Have Hugged Seen 10.11.10
Transcript of Have Hugged Seen 10.11.10
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Have You Hugged Your Supplier Today?
The Benefits As A Preferred Customer
NAPMs 85th Intl Conference Workshop
Monday, May 1, 2000 - Session CE
Patrick S. Woods, C.P.M., A.P.P., CPIM
President - Techniques In Professionalism
972.208.6116/[email protected]
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SUPPLIER PARTNERSHIPS,
LONG TERM AGREEMENTS,
STRATEGIC ALLIANCES
What do they really mean?
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Some companies give the word
PARTNERSHIP
lip service
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While actually practicing:
Have You Kicked Your
Supplier Today?
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Presentation Outline
1. Negative Relationship Factors
2. A Clarification Point
3. Partnering Tools
4. Benefits Of Pro-Active Relationships
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Negative Relationship Factors
1. Demanding more than the relationship
should cover
2. Always berating your supplier(s)
3. Micro-managing the customer-supplier
relationship
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Negative Relationship Factors (Con
4. Arguing with every supplier criticism or
feedback of you as the customer
5. Giving lip service only to a contract/long term agreement
6. Entertaining sharp practices in relation to
your supplier(s)
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All Six can produce the following result:
D emanding more than the relationship should cover
A lways berating your supplier(s)
M icro-managing the customer-supplier relationship
A rguing with every supplier criticism/feedback of you
G iving lip service only to a contract/long-term agreement
E ntertaining sharp practices in relation to your supplier(s)
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The Clarifier
Hugging your supplier philosophy
does not mean that you give them a
blank check so that they can take
advantage of you!
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The Three Philosophies - Old
Profits - First
Customers - Second
Employees - Third
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The Three Philosophies - New
Employees - First
Customers - Second
Profits - Third
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The Three Philosophies- Future
Suppliers - First
Customers - Second
Employees - Third
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Partnering Tools
The Supplier Benchmark Audit
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Benchmark (Defn):
Something that serves as
a standard by whichothers can be measured
-Webster
or
A standard or point ofreference in measuring or
judging quality or value
- NAPM
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Bottom Line:
Benchmarkingis anintensive process made up
of a cross-functional team
who visits a suppliersoperation and spends 8-10
hours interviewing the
suppliers personnel and
touring the operation.
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Defining The Standards
Key Areas Of Evaluation:
- Quality Assurance
- Technology
- General Management
- Delivery
- Pricing
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Quality Assurance Questions
. Does the supplier have a documented
QA system in place?
. Is a copy of their QA manual availablefor review?
. Are SPC techniques incorporated as
part of their system
. Is there a continuous QA plan in place?
. Does the supplier set annual quality
objectives with measurements?
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Quality Assurance Questions (Cont)
6. Does the supplier have a QA dept. w/
authority to stop production?
7. Is there a documented QA trainingprogram in place for both hourly
and salaried employees?
8. Are process capability studies
conducted for new products
prior to release?
9. Does the supplier have a documented
evaluation and certification
program for its suppliers?
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Quality Assurance Questions (Cont)
10. Does the supplier have its own
receiving/inspection system in
place that segregates incoming
material and verifies quantities?
11. Are systems in place that insurethat only the latest specifications
are used?
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Technology Questions
1. Does the supplier have a chart that
details their organization?
2. Do they participate with you in joint
development of technology?
3. Is there a program for continuing
education of technical personnel?
4. Are technical personnel involved inthe up-front quoting/planning to
assure that parts/services can be
provided?
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Technology Questions (Cont)
5. Do routers/operation sheets identify
specific operations for each part?
6. Is their equipment adequate to meet
your specifications?
7. Does cross-training for critical skills
exist?
8. Are there currently sufficient peopleto support future business?
9. Is there a union affiliation?
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Technology Questions (Cont)
10. Is there a sufficient outside laborpool to support growth?
11. Does a procedure exist to provide
feedback from production to the
appropriate functions?
