Enhancing Supplier Value and Performance

2016 Innovators Forum Report

Key Insights from the NAEP Innovators Forum and Recommended Strategies for Procurement Leaders WITHSUPPORTFROM

Enhancing Supplier Value and Performance

5/10/16

Procurement Brand

Supplier Relationships

Partnering to achieve strategic goals

2016NAEPInnovatorsForumThis paper provides an overview of the 2016 Innovators Forum with a distillation of the keydiscussion points and recommendations regarding strategic supplier relationship management(SSRM). The group engaged in robust dialog about improving supplier relationships, but alsofocusedonpragmaticideasandpracticesthatcanbeactedontoday.Thepaperoutlinesastrategicsupplier relationship management framework and recommendations for critical practicesprocurementleadersshouldfollow.

1

Table of Contents

EXECUTIVESUMMARY.....................................................................................................................................................................2

ABOUTTHEINNOVATORSFORUM..................................................................................................................................................3

ATTENDEES......................................................................................................................................................................................4

CASEFORCHANGE..........................................................................................................................................................................5

STRATEGICSUPPLIERRELATIONSHIPMANAGEMENT(SSRM)FRAMEWORK..................................................................................6

RECOMMENDEDPRACTICES

1) ProcurementVision......................................................................................................................................7

2) StrategicSupplierStrategy............................................................................................................................9

3) StrategicSupplierEngagement...................................................................................................................11

4) StrategicSupplierPerformance..................................................................................................................13

BARRIERSANDCHALLENGES.........................................................................................................................................................16

NEXTSTEPS....................................................................................................................................................................................17

SUMMARY.....................................................................................................................................................................................18

QUESTIONSFORYOURTEAM........................................................................................................................................................19

SSRMRESOURCELINKS.................................................................................................................................................................20

ABOUTUS......................................................................................................................................................................................21

ENDNOTES....................................................................................................................................................................................21

2

Executive Summary

Engaging suppliers as strategic partners is notsomething we have done well as an industry. TheInnovators Forum group through discussion and thiswhitepaper isexpressingastrongpointofviewthatwe should changeour thinking.Procurement leaderswill need to first alter a mindset that often viewssuppliers as adversaries and companies to keep at‘arms length’ instead of potential partners withsubstantialassetsthatcanhelpachievestrategicgoals.Colleagueswhopracticestrategicsupplierrelationshipmanagement at a high level report the followingbenefits:

• Theyhavegreatcontracts;• Supplierstreatthemastopcustomers;• Processefficienciesarebeingrealized;• Stakeholdersreceivegreatcustomerservice;• Spend is consolidated with fewer suppliers;

and• Theexecutiveteamisgainingappreciationfor

theimportanceoftheprogram.The first step in building a program to enhancesupplier relationships is to develop a procurementvisionthatemphasizesvaluebeyondpriceandalong-termviewofkeybusinessdrivers.Thisshiftinmindsetallows the procurement team to focus on otherelements of value including process efficiencies,customer service and achieving goals thatmatter tostakeholders.

Managing suppliers with this level of intensity takesresources and thoughtfulness. It is critical for theprocurementteamtoapplyasetofcriteriatosupplierrelationships in order to segment them into variouscategories. The importance of segmentation is tofocus scarce procurement department resources onthose relationships that have the potential tosignificantly impact objectives. In this regard, theestablishment of strategic supplier goals and themetricsnecessarytomeasureachievementisacriticalprocess. The itemsweputon scorecardswill drive alotofmeetingsandassociatedactivity.Ifmostofthisactivity is transactional, perfunctory or lookingbackwardsthenwehavemissedamajoropportunityto drive innovation and forward-lookingimprovementsinouroperation.In the end, if we create true strategic partnershipswith key suppliers, then we will have relationshipswitha long-termfocuswheregoalshavebeenjointlydeveloped and the activity toward achieving thesegoalsisjointlypursued.Thepricevaluerepresentedinthe contract will be leading practice and the othervaluecreatedwill exceedwhat couldbeachievedbyprice alone. Internal customers value service andprocess efficiency above all else and this is onesubstantialbenefit that shouldoccurwitha strategicfocusonsupplierrelationships.

“Priceiswhatyoupay,valueiswhatyouget.”--WarrenBuffett

3

About the Innovators Forum

TheNationalAssociationofEducationalProcurement(NAEP) convened the5th annual Innovators Forum inDenver, CO on February 22, 2016. College anduniversityleadersgatheredtodiscussfuturetrendsinhigher education and their impact on procurement.Thepurposeof the InnovatorsForum is toengage inan analysis of the major issues impacting highereducation institutionsandprocurementprofessionalsand to better inform institutional stakeholders onalternativewaystoapproachthesechallengingissues.The previous NAEP Innovators Forums resulted indistributionofwhitepapers titled “Key Insights fromthe NAEP Innovators Forum and RecommendedStrategies for Procurement Leaders”, “Procurementand the Impact of Technology and Expectations”,“TalentManagement”and“TheProcurementBrand”.Feedback from those attending this year and inprevious years suggests these white papers are

powerful tools for senior leaders and procurementprofessionals to learn about the challengesconfronting higher education procurement and toeducateadministrationaboutthosechallenges.Building upon the momentum of previous Forums,which explored a broad range of issues affectinghigher education andprocurement, this year’s groupwas asked to consider the topic of strategic supplierrelationshipmanagement(SSRM).The outcome of this year’s discussion continues theForum’s goal of developing roadmaps thatprocurement professionals can use to betterunderstand complex procurement topics,communicate those concepts effectively to seniorleaders and to improve results in support of criticaluniversitystrategicgoals.

