the prevalent way in which suppliers and customers interact electronically. Webbased EDI is emerging as a viable alternative. This is a critical capability for suppliers that will receive frequent orders. Radio frequency identification (RFID) also is emerging as an alternative. RFID is a passive or active radio data chip attached to products to allow retailers to track, access and compile data as part of the supply chain flow process. (ISM Glossary, 2006) A significant thrust in RFID use is in enterprise supply chain management, improving the efficiency of inventory tracking and management. However, a threat is looming that the current growth and adoption in enterprise supply chain market
- Cycle/lead time - Because it dictates the level of inventory that an organization must carry or alternatively the degree to which it must place orders in advance. Cycle/lead time relates directly to the supplier's flexibility and responsiveness. Productivity - Productivity, defined as the ratio of inputs to outputs, is a key measure of process efficiency. Increasing productivity indicates an active continuous improvement philosophy. Decreasing productivity indicates major problems and a degrading process. In the case of services, the supplier should have the ability to understand its own capacity and productivity, that is, what is their potential to absorb additional work through hiring and overtime. Flexibility - Flexibility is usually defined in manufacturing as the percentage increase in production that a supplier can achieve given a certain notice (such as four weeks). Flexibility is important in highly variable markets and in markets that are driven by events (for example, seasonal or defense industries). A similar concept applies to service provision, however, the supply management professional must be aware of the supplier's ability to be flexible given the resource constraints of the supplier. Electronic capabilities - EDI is the prevalent way in which suppliers and customers interact electronically. Webbased EDI is emerging as a viable alternative. This is a critical capability for suppliers that will receive frequent orders. Radio frequency identification (RFID) also is emerging as an alternative. RFID is a passive or active radio data chip attached to products to allow retailers to track, access and compile data as part of the supply chain flow process. (ISM Glossary, 2006) A significant thrust in RFID use is in enterprise supply chain management, improving the efficiency of inventory tracking and management. However, a threat is looming that the current growth and adoption in enterprise supply chain market