Top100supplytips

Vol. 1

� - The 100 Greatest Supply Management Tips of All Time!

© 2007 Procuri, Inc.

The 100 Greatest Supply Management Tips of All Time! - Vol. 1

This eBook is protected under the Creative Commons license. No commercial use, no changes. Feel free to share it, post it, print it, or copy it.

This eBook is available for free by visiting www.TopSupplyTips.com.

http://www.TopSupplyTips.com?AFC-top&tip=0b

http://www.procuri.com?AFC-top&tip=0b

The 100 Greatest Supply Management Tips of All Time! - �

The 100 Greatest

Supply Tips of All Time!

Vol. 1

Introduction

The title may be a bit sensational, but it got you to download this book. And the tips in the coming pages won’t disappoint.

Gathered from real-world approaches used by supply management professionals, this book is part of an ongoing project to foster the exchange of best practices and to elevate the supply management discipline.

The tips found in the coming pages are not complex. They don’t require a huge budget, CXO support, or years to deploy. Instead, they are practical, easy-to-understand approaches – most of which you can implement today.

So, try a few of the simple suggestions. Share your favorite tips with your peers. Heck, why not share a copy of this book?

If you use a tip, let others know how well it worked by sharing your experience on the website that goes with this book: www.TopSupplyTips.com. And if one of your favorite tips is not included in this book, share that too! We will include it in the next volume of The 100 Greatest Supply Tips of All Time!

Note: Wherever you see this icon click to find more practical advice and commentary – case studies, free downloads and links to other helpful content.

4 - The 100 Greatest Supply Management Tips of All Time!



Clearly communicate requirements, rules of negotiation and engagement, and award criteria to all suppliers. Be sure to abide by your stated rules. And if you need to make a change, share it equally with all suppliers. Doing so will ease suppliers’ concerns and maximize

their competitiveness.

1Play fair

The 100 Greatest Supply Management Tips of All Time! - 5

Leverage the know-how of your solution provider to learn the methods for effective sourcing, tools usage, and contract and supply management. This helps you avoid the mistakes made by early adopters and drive tool adoption and program alignment.

2 Don’t recreate the wheel


Start your supply management transformation in high impact, low friction areas, such as strategic sourcing, that don’t require multiple functions and that drive measurable savings. This allows you to demonstrate the value of your program and fund additional improvement initiatives.

3Avoid conflict


Supply management transformation is a continuous education process. Top performers set regularly scheduled meetings with functional, business unit, and corporate execs to reinforce supply management initiatives, report progress, and solicit support. These meetings also ensure supply goals are aligned with stakeholder and corporate objectives.

4 Hit the road


Selling the Value of Supply ManagementDownload a free handbook on How to Make the Perfect Pitch for Any Supply Management Initiative.

http://www.procuri.com/knowledgecenter/whitepapers.asp?display=whitepaper_9&AFC-top&tip=4b



Market dynamics, goals, and functionality change over time. Be certain to train and retrain users to drive adoption and ensure consistent practices and results.

5Train early and often


Honor top suppliers6It may sound trite, but there is strong evidence that publicly recognizing top-performing suppliers encourages performance improvements across the supply base. Put some heft into the award by granting top suppliers preferred status and first dibs on new business. And showcase their company and approaches at your next supplier conference.


7


Be an honest dealer

Manage internal expectations by clearly communicating planned sourcing or contract programs and expected results. Issue “deal sheets” for each project to illustrate negotiation approaches, pricing and market trend dynamics, and predictions

for results. Follow up with deal scorecards on how you measured up to initial expectations.

1� - The 100 Greatest Supply Management Tips of All Time!

To maximize competition, include at least four suppliers in every negotiation.

8 Four is the magic number

The 100 Greatest Supply Management Tips of All Time! - 1�

9Pay top dollar

There is a direct correlation between supply management team salaries and the performance and value returned from this function. Industry benchmarks report top supply management organizations pay 30% higher salaries, but outperform peers by more than 2X in process efficiencies,

effectiveness, and cost reductions.1

1The Hackett Group


10 Divide and conquer

Strategically segment your supply base and align sourcing and supplier management approaches by each segment. Example: use more collaborative negotiations and align product and business roadmaps with your most strategic suppliers. Use competitive negotiations and low-touch management methods for suppliers of commodity items with little strategic value.


