【正文】 in staff to manage process, expand to other areas ?Identification of BDP and system cost reduction targets ?Followup with plant tours, quality checks, etc. ?Hand over category strategy and volume expectations The optimal partnership development process is explicit and clearly articulated. Partnership Development Process Value Managed Relationships 46 Number of Suppliers: Oligopoly Giant(s) and Many Fragmented Sole Source Giant(s) and Few 1530 1530 25 25 1 Supplier Concentration: ?~80% to 68 suppliers ?Rest with 1020 suppliers ?~80% to 1 or 2 suppliers ?Rest with 1530 suppliers ?Evenly among suppliers ?~80% to 1 or 2 suppliers ?Rest with 14 suppliers ?100% to 1 supplier ?Long term petitive bids ?Short term petitive bids ?VMR ?Long term petitive bids ?Short term petitive bids ?VMR ?Long term petitive bids ?Short term petitive bids ?VMR ?Long term petitive bids ?Short term petitive bids ?VMR ?Long term petitive bids Potential Relationship Options: A range of supplier configuration options, should be evaluated. Supplier Configuration Alternatives Value Managed Relationships 47 People ? Is senior management mitted to making this work? ? Have all anizational, cultural, and skill changes been addressed ? Are the incentives appropriate to ensure employee mitment? Operational Execution ? What is the governance structure? ? How is progress monitored? How will roadblocks be resolved? ? Is there open sharing of required information? ? Can all the information systems changes be identified and specified ? How will switch disruptions be minimized? Partner Selection ? What is the optimal number of suppliers? ? Do we really understand supplier39。s needs ?Potential for customized investment in facilities/equipment ?May require investment in weak strategic business ?Adversarial bid negotiations to obtain lowest unit price ?Longterm mitment focused upon lowest total systems cost using value chain perspectives ?Focus driven by internal incentives/ transfer prices ?Separate product design ?Joint product design and cross functional participation ?Joint product design often at odds VMR VMRs can exceed the value of both traditional contracts as well as vertical integration. Strategic Purchasing Options Value Managed Relationships 8 High Potential High Low High Low Purchasing volume (relative to total supplier sales) Valueadded / engineered level ?Product redesign ?Material substitution ?Product redesign ?Material substitution ?Volume discount ?System cost improvement Moderate Potential ?Volume discount ?Some system cost No / Little opportunity (need to cluster) VMRs are most appropriate where high volume and significant value added occurs. Medium/low potential Where Are VMRs Appropriate? Value Managed Relationships 9 ?Large dollar purchase ?High level of valueadded cost in product ?Fragmentation across many divisions and suppliers ?Client represents significant part of industry output ?Industry petitive intensity high: –capacity utilization dropping –consolidation in progress –many new plants looking for volume –historical industry price umbrellas VMRs are most effective in large dollar, high value added products. In Which Categories Are VMRs Most Effective? Value Managed Relationships 10 Consolidate volume in longterm partnership Increased pace of innovation leads to strategic benefits for both Ensures continued supply for buyer and capacity utilization for supplier Commitment and scale justifies joint investment in cost savings and Ramp。s current and future cost position? ? Has the supplier screen included noncost parameters? ? Has the supplier made a realistic mitment? ? Is the supplier mitted to delivering on the agreement? Value ? Is this the right input to target for a VMR? – industry track record – proportion of buyer cost structure ? Does the benefit outweigh the risks? – switching costs – buyer leverage ? Where is the value? – Stages 1, 2 and 3 – short vs. longterm ? Is the value realizable? – potential hurdles and roadblocks Each of these issues should be considered in evaluating a VMR. Checklist for Successful Execution Value Managed Relationships 48 Identify VMR Opportunities Understand Industry Cost Structure Select VMR Candidates Obtain Top Management Commitment Identify Specific Cost Reduction Opportunities Implement VMR Opportunities Track VMR Savings VMR Process Value Managed Relationships 49 A meaningful tracking mechanism must be put in place across multiple variables to ensure ongoing results. ?Savings –product cost –systems cost ?Relationship status ?Timing –of savings –milestone achievements ?Industry –changes in industry dynamics –introduction of new technology, etc. Tracking Value Managed Relationships 50 ?VMR Concept ?VMR Key Success Factors ?VMR Sources Of Value ?Bain VMR Process ?Example ?Key Takeaways Agenda Value Managed Relationships 51 ?Client is large conglomerate producing 15 major product lines ?Current relationship with suppliers is traditional and somewhat adversarial at times ?All data and vendors have been disguised, however this is an actual Bain client and case ?Product A is called widgets throughout the example –widget SKUs are called red, blue and green Context: VMR Example Value Managed Relationships 52 EXAMPLE Identify VMR Opportunities Understand Industry Cost Structure Select VMR Candidates Obtain Top Management Commitment