4

Attendees

New attendees bring fresh ideas and insight. This year’s Innovators Forum was assembled by NAEP with the intent ofdeepeningstrategicsupplier relationshipmanagementdiscussions.Attendees includedadministrativeandC-levelexecutivesalongwithprocurement leadership,businessofficersandkeysuppliers.Theteamwascommittedto fulfillingthemissionofthe InnovatorsForumbycapturingandsharing insightswitheachother–andwiththeircolleagues inhighereducationandprocurementviathiswhitepaper–sothatother institutionsand industryprofessionalsmaybenefit fromtheirexchangeofideas.HOWIEAROESTYRegionalSalesDirectorStaplesAdvantageGEOFFBARSCH SeniorAssociateVP,ChiefBusinessOfficerUniversityofColoradoMARKCONLEYExecutiveDirector,ProcurementServicesUniversityofWashingtonLISADEALPurchasingDirectorUniversityofFloridaERICDENBYDirector,Procurement&SupplierDiversityServicesUniversityofVirginiaCHRISFARRELLSeniorDirector,MarketingSciQuestGARYGALLUZZIVicePresidentThermoFisherScientificANDREWGASTWIRTHPartnerPathstonePartnersSANDYHICKSAssociateVicePresident&ChiefProcurementOfficerUniversityofColoradoREXJANNEAssistantVicePresident&UniversityContractsOfficerTexasA&MUniversityTEDJOHNSONAssociateController,IntegratedSupplyChain&ChiefProcurementOfficerUniversityofCalifornia,SanDiego

HELENJOHNSONVicePresident,HigherEducationSalesSciQuestJOHNJOSHUADirectorUniversityofTexasSystem,SupplyChainAllianceJIMKNIGHTPresidentStonebridgeVenturesNICHOLLUOMAAssociateVicePresident,SustainabilityOfficer&ChiefProcurementOfficerArizonaStateUniversityGREGMACALUSOFacultyDirector,LEEDSchoolofBusinessUniversityofColoradoLILAMAUROAssistantVPofBusinessServicesUniversityofSouthernCaliforniaMARKMILLSExecutiveDirector,PurchasingServicesUniversityofPennsylvaniaRONMORASKIDirectorofProcurementServicesRensselaerPolytechnicInstituteDOREENMURNERChiefExecutiveOfficerNationalAssociationofEducationalProcurementMARKSHINKLEMarketVicePresident,WestKonica/MinoltaBusinessSolutionsUSADONNAEVERESTYEAWSupplierIntegrationsManagerSciQuest

5

Case for Change

AcommonthemeinpastInnovatorsForumshasbeentheexpressed goal from the Chief ProcurementOfficer grouptobecomeanessentialstrategicpartnertotheuniversity.Thereisdiversityofthoughtregardinghowbesttoachievethis, however, one common theme is that eachprocurement group shouldmeet a standardof excellencewhen it comes to spend management. This is our coreresponsibility and our relationships with suppliers are animportant component. As an industryweperformwell atstrategically sourcing contracts and managing variouselements of the price relationship. However, spendmanagementismorethanpriceandtheothercomponentsofvaluesuchasprocessimprovement,productavailability,service excellence and innovative ideas are what keystakeholderswant.The Innovators Forum group believes we should think ofcertain suppliers as partners, not adversaries. We mightconsideroursupplybasetobeaportfolioofrelationshipswith different characteristics. Some of our suppliers havethepotentialtomakesignificantimpactsonourgoalsandthese are candidates for ‘strategic supplier’ status. Thegroupbelievesthefollowingitemsarekeyelementsofthebusiness case for gaining greater value from supplierrelationships:

• The value promised in our strategically sourcedagreementsneedstobedeliveredandmeasured;

• Improved process efficiency and elimination orreductionofsystemicissues;

• Increasedcustomerservice;• Support and help to advance the University’s

mission;and• Drive innovative solutions to problems important

totheUniversity.There is a considerable amount of consulting experiencesupported by research to suggest that unmanagedcontracts (supplier relationships) will drain a substantialamountofvalueovertime.Thevalueleakageisnotdueto

improperactions,butistheresultofrelationshipssufferingfrom neglect. Products change, prices change, peopleinterpret contract provisions differently, accountrepresentationchangesetc.Asprocurementprofessionalsweareconditionedtothinkofvalueonlyintermsofpricereductions or cost savings. Mature supplier relationshipsshould harvest price opportunities. Arguably, there isgreatervalue innon-pricecomponents;although theyarehardertomeasure.Considertheimpactthatkeysupplierscan have on customer service and the efficiency ofprocure-to-pay transactions. These are critical valueelementsforkeystakeholders.Often,procurementand/orpublicpoliciesforceshort-termthinking,butcommittingtostrategicsupplierpartnershipsrequires a long-term view. Why do revenue-basedcontracts usually embrace longer term, strategicconsiderations (dining operations, pouring rights,bookstore operations, athletic apparel, others), but notspend based contracts. It is critical that strategic supplierrelationshipsbedrivenbyasetofgoalsandobjectivesandthecriterianeededtomeasureprogressagainstthem.Theword ‘strategic’ implies that we are operating against athoughtfulplantobringaboutadesiredfuturestatethatisanimprovementoverwhatwehavetoday.