11Create a crisis

Whenever possible, link your supply management initiative to a top corporate goal or challenge. Complying with the Sarbanes Oxley Act, selling into the white-hot China marketplace, or mitigating corporate risk are good places to start.

The Plus-Side of Crises See how Qualcomm used Sarbanes-Oxley Act and litigation risk to launch a successful contract and compliance management initiative.

http://www.procuri.com/knowledgecenter/webseminars.asp?display=webseminar_16&AFC-top&tip=11b




12 Start your own news network

Use multiple channels to communicate the intent, approach, and results of supply management initiatives. Channels include company newsletters, presentations at company meetings, and “deal sheets” summarizing sourcing projects or contracts.


13Become multi-lingual

Gain support and respect from other groups by translating the benefits of your supply management initiative into their language. Example: When sourcing advertising don’t highlight cost savings. Instead, tell marketing managers how you’ll help ensure brand integrity, speed turnaround

times, and stretch their budget dollars.


14 Hang out with losers

Take the time to debrief with suppliers that fail to win your business. The best will use your advice to develop new capabilities and bidding tactics that meet your future needs.


15Keep your winners

Retain your top talent using these tips: maintain competitive pay rates; keep your team’s work challenging; create special projects for your top talent; develop training and mentoring programs; plot a clear career path for team members; and support work-life balance.

�0 - The 100 Greatest Supply Management Tips of All Time!

16 Comparison shop

Benchmark pricing and supply trends to determine the right sourcing approach and to set realistic expectations for returns prior to initiating negotiations. If accurate price comparisons are not available, use commodities indices to gain directional intelligence on market prices.

The 100 Greatest Supply Management Tips of All Time! - �1

17Get involved early

Involve sourcing and commodity experts in the new product concept and prototype phases – before design is locked down. This allows supply managers to identify supplier innovations in the form of new technologies, manufacturing methods, and processes that deliver quality,

cost, and time-to-market benefits.

�� - The 100 Greatest Supply Management Tips of All Time!

18 Recruit strangers

Hire supply managers with unconventional skills and experiences. Those with financial backgrounds can advance new costing models and link supply performance to corporate goals. Engineers can identify innovation and alternative designs that meet both product and supply goals. Technologists can also speed successful deployments of supply management solutions.

The 100 Greatest Supply Management Tips of All Time! - ��

19Be responsible

Employ responsible supply strategies that foster fair labor practices, supplier development, and diversity. Such practices assure supply, often with unique competitive advantages. They also provide a highly marketable status as a socially responsible company.


20 Empower suppliers

Use a Web-based portal to empower suppliers to self-register and manage their own profile, capabilities, and certification information. This enhances buyer productivity, mitigates risks, and helps prioritize tasks for supplier qualification, development, and/or rationalization.


21Incent the right behavior

To foster support for your supply management initiatives, ensure measures and incentives are aligned to induce your intended outcome. Example: To drive adoption of supply or contract management technology, make usage part of the individual buyer or contract manager’s scorecard. Link

the scorecard to employees’ personal bonus.

A Measured Success Learn how Hess used metric and incentive alignment to get more than 95% compliance with its electronic supply management initiatives.

http://www.supplyexcellence.com/blog/2006/06/01/you-can-only-improve-what-you-measure/?AFC-top&tip=21b




22 Go On Demand

On Demand or Software as a Service (SaaS) solutions speed results and reduce risks – allowing you to focus on supply improvements not software. SaaS users report 5X-10X lower TCO, faster deployment cycles, and more frequent upgrades than installed software. SaaS users also drive 28% more spend under management than installed software users.2

2Aberdeen Group


23Reward good behavior

When negotiating new business, be sure to give “credit” to preferred suppliers with good performance history. This will motivate them to continue to keep up the good work and will signal that new suppliers will need to work harder to win such preferred status.


