Jonas Olsson - Volativolati.se/backnet/media_archive/original/26f5a107b... · Be Proactive and try to avoid RFQ process Extend current agreement Give away price increases or part

Jonas Olsson

A world leader in engineered polymer solutionsGroup profile*)

Founded in 1905 by Henry Dunker

Annual sales:

about SEK 30 billion

~ € 3 billion, $ 3.29 billion

Employing about 21,500 people in

44 countries worldwide

~ 100 manufacturing facilities

Average site = 210 FTE

2016-05-23 TRELLEBORG GROUP3

Seal


Chemical Resistant Seals

Facade Seals

Airframe Seals

5000

Damp


Floating Slab

Track Bearings

Industrial antivibration

Infrastructure

Construction Bearings

Protect


Ocean Current Protection

Elastopipe

Sprinkler System

Low Soil

Compacting Tires

6/17/2015 TRELLEBORG GROUP7

Going forward…

We focus on growing all our businesses

We strive for Excellence in all our operations; Sales, Manufacturing,

Purchasing and Working Capital

Purpose with today’s session

Describe the most used modern purchasing

tools.

Share ideas on how you can react on new

customer behaviors.

Give you my view on how you should

interact with purchasing.

Purchasing vs sales

Sales: Postive words like, growth, business acceleration, etc

Purchasing: Negative words like, saving, limitations, slow moving etc.

10 16/10 2013

Purchasing spend vs Sales

540 € 680 €

190 €

370 €

250 €

145 €

60 € 75 €

- €

200 €

400 €

600 €

800 €

1,000 €

1,200 €

1,400 €

1,600 €

Purchasing Salaries Profit

Depreciation/Capex

External compounds

Metal Components

Traded goods

Indirect material

Raw material

60% 28% 8%

Purchasing represent ~60% of our business (quite normal in any business)

Purchasing Excellence Board

Trelleborg Coated

Systems

■ Johan Wijk

Chair

■ Jonas OlssonTrelleborg Industrial

Solutions

■ Mathias Löwenberg

Trelleborg Sealing Solutions

Tewfik Mansour

Ton Roosenboom

Trelleborg Wheel

Systems

■ Pio Gizzi

Trelleborg Offshore

& Construction

■ Chris Kelsal

■ Luke Rogers

■ Arthur van Hamel

(rotating)

Sponsors

■ Peter Nilsson CEO

■ Ulf Berghult CFO

Establish BA support to drive Excellence

Quality – Procure

correct quality

Delivery, service

& CR – Obtain

desired level

Cost – Continuous

Improvement &

cash flow

People

1

2

3

4

Purchasing KPIs

Secure Customer

satisfaction

Ensure

productivity and

low inventory

Improve profit and

cash flow

Attract, retain &

develop

Objective

Quality – Procure

correct quality

Delivery, service

& CR – Obtain

desired level

Cost – Continuous

Improvement &

cash flow

People

1

2

3

4

Purchasing KPIs

Secure Customer

satisfaction

Ensure

productivity and

low inventory

Improve profit and

cash flow

Attract, retain &

develop

Objective


The Value Chain for __________________(CCV training)

Objectives

Purchasing R&D Production FinanceSales/

Marketing

KPIs

Challenges

Wider

goals

Functions

Agenda

Introduction

The Purchasing Chessboard

Purchasing Strategies (“Krajlic matrix”)

