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Supplier Management – Mystery or Mastery? An Introduction to Supplier Management Brought to you by: and Isaac Jim

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Presentation on theme: "Supplier Management – Mystery or Mastery? An Introduction to Supplier Management Brought to you by: and Isaac Jim"— Presentation transcript:

1 Supplier Management – Mystery or Mastery? An Introduction to Supplier Management Brought to you by: and Isaac Jim Tim Mark panel:

2 Senior Director, Supply Chain Operations, BioMarin Pharmaceutical Inc.: Isaac has 31 years experience in Biotechnology with roles in Manufacturing, Regulatory Affairs, Information Systems, Ethics, Strategic Sourcing, and Supply Chain. Prior to joining BioMarin, Isaac was a Director of Strategy for the Purchasing & Supplier Management Group at Baxter Healthcares BioScience Division. He has worked for small biotech startups and for a supplier to the biotech industry. Isaac has an MBA from Babson College. Associate Director of Supply Chain Management, MAP Pharmaceuticals, Inc.: Tim has over 10 years of Medical Device and Pharmaceutical Supply Chain Management experience with large and small businesses. Tim is a Chartered Engineer with the UK-based IET, and has a Masters degree in Industrial Automation. Tim has worked in manufacturing and R&D groups, as well as a Strategic Sourcing and Supply Chain positions in both corporate and business- unit roles. Senior Director, Purchasing & Supply Management, Elan Pharmaceuticals Inc.: Jim has over 25 years experience in biopharmaceuticals having held positions at Genentech, Tularik, Amgen, and Gilead. A lifetime C.P.M., Jim has served on the Institute for Supply Management (ISM) Pharmaceutical Forum Board of Directors and was a founding member of the Biotechnology Purchasing Association. Jim has an MS in Procurement & Contract Management from St. Marys College of California and a BS in Biology from University of South Carolina. Global Procurement and Supply Leader, Bio-Rad Laboratories: Mark brings over 21 years private & public sector experience in supply chain management & global sourcing, Lean manufacturing & operations planning, Six Sigma Quality process improvement, acquisition assimilation, organizational change management, complex outsourcing & global sourcing initiatives serving in roles of increasing leadership responsibility with global companies such as NCR, Solectron, Asyst Technologies, Apple Computer, & Celerity Group Inc. Mark holds a BSEE from the University of Illinois in Urbana-Champaign and was commissioned as a Marine Officer. He attended National University graduating with an MBA. Mark Buck Jim Latimer Isaac Young Tim Jordan

3 Agenda 10:00 – 11:30 Preamble Supplier Segmentation Internal Management Architecture Strategies Supplier Performance Monitoring Total Cost of Ownership (TCO) Summary Q & A Next up? Options for future presentations Page 3 We will pause periodically through the presentation to answer any questions or take your comments. Please type in your questions as you have them or raise your hand via the webinar tool when we pause. If we dont get through the entire presentation we will look to your feedback whether we conduct a part 2 or move on to other topics. Process

4 Emerging biopharmaceutical companies Page 4 A reactive business environment characterized as: Conflicting priorities – getting to market now versus surviving in the market later Investment is in product development, not infrastructure Purchasing inherits the supplier list Supply risk is rarely considered Value of any expertise is in crisis management Multiple customers Internal: R&D Quality Finance Regulatory Affairs Manufacturing External: Patients Doctors Regulators Reimbursement entities Politicians / Society

5 The External Stage Issues: Rapidly changing environments - upstream & downstream Increasing operational & security risk in supply chains Expanding cost pressures / requirements for capital preservation Accelerated innovation / accelerated obsolescence Increasing emphasis on environmental impact & sustainability More and more data, but not necessarily more and more knowledge Imperatives: Development of agility as the primary response to continued uncertainty Tolerance for ambiguity must become preparedness for ambiguity Design for supply must become an integral part of product and business development – availability / scalability / sustainability Resilience Page 5