“Myteamisincreasinglybeingaskedtoparticipateinverystrategiccontractdiscussions.Thinkingaboutthesepotentialsuppliersaspartnerswithjointlydevelopedgoalshashelpedimproveprocurement’scontributiontostrategicuniversitygoalsandalsoenhancedourbrandimage.”

--NicholLuoma,ArizonaStateUniversity

(InnovatorsForumParticipant)

6

SSRM Framework

Strategic Supplier Relationship Management (SSRM) is acomplex topic that is often confused with SupplierPerformanceManagement,ContractManagementorothersimilar idea. Universities typically have thousands ofsuppliersandalimitedresourcepooltomanagethem.TheInnovatorsForumgroupwasfocusedonthemanagementof ‘strategic’ suppliers. Therearemany contracts that areimplementedbyprocurementteam’sandthere isaseriesof activities typically associated with themanagement ofthese contracts. Those activities are generallycharacterized as compliance related. In other words, canwedeterminethroughmeasurementwhetherthecontractterms have been complied with. In the case of strategicsupplier management we are more focused on activitiessuchasspendanalytics,advancedeProcurementprocesses,two-way communication around strategic goals, drivinginnovation, extracting value beyond price and buildingstrong supplier relationships that can evolve into truepartnerships.

The amount of material on this topic is voluminous. Inpreparationfortheforumdiscussionthegroupreadafewbackground articles and from these common themesemerged. This allowed the group to discuss strategicsupplier relationship management with the followinggeneralunderstandingandagreement:

1. ThepurposeofSSRMistoengagetherightstakeholderstocreateownershipinaframeworkthatwilldrivecontinuousefficiencyimprovementsandothervalue1;

2. Selectingtherightpartnersiscritical.Thisisfacilitatedbythoughtfullydevelopingtherightcriteria1;3. AkeyenablingprocessforSSRMprogramsinvolvesacommonunderstandingofdatamanagement.Whatdatawillbe

collected,whoisresponsibleforproducingitandwhatwillbesharedintherelationship2;4. YourSSRMprogramrequiresastrongfocusonthecustomertounderstandtheirneedsforproductsandservicesand

howthatisbestobtainedthroughthesupplier3;and5. Truesupplierpartnershipstrategiesinvolvetwo-waycommunicationandjointlydevelopedstrategies.Mostcustomers

onlyfocusonwhatthesuppliercandoforthem,buttheyshouldalsothinkaboutwhattheycandotohelplowerthesupplier’soperationalcosts4.

The InnovatorsForumparticipantsarehopeful this white paper will helpmembers of the profession makeprogress toward obtaining greatervalueandperformance fromtheirkeysupplier relationships and will spurtheir colleagues toward action. The2016 Innovators Forum groupdiscussed key elements of SSRM in apragmatic fashion by following keyelementsoftheframework.

“HavingquarterlybusinessmeetingsisnotthesameasrunninganeffectiveSSRMprogram.Itiscriticaltothinkaboutthekeybusinessdriversinthecontractandtojointlysetgoalsthatmakeoperationalimprovements.”

--JimKnight,InnovatorsForumFacilitator(InnovatorsForumParticipant)

7

Procurement Vision

Allprocurementprogramsandactivitiesshouldbe linkedtothestrategicvisionof theChiefProcurementOfficer (CPO), theexecutive where the CPO reports (typically the Chief Financial Officer) and the goals and objectives of the University.Increasingly,theprocurementteamisbecominganessentialstrategicpartnerinhelpingkeyconstituentgroupsachievetheirgoalsandobjectives.It is the responsibility of the CPO to establish a clear vision for obtaining greater value from supplier relationships andestablishing the framework foraSSRMprogram.The InnovatorsForumgroupbegan thisdiscussionby recognizing that theCPO’svisionshouldstartbyconsideringwhatmattersmost totheexecutiveteamas it relates tosupplierperformanceandvalue.Theexecutiveteamwillmostlikelycareaboutthefollowingitems:

• Obtainingahigherlevelofvaluecreation;• Thedeliveryofprocessexcellence;• Thedeliveryofinnovativeideasincostmanagementtotheuniversitycommunity;• Riskmitigation;and• Advancingcustomerservicetoaleadingpracticelevel.

Incorporatingtheexecutiveteam’sobjectivesintoacoherentprocurementvisionwilllikelyincludethefollowingelements:

• Understandingandaligninggoalswithkeystakeholders;• Workingwithsupplierstoachieveacommonunderstandingofwhatstrategicpartnershipmeans;• Making sure that procurement team resources are focused on strategic issues where the greatest returns are

expected;• EducatingmembersoftheexecutiveteamandkeyconstituentgroupstothevalueofSSRM;and• EducatingothermembersoftheprocurementteamtothevalueofSSRMandtheirrole.

