【正文】 often outsourcedCustomer/Supplier Relationships?Industrywide, close retailersupplier partnerships are not mon?However, all suppliers surveyed have had some partnership experience examples include:–volume driven price discounts–joint RD/product design–elimination of duplicate processes?Supplier trends–consolidation–movement to onestop shops–provision of additional services?Customer trends –strong price focus–shortterm contract mitments–movement to multimaterial fixturesSupplier Economics?Variable costs represent 66% of total supplier costs?Raw materials costs represent 40% of total supplier’s costs?Custom suppliers achieve 5% EBIT margins on average, but significant ranges exists?Suppliers surveyed reinvest 5% of annual revenues ?Opportunity exists for operational improvement– operations are not highly automated– not fully leveraging materials purchasing across divisions or customersEXAMPLEWidget Industry Overview56Value Managed RelationshipsThe custom widget market is highly fragmented with the top 15 suppliers prising approximately 60% of the $ total market.EXAMPLE. Widget Market57Value Managed RelationshipsThe custom widget market is further fragmented by color.EXAMPLE. Custom Widget Market by Color58Value Managed RelationshipsEXAMPLEIdentify VMR OpportunitiesUnderstand Industry Cost StructureSelect VMR CandidatesObtain Top Management CommitmentIdentify Specific CostReduction OpportunitiesImplement VMR OpportunitiesTrack VMR SavingsVMR Process59Value Managed Relationships1997 Annual Revenues:Business Strategy Focus:Primary Color:Customer Concentration (Percent of Sales to Top Five Customers):Average Capacity Utilization:Experience with Client:Widget manufacturers differ significantly in terms of size and capabilities.D?Volume?Red, blue?60%?60%?Limited?$60MB?Customization?Blue?N/A?80%?No?$80MA?Onestop shopping?Blue?40%?70%?Yes?$100MC?Onestop shopping?Red, blue?33%?75%?No?$75ME?Low cost widgets?Red?42%?50%?Yes?$50MEXAMPLESupplier Profiles60Value Managed Relationships Most players in the custom widget industry tend to specialize in red or blue, many often outsource the secondary color.EXAMPLESupplier Materials Focus61Value Managed Relationships EBITGACOGSSupplier Cost Structure(Average Custom Supplier)38% 24% 7% 12% 10% 4% 5%Rent UtilitiesWhile manufacturers’ size and product focus impact their costs, preliminary estimates indicate that variable costs account for 67% of average widget suppliers’ costs, with materials prising around 40% of total cost.Estimated variable cost approx. = 67% of cost totalEXAMPLESupplier Economics: Cost Structure Detail62Value Managed RelationshipsMost major fixture manufacturers grew from “momandpop” operations, leaving significant room for operational improvement in areas such as automation and materials purchasing.Materials Purchasing?Many manufacturers are not leveraging their volume in purchasing materials, either across customers or across internal divisions–A purchases its customers’ red separately, despite the fact that the vast majority of its purchases are for the same red products–B’s manufacturing divisions each purchase raw materials separatelyBlue Fixture ManufacturersRed Fixture ManufacturersManufacturing AutomationEXAMPLESupplier Operational Efficiency63Value Managed RelationshipsMost vendors surveyed reported at least some experience with partnership arrangements.Portion of Vendors Indicating Experience in Some Partnership AspectsEXAMPLEPartnership Experience64Value Managed Relationships Client Needs Parameters Supplier Requirements?Capacity ?Potentially, the ability to supply all of client’s red, blue widget needs– current client volume of ~$80M per year?Materials ?Potentially, the ability to manufacture all client’s red, blue widgets ?Quality ?Demonstrated ability to meet all quality requirements at highest level– product quality– servicelevels– lead times?Experience ?Industryleading expertise in custom blue widget production?Industryleading expertise in custom highend red widget production?Demonstrated familiarity and expertise with client widgetsThe following “ideal” supplier profile would enable client to capture full potential value: EXAMPLE?Value engineering ?Demonstrated creativity and ability to identify and implement value engineering ideasSupplier Requirements65Value Managed Relationships Client Needs Parameters Supplier Requirements?Partnership approach ?Desire and mitment to make client the 1 customer while serving other customers as well?Commitment to create joint value together with the clientThe following “ideal” supplier profile would enable client to capture full potential value: ?Cost position ?Low cost positionEXAMPLE?Value creation ?Commitment to drive value across additional areas– automation– fixed cost leverage– systems economicsSupplier Requirements (Continued)66Value Managed RelationshipsC D EA B FKey requirementsG555444333221112667Total AssessmentRank:776?Materials:?Experience:Given current supplier capabilities, A is the closest to the “ideal” candidate profile.Red Blue:Blue Only:Red Only:EXAMPLE?Capacity:– Blue?Quality:?Value engineering:?Value creation:?Partnership approach:– Red89% 82% 71% 68% 61% 46% 43%Supplier Capabilities67Value Managed RelationshipsPartnership Development ProcessEXAMPLEIdentify VMR OpportunitiesUnderstand Industry Cost StructureSelect VMR CandidatesObtain Top Management CommitmentIdentify Specific CostReduction Op