Supply Chain to Value Chain Risks Continuum - Rate Your Company

Current State of Your Business: Column 1 We are masters of this skill; we have a 1 Rate your company's ability to determine the "fair market price" for new lot of data and have studied our market products and services going forward at for many years. We can predict to less a given level of functionality and quality. than 1% what the market will bear for pricing on a new product or service offering. 2 The typical supplier relationship from a "partnership perspective" that we have with our vendors is most like this: Almost all of our suppliers have partnered with us in a meaningful way. We seamlessly share cost and quality information and we typically look to establish rolling long-term contracts of 3 years or more. We trust our suppliers like we do our key employees and our CPA. Moving toward a "cost transparency" model is not difficult.

Another MetaOps Management Continuum RSC Consulting Corporation, 2005 Column 5 We are clueless about what the market will bear. This is not a competency that we can see having any time soon! If we guessed on the future market price for anything we do, it would be a miracle to be +/- 25% on our target pricing to the actual market. The relationship we have with most of our suppliers is best described as "acrimonious" today with very little trust or cooperation. Dealing with our suppliers is one of the most unpleasant things we do. Sometimes we get "fired" by our suppliers. Getting suppliers to buy into our needs for critical-to-quality information and issues management is a tough proposition. Forget ever seeing real cost transparency with our suppliers. Supplier development, quality, and purchasing is done as one of many "hats" by several people in the company who have not been formally trained in Quality and Supply Chain Management, Materials Management and Procurement. There is no formal control or focus on developing suppliers in any meaningful way. Our relationship gets a flunking grade! We can't design our way out of a paper bag, let alone "drive" our costs and functionality with design.

Category of Rating for the Current Value Stream State:

Column 2 <<We are between these two values>>

Column 3 Column 4 For up to 50% of the products and <<We are between these two values>> services we offer we can do a decent job of predicting market pricing for a given level of product or service capability, plus or minus 5%.

About 1/2 of our suppliers have partnered with us in a meaningful way. We share some cost and quality information and we try to establish longterm contracts of 3 years or more. We trust our suppliers quite a bit - though we won't share information we consider proprietary or financially sensitive. . . moving toward cost transparency will require a lot of work.

We have some partnering with long term Partnering? This is a foreign concept in agreements in place with a few key our company. We stand by the policy of suppliers. These relationships are getting at least 3 quotes for everything, managed by the top managers/owners of then the low price bidder almost always our company directly with the supplier's gets the business. If we can save a key people. From there the level of penny we will dump any supplier in a partnership and trust goes downhill in a New York Minute. Only the most basic of hurry. There is some exchange of critical- critical-to-quality information is shared and developed with our suppliers. to-quality information. Cost Maybe this management team will see transparency sounds good, but we are some cost transparency if we retire here. years away from doing a lot of it. We have a couple of people with some purchasing and quality training who handle most of our purchasing and supplier development and quality management tasks. Once a year we do some reports on supplier performance and conduct activities to develop our supplier's performance and quality. Maybe we are a "C" in our relationship. Supplier management and purchasing is done on an ad-hoc basis by the people responsible for customer service or who work for production. There is no central responsibility, control or action plans to develop and manage our suppliers and their quality on a consistent basis. We are a "D" at best in our relationship.

3 Formality and Resource Capabilities of the Supplier Quality, Purchasing & Supply Chain Management Function at your company. The "relationship" we enjoy to tackle difficult business issues can be graded as follows:

We have a dedicated Director or VP level Quality and Supply Chain professional(s) on staff with many years of experience and formal education to handle our supplier development and supplier quality programs. We have an A+ relationship will all our key suppliers and can do amazing things.

We do have a Materials and/or purchasing manager and a quality manager with several years of experience in Supply Chain. They have formal responsibility for supplier development. There is some monthly tracking of supplier performance metrics including supplier quality. We enjoy a "B" level relationship.

4 Design capabilities - the ability to do design-for-manufacturability/assembly, conducting "Cost Kaizen" activities.

<<We are between these two values>> We are completely staffed and able to design-in cost and quality at a worldclass level. This differentiates us in our markets. Everyone in our industry including most of our suppliers have been aggressively pursuing the implementation of Six Sigma Quality and Lean Manufacturing for more than 10 years. Heavy commitment and involvement in being a Six Sigma level World Class Enterprise is a requirement to play in the game. We understand what a DFMEA is all about!

We are probably in the middle of the pack <<We are between these two values>> when it comes to having this set of competencies.

5 Level of active involvement in implementing Quality Systems, Six Sigma, Lean Enterprise, and Design for Manufacturing/ Assembly Failure Effects Analysis (DFMEA) across our industry and supply chain.

Probably 75% of the trading partners in Maybe 50% of the trading partners in our our industry have been aggressively industry have been aggressively pursuing the implementation of Quality pursuing the implementation of Quality Systems and Lean or World Class Systems and Lean or World Class Manufacturing for a while now. Heavy Manufacturing for a while now. Heavy commitment and involvement in being a commitment and involvement in being a World Class Enterprise operating at near- World Class Enterprise is becoming more Six Sigma levels of quality is becoming and more a requirement to play in the a key requirement to play in the game. game. We do some DFMEA stuff once in DFMEA is something we are learning to a while. master. We conduct joint "Six Sigma", "Cost We conduct joint "Six Sigma", "Cost, Kaizens" or "Continuous Improvement" Kaizen" or "Continuous Improvement" activities two to four times a year with activities five to ten times a year with certain key suppliers. certain key suppliers.

Maybe 25% of the trading partners in our industry have been aggressively pursuing the implementation of Quality and Lean or World Class Manufacturing recently. Heavy commitment and involvement in being a World Class Enterprise promises to provide a competitive advantage in the future. We have sent some of our engineers and DFMEA training.

Our company and trading partners can't spell Six Sigma or Lean, let alone understand what they are. We don't understand or embrace what is possible in the application of the Six Sigma Quality or World Class Enterprise principles and practices. Implementing the World Class Enterprise could provide a large competitive advantage for us. DFMEA? What's that?

6 Rate the level of formal continuous improvement activities taking place in the relationship to drive quality, speed, and cost improvements - practice of "Kaizen Costing".

We conduct joint "Six Sigma", "Cost Kaizen" or "Continuous Improvement" activities at least one time a year with each of our top 20 suppliers.

We conduct joint "Six Sigma", " Cost Kaizen" or "Continuous Improvement" activities with key suppliers occasionally - if at all.

Are you kidding? We absolutely cannot trust our suppliers with any information about our quality, products and services. Any "Six Sigma" "Cost Kaizen or other continuous improvement efforts we get out of our suppliers comes at the point of a bayonet. 5 # selected this column X 5:

Point Value Scale: 1 2 3 Check the box that best describes the situation at your company today. Then add-up the numeric value on the 'scale' line to find where you may be on the continuum. # selected this column X 1: # selected this column X 2: # selected this column X 3: Point Values:

4 # selected this column X 4:

Total Points All Columns: Score Interpretation/Diagnostic: 10 or less: 11 to 15 16 to 20 21 to 25 26 or more The business case for a new Value Chain initiative is weak. There would be little justification for the effort, as your company is a leader already! There is some value for your organization in pursing more efforts in a Value Chain initiative for certain business lines that need attention. There is a strong business case to aggressively starting a Value Chain initiative incorporating Target Costing and Cost Kaizen implementation. Adopting a Value Chain strategy should be a critical consideration - albeit there will be considerable effort required to get it off the ground. Supply Chain performance may be the single biggest opportunity your company has - Value Chain development is mission critical to your future.