24 Fire your best people

Remove your best team members from their day jobs and put them in charge of your most important supply management improvement initiatives. This ensures program success and helps retain talent.


25Cut communication lines

Stop supplier attempts to subvert sourcing procedures by cutting off unauthorized communications to influential personnel. Use workshops with internal stakeholders to reinforce the importance of maintaining integrity in sourcing and supplier relations. Shut off new business to

suppliers that violate the policy.


26 Listen to your users

Use training programs to solicit stakeholder feedback on process improvements or solution functionality changes. This feedback loop secures stakeholder alignment and improves program adoption and compliance.


27Ensure currency

Have suppliers bid in your currency to reduce exposure to currency fluctuations. Or share currency risk with suppliers by negotiating tiered pricing in the seller’s currency based on a mean price set at an agreed exchange rate. Make adjustments to the agreed price (reductions for

unfavorable rate changes, increases for favorable rate changes) as currency rates fluctuate.

�� - The 100 Greatest Supply Management Tips of All Time!

28 Go old school

Gain insight into supply market pricing and availability trends for specific categories by using traditional market intelligence methods – with an Internet-age spin. Use the Web to access public reports, annual reports, press releases, and news articles to learn about technology breakthroughs, plant locations, material specs, and capacities for specific commodities, or even suppliers. Tap your personal contacts for their own experiences and supplier recommendations in the category.

The 100 Greatest Supply Management Tips of All Time! - ��

29Analyze before auctioning

To determine which spend categories are ripe for auctioning, ask four questions: Can you define clear specifications for the category? Is there a competitive supplier pool? Is the spending or unit volume significant enough to be of interest to suppliers? Are you prepared to

change suppliers based upon the auction results? If yes, then auction it.

Beyond Reverse Auctions e-Sourcing involves much more than price-based reverse auctions. In fact, auctions comprise only about one-third of all e-sourcing projects.

http://www.supplyexcellence.com/blog/2006/08/11/e-sourcing-it-aint-all-about-reverse-auctions/?AFC-top&tip=29b




30 Choose Favorites

Channel your most complex sourcing or contracting projects through a Center of Excellence (CoE) in which a core group of experts or power users are trained on the latest approaches and functionality. This ensures the use of best practices and the delivery of faster and more consistent results. Empower less-frequent or less-skilled users to specify projects and to execute common tasks, such as basic e-RFx, reverse auctions, or configuring contracts from pre-approved templates or terms.


Buy lunch 31Host periodic lunch-and-learn workshops to train team members and other functional stakeholders on your supply management initiatives – whether training on a new application feature, showcasing results of successful sourcing projects, or defining your supplier diversity

program.


32 Sell to suppliers

When rolling out new initiatives or technologies, educate suppliers on the benefits they can expect and how best to use your tool of choice. Example: With e-sourcing projects, inform suppliers of the rules of engagement for online negotiations, your selection criteria, and award strategy. Better trained suppliers make more competitive (and realistic) offers.


33Define the rules of engagement

To guard against post-event bartering in supplier negotiations, use prerequisites and knockout questions to ensure that suppliers agree to all conditions prior to the negotiation and to avoid any surprises or disputes after award.


34 Ask “Why Not?”

Don’t debate the “this-category-is-too-strategic/complex/ unique-to-be-sourced-online” crowd. Instead, make category managers – and reluctant stakeholders – start from a position of, “Why can’t this spend category be e-sourced?” This discipline will ensure consistent and documented sourcing methods are used for all spend and provide vital insight into spending and market trends. Oh yeah, it will also help you eke out 5%-14% additional cost savings above what you could achieve offline.


35Go East

Invite qualified suppliers from low-cost Asian regions – particularly China – to participate in negotiations. Experience shows that their participation drives other suppliers to bid more aggressively.


Make supply management a team sport36

There is a direct correlation between the involvement of non-purchasing stakeholders in the sourcing process and the contract compliance rates. Other functions can also offer invaluable insight into cost drivers and market dynamics.


