and Principal, - OMTEC · Jeoff Burris, Founder and Principal, Advanced Purchasing Dynamics ... Speed to market ... Designed to understand a supplier’s cost structure

Jeoff Burris, Founder and Principal, Advanced Purchasing Dynamics

Strategic Sourcing:Moving Purchasing Beyond Price

Transformation/History

Jeoff Burris Founder and Principal Ford Motor, Metaldyne, Intier Purchasing Industry Leader with Substantial P&L Experience

Knowledge based purchasing approach Data / Fact driven purchasing Make solutions broader to manufacturing

Today2004

Innovation PhaseConsulting

Training

Service Delivery & Optimization

Placement

APD CloudCost Engineering

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Company Foundation

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Facts and Figures

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Company Strategy

Essential tools for knowledge based collaborative purchasing

Enable organizations to take ownership

Tailor sequence of tool set delivery

Minimum disruption ‐ Easy adoption

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Strategic Sourcing Understand Company Strategy Assess commodities to Identify the Strategic Ones For Strategic Commodities Build the right teams Develop an ideal supplier profile Evaluate current and potential suppliers Develop Strategy Implement Ongoing management

Objectives

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“ Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly dive it to completion”.

Jack Welch, former Chairman and CEO, General Electric

It Starts at the Top

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Good Purchasing Leadership develops a function that works within and externally the company to deliver the vision

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and Moves to Purchasing Leadership

Strategic Supply Base Management develops and manages a supply chain that fits the vision for the business.

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and Moves to the Supply Base

Technology Investment KnowledgeGlobal Reach

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Supply Base

Effort

Load

CostGrowth

Leverage the Supply Base

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The important vs. urgent battle: Time: External Conflicts: Suppliers will have visions for their businesses that are not 100% in alignment with the customer’s vison.

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Obstacles to Strategic Purchasing

Understand Corporate Strategy

Develop the Purchasing Strategy

Assess Commodities’ Strategic Impact

Purchasing Leadership Responsibilities

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Easy if your CEO is Jack Welch

Company Strategic Plan

Technology HR Manufacturing Purchasing

Understand the Corporate Strategy

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Listen Question Summarize

What is my company’s strategy?????????????

Resources: Annual reports Earnings Calls Website

If you don’t work for a Jack Welch

Understand the Corporate Strategy

Developing the Purchasing Strategy

Are the current processes capable of supporting the corporate and purchasing visions? – Cost, Quality and Delivery

How could they be improved?

What are the tools in current use to achieve Quality, Delivery and Cost expectations?

Do they support the corporate vision/strategies?

Are roles & responsibilities clearly defined? Is a robust performance management process in place? Does the team have the right skills and knowledge required to

run the processes and use the tools?

Process

Tools

People

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Cost Tool Example

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Open Book Shop Floor Models

Developed on a supplier by supplier basis based upon manufacturing cost studies on supplier shop floor – Each stamping supplier would have a unique cost model.

Examples: GM OneCost Honda

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Highly credible and accurate

Time intensive to develop

Requires detailed supplier participation

Used for Stampings, injection molding, fabrication, fasteners

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The Road to Strategic Relationships

In the past customers exerted more of their demands and considered less of the suppliers needs

But the need to get more out of the supply chain has changed the relationship to more collaborative. Technology Speed to market

Reduced warranty & recalls Cost improvements


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Collaborative Tool Jointly Developed Designed to understand a supplier’s cost structure Enhance transparency between customer and supplier Determine/form long‐term relationships Identify risks and opportunities

Open Book Used to: Facilitate transparent cost related discussions with

suppliers (driven by data) Identify and eliminate waste Become the baseline for any pricing related discussions


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Open Book Is.. Supplier/Plant specific

Models Understanding true costs

to manufacture a product Activity based Costing –

features and process are linked to cost

Collaborative

Open Book Is Not… One and done… Generic “one size fits all”

modeling Audit tool


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Knowledge Based Quote Models

Regional or local based models developed using industry best or supply base best cost drivers.

Statistical based developed using data gathered through knowledge based quote activity with a high degree of accuracy and competitive pressure.

Industry or supply base best. Examples: Ford – Optimal Cost Estimate (OCE) JCI Stamping

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Good level of credibility as they are using supplier data.

