Relationship Continuity Management

How Do You Maintain SupplIer Relationships 1

Today’s State Of Supplier Relationships Copyright 2000 by Supply Chain Technology News and Penton Media Inc. Used with permission.

“It’s the next level of real-time vendor relations. But we’re still beta testing.”

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Vested Is A Methodology

Five Rules 10 Contract Elements

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The 5 Rules Of Vested 4

Governance is One of the Five Rules We codified their success into a methodology based on Five Rules 5

Manage The Business, Not Just The Supplier • Supplier Relationship Management (SRM) – SRM is the practice of creating mechanisms to increase the efficiency and effectiveness of how a company manages its suppliers • Some SRM efforts are designed to build deeper relationships that foster improved collaboration and innovation. • However, SRM techniques alone is not best practice and inadequate in Vested relationships.

• We suggest that you deploy SRM practices with a unique spin by putting on your what’s-in-it-for-we (WIIFWe) hat, and develop processes for jointly managing the business, not just managing the supplier.

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A Shift In Approach…

ME

• Getting the supplier to meet my needs • It’s in the contract, now it’s the supplier’s problem • Blame and punish the supplier

WE

• Finding a way to meet our mutual needs • Work together to achieve performance and compensation goals • Communicate the issues, jointly find solutions • Unpleasant surprises • Integrated planning and communications Manage the Business…Not Just the Supplier 7

What Goes into “Governance”

Vested Governance Framework The Vested framework incorporates four elements: 1. Element 7: Relationship Management 2. Element 8: Transformation Management 3. Element 9: Exit Management 4. Element 10: Special Concerns and External Requirements 9

Element 7: Relationships Management The Relationship Management element of your agreement should contain six key components, each serving a different function 1. Create a

tiered management structure

2. Establish

separate roles

service delivery, transformation, and commercial management 3. Establish

peer-to-peer communications

protocols 4. Develop a communications

cadence

, tempo, or rhythm 5. Develop a process to maintain

continuity of resources

6. Establish a

performance management program

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Strategic Drift Disease • Strategic drift occurs when buyers and suppliers don’t work to maintain their relationship and/or work to update strategic priorities • Typically happens after a first generation outsourcing deal has been successful – QBRs begin to slip to bi-annual or annual – Suppliers loose sight of priorities and as such begin to not be proactive in driving solutions to problems or connecting new solutions to new priorities • Typically results in buying company thinking the supplier is not proactive – and seeking new suppliers when in reality they already have a good supplier 11

New Sheriff In Town Syndrome • The New Sheriff in Town often occurs when a new leader joins the buying company and wants to shake things up • Classic example is from GM – Randy Mott – CIO of GM – Made the decision to in-source 90% of the IT work.

– HP, which won GM’s Supplier of the Year award in 2010 and 2011 for its “dedication and loyalty” will stand to lose more than $1 billion in revenue and hundreds of key employees http://www.vestedway.com/ailment-11-new-sheriff-in-town-syndrome/ 12

We Studied Some Of The World’s Best….

• P&G (Real Estate/Facilities Management) • Microsoft (BPO) •

McDonald’s (Supply Chain)

• U.S. Dept. of Energy (Environmental Services) • State of Minnesota Dept. of Transportation (Construction) • Integrated Management Services (Staffing) • Diversey (IT) • Water for People (non-profit NGO support in developing countries) 13

Jim Skinner From McDonald’s Will Help Tell The Story…

Jim Skinner

CEO, Retired McDonald’s Source: Video: http://video.cnbc.com/gallery/?video=3000098271 Source: Photo: Courtesy of McDonald’s Some videos are an excerpt from an interview with Jim Skinner for CNBC 14

Ray Kroc’s Philosophy

“None of us is as good as all of us.”

Ray Kroc

Founder McDonald’s Source: http://www.biography.com/people/ray-kroc-9369349 15

The McDonald’s “System” • Founder Ray Kroc based the McDonald’s philosophy on that of a three-legged stool • Each leg represents a member in the System – McDonald’s Corporation – Suppliers – Franchisees/Owner-Operators • For one to prosper, each leg must prosper Source: http://common3.csnimages.com/lf/49/hash/11311/5161408/1/Stool-International-Asian-Antique-Kids-Stool.jpg

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Creating Value – Not Competing

Three Legged Stool

McDonald’s System’s First Philosophy “Everyone understands they are trying to create wealth for all three legs of the stool. As they

“grow the pie,”

there is more for all.” 17 Source: http://common3.csnimages.com/lf/49/hash/11311/5161408/1/Stool-International-Asian-Antique-Kids-Stool.jpg

It’s Not Just Business….it’s Personal Ed Sanchez CEO Lopez Foods “McDonald’s wants the relationship with the person. If a person is assigned to the account – it is constant. To McDonald’s – suppliers are part of the planning and execution of their Plan to Win. It’s not just business – it’s personal and they want to see the person that is helping them succeed or fail .” 18

Self-Governance Is a Key

Ted Perlman

Chair of the Board HAVI Global Solutions Source: http://www.havigroup.com/about-us#four_about “My whole role in life as a supplier is not letting McDonald’s consciously make a mistake.” 19

Doubling Beef Patty Production 20

Focusing on Responsiveness

Who ran out of chicken during the Asian Avian Flu crisis?

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Safety Peter Eisler, Blake Morrison, and Anthony DeBarros “

Fast-food standards for meat top those for school lunches

” Dec 9 th , 2009 Source: http://usatoday30.usatoday.com/news/education/2009-12-08-school-lunch-standards_N.htm

“McDonald’s... [is] far more rigorous in checking for bacteria and dangerous pathogens. They test the ground beef they buy five to 10 times more often than the USDA tests beef made for schools during a typical production day .”

Sustainability Source: http://www.huffingtonpost.com/2013/01/24/mcdonalds-fish-sustainable_n_2542502.html

In January 2013 McDonald’s met its goal of serving 100% Marine Stewardship Council certified fish.

The Plan To Win Delivers Photos Source: The McDonald’s Revitalization: Getting Better, Not just Bigger 24

The System – A Real Winner 25

Contact Me!

Kate Vitasek

Faculty, Univ. of Tennessee Center for Executive Education Source: http://www.biography.com/people/ray-kroc-9369349 [email protected]

www.vestedway.com

Our next 3 day Executive Education course is Nov 5-7 Register for our free Vested Orientation online course here 26

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