supplier relationship management in global market · 2007-06-07 · makers, industrial oems •...

Supplier Relationship Management in Global Market

Supplier Relationship Management in Global Market

June 1, 2007

James H. Lee (이중호)

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Agendas

Why Global Sourcing?

Exploring how to effectively design and implement Global Sourcing Strategy

Strategically Managing supplier performance and conduct continuous improvement

Lessons learned

Managing the differences when doing business with your global suppliers

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•Cost Reduction

•Biz growth in new and emerging markets

•Supporting Customers’

Manufacturing Foot Prints

•Portfolio strategy of field

•Incentives :tax, investment capitals

• Overall Lower Cost

• Technology Trend current to global leadership

• SCM help organization find partners in global market

Benefits•From Price focus to total cost focus

•ESI

•Competitiveness of Logistic management

Barriers&Considerations

•Complexity of supply chain

•Differences : Language, Time-zone, Culture, Specs, Prints

•Risks : Currency, Political Stability, Finance

Why Global Sourcing Why Global Sourcing

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Why Global SourcingWhy Global Sourcing

•

EuropeEuropeEuropeAsiaAsiaAsiaAmericaAmericaAmerica

20% →15%

20% 20% →→15%15%

30% →50%

30% 30% →→50%50%50% →

35%50% 50% →→

35%35%

Commodity Strength by Country?

Marketing/ Manufacturing Strategy?

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Global Labor Competitive Landscape

Asia Eastern Europe Central/ South America

.47 Russia

Labo

r Cos

t Per

Hou

r…$U

SD

1.39 Estonia

2.06 Czech Republic2.13 Hungary

3.45 Turkey4.51 Slovenia

1.30 Brazil

2.15 Columbia2.29 Mexico2.50 Venezuela

.14 Indonesia

.35 Vietnam

.53 China

.78 India1.05 Thailand

1.78 Philippines

2.68 Malaysia

7.00 Portugal4.86 Chile6.13 Taiwan

7.13 Singapore/ Korea

1.60 Romania

4.81 Poland

1.50 Bulgaria

.86 Ukraine

Leverage Capability/Low Cost Leadership

1.25 Belarus

19.51 Japan19.86 USA

High Cost22.28 Germany

.80 North Africa

Note: Labor rates published by IMD…Institute for Management Development


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Productivity Index

On Developing

Quality/Technology Index

On Developing


Total Cost Estimation Model

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5% – 30%Japan, Korea, Taiwan, ChinaCNC Lathe

15% – 50%IndiaSoftware Development

15% – 50%China, Taiwan, KoreaTransformers, Coils, Solenoids, Relays and Cables

10% – 40%China, Korea, Malaysia, Thailand, IndiaMachined / Turned Parts

Taiwan, China, Malaysia, Singapore, Korea

China, India, Korea

China, Thailand, Malaysia

China, Korea

China, Thailand, Korea

China, Malaysia, Thailand, Taiwan

China, Taiwan, Malaysia, Thailand

China, India, Thailand, Korea

China, India, Thailand, Korea

Countries Focused

10% – 45%Aerospace Components

15% – 45%Powdered Metal Parts

20% – 40%Rubber Parts

15% – 30%Plastics Molded Parts and Molds

10% – 35%Stamping Parts and Dies

15% – 60%Electronics/ Electromechanical Box Build

10% – 35%PCBA

10% – 30%Al / Zn Die Castings Parts

15% – 40%Machined Castings Parts

Potential SavingsKey Commodity

Potential Saving for Commodities


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Design and Implement Global Sourcing StrategyDesign and Implement Global Sourcing Strategy

-Global Sourcing Strategy

Commodity Priority

Strategic Suppliers

Best – In – Class

ManufacturingManufacturing

Foot Print Foot Print

SWOT ofSWOT of

key Target Countrieskey Target Countries

Trend of World Trend of World

Class TechClass Tech

Corporate Commodity StrategyCorporate Commodity Strategy

Biz Group Commodity StrategyBiz Group Commodity Strategy

Div Commodity StrategyDiv Commodity Strategy

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Design and Implement GS Sourcing StrategyDesign and Implement GS Sourcing Strategy

MrktgMrktg/Sales/Sales

ITIT

SourceSource

EngineeringEngineeringOPSOPS

Tools, Process and Aligned Goals will Improve Collaboration

HRHR

FinanceFinance

SRM

EngineeringEngineering

OPSOPSITIT

SourceSource

MrktgMrktg/Sales/SalesFinanceFinance

HRHR

SCM

– Global Commodity Mgmt.