37Get aligned

Ensure sourcing and supply management goals map directly to corporate and financial objectives. Whenever possible, piggyback on major corporate initiatives – such as Sarbanes Oxley Act compliance – to ensure support and funding for your own goals.


38 Use your own paper

Use (and reuse) your own standard form contracts whenever possible. This maintains consistency, reduces risks, and improves negotiation leverage with suppliers. It also streamlines contracting cycles.


39Run two online sourcing projects

Prove the impact of supply management improvement by conducting an e-sourcing project. Enhanced transparency and competition – fueled through e-sourcing – yield an average of 14% cost savings for first-timers. Users report full ROI within two to four events.

Early Wins, Long-Term ResultsView a case-study on how Sun Microsystems used e-sourcing to beat its savings goals by 256% in its first year of deployment.

http://www.procuri.com/customers/snapshots.asp?display=sun&AFC-top&tip=39b




40 Close back doors behind you

To speed success of new supply or contract management initiatives, shut off legacy processes or systems that could enable reluctant stakeholders or suppliers to circumvent your new ones.


Look inward before outsourcing 41

Document and standardize processes before outsourcing spend categories or procurement activities. Also, design and build your internal capabilities to manage an outsourcing service provider relationship – prior to the selection process. This helps define expectations, gain

alignment, and mitigate risks and failures later on.


42 Get auction clairvoyant

Predict auction success by requiring suppliers to complete a detailed pre-bid RFP response. This guarantees that suppliers fully understand your requirements. It also serves as an early indication of the auction results.


Work both ends of the organization 43

Deploying a supply management initiative requires securing support from top executives as well as frontline employees. Execs can provide the budget, resources, and policy changes required to get a program going. But success will be determined by stakeholder support and adoption.


44 Come armed with facts

Top executives, particularly CFOs, want to know how your supply management program is going to hit the bottom line and when it’s going to get there. Ensure you have visibility into spending, compliance, and performance data. Report how this intelligence links to corporate goals and profits.


45Make it personal

Ensure senior executives understand supply management’s contribution to your company’s profits, performance, and competitive edge by illustrating how supply management affects their personal lives. Use examples of how supply constraints are increasing prices for luxury items, like golf clubs. Or how supply

risks, such as counterfeiting, are impacting their showpiece purchases like fine wines, cosmetics, or hand bags. Or how a limited understanding of personal spending at home is akin to limited visibility into corporate spending at the office.


46 Check on suppliers well being

Measuring company supplier performance only tells half the story. Run periodic checks on the financial and business health of your suppliers – pay attention to any liens, legal judgments, or restructurings. This information is available from third-party information aggregators for a fee. But you can get started by setting news alerts on your top suppliers using any of the leading Web search sites.


Create your own opportunity 47

Volunteer to take charge of your company’s e-supply initiatives. Technology project management skills are among the most in-demand in the supply management field. If there is no existing job description for this role, create one. Be sure the role has responsibility for assessing existing

infrastructure, defining solution requirements, leading solution selection, and heading training and deployment. If you lack skills to fill these shoes, educate yourself on supply management technology.


48 Make every day Secretary’s Day

Woo executive assistants and administrators. They often select vendors, issue requisitions, and make purchase decisions on behalf of business executives. Getting them on board early drives compliance. Admins also offer a wealth of insight on buying preferences and vendor and system performance.


49Put risk management on autopilot

Reduce your exposure to supply risk by setting automatic alerts when key supplier milestones – such as insurance renewals or critical certifications – are coming to term. Issue reminders to suppliers well in advance of the term date and track their compliance. Some supplier portal

and performance management systems offer this capability. If not, set the alerts in your desktop calendar.


50 Go back to school

Enhance the skills of your supply management squad by partnering with a university. The top supply management schools offer executive training programs, and most will customize curriculum to meet your group’s needs.


51Give frequent report cards

Establish standard, easy-to-understand metrics for measuring supplier performance. Share performance scorecards with suppliers frequently, giving them ample chance to refute and improve their scores. Research shows companies that openly share scorecards with suppliers

drive greater performance improvements.

