Survey Report Supplier Scorecard Innovation Report Bruce Tompkins February 2014 www.tompkinsinc.com
Table of Contents Study Purpose and Scope 3 General Key Executive Summary 4 General Survey Demographics 6 General Data and Research Findings 11 Report Author 30 Tompkins Supply Chain Leadership Forum 31 2
Study Purpose and Scope Study Purpose The Supplier Scorecard: Innovation Report provides a better understanding of how companies utilize innovation in their supplier scorecards. Specific questions have been developed to collect information such as how companies measure innovation, work with suppliers on improving innovation, and award business based on innovation. Study Scope The scope includes a focus on companies representing 17 unique industry groups. The overall data is derived from 153 total survey responses. (Note: Responses were not included in the data if the respondent did not answer enough of the survey.) This report summarizes information from each survey question and covers the general responses to the survey s questions. There are also several analytics created using cross tabs to gain additional insights into the survey data. 3
General Key Executive Summary Comments from the General Responses to the Survey More than 75% of all companies utilize supplier scorecards with their suppliers. The most common performance areas on supplier scorecards are quality, cost, and delivery, but innovation was identified by a third of all companies. A majority of companies measure innovation with either quantitative (24.1%) or qualitative (25.9%) types of measure or both (50%). All respondents had some difficulty determining specific measures that they use for innovation, even though about 48% have been measuring innovation for some period of time. 4
General Key Executive Summary Additional Comments from the General Responses to the Survey The most commonly stated engagement models involve meeting with suppliers on a regular basis and sharing of data, but other ideas were brought forward. On a percentage basis, few respondents believed that measuring innovation was very successful, but many more thought it was successful than not. Data collection, measurement, and defining the value of innovation are some of the greatest challenges. Only about 30% of respondents indicated that innovation influences the awarding of business. The average weighting factor for innovation in awarding business was 29% for all respondents, compared to 23% for technology companies. 5
General Survey Demographics 6
Primary Industry 7
Company Size The data collected is for a range of company sizes, with a fairly equal distribution of different sized companies. 8
Company Position Vice President and C-Level survey participants accounted for nearly 39% of respondents, followed by Directors at 34.7%. 9
Measuring Supplier Performance Nearly 59% of respondents are from sourcing / procurement roles and 32% are from partner management roles. 10
General Data and Research Findings 11
Utilization of Supplier Scorecards 12
Management of Supplier Scorecards 13
Scorecard Performance Areas 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 85.4% 79.6% Scorecard Performance Areas: Percentage of Survey Respondents 72.8% 51.5% 47.6% 46.6% 33.0% 26.2% 25.2% 24.3% 15.5% 2.9% 1.0% 1.0% Quality, cost, and delivery are the top performance areas on supplier scorecards. Innovation is near the middle of the pack, with a third of respondents selecting innovation. 14
Measurement of Supplier Innovation 45.0% Measurement of Supplier Innovation: Percentage of Survey Respondents 42.2% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 14.7% 15.6% 17.4% 10.0% 5.0% 3.7% 6.4% 0.0% Yes, do it now Yes, in the next 6 months Yes, in the next year Possibly, but not sure at this time No plans No response About 42% of respondents already measure supplier innovation in some manner. Several respondents plan to measure supplier innovation in the near future. 15
Comparison of Innovation Measurement Q2. Which category best describes the size of your company? Q8. If you are not currently measuring supplier innovation, do you have plans to measure it in the future? Ver. Hori. Yes, do it now Yes, in the next 6 months Yes, in the next year No plans Possibly, but not sure at this time Did not answer Total >$25 billion annual revenue Between $10 billion and $25 billion annual revenue Between $1 billion and $10 billion annual revenue Between $250 million and $1 billion annual revenue < 250 million annual revenue Did not answer Total Count 9 1 0 4 4 6 24 % within Q8 19.60% 25.00% 0% 23.50% 23.50% 9.70% 15.70% % within Q2 37.50% 4.20% 0% 16.70% 16.70% 25.00% 100.00% Count 6 1 2 1 2 3 15 % within Q8 13.00% 25.00% 28.60% 5.90% 11.80% 4.80% 9.80% % within Q2 40.00% 6.70% 13.30% 6.70% 13.30% 20.00% 100.00% Count 10 1 3 6 6 16 42 % within Q8 21.70% 25.00% 42.90% 35.30% 35.30% 25.80% 27.50% % within Q2 23.80% 2.40% 7.10% 14.30% 14.30% 38.10% 100.00% Count 11 1 1 3 2 18 36 % within Q8 23.90% 25.00% 14.30% 17.60% 11.80% 29.00% 23.50% % within Q2 30.60% 2.80% 2.80% 8.30% 5.60% 50.00% 100.00% Count 10 0 1 3 3 11 28 % within Q8 21.70% 0% 14.30% 17.60% 17.60% 17.70% 18.30% % within Q2 35.70% 0% 3.60% 10.70% 10.70% 39.30% 100.00% Count 0 0 0 0 0 8 8 % within Q8 0% 0% 0% 0% 0% 12.90% 5.20% % within Q2 0% 0% 0% 0% 0% 100.00% 100.00% Count 46 4 7 17 17 62 153 % within Q8 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% % within Q2 30.10% 2.60% 4.60% 11.10% 11.10% 40.50% 100.00% 16