6 Purchasing versus Strategic Sourcing Historical Purchasing Purchase order management Primarily an Administrative role – little to no involvement in corporate or supply chain strategy development Little to no involvement in sourcing process Limited expertise with materials / services procured Narrow focus on purchase price and delivery Low consideration of supply risk Predominantly reactive Strategic Sourcing Supplier management Develops and implements long term supply strategies aligned with corporate strategy Involved in supplier selection and development early on Value add resource to internal customers Broad perspective on multiple cost elements Responsible for managing supply risk Driven to be proactive Page 6

7 Have An Articulated Vision Describe what a world class supplier management function would look like at your company examples: There is a clear delineation of suppliers based on their strategic importance. Formal, characterized structures exist that define the relationship with a supplier. Supply base strategies exist and are based on robust industry intelligence. Supplier relations are structured around common goals Opportunities for innovation transfer have been maximized and monitored. A quality system based supplier performance and development program is in place. The supplier base reflects a conscious implementation of documented policies in support of diversity and sustainability.

8 Document What You Do What: Policies, procedures, operational design, operational strategies, goals & achievements, points to consider, supplier performance, total cost evaluations, category strategies, meeting minutes, etc. Why: Documents build equity in the form of a knowledgebase, not just short term value adds Documents provide the when and why of the lessons learned so the wheel doesnt get invented again Documents articulate the value added and facilitates the communication of that value to the rest of the organization Makes it official – theyre required to stand up in a financial audit How: Start thin – its better to have a document that is weak than to have no document at all Consider leaving out of quality documentation system (no FDA review, no deviations if not followed to the letter, etc.) Do have revision control, revision history, reviewer signoff Page 8

9 Supplier Segmentation Isaac Jim Tim Mark

10 Defining a Supplier Base Formally stratify or categorize your Supplier base to focus resources where they are most valuable –Manage total cost of acquisition –Increase operating efficiencies –Foster better communication –Better leverage the knowledgebase of all parties –Minimize risk –Nurture opportunities for transfer of innovation Page 10

11 How to characterize the Suppliers Considerations for classification –Category of spend Which commodities are involved –Amount of spend –Direct vs. Indirect classification –Single source / sole source status –Criticality to operations –Strategic importance –Level of perceived risk –Bandwidth of your resources How many can actually be managed with the resources available Page 11

12 Example Worksheet Page 12

13 TRAIT / DOMAIN TransactionalCollaborativeAlliance Number of Suppliers ManySomeFew Communication No specificSystemic Competitive Advantage NoMed- HighHigh Continuous Improvement NoOpportunityVIP Difficulty Change/Exit EasyDifficultVery Difficult Duration of Relationship Short termMid/Long TermLong Term Avoid/Resolve Issues ReactiveDeveloping ProactiveProactive Focus Lowest priceTotal Cost Best TCO / Risk Mitigation Level of Integration NoneMediumHigh Quality Incoming InspectionCertified QualityJoint Liability Dedicated Resources Few, Low SkillProfessionalDedicated Service Level LowDeveloping HighHigh Forecasts P.O.CommunicatedShared / Co-developed Type of Interaction Tactical Cooperative / Collaborative Strategic Synergy Types of Relationships Consider how the relationship can be defined and what that means to available resources and the ROI on the effort involved. Example:

14 Segmentation Profile Example 14 Office Supply Janitorial Services Computer software suppliers eTools Price / Service Agreements RFPs Mechanisms Examples Commodity based, cost only focus Characteristics Lab Supply Freight forwarders Employee benefits providers Annual reviews Service agreement Internal surveys Benchmarking Risk mgmt plan Commodity, higher impact on operating environment Clean room garments Testing Laboratories Scorecards Category Teams Bi-annual Business Reviews Bi-annual audits Risk profiles BC / DR Plans Inventory Plan Change Control Agreement High importance, widely available, readily changed Critical raw materials Contract Manufacturers Scorecards Technical Category Teams Qtrly Business Reviews Bi-annual audits Financial monitoring Risk profiles BC / DR Plans Inventory Plan Supply Agreement Critical impact, high cost of change Collaboration Continuum Transactional Engaged

