某咨询战略分析工具

SheilaDubinValueManagedRelationshipsDecember1998Author:1第一页，共八十一页。Aftercompletingthismodule,youwillbeableto:UnderstandVMRconceptandapplicationArticulatetypesofcostsavingsopportunitiescreatedbyVMRsUsetheBainframeworktoconductaVMRRefertorealexamplesofBain’sVMRprocessandsuccessValueManagedRelationshipsObjectives2第二页，共八十一页。

VMRConceptVMRKeySuccessFactorsVMRSourcesOfValueBainVMRProcessExampleKeyTakeawaysAgendaa.tr3第三页，共八十一页。

AValueManagedRelationship(VMR)isafullpartnershipbetweenacustomerandasupplier.Itsgoalistomaximizequalityandminimizetotalsystemcostsofdoingbusinessthroughcollaborativesharingofinformationandresources.AVMRcreatesawin/winrelationship.VMRDefinition4第四页，共八十一页。“Partnership”TrueVMR

ProcurementStrategiesValueManagedRelationshipSoleSourceVerticalIntegrationCompetitiveBidShort-termContract/SpotLong-termContractAVMRisoneprocurementstrategytomaximizecostsavingsandstrategicvalue.WhatisaVMR?5第五页，共八十一页。

AValueManagedRelationshipcanexceedthevaluepotentialofbothverticalintegrationandtraditionallynegotiated"arm'slength"transactions:aconsolidationofpurchasestooneorfewsupplierswhoarecapableofmaintaininglongtermcompetitiveeconomics,highqualityandefficientdeliveryparticipantsmustsharesinglegoalofachievinglowestindustrysystemscostsavingsshouldbesharedtoprovidemutualongoingincentivestoeliminateredundanciesAVMR,whenappropriate,exceedsthevalueofall

othertypesofrelationships.HowDoesaVMRWork?6第六页，共八十一页。Fragmentedsupplierbase,sporadiccommunicationSingleorsmallnumberofsuppliers,frequentcommunicationIn-housesupply,communicationfrequentTraditional"ArmsLength"ApproachVerticalIntegrationInvestmentsbaseduponmanufacturer'sneedsPotentialforcustomizedinvestmentinfacilities/equipmentMayrequireinvestmentinweakstrategicbusinessAdversarialbidnegotiationstoobtainlowestunitpriceLong-termcommitmentfocuseduponlowesttotalsystemscostusingvaluechainperspectivesFocusdrivenbyinternalincentives/transferpricesSeparateproductdesignJointproductdesignandcrossfunctionalparticipationJointproductdesignoftenatoddsVMRVMRscanexceedthevalueofbothtraditionalcontractsaswellasverticalintegration.StrategicPurchasingOptionsa.tr7第七页，共八十一页。

HighPotentialHighLowHighLowPurchasingvolume(relativetototalsuppliersales)Value-added/engineeredlevelProductredesignMaterialsubstitutionProductredesignMaterialsubstitutionVolumediscountSystemcostimprovementModeratePotentialVolumediscountSomesystemcostNo/Littleopportunity(needtocluster)VMRsaremostappropriatewherehighvolume