Quantitative vs. Qualitative Measurement What Kind of Measure is Innovation? 25.9% Qualitative 50.0% Quantitative Both 24.1% Innovation is equally distributed between quantitative and qualitative, but half responded with a response of both for supplier scorecards. 17
Innovation Measurements: Comments We look at new services offered and service improvements. New component for us - not directly measured yet. Under the other category Improved process performance, looking for an improved/ enhanced solution. It is measured on features offered and sales generated on the first 12 months of launch of machine. Subjective feedback from the sales organization. We look for creative solutions that the supplier has brought to the table. We don t currently quality of the value of such solutions. Discussion and agreement on what innovation should be implemented, by when, and at what savings. Sales/marketing surveys Support for R&D projects, manufacturability review. Part of service level. Collaborative ideas brought forward for improvement. Technical score rating by commodity management. 18
Innovation Measurements: Comments Both in how innovation improves current performance while setting up a platform for expanded operations. Roadmap of technology improvements vs. our needs. It is not today, but in the future, expectation is continued advancement in a total paperless environment. Off of the new product process. Special projects in progress, new techniques, modernization, understanding what the supplier is doing to bring innovation and scoring the efforts. All opportunities/proposed improvements are captured and qualified. If implemented successfully, they are tracked for the first year. Today we don t measure innovation. We do measure CI initiatives which may lead to innovation, but we don t have a measure specific to innovation. Qualitative measurements based on how organization is working on improving processes in support of cost reduction. Has the supplier provided ideas to improve the shared processes? 19
Innovation Length of Time Nearly 42% of surveyed companies are measuring innovation, and 12% have been doing it for more than three years. Others are just beginning to measure innovation. 20
Engagement Model: Comments Utilization for advanced products/manufacturing, and commitment to capacity filling-preferences and sharing on cost-savings resulting from innovation. It is very loosely designed process and highly subjective. Semi-annual meetings Quality cost and service are baseline measurements. Innovation means looking outside of existing models for improved supply chain performance. Working together from the beginning to determine success. We have a formal multi-tiered supplier classification system with each tier having specific requirements and expectations. Two way. If they have a new innovative idea and we agree, we implement. If we do, it is done likewise. Quarterly review of new projects, annual product roadmap. Strategic planning Scorecards mailed quarterly, meetings with key suppliers about same frequency. Open dialogue, shared strategies. Define current issue. Brainstorm possible ways to innovate and fix issue, extend ideas to fix anticipated issues, implement, measure. Sometimes we partner with them on new technologies, or we agree to help test their new parts in our designs. Identifying key areas and asking suppliers for input and ideas, then working toward those. 21
Engagement Model: Comments Quarterly reviews and partner surveys Measuring performance through a comprehensive joint scorecard; top to top collaborative sessions focused on driving synergies and joint improvements. Relationship strength; 1:1 meetings. Having new information sent to us regarding product attributes EDI856 Critically important to the success of the business. Strategic goal for this year is improvement on global supply chain and partners. In development need to create one (2 responses). Supplier involved in new products at stage gate 0. Understand both sides of the fence, work in collaboration and look at processes holistically. Guarantee two first runs of any innovative ideas. Part of expectations in order to become an SSA suppliers. It s not driven 100%. Suppliers need to provide innovative ways of improving the existing business by pulling crossindustry experience gained with other customers. New distribution models innovation in global distribution. Innovation is a strategic sourcing initiative, but not measured with a scorecard. We tend to migrate to suppliers who are partners. Utilize Excel, PowerPoint. Will be moving to SharePoint in the next year. 22
