Description
The ppt is explaining on supplier vendor development.
SUPPLIER
DEVELOPMENT
Objective
Develop a methodology to objectively evaluate service providers or products, ensuring that the best one is selected for a given situation. The intent is to consider all relevant factors and minimize the subjective issues that can potentially influence such a decision.
2
THE NEED
THE NEED
? Decrease the number of suppliers in order to develop supplier
partnerships. ? Help improve competitiveness, ? Lower costs ? To increase quality and reliability of products.
? The strengthened supplier/buyer relationships can also lead to
improved trust which then can lead to more win/win team achievements through cooperative efforts.
Vendor Definition
A third party that performs functions on your company’s behalf or provides services to your company. Some examples include:
? ? ? ? ? ? ? Core Processing Information and Transaction Processing Security Monitoring System Development and Maintenance Print and Reprographics Strategic Alliances Internet Services
5
Indian Scenario
? Competition is becoming increasingly intense ? Manufacturing companies need to lower costs and improve
quality ? Materials are a significant part of cost of production for a majority of industries ? Outsourcing of components is a means of lowering costs and reducing risk ? Industry has developed in a protected and controlled economic environment ? In the past, cost, quality and customer service were not critical parameters
Indian Scenario (cont’d)???
? Most suppliers are small or medium scale units
? Small industry is defined in terms of investment in plant and
building
? Small industry has always been given special protection by the
Government (reservation policy, excise concessions)???
? Consequently, most suppliers did not grow or increase
investments to improve technology, as well as production and quality control systems
? In the past, pricing was only on cost plus basis
Indian Scenario (cont’d)???
? To reduce/avoid tax payments, most industries declared low
profits ? Consequently no internal resources were generated
? There were no long term contracts or relationships with
buyers
? Now competitive environment requires suppliers to meet
stringent quality standards, regularly improve technology and be cost competitive
Approaches to Developing Suppliers
? Single Sourcing
? Use only one supplier per component
? Pros: Strong relationship and supplier becomes
an expert at providing the quality product your company expects at a low cost ? Cons: Any disruption in the supplier’s production could leave you shorthanded
Approaches to Developing Suppliers
? Dual Sourcing
? Number of approved suppliers is limited (generally
2 -3)???
? Pros: Reduces risks of having a sole supplier ? Cons: Reduces amount of specialization of suppliers
Approaches to Developing Suppliers
? Supplier Evaluation
? Rates suppliers on quality, technical capabilities,
and abilities to meet scheduled requirements
? Pros: All suppliers are evaluated on same basis ? Cons: Minimal hands on with no focus on improvement
EVALUATION OF NEW SUPPLIERS – 2007
Item: MASS ETECTOR
PARAMETERS
SUPPLIERS PERKIN ELMER (CLARUS 500) Score Weighed Factor 0.3 0.1 0.2 0.1 0.1 0.2 Weighed score x 10 27 8 18 8 8 18 Score 9 8 7 8 8 7 AGILENT Weighed Factor 0.3 0.1 0.2 0.1 0.1 0.2 Weighed score x 10 27 8 14 8 8 14
Product Quality Type of Supplier Price Market Reputation Financial Standing Commercial Terms
9 8 9 8 8 9
TOTAL
87
TOTAL
79
EVALUATION OF SERVICES - 2007
INTERNAL SERVICES
PARAME TERS
SERVICES FOR THE YEAR
ELECTRICAL SUPPLY
Weighe d Factor
WATER SUPPLY
Weighe d Factor
A/C SUPPLY
Weighe d Factor
Score Quality of Service Response time On-time service Help after service
Weighe d score x 10
Score
Weighed score x 10
Score
Weighe d score x 10
8
0.3
24
7
0.3
21
8
0.3
24
8
0.2
16
8
0.2
16
8
0.2
16
8
0.3
24
9
0.3
27
9
0.3
27
7
0.2 TOTAL
14 78
8
0.2 TOTAL
16 80
8
0.2 TOTAL
16 83
EXTERNAL SERVICES
PARAMETE RS AGILENT (for G.C.) Scor e Quality of Service On-time service Breakdown during service contract period Availability of cantact person Response Time Cost 9 8 Weighed Factor 0.2 0.1 Weighe d score x 10 18 8
Annual Maintenance Contract V.J.ELECTRONICS (for Hotpack) Weighe d Factor 0.2 0.1 Weighed score x 10 14 7 SKALAR(for Autoanalyser) Weighe d Factor 0.2 0.1 Weighe d score x 10 16 7