8

Procurement Vision

Geoff BarschSenior Associate Vice President and Chief Business Officer

University of ColoradoSystem Administration

Procurement Service Center

5/1/16

Sandy HicksAssociate Vice President and Chief Procurement Officer

Charlene LydickDirector of Procurement

Operations

Kara FinchDirector of

Procurement Systems

Mary MartinDirector of Payment Services

and Travel

Will James Purchasing Services Mgr

Sean MyersIT Commodity Manager

Ken Witt

Colleen ShafferContracts Administrator

Penny Davis Small Business Liaison

Officer

VACANTProcurement Systems

Analyst

Admin Support and VendoringTony Tolin

Sunny MaurerCarolyn JohnsonPamela Andrade

Robin BryantExecutive Assistant

Maria Buerman

Payable Services Manager

Payable StaffPete Ciacco

Robyn NicastroShelley Martin Sally Gumaer

Betty HeimansohnProcurement Systems

Administrator

Tina BernardoniContract Services Manager

Sondra PayneCommercial Card Program

Specialist

Duane TuckerDirector of Strategic

Procurement

Luann Heath Scientific Contracts Manager

Kaye Stewart-HicksAdministrative Supervisor

Jenny CasanovaMegan deGrood

David TurnerPurchasing Agents

Todd SalimanVice President and Chief Financial Officer

Mai Ngo Senior Payable …...Specialist

Denise Nakamichi Customer Relationship

Manager

Payable StaffCordelia AngelPaula KirkmanLan Nguyen

Stephanie Frazer

Gloria ChavezPayable Services Team

Lead

Brandy Lombardi

Payable Services Team Lead

Shannon MillerTravel Manager

Charlie GeanettaFacilities Commodity

Manager

Kathy Chang Supplier Relationship

Specialist

Houa ChaCommercial Card Program

AssistantShondel Gordon-

Baum Purchasing Services Mgr

Stuart LittlefieldMadeline Souder

Purchasing Agents

Susannah HutchisonProcurement Systems

Specialist

Esther NaftzTravel Coordinator

Jaime MendezProcurement Systems

Administrator

Kelsey Garvella Strategic Procurement

Analyst

Kelly Richter

Business Analyst

Mike ViolaIT Category Manager

“Weplacestrongemphasisonmanagingourstrategicsuppliers.Weinitiallyfocusedonprocessefficiencyandcustomerservice.Astheprogrammatureswearetransitioningtowardtheachievementofjointlydevelopedstrategicgoals.”

--SandyHicks,UniversityofColorado(InnovatorsForumChair)

9

Strategic Supplier Strategy

Forum attendees next turned their attention to two elements of SSRM strategy: 1) themethod and criteria by which theprocurementteamshouldsegmentthesupplybaseintodifferentmanagementcharacteristicsand2)thespecificcriteriathatshoulddefineourmost important ‘strategic’ suppliers. Procurement teams always face resource constraints and there is aconstant internal battle to direct resources to strategic activity and avoid unproductive time. One clear value strategicsuppliersshouldbringtothetableisapartnershiptoresolverecurringandsystemicprocure-to-payissuesthatwasteresourcetime.SupplyBaseSegmentationWeonlyhaveafewresourcesavailablefortheintensivesupplierengagementactivitiesrequiredtomanagekeyrelationshipsat a strategic level. It is critically important for the procurement leadership team to focus resources where they areappropriate. Step1 in this process is to determinehowbest to ‘segment’ the supply basebydistinguishing characteristics.Therearemanywaystogoaboutthis,buttheInnovatorsForumgroupsuggestedsomeformofthefollowing:

• Tier1:StrategicPartners(thegreatestopportunitytomakeanimpact);• Tier2:PreferredSuppliers(actionstodirectspend);• Tier3:ContractSuppliers(beyondonePO,enabledineProsystem,approvedsuppliers,other);• Tier4:TacticalSuppliers;and• Tier5:Unmanaged,neworproblematicsuppliers.

StrategicPartners,Characteristicsof…The criteria for becoming a strategic supplier to the University should not be considered lightly. This designation is highlyvaluabletothesupplierandwillsetinmotionawholeseriesofactivitiesthatrequireworkonbothendsoftherelationship.Thegroupdiscussedandreachedconsensusonthefollowingsuggestedcriteria:

• Thesupplierunderstandsandhasalignmentwiththeuniversitymissionandpartnershipgoals;• Therewillbeahighinvestmentintherelationship(resourcesandengagementlevel);• Thereisanopportunitytohavebroadimpactontheuniversity(highspend,value&risk);• Thereisasignificantpotentialtocreatevaluebeyondprice;and• Thechancetoimpactkeyend-usersishigh(manytouchopportunities).

SomeexamplesofstrategicsuppliersmentionedwereMRO,officesupplies, informationtechnology(hardwareandsoftwareservices), business system applications, life sciences, food, travel, managed print, construction and temporary labor andstaffing.Therewasadditionaldiscussionregardingsupplierrelationshipsthatarenottypicallymanagedbyprocurement,butperhaps shouldbe. Someof these supplier relationships include:outsourced contracts, pouring rights agreements, revenueagreementsandmajorconstructioncontractors.

10


Case Study – University of Washington (Identifying Strategic Supplier Relationships)

Belowisamethodologyforidentifyingstrategicsupplierrelationships.

Goals

• Reducecosts• Improve quality and service for

customers

• Improveprocessefficiency

• Stimulatecontinuousimprovement

• ReduceriskstotheUniversity• SupportUniversityinitiatives• Standardize contract management

process

• Fostersynergiesformutualbenefit

Methodology

• Create a standard method ofanalyzingspendtoidentifyourmostimportantsuppliersandcontracts

• Identify the parameters that areimportant elements of a strategicsupplierrelationship

• Assign points relative to theimportanceofeachparameter

Parameters

• Create Spend (dollars): 100 – 300pts.

• Number of transactions (purchaseorders):50–150pts.

• Numberof userdepartments: 50–150pts.

• Amountofrevenue:0–150pts.