Governance Policies and Practices for Driving Partner Innovation: Comments Leaders can enjoy cost-savings to fast offset innovation investments rating amongst supplier peers annually. There is no specific contractual language around innovation in any of our current contracts. Monthly meetings on activity and initiatives. We have a toll-gate process for R&D to drive NPI (new product introduction). Quarterly review meetings with the supplier. Number of significant changes done, timelines, and cost savings. Long-term agreements Audit annually Just part of the scorecard No policies, just standard business practice. Twice a year meetings. Standard processes, mid-year reviews. Supply chain template is built into our innovation technology tool. Online submissions, review of ideas by our innovation teams. Innovation is reviewed quarterly along with a monthly savings improvement program. 23
Success of Partner Innovation: Comments Comments for Yes, it was successful. Consistent demonstration of advantages for the supply partners, cooperative behavior. In new relationships, it s easier to identify the opportunities. The suppliers have responded to the scorecards. Accountability and opportunity to grow the existing business base. It shows that new products make up 30% of our sales, which drives higher margin. It s robust. The suppliers all want to receive a gold rating. To some extent. We have had some successes but there is not widespread adaptation of the concept. Yes, when both parties agree the change is needed and it helps our business (and usually theirs too). Very tight supplier integration with our NPI process. Improved costs, schedule, and lead-time. Factory is able to find out root cause and come out with action plan. Provides a competitive advantage vs. our peers. Yes, because it s about fixing current and future problems. In our industry, it is critical to know the new technologies and be first to market. Some success based on situation. Packaging innovation, systems automation, new product development. Achieved desired results with winning ideas and programs identified and implemented. Just beginning, too early to quantify. Has improved communication, quality, on time deliveries - total value. In terms of providers getting the message and trying to achieve the requirement. Formalized program with controls, with only true/high potential programs followed. Good clean data. We are still in the early stages but I do feel that we have had some success that we will build on. 24
Success of Partner Innovation: Comments Comments for No, it was not successful. Not fully developed at this time. Not highly successful. Hard to give incentive. One time audit and regular record can provide the data for measure, but the key is the improvement. Not strong enough motivator. No follow up. Not yet. Not enough experience to date. We only incorporate this on a few of the contracts and we gloss over it during business reviews. Not as successful as we would like. Most of technology has been around and high cost of options. Not enough vested buy-in from all to drive results and partner together for collective wins. Our company would like to see more dramatic proposals that will definitely push our operations forward. We do not measure innovation formally. We migrate to suppliers who offer innovation via partnering. 25
Challenges of Partner Innovation: Comments Overcoming the initial reluctance to invest in innovation, agreeing on same measures of success with innovations. As relationships grow, the opportunities for innovation become harder to execute as both companies are managing within their own limitations. Data management The biggest issue has been qualifying the financial value of the innovation to us and determining how to "reward" the supplier financially. If you don't agree on the innovation, it makes no sense to engage, as it will not get implemented right. Choosing domestic vs. offshore suppliers for partnership Measureable results could be mixed with other activities Identifying roles, and lack of appropriate level transparency Hard to automate 26
Challenges of Partner Innovation: Comments Data collection Openness if they compete with us in other areas. Overseas suppliers are reluctant. Consistency Measurement, more subjective than objective. Still working through how to track and measure innovation improvements. Looking for more quantitative value for identifying savings as partner reduces costs. Defining shared incentives; carriers typically do not want to lower turnover. Diverse computer systems/programs/parameters Getting good information from the system tracking. Their commitment to the process. Issues with what each supplier is awarded should their submitted idea be chosen. What do we want to achieve besides, on-time, no damage, correct product. Need to look at the whole supply chain process for both partner and us. Changing the providers' mindset that boxes our business in an industry category (hi-tech) without bringing ideas from other industries (i.e., automotive). Measuring if success/benefits are due to the innovation or attributable to other factors. 27
Innovation Influences Innovation Influences Awarding of Business 30.1% Yes 55.3% No 14.6% No response 28
Weighting Factor for Innovation If partner innovation influences the awarding of business, what weighting would you give it from 1% to 100%? Average Weighting = 29% 29
SUPPLY CHAIN EXCELLENCE Report Author Bruce Tompkins Executive Director 6870 Perry Creek Road Raleigh, NC 27616 (919) 855-5527 Office (919) 345-0479 Mobile btompkins@tompkinsinc.com 30
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