BULM 744: Managing the Real Time Supply Chain

Supply Relationship Management

SYLLABUS 2012

Dr. Kevin McCormack [email protected]

I. Introduction

“Enterprises are spending increasing amounts on goods and services, with such expenditures often exceeding 45 percent of revenue. This growth is being driven by moves to “virtualization,” including the purchase of “components,” instead of raw materials; the use of contract manufacturing; and the development of other unconventional supply arrangements. As your expenditures with suppliers grow, their ability to directly affect corporate performance increases. To improve or sustain financial performance, you must aggressively manage your supply base.

In a macro-economic environment with slow top-line growth, you can avail yourself of an immediate opportunity to boost profits through the cost management of supply-side expenditures. However, suppliers represent more than just a cost center. They can also be a source of expertise, capable of delivering more-innovative products in shorter time periods and at better prices.

Supplier relationship management (SRM) is the practice of establishing the business rules and understanding needed for interacting with suppliers of products and services of varied criticality to the profitability of the enterprise. Supplier relationships that are properly managed can contribute to enterprise innovation and growth. At the same time, a poorly managed supply base will drive up costs and slow new-product initiatives to a crawl.” (Gartner 2002)

In this course, we introduce the student to the foundational theories, strategies and methods used to build and manage supplier relationships for mutual success.

On Day One, we review the basic concepts of SRM. We also examine best practice companies that have successfully implemented SRM.

On Day Two, we explore the SRM process and the factors that lead to success. Case teams will be formed to role play (supplier, customers, SRM manager, etc) and interact, using a simulation, to experience real situations and develop win-win solutions. On Day Three, the case teams continue to work the case and present their solutions and action plan for review.

We focus on the SRM framework and process to better understand the drivers that create value in a relationship. This framework and process consists of a set of best practice process steps and activities developed through several years of research and experience with global supply chains. The process and framework, shown in Figure 1, has been used by SRM teams and commodity managers to aid in successfully managing supplier relationships.

Figure 1. The Supplier Relationship Model

The process in Figure 1 can only be successful if key factors are aligned. Trust, Power and supplier relationship management approaches. Supplier relationships take many forms and require different management approaches. Organizing and classifying these relationships and aligning supplier management tactics are critical for success. Building and maintaining trust and long-term commitment has been shown to lead to superior, sustainable supply chain performance and innovation. The appropriate understanding and use of power has also been shown to help build this trust and commitment or destroy it.

This course explores SRM from multiple perspectives: -from the perspective of the commodity manager who has concerns about what type of actions are required for different supplier relationships.

-from the perspective of the buyer who must handle day to day interactions that can enhance or destroy a relationship.

-from the perspective of suppliers who are concerned about effectively servicing their customers and managing a profitable company from a short term and long term perspective.

The benefits of Supplier Relationship Management to the enterprise have been shown to be in improved short term performance (a 5% benefit in reduced price), priority access to key resources needed during a crisis, reduced risk of supply disruption and improved innovation in product development and services.

II. Objectives

This course has the following learning objectives:

1. To provide the student with exposure to the concept of Supplier Relationship Management as an emerging business discipline of crucial importance.

2. To demonstrate how the student can use systematic approaches, such as the SRM model to assess and improve a supplier relationship.

3. To enable the student to actually build a supplier relationship management process using best practices.

4. To provide a hands-on role-play exercise for the student on managing supplier relationships in support of key learning objectives. III. Required Materials

A. Required Text:

None – Handouts will be provided.

B. Required Software License :

Individual student licenses for Simulator, a web based program will be required.

Please bring a wireless-connected laptop with you to class!

C. Additional Required Readings:

Relationship Management (Strategic Supplier Relationships), Ch. 10. “Supply Market Intelligence: A Managerial Handbook for Building Sourcing Strategies ”, Handfield, R., Taylor & Frnacis Group, 2006. IV. Session Plan

Day One: Supplier Relationship Management: Concepts & Best Practices

Morning Part 1

Lecture - Introduction to course

Lecture – Supplier Relationship Management (SRM) concepts, principles and frameworks

Break out case – Appendix C: Suncor Energy Foothills Drilling Case (map the truck co. supplier flows and social network)

Groups will break out and answer case questions and present their answers:

Relationship Management (Strategic Supplier Relationships), Ch. 10. “Supply Market Intelligence: A Managerial Handbook for Building Sourcing Strategies ”, Handfield, R., Taylor & Francis Group, 2006.

Morning Part 2

Lecture - Customer of choice theory

Break out - TBD

Groups will break out and answer case questions and present their answers:

Lecture – Types of supplier relationships.

Are you a customer of choice?, by Tim Minahan, posted June 13th, 2007.

“An Assessment of supplier – customer relationships”, Handfield et al., Journal of Business Logistics, Vol. 25, No. 1, 2004. Day 1 Afternoon

Lecture – Power and trust – critical factors in SRM

Break out – Power and trust assessment exercise.

Groups will break out and develop a power assessment of a relationship and present their results.

Trust, power, dependence, and economics: can SCM research borrow paradigms? R. Handfield and Christian Bechtel, Int. J. Integrated Supply Management, Vol. 1, No. 1, 2004

“Power Influences in the supply chain.”, Maloni, M. and Benton, W., Journal of Business Logistics, Vol. 21, No. 1, 2000.