Score 7 7
Score 8 7
8
0.2
16
8
0.2
16
7
0.2
14
7 7 7
0.2 0.2 0.1 TOTAL
14 14 7 77
8 8 7
0.2 0.2 0.1 TOTAL
16 16 7 76
8 8 7
0.2 0.2 0.1 TOTAL
16 16 7 76
Approaches to Developing Suppliers
? Sourcing Filters
? External Validation of Quality Programs
? ISO 9000:2000 ? Malcolm Baldrige Qualified
? Pros: Gives customers comfort; “Seal of approval” ? Cons: Qualifications do not necessarily guarantee quality product
Approaches to Developing Suppliers
? Supplier Certification/Qualification
? Inspections performed by company to evaluate
suppliers
? Pros: Thorough understanding of suppliers strengths/weaknesses ? Cons: Time consuming; focused entirely on evaluating supplier, not improvement
Approaches to Developing Suppliers
? Supplier development programs
? Hands on work with suppliers to continually
improve quality
? Pros: Develop suppliers to meet your exact needs ? Cons: Very time consuming to groom suppliers to meet your needs
Supplier Development in the Real World
? Honda Motors
? Partnered with Parker Hannifin Corp
? Honda engineers worked over six Parker plants making basic efficiency changes saving Parker over $1.6 million a year.
Supplier Development in the Real World (Continued)???
? Areas Honda helped to improve do not all
involve parts supplied to Honda
? Why help suppliers improve areas that do not
directly affect the company?
? “We want suppliers to be better companies
because, ultimately, that makes us a better company,” Richard Mayo, Honda purchasing executive
Supplier Development in the Real World (Continued)???
? Improvements in Parker products directly related to Honda’s developmental help
-Decreased cylinder line travel from 19 days to 5 minutes -Reorganized production process to decrease scrap from 5% to 2% and increase output per man-hour by 30%
Maruti Experience
? When Maruti entered into Joint Venture with Suzuki in 1982 to
produce cars, Government policy required local content to increase to about 93% in 5 years ? No component of Suzuki cars readily available in India ? All items had to be developed ? Japanese specified quality standards had to be met in order to localize any component ? In order to sell 100,000 cars in a market which had been at the level of 40,000 for 10 years, price of vehicles had to be kept low
Vendor Development Policy
? Technology, quality and manufacturing standards of vendors in
1983 were not of international standards
? Most vendors were reluctant to make investments for Maruti
? Not confident that Maruti could achieve stated volumes
? First task was to dispel doubts and create confidence ? Maruti assured vendors of long term relations
? No annual tender system
? Maruti normally limited suppliers of any component to two
vendors
? Good volumes thus assured
Vendor Development Policy (cont’d)???
? Prices fixed once a year on basis of cost of production
? Transparent and quick payment system - no delays
? Maruti provided financial help to vendors for tooling,
payment of custom duty etc. ? Maruti helped to identify sources of technology, and its transfer to Indian vendors ? Maruti deputed engineers for introducing systems, improving manufacturing practices, trouble shooting ? Suzuki provided opportunities for training to vendors
Vendor Development Policy (cont’d)???
? Where large and complex dies were required, Maruti imported
and supplied to vendors ? Line of credit for vendors arranged with FI’s to enable lease financing for purchase of equipment and tooling ? Maruti assisted in bulking purchase of aluminium, steel, plastic materials, seat fabric to lower costs ? Maruti provided feedback to vendors on their performance and monitored improvements
Vendor Development Policy (cont’d)???
? Annual awards were given to vendors to encourage them ? ?
?
? ? ?
to improve These measures and the sales success of Maruti made vendors willing to invest Maruti participated upto 26% in equity of some vendors Assisted in project formulation, implementation and management of these JV’s Assured reasonable return on investment Management control of JV’s left to Indian partners 11 JV companies were established
Purchasing
? Vendor rating system introduced
? Share of business based on performance
? Vendors were required to be ISO certified ? Small vendors assisted to obtain ISO
certification by adopting cluster approach
Purchasing (Cont’d)???