15 Defining a Supplier Base Goals: –More engagement for suppliers that play a higher value role in your operations –More expedient development of management strategies based on where a supplier fits Be cautious in the use of terms such as preferred supplier / key supplier / primary supplier as descriptors / labels without considering the ramifications of existing connotations Repeat periodically (defined) to re-class Suppliers as appropriate Pre-screen the vendor master –It is probably populated with every payee the company has ever written a check to – not a good starting point Available resources may influence tier volume – work with what you have Page 15

16 Internal Management Architecture Supplier Segmentation End of: Next: pause for questions Isaac Jim Tim Mark

17 Selecting An Operating Model Define how procurement activity and supplier interaction across the entire organization is structured both now and where it could / should be in the future: Decentralized –Procurement activity, including any policy or other governance, is disbursed across the organization without any centralized oversight (typically just financial controls) Centralized –All procurement activity / third party interaction occurs in a single group Hybrid –A significant, defined subset of procurement activity is centralized to a single group with the balance being fully decentralized Center-Led –A single group is responsible for policy and oversight of any decentralized activity, setting standards, consolidating volumes, driving compliance, etc. with decentralized transactional activity across the organization Page 17

18 Supplier Management Mechanisms Category Managers (sometimes referred to as Commodity Managers) Category Management Teams Business Reviews Category Strategies Performance Monitoring / Supplier Scorecards Executive Oversight Corporate Strategy Development Process Process / Technology –Sourcing tools (i.e RFx, planning forecasting tools, iRFx, eProcurement engines, reverse auctions, etc.) –Data sources (D&B, ISM, CAPS, CPI, Web, Suppliers, etc.) –Supplier portals Page 18

19 Category Management Teams Cross-functional (and cross site if applicable) teams are the standard, and for good reason: –Increases breadth of expertise applied to the category –Provides deeper visibility into current and future spend –Instills a greater awareness of the internal customer requirements –Improves acceptance / compliance of agreements –Fosters credibility internally and with Suppliers –Creates greater access for Suppliers to focused areas in the company to improve collaboration and understanding of the customers requirements –Facilitates greater opportunity for management of innovation transfer from the Supplier –Promotes more awareness of the complexity and magnitude of other team members roles, aiding in the breakdown of organizational silos Page 19

20 Category Management Teams Output is the articulated category & supplier strategies & tactics Team constituency should bring the technical knowledge base together for current and future activity but also get upstream sufficiently to impact product and process design for supply risk reduction within that category – Design for Supply Stakeholders are not necessarily the Subject Matter Experts (SMEs) – SMEs may be found in some unlikely places Team constituency can be dynamic – an opportunity to broaden skill sets, increase the diversity of input, and adapt current category strategy Remain sensitive to conflicting priorities –Diversity in function to function focus and priorities Transparency – no hidden agendas Supplier councils (steering committees) – when a Supplier has multiple inroads into your organization Page 20

21 Agenda Example: Company Updates Commodity Review Sales History Review Business Forecast Updates Supplier Performance (Scorecard Presentation) –Quality Issues –Delivery Issues –Service Issues Pricing Issues Project Updates Opportunities Page 21 Business Reviews And document the meeting minutes as well as any pre-meetings and / or debriefs Periodic, formal, proactive engagement for review of the relationship to assure alignment and optimization.