• Risk/criticality:50–150pts.• Abilitytoinfluencesupplier:0–300

pts.

Top 10 Strategic Contracts Identified

“Wehavegivenalotofthoughttothecriteriaforbeingastrategicsupplier.Themethodologywedevelopedforcedustoidentifysupplierswiththemostpotentialtoimpactourgoalsandobjectives.”

--MarkConley,UniversityofWashington(InnovatorsForumParticipant)

11

Strategic Supplier Engagement

Customers often make judgments about their procurementexperiencebasedonoutcomestheyreceivefromkeysuppliers.As is true with any management system, it takes vision,governance,jointlydeterminedobjectives,goals,executionandmeasurementtoobtaindesiredoutcomesandvalue.Itiscriticalfor the rightpeople fromtheuniversityand thesupplier tobeengaged in the SSRM process. There is a fair amount ofvariability in the way Forum participants conduct strategicsupplier meetings. However, a couple of common themesemergedfromtheconversation:1)mostmembersofthegroupstartwithafocusonsuppliersthatmattertoprocurementandcan impact the efficiency and customer service goals of CPO’sand 2) procurement team members must have strongrelationship skills to successfullymanage this process. Supplierparticipants also discussed how their sales organizations and associated skill sets needed to evolve to match accountrelationships that emphasize value beyond price management and jointly determined strategic goals. Incorporatingstakeholderviewpointsandparticipationisdifficultandanareaforimprovementinthefuture.Themostimportantaspectofengagingsuppliersstrategicallyistodefinerelationshipgoalsforthetermofthecontract.Itiscriticalforthisdiscussiontoinvolveatwo-waydialogthatfinisheswithjointlydeterminedgoalsandactionplans.AsummaryoftheForumparticipant’sdiscussiononrelationshipgoalsislistedbelow.

RelationshipGoals,SupplierPerspective• Didweprovidebestinclassservice;• Didweadheretocontractpricing;• Didweparticipateinvalueaddedinitiativesthatwerevaluedbythecommunity(e.g.sustainability);• DidweembracetheP2Ptoolsattheuniversity;and• Didwedriveinnovationorprovideexpertisethatwashelpful?

RelationshipGoals,CPO’s

• Contractcompliancegoalsandmeasurement(trend);• Servicesatisfactiongoalsandmeasurement(trend);• Supplier’saccountgoals(review);• Ajointlyestablishedaccountvision;• Aconstantflowofideastosupportthevision;• Ajointdefinitionofvalue;• Aconfirmationofvaluedelivered(log);• Aroadmapfordeliveringvalue;and• Apathforthenext3to5years.

RIDERXXXSUPPLIERRELATIONSHIPMANAGEMENT

1.0 SupplierRelationshipManagement

(“SRM”)ProgramRequirements

2.0 …

3.0 …

4.0 …

5.0 …

“WebelieveitisimportanttointegratetheSRMprogramwithstrategicsourcing.Whenwethinkacompetitivesolicitationmaygiverisetoastrategicrelationshipweattacharidertoourrequestforproposalsosuppliersunderstandourexpectationsbeforebiddingonourwork.”

--JohnJoshua,UniversityofTexasSupplyChainAlliance(InnovatorsForumParticipant)

Sample Contract Rider for SRM

12


Supplier Point of View – What are the Benefits of an Effective Supplier Relationship Program? The consistent communication and projectmanagement provided by an effective Supplier RelationshipManagement(SRM) program leads to success for both the supplier and the customer. The results build momentum and driverelationshipevolution,allowingforcontinuousvaluecreation.Simplyput,thewell-definedprocessandstructureleadtothedesiredresult.ThehallmarkofaneffectiveSRM is thatvaluecreationprojectsare jointlyagreedupon.The team,whichishowbothinstitutionsshouldviewthe relationship, comes together todetermineopportunities andprioritizes thembaseduponthegreatestreturnandthefeasibilityofsuccess.Thecustomerandsupplierbothneedtoparticipateintheprojects inordertoincreaseprojectownership.Inevitably,obstacleswillariseandthestructureoftheprogramwillallowtheteamto identify issues quickly and to develop creative solutions. Each party should benefit from the outcome that willmotivatetheteamtoembarkonnewprojects.Valuecreationcannotoccurifthereisnotahighlevelofperformancebybothparties.Operationalissuesaresignificantbarriers to progress and often hijack the time and resources that are needed to create added value. Effective SRMprograms include agreed upon performance measurements to monitor operational areas that are critical to dailybusiness activities.Regularmeetings andcommunicationsupport follow-upand resolution.Perhapsmost importantly,thecommunicationstructureincludesafter-actionreviewtodeterminetherootcauseofissuesandtheimplementationofbusinessprocessesthatwillmitigaterecurrence.While SRM is not a panacea for dysfunctional teams or cultures, the disciplined processes do support the improvedperformance of teams. Consistent communication, problem solving, and value creation drive the supplier/customerrelationship to a higher level, allowing for even greater mutual returns. Strategic suppliers do not wish to be atransactionalpartnerthatisfocusedonresolvingbasicoperationalissues.Theytrulydesiretobecomeavaluedbusinesspartnertocustomers,workingonimportantinstitutionalissues.

