09/2013

Global / Local Collaborative Supplier Management (CSM)

Global Local

Sustaining Supplier Management Excellence in a World Where Local Differences Increasingly Matter

Marc EscandeGlobal Director, Hatch

SIG Nahsville, April 2014

2

09/2013

Agenda

• The Global / Local Supplier Management Challenge

• CSM Framework Overview

• CSM Case Study

• CSM Benefits

• CSM: Making It Happen

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09/2013

1990 – 2010The Rise of Global Procurement

Global Procurement Organizations

Global Category

management

Global Spend analysis

Global supply base

rationalization

Global preferred suppliers

Global leverage and compliance

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09/2013

2010 – 20?? The “Revenge” of Local Procurement

The Economist, October 2013

More material flow controls

More local competition

More financial flow controls

“Buy local” policies

More local standards

More information

flow controls

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09/2013

Global / Local Procurement Collision Course

How to secure the Global Procurement benefits while factoring the growing Local

Procurement specificities?

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09/2013

Popular Approaches Used to Address the Global / Local Procurement Challenge

“Survival of the fittest”

Local

Supplier A

Hybrid model

Local

Supplier A

Supplier A

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09/2013

Neither of These Popular Approaches Optimally Address The Global / Local Supplier Management Challenge

Price

Quality

Risks

Accountability

Global

LocalGlobal

Local

Resulting sub-optimal sourcing decisions can quickly translate in hundreds of millions of dollars wiped out from bottom lines

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09/2013

How to Assemble the Global / Local Supplier Management Puzzle?

Local 4Local 1 Local 2

Local 3Local 4

Global?

The Global / Local Collaborative Supplier Management (CSM) Framework Provides The Answer

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09/2013

Agenda

• The Global / Local Supplier Management Challenge

• CSM Framework Overview

• CSM Case Study

• CSM Benefits

• CSM: Making It Happen

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09/2013

Supplier Owner

Category Owner

CSM Cornerstone: Collaborative Rating Of Suppliers Competitiveness by Geographical Location

Region Owners

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09/2013

Region Owners

Category Owner

CSM Cornerstone: Collaborative Rating Of Suppliers Competitiveness by Geographical Location

Supplier Owner

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09/2013

LV Transformers MV Transformers HV Transformers

South East Asia

Australia

Africa

Russia

Europe

South America

North America

Example: Chinese Electrical Equipment OEM

Categories

Geo

grap

hica

l loc

atio

ns

CSM - Rating Matrices

Lacks certifications & After sales support in these

regions

Major cost advantage + proven track record + adequate support

New offering

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CSM: Global / Local Collaborations

Peru

Oceania

Chile + rest of South America

3. Both parties discuss differing

views. Divergences are arbitrated by the

CPO and ratings eventually entered in the CSM rating matrix

Africa

2. Africa and Oceania Regional owners argue that the supplier is not

competitive in the region

1. Global Category Manager recommends a new supplier to be used

worldwide

Brazil

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09/2013

CSM: Cross-Regional Collaborations

Brazil

Peru

Oceania

Chile + rest of South America

1. A supplier owner suggests to region owners that a Chinese supplier can be competitive in

South America, Africa and Oceania

Africa

2. Regional owners assess supplier

competitiveness ability to compete in their region

3. Global Category Manager reviews

proposed changes and misalignments and post

ratings

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09/2013

Agenda

• The Global / Local Supplier Management Challenge

• CSM Framework Overview

• CSM Case Study

• CSM Benefits

• CSM: Making It Happen

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09/2013

CSM Case StudyMajor Multinational Company

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09/2013

Supply Base By Headquarter Location

428

693

1,115

886

445

160

342

70%+ of suppliers competitive in more than one locationBut less that 2% of them competitive worldwide for all categories!

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09/2013

CSM-Enabled Supplier Management Platform

Supplier performance

Supplier information

Global / local Core Team

Operations

Suppliers

Supplier CSM Ratings

CSM

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09/2013

Supply Quality Offering

Supplier ABC Ratings

Geographical Competitiveness

CSM Ratings

Exchange Rates

Exchange Rates Variations Against USD; Ref=1 on March 2008

0.6

0.65

0.7

0.75

0.8

0.85

0.9

0.95

1

1.05

1.1

2008/03

2008/04

2008/05

2008/06

2008/07

2008/08

2008/09

2008/10

2008/11

2008/12

2009/01

2009/02

2009/03

2009/04

2009/05

2009/06

2009/07

2009/08

2009/09

2009/10

2009/11

2009/12

2010/01

2010/02

Labor Rates

Labor costs per hour in USD - Source Economist Intelligence Unit (January 2009)

0

5

10

15

20

25

30

35

40

Indon

esia

Egypt

Philipp

ines

India

Ukraine

China

Malays

ia

Turkey

Russia

Brazil

Roman

ia

Poland

South

Korea

Czech

Rep

.