22 Supplier Business Review Criteria Worksheet - Template Supplier NameCommodityProducts/Services Annual Spend > $1mil (10pts) Annual Spend $250K- $999K (8 pts) Annual Spend $100K- $249K (6 pts) Sole Source GMP Material (10 pts) Multi Dept Impact (5 pts) Product Portfolio - Volume and Diversity (5 pts) GMP Material/ Service (5 pts) Mgmt Overide (n pts) Total PointsFrequency TosohChem/Bioresin Qtrly InvitrogenChem/Biomedia Annual Sigma AldrichChem/Biochemicals Bi-annual CDWIT hrdw/sftw 0 DellIT hrdw/sftw 0 World CourierLogistics/Freight 0 Flow CompProd Disposableshoses,fittings 0 Fedex ERSLogistics/Freight 0 Doe & IngallsChem/Biomfg chemicals 0 SBMGen/Ops Sevcleaning services 0 StaplesGen/Ops Sevoffice supplies 0 Cole-ParmerProd Disposablestubing/fittings 0 SAFCChem/Biomedia 0 MilliporeBPC, Filtersbags, filters 0 PallFiltersfilters 0 SartoriusFiltersfilters, bags 0 VWRLab Equip/Supplieslab equip/supplies 0 HyCloneProd DisposablesBPC 0 PraxairGen/Ops Sevspecialty gases 0 GE HealthcareResinresin 0 3MFiltersfilters 0 PrudentialGen/Ops Sevcleanroom gmnts 0 POINTS LEGEND: Total Points Review Frequency >50 Quarterly Bi-Annual < 30 Annual 2011 Supplier Business Review Schedule Vendor NameCategoryProduct (s)2010 spendFrequencyDateBuyer Cole-ParmerProd Disposablestubing/fittings$ 5,000Bi-Annual IY Corp Express/StaplesOffice Suppliesoffice supplies $ 10,000 Contract Renewal14-FebIY CUNO/3MFiltersfilters$ 50,000 Bi-Annual 9-FebIY Doe and IngallsChem/Biochemicals $ 500,000Qtrly25-JanIY Flow ComponentsProd Disposables process hoses, connectors $ 250,000Annual IY GE HealthcareResinresin/columns$ 1,000,000Annual11-MarIY HyCloneBPC $ 500,000Bi-Annual9-FebIY MilliporeFilters, BPC $ 250,000Annual4-JanIY PallFiltersfilters $ 500,000Bi-Annual7-FebIY PraxairGen/Ops Sevlab/specialty gases $ 300,000Annual10-MarIY Process HQProd DisposablesProcess hoses $ 100,000Annual IY PrudentialGen/Ops SevCleanroom garments $ 250,000Annual4-MarIY SAFCChem/Biomedia$ 2,000,000Qtrly15-MarIY SartoriusFiltersfilters$ 1,500,000Qtrly11-FebIY SBMGen/Ops SevCleanroom cleaning/janit$ 300,000Annual17-FebIY VWR Lab Equip/Supplieslab supplies/chemicals $ 3,000,000Qtrly27-JanIY Page 22 Business Reviews

23 Strategies End of: Next: pause for questions Internal Management Architecture Isaac Jim Tim Mark

24 Supplier Tactics and Responses – Examples: Going direct to end user – excluding Purchasing –Include end user on Category Teams –Establish facilitation policies with guidelines Focus on upstream product development to get into hard-to-change regulatory filings –Get involved in Product Development process, involve Product Development on Category Teams –Establish contractual agreements early on in relationship –Make prolific use of the term or equivalent in regulatory filings Getting sticky, getting into multiple areas / categories making it more difficult to switch supplier out –Manage supplier within one Category team but monitor / report on all category involvements –Rolled up scorecard (all areas) is basis for business reviews Page 24

25 Response: Category Management Best-in-class strategic sourcing organizations add value in numerous areas, not just in lowering prices: Policy development and monitoring Guidance for non-procurement related interactions Reduced time to market Standardization of specifications Working capital reduction –Reduced inventories, vendor managed inventories –Extended payment terms Demand reduction / management –Promoting alternatives –Matching procurement to requirements Process optimization across the Supply Chain Facilitating innovation transfer from suppliers Risk reduction / change control / continuity of supply Page 25

26 Category Management Process 26 Category Definition AnalysisStrategyImplementationReview There are multiple models that have been published supporting endless academic discussions. All work towards the same goals. Example of a 5 step model: Example of a 8 step model:

27 Category Management Process Supplier Management Supplier Development Program Negotiations and Contracts Supplier Evaluation Supply Management Supply Chain improvement Risk Assessment Risk Mitigation Monitor, Measure and Communicate Supplier Review Meeting Supplier Improvement Stakeholder Feedback Category Assessment Category Strategy Category Sourcing RFP Supplier Selection Evaluate Quotation Negotiation plan / perform Agreement Implement Manage + Maintain Spend Analysis Material/Service Analysis Utilization/Dissemination Market / Industry Analysis Strategy Development Perform Strategic Analysis Generate and Evaluate Options Generate Source Plan Obtain Strategy Approval Strategy Realization Implementation Plan Communication plan Sourcing plan

28 Supporting elements of the process Demand analysis / spend analysis –Current –Future –Use category / commodity codes to support future analyses Material / Service analysis –Origin –Competing demand –Technology direction Market / industry knowledge – must think global –Fragmented / concentrated / side line or strategic focus –Regulatory concerns Benchmarking Company culture –Appetite for change –The curse of success - If it aint broke dont fix it Supplier cultures Page 28

29 Strategic statements - examples Consolidate number of suppliers to increase leverage & reduce costs Increase number of suppliers to increase competition Leverage Group Purchasing Organizations Collaborate to reduce supply risk Facilitate innovation transfer / Integrate suppliers into product development process Improve sustainability profile Focus on other total cost elements Manage demand Standardize specifications Outsource / in-source material or service Invest in key suppliers Become customer of choice for supplier Expand the currency of the business Page 29

30 Gap Analysis Example Page 30 Set strategies over interim time periods (i.e. 1 year, 3 years, 5 years) and measure progress to close the gaps

31 Supplier Relationships Secure the relationship and leverage the value Commoditize Structure towards Collaboration / Alliance Remedy or replace Complexity / Effort of relationship Value of relationship Buyer Dominant Relationship Independent Relationship Interdependent Relationship Supplier Dominant Relationship Supplier Strength Buyer Strength Category strategies and supplier strategies drive each other in an iterative process

32 Culture Internal culture / Supplier culture alignment –Focus horizon (short versus long term) –Similarity of values –Over focus on select, key staff –Concomitant sensitivity to all stakeholder challenges –Ethics –Commitment to corporate reputations –Awareness / approach to risk –Far Side versus Dilbert

33 Relationship Sophistication Alignment of goals - Shared vision –Common definition of success and the path to get there Shared customer focus Cooperation / collaboration Trust –performance to commitment –Predictability –Consistency Open & effective communication Leverage competencies of both parties Long term focus on mutual benefits Dedication to innovation and continuous improvement Acknowledgement of external pressures

34 Set Goals Plan Execute Measure Improve React Collaborate Optimize Supplier Relationships Deliver Operational Excellence across the partnership / across the supply chain

35 Notes Category strategies, if authored by appropriate cross-functional teams, are more readily implemented and refined as the stakeholders have already been involved and continue to be the champions How much money are you going to spend in trying to save money? Remember the zero-sum game concept –If your gain is your suppliers or customers loss, it may not be sustainable –Shifting costs to other areas does not represent value add for the Company Even if it cant be measured, it still can be improved and reported Beware going after measurable dollars by taking on immeasurable risk Fundamental change across the supply chain is real legacy value Standardization of specifications Economies of scale Leveraging core competencies wherever they are Lean processes Cost of Quality Resilience Page 35

36 Supplier Performance Monitoring Strategies End of: Next: pause for questions Isaac Jim Tim Mark

37 Supplier Performance Measurements A common tool for most environments with demonstrated results

38 Supplier Performance Measurements Why & What

39 Measurements Measurement Needs of CEOs/Presidents The CEOs/presidents of the 1,000 largest firms (500 manufacturing and 500 service) and 200 best small firms, when surveyed on their need for purchasing measures, said the most-needed measures primarily were non-financial in nature. The five most-needed measures, in order, were: 1.Quality of purchased items 2.Key supplier problems that could affect supply 3.Supplier delivery performance 4.Internal customer satisfaction 5.Purchase inventory dollars Center for Advanced Purchasing Studies