12. Does a well defined preventativemaintenance schedule exist?
13. Do backup plans exist to continue
production in the event of
machine downtime?
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General Management Questions
1. Does the supplier have a written
policy on integrity?
2. Does a formal system exist for the
development of an annualbusiness plan?
3. Is the suppliers overall mission
identified?
4. Does the suppliers management
possess a high level of skills inorganization and mangement?
5. Are educational opportunities
offered to all employees?
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General Management Questions (Cont
6. Is a system in place to insure that thesupplier covers all purchase order
requirements?
7. Is there good work interactionbetween the workers and mgmt.?
8. Are the suppliers company values
posted?
9. Is there an ongoing program to
reduce cycle times?
10. Is technical and administrative help
available to fix problems?
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General Management Questions (Cont)
11. Is full responsibility for product
warranty accepted if failuresshould occur?
12. Is excessive follow-up required with
the supplier?
13. Are communication meetings held
with employees to discuss keymeasurements?
14. Are financial audits performed
annually?
15. Is the supplier willing to share key
financial data?
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Delivery Questions
1. Is the supplier aware of your
delivery and cycle time goals?
2. Does the supplier respond favorably
to schedule changes?
3. Are schedule push-outs accepted?
4. Does the supplier have an effective
planning system to insure timelydelivery from its supplier(s)?
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Delivery Questions (Cont)
5. Does the supplier have an effectiveinventory system in place that will
consistently meet your schedule
requirements?
6. Does/will the supplier work with you
on consignment inventory?
7. Is the suppliers packing slips,
invoices and other paperwork
accurately completed?
8. Are P.O. acknowledgements
returned within the requested
timeframe and accurate?
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Delivery Questions (Cont)
9. Are records and supplier personnel
available to review delivery status
on purchase orders?
10. Is the customer promptly notified of
delivery problems or slippage?
11. Is there a plan to reduce lead time?
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Pricing Questions
1. Does the supplier have defined
programs to control its utility
and operating costs?
2. Are there processes for control &
leverage of raw material costs?
3. Is there sufficient knowledge of
industry and market trends to
control raw material costs?
4. Does the supplier submit alternative
proposals to reduce costs?
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Pricing Questions (Cont)
5. Are productivity improvement
suggestions submitted for cost
reduction?
6. Are quotation prices fixed for an
acceptable period of time?
7. Are P.O.s accepted for required
quantities without a minimum
buy requirement?
8. Are schedule adjustments allowed
without unit price increases?
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Pricing Questions (Cont)
9. Is unit pricing within a competitive
range of markets served?
10. Is total cost within the competitive
range of the market?
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Quantifying The Standards
Scoring
5 = BEST, 0 = WORST
5 - Implemented - Proven Process
4 - Implemented - Not Proven
3 - Started Implementation - NotManaged Well
2 - Recognized Or In Plan - NotImplemented
1- Recognized - No Plan
0 - No Recognition
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Weighting Each Section
Quality 20 Points Max
Technology 20 Points MaxMgmt./Financial 20 Points Max
Delivery 15 Points Max
Pricing 25 Points Max
Total = 100 Points Max
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Total Condition
85% Or Greater Best In Class
75 - 85 % Acceptable
60 - 75 % Marginal
60% Or Less Unacceptable
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Contract Language - Cost Reduction
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Specific Clauses - Goals
Supplier agrees to provide
customer with total annual cost
reductions of ___ % under this
agreement. Cost reductions will
be measured on the total value of
products purchased under the
agreement on an annual basis. If
supplier does not provide the
agreed cost reduction percentagein a given year, supplier will
rebate the amount of the
shortfall to the customer within
45 days after the applicable year.
The parties will share costreductions in excess of ___%
equally, as described below.
