Professional Documents
Culture Documents
22-1
Key Concepts
Key Concepts
Technology
The New Product Development Cycle
Supplier Feedback
Social Responsibilities
Standardization
Value Engineering and Value Analysis
Organization and Staffing
22-3
Background
Vice-president of Supply Management of Megatronics
Base salary $450,000 per year
Potential $450,000 per year bonus
You may hire a maximum of 16 new supply
management professionals
You obtained authorization for a training budget of
$3.25 million per year
You will become a member of the executive committee
22-4
Value proposition
Reduce Megatronics new product development
time by 50%
Cut time to market by 30%
Reduce post-introduction revisions by 70%
Increase customer satisfaction from 85% to 98 %
Increase the impact of the firms test and
measurement equipment on customer
profitability by 15%
Background
Obligations:
Reduce the cost of purchased goods and
services by an average of 5% per year
Reduce incoming material defects from a
current average of 1,000 ppm to 10 ppm over
the next 5 years
Improve cutting-edge technology inflow by
10% per year
Reduce the average product development
cycle by 20% per year
22-8
22-9
Transformational Training
22-11
2.
3.
4.
5.
6.
22-12
7.
8.
9.
10.
11.
12.
22-13
Organization Chart
Top Half
Chief
Executive Officer
Corporate Level
VP of
Finance
President
VP of
Engineering
Division Level
General Manager
Surgical Division
General Manager
Optical Division
VP of
Operations
Director of
Purchasing
General Manager
Test Division
VP of
Marketing
To Divisional
Purchasing
Managers
General Manager
Medical Division
22-14
To Director
of Purchasing
Purchasing
Manager
Executive Assistant
Buying Teams
(70)
Buyer
Expediter
Support
Person
22-15
Transformational Planning
Supply management must develop and manage
the firms supply strategy as an integrated whole
instead of a series of unrelated strategies
The corporations strategy is the key driver of the
supply strategy
The technology, marketing, finance, and
production strategies are all inputs to the supply
strategy
Conversely, the supply strategy is an input to the
corporations strategies for technology,
marketing, finance and production
22-16
22-17
22-19
Cost
You proposed an overall savings goal for
the first year of 10% on the costs of
purchased materials, equipment, supplies,
and services
The team agrees that the focus must be
TCO
The problem is that price often rises when the
focus is on TCO
If we pay a price premium that is offset with a
reduction in the total cost of ownership, we
will document our analysis
22-20
Strategic Sourcing
Criteria for Rating Suppliers
Cost minimization by suppliers
Willingness to share cost data
Incoming quality levels (ppm, if feasible)
Current technology status: leader/follower
Ability to meet Megatronics technology needs
in 3 years
Potential to become an alliance supplier
22-21
22-23
Quality
Development of clear and concise specifications
by our internal customers,
Quality considerations during sourcing,
Development of a clear understanding with
suppliers on all aspects of quality both prior to,
and subsequent to, award of a contract
Identification of opportunities for supplier
development,
A comprehensive monitoring system, supplier
certification,
A motivational program addressing quality, cost,
and service
22-24
Technology
Technology changes very fast and could be expensive
Prequalify suppliers
Create supply managers with engineering
knowledge
22-26
Social Responsibilities
22-28
Standardization
22-29
22-30
22-31
22-32
Faster to Market
Improved Quality
Pricing Flexibility
Innovation
Acquisition Cost
Processing Cost
Quality Cost
Downtime Cost
Risk Cost
Cycle Time Cost
Conversion Cost
Non-value Added Cost
Supply Chain Cost
Post Ownership Cost
22-35
Strategic Intent
Our global supply chain will be unequaled in
performance and one of Megatronics greatest
competitive advantages.
Carrying out this strategic intent requires:
An optimized, leveraged, and responsive global supplier
base and an efficient supply chain
Unequaled performance as measured by A.T. Kearney
and as compared to competition and best-in-class
A supply chain that creates new business opportunities
for Megatronics by providing an outlet for marketing our
best practices and by allowing us to bring suppliers
innovations to Megatronics new markets.
22-36
22-37
Recruit best candidates to fill entry-level and mid career openings, ongoing
22-40
22-41
22-43
Integrate the supply chain into the technology delivery process, ongoing
Provide needed education and training, globally, across the enterprise and
enable distance learning, ongoing
2012
Its January, 2012, four and a half years since you
were hired
Megatronics stock has increased 5-fold
You enter your new office and get a thrill out of
the sign on your new door:
Office of the President and Chief Executive
Officer
22-48
Corporate
Level
Director of
Supplier
Development
(16 FTE)
Director of
Supply
Engineering
(2 FTE)
Division
Level
Dir. Supply
Chain Mgmt.
Surgical
Division
Dir. Supply
Chain Mgmt.
Optics
Division
60 FTE
Demand
Management
(2 FTE)
Commodity
Managers
(8 FTE)
Supply
Managers
(32 FTE)
Executive Assistant
Director of
Measurements
and Standards
(4 FTE)
Director of
Alliances and
Networks
(12 FTE)
Dir. Supply
Chain Mgmt.
Test
Division
Dir. Supply
Chain Mgmt.
Medical
Division
62 FTE
Value
Engineers
(4 FTE)
Director of
Supply Systems
and Logistics
(3 FTE)
75 FTE
Project Supply
Managers
(12 FTE)
Support Staff
(2 FTE)
Cost
Engineers
(2 FTE)
Logistics
(10 FTE)
Supply
Engineers
(2 FTE)
22-49
Director of
Supplier
Development (16
FTE)
Director of
Supply
Engineering
(2 FTE)
Director of
Measurements
and Standards (4
FTE)
Executive
Assistant
Director of
Alliances and
Networks
(12 FTE)
Director of
Supply Systems
and Logistics
(3 FTE)
22-50
Dir. Supply
Chain Mgmt.
Surgical
Division
Dir. Supply
Chain Mgmt.
Optics
Division
60 FTE
Demand
Management
(2 FTE)
Commodity
Managers
(8 FTE)
Supply
Managers
(32 FTE)
Dir. Supply
Chain Mgmt.
Test
Division
Dir. Supply
Chain Mgmt.
Medical
Division
62 FTE
Value
Engineers
(4 FTE)
Project
Supply
Managers
(12 FTE)
75 FTE
Support Staff
(2 FTE)
Cost
Engineers
(2 FTE)
Logistics
(10 FTE)
Supply
Engineers
(2 FTE)
22-51
Concluding Remarks
Implementing Value Network Management
is as much about leadership and
management as it is about supply
management concepts and practices
Based on its integrative, relationship, and
boundary spanning nature, there is no
question in our minds:
World class supply managers have the
essential skill set to become Chief
Executive Officers!
22-52