– SCM Standard Platform

Supply Chain Management (SCM)

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Supporting Goals by Improving Material Productivity Enabling the Shift in the Manufacturing Footprint

Mfg. Footprint(Develop Local Suppliers)• Raw Materials • Components• Sub-assemblies

Mfg Rationalization(Out-sourcing)• Components• Sub-assemblies• Complete product

Re-sourcing(Drive Cost Out)• Components• Sub-assemblies• Complete product• Design

Strategic Goal: Target Country Sourcing Initiative

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ThreatsThreats• Diminishing competitiveness due to increasing demands.• ‘Seller’s market’- Capacity constraints

OpportunityOpportunity• Big growth in Indian car market 20%+.• Vehicles export numbers 1 M+ in 2005• Government support for Export Oriented Units• Companies willing for investments against specific projects.

WeaknessWeakness• Lack of proper infrastructure – Roads, Electricity, Water, Airports• Domestic market tuned to low-medium volumes.• Some ‘Hand Holding’ required to upgrade to international standards.• Less ‘free mfg capacity’ available leading to higher lead times.• Availability of Finance.

StrengthsStrengths• Availability of Skilled Engineers / Technicians• Business Language - English - Easier communication globally• Advanced Engineering capabilities. Strong Technology Base & continuous up-gradation due to presence of Auto majors •Continuous Improvements thru Kaizen, 6 sigma, TPM practices etc.

• Political and Economic stability• Availability of skilled low cost labor.

SWOT Analysis – Country “W”

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ThreatsThreats• Uncertainty of exchange rate • Fluctuation of car market forecast• Intellectual Properties

OpportunityOpportunity• Government support for new projects with foreign customers• High-tech components still has profit margin in market• Big growth of car market

WeaknessWeakness• Lack of international biz experience• Not deeply understand customer requirement• Most suppliers lack of R&D capability • Low automation on production• Need to improve quality system from reactive to preventive• Lack of skilled resources

StrengthsStrengths• Low labor cost (U$ 2/ hrs); East Coast Area• Strong on precision machining, die casting, injection mould, stamping• Supplier base experienced with Global Automotive Customers, GM/ VW/ Honda/ Hyundai/ Delphi/ Bosch.• Cost competitive for manual assembly

SWOT Analysis – Country “X”

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Product "A" Product "B" Product "C" Product "A" Product "B" Product "C"

Screw/Bar ★★★★ ★★★★ ★★★★ ★★★★

Al Die-casting ★★★★ ★★★★

Forging/Forming ★★★ ★★★ ★★★

Gravity Casting ★★★

Casting ★★★★ ★★★

★★★

★★★ ★★★ ★★★

★★★ ★★★ ★★★ ★★★ ★★★

★★★★ ★★★ ★★★ ★★★ ★★★★

★★★★ ★★★★

★★★★ ★★★★ ★★★★

★★★ ★★★

★★★ ★★★

Industry "A" Industry "B"

Machining

Steel

Commodity Industry

Powder MetalStamping/Fine BlankingBearingPlasticRubberElectricElectronicToolings

* Estimated Success Rate: < ★- 10% ★★- 20% ★★★- 40% ★★★★- 60% ★★★★★- 80% >: Sourcing Strategy

: Sourcing Strategy + Manufacturing Foot print

: Sourcing Strategy + Manufacturing Foot Print + Country Strength

: Enough Suppliers Identified

> 4

Capability Matrix of Country “X”

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- Potentials of Korean suppliers for GS sourcing project• Positioning • Characteristic

High

Low

100%

60%

100%

60%Low High

• Positioning

(Quality, Precision, Technology)

Cost QuotationHigh

LowLow High

EAU

Country “X”/ “Z”

Korea

Country “A”

Other Asia suppliers Korea

• Best fit projects for Korean suppliers- High precision - Low material cost rate- High volume ; Production engineering needed (Automation and etc.)- Automotive industry- Sub- assemblies ( not labor-oriented project)

GS Products

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How to implement

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STRATEGYSUPPLIER

SELECTION AND AWARD

TRANSITION SETUP VALIDATION PRODUCTION AUDIT

1 2 3 4 5 6

Phase 1LCC viabilitySup. Diversity

inclusionSpend AnalysisMobility StudyBusiness CaseRisk AssessmentSourcing StrategyTeam MembersProject PlanRelationship with

ESTP

Phase 2Make Vs. Buy

AnalysisFinalized RFPSupplier ProfileAudit ReportEngineering ReviewSupplier ProposalSupplier AnalysisProposal Vs. GoalsSupplier Selection

Phase 3Tooling Req. ReviewReview Sp.

CharacteristicsLogistics PlanSigned ContractImplementation PlanCommunication PlanPPAP/FAI TIMELINE Revised Project Plan

Phase 4(4.1, 4.2, 4.3 and 4.4)APQP CompletedPPAP/FAI completed Product Design

StatusContingency PlansProject PlanValidation & Test

PlansValidation Testing

Phase 5Ramp-up/ramp-down

planIncoming parts quality

plan

Phase 6- Review decisions

made, and the overall process.

