1. SAPICS 2007
Sun city RSA
“The Relationship Driven Supply Chain:
from Service to Success
Inspired by the book
“The Relationship Driven Supply
Chain”
by Emmett and Crocker (2006)

2. The Supply Chain: a definition
One with four parts:
• Everything in & between Supply<>demand;
• Flows of materials/inventory/information;
• From Suppliers>Company>Customers;
• In a Timely manner to meet Customer requirements.

3. The Supply Chain is a Process
A Process:
“A sequence of dependent events, involving time, which has a
valued result for the eventual end user”
Three key aspects:
• Dependences
• Variability's
• Interfaces

4. Supply Chain Management
“Managing a dependent process in isolation and
managing it independently is plain folly.
Managing the supply chain without the collaboration
of the other players is a fruitless strategy”
(Emmett& Crocker).
• SCM = “Integrate, coordinate and control the
Supply Chain”
• Integration and coordination is therefore needed
“in the hearts and minds of people” and not just by
using technical tools/systems/techniques.

5. Supply Chain Management
“Because the object of management is a human community
held together by the work bond for a common purpose,
management always deals with the nature of man.”
(Peter Drucker)
To integrate the people to form collaborative relationships;
means dealing with that “soft/fluffy stuff”
“The hard stuff is actually the soft stuff”
(Dr. Trevor Bentley)

6. Lessons from experience
“The most critical and important business opportunities are:
• Understanding customers needs and requirements
• Customer service excellence
• Collaboration amongst supply chain partners”.
(Rasmussen & Simonsen , Survey 2006)

7. Collaboration in the Supply Chain
It is
• Selective dialogue between
the “right” people
• Intense and focused with
investments of time /
resources, of the whole
organisation
• Taking the long term and
strategic view
• To improve the
performance of the whole
supply chain
It is not
• A SRM software package
• “I will take all the benefits”
• A quick fix
• Easy
• For everyone
• A “one size fits all”
approach

8. SCM futures
“The future is one not of
competing companies but
of competing supply
chains”
(Prof. Martin Christopher)
•
•
Therefore success in the
future, comes from how we
manage our supply chains.
To do this, we will need to
have a “collaborative
advantage”

9. The benefits of
effective SCM are clear

10. Supply Chain Benefits
Return on
Assets
Profit
Customer
Service
levels
Performance
Stock/
Inventory
levels
Cost

11. Benefits
Ways of
working
(Source: Adapted from PTRM)
In Functional Silos Internal Integrated
SC
No internal
External
Integrated SC to
1st level/T1
“joined up”
thinking
“Win the homes
games first”
100
78
62
Inventory carrying 3.2%
cost
% sales
2.1%
1.5%
On Time In Full
delivery (OTIF)
80%
91%
95%
Profit % Sales
8%
11%
14%
KPI
Inventory days of
supply Indexed
Partnership or
Partnershaft?

12. No internal “joined up” thinking
Procurement
Production
Logistics
Marketing

13. “Win the home games first”
Procurement
Production
Logistics
Marketing

14. “There may be trouble ahead!”

15. Quote
“The
supply chain lies no longer with an individual company; we
have global networks cutting across countries and
organisations. The only way forward is to get players working
to a common agenda – the collaboration agenda. We have
been taught to compete: nobody has taught us to work
together. The need and awareness is there but still nobody
has taught us how to do it”.
(Professor Alan Waller)

16. Some Supplier/
Buyer relationships
Supplier view:
Distrust.
Insecurity.
Short-term gain. Minimum
investment. Increased
borrowings.

17. Some Supplier/
Buyer relationships
“The Mail of Sunday alleges the Retailer was asking 700 of its
suppliers for a contribution from their contracts and the
company was to lengthen its payments terms from 60 to
90 days
(Supply Management 18 January 2007)
“The
Company is locked in a bitter dispute battle with its
suppliers over attempts to extract cost savings from its
supply chain………One supplier claimed the company were
arrogantly out of touch”
(Sunday Times 11 February 2007)

18. Lessons from experience on
relationships
•
“We have
to be interested in being criticised”
• “Business is increasingly interdependent, where action
takes place between and not within”
• “Trying to get through years of accumulated baggage
is tough”.
• “Personal relationships that bridge former gaps in
communications between vendor and retailer are what
can really spell success”.