40 Example 1: Page 40

41 Example 1: Page 41

42 What has worked and what hasnt Suppliers took notice and some even used the scorecards internally for communication and improvements It did (sometimes) drive focus to areas that needed it Measurements were rather easy to generate, and generally, looked pretty good It played well with the wave of Six Sigma and Lean initiatives that were sweeping business Some Suppliers waved their high scores around like some victory banner Some Buyers did the same The scorecard frequently did not reflect how either party looked at the relationship – a good scorecard sometimes did not mean a good relationship A (too precious) few saw an opportunity for a deeper dialog and a vision of real improvement for the Supply Chain Page 42

43 Misuse of Supplier Metrics Worse than no metric? Not knowing what to do with the tool and its results before implementing it Does the metric matter (i.e. 3/1 window on delivery)? Ease of creation useable value Does the metric reflect what it implies (Quality)? Precision accuracy The metric, unto itself, cannot be the sole deciding factor in formulating action, as numbers do not yet tell all Be careful attempting to formulate a significant element of your responsibility – If your job could be automated…. Einsteins theorem: Not everything that can be counted counts, and not everything that counts can be counted. Page 43

44 The Role of Supplier Performance Metrics Education –Performance visibility / improvement guidance –Identify inefficiencies / continuous improvement A language for communication –Revelations –Set & communicate standards / goals Alignment Objective evidence for contrasting against subjective perspectives Decision support – guidance, not mandate Risk mitigation Supplier selection – competitive evaluations Page 44

45 Example 2: Page 45

46 Example 2: Page 46

47 Example 2:

48 Risk of Rolled Up Scores An aggregate score masks the issues – youre looking for the low numbers, not the weighted mean Page 48

49 Example 3: BioSupplier Page 49

50 Example 3: Comparing Suppliers Supplier X Page 50

51 Example 4: Page 51

52 Example 5 – Supply Risk Scorecard: Page 52

53 Assessing and Engaging Suppliers Focus on constructive, not adversarial information / presentation –Scorecards should not be scarecards Use all internal resources – every opinion counts Balance long term direction with short term performance Use subjective areas as well (innovation, risk, culture, etc.) Dont confuse precision with accuracy Dont roll up the scores into one reportable number Consider making category specific – not one template for all If your scorecards are always running in the 95% - 100% range, youre measuring the wrong things Use scorecard templates to identify new suppliers If metrics that matter can help inspire and drive continuous improvement, then why wouldnt we have our suppliers measure us? Consider actionable metrics for both parties and use them. Page 53

54 Total Cost Supplier Performance Monitoring End of: Next: pause for questions Isaac Jim Tim Mark Page 54

55 Total Cost Page 55 Purchase Price Sales / Use Tax Freight Handling charges Packing charges Hazardous materials charges Customs filings charges Value Added Tax Installation costs Disposal costs Impact on operations Consulting / engineering / implementation costs Cost of supplies / consumables / spare parts Cost of maintenance / service / calibration Cost of licenses or other fees Cost of training Salvage value Cost of upgrades Validation Compliance qualification Supplier qualification Prototyping Ongoing testing & compliance – Cost of Quality Distribution costs Warranty cost Cost of doing business with (new) Supplier Cost of change if required in the future Lead times / cost of required inventory Exchange rates Anticipated price inflation All factors impacting the value of the acquisition must be considered: Consult all stakeholders when assessing costs, not just the end user: Finance, EH&S, QA/QC, Validation, Legal, Supply Chain, Manufacturing, Regulatory Affairs, Compliance, Sales & Marketing, Business Development, etc. – all may have a stake in the choices you make

