Mitigate Risks in Global Supply Chains through Supplier Collaboration

#AribaLIVE
Mitigating Global Supply Chain Risks
through Smarter Supplier Management
@ariba
Speakers
• Lutz Piechert – Forrester Research
• Aurelie GOUBIN – The Albea Group
Moderator
• Sundar Kamakshisundaram – Ariba, an SAP Company

Agenda
• Introduction
• Panel Presentations
• Key Takeaways
• Q & A
© 2014 Ariba – an SAP company. All rights reserved.2

The Panel Team
© 2014 Ariba – an SAP company. All rights reserved.
Speakers:
• Lutz Piechert – Forrester
• Aurelie GOUBIN – The Albea
Group
Moderator:
Sundar Kamakshisundaram
3

© 2014 Ariba, Inc. All rights reserved.
Defining Supplier Management…
Supplier
Portals
Vendor Master
Management
Risk
Management
Diversity/Green/
Corporate
Responsibility
Registration &
On-boarding
Process
Performance
Management
Supplier
Management
or SRM
Supplier
Discovery
“Supplier Management” is multi- faceted and
touches many aspects of Business Commerce
• Supplier Information Management that unifies platform,
process and supplier profiles across the company and keeps it
current, complete and correct.
• Highly usable web-based portal for suppliers to register and
manage information collaboratively with customers
• Supplier Performance Management capabilities including
Process Workflow and approvals, Surveys and scorecards,
flexible role based dashboards and customizable reports
• A Robust technology platform that seamlessly integrates in-
context Supplier info such as Parentage, Financials, Diversity
and Sustainability to manage and mitigate Supply Risk
• A unified Supplier Record merging data and process flows to
third party systems and data sources
4

Increasingly Complex Supply Chains Can Create
Significant Risk
Brand
Damage
Unsatisfied
CustomersIncreased
Costs
Revenue
Loss
5

Many Sources of Supply Chain Risks
“Research from across 62 countries has revealed that 85% of organizations surveyed recorded at
least one supply chain disruption in 2011. 40% of disruption originated below the immediate
supplier.”- Business Continuity Institute, Nov. 2011
• Mergers & acquisitions
• International sourcing
• Commodity volatility
• Capacity shortage and Growing lead times
• Lack of available credit
• Quality and sustainability
• Tier 1 and 2 supplier performance
 Price
 Disruption
 Brand
6
BOTTOM LINE: ELIMINATE WHAT YOU CAN. MANAGE THE REST!

#AribaLIVE
Mitigating Global Supply Chain Risks
through Smarter Supplier Management
Lutz Peichert
Vice President and Principal Analyst
Forrester Research

Making Leaders Successful
Every Day

Finding Customer Advantage in
Managing Vendor Risk
Lutz Peichert
Vice President and Principal Analyst

What if you weren’t afraid of anything?

© 2013 Forrester Research, Inc. Reproduction Prohibited 11
Agenda
› Why being customer-obsessed
means rethinking your vendor
risk approach
› A simple plan for using vendor risk
to create customer advantage
› Focus on risk treatment and
become fearless

You need to become customer-obsessed
Transform
the customer
experience
Embrace
the mobile
mind shift
Become
a digital
disruptor
Age of the
Customer
Turn big data
into business
insights

Age of the customer changes how to
approach vendor risk
“Removing Bad” Approach
Objective: reduce risk to “zero”
Consider all risks negative
Use one treatment for all risks
Think about only internal
stakeholders/business impact
Key question: What can I do to avoid
any risk?
“Creating Good” Approach
Objective: actively manage risk to
business advantage
Consider some risks positive
Use multiple treatments
Make customer-impact a key
consideration
Key question: How can I use risk to
my advantage?

Customer-obsession mean you need to
consider multiple kinds of supplier risk
Forrester Research, October 2013 “Understanding Software Options For Managing Vendor Risk”

Each industry weighs those four risks
differently
› Examples:
• Retail
• Financial services
• Oil/gas/utilities
• Automotive

Emerging suppliers complicate the
risk picture
› Start-ups often lack the sophistication and/or funds to
properly secure data to client specifications
› Access to validated financial data often isn’t available
› Traditional definitions of financial viability don’t apply
› If we reject a vendor because it is risky, the business
user can overrule us and buy anyway

Your big suppliers aren’t inherently less
risky, by the way…
How well do you understand your suppliers’ supply chains?
› Is there a reasonable chance that my supplier’s
subcontractors could hurt my supplier’s viability?
› What subcontractors does my supplier use?
› Can the supplier validate that its subcontractors follow
the same privacy/disaster recovery/compliance policies
that it does?
› How viable are those subcontractors?