- Review supplier performance

- Comparison of performance to stated goals and cost savings

- Critique of process performance.

- ID opportunities for improvement / changes to overall process

APQP/PPAP

Submission

PPAP Approval

4.1 4.2ValidationTesting

CustomerApproval

4.3 4.4

PhasesGlobal Sourcing Process

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• IPO meeting : SWOT Analysis on Korea Supplier Base• Capability Matrix of each commodity• Macroscopic Economy Index• Government Investment policy• Trend of New Technology

• Supplier List : Car Makers, Industrial OEMS• Credit Report : Bank• Reputation from Current Customers• Subjective rating for main commodities for potential suppliers

•Alignment with Global Sourcing Strategy• Competitive suppliers in total cost• Flexible Capability for GS Products

High Potential Commodity

Qualified Supplier Base

Tailored Suppliers

•Supplier Selection Methodology-Price-Risk Assessment-Financial Health (Open Rating)

Supplier Identification/ RFQ/ Supplier Selection (Ph Ⅰ/Ⅱ )Design and Implement GS Sourcing Strategy in KoreaDesign and Implement GS Sourcing Strategy in Korea

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• Trace progress of PPAP approval• Do appropriate action upon result

• Gage Correlation• Review PPAP documents in advance• Audit process and drive improvements• Capacity Verification ; 4M

• Computer Simulation Analysis • Quality History• Optimized packing • Train about WISPER, VMI and SEM

PPAP ApprovalPPAP Submission Tooling

APQP Activity : Lead by Suppliers-Learning Curve: Reduce communication gap

-Thorough follow-up action items

-Clear understanding of customer requirements

Mutual Site Visits : US plants and Suppliers-Reduce potential risks

-Find improvement ideas

-Comfortable communication environment

Use third party resources for expediting implementation if necessary

Project Implementation (Ph Ⅲ/Ⅳ)Design and Implement Asia Sourcing Strategy in KoreaDesign and Implement Asia Sourcing Strategy in Korea

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Periodic Meeting with Main/ Strategic Suppliers- Find problem/ complaints proactively- Find another business opportunity- Monitor performance and drive improvement ideas

Immediate Support for urgent issues

Transfer new business/ product information

Production (Ph Ⅴ/Ⅵ)Design and Implement Asia Sourcing Strategy in KoreaDesign and Implement Asia Sourcing Strategy in Korea

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Suppliers

60% + +

Company Customers

90% 90%

Why Kaizen at suppliers?Why Kaizen at suppliers?

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Manage supplier performance and continuous improvementManage supplier performance and continuous improvement

•Online performance management system (Q.C.D.D)

•Supplier Suggestion Program

•Periodic Evaluation

•Quality System Audit

•Process Audit

Value Engineering

Six Sigma

Lean System

•Value stream Mapping

•SPC Tools

•Problem Solving Tools

KAIZEN TOOLS

Supplier Performance Management ToolsSupplier Performance Management Tools

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Positioning of Supply Base

?2

Star

Dog

?1

HighLow

High

Strategic Relationship / Alignment With LCC Commodity

Low

Action Plan* Star :

- Consolidate more projects for the same commodity into each supplier

- Put efforts for continuous improvement

* ?1:

- Expand business relationship or keep current business appropriately

* ?2 :

- Concentrate on continuous Improvement

- Long-term plan for moving to Star section

* Dog

- Remove from ASL once current business is terminated

Com

petitiveness/ Performance

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Manage supplier performance and continuous improvementManage supplier performance and continuous improvementModel for KAIZEN Activity (PECR)

2P (Proactive, Preventive)

2E (Effective, Efficient)

2C (Clear, Contributive)

1R (Robust)

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- Supplier Evaluation in Overall Capabilities Supplier Base – Country “X”

Global Experience( Current Biz, English

communication, Understanding ofGlobal Standard )

Engineering( R&D investment, Self-design ability,

Qualificationof Engineer )

Finance (Profitability, Liquidity, Stability,

Growth-ability)

Cost ( Total Cost, Cost Management Tool )

Quality( 50ppm, Failure Cost

KAIZEN Activity, Calibration )

20062007

Delivery ( 100% OTD, Contingency Plan )

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- Supplier Evaluation in Overall Capabilities Supplier Base of Korea

Global Experience( Current Biz, English

communication, Understanding ofGlobal Standard )

Engineering( R&D investment, Self-design ability,

Qualificationof Engineer )

Finance (Profitability, Liquidity, Stability,

Growth-ability)

Cost ( Total Cost, Cost Management Tool )

Quality( 50ppm, Failure Cost

KAIZEN Activity, Calibration )