Modern purchasing tools and how to respond to them

Purchasing Behaviors

The Purchasing Chessboard – 64 methods

Invention on

demand

Core-cost

analysis

Vertical

integration

Bottleneck

management

Sourcing

community

Procurement

outsourcing

Compliance

management

Demand

reduction

Leverage

innovation

network

Design for

sourcing

Intelligent

deal

structure

Political

framework

management

Buying

consortia

Mega

supplier

strategy

Closed loop

spend

management

Contract

management

Functionality

assessment

Product

teardown

Composite

benchmark

Product

benchmark

Cost-data

mining

Master data

management

Supplier

consoli-

dation

Bundling

across

product lines

Specification

assessment

Design for

manufacture

Process

benchmark

Complexity

reduction

Standardi-

zation

Spend

transparency

Bundling

across

generations

Bundling

across sites

Value chain

reconfigu-

ration

Supplier

tiering

Collaborative

capacity

management

Visible

process

organization

RFI / RFP

process

Supplier

market

intelligence

Make or buy

Global

sourcing

Revenue

sharing

Sustain-

ability

management

Virtual

inventory

management

Vendor-

managed

inventory

Expressive

bidding

Reverse

auctions

Bestshoring

LCC

sourcing

Profit

sharing

Project-

based

partnership

Total life

cycle

concept

Supplier

development

Total cost of

ownership

Price

benchmark

Cost-

regression

analysis

Cost-based

price

modeling

Strategic

alliance

Value-based

sourcing

Collaborative

cost

reduction

Supplier

fitness

program

Leverage

market

imbalances

Unbundled

prices

Factor-cost

analysis

Linear

performance

pricing

8

7

2

1

6

5

4

3

B HA GFEDC

High

Supply

power

Low

Low HighDemand power

By AT Kearney

Agenda

Introduction





High $$$$$

Low $

Competition

High

Leverage

Shop Manage Risk

Partner

Low

The Krajlic Matrix

Different strategies requires fundamentally

different purchasing approaches and tools

High $$$$$

Low $

Competition

High

Leverage

Shop Manage Risk

Partner

Low

Sales price

goes down

Sales price

goes up

Everyone strives to become partners

to maximize profit

The Kraljic matrix from a supplier perspective

Many

alternat

-ives

Unique

product

/service

Supplier bargain power

Low

High

Vo

lum

e

Unique high

volume high

margin

partner•All supplier’s strive

to increase volumes

and margins to

become an

indispensible

partner or “solution

provider”.

•To bundle, offer add-

ons and complete

“solutions” are

example of common

tactics.

The new Brand Platform builds on a stronger

positioning and value promise to customers

We seal, damp and protect critical applications in demanding environments

Our innovative engineered solutions accelerate performance

for our customers in a sustainable way

Upgrading our role and contribution

to become even more strategically

relevant to customers

Product Supplier

Solution Provider

Business Accelerator

25 TRELLEBORG GROUP

BA TRELLEBORG OFFSHORE & CONSTRUCTION26

Trelleborg Marine Systems:

We offer a complete port / vessel solution advanced engineering for safety and efficiency

Volati


High

Low

Difficulty of obtaining supply

Low High

Imp

ac

t o

n p

rod

uc

t va

lue

/ p

roc

es

s

ec

on

om

ics

Leverage

Shop Manage Risk

Partner

All this to secure that we are our customers first

choice!

Topdelivery

Top Quality

5 S

Excellence

Branding

Ease ofdoing

business

Innovative

Solutions

Digital /Apps

Topdelivery

Top Quality

5 S

Excellence

Branding

Ease ofdoing

business

Innovative

Solutions

Digital /Apps

High

Low

Difficulty of obtaining supply

Low High

Imp

ac

t o

n p

rod

uc

t va

lue

/ p

roc

es

s

ec

on

om

ics

Leverage

Shop Manage Risk

Partner

All this to secure that we are our customers first

choice!

Topdelivery

Top Quality

5 S

Excellence

Branding

Ease ofdoing

business

Innovative

Solutions

Digital / apps

Who wants to be where at

the customer side?

High

Low

High

Leverage

Shop Manage Risk

Partner

Low

• Purchasing

• Budget owners

• Sales

• Production

• R&D

Imp

ac

t o

n p

rod

uc

t va

lue

/ p

roc

es

s

ec

on

om

ics

Competition



High

Low

High

Leverage

Shop Manage Risk

Partner

Low

Imp

ac

t o

n p

rod

uc

t va

lue

/ p

roc

es

s

ec

on

om

ics

• Supplier days

• Challenge specifications

• Design-to-Cost

• Supplier workshops

• Clean sheeting/should

costing

• Total Cost of Ownership

(TCO)

• Supplier development

• Internal workshops

• Raise-the-Stakes meetings

• Professional RFQ incl. price points

and modifiers

• Transparent, iterative and fact

based feedback

• Total Cost of Ownership (TCO)

• Rapid repricing

• Consolidation Competition

We want to have as many suppliers as

long as possible in the process

17 15 13

4

2

RFQ response

RFQ send out

Contracted

Initial long-list

After 3rd price

feedback

Try to keep all in the

game!