19. Lessons from experience and
the “T” word
•
“It
changes the paradigm. It's definitely a different type
of relationship with your customer. It's based on
mutual trust and it's got to be there to succeed”.
• “On paper, the process seems simple to implement,
but in the real world of personalities and professional
relationships, there are many obstacles to climb.
Trust is very important for success”.
• “You can define any relationship by the degree of
trust. No trust then no relationship. This applies both
in business and also in personal life”.
• “The biggest thing my boss could do for me is to trust
me”

20. Trust and moving beyond
Service to Success
Trust Level one, Contractual and “Service”:
Boundary time bound trust for standard performance. Exchanged
data for transactions
Trust Level two, Competence and “Satisfaction”:
Reliable trust for satisfactory performance, with some information
sharing and cooperation
Trust Level three, Commitment and “Success” :
Goodwill open ended trust giving beyond expectations success
with, cognitive connected decision making
Source: After Dr. Mari Sako

21. Trust
Collaborative relationships
depend on trust.
• Deeper trust is the crucial
ingredient of collaborative
supply chain success.
• Building it, maintaining it,
and restoring it if damaged,
must be at the top of
every chief executive’s
agenda.
From “win the home games
first” onto external
suppliers and/or
customers:
• Understand each other
• Agree fundamental objectives
such as “reductions”,
“improvements”
• Share information
• The “how” is not easy

22. Rules for relationships
•
•
•
•
•
•
•
•
Mutual goodwill and being in this together
Compromise is the key and sorting out problems together
Don’t try and prove who is right
Don’t stonewall but keep talking
Understand each other
Talk about what is valued in each other
Don’t break commitments and promises
Separation is painful and expensive
Source: What makes a good marriage

23. Varied types of relationships
“One night stand or living life together?”

24. Procurement portfolio (After: Kraljic)
High
Bottleneck
Critical
“Secure Supply”
“Check & Search”
Routine
Leverage
Risk
“Organise & let go”
Low
Spend
“Play the Market”
High

25. Procurement & Power
High
Bottleneck
Critical
Supplier power
Strategic
Strategic
Routine
Risk
Interdependency
Leverage
Independent
Tactical
Low
Buyer power
Tactical
Spend
High

26. Variations in relationships
1.
2.
3.
4.
5.
6.
Varied Levels of
Quality of Information Exchange,
Trust and Openness
Tactical
Distant
“Deal for me”
Shorter term
Level 1 Trust (Contractual)
Strategic
Closer
In it together “we”
Longer Term
Level 3 Trust (Goodwill)

27. Types of Relationships
More Tactical
1.Adversary
“Take it or leave it”
2.Transactional
Normal ordering
3.Single Source
Exclusive agreements usually
at fixed price for a specific
time
More Strategic
4.Strategic alliance
Working together for a specific
purpose
5. Partnership
Commitment with shared
risks/benefits
6. Co-destiny
Interdependency

28. Relationship “Extremes”
More Tactical
• Trust based on what the
contract says
• Do what the contract
says
• Strong use of negotiation
ploys
• Reduce price
• Short term
• Measure non compliance
More Strategic
• Goodwill trust and
cooperation
• Do whatever is needed
• Mutual gains and goals
“rule”
• Reduce costs; (Total Cost of
Ownership, Cost to Serve and
Best Value orientations)
• Long term
• Both measure and jointly
agree remedial actions

29. Making the Change:
pre-requisites

30. Changing the Thinking/1
•
Thinking comes from our mental maps.
•
These are like computer programmes that give
predetermined actions. For example, the attitudes /beliefs /values,
that give us our “reality.”
•
With computer programmes we will check and re-calibrate
the parameters when needed. For example, with
independent/random demand.