A simple plan…
› Crystallize your suppliers’ overall risk with
a risk index
› Clarify your own risk tolerance
› Track supplier-related risks based on their
strategic importance to you
› Create a treatment plan for every likely or
critical risk

Crystalize your suppliers‘ risk
Financials Strategy
Customer
base
News

Clarify your own risk tolerance
Financial
Process
and
execution
maturity
ResourcesBusiness

Match your supplier’s risk to your tolerance
Vendor Risk Index
0 100
A B C D
E
ZF G
Too risky Safe
Client risk
Tolerance index

Focus on risk treatment and become
fearless!
› As the Age of the Customer continues, rethink
your vendor risk approach
› Create a treatment plan to address any very
likely or devastating risks
› Use the treatment plan to collaborate with
product/business execs and gain advantage
with customers

Thank you
Lutz Peichert
lpeichert@forrester.com

#AribaLIVE
Mitigate Risks in Global Supply Chains
through Supplier Management
Aurelie GOUBIN, Best Practices Procurement Manager, Albéa
@SpeakerTwitterHandle
@ariba

Agenda
• Albéa Group
 Who we are?
 Albéa Procurement Organization
 Albéa 2013’ Procurement Stakes
• Manage Risks: why?
• Albéa new way of managing suppliers:
 Step 1: Get the data
 Step 2: Involve other functions
 Step 3: Report & Analyze
 Step 4: Dig in Deeper
 Step 5: Track & Develop
• Conclusion – Take away
• Questions

Group
• 16 700 employees
• 46 plants
• 14 countries
• Sales 2013: US $ 1,6 Billion
Global leader in Beauty & Personal Care Packaging
• Products portfolio based upon 4 core expertise
 Tubes laminates, plastic tubes
 Dispensing systems fragrance, lotion, foam,
samplers
 Cosmetic Rigid Packaging mascara, lipstick, lip
gloss, jars
 Beauty solutions, kitting, soft goods & promotional
items

Group
Ambition
• Be the best global packaging company in the eyes of our people, our
customers and our shareholders
Values
• World-class partner
• Speed to market
• Quality through continuous improvement
• Broad range of expertise and product innovation
• Some of our main customers

Procurement Organization
• Central Procurement team – 2013/4
 Global Lead Buyers per commodities
 Regional Procurement Directors
 Analysts & Ariba specialist
• Local Procurement team
 Buyers: implement strategies & run projects
• Global spend US$ 1 Bil.
 70% production items (raw materials, components, sub-contracting)
 30% non-production items (energy, transportation, travel, etc.)
 Global AND diversified Supply Base

Procurement – 2013’ Stakes
• Increase of the supplier base complexity with important growth of
suppliers in emerging markets
 Over 15 000 suppliers worldwide
 Quality & Supply Chain assurance, cultural differences, time zone, etc.
• Cosmetic Industry European and American regulations to be followed
by suppliers
• Continue growth of Albéa & tensed economic situation lead to higher
pressure on prices & cost down

WHY SPEND RESOURCES ON
SUPPLIER RISKS MANAGEMENT
WHEN OUR MAIN BUSINESS
OBJECTIVES ARE COST SAVINGS AND
SHORT-TERMS PROJECTS?

Manage Risks
Not a luxury but a necessity
• Best in class process would be to
1. Identify the risks: economical, financial,
industrial, legal, business
2. Identify the impact: Critical, High,
Low
3. Define roadmap prioritizing actions
• Why?
 Increase of Customers’ pressure
 Tighten legislations
 Difficult economic situation
 Market restructuration - decrease of
potential sources (suppliers/materials)
• … in the “real life”
 Lack of resources to implement & follow up process
 Lack of time – solving emergencies and Achieving budgets

Albéa New way of managing Suppliers
• Supplier Information management
initiated in Q2 2013
 Wave 1: 250 suppliers
 Wave 2: Factories Top 10 suppliers
• Supplier Performance management
initiated in Q1 2014
 Wave 1: 20 suppliers
• Objectives:
 Enhance collaboration among the
different company’s function and with
the suppliers
 Improve communication & actions
efficiencies (limited number of contacts)
 Common & Global tool to Select suppliers
monitor performance
 Improve suppliers overall performance by
monitoring and following up in a
systematic way
Supplier selection

Supplier management
Step 1: Get the data
Start simple ! Who are they?
• A basic of the procurement process:
 Request for information (RFI)  Converted into Albéa Supplier Profile Questionnaire (SPQ)
 Sent to all our existing suppliers
 Sent to any new/potential suppliers
• Questionnaire:
 Built together with Procurement, Quality, Supply Chain, Regulatory affairs, Legal
 Includes a scoring system
 Mandatory for suppliers to meet buyers & access sourcing events