? Vendor contracts provided for payment after
30 days
? Payment system computerized early
? Option given to receive payment in 15 days, with
0.5% discount
? No delay in payments
VA/VE Activities
? Value analysis, value engineering activities started in
1999 using cross functional teams ? Benefits shared with vendors in order to motivate them ? Value of implemented suggestions increased from Rs. 268 million in 1999 to Rs. 601million in 2001 ? VA/VE workshops started to lower cost of high value components ? In first year savings of Rs.13 million
Lessons From The Maruti Experience
? Outsourcing essential for reducing costs, reducing risk and
enabling management to concentrate on core business ? Since 74% of vehicle cost was outsourced, Maruti’s competitiveness depended on quality and cost levels of suppliers ? It was in Maruti’s interest to improve vendor efficiency and performance ? Ideally, vendor operations needed to be made as efficient as Maruti
Lessons (Cont’d)???
? For this, developed long term relationships and instilled
confidence in small suppliers ? Devoted resources to upgrade vendors in terms of technology, quality, systems, and management ? Indian industry today needs to recognize the important of outsourcing and upgrading vendors ? Since not many buyer companies have resources comparable to Maruti, important to build institutional arrangements to provide marketing and affordable consultancy services for small industry ? This activity should be carried out by appropriate nonGovernmental agencies
Vendor selection in diamond
? Rough Diamond is a basic row material ? Few big companies has control over mines DTC BHP RIO
TINTO
? Reverse case where supplier selects manufacturer ? Sight holder / supplier of choice
Vendor selection in diamond
? What supplier expects ? Forward integration ? Corporate culture
? Technological advancement
? Performance of manufacturer
? Standards and quality
What if you are not a sight holder
? Originality of rough stones
? Trust and relation are key drivers
? Consistency in supply
? Price factor
? Reputed and authorized person and having international
credentials
doc_819407365.ppt
The ppt is explaining on supplier vendor development.
SUPPLIER
DEVELOPMENT
Objective
Develop a methodology to objectively evaluate service providers or products, ensuring that the best one is selected for a given situation. The intent is to consider all relevant factors and minimize the subjective issues that can potentially influence such a decision.
2
THE NEED
THE NEED
? Decrease the number of suppliers in order to develop supplier
partnerships. ? Help improve competitiveness, ? Lower costs ? To increase quality and reliability of products.
? The strengthened supplier/buyer relationships can also lead to
improved trust which then can lead to more win/win team achievements through cooperative efforts.
Vendor Definition
A third party that performs functions on your company’s behalf or provides services to your company. Some examples include:
? ? ? ? ? ? ? Core Processing Information and Transaction Processing Security Monitoring System Development and Maintenance Print and Reprographics Strategic Alliances Internet Services
5
Indian Scenario
? Competition is becoming increasingly intense ? Manufacturing companies need to lower costs and improve
quality ? Materials are a significant part of cost of production for a majority of industries ? Outsourcing of components is a means of lowering costs and reducing risk ? Industry has developed in a protected and controlled economic environment ? In the past, cost, quality and customer service were not critical parameters
Indian Scenario (cont’d)???
? Most suppliers are small or medium scale units
? Small industry is defined in terms of investment in plant and
building
? Small industry has always been given special protection by the
Government (reservation policy, excise concessions)???
? Consequently, most suppliers did not grow or increase
investments to improve technology, as well as production and quality control systems
? In the past, pricing was only on cost plus basis
Indian Scenario (cont’d)???
? To reduce/avoid tax payments, most industries declared low
profits ? Consequently no internal resources were generated
? There were no long term contracts or relationships with
buyers
? Now competitive environment requires suppliers to meet
stringent quality standards, regularly improve technology and be cost competitive
Approaches to Developing Suppliers
? Single Sourcing
? Use only one supplier per component
? Pros: Strong relationship and supplier becomes
an expert at providing the quality product your company expects at a low cost ? Cons: Any disruption in the supplier’s production could leave you shorthanded
Approaches to Developing Suppliers
? Dual Sourcing
? Number of approved suppliers is limited (generally
2 -3)???
