I interviewed Yann Teste who discussed Why Supplier Relationship Management is Essential to Your Business.
...who's going to talk about Why Supplier Relationship Management is Essential to Your Business. It's great to speak to you today, Yann.
Can you please first provide a brief background yourself?
Yes, thanks for inviting me for the speech today. Good morning, afternoon, or evening all, My name is Yann Teste, I am French, I hold two Master’s degrees, one in engineering and another one in Finance and Business Administration. I am working for Volvo Construction Equipment, a group which is a branch of the Volvo AB group. We manufacture and sell about $8 billion of construction vehicles per year.
I am located in the global headquartersin Brussels, Belgium and work as the Global Director of Purchasing and Supplier management for the powertrain and electromobility commodity.
I have a bit more than 18 years of purchasing experience for two different companies including Volvo. Among them are 16 years of leading and building purchasing teams including seven years in China as the Asia purchasing leader, and the last five years in Belgium as a global purchasing leader.
In terms of responsibilities that I have had in the last years have been including logistics, supplier quality development, international purchasing office management, managing international purchasing professionals and suppliers, but also starting up a company in China and being engaged in a joint venture due diligence and post-merger integration in China.
My current scope that I have is managing the purchasing strategy and the supply of [inaudible 00:01:52] which are engines, axles, transmissions, wheels, tires, and also gears, castings, or truck chains for excavators. And this is representing 600 suppliers, roughly $1 billion spent with a team of 40 people.
Thank you. And regarding supplier relationships. What would you like to share today about this topic?
That's the topic I have the pleasure to share with you today, is supplier relationship and supplier relationship management, as it counts. If we go into [inaudible 00:02:36] and internet, and you look at what is supplier relationship, supplier relationship describes all interactions with third party organizations that supply goods and/or services to an organization, interactions.
So what is supplier relationship management, also called SRM? Well this is the discipline of strategically planning for and managing these interactions in order to maximize their values, creating closer and more collaborative relationships with key suppliers in order to uncover and realize new value, and reduce risk of failure.
This is the definition that I think explains very well supplier relationship and supplier relationship meeting.And that's what I want to talk to you about.
So, why does supplier relationship management count?
Well, if you look at the business climate today, I think we can summarize it as follows. The speed of development is faster. It's increasingly faster. The business cycles are shorter and less predictable. The broad life cycles are the same. And global growth is slower. Investment capabilities are lower. Technical knowledge excellence is getting more and more specialized. You have more and more purchase components in the industry of for footprints of the businesses. And manufacturing footprints are becoming global. The customers are global. And finally, there is the internet of things that [inaudible 00:04:35] business in the industry of business or business to customers or business to business. And thinking about how are we going invest this and take value of this.
If you describe the business climate like this — the [inaudible 00:04:51] of companies are evolving and trying to [inaudible 00:04:56]. How can we manage successfully such a climate? Actually [inaudible 00:05:06] and [inaudible 00:05:07] is the team of business partners that we can call as our extended enterprise with, actually the stakeholders and people, all of your company and extended enterprise. This is actually your supplier base and your teams through a sound, sustainable and performing relationship.
This is the eco system that we are in. And when we say "we," this is our company and the companies that are working together with us, our supplier base.
And you know that to be successful in such a climate, you need to pay attention to the way this company [inaudible 00:05:50]. This is about managing the interactions.
So, what could be the qualitative relationship between your suppliers and your company, as a customer of choice?
First you should have access to innovation — faster and [inaudible 00:06:14]. And you know, innovation can be in several areas, can be in supply chain, can be servicing, can be in technology of tools, can be also in market intelligence or in market approaches or market penetrations.
It could also be tailored technical solutions for a functional purpose, or exclusivities on technical solutions. It could be also design to cost and design to manufacturing. And it can be also on business stability or finally lower interests. And this is where, actually, the best supplier relationship is, can probably bring you what we call and what we're all searching for, a competitive foundation.