--GaryGalluzzi,VicePresident,ThermoFisherScientific(InnovatorsForumParticipant)

13

Strategic Supplier Performance

As Procurement professionals most of us are highly skilled at strategic sourcing and negotiating contracts. However,experienceand research tell us that a significantportionof the valuewill leak away ifwedonotmanageour agreements.Products change,pricing termsneedupdating, contract languagemaybe subject to interpretation, key costdriversarenotmanagedandothercontractcomplianceissuesmayarise.Theseissuesareespeciallyproblematiciftheyoccurwithourmoststrategicsuppliers.Ifthatisthecase,thenwearemissingarealopportunitytomakeanimpactonourcampuses.OurabilitytoextractthemaximumvaluepossiblefromstrategicsupplierrelationshipsultimatelydependsonhowwellwerunQuarterlyBusinessReviews(QBR’s)andhowwellweconstructandmanagethescorecardsthattelluswhetherthecontractvalueweexpected is realized. The Forum group has a wealth of experience on this topic and shares the following insights forconsiderationbytheircolleagues:

Quarterly Business Review, Best Practice Suggestions

• Theuniversityshouldcontroltheagenda,butmakesureitismutuallydevelopedwiththesupplier;• Thereshouldbeacommonviewofthekeybusinessdrivers;• Thereshouldbeacommonunderstandingofdatatoshareandstatisticstobenchmark;• Ifyourprogramismature,thenyouragendasshouldemphasizetopicsthatlookforwardandifyourprogramisinthe

earlystagesyoumightemphasizeresolvingtransactionalandsystemicissues;• Thereshouldbeatwo-waydialogandknowledgesharelinkedtogoalattainment;• Theuniversityshouldtakeownershipforthedataandnotbereliantonthesupplierforthis;and• Donothaveaquarterlymeetingforthesakeofameeting.ItisokaytohaveaPBR(PeriodicBusinessReview).The

needsofeachuniversityandsupplierrelationshipwilldeterminethis;and• QBR’s are a serious commitment of time – it is important to have the right level of the supplier’s organization

participatinginthem.

Case Study – University of Texas System, Supply Chain Alliance (An Introduction to SRM Webinar)

AnIntroductiontoSupplierRelationshipManagement

ObjectivesIntroduceSRMasabusinessstrategyforvaluecreation.

WhatisSRM

SRM,Performance

ManagementandStrategicSourcing

BenefitsofSRM SRMProgramReadiness

MeasuringSuccess

14


Case Study – University of Colorado (Supplier Scorecard)

SUPPLIER SCORECARDSupplier Name: Review Period: Q4 FY14Date: April 05, 2016

Satisfaction Metrics - Quarterly

Key Areas Owner Current Period Previous Period

Supplier Satisfaction Supplier 3

SRM Satisfaction PSC 3

Procurement Satisfaction PSC 3

AP Satisfaction PSC 3

Marketplace Satisfaction PSC 3

Department Satisfaction PSC 3

Compliance Metrics - QuarterlyCurrent Previous

Key Areas Target Actual Target Actual

Billing Compliance

E-Invoice Delivery (paper invoices vs catalog orders) 99% 99% TBD

PO/Invoice Match Exception 99% 99% TBD

Survey Responsiveness 100% 100% 100%

Maximum 5% aggregate increase annually regarding Hot List 100% 100% 100%

Aggregate on time delivery rate of 95% 95% 95% 100%

Order Accuracy rate of 95% 95% 95% 99%

Delivery Metrics - AnnualKey Areas Target Actual

Savings Delivery

Cost Avoidance Delivery

Goal TrackingKey Areas Owner Target Actual

Supplier Specific Goal

Supplier Specific Goal

Business RelationshipKey Areas Owner Target Actual

Payment Plus Supplier Enabled Enabled

Contract Key Dates Next Business Review

End of Contract

0 1 2 3 4 0 1 2 3 4

15


Case Study – The University of California, San Diego (Business Review Protocol)

Purpose of Protocol

• Provide an SOP for preparing andconductingbusinessreviews

• Createaunifiedslidedecktemplateforthesetypesofpresentations

• Standardize and emphasizeStrategic Procurement’s role insuppliermanagement

• Allow newer members of IPPS tobecome familiar with the businessreviewprocess

Protocol Layout The protocol consists of three separatedocuments

1. Worddocumentwhichoutlinestheentire review creation processincluding:• Gathering data from Spend

Radar• Performing data analysis and

chart/graphcreationinExcel• Formatting PowerPoint slide

deck2. Excel document which gives

examples of data analysis andchart/graphcreation—meanttobeused in tandem with Worddocument

3. Power Point document whichshows what a finished businessreviewslidedeckshouldlooklike

Plans for Implementing the Protocol

• The protocol will be sent out toeachCommodityTeamLead

• Each Team Lead should choose asupplierwhotheywouldliketosetupabusinessreviewwith• Use the protocol to prepare

thebusinessreview

• Disseminate to the commoditygroupandhaveadesignatedbuyerprepare a business review usingtheprotocol

“Basedonexperienceweunderstandhowimportantawellrunsupplierbusinessreviewmeetingis.Wetakegreatcareinpreparingforthesemeetingsandincorporatingviewpointsfromkeystakeholders.Wehavetakenthetimetoestablishaprotocolforhowthemeetingswillbeconductedandthetypeofdatathatwillbegatheredandpresented.”

