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9 Δεκ 2012 (πριν από 4 χρόνια και 13 μέρες)

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Supplier Management


Mystery or Mastery?

An Introduction to Supplier Management

Brought to you by:

and

Isaac Young

IYoung@bmrn.com

Jim Latimer

Jim.Latimer@elan.com

Tim Jordan

Tjordan@mappharma.com

Mark Buck

Mark_Buck@bio
-
rad.com

panel:

http://www.biosupplyalliance.com

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 Healthcare’s
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. Mary’s 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

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 don’t get through the entire presentation we will look to your
feedback whether we conduct a “part 2” or move on to other topics.

Process

http://www.biosupplyalliance.com

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


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

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

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.

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
doesn’t get invented again


Documents articulate the value added and facilitates the communication of
that value to the rest of the organization


Makes it “official”


they’re required to stand up in a financial audit

How:


Start thin


it’s 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

Supplier Segmentation

Isaac Young

IYoung@bmrn.com

Jim Latimer

Jim.Latimer@elan.com

Tim Jordan

Tjordan@mappharma.com

Mark Buck

Mark_Buck@bio
-
rad.com


http://www.biosupplyalliance.com

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

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

Example Worksheet

Page
12

Criteria
Description
Weight
Scale
Value
Strategic Role
25%
7
High
10
>6
Level 1
X
Medium
5
4 - 6
Level 2
X
Low
0
2 - 4
Level 3
X
<2
Level 4
X
Quality Risk
25%
9
High risk
10
Medium Risk
5
Low
0
Level 1
X
Complexity Risk
15%
6
Level 2
X
High
10
Level 3
X
Moderate
5
Level 4
X
Low
0
Supply Risk
25%
3
High
10
Medium
5
Level 1
X
Low
0
Level 2
x
Level 3
x
Spend
10%
2
Level 4
x
>$1M
10
$250K - $1M
5
< $250K
0
Management Override
1
Level 1
X
Notes:
Level 2
x
Level 3
x
Total Score
6.9
Level 4
x
Monitoring
Business Reviews
Strategy Reviews
Supplier
Class
Qrtrly
Bi-annual
Annually
static
Supplier
Class
Qrtrly
Bi-annual
Annually
Internal
Only
Supplier
Class
Qtrly
Scorecard
Annual
Scorecard
No
Scorecard
Total
Score
Supplier
Class
Qualification
annual
audit
2 year
audit
survey
only
not
required
assessment of the potential
impact of a quality failure on a
patient
level of sophistication / intricacy
of a material or service including
any I.P. protection or other
esoteric factors
projected spend for material or
service over next year or other
appropriate time period
the extent to which the material
or service factors into the overall
success of corporate goals and
objectives
assessment of the potential for
interruption to the continuity of
supply and its impact on
operations
Supplier Classification



TRAIT / DOMAIN

Transactional

Collaborative

Alliance

Number of Suppliers

Many

Some

Few

Communication

No specific

Systemic

Systemic

Competitive Advantage

No

Med
-

High

High

Continuous
Impr
ovement

No

Opportunity

VIP

Difficulty Change/Exit

Easy

Difficult

Very Difficult

Duration of Relationship

Short term

Mid/Long Term

Long Term

Avoid/Resolve Issues

Reactive

Developing Proactive

Proactive


Focus

Lowest price

Total Cost

Best TCO / Risk
Mitigation

Level of Integration

None

Medium

High

Quality

Incoming Inspection

Certified Quality

Joint Liability

Dedicated Resources

Few, Low Skill

Professional

Dedicated

Service Level

Low

Developing High

High

Forecasts

P.O.

Communicated

Shared / 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:

Segmentation Profile Example

14

0
100
200
300
Tier 4
Tier 3
Tier 2
Tier 1
# of suppliers

Office Supply

Janitorial Services

Computer software
suppliers


eTools


Price / Service
Agreements


RFP’s

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

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

Internal Management Architecture

Supplier Segmentation

End of:

Next:

pause for questions

Isaac Young

IYoung@bmrn.com

Jim Latimer

Jim.Latimer@elan.com

Tim Jordan

Tjordan@mappharma.com

Mark Buck

Mark_Buck@bio
-
rad.com


http://www.biosupplyalliance.com

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

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

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
customer’s 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

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 (SME’s)


SME’s 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

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.