Buyers questions only: Type of
supplier? Our objectives? Need for
specifics treatments?
Financial key data: Revenue? EBITDA?
Ask for a range to lower the fear from
suppliers
Quality: List of certificates?
Supply Chain: Suppliers List of
processes & KPIs?
EHS: From Regulatory affairs: Are the
suppliers compliant with regional/global
legislations?
Sustainability & Legal: Are the
supplier compliant with Albéa
Policy?
Supplier management
Step 2: Involve other functions

Follow up !
• Reporting available in users’
dashboard
 Fact based
 Ease the analysis
 Rank suppliers
• Internal & Global process
defined to take actions for
low-scored suppliers
Supplier management
Step 3: Report & Analyze

Enlarge !
• Supplier « Deeper » questionnaire
 Sent by Procurement team on the
initiative of Sustainability /
Procurement managers
 Objectives:
– More detailed evaluation of potential
« risky » suppliers
– Validate the need of lunching an on site
social audits
Empower buyers
Highlight risks via Questionnaires & follow up
Supplier management
Step 4: Dig in deeper

Continuous improvements !
• Supplier performance Management – more than a « simple » performance
assessment
• Target: Strategic suppliers
• Different Scorecards / Survey depending on commodities
• Joined efforts to build Survey & KPIs
 Internal seminar of 2 days
 Procurement, Quality, Supply Chain, Regulatory affairs, Sustainability
 Scoring system
Supplier management
Step 5: Track & Develop

A simple process
3 Phases: Plan / Monitor / Review
Set of documents associated to tasks
to support Buyers analysis
Recurring process: Quarter / Semi-
Annual / Yearly
Different surveys depending on the
stakeholders (internal only)
• Risk & Commercial
• Supply Chain
• Quality
1 Scorecard
Supplier management

Collaboration…
Team composed of:
• Procurement Management
• Global Lead buyers
• Global Suppliers Quality Manager
• Global / Local Sustainability Team
• Local Buyers – Respond to the Cial & Risks survey
• Local Quality – Respond to the Quality Survey
• Local Supply Chain – Respond to the SC Survey
• Others
Supplier management

Surveys
#1
#2
#3
Supplier management

Risks types:
• Tooling
• Force majeur
• Quality failure
• Financial
• Supply Chain
A simple evaluation system:
• What is the impact : 0 to 20 (minor to
catastrophic)
• What is the likelihood: 1 to 5 (rare to certain)
Risk = Impact x likelihood
Survey – Zoom on Supply Chain Risks Management
Supplier management

Scorecard
Score easily accessible
depending on pre-
defined weight
Different sources: Report / Survey
Alerts when score below target
Supplier management

Report & Evaluate the trend
Sustainability
Innovation & Technology
Albéa Account management
Commercial
Supply Chain risks management
Quality
Supply Chain
Meaningful reporting available in Public
Report
Reports & Scorecard presented to:
1. SPM Project Team
2. Suppliers
Suppliers are then asked to provide Albéa an
action plan when improvement is needed
Supplier management

Supplier Performance Management : summary
• Global & simple process
• Offers tangible data
• Formalized suppliers’ responsibilities
Empower buyers
Promote internal collaboration – 360° view
Prevent risks through regular & systematic assessment
Supplier management

Conclusion
• Ariba to improve – Questionnaire
 Multiple questionnaire depending on suppliers / activities
 Double scoring system
– Measure of Sustainability = 1 score
– Measure of Financial information = another score?
• Ariba to improve - Scorecard
 Create link between Supplier Profile Questionnaire & Scorecard  manual input
 Weighting system depending on participants
 Develop Formula’s type KPIs
 Possibility to attach documents in Scorecards : get details of why this scoring (beyond
the surveys)

Conclusion – Take away
1. Set up SIMPLE Tools:
1. SPQ from classic RFI
2. Sent it to all your suppliers
2. Automatize controls:
1. Create Reports available for a large
community
2. Rank vendors with pre-defined scoring
system
4. Regularly Communicate:
1. Invite Stakeholders as members of
your processes
2. Set up clear schedules for review
Simple – fast – paper less
Enable organizations to Prevent & Mitigate risks
3. Develop tools & processes:
1. Surveys & Scorecards to a
limited number of suppliers
2. Improve processes

• Questions

Summary and Key Takeaways
Determine Supplier Segmentation Model
Pilot specific categories and/or supplier tiers
Build Collaborative Relationships
and Obtain Executive
Sponsorships
Use technology as an Enabler
Measure and plan for continuous
improvement
ACCELERATE SAVINGS, IMPROVE COMPLIANCE & MITIGATE RISK!

Thank you
Q
A&
Contact information:
Sundar Kamakshisundaram
Sr. Director – Global Solutions Marketing
E: sundar.kamak@sap.com
51

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