--TedJohnsonUniversityofCalifornia,SanDiego

(InnovatorsForumParticipant)

16

Barriers and Challenges

Thediscussiononthistopicwasfocusedonthebarriersandchallengeswithinouruniversitiesthatmakeitdifficulttobuildthestrategic supplier relationshipsweprefer. Procurement leaders are competingwith other university priorities and trying tomanageacomplexbusinesswithaleanresourcepoolandperhapswithtalentthatisnotoptimizedforrelationshipbuilding.Someofthebarriersandchallengeswefaceinclude:

• Amajorityofuniversityleadersdonotseeorunderstandthevalueofstrategicsupplierrelationships;• Ourinternalorganizationaldesignmaynotadequatelyseparatestrategicfromtacticaloperations;• Lackoftalentthatcanfocusonandbuildstrategicsupplierrelationshipsthatgobeyondprice;• GettingoursupplierstounderstandourgoalsandobjectivesandnottreatSSRMassimplyanotherwayto increase

sales;• Overcomingthetraditionalperceptionthatprocurementisonlyinterestedinshort-termoutcomes;and• Policychoicesthatrequireperiodicbiddingoracceptingthelowbidorothersimilarrequirementsthatarenotideal

forthelong-terminvestmentsthatsuppliersandprocurementdepartmentsneedtomaketoprovidethenextlevelofvalue.

17

Next Steps

Actions We Can Take Now While barriers and challenges exist for any important taskwe undertake, it is leadership and vision that overcomes theseobstacles.DevelopingacompellingbusinesscaseforSSRMrequiresa journeythatwill taketimeandafocusoncontinuousimprovement.WhilethemembersoftheForumgrouparepursuingadvancedSSRMobjectives,theyofferthefollowingadvicebasedontheirexperiencetocolleagueswhomaybeatthebeginningstagesofdevelopingbettersupplierrelationships.

• TheChiefProcurementOfficershouldtakeownershipforcontractperformancemanagement;• ReviewyoursolicitationdocumentsandbuildinanexpectationforSSRM;• Establishcriteriatosegmentyoursupplierbaseandidentifythefewthatqualifyasstrategic;• Ineachofyourkeysupplierrelationships, thinkaboutthe3 to5 key costdrivers inthecontractandthegoals you

wanttoachieveattheendofthecontractterm;• InitiallyfocusSSRMobjectivesonprocurementgoalsthatremovesystemicissuesintheprocure-to-payprocessand

increasetheefficiencyofyourstaff;• EstablishtheframeworkandstrategicvisionforaSSRMprogram;and• Thinkabouthowyourkeysupplierscanimprovecustomerservicetokeystakeholdergroupsasanextensionofyour

team.

Actions the Innovators Group is Considering One of the great benefits to any forum of colleagues is that people learn from each other and become interested in theactivitiesoccurringonothercampuses.ReadersofthispapermayfinditusefultounderstandhowtheInnovatorsForumgroupispushingtheenvelope inSSRMontheircampuses.Thefollowing ideasareafewoftheonesexpressedduringthegroup’stimetogetherinDenver:

• Thegroupseesvalueinmanagingallkeysupplieragreements,notjustthosewithaprocurementfocus;• Moving SSRM responsibilities to managers who are focused on strategic activities and who can focus on this

responsibility;• Focusing on the talent gap and refining jobdescriptions, roles& responsibilities, salarybandsetc. tohire the right

peoplewithrelationshipskills;• Everyonehassomesortofscorecardprocess,butreallytakingthetimetothinkstrategicallyandlong-termaboutthe

goalswewanttoachievewithourstrategicsuppliers;• Making sure that QBR meetings pay sufficient attention to forward looking goals, rather than backward looking

complianceactivities;• Thinkingaboutcurrentcontractsandwhethertheypayenoughattentiontopositive‘reward’fordoingthingsrightas

opposedtoonlyconsideringpenaltiesforperformancefailures;• WorkingextensivelywithsupplierstoprovidedataintheformatandtimeframetheUniversityneedstoenhancedata

analysisandcontinuousimprovementactivity;• Workingwithsupplierstomakesuretheiraccountrepresentationmatchestheprofessionalismnecessarytohavea

dynamictwo-waydialogonkeystrategicgoals;• Workingwithsupplierstodriveinnovationandenhancedcustomerservicefromtherelationship;and• Workingwithkeystakeholderstoincreaseprocurement’sinvolvementinoutsourcedcontractsandconstructionand

facilitiessupplier/contractorrelationships.

18

Summary

Thisyear’sdiscussiononstrategicsupplierrelationshipsisadirectlinktothe2015discussiononprocurementbrandandthe2014discussionontalentmanagement. Inordertoobtaingreatervaluefromourexistingsupplierrelationshipsweneedtocommit to a partnership principle, “sell” the business case to executive sponsors, invest in the infrastructure needed tomanagecontractsandsuppliersinadifferentwayandobtainthetalentedpeoplewhoareadeptatrelationshipmanagement.Ifwemove aggressively down this pathwith thoughtfulness and pragmatism, thenwehave a great chance to significantlyenhance thevaluewecurrently receive fromkey supplier relationships.Perhapsof greater value is thatour customerswillreceivebetterserviceandprocessefficiencieswillresult.Asprocurementleaderswewanttoadvanceonourprimarygoalofbecominganessential strategicpartner to theuniversity community.Managing suppliersmore strategically isoneconcretestepwecantaketomakethishappen.