? Pros: Reduces risks of having a sole supplier ? Cons: Reduces amount of specialization of suppliers
Approaches to Developing Suppliers
? Supplier Evaluation
? Rates suppliers on quality, technical capabilities,
and abilities to meet scheduled requirements
? Pros: All suppliers are evaluated on same basis ? Cons: Minimal hands on with no focus on improvement
EVALUATION OF NEW SUPPLIERS – 2007
Item: MASS ETECTOR
PARAMETERS
SUPPLIERS PERKIN ELMER (CLARUS 500) Score Weighed Factor 0.3 0.1 0.2 0.1 0.1 0.2 Weighed score x 10 27 8 18 8 8 18 Score 9 8 7 8 8 7 AGILENT Weighed Factor 0.3 0.1 0.2 0.1 0.1 0.2 Weighed score x 10 27 8 14 8 8 14
Product Quality Type of Supplier Price Market Reputation Financial Standing Commercial Terms
9 8 9 8 8 9
TOTAL
87
TOTAL
79
EVALUATION OF SERVICES - 2007
INTERNAL SERVICES
PARAME TERS
SERVICES FOR THE YEAR
ELECTRICAL SUPPLY
Weighe d Factor
WATER SUPPLY
Weighe d Factor
A/C SUPPLY
Weighe d Factor
Score Quality of Service Response time On-time service Help after service
Weighe d score x 10
Score
Weighed score x 10
Score
Weighe d score x 10
8
0.3
24
7
0.3
21
8
0.3
24
8
0.2
16
8
0.2
16
8
0.2
16
8
0.3
24
9
0.3
27
9
0.3
27
7
0.2 TOTAL
14 78
8
0.2 TOTAL
16 80
8
0.2 TOTAL
16 83
EXTERNAL SERVICES
PARAMETE RS AGILENT (for G.C.) Scor e Quality of Service On-time service Breakdown during service contract period Availability of cantact person Response Time Cost 9 8 Weighed Factor 0.2 0.1 Weighe d score x 10 18 8
Annual Maintenance Contract V.J.ELECTRONICS (for Hotpack) Weighe d Factor 0.2 0.1 Weighed score x 10 14 7 SKALAR(for Autoanalyser) Weighe d Factor 0.2 0.1 Weighe d score x 10 16 7
Score 7 7
Score 8 7
8
0.2
16
8
0.2
16
7
0.2
14
7 7 7
0.2 0.2 0.1 TOTAL
14 14 7 77
8 8 7
0.2 0.2 0.1 TOTAL
16 16 7 76
8 8 7
0.2 0.2 0.1 TOTAL
16 16 7 76
Approaches to Developing Suppliers
? Sourcing Filters
? External Validation of Quality Programs
? ISO 9000:2000 ? Malcolm Baldrige Qualified
? Pros: Gives customers comfort; “Seal of approval” ? Cons: Qualifications do not necessarily guarantee quality product
Approaches to Developing Suppliers
? Supplier Certification/Qualification
? Inspections performed by company to evaluate
suppliers
? Pros: Thorough understanding of suppliers strengths/weaknesses ? Cons: Time consuming; focused entirely on evaluating supplier, not improvement
Approaches to Developing Suppliers
? Supplier development programs
? Hands on work with suppliers to continually
improve quality
? Pros: Develop suppliers to meet your exact needs ? Cons: Very time consuming to groom suppliers to meet your needs
Supplier Development in the Real World
? Honda Motors
? Partnered with Parker Hannifin Corp
? Honda engineers worked over six Parker plants making basic efficiency changes saving Parker over $1.6 million a year.
Supplier Development in the Real World (Continued)???
? Areas Honda helped to improve do not all
involve parts supplied to Honda
? Why help suppliers improve areas that do not
directly affect the company?
? “We want suppliers to be better companies
because, ultimately, that makes us a better company,” Richard Mayo, Honda purchasing executive
Supplier Development in the Real World (Continued)???
