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Agenda
Time (approximate) Theme
14:00-14:30 Welcome
14:30-15:30 Value Drivers in Supplier Relationships (Workshop 1)
15:30-15:45 Coffe Break
15:45-16:45 Value Measurement (Workshop 2)
16:45-17:00 Wrap up
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Understanding value is the key for understanding
exchange
Value = the cornerstone of business market management(Anderson and Narus, 1999)
Value creation = the essential purpose for a relationship (Anderson, 1995; Grönroos, 1997; Wilson, 1995)
Value = a trade-off between benefits and sacrifices (Sinha and DeSarbo, 1998; Ulaga, 1999; Woodruff, 1997)
Ritter (2014)
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There are many views on value
Cost of ownership
Purchasing costs
Product value
Relationship value
Network value
Time
Value = - price - production costs + sales price premium + extras+ other relationships
Ritter (2014)
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Four perspectives exist in every relationship
Ritter & Walter (2008)
Supplier CustomerRelationship
Supplier perceives customer value
Supplier perceives own value Customer perceives supplier value
Customer perceives own value
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Value: (Benefits – Costs)
Perceived Value (PV) =Perceived
Benefits
Perceived
Costs-
When (PV > 0) there is a perceived payoff from the supplier relationship
and thus an incentive to engage in it
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Relationship Benefits
• Product Quality
• Delivery Performance
• Service Support
• Personal Interaction
• Supplier Know-how
• Time-to-Market
Relationship Costs
• Direct product costs
• Process costs
Value Drivers in Supplier Relationships
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Relationship Value
Relationship Benefits
Relationship Costs
CoreBenefits
SourcingBenefits
OperationsBenefits
DirectCosts
AcquisitionCosts
OperationsCosts
Ulaga and Eggert (2006)
Drivers of value creation opportunity
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Value as comparison over time or across the Supply network
Outcomes given
comparison level (CL)(Obtained Value) > = < (Expected value (CL))
?
Comparing over Time
Based on Anderson & Narus (1984, 1990)
Comparison Level for
alternatives (CLALT)(Obtained Value) > = < (Alternative value (CLALT)
?
Comparing across the Supply Network
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• The perceived net worth of the tangible benefits to be derived
over the life of the relationship (Hogan, 2001).
• ERV = A monetary value (and its distribution).
• Estimating the size and uncertainty attached to the benefits and
costs that drive relationship value.
• Using Monte-Carlos analysis to understand the statistical
distribution of the value that can be derived from the relationship.
Expected Relationship Value (ERV)
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Monte-Carlo analysis using Excel
Purchasing Volume 70.000.000
SUPPLIER RELATIONSHIP ADMINISTRATION DKK per. Hour RISK Year 1 Year 2 Year 3
Management time 455 50% 120 120 120
Administrative time 140 50% 200 200 200
COST REDUCTION PROGRAM DKK per. Hour RISK Year 1 Year 2 Year 3
Engineering time 263 50% 150 150 150
Price Reductions (% af Purchasing volume) 50% 0,70% 0,70% 0,70%
EARLY SUPPLIER INVOLVEMENT PROGRAM DKK per. Hour RISK Year 1 Year 2 Year 3
Engineering time 263 20% 2.000 2.000
Process Efficiency (% af Purchasing volume) 70% 0,90% 0,90%
Material Reductions (% af Purchasing volume) 70% 0,90% 0,90%
JUST IN TIME PROGRAM DKK per. Hour RISK Year 1 Year 2 Year 3
Engineering time 263 20% 1.000 500
Administrative time 140 20% 150 150
IT Investments 40% 525.000
Reduced inventory slack (% af Purchasing volume) 70% 0,80% 0,80%
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• Value Drivers in Supplier Relationships.
• What are they in your firm? Your sourcing operation?
• Qualitative assessment (comparing).
• Expected Relationship Value (ERV)
• Make an influence Diagram.
• Assessment of benefits/costs
• Assessment of uncertainties.
• Monte-Carlos analysis (using Excel or other more advance software)
Summary
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• Multiple applications of the ERV-model in case firms
• How does ERV work in advanced settings?
• What are the obstacles using this approach?
• Access and accuracy of data available in the firm?
• Survey on the practices of value assessment in supplier relationships
• How do firms measure supplier value?
• How advanced are the methods of assessment?
• When are the methods more advanced?
Next steps in the project
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Kim Sundtoft Hald,
Associate Professor, Ph.D.
Copenhagen Business School, Department of Operations Management
Solbjerg Plads 3, 2000 Frederiksberg, Denmark
Mobile: +45 23 72 23 03
E-mail: [email protected]
Contact Details