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October 1999 Volume 1.05
Working
with your suppliers to add value
by Rodger Gallagher
Supply Chain Management
 When
retail and distribution businesses receive feedback from Customer
Value Added research, they always find a few areas to focus on so
they can provide superior value to customers. Drilling down into
these areas reveals the underlying causes that limit the value of
products and services being delivered to customers. Often the underlying
causes lead right back through the supply chain to a company's suppliers.
When this happens, attention must be turned to supply chain management.
It is now quite common to track supplier performance with process
metrics covering the percentage of the order delivered, the time
of the delivery against when it was promised, and whether the goods
met the specification. Companies like the Home Depot in the United
States demand that suppliers comply 100% with these requirements.
But isn't demanding a supplier meet this type of standard a bit
like expecting a hotel to provide hot water in a guest's room? Delivering
what was ordered on time is the basic requirement expected from
a supplier, rather than something that adds value to your business.
In a strongly competitive situation all suppliers are likely to
match each other on these basic supply arrangements. While these
basic supply chain measures are a useful first step, it is unlikely
that these types of measures will reveal what is causing problems
for your customers and your business processes once basic problems
have been resolved.
Partnering with suppliers
Many businesses first found that it made good sense to adopt a partnering
approach with their customers. By doing this they could mutually
grow their business volumes. But what if their own suppliers did
not fully appreciate the benefits of partnering with them as customers?
In these situations, businesses have found that business gains can
be achieved by initiating a partnership with key suppliers.
An ideal launch pad for a supplier-customer partnership is a Supplier
Value Added implementation project. This type of project starts
with identification of key suppliers, and ends when an ongoing management
process has been up for the supplier-customer partnership. The major
steps in a Supplier Value project are:
Step 1
Identify key suppliers to be covered by the Supplied Value Added
research, their main contacts within your company, and prepare the
project plan.
Step 2
Define supplier-customer partnership needs and develop needs waterfall
processes covering the important needs and interactions in conjunction
with key suppliers.
Step 3
Design a research plan, develop questionnaires based on the waterfall
processes of supplier-customer needs, then undertake the survey
to collect the views of supplier contacts in your company on the
key suppliers.
Step 4
Analyse the data collected in the survey, determine supplier performance
for each key supplier and partnership importance weights, then interpret
the data.
Step 5
Work with suppliers on prioritising the information and focussing
on partnership improvement and business opportunities.
Step 6
Develop supplier partnership and performance management system based
on metrics from SVA findings and use to manage supplier relationships.
Early gains come during the project but ongoing paybacks continue
and build as the supplier partnerships build.
GPK
 One
of my many pleasant memories from Tuscany is of sitting in a Pizzeria
watching the circles of pizza dough being spun in the air as part
of preparing the base. And then after the topping was added the
pizza was slid into the wood fired oven. The aroma from the oven
wafted into the restaurant adding to the visual display by the pizza
makers. And all this while sampling a few glasses of the house Chianti.
After what seemed no time at all a wonderful pizza appeared on our
table, and its taste exceeded the expectation built up by our experience
as we watched and waited. And all this together with outstanding
service and reasonable prices delivered excellent value.
In Auckland I've discovered another pizza restaurant which matches
my Tuscan pizza memories. GPK Dominion Road has an outstanding range
of pizzas prepared in one of those same wood fired ovens. Housed
in a turn of the century building on the corner of Dominion and
Valley Roads Dominique Parat and his team provide superb service
at reasonable prices. And as your eyes wander around other diners
and tables you see some irresistible deserts.
And after one visit I noticed my next credit card statement had
a GPK credit as well as the debit for the meal. GPK had realised
I had been overcharged and put through a credit when they discovered
their error. GPK is definitely one of those restaurants that I return
to again and again.
The Mission for Your Customers
Continues...
8.0 Develop Business Decision Models
This article focuses on developing business models with the
Customer Value Added (CVA) data.
An important reason for undertaking CVA research is to provide information
that reveals the underlying customer needs and perceptions that
drive market share. Other equally important reasons (for undertaking
CVA research) are to identify competitive advantages, competitive
disadvantages, and opportunities for improvement of customer facing
service delivery processes, product design features and performance
on issues affecting market perceptions of the company's performance
on price and costs. A key enabler for achieving this is to build
a series of econometric models based around the Customer Value Trees.
These trees would have been developed while working out the purchase
criteria to include in the questionnaire. In this step, the raw
data is converted into information, indicating performance and purchase
impact. This information covers the criteria for all critical customer-facing
business process activities, costs and product features. Interpreting
this information allows fact based management and decision making,
so that customer loyalty and market share can be increased at minimum
cost. Reporting this information allows it to be used by a company's
managers and subject matter experts.
Development of econometric models is a job best left to experts.
A blend of high level statistical theory must be matched with a
pragmatic view on how the modelling relates to findings from the
qualitative market research results, and business process interaction.
The econometrician must know when to drill down into the data to
explore the underlying customer needs that simple modelling would
leave undiscovered. When modelling work is done thoroughly and expertly,
valuable perspectives on the criteria that drive purchasing will
then be revealed.
Watch the next CVM Update for further ideas on Implementing
the Customer Value Added Process.
Previous Step
7.0 (Part Two)...
Next Step 9.0...
Regards,
Rodger Gallagher
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