The Benefits of SharingLearn how the nation’s largest financial institution has improved performance and lowered costs by automating supplier registration, scorecarding, and corrective action management.

http://www.procuri.com/customers/snapshots.asp?display=bofa&AFC-top&tip=51b





52 Solicit feedback

Top performers use 360-degree performance reviews, actively soliciting supplier opinions on how they rate as a customer. Some areas of evaluation include communications, payment, and responsiveness. Such ratings help buyers understand where to improve and provide early warnings on problem supplier relationships.


53Harvest supplier innovation

Establish formal channels (such as a Web-based portal) and procedures to receive, evaluate, implement, and measure results of cost-reduction or improvement suggestions from suppliers. Improvements can come in many forms, including design alternatives, inventory

consignment, automated invoice reconciliation, and payment.


54 Share gains with suppliers

If a supplier provides a cost-reduction or improvement suggestion that is successfully implemented, share a portion of the savings (preferably half) with the supplier. This will encourage suppliers to share proactively, contribute ideas that eliminate costs, and provide joint competitive advantage.


55Get on the M&A squad

Elevate your status by helping to assess the synergies of your company’s merger and acquisition targets. Nearly 60% of the hard-dollar impact of any M&A deal comes from supply management improvements. Assess spend aggregation, supplier rationalization, and part-reuse

opportunities for a more accurate valuation. Get involved early so your CEO knows the impact supply management can contribute to the deal.


56 Get classified

Automate spend data classification to gain detailed insight into spending and to increase accuracy and frequency of spend analysis. This can uncover hidden opportunities for better spend leverage, compliance, and supplier rationalization.

The Power of Spend VisibilityLearn how a Global Healthcare Company used automated spend-data visibility to improve strategic sourcing performance and achieve over $250 million in savings.

http://www.procuri.com/customers/snapshots.asp?display=aghcc&AFC-top&tip=56b





57Finance your future

Enlist your finance organization for help crafting policies and provide support to drive contract compliance. Have finance validate supply savings and track policy compliance. If possible, get finance to remove savings from business and functional budgets.


58 Find hidden experts

Get a crash course in new spend categories from functional stakeholders who understand cost drivers and innovation in those areas. Examples: Tap IT for software and hardware tips, or ask Marketing to aide your advertising or print buy. You bring the negotiation knowledge…and the lunch. You’ll find new cost savings, increase spend under management, and improve compliance.


59Teach your suppliers well

Share your sourcing and supply management expertise and systems with your key Tier 1 suppliers. This approach can increase your visibility to sub-tier supply costs and risks. It can also arm your supplier partners to drive best-value sourcing and cost reductions across their own supply chains.


60 Establish a Co-Op

Aggregate spending or share contracts with your suppliers. Allowing suppliers to purchase certain commodities or parts at your preferred rates can dramatically lower your supply costs. Likewise, some suppliers, such as contract manufacturers, often secure better deals than you on certain parts and components.


Be the middle man 61Leverage your volume to buy commodities/parts at a lower price and resell to supplier partners to reduce total product/supply chain costs. This buy-sell arrangement can not only lower your supply costs, but if managed properly, can even let you turn a profit on the resale.


62 Get suppliers on your design team

Secure a spot for your most strategic suppliers early in your product design phases. This ensures you are designing the latest product and manufacturing innovation into your products. It also guarantees that suppliers have the capabilities and capacity to support your new designs. Early supplier involvement has been proven to reduce costs and speed development cycles.


Share risks with suppliers 63

Ensure that your contracts include clauses to have suppliers share risks in areas of payment terms, currency fluctuations, capital investments, and freight surcharges. This will not only reduce your exposure, but also create true supplier partnerships.


64 Partner with logistics

Transportation, handling, and tariff costs range from 13% to 24% of the basic price of imported materials and parts. Tap your logistics team (or third-party forwarders or brokers) to monitor shifting harmonized system codes; tariffs; transportation, drayage, and handling costs; and cross-border regulations. Ask how to lower these “total landed costs” and dodge tariffs by rerouting goods or postponing assembly until after crossing borders.