Day 2: Supplier Relationship Management: the objectives and the process

Lecture – The SRM process, objectives and methods.

Break out – Teams break out and begin SRM case using the simulator.

Relationship Management (Strategic Supplier Relationships), Ch. 10. “Supply Market Intelligence: A Managerial Handbook for Building Sourcing Strategies ”, Handfield, R., Taylor & Francis Group, 2006.

See Appendix for details of simulation workshop

Day 3: Effective SRM

The teams will report out on their simulator exercise results and complete the written test. IV. Grading

Final Exam- 50 points

An exam will be administered in class during the afternoon of our final session. It will cover the required readings, in class lectures & cases.

Workshop Team Presentations- 30 points

Each team will be evaluated on the basis of content, presentation, analysis, conclusions & actionable recommendations

Class Participation-20 points

Level of Preparation, Participation/ & Contribution in classroom discussions and team exercises. Appendix: SRM Workshop

Workshop Agenda

Using experiential learning approaches, real case studies and a simulated supply chain environment, this workshop will provide supply and procurement leaders and commodity managers an understanding of the fundamentals of supplier relationship management.

As a result of completing this workshop, participants will be able to:

1. Understand the purpose and goals of supplier relationship management (SRM) within the context of their firm and supply network. • How and SRM based process view fits into the their mission and vision • SRM benefits to their firm

2. Develop a basic SRM strategy and plan for their organization and understand: • The supply chain network view (interactions, relationships, attributes, environment) • Your SRM strategy • SRM Program Management • Relationship classifications and organization • The importance of power, trust and commitment. • Supplier relationship assessment, diagnoses and improvements. • Supplier relationship portfolio management – building the combined view • How to build a SRM measurement system • Deployment methods, roles and responsibilities

3. Understand and articulate the impacts of success for an SRM program Workshop Details

Duration 1 and 1/2 Day - 12 hours

Resources Required

Three flipcharts, tables for all participants, LCD monitors with laptop connection, masking tap for hanging posters on the wall, four sets of multicolored markers. Active laptops and Internet connections for at least 50% of the participants.

Instructor: Dr. Kevin McCormack, Time: Day 1 - 8:00 a.m. – 5:00 p.m., Day 2 – 8:00 a.m. – 12 N.

Time Topic How Outcomes 8:00 AM – Introductions, workshop Individual introductions and Participants meet fellow 8:30 overview and training instructor review of participants, understand procedures workshop outcomes the experiences each brings, and understands the workshop goals and outcomes. Participants also organize into teams for the exercises. 8:30 – The SRM process Model - lecturette on basic elements Participants will be able to 10:15 – background, of SRM model and ID components of the components, and application SRM model and their strategies. purpose.

10:15 – Break 10:30

10:30 – 12n Assess the assigned - each team will Completed assessment of supplier relationship case complete their relationship the assigned supplier assessment. relationship 12n -1:00 Lunch Time Topic How Outcomes

Time Topic How Outcomes 1:00 – 2:15 Develop Reports and - each team will build their Participants are able to analyze the data reports and analyze the data explain how they used the using the SRM model SRM model components to describe a supplier situation. 2:15 – 2:30 Break Compile Results in Simulator 2:30 – 5:00 Diagnose the relationship - breakout exercise Participants are able to and identify diagnosing the results of the explain how they used the improvement actions. assessment and building SRM model components improvement action plans. to diagnose a supplier relationship Day 3 – Report out and wrap up - each team presents Participants are able to 8:30 – 11 N their results. explain how they used the Written Test - Q and A SRM model components to diagnose a supply chain network obtain feedback Day 3 – Close and Adjourn Participants complete Workshop feedback 12 N workshop feedback assessment assessment KEY PERSONNEL

Kevin McCormack, BS, MBA, DBA

Dr. McCormack is currently President of DRK Research, a global business analytics research network, a Professor at National Graduate School and a visiting professor at SKEMA Business School (France). He has taught at NC State University, University of Alabama, University of Maryland, Keller Graduate School and Campbell University. He has over 30 years of business leadership, engineering, teaching, research and consulting experience in the areas of information technology, operations management, and supply chain management. Some of his clients have been Chrysler, Daimler, Texas Instruments, USMC, USAF, Chevron-Phillips, Shell, Exxon-Mobil, Dow Chemical, Standard Charter Bank, Microsoft, Intel, several state governments, Wal-Mart, Campbell’s Soup, General Mills, and PepsiCo.

Dr. McCormack is also a judge for the Manufacturer of the Year award for the state of Alabama, home of several international manufacturers’ locations (Honda, Mercedes, Lockheed, BASF, Nucor, U.S. Steel, and Siemens Automotive) as well as dozens of defense and automotive suppliers. He has been a member of the Supply Chain Council, the Institute of Supply Management, APICS and several other associations focused on the supply chain.

Dr. McCormack has degrees in Chemistry, Engineering, an MBA and a DBA. He has also developed and delivered courses in Information Technology, Operations Management, and Supply Chain Management at the graduate and undergraduate level both in the U.S., China and Europe. He has published five books and over 100 articles in Quality Progress, Business Process Management Journal, Supply Chain Management, Benchmarking: A International Journal, Supply Chain Management Review and several others.