56 Economic & Financial Economic Collapse Currency Devaluation Labor unrest, strikes Labor Shortage Major Market Fluctuations Quick Decline in earnings Hostile Takeover Negative Cash Flow Bankruptcy Financial/Bank Collapse Other investment failings Political & Social Government Policy Change Imprisonment of employees or family members Regulatory Change Civil Unrest Martial Law Brand/Org Reputation Product & Service Liability, recall & failure Obsolescence Counterfeiting Organization Ethics or Moral Violations Improper Business Legal Issues Black Market Dealings Weather & Nature Hurricanes, Cyclones, Tornadoes & High Winds Typhoons / Torrential Rains Earthquakes & Volcanoes Rising Water, Tidal Waves & Tsunamis Extreme Heat/Cold Global Climate Change Wildfire Mudslides and Sink Holes Environment & Human Condition Chemical, biological, radioactive & nuclear spill Fire/Explosion Water Contamination Public Utility Failure Emissions & waste Clean-up Mold and Asbestos Infestations and pest control Water Leaks/Levy breaks Physical Structure Collapse Criminal & Terrorist Product Tampering Terrorist Acts/Threats Arson & Bombing Industrial Espionage Sabotage Kidnapping or Extortion Fraud & Theft Product Use by Terrorist Workplace Violence Counterfeiting Informational Loss of IP, Confidentiality or Trade secrets (Tribal knowledge) Information Integrity or Quality of data Loss of key customer, supplier, production data Technological Corporate Hardware Failure Enterprise SW failure or corruption Capacity Issues Bandwidth or services issue Legacy or relevance issues Strategy Unknown competition Product Irrelevance or misplacement Poor Marketing Plans Sales Force Target Markets Poor Acquisition Strategy Failure to innovate Customer Perception Failure Improper Supply Chain Alignment Operational Out of Stock Poor Forecast for market Sourcing Failure Pricing Misalignment Production Shortage/Failure Poor Change Control Product/Project Mgt Failure Transportation/Log Accident Workforce Stoppage Disruption/Delay to work Restricted Access to facility Compliance and Governance Non-Compliance Statutory Regulatory Legal Contract Class Action/Lawsuits Corporate Governance Issues Executive Misdeed, bribes, security & code of conduct Oversights, errors, improper practice Health & Labor Epidemic or Pandemic Long-term Health issues Defections and lost knowledge Unattractive market or company for talent Skills shortage Workplace harmony Total Cost Models Must Account for Risk Subjective assessment is better than leaving it out because its hard to measure An absolute requirement when comparing sources / options Page 56

57 Examples: Filter Housings –Capital layout for one Supplier may be substantially less, but the housing will only fit their filters and they happen to be quite a bit more expensive or provide inferior performance Purification resins –Any marginal difference in the cost of the resin wont compare to any yield differences in performance Major software purchase –Implementation / validation / training / ongoing license and maintenance costs typically outweigh the purchase price Hazardous chemicals –Cost of disposal of any excess or the containers may outweigh the savings from a particular Suppliers offering API –Heparin Page 57

58 Summary Page 58

59 Summary comments If you cant articulate your vision, its a hallucination Dont let precision mask the absence of accuracy Pace the implementation of Supplier Management – the organization is ready for you to start but may not be ready to proceed at the same pace as you are Creation of a value add knowledge base that can be built upon is a great legacy, but it must be documented Everything should be made as simple as possible, but not one bit simpler (Einstein) Page 59

60 Engage: Isaac Jim Tim Mark Options for future webinars: o Supply Chain Risk Assessment and Mitigation o World Class Purchasing – Articulating Your Vision o Others? To provide feedback, or if interested in becoming a member of this group, please contact Bill Coakley at , or

61 Because life depends on us TM, the Bio Supply Management Alliance supports continuous learning and improvement of bio supply management professionals and the enhancement of the efficacy of the supply chain of the industry through collaboration. Our Mission To build effective and efficient supply chain STRATEGY for the biotech, biopharma, pharma and biomedical device industries by developing, advancing, and disseminating best practices, knowledge, and research. To encourage and promote supply chain INNOVATION within the biotech, biopharma, pharma and biomedical device industries for the highest quality and clinical outcomes in patient care and welfare. To create a supply chain COMMUNITY of thought and practice leaders from the business, professional association and academic sectors for information exchange, shared services, and collaboration.

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