31. Changing the Thinking/2
• But, how often do we challenge our own mental map
parameters?
• Changing our thinking means acquiring different
perspectives, but such change may be uncomfortable and
may be rejected, for example:“Trust is the emotional glue that involves commitment to others”
versus
“Emotions have no part to play in business”

32. Company thinking types
Left brain influences/
companies
• Short term results
• Problems reoccur as only
the symptoms are treated;
(“Band aid” solutions).
• Rational thinking with
Science and Technology.
• “Facts”
• Existing and known ways
“The numbers speak for
themselves.”
Right brain influences/
companies
• Long term success
• Problems are tackled by
looking at the cause
/thinking.
• Holistic thinking with
Motivating/Empowering
people.
• “Solutions”
• Experimentation.
“It is how we connect
together that is
important.”
Need both: see the handout

33. One more time: relationships are
fundamental to SCM success
“Supply-chain management is technically simple, but it is usually
managerially difficult”.
• What must be fundamental, is how the relationships are
handled, with all internal and external supply-chain players.
• Improving relationships is one of the main keys to enable
SCM success
• Relationship management must be a company strategy and
become a core capability.
• We must believe this to be true

34. Change in the future?
The Supply Chain Manager
The Relationship Manager

35. Lessons from experience
“Benefits of our Collaboration programme include:
• Improved service levels.
• Faster flow of product through the supply chain.
• Rational use of resources and more effective promotion
planning.
• Synchronisation of production to better match supply with
demand.
• Shared responsibility and mutual trust”.
Source: FMCG Retailer and Supplier

36. Lessons from experience
“A
real focus on joint and collaborative planning has been
critical. It’s all very well putting in great capability and
structurally changing our supply chain but at the end of the
day you can’t make it happen unless you work together.”
(Logistics Manager June 2004)
“Key suppliers work collaboratively, ensuring efficient
processing and best practices, driving our competitive edge”
(IBE Report 2006)

37. Lessons from experience
"There has to be a strong education program within the
organisation by initially using external facilitators . Then we
had to answer:
• How will it work?
• Who should we involve?
• How will we share out the benefits?
• How do we get to the end goal?”

38. Lessons from experience: Contracting
UK National Stadium
UK Heathrow’s Terminal 5
•
•
•
•
•
•
•
•
Design-and-build contract.
Fixed-price, lump-sum.
All risk is passed to the
contractor
Labour and people problems
Over time, (one year)
Over budget, (nearly double
the cost)
Litigation
•
Work in partnership with
contractors.
Contract requires totally
integrated teams, including the
principal subcontractors, through
main contractors and designers to
the operator (BAA) and the end
user (BA)
•
•
•
•
Contractors are paid on a cost reimbursable basis, with
performance bonuses
Risk is accepted by BAA
On time
On budget

39. Joint Improvements
Focus on all the “usual
suspects”
• Demand forecast sharing
• Order lead times
• Inventory status sharing
• Inventory reductions
• Shipment sizes
•
•
•
•
•
•
Shipment frequency
Supplier lead times
On time delivery
Packaging
Joint KPI’s
Relationships

40. Recall…. why there is
a need to change….

41. Costs of bad relationships
• High administration costs
• Time spend price wrangling
• Time spent resolving
problems
• Too many meetings with too
many people
• Unwilling to consider simple
solutions to problems
• An atmosphere that
discourages innovation
(Source: Toyota in Institute of Business
Ethics Supplier Relationships report
2006)

42. Benefits
(Source: Adapted from PTRM)
Silo / Functional
working
No internal joined
thinking
Internal Integrated SC
“Win the homes
games first”
External Integrated
SC
to 1st level/T1
Partnership or
Partnershaft?
More Strategic
Inventory days of
supply Indexed
100
78
62
Inventory carrying
cost
% sales
3.2%
2.1%
1.5%
OTIF
80%
91%
95%
Profit % Sales
8%
11%
14%

43. Vision: The Supply Chain Future
The Supply Chain is driven by Flows of materials and
information and money
Plus it also needs:
People working together in Flow - that special state when we
are connected and think together; when we have a positive
relationship with no separation; when we have connected our
“hearts and minds”
Only then, can we realise supply chain success

44. Question Time
1) How will we get these benefits?
• By “partnershaft” or by “partnership” ?
• By competing or by collaborating?
2) What is there left to “squeeze”?
“We just can’t continue with the mindless search for the lowest
price, in the belief that somehow, this will give us the best
quality and the best performance”
3) My own perennial question is:
What benefits can be found from having better
relationships?

45. 3 Final thoughts
1) “If you always do, what you have always done,
Then you will always get, what you have always got”
2) A crazy person has been defined as someone:
“Who keeps doing the same things, yet
expects different results”
3) Compete or Cooperate? It is your call

46. More information
1) For books
2) For articles on
• Partnerships and Partnershaft
• Supply chain re-thinking
Visit the resources section at
www.learnandchange.com

47. Thank You