Supplier Business Review Criteria Worksheet
-

Template

Supplier Name

Commodity

Products/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
Points

Frequency

Tosoh

Chem/Bio

resin



8



10

5

5

5

20

53

Qtrly

Invitrogen

Chem/Bio

media





6



5

5

5

0

21

Annual

Sigma Aldrich

Chem/Bio

chemicals



8





3

5

5

10

31

Bi
-
annual

CDW

IT hrdw/sftw

IT hrdw/sftw

















0



Dell

IT hrdw/sftw

IT hrdw/sftw

















0



World Courier

Logistics/Freight

Logistics/Freight

















0



Flow Comp

Prod Disposables

hoses,fittings

















0



Fedex ERS

Logistics/Freight

Logistics/Freight

















0



Doe & Ingalls

Chem/Bio

mfg chemicals

















0



SBM

Gen/Ops Sev

cleaning services

















0



Staples

Gen/Ops Sev

office supplies

















0



Cole
-
Parmer

Prod Disposables

tubing/fittings

















0



SAFC

Chem/Bio

media

















0



Millipore

BPC, Filters

bags, filters

















0



Pall

Filters

filters

















0



Sartorius

Filters

filters, bags

















0



VWR

Lab Equip/Supplies

lab equip/supplies

















0



HyClone

Prod Disposables

BPC

















0



Praxair

Gen/Ops Sev

specialty gases

















0



GE Healthcare

Resin

resin

















0



3M

Filters

filters

















0



Prudential

Gen/Ops Sev

cleanroom gmnts

















0



POINTS LEGEND:





Total Points



Review Frequency

>50



Quarterly

30
-

50



Bi
-
Annual

< 30



Annual

2011
Supplier Business Review Schedule









Vendor Name

Category

Product (s)

2010 spend

Frequency

Date

Buyer

Cole
-
Parmer

Prod Disposables

tubing/fittings

$ 5,000

Bi
-
Annual



IY

Corp
Express/Staples

Office Supplies

office supplies


$ 10,000

Contract

Renewal

14
-
Feb

IY

CUNO/3M

Filters

filters

$ 50,000

Bi
-
Annual


9
-
Feb

IY

Doe and Ingalls

Chem/Bio

chemicals


$ 500,000

Qtrly

25
-
Jan

IY

Flow Components

Prod Disposables

process hoses,
connectors


$ 250,000

Annual



IY

GE Healthcare

Resin

resin/columns

$ 1,000,000

Annual

11
-
Mar

IY

HyClone

BPC

BPC

$ 500,000

Bi
-
Annual

9
-
Feb

IY

Millipore

Filters, BPC

Filters, BPC


$ 250,000

Annual

4
-
Jan

IY

Pall

Filters

filters


$ 500,000

Bi
-
Annual

7
-
Feb

IY

Praxair

Gen/Ops Sev

lab/specialty gases


$ 300,000

Annual

10
-
Mar

IY

Process HQ

Prod Disposables

Process hoses


$

100,000

Annual



IY

Prudential

Gen/Ops Sev

Cleanroom garments


$ 250,000

Annual

4
-
Mar

IY

SAFC

Chem/Bio

media

$ 2,000,000

Qtrly

15
-
Mar

IY

Sartorius

Filters

filters

$ 1,500,000

Qtrly

11
-
Feb

IY

SBM

Gen/Ops Sev

Cleanroom cleaning/janit

$ 300,000

Annual

17
-
Feb

IY

VWR

Lab
Equip/Supplies

lab supplies/chemicals


$ 3,000,000

Qtrly

27
-
Jan

IY

Page
22

Business Reviews

Strategies

End of:

Next:

pause for questions

Internal Management Architecture

Isaac Young

IYoung@bmrn.com

Jim Latimer

Jim.Latimer@elan.com

Tim Jordan

Tjordan@mappharma.com

Mark Buck

Mark_Buck@bio
-
rad.com


http://www.biosupplyalliance.com

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

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

Category Management Process

26

Category

Definition

Analysis

Strategy

Implementation

Review

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:

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


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
ain’t

broke don’t fix it


Supplier cultures


Page
28

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

Gap Analysis Example

Page
30

Cycle Time
Sustainability
Cost
Agility
Quality
Risk
Strategic
Performance by Focus Area

Current
Target
Set strategies
over interim time
periods (i.e. 1
year, 3 years, 5
years) and
measure progress
to close the gaps

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

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”


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


Set
Goals

Plan

Execute

Measure

Improve

React

Collaborate

Optimize
Supplier Relationships

Deliver Operational
Excellence across the
partnership / across the
supply chain

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 supplier’s or customer’s loss, it may not be sustainable


Shifting costs to other areas does not represent value add for the Company


Even if it can’t 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

Supplier Performance Monitoring

Strategies

End of:

Next:

pause for questions

Isaac Young

IYoung@bmrn.com

Jim Latimer

Jim.Latimer@elan.com

Tim Jordan

Tjordan@mappharma.com

Mark Buck

Mark_Buck@bio
-
rad.com


http://www.biosupplyalliance.com

Supplier Performance Measurements

A common tool
for most
environments
with
demonstrated
results

Supplier Performance Measurements

Why




&




What

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

Example 1:

Page
40

Example 1:

Page
41

What has worked and what hasn’t


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

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….


Einstein’s theorem: “Not everything that can be counted
counts, and not everything that counts can be counted.”

Page
43

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

Example 2:

Page
45

Example 2:

Qtr 1
points
possbl
Qtr 2
points
possbl
Qtr 3
points
possbl
Qtr 4
points
possbl
1
3
1
2
4
2
2
4
2
2
4
2
2
2
4
2
2
4
2
2
4
2
2
4
2
2
3
3
1
2
3
1
2
4
2
2
4
2
2
4
Supplier consistently communicates changes in advance
3
2
4
4
4
4
4
4
4
4
4
4
5
Supplier provides transparent insight into their strategy and business operations
4
2
2
4
2
2
4
2
2
4
2
2
6
Supplier provides stable, long term pricing
4
4
4
4
4
4
4
4
4
4
4
4
7
3
1
2
4
2
2
4
2
2
4
2
2
8
1
n.a.
0
1
n.a.
0
1
n.a.
0
1
n.a.
0
9
4
2
2
4
2
2
4
2
2
4
2
2
10
Supplier has not declared a force majeure or other supply interruption
4
2
2
4
2
2
4
2
2
4
2
2
Qtr 1
points
possbl
Qtr 2
points
possbl
Qtr 3
points
possbl
Qtr 4
points
possbl
11
1
n.a.
0
3
1
2
4
2
2
4
2
2
12
1
n.a.
0
4
2
2
4
2
2
4
2
2
13
1
n.a.
0
1
n.a.
0
1
n.a.
0
1
n.a.
0
Qtr 1
points
possbl
Qtr 2
points
possbl
Qtr 3
points
possbl
Qtr 4
points
possbl
14
3
1
2
4
2
2
4
2
2
4
2
2
15
4
2
2
3
1
2
3
1
2
4
2
2
16
4
2
2
4
2
2
4
2
2
4
2
2
Qtr 1
points
possbl
Qtr 2
points
possbl
Qtr 3
points
possbl
Qtr 4
points
possbl
17
4
2
2
4
2
2
4
2
2
4
2
2
18
4
2
2
4
2
2
4
2
2
4
2
2
19
4
2
2
4
2
2
4
2
2
4
2
2
Performance %
points
possbl
Performance %
points
possbl
Performance %
points
possbl
Performance %
points
possbl
82%
28
34
92%
35
38
97%
37
38
100%
38
38
Packing slips and/or other required shipping documentation is included
with shipments including P.O. #.
Shipments are packaged according to delivery requirements and local notification
or other delivery procedures are followed
Invoices are accurate and legible
Supplier accommodates information requests in a timely manner
Invoice Evaluation –
6
points
Statement
Purchase Order is identified on the invoice
Receiving Evaluation –
6
Points
Statement
Shipments arrive in a safe and satisfactory condition
Shipments are suitably packaged and labeled to facilitate inspection
and sampling
Supplier provides satisfactory responses to material issues consistent with the
urgency of the issue
Statement
Required Quality Documentation is accurate and available in a timely manner
communications
RUSH orders are accommodated with efficiency and accuracy
Supplier is proactive in suggesting opportunities for value improvement and
works closely to realize that value
Supplier has formal and tested risk mitigation and contingency plans in place
Supplier has documented and effective initiatives on sustainable practices ("green"
initiatives)
Purchasing Evaluation - 24 Points Possible
Statement
Sales representative keeps Purchasing informed and involved with regular
Supplier shares cost savings and / or insight into cost factors.
Inspection Evaluation –
8
points
Sometimes =1
Consistently = 2
Sometimes =1
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Sometimes =1
Consistently = 2
Consistently = 2
Consistently = 2
Sometimes =2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Sometimes =1
Consistently = 2
Not Applicable
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Sometimes =1
Consistently = 2
Not Applicable
Consistently = 2
Consistently = 2
Consistently = 2
Not Applicable
Consistently = 2
Consistently = 4
Consistently = 4
Consistently = 4
Consistently = 4
Consistently = 4
Consistently = 4
Consistently = 4
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Sometimes =1
Sometimes =1
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Sometimes =1
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Consistently = 2
Page
46