andsignificantvalueaddedoccurs.Medium/lowpotential

WhereAreVMRsAppropriate?8第八页，共八十一页。LargedollarpurchaseHighlevelofvalue-addedcostinproductFragmentationacrossmanydivisionsandsuppliersClientrepresentssignificantpartofindustryoutputIndustrycompetitiveintensityhigh:capacityutilizationdroppingconsolidationinprogressmanynewplantslookingforvolumehistoricalindustrypriceumbrellasVMRsaremosteffectiveinlargedollar,highvalueaddedproducts.InWhichCategoriesAreVMRsMostEffective?9第九页，共八十一页。Consolidatevolumeinlong-termpartnershipIncreasedpaceofinnovationleadstostrategicbenefitsforbothEnsurescontinuedsupplyforbuyerandcapacityutilizationforsupplierCommitmentandscalejustifiesjointinvestmentincostsavingsandR&D/technologyJointeffortsleadtosystem-widebenefitsforbothAddedvalueleadstomorereasonstocollaborateAsuccessfulVMRwillcontinuetocreatevalueastherelationshipprogresses.ValueCycle10第十页，共八十一页。VMRscreatevalueforthebuyer.HigherqualityandfewerrejectsSuperiorservicePartnerinjointsystemcostreductionInnovationTechnologicalexpertisepackageperformanceimprovementsspecconsolidationproductredesignandmaterialssubstitutionPricingcommensuratewithlarger,longervolumecommitmentsCommitmenttocontinuousimprovementofthepartnershipValueOfVMRs—Buyera.tr11第十一页，共八十一页。VMRscreatevalueforsuppliers.Largervolumesinfeweritemslongerrunlengthsandfewerset-upshighercapacityutilizationlearningcurvebenefitsStablelongtermdemandSharinginbuyer’sstrongcommitmenttofuturegrowthPartnerinjointsystemcostreductionResourcesandstabilitytoinvestintechnologyCommitmenttocontinuousimprovementofthepartnershipValueOfVMRs—Supplier12第十二页，共八十一页。VMRshaveaveraged15%to20%costsavings.AverageRangeBainExperienceinVMRs13第十三页，共八十一页。Althoughthevaluemanagedrelationshipcanbesophisticatedandcomplex,theresultsarequantifiableandsimple.100%ofvolumewithonesupplierforthreeyearsUpfrontpricereductionof7%Guaranteed9.8%recurrentsavingswithinthreeyearsCost-basedindexedpricingovertime50/50savingssharingPenaltiesandinspectionsbuilt-inEtc.VMRSampleAgreementa.tr14第十四页，共八十一页。

VMRConceptVMRKeySuccessFactorsVMRSourcesOfValueBainVMRProcessExampleKeyTakeawaysAgendaa.tr15第十五页，共八十一页。Overonehalfofexistingpartnershipsdonotmeetexpectations.ThisrealityincreasestheneedtounderstandandfocusonthekeysuccessfactorsPartnershipsExpectations16第十六页，共八十一页。Strategy,organizationandprocessmustbeinplaceinordertoensureVMRsuccess.ClarityofandagreementonstrategyandgoalsStrategyAppropriatelevelofinvolvementinandacrossorganizationsOrganizationDetailedandstructuredprocessforidentifyingandimplementingopportunitiesProcessKeySuccessFactors17第十七页，共八十一页。Longtermrelationshipsfocusedontotalvaluearecriticalstrategicissuesthatmustbeclearlyarticulated.VMRspursuedonlywhereappropriateTruesupplierpartnershipslong-termrelationshipswithoneorfewsuppliersrelationshipsatallorganizationallevelsextensivetwo-wayinformationsharingsharingofallsavingswillingtoaddressinherentrisksFocusontotalvalue-chain,notinputpricesuppliersselectedbasedonlong-termtotalvalueopportunitiesidentifiedandcapturedacrossentiresupplychainKeySuccessFactors—Strategy18第十八页，共八十一页。Involvementandcooperationacrosstheorganizationiscriticaltosuccess.Seniormanagementdirectinvolvementandongoinginterest/supportCross-functionalinvolvementinscheduling,logistics,designanddevelopmentImplementationdrivenat"grassroots"levelClearprocess"champions"FormalizedstructureandprocesstoperpetuatepartnershipKeySuccessFactors—Organization19第十九页，共八十一页。Adetailedprocessmustbeinplacetomaximizevalueandensureongoingopportunityidentification.UpfrontidentificationofopportunitiesanduniquevalueeachpartneroffersDocumentedexistenceofsignificantuntappedsystemscostvalueRigorousandfact-basedsupplierselectionExtensiveconsensusbuildingSystemsandstructurestoperpetuateprocessKeySuccessFactors—Processa.tr20第二十页，共八十一页。Scopeofpartnershiplimitednotwin/winFocusonpriceinsteadoftotalvaluesupplierselectionbasedonpricefailuretoconsidertotalsystemassourceofsavingsChosenstrategyinappropriateforpurchasecategoryAninappropriatestrategycanprohibitawin/winrelationship.ReasonsforPartialSuccess—Strategya.tr21第二十一页，共八十一页。LimitedseniormanagementparticipationLittlecross-functionalinvolvement"Over-centralized"decisionmaking:Notparticipative/inclusiveAdhocstructuresetuptoimplementstrategyPartialsuccesscanbecausedbyseniororlineorganizationalinadequacies.ReasonsforPartialSuccess—Organizationa.tr22第二十二页，共八十一页。LackofinternalandexternalconsensusbuildingLackof"relentlesspursuit"Supplierselectionnotrigorousandfact-basedTechnicalopportunitiesnotidentifiedupfrontLackofsystemsandstructurestoperpetuatetheprocessAnincompleteprocesscanalsocauselimitedsuccess.ReasonsforPartialSuccess—Processa.tr23第二十三页，共八十一页。