20062007

Delivery ( 100% OTD, Contingency Plan )

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Strategic Initiatives for competitive supplier base in Asia

Q> Drive TS16949 certificationQ> APQP Activity lead by supplierQ/D> Full deployment of WISPERC> Increase No. of LTA supplierC/D> Deploy Lean System in supplier base D> Drive VMI program to all suppliersE> Enhance Strategic supplier’s R&D Capability by proposing the

increase of R&D investment in advanceF> Enhance CFROGC of strategic suppliers with CFT Activity

Continuous Improvement Activities (Mid-Term)

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Future Direction of Supplier Base (Long-Term)

Model of Supplier Excellence in Global supplier base

Strategic partners for new technology market

Information source on business trend and technology

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Lessons learned Lessons learned

- RFQ Package : Time/ Efforts Loss• Ad-hoc project• Short lead-time • Specifications of US / European

Norm(especially, material spec)• Samples not current to prints • Inconsistent RFQ- Success Rate• Low Award efficiency• Failure cost - implementation

Issues & Barriers Ideas & Suggestions

- Global sourcing Center• Control useless RFQ• Checklist for RFQ Package• International Norm• Prints current to the latest

revision

- Team Activity / Systematic Approach• Standardized sourcing process

(w/ Gate View)• Global sourcing strategy• ESI• CFT activity with suppliers• GS call – periodic• Project Management

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- Resources• Lack of regional resources• Apprentice• High turnover rate

- Strategic Suppliers• Interest decreased –

interactive?• Conflict with commercial

issues• Potential Risk with investment• Economy of Scales-Inventory Management• Risk of shortage• Elongation of inventory

Issues & Barriers Ideas & Suggestions- HR Management• Hire vs Third Party decision• Workload allocation :sourcing vs Implementation• Systematic training program through class and

project (& Functional Excellence)• Commodity Expert program• Talent Management • Global Workplace Rotation Program • Global Mentor Program- Partnership Management• Timely Feedback• Standard Contract Management• Senior Management Involved (Sponsored)• Strategic Commodity Team : Leverage

-Logistic Program• VMI program• LLP

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Issues & Barriers Ideas & Suggestions


- Visibility of GS projects

•Goal is set, but no implementation plan with projects in pipeline

•Data separated

- Information / knowledge Management

•Not integrated

•Difficult to Access

-Projection of GS projects•Project plan in pipeline

•Data Integration on line

•Global SCM Conference

-GS Information Management•Share Folder : By themes (Bench marks, Lessons Learned, Commodity technology, and etc

•Information Bank : General (Country Economy, currency trend and etc)

•GS Guidebook : Process, Procedure, Organization Chart and etc

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Recognition of Differences Difference Management

Manage differencesManage differences

- Regional / Local Norms

•Specs / prints

•Terminology

-Barriers of communication

•Language

•Right communication channel

•Decision Maker?

- Discussion / Agreement

•Verbal (Meaning of Yes?)

•E-mail

-Ethical Behaviors

•Corruption rate

•Administration process

•Moral Standard

- International Norms

-Designated coordinator / authorized person

-Document / Contract Management

-Decision Marking based on Global Ethics

•Zero Tolerance

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Recognition of Differences Difference Management

Manage differencesManage differences

- Regulation / Law

-Time Difference

- Social/ Political issues

•Religion

•Body Language

•History

•Attitude

•Dress code

- Decoration of Real Capability

•Web-site

•Documents

•Statistical Gamesmanship

- Business Environment

•Influence of government

•Flexibility of Market

- Third Party or Global Law Team

- Consideration on Teleconference Time

- Guideline Book or Training for each country targeted

- Verification on site

•Local resource needed

•Reality of data

- Leverage all resources & networks

•Cooperation with local organization

•Cooperation with local association

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Digitization

+++= 2211ˆ XbXbaY

Key Factors for SuccessKey Factors for Success

Mathematical Model for Success (Regression Analysis) ;

Global Market Development

Global Supplier Data base

Global Ethics

•Supplier Performance Management

•Continuous Improvement Activities

•Projection of Supply Base

Global Sourcing Strategy Strategic Partnership

Global Technology Leader

Overall Cost Competitiveness

Standard Sourcing ProcessProject Management Integrated

Right Resources

Logistic ProgramInformation / knowledge Management

Recognition of DifferencesInvolvement of Leadership

Overall Cost Evaluation Model

Contract Buying

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SOX

EHS: IMDS, ISO14001

Business Ethics

TS16949/ ISO 9001/ AS9000

SRM

CRM

Local Industry/ Government Regulations

Community

Stakeholders

Factors considered in processFactors considered in process

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Q & A

“It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change.”

Charles Darwin (1809 – 1882)