【正文】 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 47 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 48 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 49 ?VMR Concept ?VMR Key Success Factors ?VMR Sources Of Value ?Bain VMR Process ?Example ?Key Takeaways Agenda 50 ?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 51 EXAMPLE 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 52 0%25%50%0% 5% 10%Pr od uc t EPr od uc t HPr odu c t IP r o du c t KP r odu c t LP ro d u c tCP ro d u c tFP ro d u c tGP rod uc tMP rod uc tBPr oduc tDPr oduc tNPr oduc tOPr od uc t A( W id ge t s )P rod uc tJValueAdded as a Percentage of SalesP u rc h a s e s a s a P e r c e n t ag e o f t h e To t a l Ma rk e t fo r E a c h P r o d u ctUpon evaluation of ABC39。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 7 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? 8 ?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? 9 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 RD/technology Joint efforts lead to systemwide benefits for both Added value leads to more reasons to collaborate A successful VMR will continue to create value as the relationship progresses. Value Cycle 10 VMRs create value for the buyer. ?Higher quality and fewer rejects ?Superior service ?Partner in joint system cost reduction ?Innovation ?Technological expertise –package performance improvements –spec consolidation –product redesign and materials substitution ?Pricing mensurate with larger, longer volume mitments ?Commitment to continuous improvement of the partnership Value Of VMRs— Buyer 11 VMRs create value for suppliers. ?Larger volumes in fewer items –longer run lengths and fewer setups –higher capacity utilization –learning curve benefits ?Stable long term demand ?Sharing in buyer’s strong mitment to future growth ?Partner in joint system cost reduction ?Resources and stability to invest in technology ?Commitment to continuous improvement of the partnership Value Of VMRs— Supplier 12 Lab SuppliesMedical SuppliesFlexiblePackagingGasesPunchesand DyesDrinksPackagingOffice SuppliesSBS FoldingCartonsEle