Relationship Continuity Management How Do You Maintain SupplIer Relationships 1

Today’s State Of Supplier Relationships Copyright 2000 by Supply Chain Technology News and Penton Media Inc. Used with permission. “It’s the next level of real-time vendor relations. But we’re still beta testing.” 2

Vested Is A Methodology 3 Five Rules 10 Contract Elements

The 5 Rules Of Vested 4

5 Governance is One of the Five Rules We codified their success into a methodology based on Five Rules

Supplier Relationship Management (SRM) –SRM is the practice of creating mechanisms to increase the efficiency and effectiveness of how a company manages its suppliers Some SRM efforts are designed to build deeper relationships that foster improved collaboration and innovation. However, SRM techniques alone is not best practice and inadequate in Vested relationships. We suggest that you deploy SRM practices with a unique spin by putting on your what’s-in-it-for-we (WIIFWe) hat, and develop processes for jointly managing the business, not just managing the supplier. 6 Manage The Business, Not Just The Supplier

A Shift In Approach… 7 Getting the supplier to meet my needs It’s in the contract, now it’s the supplier’s problem Blame and punish the supplier Unpleasant surprises Finding a way to meet our mutual needs Work together to achieve performance and compensation goals Communicate the issues, jointly find solutions Integrated planning and communications WE Manage the Business…Not Just the Supplier BECOMES ME

What Goes into “Governance”

The Vested framework incorporates four elements: 1.Element 7: Relationship Management 2.Element 8: Transformation Management 3.Element 9: Exit Management 4.Element 10: Special Concerns and External Requirements 9 Vested Governance Framework

The Relationship Management element of your agreement should contain six key components, each serving a different function 1.Create a tiered management structure 2.Establish separate roles service delivery, transformation, and commercial management 3.Establish peer-to-peer communications protocols 4.Develop a communications cadence, tempo, or rhythm 5.Develop a process to maintain continuity of resources 6.Establish a performance management program 10 Element 7: Relationships Management

Strategic Drift Disease 11 Strategic drift occurs when buyers and suppliers don’t work to maintain their relationship and/or work to update strategic priorities Typically happens after a first generation outsourcing deal has been successful –QBRs begin to slip to bi-annual or annual –Suppliers loose sight of priorities and as such begin to not be proactive in driving solutions to problems or connecting new solutions to new priorities Typically results in buying company thinking the supplier is not proactive – and seeking new suppliers when in reality they already have a good supplier

New Sheriff In Town Syndrome 12 The New Sheriff in Town often occurs when a new leader joins the buying company and wants to shake things up Classic example is from GM –Randy Mott – CIO of GM –Made the decision to in-source 90% of the IT work. –HP, which won GM’s Supplier of the Year award in 2010 and 2011 for its “dedication and loyalty” will stand to lose more than $1 billion in revenue and hundreds of key employees

We Studied Some Of The World’s Best…. 13 P&G (Real Estate/Facilities Management) Microsoft (BPO) McDonald’s (Supply Chain) U.S. Dept. of Energy (Environmental Services) State of Minnesota Dept. of Transportation (Construction) Integrated Management Services (Staffing) Diversey (IT) Water for People (non-profit NGO support in developing countries)

14 Jim Skinner CEO, Retired McDonald’s Jim Skinner From McDonald’s Will Help Tell The Story… Some videos are an excerpt from an interview with Jim Skinner for CNBC Source: Video: Source: Photo: Courtesy of McDonald’s

15 Ray Kroc Founder McDonald’s Ray Kroc’s Philosophy “None of us is as good as all of us.” Source:

Founder Ray Kroc based the McDonald’s philosophy on that of a three-legged stool Each leg represents a member in the System –McDonald’s Corporation –Suppliers –Franchisees/Owner-Operators For one to prosper, each leg must prosper 16 The McDonald’s “System” Source:

“Everyone understands they are trying to create wealth for all three legs of the stool. As they “grow the pie,” there is more for all.” 17 Creating Value – Not Competing Three Legged Stool McDonald’s System’s First Philosophy Source:

“McDonald’s wants the relationship with the person. If a person is assigned to the account – it is constant. To McDonald’s – suppliers are part of the planning and execution of their Plan to Win. It’s not just business – it’s personal and they want to see the person that is helping them succeed or fail.” 18 It’s Not Just Business….it’s Personal Ed Sanchez CEO Lopez Foods

19 Ted Perlman Chair of the Board HAVI Global Solutions Self-Governance Is a Key “My whole role in life as a supplier is not letting McDonald’s consciously make a mistake.” Source:

20 Doubling Beef Patty Production

Who ran out of chicken during the Asian Avian Flu crisis? 21 Focusing on Responsiveness

“McDonald’s... [is] far more rigorous in checking for bacteria and dangerous pathogens. They test the ground beef they buy five to 10 times more often than the USDA tests beef made for schools during a typical production day.” Safety Peter Eisler, Blake Morrison, and Anthony DeBarros “Fast-food standards for meat top those for school lunches” Dec 9 th, 2009 Source:

In January 2013 McDonald’s met its goal of serving 100% Marine Stewardship Council certified fish. Sustainability Source:

24 The Plan To Win Delivers Photos Source: The McDonald’s Revitalization: Getting Better, Not just Bigger

25 The System – A Real Winner

26 Kate Vitasek Faculty, Univ. of Tennessee Center for Executive Education Contact Me! Our next 3 day Executive Education course is Nov 5-7 Register for our free Vested Orientation online course here here Source:

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