ToachievesuccessfulVMRs,thereareseveralareasofpotentialobstaclestowatchoutfor.Benefitsarevagueandunqualifiedno“fullpotential”economicsanalysishasbeendevelopedforbothpartiesProcessChallengesAssumptionsaremadebysuppliersthatVMRsareaone-timetrickCommunicationChallengesWatchoutsConcernsaboutsharingexpenseandproductinformationSufficientcommunicationofthebenefitsofchangethroughoutbothorganizationsThereisalackofunderstandingandcommitmenttochangingthewaybusinessisdoneBenefitsoftheVMRaresplitinalop-sidedmannerSKUproliferationNoongoingvaluerealizationagendahasbeencreatedand/ornoVMRchampionsareempoweredtoactOrganizationalbarriers(e.g.multi-divisionalcompanies)Watchouts24第二十四页，共八十一页。

VMRConceptVMRKeySuccessFactorsVMRSourcesOfValueBainVMRProcessExampleKeyTakeawaysAgenda25第二十五页，共八十一页。

ImprovedqualityduetoreducedvariabilityImprovedcommunicationsLongercommitmentsallowforlongerrunlengthsPurchasingeconomiesAstrongVMRcancapturethevalueinherentinverticalintegrationwhileallowingtheclienttofocusbothcapitalandmanagementresourcesonitsprimarybusiness.ExampleSourcesofValue:PrimarySourcesofValueVolume/ScaleEconomiesValueEngineeringand

QualityImprovementSystemCostReductionTechnologyandcapabilitysharingtocreatelowestcost,highestvalueproductJointdeterminationofpotentialfor:materialsubstitutionreductionofmaterialcontentstandardizationofmaterialsJointidentificationofredundant/duplicateprocesses,e.g.qualitycontrolorderprocessingtransportationengineeringmanagementfunctionsimprovedinventorycontrolCrosscompanylogisticssharingoftransportationanddistributionoperations(e.g.,leveragedbackhaulopportunities,shareddeliveryruns)EstimatePercentofTotalValueCreated:25%50%25%SourcesofValue(1of2)26第二十六页，共八十一页。Valueengineeringandsystemscostreductionaremostdifficulttoimplementandrequirethemostseniorinvolvment.SourceofValueMethodologyDifficultyofImplementationSeniorManagementInvolvementAnopendialogueregardingproductdesignbeginstooptimizedesign/costtrade-offsValueengineeringandqualityimprovementBuyerandsupplierjointlyexaminecurrentmethodsofinteractionandbegintoeliminateredundanciesSystemscostreductionConsolidationofsuppliersallowsthebuyertonegotiateforshareofincrementalprofitVolume/scaleeconomicsSourcesofValue(2of2)27第二十七页，共八十一页。DisguisedexampleIncreaseof3.2times6%ProfitImprovementRelevantPlantCapacityUtilizationIncrementalMarginImpactIncreasingasupplier’sutilizationby22%hada6%profitimpact.Volume/ScaleEconomies—Example28第二十八页，共八十一页。NewDesignsIndexedQualityIndexedCostValueengineeringidentifiedthreenewproductoptionsthatincreasedqualityandreducedcost.*ProtypesdevelopedjointlywithsupplierDisguisedexampleValueEngineering—Example29第二十九页，共八十一页。