? Improvements in Parker products directly related to Honda’s developmental help
-Decreased cylinder line travel from 19 days to 5 minutes -Reorganized production process to decrease scrap from 5% to 2% and increase output per man-hour by 30%
Maruti Experience
? When Maruti entered into Joint Venture with Suzuki in 1982 to
produce cars, Government policy required local content to increase to about 93% in 5 years ? No component of Suzuki cars readily available in India ? All items had to be developed ? Japanese specified quality standards had to be met in order to localize any component ? In order to sell 100,000 cars in a market which had been at the level of 40,000 for 10 years, price of vehicles had to be kept low
Vendor Development Policy
? Technology, quality and manufacturing standards of vendors in
1983 were not of international standards
? Most vendors were reluctant to make investments for Maruti
? Not confident that Maruti could achieve stated volumes
? First task was to dispel doubts and create confidence ? Maruti assured vendors of long term relations
? No annual tender system
? Maruti normally limited suppliers of any component to two
vendors
? Good volumes thus assured
Vendor Development Policy (cont’d)???
? Prices fixed once a year on basis of cost of production
? Transparent and quick payment system - no delays
? Maruti provided financial help to vendors for tooling,
payment of custom duty etc. ? Maruti helped to identify sources of technology, and its transfer to Indian vendors ? Maruti deputed engineers for introducing systems, improving manufacturing practices, trouble shooting ? Suzuki provided opportunities for training to vendors
Vendor Development Policy (cont’d)???
? Where large and complex dies were required, Maruti imported
and supplied to vendors ? Line of credit for vendors arranged with FI’s to enable lease financing for purchase of equipment and tooling ? Maruti assisted in bulking purchase of aluminium, steel, plastic materials, seat fabric to lower costs ? Maruti provided feedback to vendors on their performance and monitored improvements
Vendor Development Policy (cont’d)???
? Annual awards were given to vendors to encourage them ? ?
?
? ? ?
to improve These measures and the sales success of Maruti made vendors willing to invest Maruti participated upto 26% in equity of some vendors Assisted in project formulation, implementation and management of these JV’s Assured reasonable return on investment Management control of JV’s left to Indian partners 11 JV companies were established
Purchasing
? Vendor rating system introduced
? Share of business based on performance
? Vendors were required to be ISO certified ? Small vendors assisted to obtain ISO
certification by adopting cluster approach
Purchasing (Cont’d)???
? Vendor contracts provided for payment after
30 days
? Payment system computerized early
? Option given to receive payment in 15 days, with
0.5% discount
? No delay in payments
VA/VE Activities
? Value analysis, value engineering activities started in
1999 using cross functional teams ? Benefits shared with vendors in order to motivate them ? Value of implemented suggestions increased from Rs. 268 million in 1999 to Rs. 601million in 2001 ? VA/VE workshops started to lower cost of high value components ? In first year savings of Rs.13 million
Lessons From The Maruti Experience
? Outsourcing essential for reducing costs, reducing risk and
enabling management to concentrate on core business ? Since 74% of vehicle cost was outsourced, Maruti’s competitiveness depended on quality and cost levels of suppliers ? It was in Maruti’s interest to improve vendor efficiency and performance ? Ideally, vendor operations needed to be made as efficient as Maruti
Lessons (Cont’d)???
? For this, developed long term relationships and instilled
confidence in small suppliers ? Devoted resources to upgrade vendors in terms of technology, quality, systems, and management ? Indian industry today needs to recognize the important of outsourcing and upgrading vendors ? Since not many buyer companies have resources comparable to Maruti, important to build institutional arrangements to provide marketing and affordable consultancy services for small industry ? This activity should be carried out by appropriate nonGovernmental agencies
Vendor selection in diamond
? Rough Diamond is a basic row material ? Few big companies has control over mines DTC BHP RIO
TINTO
? Reverse case where supplier selects manufacturer ? Sight holder / supplier of choice
Vendor selection in diamond
? What supplier expects ? Forward integration ? Corporate culture
? Technological advancement
? Performance of manufacturer
? Standards and quality
What if you are not a sight holder
? Originality of rough stones
? Trust and relation are key drivers
? Consistency in supply
? Price factor
? Reputed and authorized person and having international
credentials
doc_819407365.ppt