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Specific Clauses -Calculations
Once a cost reduction program is
implemented, the measurable cost
reduction percentage will be tracked by
the steering committee on a quarterly orsemi-annual basis. For purposes of
calculating the total annual cost
reductions under this agreement,
specific cost reduction programs will be
counted for a period of no longer than
12 consecutive months. If a cost
reduction program requires a capital
expenditure by one or more parties, the
party or parties making thatexpenditure will be entitled to the entire
benefit of the resulting cost reductions
until its or their capital expen- ditures
have been recouped.
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Specific Clauses - Admin.The steering committee will be
responsible for creating, implementing,
managing and approving cost reduction
programs. The customer will provide
reasonable necessary support to the
supplier to assist in creating cost
reduction programs under this
agreement. All proposed cost reductionprojects will be submitted in writing to
the steering committee. By ___ of each
year during which the agreement is in
force, beginning with the first year
covered by agreement, the steeringcommittee will deliver the following to
management:
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Specific Clauses - Admin. (Cont)
- A proposal, including cost reduction
targets, for the up-coming 12 monthperiod to reduce costs under the
agreement,
and
- A report detailing its cost reduction
efforts during the preceding 12 months,
including the measurable cost reductionpercentage achieved.
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Contract Language - Ratings
Quality, Delivery, Technology
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Specific Clauses - Quality Goals
Examples
PPM
% Shipments Defective
% Scrap
CpK
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Sample Language
Supplier agrees to achieve,
during the term of this
agreement, a quality measure of
__PPM. On the productssupplied, Supplier will main-tain
a ___ CpK or better for the
customer defined, critical key
characteristics during this
agreement.
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Specific Clauses - Delivery Goals
This agreement will set a time
period after the issuance of a
purchase order in which an
order will be deemed delivered
on-time. If a delivery is notexpected to be made on-time,
supplier will notify the customer
and will take all reasonable steps
at its own cost to expedite
delivery. If a delivery is notmade on-time or if notice is given
that a delivery is expected to be
late, the customer may cancel the
order immediately by delivery
written notice of the cancellation
to the supplier.
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Specific Clauses
- Delivery GoalsAbsent such cancellation notice,
supplier will deliver the order on
an expedited basis at its own
cost. Upon such cancellation, the
customer will not have any
further obligation with respect to
such issue. If a delivery is not on
time and is cancelled by thecustomer, the customer will be
free to purchase the late
products from a third party and
deduct from payment of future
invoice(s) from supplier for anydifference between the third
party purchase price and what
the customer would have had to
pay for such late products.
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Specific Clauses -TechnologyAs supplier is privy to new
technology related to production,
material and/or application, it
will share this information with
customer and incorporate into
customers products, per
customers product engineering
approval. As requested by
customer, supplier will provideprototype (timely) support to
engineering cost reduction
programs.
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The Top 10 Benefits Of Being A
Preferred Customer
10. Your supplier will promote you to the
business world as one who displays
fairness and high ethical principles.
9. In our changing business marketplace, if
your supplier should also become your
customer, then you have strengthened
the relationship for future growth.
8. As your relationship continues and grows,
you will eliminate or minimize the costs
of trying to locate replacement sources.
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The Top 10 Benefits Of Being A
Preferred Customer
7 . By saving time in trying to find suppliers
for replacements, you can now focus on
other strategic projects.
6. Your partnered supplier will be willing to
share new ideas and new opportunities
with their key customer, you.
5. By utilizing good customer-supplier type
relationships, your company will have
a competitive edge.
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The Top 10 Benefits Of Being A
Preferred Customer
4 . With contract clauses such as the 50/50
Share, the supplier now has incentive
and will/should make improvements.
3. Since your supplier relationships are
positive, this should lead to a lower
stress level and much happier folks.
2. Since their customer relationships are
positive, your supplier should have
a lower stress level as well with
happier folks.
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and the Number 1 reason to become a
Preferred Customer to your supplier is:
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The Top 10 Benefits Of Being A
Preferred Customer
1 . As your supplier works to assist you, its
Preferred Customer, in reducing the
costs of purchases, the results go
straight to the bottom line!