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eWorld Masterclass Presentation September 28th, 2010 London, UK One of the greatest challenges faced by both the private and public sectors in terms of driving best value decision-making, is supply base erosion. Almost irreparably damaged through ill-advised initiatives such as supply base rationalisation and low cost country sourcing (to name but two), many supplier development, engagement and utilisation programs are little more than exercises in futility. This session aims to dramatically increase your chances of success, by explaining the new dynamics of the global economy and how you can drive sustainable value through your supplier relationships. Speaker: Jon Hansen, Procurement Insights
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2. Supplier Development in aGlobal Market
Why is governance important ?
3. Supplier Development in aGlobal Market
The concept of "governance" is central to the global value chain
approach . . . some firms in the chain set and/or enforce the
parameters under which others in the chain operate . . . A chain
without governance would just be a string of market
relations.
4. Supplier Development in aGlobal Market
Case Reference:Tesco control of the production of mangetout (snow
peas or snap peas) in Zimbabwe
5. Supplier Development in aGlobal Market
Why does governance matter?
6. Supplier Development in aGlobal Market
Market access: developed countries dismantle trade barriers,
developing country producers do not automatically gain market
access, because the chains which producers feed into are often
governed by a limited number of buyers . . . And access to and
coordination with lead firms and their objectives.
Note: Lead firms according to Gereffi undertake the functional
integration and coordination of international dispersed
activities.
7. Supplier Development in aGlobal Market
Fast track to acquisition of production capabilities: producers
that gain access to the chains lead firms tend to find themselves
on a steep learning curve . . . are very demanding with regard to
reducing cost, raising quality and increasing speed (and are
therefore unpopular with the local workforce) . . . best practices*
and provide hands-on advice (and pressure!) on how to improve
layout, production flows and raise skills.
* Similar The Wal-Mart position that their demands on their
suppliers make them (being the suppliers more efficient).
8. Supplier Development in aGlobal Market
Case Reference (The Bad?):Wal-Mart and Vlasic Pickles
9. Supplier Development in aGlobal Market
Case Specifics: Finally, Wal-Mart let Vlasic up for air. The
Wal-Mart guys response was classic, Young recalls. He said, Well,
weve done to pickles what we did to orange juice. Weve killed it.
We can back off. Vlasic got to take it down to just over half a
gallon of pickles, for $2.79. Not long after that, in January 2001,
Vlasic filed for bankruptcy.
10. Supplier Development in aGlobal Market
11. This trend is most pronounced in the apparel-and-accessories category, where average gross margin drops from 48.7% for companies generating less than 10% of sales through Wal-Mart to 28.7% for those selling 20% or more. Food and beverage also shows a big disparity, where the same breakdown shows average gross margins dropping from 39% to 22%. 12. In all, only 25 of 333 companies managed to beat their sector gross-margin average while generating at least 10% of their revenue through Wal-Mart. Only 7 that sold more than 20% there did it