Is there anything more you wanted to add about how supplier relationships should be managed?
Yes. I can share. I think it's for me, the first question is quite [inaudible 00:07:29]. It's basic. Do you and your management see the potential value in supplier relationship meeting? It [inaudible 00:07:36] everything.And if the answer is no, then I think it's worth investigating why. Is it actually relevant for your business? Do you and your management see some gaps towards your competition in some areas.What about [inaudible 00:07:57]? Do you think that you depend significantly on your supplier base? Do you see any potential here? That's the start.
If the answer is yes, supplier relationship management counts, it's seen by management to be something useful to be better than the competition. Then do you have the proper structure and teams to manage it?
Usually there's specific teams set up to manage the supplier relationship and it should have a specific focus and also a specific set of skills — skills related to purchasing, skills [inaudible 00:08:40] leadership skills.
Usually we call them category teams or sourcing teams, commodity teams, strategic sourcing teams, as you wish. And they focus on the sourcing strategy, supplier selection, supplier overall QDC and innovation performance. They manage the contractual [inaudible 00:08:40], did negotiation. They are also in charge, most of the time, of [inaudible 00:09:08], coordinating, and leading cost reduction, idea generations of projects, and of course, what is the most important, also, is to manage the interactions between the suppliers and your own business [inaudible 00:09:25] businesses. [inaudible00:09:25], marketing is marketing. Project management, purchasing, [inaudible 00:09:35].
At Volvo, these teams are managed, by similar functions as [inaudible 00:09:40], which is a global [inaudible 00:09:44] organization. In my case, possibly a strong alignment [inaudible 00:09:51] on the different technologies that we manage.
And then the second question is do you have the proper tools and methods to manage the supplier relationship. At Volvo, once again, we use what we call... It's a mix of a performance grid and a relationship grid, so in maps out where you... On the x-axis, you have the performance, which is basically usually QDC performance, based on very factual [inaudible 00:10:29]. Consequently, [inaudible 00:10:34].But we have been putting on the y-axis also a relationship measure that is transparency of [inaudible 00:10:49]...
Okay, and then my last question is can you share an example of supplier relationship management that has been successful?
When I took over this position, the first [inaudible 00:11:53] to fix several key supplier relationship issues. Those suppliers were smaller ones. Some were actually much bigger than our own business. With the background I had, the values that we have in the group, that was a [inaudible 00:12:15]. We needed to find a solution in order to create business [inaudible 00:12:20] for us, when we [inaudible 00:12:22] depend so much on some of our suppliers.
And[inaudible 00:12:26] supplier, actually, the relationship was, I would say, [inaudible 00:12:31] around. [inaudible00:12:37]
This was a strategic relationship that was based on [inaudible 00:12:46] and [inaudible 00:12:49] that was actually a [inaudible 00:12:52]. So, the first decision that we took is [inaudible 00:13:01] meetings. The alignment meeting and put everything on the table. [inaudible00:13:07], engagement [inaudible 00:13:11]. And then go through the different alignment that we have. [inaudible00:13:22]...
I don't know if it is the same for you, but when [inaudible 00:13:43] to each other, it doesn't [inaudible 00:13:47] a very positive reason. So, we [inaudible 00:13:50] supplier and customer the same.And what we [inaudible 00:13:56] by putting on the table all those issues, [inaudible 00:14:05]...
And this was the first time [inaudible 00:14:12] turn around [inaudible 00:14:13]. What we have been putting [inaudible 00:14:18] alignment. It started in [inaudible 00:14:26]...
...That we can consider a competitive advantage.
So, overall, I would say that thanks to really refocusing on the better relation between the [inaudible 00:15:47], we finally [inaudible 00:15:54] relationship [inaudible 00:16:02]...
About Yann Teste
Global Director Purchasing & Supplier management, Commodity Powertrain at Volvo Construction Equipment