WHY SUPPLIER MANAGEMENT?

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1 WHY SUPPLIER MANAGEMENT? A long-lasting partnership with suppliers is important for future business development. Goods and services procurement already accounts for more than 70 percent of Company s total spend. Procurement capability and the competitiveness of suppliers become strategic core elements of our company. Management is the organization, controlling, and development of supplier and its relationships. Goals of Management are: o Management of suppliers, based on the total cost of the relationship o Procurement volume concentration on the best suppliers o Supply Chain-Procurement costs decrease o performance increase o Improvement of co-operation o Optimization of the entire value chain in collaboration with suppliers

2 SUPPLIER MANAGEMENT e-registration Administrative & HSE assessment -commodity classification Define key suppliers in the supply base ICT: Auto procure-to-pay (P2P) business processes; Information exchange & Seamless integration (Web-enabled, XML, EDI) Collaborative planning Catalog management Corporate Social Responsibility Sustainability-Green SCM Strategic alliance Qualification Development/ Improvement Supply Base Rationalization Management Supply base optimization / right-sizing phasing out Strategic Sourcing Evaluation Total-spend for-material spend analysis Cross-functional Team -commodity strategy Long-term relationships development Contract management process Total Cost of Ownership (TCO) approach performance measurement scorecards Contract performance Performance KPIs / metrics database and rating system Pool of potentially capable suppliers

3 SUPPLIER RELATIONSHIP MANAGEMENT A comprehensive approach to managing an Company s interactions with the goods and services providers. The goal of SRM is to streamline and make more effective the processes between Company and its suppliers. SRM is a methodology to structure and support relationships with suppliers that will assist in: Reducing procurement and excess inventory costs Supporting a customer-focused business that delivers product/service customization and quality in the desired time frame Continuously improving supply processes Processes enabled by SRM: Lean and just-in-time 3PL partnerships managed inventory Collaborative transportation management Etc. Lifecycle Management Source: adopted from 2012 APICS

4 SUPPLIER QUALIFICATION Approved Mfr List & Technical Database GS-700 Online Registration Sole Source (Sole Agents & Distributors) Tender Pre-qualification User Recommendation Database Eligible & Key s List Sole Sources SAP Vendor Master must agree to PHE WMO s Code of Conduct must be able to provide full contact must be able to provide a tax identification number must be able to provide all required administration documents Self Assessment Capability Review SPDA (Admin Cert) Contract/PO/SO Awarded? Site Visit Required? On site Assessment commodity Classification Rejected: score under 20 On Probation: score between 20% and 50% Qualified: score above 50%

5 STRATEGIC SOURCING Discovery Strategy Design Execute & Monitor 1 Business 2 Supply 3 Sourcing 4 Suppler 5 Contract Requirements Market Strategy Selection Implementation Analysis Analysis Development Opportunity identification Capture benefits Sustain benefits STRATEGIC PROCESS End User Groups Commodity Teams s User Inputs Data Analysis Inputs User Needs Commodity Strategy Proposal *TCO Sourcing Decision Develop Mutual Agreement Establish, measure, monitor, & update *TCO & **KPIs Technology Champions CONTINUOUS IMPROVEMENT LOOP Cross-functional Commodity + Teams Teams + Teams * Total Cost of Ownership ** Key Performance Indicators

6 PERFORMANCE EVALUATION Imported data Assessment Internal feedback survey Scorecards Performance metrics (KPIs) Overall performance 0 10 Quality Delivery Responsiveness HSE Compliance Certification ICT Skills Cockpit

7 SCORECARDS & METRICS Scorecard Category Metrics (Sub-criteria) Weighted Scorecard Quality Delivery Responsiveness HSE Compliance Certification Quality Delivery Responsiveness HSE Compliance % of CAR Number of Rejection Awarded Orders Contract performance % of On-time Deliveries % of Late Deliveries % of Early Deliveries Quantity reliability Compliance with shipping instructions Emergency request for demand change Overall communications CHSEMS score Total recordable incidents Green initiatives ICT Skills Certification ISO series certifications OHSAS World-class standards and achievements 3 ICT skills Professional website Internet capability ERP EDI 2 Purposes of supplier measurement systems: 1) track suppliers performance & benchmark against best practices. 2) identify supplier improvement opportunities; 3) develop suppliers & award top performers.

8 SAP MM VENDOR EVALUATION Generate executive dashboard reports for entire supplier base and supply chain performance

9 ELIGIBLE SUPPLIERS LIST Matrix 20% Preferred (Top Performance) 60% Standard (Average) 20% Phase Out (Poor Performance) Sole agents; sole distributors; providers of specific products/unique items; sole fabricators mandatory domestic products General suppliers with no single transaction in the last one year Sole Sources & Key s Inactive s

10 WHY RATIONALIZE OUR SUPPLY BASE? As our organization grows, the number of suppliers have been increasing very significantly: 1931 Vendor Names in the SAP Master Data (Jan 2013) A supplier rationalization program is a common fix to this issue to target an optimal supplier base. This optimization can bring many benefits both from a financial and business process perspective: Better management of suppliers can spend time managing relationships and partnership program with suppliers. Decrease waste in process - having a large supplier base results in inefficiencies being built into the process: overhead to manage and administrate; e.g. set up in SAP systems (often both purchasing and financial). Increased focus to selected reliable suppliers against business need and/or requirements - significant few instead of trivial many. In tune with business needs - ensuring our suppliers have the right capability to fulfill our needs will ensure your success in the future. Improved visibility - with a more defined supplier pool and spend profile we can effectively segmenting suppliers into capability or commodity groups. Simplified vendor master database and reporting. (CAP) CORRECTIVE ACTION PLANS PHASE OUT Rejected (Poor Performance) Inactive s Procurement Blocked

11 SUPPLIER DEVELOPMENT & IMPROVEMENT Streamlining P2P: Request Quote Order Receive Invoice Verify Pay Collaborative Planning, Forecasting & Replenishment (CPFR) Cooperative inventory management through increased visibility and joint replenishment by sharing information. Continuous updating of inventory and upcoming requirements to have a more efficient endto-end supply chain: decrease expenditures for inventory, logistics, and transportation across all trading partners. Corporate Social Responsibility Local suppliers, SME companies development Domestic products appreciation Sustainable-green SCM Greener with partner Joint total carbon footprint monitoring and reduction Strategic Alliance Long-term Contracts, Managed Inventory, Managed Replenishment, Performance-based Contracts

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