【正文】 — Strategy Value Managed Relationships 22 ?Limited senior management participation ?Little crossfunctional involvement ?Overcentralized decision making: Not participative/inclusive ?Ad hoc structure set up to implement strategy Partial success can be caused by senior or line anizational inadequacies. Reasons for Partial Success— Organization Value Managed Relationships 23 ?Lack of internal and external consensus building ?Lack of relentless pursuit ?Supplier selection not rigorous and factbased ?Technical opportunities not identified up front ?Lack of systems and structures to perpetuate the process An inplete process can also cause limited success. Reasons for Partial Success— Process Value Managed Relationships 24 To achieve successful VMRs, there are several areas of potential obstacles to watch out for. ?Benefits are vague and unqualified –no “full potential” economics analysis has been developed for both parties Process Challenges ?Assumptions are made by suppliers that VMRs are a onetime trick Communication Challenges Watchouts ?Concerns about sharing expense and product information ?Sufficient munication of the benefits of change throughout both anizations ?There is a lack of understanding and mitment to changing the way business is done ?Benefits of the VMR are split in a lopsided manner ?SKU proliferation ?No ongoing value realization agenda has been created and/or no VMR champions are empowered to act ?Organizational barriers (. multidivisional panies) Watchouts Value Managed Relationships 25 ?VMR Concept ?VMR Key Success Factors ?VMR Sources Of Value ?Bain VMR Process ?Example ?Key Takeaways Agenda Value Managed Relationships 26 ?Improved quality due to reduced variability ?Improved munications ?Longer mitments allow for longer run lengths ?Purchasing economies A strong VMR can capture the value inherent in vertical integration while allowing the client to focus both capital and management resources on its primary business. Example Sources of Value: Primary Sources of Value Volume/Scale Economies Value Engineering and Quality Improvement System Cost Reduction ?Technology and capability sharing to create lowest cost, highest value product ?Joint determination of potential for: – material substitution – reduction of material content – standardization of materials ?Joint identification of redundant/duplicate processes, . – quality control – order processing – transportation – engineering – management functions – improved inventory control ?Cross pany logistics – sharing of transportation and distribution operations (., leveraged backhaul opportunities, shared delivery runs) Estimate Percent of Total Value Created: ?25% ?50% ?25% Sources of Value (1 of 2) Value Managed Relationships 27 Value engineering and systems cost reduction are most difficult to implement and require the most senior involvment. Source of Value Methodology Difficulty of Implementation Senior Management Involvement ?An open dialogue regarding product design begins to optimize design/cost tradeoffs ?Value engineering and quality improvement ?Buyer and supplier jointly examine current methods of interaction and begin to eliminate redundancies ?Systems cost reduction ?Consolidation of suppliers allows the buyer to negotiate for share of incremental profit ?Volume/scale economics Sources of Value (2 of 2) Value Managed Relationships 28 Disguised example C li entPu r c hasesC ur r ent I ncre m entalC lie nt Volu m e78%10 0%0%25%50%75%10 0%Weighted Average Plant Capacity UtilizationIncrease of times Pr of itF ix ed C os tsV aria bl eC os tsIndustr y C os tS tr uctu r eI ncre m entalC lie nt Volu m e10 0% 10 0%0%20%40%60%80%10 0%Percent of Sales6% Profit Improvement Relevant Plant Capacity Utilization Incremental Margin Impact Increasing a supplier’s utilization by 22% had a 6% profit impact. Volume/Scale Economies— Example Value Managed Relationships 29 C urr en t Pro duct Pr ototy pe A * Pr ototy pe B * Pr ototy pe C *100 100136941369112188050100150Indexed Cost and QualityNew Designs Indexed Quality Indexed Cost Value engineering identified three new product options that increased quality and reduced cost. *Protypes developed jointly with supplier Disguised example Value Engineering— Example Value Managed Relationships 30 Before VMR (5 Quality Control FTEs) After VMR (3 Quality Control FTEs) Supplier Customer Joint Quality Control Customer Direct to packaging operations = QC inspection personnel In this example of systems cost VMR, the supplier and Bain client eliminated redundancy and saved 40% of quality control costs. To packaging operations Ongoing Feedback to Vendor Systems Costs— Example Value Managed Relationships 31 Sy s tem C os tVa lu e En gi ne erin gV ol um e/Scale Ec ono m ics19%0%5%10%15%20%Percent of Total CostsOverall, this client achieved a 19% cost reduction through the VMR example shown. Summary of Cost Savings— Example Value Managed Relationships 32 1 2 30%20%40%60%80%10 0%Savings Captured?Volume/price savings and some level of value engineering/ quality benefits are realized very early in the relationship ?Additional value engineering savings and system cost reductions are more likely to e later Bain experience has found that the value from VMR is developed over several years. Years into VMR Value engi