Managing Business Marketing & Sales 7

Professor Waldemar A. Pfoertsch

弗沃德

Term 4/MBA 2006

Oct. 8 -28, 2007

Strategic Procurement & Key Account Management • From short term profit and transaction behavior to relationship behavior • Leads to positive effects on firm’s financial performance and customer relationships

Strategic Procurement & Key Account Management • Everyone is a winner!

• Measurement and risk affects both suppliers and customers • What happens when??

– Earth Quake in Japan – Strike at Supplier

Firm A Key Account Management (KAM) Effects Firm B Stronger customer relationships Stronger supplier relationships Extended customer relationships Stronger supplier relationships

Key Account Management (KAM) Issues • Supplier performance measurement • Risk Assessment of supplier relationship • Developments: – Supplier reduction – Supplier development Tier 1 2 3 4 System Module Components Parts

Strategic Procurement & Key Account Management Example Factories Trucks Cars Buses System Supplier Module Supplier Strategic Purchasing 1 2 n 18 000 suppliers

Drivers of supplier’s selection

Supplier performance measurement • It is need, but not always done • Metrics are needed • Move to shared supplier performance measurements

Supplier Performance Measurements (SPM) • “Value for Money” (transactional element): – Price – Quality conformance – Delivery reliability • Service (per relationship) – Response flexibility – Technical support – Solution selling • To joint shared performance measures

Joint shared performance measures • Order size • Repeatability • Standardization • Timeliness of order • Pricing terms • Pricing structure • Accuracy of specifications • Schedule of delivery • Fulfillment for profitability

Fulfillment for profitability

Example: Electrical components company

New Paradigm shift

• From: We win, the other side loses • To: Win – Win • For: Easy to do business with fair relationships

ABB / CAT Case: The Players

ABB

• Fred Kindle CEO • Dan Ahern KAM for CAT • Dinesh Paliwal Senior Executive Team • Greg Scheu Senior Executive Team • Frank Duggan Group KAM • Oliver Riemenschneider Baden Plant • Rolf Schweizer GM Turbo Sales

CAT

• Jim Owens CEO • Dan Murphey VP Global Purchasing • Paul Wroblewski Kiel Plant • Tom Sandborg Purchasing Turbo Systems

ABB with $ 20,7b sales in 2004

Utilities Industrial & Automation

The Turbocharger

• Improves efficiencies and performance

The partner

ABB Sales Management

ABB Key Account Management New Frank Duggan Dan Ahern for CAT

The ABB CAT Account

• 2004 Total $ 67m • Turbo $ 40m – 30% of total sales – 10 % of profit – For CAT Lafayette,IN & Kile, germany • Supplied from Baden Germany – Oliver Riemenschneider VP Turbo Marketing – Rolf Schweizer GM Turbo Sales

The CAT Supplier ABB

• 3 suppliers + own Air- Systems • “ABB were holding them hostage” • Develop new source • Issues – Service approach of ABB – Intellectual property • Tom Sandborg CAT purchasing manger • Working Group AAB/CAT + Steering Committee

ABB/CAT case Questions

1. What are the changes of the Key Account Management in 2004 at ABB?

2.

What caused the problems at CAT’s Large Engine Plant concerning turbo charger?

3. Had Dan the right approach to solve the issue within ABB? Is the organizational structure appropriate?

4. What other steps could you propose?

Thank you!

谢谢！ Waldemar Pfoertsch Professor Business Marketing CEIBS 699 Hongfeng Road, Shanghai China