BeforeVMR(5QualityControlFTEs)AfterVMR(3QualityControlFTEs)SupplierCustomerJointQualityControlCustomerDirecttopackagingoperations=QCinspectionpersonnelInthisexampleofsystemscostVMR,thesupplierandBainclienteliminatedredundancyandsaved40%ofqualitycontrolcosts.TopackagingoperationsOngoingFeedbacktoVendorSystemsCosts—Example30第三十页，共八十一页。Overall,thisclientachieveda19%costreductionthroughtheVMRexampleshown.SummaryofCostSavings—Example31第三十一页，共八十一页。

Volume/pricesavingsandsomelevelofvalueengineering/qualitybenefitsarerealizedveryearlyintherelationshipAdditionalvalueengineeringsavingsandsystemcostreductionsaremorelikelytocomelaterBainexperiencehasfoundthatthevaluefromVMRisdevelopedoverseveralyears.YearsintoVMRValueengineeringandqualityimprovementSystemcostreductionVolume/priceeffectTypicalTiming32第三十二页，共八十一页。

VMRConceptVMRKeySuccessFactorsVMRSourcesOfValueBainVMRProcessExampleKeyTakeawaysAgenda33第三十三页，共八十一页。IdentifyVMROpportunitiesUnderstandIndustryCostStructureSelectVMRCandidatesObtainTopManagementCommitmentIdentifySpecificCostReductionOpportunitiesImplementVMROpportunitiesTrackVMRSavingsSelectproductsforVMRbasedonpurchasingvolumeandvalue-addedAnalyzeindustryeconomicstodevelopsavingshypothesesAnalyzesupplierstoselectbestVMRcandidatesEnsureseniormanagementofclientandsupplierarefullycommittedConductanalysistoprovehypothesesandquantifysavingsopportunitiesFormalizerelationshipandimplementopportunitiesTrackprogressofsavingsandrelationshipsVMRProcess34第三十四页，共八十一页。EXAMPLEIdentifyVMROpportunitiesUnderstandIndustryCostStructureSelectVMRCandidatesObtainTopManagementCommitmentIdentifySpecificCostReductionOpportunitiesImplementVMROpportunitiesTrackVMRSavingsVMRProcess35第三十五页，共八十一页。ThismatrixwillhelpyouprioritizewhichopportunitiesaremostappropriateforaVMR.No/LittleOpportunity(needtocluster)HighLowLowHighPurchasingVolume(RelativetoTotalSupplierSales)Value-Added/EngineeredLevelProductredesignMaterialsubstitutionVolumediscountSystemcostimprovementVolumediscountSomesystemcostProductredesignMaterialsubstitutionModeratepotentialHighpotentialMedium/lowpotentialPurchasingCategoryPriority36第三十六页，共八十一页。BecausetheVMRprocessislengthyandtimeconsuming,qualitativeissuesmustalsobeevaluatedinselectingwheretoimplementaVMR.SuppliersandclientorganizationsmustbewillingtoworkcloselytogethercommitmanagementtimeandeffortprioritizesuccessofVMRTopmanagementofsupplierandclientmusthaveauthoritytocoverfullscopeofVMRBalanceamountofcostsavingswithlevelofsensitivityassociatedwithproductcategoryPurchasingCategorySelection37第三十七页，共八十一页。IdentifyVMROpportunitiesUnderstandIndustryCostStructureSelectVMRCandidatesObtainTopManagementCommitmentIdentifySpecificCostReductionOpportunitiesImplementVMROpportunitiesTrackVMRSavingsVMRProcess38第三十八页，共八十一页。UnderstandingtheindustrystructurevalidatesopportunitiesthatwereidentifiedinthefirstVMRprocessstep.IndustryCostStructureandDriversIndustryCompetitiveStructureIndustryCapacityUtilizationHowsuitableisthismarketanditscompetitivedynamicsforaVMR?Howimportantistheclientasacustomerinthisindustry?Whatisthecoststructureoftheindustry?ExampleQuestions:Whoarethekeyplayers?Whatistheindustrycapacityutilization?Whatdrivesthiscoststructure?Howfragmentedistheindustry?Whatistheutilizationofeachplayer?Whattypeofcostsavingsopportunitiesmightexist?Onwhatfactorsdokeyplayerscompete?Whatdrivesutilization?UnderstandIndustryStructure39第三十九页，共八十一页。IdentifyVMROpportunitiesUnderstandIndustryCostStructureSelectVMRCandidatesObtainTopManagementCommitmentIdentifySpecificCostReductionOpportunitiesImplementVMROpportunitiesTrackVMRSavingsVMRProcess40第四十页，共八十一页。VMRpartnersmustbeabletoperformintherelationshipandbeawillingpartner.PotentialforlowcostpositionStrongtechnology/qualityNewproductdevelopmenttrackrecordAdequatefinancialresourcesLongTermWinnersCapabilityandWillingnesstoDevelopaPartnershipImportantcategoryforsupplierClientimportanttosupplierPartnershipswithothersuppliersScaletohandlevolumeParentcompanysupportIdealPartnersSupplierPrioritization41第四十一页，共八十一页。Initialanalysisofthesuppliermustbeconductedtodeterminepotentialforbeingalong-termwinnerandcapability/willingnesstodevelopapartnership.ExampleAnalyses:SizeandmarketshareStrategyProfitabilityCashflowQualityphilosophyandimplementationTechnologyapplicationImportanceofclient’sbusinesstosupplierInitialSupplierEvaluation42第四十二页，共八十一页。