Get a green thumb 65Incorporate environmentally responsible practices in your supply strategies, such as use of recycled materials, sustainable energy, and environmentally friendly materials and manufacturing practices. These efforts not only ensure compliance with tougher environmental regulations, but also assure supply and mitigate price increases for certain commodities. Environmentally sound sourcing

can also be used as a positive marketing tactic.

Sustainability for ProfitsLearn how some of the world’s leading companies have used environmentally and socially responsible supply practices to mitigate risks, reduce costs, and boost profits.

http://www.supplyexcellence.com/blog/2007/01/02/2007-the-year-of-sustainable-supply-strategies/?AFC-top&tip=65b





66 Walk in your suppliers’ shoes

Prior to any negotiation, be sure to evaluate price and supply trends for key inputs (e.g., commodities, parts, etc.) into the products or services provided by suppliers. This insight can help you identify key negotiation levers. It can also help you set realistic expectations for supply savings.


Don’t be afraid of commitment 67

Assess future pricing and supply market implications to determine when to engage in long-term supplier or hedging agreements. This will assure supply and lock in preferred pricing, which is particularly wise in the face of rising metals, plastics, and energy prices.


68 Make plans

Define a three-year roadmap for transforming your supply management organization and performance. Be sure to include measurable milestones as well as resources (budgetary and otherwise) and policy changes required to achieve them. Where possible, link your objectives to those of the business. You may not achieve all you plan, but you’ll get more accomplished (and more respect) than without one.


Give suppliers more responsibility 69

Reduce costs and exposure by adopting alternative business relationships with your top-performing suppliers or for suppliers in categories where you lack expertise. Options for the former: Move from buying piece parts to having suppliers provide sub-assemblies or complete

assemblies or establish a joint venture. Options for the latter: consignment inventory, third-party logistics, or integrated supply.


70 Hold an open house

Make a practice of visiting successful supply management organizations at their locations. Ask for a presentation of their organizational structure, training and supplier development programs, key performance indicators, and technology approaches. Be sure to return the favor by hosting others at your location.


71Mix centralized decisions, with local

When embarking on a supply or contract management improvement initiative, strive for centrally defined processes and global spend leverage with geographically distributed support and execution. This matrix or “center-led” model provides the benefits of standardization while

supporting the nuances of individual businesses and regions. It also meets less resistance than centralized command and control.


72 Make connections

When sourcing from low-cost regions, foster frequent interaction between suppliers’ quality personnel and your engineers. This helps ensure quality and can speed the ramp up process.


73Reap what you sow

Supply and contract managers focus considerable effort on negotiating the best deal, but many times, they overlook procedures for ensuring compliance after the deal is done. Get stakeholder involvement (and compliance commitment) at the beginning of the sourcing process. Establish channels to inform stakeholders of the pricing and terms of the new agreement and how they can order from it. Monitor transactional

and pricing compliance with the contract. Report compliance performance on a periodic basis – fingering areas of non-conformance. (If possible, get execs to put teeth in compliance policies.) Be sure to align your team’s incentives to actual contract compliance – not just negotiated savings.


74 Call on Superheroes

Establish resident experts or “super users” within certain businesses or regions to encourage program and system adoption and support other users. Super users also ensure consistent approaches and system usage across the organization. Keep super users fully informed of program progress and trained on the latest features of your supply or contract management system.


75Set limits

Speed adoption and support for supply or contract management initiatives by establishing policies or dollar value thresholds to encourage compliance. Example: Mandating e-sourcing use for sourcing projects above a certain dollar volume threshold ensures that online

sourcing methods are used for projects where they can have the most visible impact. Early wins on big ticket items can help gain support for expanding the program to all spending.


76 Watch for sour grapes

Constantly monitor online auction events to discourage suppliers with no chance of winning from sniping, phishing, or extending bidding to force more concessions from their competitors. Remove suppliers employing such tactics from future business opportunities.