Every supplier can

contribute – even if not

selected e.g., competition,

cost saving ideas Suppliers decide to leave

based on our guidance

Here is where we want

suppliers to leave based on

facts (ABCD-letters)

Final decision

Trade-off with softer

parameters

RFQs comes with a professional

cover memo

If we are professional we get professional responses

from the suppliers

The more price points and price

modifiers we use the better results

we obtain

Price points

▪ Definition ▪ The price you ask from the supplier

for a product/service or part of a

product/service

▪ Typical unit ▪ USD per piece or activity

▪ Examples ▪ Tooling cost

▪ Production start-up cost

▪ Unit cost

▪ Cost of Hose

▪ Cost of Fitting

▪ Cost of xxx

▪ Comments ▪ Changes in “harder requirements”

e.g., alternative solution, other

material would normally be

handled by price points i.e., two

alternatives are prices

▪ Typical

savings

▪ >15+% on total cost

Excercise

Warrenty

3 year contract

The more price points and price

modifiers we use the better results

we obtain

Price points Price modifiers

▪ Definition ▪ The price you ask from the supplier

for a product/service or part of a

product/service

▪ Price modifiers are changes in

“soft requirements” that we

separate out from the base price in

order to make a fact based

decision

▪ Typical unit ▪ USD per piece or activity ▪ % on total cost

▪ Examples ▪ Tooling cost

▪ Production start-up cost

▪ Unit cost

▪ Cost of Hose

▪ Cost of Fitting

▪ Cost of xxx

▪ Rebate/Increase for longer/shorter

duration


lead times


payment terms

▪ Comments ▪ Changes in “harder requirements”

e.g., alternative solution, other

material would normally be

handled by price points i.e., two

alternatives are prices

▪ Not using the unit % on total cost

will likely result in time consuming

and difficult analytical work

▪ Typical

savings

▪ >15+% on total cost

▪ <5% on total cost

Best-of-Best (BoB) methodology Best offer

Tooling cost (1 year)

(USD/tool)

Set-up cost

(USD/order)

Unit cost

(USD/piece)

Additional treatment

(USD/piece)

Cash rebate 15 days

(%)

Volume

Total

1

100

100 000

50 000

N/A

N/A

Supplier 1

50 000

150

15

3

1.5%

1,689,275

Supplier 2

70 000

Included

18

Included

0

1 870 000

Supplier 3

47 000

100

13

5

0

1 607 000

BoB

47 000

0

13

0

1.5%

1 326 795

More volume 25 000 5% 2% 2,5% 5%

Page 1 Page 2

General price feedback

(1st and 2nd price round)

How to create even more…..

Raising-The-Stakes meeting

1. Background to us and what we are doing

2. Purpose with this RFQ

3. Explanation of the sent out RFQ

4. Q&A session


Position our self as an

attractive partner

Align with the suppliers

on high aspirations

Clarify the sent out

material

CEOCPO Purchaser

Raising-The-Stakes meeting: Illustration for another company (Company car tender) – 1/2

Description of this RFQ

• Conducted 17th of June – contracts signed 9 weeks later

• 41 companies where invited, 36 companies participated

• The suppliers had not experienced anything like it before, but where highly impressed

• CEO and CPO participated and had their contributions to the meeting even though

meeting was headed by category lead

Why start an RFQ or change supplier?

1.Quality issues

2.Quality issues

3.Quality issues

4.Delivery issues

5.Delivery issues

6.Huge price difference vs market

1.Effects customers Sales



4.Effects customers Production

5.Effects customers Production

6.Effects customers Purchasing

Why start an RFQ or change supplier?

What can sales do?

Be Proactive and try to avoid RFQ process

Extend current agreement

Give away price increases or part of it (Customer ”save” 2 % or xxx

€ in less increase)

Give away 3 year and 3 % per year in common R&D work to take

out cost.