TofurtherdeterminewhetheraspecificsupplierisagoodVMRcandidate,evaluatethevendoronavarietyofcriteria.QualityofServiceSupplierCommitmentMagnitudeofCostReductionPotentialLong-TermLeadershipPotentialProduct/delivery/systemsGeographiccoverageDedication/dependenceInterestinVMRSystemseconomicsFlexibilityofapproachCredibilityofplan/resourcesTechnologyScaleFinancialSupplierEvaluation43第四十三页，共八十一页。PartnershipDevelopmentProcessIdentifyVMROpportunitiesUnderstandIndustryCostStructureSelectVMRCandidatesObtainTopManagementCommitmentIdentifySpecificCostReductionOpportunitiesImplementVMROpportunitiesTrackVMRSavingsVMRProcess44第四十四页，共八十一页。ImplementationSetuppartnershipmanagementstructureandrolloutNegotiationsShareaggregateresponsesSupplierProposalsAnalysisReceiveresponsesInitialContactwithSuppliersDescribeproposedrelationshipSelectionofsupplier(s)ComparativeanalysisElicitsuppliers'attitudesonapartnershipwiththeclientTrainstafftomanageprocess,expandtootherareasIdentificationofBDPandsystemcostreductiontargetsFollow-upwithplanttours,qualitychecks,etc.HandovercategorystrategyandvolumeexpectationsTheoptimalpartnershipdevelopmentprocessisexplicitandclearlyarticulated.PartnershipDevelopmentProcess45第四十五页，共八十一页。

NumberofSuppliers:OligopolyGiant(s)andManyFragmentedSoleSourceGiant(s)andFew15-3015-302-52-51SupplierConcentration:~80%to6-8suppliersRestwith10-20suppliers~80%to1or2suppliersRestwith15-30suppliersEvenlyamongsuppliers~80%to1or2suppliersRestwith1-4suppliers100%to1supplierLongtermcompetitivebidsShorttermcompetitivebidsVMRLongtermcompetitivebidsShorttermcompetitivebids

VMRLongtermcompetitivebidsShorttermcompetitivebidsVMRLongtermcompetitivebidsShorttermcompetitivebids