Keep it CleanLearn how to keep suppliers from derailing your supply management initiatives from the real-world experiences of one of the world’s leading food and beverage companies.

http://www.supplyexcellence.com/blog/2006/06/01/houston-dirty-supplier-tricks-and-how-to-combat-them/?AFC-top&tip=76b





77Speak CFO

Link supply improvements to the metrics that matter most to your CFO: Return on Invested Capital (ROIC) and Earnings per Share (EPS). ROIC is earnings divided by the total capital invested in the business (i.e., long-term debt plus stockholder equity). EPS is net income divided

by the number of outstanding common shares.3

3Straight to the Bottomline


78 Don’t neglect yoursoft side

Wring hard-dollar impact from “soft cost” savings. Automating sourcing, contracting, and procurement execution shortens process cycles 50%-70%. Cycle time improvements free you up to apply strategic sourcing or contracting principles to more and a wider range of spend. Example: For a company with $1 billion in annual revenues, cycle time savings from e-sourcing alone can yield more than $42 million in additional hard-dollar savings.


79Avoid late fees

Speed invoice matching and reconciliation to take advantage of those early payment discounts you spent so much time negotiating. Depending on their cash position, suppliers may be willing to offer additional rebates (beyond those contracted) for earlier payment.


80 Outsource the energy buy

Deregulation added complexity to the already complex energy buy. While larger companies often hire their own energy experts on staff, other businesses should look to energy management firms to help design purchasing strategies (like hedging) that minimize risk, negotiate with potential energy providers, or organize buying pools to get volume discounts on energy.


Take it off 81Work with internal stakeholders (marketing, engineering, and logistics) and suppliers to reduce packaging, including plastic films, filler, and paper. This simple move not only cuts packaging costs but also can lower your inbound and outbound transportation and waste management bills.

(It’s good for the environment too!) Also consider shifting from disposable to reusable pallets and containers. And if cost- and durable-effective, use recyclable materials.


82 Know your alternatives

Identify alternative suppliers, substitution parts or materials at the outset of each new sourcing project. You may not award them any business, but it’s good to have a record in case there are problems with your primary supplier, or if a certain part has become obsolete by the manufacturer or regulatory changes. Substitution planning can also mitigate the risk of volatile pricing or supply shortages.

Risky BusinessLearn how to assess, mitigate, and respond to a wide range of supply risks – from price volatility to natural disasters.

http://www.supplyexcellence.com/blog/wp-content/themes/threecolumn/podcast/supplynow1.html?AFC-top&tip=82b




83Change a light bulb

Replace incandescent bulbs with energy-saving fluorescent lights. This simple swap can cut the cost to light your buildings by up to 75%.


84 Take in a show

One of the quickest ways to catch up on the latest supply and contract management best practices and technologies is to attend an industry association’s annual conference. These shows are jam packed with instructional sessions led by peers and industry experts. (And you can earn professional credits for attending.) They also provide a venue to compare most available technology solutions. They are great places to network too. (Vendor-run forums are also helpful; but be prepared to hear their sales pitch.)


Don’t forget to evolve 85The only thing worse than not measuring performance is tracking the wrong attributes. Revisit supplier performance metrics on a periodic basis to ensure that measures reflect changes in your company’s requirements and new supply market dynamics and risks.


86 Embrace diversity

Develop or expand a supplier diversity program. Start by securing executive leadership for your program. Link diversity initiatives with company goals for social responsibility. Establish a supplier diversity council of execs across businesses. Expose existing minority suppliers to new business opportunities and help these suppliers develop new capabilities. Find new diversity suppliers at trade shows or by joining minority organizations. And give annual awards to top performing minority suppliers.


Use explicit language 87Clearly define the terms of sale for all your supplier contracts. Be explicit about the freight payment options. If you have the clout, negotiate F.O.B. (“free on board”) Destination, meaning the sale is finalized when you sign for the goods on your dock. This lowers your risk and your cash flow. If a

contract does not mention any terms, F.O.B. Origin is often assumed, meaning the title to the goods passes to the buyer the instant the driver picks them up at the supplier site.