19

Questions for Your Team

Procurement Vision

• Doyouviewkeysuppliersaspartners,adversariesorpeopletokeepatarmslength?• Ifyouthoughtofkeysuppliersasanextensionofyourteam,howwouldyouusethemdifferently?• Doyouhaveagoodunderstandingofwhatyourendusersandkeystakeholdersvaluefromkeysuppliers?• What would you say if you had 5 to 10 minutes to educate the executive team on the importance of supplier

relationshipmanagement?• Doyouhaveafewkeysupplierswhoareoutstandingindeliveringvaluetotheuniversity?Ifyes,whatdoyourpolicies

require you to do at the end of the contract term? Can you negotiate with the incumbent or must you run acompetitivebidprocess?


• Doyouknowwhothetopsuppliersarefortheprocurementteam,fortheuniversity?• Doyouhavecriteriaestablishedtoidentifystrategicsuppliers?• What is theprimaryobjectiveofyour supplier contractsand relationships? Is itprimarily tocontrolpriceordoyou

seekvaluebeyondprice?• Thinkofafewsupplierrelationshipsmanagedoutsideoftheprocurementgroup.Doyouthinktheserelationshipsare

managedwell?Whatroleshouldtheprocurementteamplayintheserelationships?


• Doyoumeetwithkeysuppliersonaperiodicbasisandifsoisyourtimespentresolvingtacticalorstrategicissues?• DoyouhaveaQuarterlyBusinessReview(QBR)process?Whocontrolstheagendaforthesemeetings?• IntheQBRprocessdoyouhaveatightalignmentamonguniversity,procurementanduserdepartmentobjectives?


• Thinkaboutyourtop5supplierrelationships.Doyouknowwhatgoalsyouwouldliketoaccomplishwitheachoftheminthenext3to5years?

• Thinkaboutthecontractyourecentlycompletedwithyourtop5suppliers.Doyouknowthe3to5keycostdriversinthecontractandareyoumonitoringperformanceagainsttheseitems?

• Doyouhaveascorecardinplacetomonitorgoalattainment inyourkeysupplierrelationships?Arethegoalsshort-termfocused?Doesthescorecardreflectatwo-waypartnershiporone-waysupplierperformancemonitoring?

20

SSRM Resource Links

Followingareresourcelinksofferedbyyourcolleagues.

• ATKearney–AssessmentofExcellenceinProcurementStudy,2014:https://www.atkearney.com/procurement/assessment-of-excellence-in-procurement-study

• UniversityofTexasSystem,SupplyChainAlliancehttp://www.utsystem.edu/hea/supplychainalliance/

• UniversityofColorado–OrganizationalChart:https://www.cu.edu/psc/vision-mission

21

About Us

NAEP is the association of choice for educational procurement professionals dedicated to their continued professionaldevelopmentandtoreinforcingthestrategicroleofprocurementineducation.Sincethe1920’s,NAEPhasbeenthenon-profitprofessionalassociationprimarilydedicatedtoservinghighereducationpurchasingofficers intheU.S.andCanada. In1934,members of the Association founded E&I Cooperative Purchasing, Inc. as an important undertaking and benefit of NAEPmembership. Currently, over 800 colleges and universities aremembers. NAEP is a member-focused association providingprogressiveknowledgemanagementinstrategicsourcing,supplychain,materialsandlogisticsforprocurementprofessionals.NAEPprovidesprofessionaldevelopmentandnetworkingopportunitiesregionallyandnationally.Thesemeetings,workshops,andseminarsprovideknowledgetransferrangingfrom“beginning”to“advanced”andareconductedthroughouttheyearandacrossthenation.Visitwww.NAEPnet.orgtolearnmore.

SciQuest (NASDAQ: SQI) is a leading provider of eProcurement solutions to higher education that enables colleges anduniversitiestorealizesignificantefficienciesandsavingsontheirpurchasesof indirectgoodsandservices.SciQuest’suniqueexpertise and innovative “source-to-settle” approach to eProcurement enables institutions to identify savings opportunitiestheymayotherwisehavemissed,whileimprovingcontractmanagement,compliance,andsuppliermanagement.LearnmoreaboutSciQuest’scommitmenttohighereducationatwww.sciquest.com/higher_education.

StonebridgeVenturesisaleadingprofessionalservicesfirmfocusedoncreatinginnovativesolutionsinthehighereducationprocure to pay market. We work collaboratively with client partners to solve pressing challenges and helpenhance theprocurement team’s role as an essential strategic partner. We specialize in strategic planning, spend analytics, categorymanagement, process improvement, supplier relationship management, organizational design and other importantprocurement issues. We have a particular expertise in driving collaboration between procurement and the facilities /construction team.StonebridgehelpsyoucultivateBetterConnectionswithexecutives, suppliers, internal stakeholdersandemployees to deliver flexible solutions that enhance service, improve quality and reduce cost (procurement brandperformance)[email protected].

END NOTES 1“SupplierRelationshipManagement(SRM)RedefiningtheValueofStrategicCollaboration.”Deloitte,2015.2 “PublicProcurementPractice:SupplierRelationshipManagement.”CIPSandNIGP,2012.3 “StrategyGuide:SupplierRelationshipManagement.”ProcurementLeaders,GlobalIntelligence4 “10StrategiesforManagingSuppliers.”DaveBlanchard,IndustryWeek,July15,2009.

8840StanfordBoulevard,Suite2000Columbia,MD21045

443-543-5540www.naepnet.org

©2016NAEP.DonotreproduceordistributewithoutpermissionfromNAEP.

Enhancing Supplier Value and Performance

Documents

Transcript of Enhancing Supplier Value and Performance