VMRLongtermcompetitivebids

PotentialRelationshipOptions:Arangeofsupplierconfigurationoptions,shouldbeevaluated.SupplierConfigurationAlternatives46第四十六页，共八十一页。PeopleIsseniormanagementcommittedtomakingthiswork?Haveallorganizational,cultural,andskillchangesbeenaddressedAretheincentivesappropriatetoensureemployeecommitment?OperationalExecutionWhatisthegovernancestructure?Howisprogressmonitored?Howwillroadblocksberesolved?Isthereopensharingofrequiredinformation?CanalltheinformationsystemschangesbeidentifiedandspecifiedHowwillswitchdisruptionsbeminimized?PartnerSelectionWhatistheoptimalnumberofsuppliers?Dowereallyunderstandsupplier'scurrentandfuturecostposition?Hasthesupplierscreenincludednon-costparameters?Hasthesuppliermadearealisticcommitment?Isthesuppliercommittedtodeliveringontheagreement?ValueIsthistherightinputtotargetforaVMR?industrytrackrecordproportionofbuyercoststructureDoesthebenefitoutweightherisks?switchingcostsbuyerleverageWhereisthevalue?Stages1,2and3shortvs.long-termIsthevaluerealizable?potentialhurdlesandroadblocksEachoftheseissuesshouldbeconsideredinevaluatingaVMR.ChecklistforSuccessfulExecution47第四十七页，共八十一页。IdentifyVMROpportunitiesUnderstandIndustryCostStructureSelectVMRCandidatesObtainTopManagementCommitmentIdentifySpecificCostReductionOpportunitiesImplementVMROpportunitiesTrackVMRSavingsVMRProcess48第四十八页，共八十一页。Ameaningfultrackingmechanismmustbeputinplaceacrossmultiplevariablestoensureongoingresults.SavingsproductcostsystemscostRelationshipstatusTimingofsavingsmilestoneachievementsIndustrychangesinindustrydynamicsintroductionofnewtechnology,etc.Tracking49第四十九页，共八十一页。

VMRConceptVMRKeySuccessFactorsVMRSourcesOfValueBainVMRProcessExampleKeyTakeawaysAgendaa.tr50第五十页，共八十一页。Clientislargeconglomerateproducing15majorproductlinesCurrentrelationshipwithsuppliersistraditionalandsomewhatadversarialattimesAlldataandvendorshavebeendisguised,howeverthisisanactualBainclientandcaseProductAiscalledwidgetsthroughouttheexamplewidgetSKUsarecalledred,blueandgreenContext:VMRExample51第五十一页，共八十一页。EXAMPLEIdentifyVMROpportunitiesUnderstandIndustryCostStructureSelectVMRCandidatesObtainTopManagementCommitmentIdentifySpecificCostReductionOpportunitiesImplementVMROpportunitiesTrackVMRSavingsVMRProcess52第五十二页，共八十一页。UponevaluationofABC'sproductpurchases,ProductAisthemostattractiveVMRopportunity.EXAMPLEABCPurchasedProductsABCCompanyPurchasingCategoryPriority53第五十三页，共八十一页。ProductcategoryAhasthemostsupplierandclientsupport.ProductExecutiveCommitmentCorporateWillingnesstoProductChangeRankingSupplierCommitmentSupplierCooperationProductCategory1ProductA(Widgets)2ProductDEXAMPLE3ProductB4ProductCPurchasingCategorySelection54第五十四页，共八十一页。EXAMPLEIdentifyVMROpportunitiesUnderstandIndustryCostStructureSelectVMRCandidatesObtainTopManagementCommitmentIdentifySpecificCostReductionOpportunitiesImplementVMROpportunitiesTrackVMRSavingsVMRProcess55第五十五页，共八十一页。MarketTrendsMarketOverview$1.5Bcustomwidgetmarket7%industrygrowthrateHighlyfragmentedmarketlargest15vendorscomprise60%SupplierstendtowardsmaterialsspecializationsecondarymaterialsoftenoutsourcedCustomer/SupplierRelationshipsIndustry-wide,closeretailer-supplierpartnershipsarenotcommonHowever,allsupplierssurveyedhavehadsomepartnershipexperienceexamplesinclude:volumedrivenpricediscountsjointR&D/productdesigneliminationofduplicateprocessesSuppliertrendsconsolidationmovementtoone-stopshopsprovisionofadditionalservicesCustomertrendsstrongpricefocusshort-termcontractcommitmentsmovementtomulti-materialfixturesSupplierEconomicsVariablecostsrepresent66%oftotalsuppliercostsRawmaterialscostsrepresent40%oftotalsupplier’scostsCustomsuppliersachieve5%EBITmarginsonaverage,butsignificantrangesexistsSupplierssurveyedreinvest5%ofannualrevenuesOpportunityexistsforoperationalimprovementoperationsarenothighlyautomatednotfullyleveragingmaterialspurchasingacrossdivisionsorcustomersEXAMPLEWidgetIndustryOverview56第五十六页，共八十一页。Thecustomwidgetmarketishighlyfragmentedwiththetop15supplierscomprisingapproximately60%ofthe$1.5Btotalmarket.EXAMPLEU.S.WidgetMarket57第五十七页，共八十一页。Thecustomwidgetmarketisfurtherfragmentedbycolor.EXAMPLEU.S.CustomWidgetMarketbyColor58第五十八页，共八十一页。EXAMPLEIdentifyVMROpportunitiesUnderstandIndustry