88 Shoulda, woulda, coulda

Adopt should-cost standards for parts and assemblies by analyzing part design and supplier operations. This enables fact-based negotiations and uncovers ways to offset increases in raw material prices or engineering costs with savings in other areas like manufacturing or labor efficiencies and SG&A. Suppliers benefit through more efficient operations.


Set (and reset) thebar high 89

Set annual goals for supplier cost-reduction or innovation contributions. Make this goal part of suppliers’ overall performance scores. Give top contributing suppliers first crack at new business opportunities.


90 Enter China gingerly

It’s easier to get into China than to get out if things go awry. When launching a China sourcing program, use a phased approach to ensure success and minimize risk. Personally train suppliers to understand your business requirements, methods, and objectives. Tap an experienced third-party partner with local presence to help onboard and develop suppliers.

Lost in TranslationLearn how to navigate the challenges of sourcing and managing suppliers in China from one of the world’s foremost experts.

http://www.supplyexcellence.com/blog/wp-content/themes/threecolumn/podcast/supplynow2-se.html?AFC-top&tip=90b




It all boils down to spend under management 91If you had to use a single metric to measure supply management effectiveness, make it spend under management. Spend under management is the percentage of your company’s total addressable spend that is managed using approved strategic sourcing and

compliance procedures. Why is this so important? Each new dollar brought under management yields $0.05 - $0.20 in savings.


92 Know your market share

Measure spend under management on two axes: First, what is the corporate-wide sourcing and contract compliance for each spend category? (Example: Compliance for your preferred airline was 82% last quarter.) Next, what’s your “market share” for a given department? (Example: 90% of the marketing department’s spend is under management of your standard sourcing and compliance procedures.)


93Go on a diet

Apply lean principles to sourcing, contracting, and supplier management processes. Eliminate non-value added tasks, such as redundant data entry. Automate and streamline time- and labor-intensive processes and communications, and embed standard policies, processes,

and controls in all aspects of supply management. Use repeatable sourcing and contract templates to enhance productivity and knowledge transfer.


94 Encourage counter offers

Enable suppliers to bundle and un-bundle line items or provide alternative offers. This helps you determine the overall best value allocation. It also allows suppliers to differentiate on more than just price. And because suppliers are the experts on their products, they may suggest innovative technologies or processes that you may never have considered.


Start off on the right foot 95Work closely with new suppliers to codify performance requirements, measures and methods, and continuous improvement goals for costs. Give suppliers advanced (preferably On Demand) visibility into their performance. Link performance tracking with supplier development and

new business opportunities.


96 Develop a marketing plan

Take a page from Marketing’s book and develop standard procedures and tools for communicating your supply and contract management plans – and for trumpeting your success. Some tactics: Brief business executives regularly on your initiatives, results, and how they impact their business. Pen a regular column in the company newsletter on the value of supply. Publish case studies on your most satisfied (internal) customers. Issue deal sheets for each sourcing and contract project, defining your approach and results.


Invest in suppliers 97Identifying supplier performance problems is easy. Resolving the issue quickly is another matter. Top supply groups take matters into their own hands. Dedicate tiger teams to work with key suppliers to quickly assess the root cause of a problem and make recommendations on how

to fix it. In most cases, the investment is less costly than switching to a new supplier.


98 Digitize your contracts

The number one challenge to spend compliance is poor visibility into contracts. Digitize and store at least contract header information in a searchable repository. This enhanced visibility can dramatically improve contract compliance, minimize risks, and provide leverage to force policy changes.

A Contract StoryView a case study on how contract management automation helped one of the nation’s largest health-insurance companies avoid risks and business disruptions, improve visibility and compliance, and reduce administrative cycles and costs.

http://www.procuri.com/customers/snapshots.asp?display=bcbsfl&AFC-top&tip=98b





Pass this eBook along

E-mail this book to a colleague or two (or more!).

99



100 Share your wisdom

Do you have favorite supply management improvement tips of your own? Share them at The Top 100 Supply Management Tips of All-Time! site here:

www.TopSupplyTips.com

Your wisdom will live on. And it could make it into the next volume.