Give away 2% on Price (Purchasing Love a quick way out)

If in the process

Try to ”fix” the selection criteria (TCO)

Fill out as little as possible

Demand feedback

Ignore ”BoB” ask about best supplier

The Purchasing process

Process time

Pro

fit im

pa

ct

Need analysis

Supply market analysis

Correct specification

Request for quotation

Bid evaluation

Negotiation

Contract follow up

Sales people wants

to jump here directly

Modern

purchasingOld fashion

purchasing

With this result

Shop suppliers

High

Low

High

Leverage

Shop Manage Risk

Partner

Low

Imp

ac

t o

n p

rod

uc

t va

lue

/ p

roc

es

s

ec

on

om

ics

• Rapid repricing

• Consolidation



and modifiers


based feedback



• Supplier days


• Design-to-Cost



costing


(TCO)


Competition

Spend and supplier base


€27,446

€54,051

€11,675

€0€0

€10,000

€20,000

€30,000

€40,000

€50,000

€60,000

Partner Leverage Shop Risk

Value

19

348

1463

40

200

400

600

800

1000

1200

1400

1600

Partner Leverage Shop Risk

# Suppliers

Rapid repricingExample of purchasing approaches and tools primarily suitable

High

Low

High

Leverage

Shop Manage Risk

Partner

Low

Imp

ac

t o

n p

rod

uc

t va

lue

/ p

roc

es

s

ec

on

om

ics

• Rapid repricing• Consolidation



and modifiers


based feedback



• Supplier days

• Challenge

specifications

• Design-to-Cost



costing

• Total Cost of

Ownership (TCO)


Competition

Example of a well prepared rapid

repricing letter

Start with a compliment

We already asked for it

Justification

Gentle threat

Example of a rapid repricing letter -

Background and approach Letter

• Conducted by: Joakim Hansson,

Purchasing Manager, Trelleborg Sealing

Profiles

• Approach:

Letter sent out to 361 suppliers (See

letter to the right)

Total spend for these 361 supplier EUR

~5,4 Million

Average payment terms today 29 days

• Realized savings

299 suppliers (83%) changed to 60

days

Average increase of 31 days for a

spend of EUR 3,4 Million (63%)

• Risks

Right person not received letter

Consequences some interest invoices

caused by delayed payment from those

who haven´t got the letter.



High $$$$$

Low $

Competition

High

Leverage

Shop Manage Risk

Partner

Low

Purchasing has

“ALL”power

Purchaising has

“NO” power

Supplier daysExample of purchasing approaches and tools primarily suitable

High

Low

High

Leverage

Shop Manage Risk

Partner

Low

Imp

ac

t o

n p

rod

uc

t va

lue

/ p

roc

es

s

ec

on

om

ics

• Rapid repricing

• Consolidation



and modifiers


based feedback



• Supplier days• Challenge specifications

• Design-to-Cost



costing


(TCO)


Competition

Supplier days

Typical

purpose?

Whom to

invite?

Participants

form our

side?

Timing and

duration?

Inform – Share information to e.g., find joint interest

and/or create a credible threat

Communicate targets – Leveraging the peer pressure

to communicate targets and expectations

Selected key suppliers (e.g., top 10-20 most

important suppliers)

Primarily partners, but also leverage suppliers pending

on purpose

Management team – To underline the importance of

the day it’s beneficial to have as senior participation as

possible (for parts of the day)

Purchasing and subject experts – To contribute with

expertise and facts in different areas

Normally conducted on a yearly basis and/or at the

launch of new projects/programs

Duration from 2 hours + lunch to full day + dinner

Sometimes CUSTOMERS ask for

contribution / money

Supplier workshops Example of purchasing approaches and tools primarily suitable

High

Low

High

Leverage

Shop Manage Risk

Partner

Low

Imp

ac

t o

n p

rod

uc

t va

lue

/ p

roc

es

s

ec

on

om

ics

• Rapid repricing

• Consolidation



and modifiers


based feedback



• Supplier days

• Challenge

specifications• Design-to-Cost

• Supplier workshops• Clean sheeting/should

costing


(TCO)


Competition

Challenge specifications: Where manufacturing and

purchasing excellence come together

Giant leap from clean sheet

modeling excise to suppliers’ quotes

Trelleborg’s competitors are using

different products – like we can do

the same

Difficult to change products

Leverage Partner

Shop Manage risk

Low HighDifficulty of obtaining supply

Low

High

Imp

ac

t o

n p

rod

uc

t va

lue

/

pro

ce

ss

ec

on

om

ics

Challenge specifications can be

applied in a range of situations

Introduction (~15 min) Our perspective (~15 min)

Workshop (~45 min) Summary of ideas (afterwards)

Client specific (not shared due to confidentiality)

• Why a focus area, e.g.