Qtr 1
points
possbl
11
4
2
2
12
4
2
2
13
4
4
4
Qtr 1
points
possbl
14
4
2
2
15
3
1
2
16
3
1
2
Qtr 1
points
possbl
17
4
2
2
18
3
1
2
19
4
2
2
Performance %
points
possbl
88%
37
42
Packing slips and/or other required shipping documentation is included
with shipments including P.O. #.
Shipments are packaged according to delivery requirements and local notification
or other delivery procedures are followed
Inspection Evaluation –
8
points
Receiving Evaluation –
6
Points
Invoices are accurate and legible
Supplier accommodates information requests in a timely manner
Statement
Purchase Order is identified on the invoice
Invoice Evaluation –
6
points
Statement
Shipments arrive in a safe and satisfactory condition
Shipments are suitably packaged and labeled to facilitate inspection
and sampling
Supplier provides satisfactory responses to material issues consistent with the
urgency of the issue
Statement
Required Quality Documentation is accurate and available in a timely manner
Consistently = 2
Consistently = 2
Consistently = 4
Sometimes =1
Sometimes =1
Consistently = 2
Sometimes =1
Consistently = 2
Consistently = 2
Example 2:

Risk of Rolled Up Scores

An aggregate score masks the issues


you’re looking
for the low numbers, not the weighted mean

Page
48

Example 3:

BioSupplier

Page
49

Example 3: Comparing Suppliers

Supplier X

Supplier X

Page
50

Example 4:

Page
51

Example 5


Supply Risk Scorecard:

Page
52

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.)


Don’t confuse precision with accuracy


Don’t 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,
you’re measuring the wrong things


Use scorecard templates to identify new suppliers


If “metrics that matter” can help inspire and drive continuous
improvement, then why wouldn’t we have our suppliers measure
us? Consider actionable metrics for both parties and use them.



Page
53

Total Cost

Supplier Performance Monitoring

End of:

Next:

pause for questions

Isaac Young

IYoung@bmrn.com

Jim Latimer

Jim.Latimer@elan.com

Tim Jordan

Tjordan@mappharma.com

Mark Buck

Mark_Buck@bio
-
rad.com


http://www.biosupplyalliance.com

Page
54

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

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 “it’s hard to measure”


An absolute requirement when comparing
sources / options

Page
56

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 won’t 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 Supplier’s offering


API


Heparin

Page
57

Summary

Page
58

Summary comments


If you can’t articulate your vision, it’s a hallucination


Don’t 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

Engage:



http://www.biosupplyalliance.com


Isaac Young

IYoung@bmrn.com

Jim Latimer

Jim.Latimer@elan.com

Tim Jordan

Tjordan@mappharma.com

Mark Buck

Mark_Buck@bio
-
rad.com

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 650
-
358
-
3434, or
wcoakley@sciclone.com


“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.