Austra

liaJa

pan

USA

Canad

a

German

y

Countries

USD 2009

2010

Country Risks

China Vendor Risk

0

5

10

15

20

25

Qualitymanagement

Planning andcontrol

Employeesqualification

T&Cs compliance

Financial health

Safety, CSR andSD

mmunication

Engineering

BeforemitigationAftermitigation

Logistics Costs

Mac

ro-

econ

omic

in

telli

genc

e

CredentialsQualificationsFeedbacks Size and location

Supp

lier

ABC

in

telli

genc

e

Supplier Manager for Supplier ABC

Reviewed and approved by Category

owner(s)

Reviewed and approved by

Countryowner(s)

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Geographical Locations

CSM-Enabled Supplier Management Portal

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CSM-Enabled Supplier Competitiveness Scorecard

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Competitive Suppliers in a Specific Geographical Location

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Local And Foreign Suppliers Rated Competitive In A Geographical Location by Sourcing Category

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CSM-Enabled Supplier Management Platform Key Characteristics

• Global– Central repository for supplier intelligence, worldwide.

• Local– Ability to “parachute” in any part of the world to get a

local view of the competitive supply landscape• Collaborative

– Global and local procurement jointly manage CSM rating matrices through structured collaborative workflows

• Participative– Every employee can communicate with the CSM team

through the platform to help optimize the CSM rating matrices

• Controlled– Clear responsibilities assigned to manage the CSM

rating matrices• Best of breed

– Emptoris Award for Innovation in Supplier Performance Management

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09/2013

CSM Chronology• Before 2009

– No global supplier database– No standard list of sourcing categories– No standard process for supplier performance capture and storage

• 2009– CSM team created– CSM processes designed – Emptoris licensed to enable the CSM implementation– CSM implementation initiated

• 2010 – Inputs from 350 employees reconciled and translated into CSM rating matrices– CSM launched in June with matrices covering on 2,000 suppliers over 1,200

categories• 2011

– Supplier performance feedback process integrated with CSM• 2012

– Access to CSM intelligence redesigned to maximize usability and knowledge sharing

• 2013– Roles and processes fine tune to enhance CSM sustainability– New CSM portal application launched

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09/2013

Agenda

• The Global / Local Supplier Management Challenge

• CSM Framework Overview

• CSM Case Study

• CSM Benefits

• CSM: Making It Happen

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09/2013

CSM Benefits (1/2)

Optimized sourcing decisions / Reduced sourcing risks Prevent excessive enforcements from the center from suppliers with

uneven competitiveness footprint Prevent excessive allegiance to less-than-optimal local suppliers

Dramatic improvements in collaboration and alignmentthroughout the Procurement organization Anchored on a single, integrated, consensus view on supplier

competitiveness in each geographical location

Optimized Category Management

Maximized, documented local benefits

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09/2013

CSM Benefits (2/2)

Increased leverage of regional sourcing

Enhanced supplier collaboration and continuous performance improvement

Less “ethnocentric”, more knowledgeable, balanced, in summary better Procurement professionals

Increased ability to attract the best Procurement talents

Definitive argument to decommission local supplier databases

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09/2013

CSM Integrates, Reconciles And Optimally Balances Global And Local Procurement

• Price

• Quality

• Risks

• Sustainability

• Regional benefits

30

09/2013

Agenda

• The Global / Local Supplier Management Challenge

• CSM Framework Overview

• CSM Case Study

• CSM Benefits

• CSM: Making It Happen

31

09/2013

CSM: Making It Happen

• CPO-led– An absolute prerequisite

• Spot local differences

The “Not So Flat” Procurement Picture

Source: Hatch Global Procurement Bulletin, March 2014

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09/2013

CSM: Making It Happen

• CPO-led– An absolute prerequisite

• Spot the local differences– Create, publish and maintain sourcing risk “watchlists” for every geographical location.– Differentiate supplier qualification process accordingly

• Start the CSM journey with a “thin slice” pilot– Pick a combination of geographical locations, categories and/or suppliers for which both adoption

and benefits are expected to be high

• Align all stakeholders company-wide– Run a CSM Executive workshop, leveraging the results of the thin slice pilot

• Define the global deployment strategy – Choose CSM geographical locations and align existing tables (spend analysis, supplier performance

management, etc.) if necessary– Choose a CSM platform and plan its integration with existing supplier management systems– Assign responsibilities and deadlines to populate the CSM rating matrices – Discuss rating matrices with suppliers

• Actively communicate during and after the company-wide launch– Encourage everyone’s contribution