Large cost

Fragmented supplier base

Lack of strategy

Environmental aspect of essence

Important to end customer

• Decision at senior mgt level to review strategy and optimize category

~1%

~1%

~0–10%

Unit price (market +

supplier markup)

Specification (e.g. type

of power portfolio)

Admin

~10–20%Energy efficiency (i.e.

reduce consumption)

Ease of implementation

Savings

potential

High

= 4

Low

= 0 Difficult

= 0

Easy

= 4

Medium

= 2

Medium

= 2

3) …

1) …

2) …

4) …

5) …

6) …

7) …

Key output

• 50+ savings ideas generated (4

participants)

• Strategy confirmed and new ideas added

• Strengthened collaboration with supplier

Example of supplier workshop

YOU SHOULD THINK !

Ideally you should run customer

workshops without purchasing

Total Cost of Ownership (TCO)Example of purchasing approaches and tools primarily suitable

High

Low

High

Leverage

Shop Manage Risk

Partner

Low

Imp

ac

t o

n p

rod

uc

t va

lue

/ p

roc

es

s

ec

on

om

ics

• Rapid repricing

• Consolidation



and modifiers


based feedback


(TCO)


• Supplier days


• Design-to-Cost



costing

• Total Cost of

Ownership (TCO)• Supplier development

Competition

Purchasing cost is only

one part of TCO

Minimize

TCO of

commo-

dity

Reduce external

costs

Reduce total

internal business

costs

Reduce joint

supplier/

company/customer

life-cycle costs

Purchase

cost

Transportation

Inventory

carrying

costs

Purchasing

administration

Warehousing

R&D

qualifications

Expediting

Production

capacity

Warranty

Factory

yield / scrap

Running

cost /

lifetime

Example – Trelleborg TCO comparing

two alternatives

TSR 10 vs. CV60; EUR/kg compound

TCO 3,70

Process cost 0,40

Other material 1,00

Natural rubber cost 2,30

3,60

0,20

0,95

2,45

TSR*10 CV**60

* Technical Standard Rubber (TSR)

** Constant Viscosity (CV)

2 step mixing 1 step mixing

Agenda

Introduction





Hierarchy

1. Sales

2. Production

3. R & D

4. Finance / Budget owner

5. Purchasing

Kraljic wish

1. Partner

2. Partner

3. Partner

4. Partner / Leverage

5. Leverage

How strong is purchasing internally ?



High $$$$$

Low $

Competition

High

Leverage

Shop Manage Risk

Partner

Low

Purchasing has

“ALL”power

Purchaising has

“NO” power

Business and

personal needs


Business

needsPersonal

needs

Wants

Different Risk! (CCV training)

Business risk

Personal risk

What is in it for the buyer/R&D/sales ?

■ Success

■ Innovations

■ Trouble free supply

■ Bonus (KPI’s)

■ Fun, enjoyment

How to do a purchaser look good

in a price increase

■ Talk about cost avoidance

■ We will stop production/article

■ Many small increases much better than 1 large

■ Savings – kickback better than lower net pricing

■ Time saving

■ Do the ”internal” presentation for the buyer.

Why change supplier ?

1. Quality issues

2. Quality issues

3. Quality issues

4. Delivery issues

5. Delivery issues

6. Huge price difference vs market

Don’t make someone look bad !

Todays key learning

RFQ incl BoB, give out as little as possible

Rapid Re-pricing if needed give away 100 €

Food chain, don't be afraid of the buyer, ignore

them as much as possible.

What's in it for me

Make life easy

Documents

Jonas Olsson - Volativolati.se/backnet/media_archive/original/26f5a107b... · Be Proactive and try to avoid RFQ process Extend current agreement Give away price increases or part