Less time intensive than True Cost Models

Less accurate than True Cost Models

Used for Stampings, injection molding, fabrication, fasteners, others……

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Knowledge Based Quote Models

RESINS

Prior Pricing agreement allowed gap to

grow when cost inputs were falling

After Pricing agreement tied pricing to

input costs

Knowledge Model Application

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50

60

70

80

90

100

Jan Apr Jul Oct

Cost per Pou

nd

Index Based ProjectionsAdjustment Frequency

Quarterly

Monthly

OPPORTUNITY

0

20

40

60

80

100

Q1 Q2 Q3 Q4

Cost per Pou

nd

Index Based ProjectionFeedstock Cost

Supplier Pricing

Cost Model

OPPORTUNITY

APD – Transparency as a Service

APD – Transparency as a Service24

Attribute Based Quote Models

Developed based upon regression performed of physical part attributes.

Best if done when pricing has been establish with competitive pressure.

Usually developed when suppliers will not provide detailed cost breakdowns.

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Attribute Based Quote Models

Does not require supplier participation.

Easy to develop.

Less accurate – used mostly to identify “outliers” for investigation.

Used for Bearings, Seals, Motors…..

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Rule of Thumb Models

Simple benchmark rules of thumb: Grey iron castings should cost $.28‐.32 per pound. Tools for a simple stamping should cost $10‐15,000 per part.

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Power and Importance

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High

Low Impa

ct o

n B

uyer

’s B

usin

ess

Low Complexity –

Buyer has Many Options

High Complexity –

Buyer has Few Options

Buyer’s Supply Market Complexity(Source A.T. Kearney, Inc.)

Commodity Product

Commodity Product(Non-Critical) (Low

Attention)

(Leverage) (High Attention)

Excel Tool

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Time

Very High

OpenCost

PiecePrice

Level ofTransparency and Savings

Very Low

Medium

CostBreakdowns

CostEstimates

Should-beCost

Single Tool Approach to Pricing

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Single Tool Approach to Pricing

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Multiple Tool Approach

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Multiple Tool Approach

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Understand Corporate Strategy

Develop the Purchasing Strategy

Assess Commodities’ Strategic Impact

Purchasing Leadership Responsibilities

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Strategy – Grow in Asia

Understand: How does the company plan to achieve this: Products Manufacturing Strategy Customers

Assess: Commodities’ impact on Asia Strategy? – High/Low Ability to Support – Easy/Hard

High Level Initial Assessment

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Identify High Impact Commodities

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Strategy Matrix

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Build the Team

Educate the Team

Develop an Ideal Supplier

Profile

Evaluate Suppliers Develop

Strategy

Implement

Continuously Manage

Strategic Sourcing a Commodity

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Build the Team Differentiate between functions that need to approve and those that need to be advised

Ensure it’s a cross‐functional priority

Establish charters


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Ensure teams understand

Corporate strategy

Purchasing strategies

Purchasing processes and tools

Other functional strategies

Educate the Team


Be a Jack40

Build on the initial analysis.Develop an

Ideal Supplier Profile

Quality Tech. Mfg. Financial


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Identify High Impact Commodities

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Build on the initial analysis.

What characteristics would the ideal supplier have to have to support the vision?

How do you measure?

Develop an Ideal Supplier

Profile



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Identify potential suppliers

Agree who to assess

Cross functional assessment against the Ideal Supplier Profile


Evaluate Suppliers


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Determine who to develop

Select tools Cost Quality Delivery

Determine who to eliminate

Develop Strategy


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Develop Commodity Action Plans

Strategy: Establish manufacturing location in India in 2016 to support product sales to Indian market.

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Establish processes that develop suppliers to the ideal

Implement Continuously Manage


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Senior Management Cloud Conferences

Top 5 Ways for Purchasing Management to Jumpstart Savings for 2016June 25th, 10‐10:30am EST

We will overview: Key factors that contribute to a highly successful purchasing organization Must know cost savings approaches for purchasing teams The “secret sauce” APD uses to build high‐velocity purchasing teams

Is your Purchasing Organization Ready for Strategic Sourcing?July 30th, 10‐10:30am EST

We will review: How success at implementing a strategic sourcing program is dependent on

having a few fundamental processes and skills established in their organization What are those fundamentals? A self‐assessment tool to evaluate if your team is ready for strategic sourcing

Winning the War for Purchasing TalentAugust 28th, 10‐10:30am EST

We will discuss: The war for strategic purchasing talent that is happening now Do you have alternative ways to focus resource dollars to better impact your

bottom line? Current market trends, opportunities, and challenges How high performing organizations structure their organization to deliver results

https://goo.gl/R5IiE8

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https://goo.gl/K0neen

For more information, visit ApurchasingD.com

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Documents

and Principal, - OMTEC · Jeoff Burris, Founder and Principal, Advanced Purchasing Dynamics ... Speed to market ... Designed to understand a supplier’s cost structure