Transcript Samen dansen op de vulkaan: De rol van inkoop in

Establishing & developing
buyer-supplier partnerships
Guest Lecture
Innovation Networks and Alliance Formation
Eindhoven, October 30, 2007
Prof.dr.ir. Bart Vos
NEVI Chair Purchasing Management
Department Organization & Strategy
Tilburg University
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Lecture Structure
• Collaboration with key suppliers: Why & how?
• DSM Agro case: intra-firm
• KPN-Atos Origin case: inter-firm
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Why Supply Chain Collaboration?
• Increasing emphasis on supply chain optimization 
relay race as a metaphor
• Outsourcing requires professional selection,
management and development of suppliers
professional purchasing management “must”
• More pressure on performance: faster, better, cheaper
• Also puts more pressure on supplier performance:
suppliers as “partner”?!?!
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Supplier Development Results
(Krause, 1997, Survey of 527 firms, NAPM members)
Before Supplier
Development
After Supplier
Development
Incoming defects
11.65 %
5.45 %
% on-time delivery
79.85 %
91.02 %
35.74 days
23.44 days
85.47 %
93.33 %
Cycle time
(from order placement to
receipt)
% orders received complete
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Supplier collaboration: with whom?
Portfolio model Bensaou
Specific
investments
customer
Buyer
Captive
Market
Strategic
Partnership
Supplier
Captive
Specific investments supplier
Special, vertical form of alliance
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Examples of specific investments
Tangible
• Buildings
• Machinery/equipment
• Information systems
Less tangible
• Exchange of employees (e.g. engineers)
• Training programs/workshops
• Informal relations
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Supply chain collaboration: How?
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Information
transparency
TOOLS
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+
+
Openness
communication
TRAVAIL
+
-
+
-
Quality SCM
decision-making
Gaming
+
+
+
+
Intensity
communication
Trust
+
+
Firm
performance
+
+
Habituation
History of
successful +
collaboration
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Bumpy road to closer supply
chain links
• It is not only about the content of supplier
involvement (e.g. in terms of technological
and organizational capabilities)
• Quality of the relationship and the way that it
is managed are crucial as well
• And on top of all that perceptual differences
on the functioning of a buyer supplier
relationship further complicate the story!!
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DSM Case Buyer-Supplier
Relationships
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•
•
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Introduction
Case setting
Main case results
Managerial implications
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Introduction DSM Case
Process industry: specific characteristics
• Relatively low level of product variety
• High capital investments implying a focus on maximising
capacity utilisation
• Prevailing use of inventories as coordination mechanism
• Geographic clustering of related processes
PUSH as “logical” Supply Chain planning strategy
Research method
• Delphi workshops (“travail”)
• Pilot projects: action research
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DSM Case Setting:
Intra-firm collaboration
• Aim was to investigate the potential for improved
collaboration between 2 DSM Business Units (intrafirm)  DSM Agro and DSM Fibre Intermediates
• Ammonium Sulfate (AS) is a residual product in the
production of Caprolactam (FI), sold by the Agro unit
• Financial responsibility (FI) versus operational
responsibility (Agro);logistics “in between” area
• Centrally “enforced” buyer-supplier relationship
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Joint workshops in DSM Case:
Night versus day
•Tense atmosphere due to
misfit in perceptions
•Lots of “travail” needed to
change this
Day
•After “partnership notion”
more positive sessions
•Need to demonstrate savings
Buyer’s specific investments
Night
Buyer
Captive
PAgro
Strategic
Partnership
Agro
P DFI
Market
Exchange
Supplier
Captive
Supplier’s specific investments
Agro = reality DSM FI – DSM Agro relationship
P Agro = Perception Agro
P DFI = Perception DSM FI
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Closer Ties Between Agro & DFI
Tools to demonstrate potential gains
Revenues
Logistics costs
Inventory costs
Working capital costs
Payment term advantage
Result
Base case
Fluctuation within 'lung'
1000
344
656
978
292
686
Reduced sales volume 'lung'
1061
334
2
2
10 ( + )
736
“Lung function”: sales of AS fertilisers on southern
hemisphere (e.g. Brazil, South Africa, Australia)
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Managerial implications DSM Case
• “Travail” results in both alignment of perceptions vs.
reality and mutual commitment to SCC
• Appropriate (quantitative) tools are vital to increase
transparency
• Travail and tools are catalysts in reinforcing trust loop
• Improved mutual trust ultimately leads to increased
supply chain performance
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KPN Atos Origin Case:
Inter-firm collaboration
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What went wrong
• KPN In-sourcing capabilities gone
• Cost only drive, invoking penalties
• No demand organization in place
• Revenue Guarantee leads to complacency
• Current contract form ineffective
• Continued asset utilization drive at Atos (P&L)
Effects
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•
•
•
KPN Cost down drive in conflict with Atos’s Revenue aspirations
Complacency at Atos creates major irritation at KPN
No incentive to Atos to enhance asset productivity
KPN Businesses not committed to overall deal
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October 2003: Initiated turnaround
• Bend or bust message to Atos
• From Penalty to Incentive:
– Remove Revenue Guarantee/ Penalty Exposure
– Joint Key Performance Indicators (KPIs), closely connected to KPN’s
Leading Business Indicators
– KPIs linked to process outputs/”deliverables”
• Advantages KPN:
─ Better customer service
─ Steering/incentive mechanism
─ Improved decision making
• Advantages Atos:
─ Maintain KPN as customer
─ Road to new business
─ Achieve “strategic ambitions”
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Concluding Root-Cause analysis
Delivery Process: March 2004
• Customer interaction takes place through processes, yet
current way of working is stove-piped (“functional silos”)
• Little prevention, rather “fire fighting” symptoms
• No feedback to Atos on KPN’s customer complaints
• KNP & Atos account managers did not align regularly
• Need to define Process KPIs, i.e. % “Aftercare needs”
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Main conclusion: The (customer) delivery
process should be managed as a whole
New approach
• Manage the process as a whole from joint (‘smart’) office
• KPN and Atos cooperate to improve customer satisfaction
• Atos accepts ‘partner in business’ position in this process
Improvement KPI’s:
• % Aftercare needs down from +/- 15% to 9 % in 4 months
• In May 2007 further reduced to about 5 %
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Lessons learned
• Outsourcing a mess leads to in-sourcing a mess
• In these complex settings, there is no clear distinction
between buyer (who delegates) and supplier (who engages)
• Complexity of processes and systems inhibit allocating
the burden of non performance towards a single party
• In fact buyer & supplier are co-producing
• Joint development of joint KPIs assures commitment
• Rewarding both parties (win-win) is key in this concept
• Process cannot be managed from helicopter
• Ultimately, people (at both sides!) make the difference
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Concluding remarks
• True SC improvements start at operational (process) level,
yet alignment with higher management levels is key
• Travail (e.g. dedicated workshops) and tools (e.g.
collaborative KPIs) enablers to make change happen
• Be aware of indirect functions “sabotaging” such
improvements
cross-functional approach essential
• External, trusted parties may act as “catalyst” in developing
collaborative buyer-supplier relationships, especially in cases
with “perceptual differences”
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