CostStructureSelectVMRCandidatesObtainTopManagementCommitmentIdentifySpecificCostReductionOpportunitiesImplementVMROpportunitiesTrackVMRSavingsVMRProcess59第五十九页，共八十一页。1997AnnualRevenues:BusinessStrategyFocus:PrimaryColor:CustomerConcentration(PercentofSalestoTopFiveCustomers):AverageCapacityUtilization:ExperiencewithClient:Widgetmanufacturersdiffersignificantlyintermsofsizeandcapabilities.DVolumeRed,blue60%60%Limited$60MBCustomizationBlueN/A80%No$80MAOne-stopshoppingBlue40%70%Yes$100MCOne-stopshoppingRed,blue33%75%No$75MELowcostwidgetsRed42%50%Yes$50MEXAMPLESupplierProfiles60第六十页，共八十一页。

Mostplayersinthecustomwidgetindustrytendtospecializeinredorblue,manyoftenoutsourcethesecondarycolor.EXAMPLESupplierMaterialsFocus61第六十一页，共八十一页。

EBITG&ACOGSSupplierCostStructure(AverageCustomSupplier)38%24%7%12%10%4%5%Rent&UtilitiesWhilemanufacturers’sizeandproductfocusimpacttheircosts,preliminaryestimatesindicatethatvariablecostsaccountfor67%ofaveragewidgetsuppliers’costs,withmaterialscomprisingaround40%oftotalcost.Estimatedvariablecostapprox.=67%ofcosttotalEXAMPLESupplierEconomics:CostStructureDetail62第六十二页，共八十一页。Mostmajorfixturemanufacturersgrewfrom“mom-and-pop”operations,leavingsignificantroomforoperationalimprovementinareassuchasautomationandmaterialspurchasing.MaterialsPurchasingManymanufacturersarenotleveragingtheirvolumeinpurchasingmaterials,eitheracrosscustomersoracrossinternaldivisionsApurchasesitscustomers’redseparately,despitethefactthatthevastmajorityofitspurchasesareforthesameredproductsB’smanufacturingdivisionseachpurchaserawmaterialsseparatelyBlueFixtureManufacturersRedFixtureManufacturersManufacturingAutomationEXAMPLESupplierOperationalEfficiency63第六十三页，共八十一页。Mostvendorssurveyedreportedatleastsomeexperiencewithpartnershiparrangements.PortionofVendorsIndicatingExperienceinSomePartnershipAspectsEXAMPLEPartnershipExperience64第六十四页，共八十一页。

ClientNeedsParametersSupplierRequirementsCapacityPotentially,theabilitytosupplyallofclient’sred,bluewidgetneedscurrentclientvolumeof~$80MperyearMaterialsPotentially,theabilitytomanufactureallclient’sred,bluewidgetsQualityDemonstratedabilitytomeetallqualityrequirementsathighestlevelproductqualityservice-levelsleadtimesExperienceIndustry-leadingexpertiseincustombluewidgetproductionIndustry-leadingexpertiseincustomhigh-endredwidgetproductionDemonstratedfamiliarityandexpertisewithclientwidgetsThefollowing“ideal”supplierproenableclienttocapturefullpotentialvalue:EXAMPLEValueengineeringDemonstratedcreativityandabilitytoidentifyandimplementvalueengineeringideasSupplierRequirements65第六十五页，共八十一页。

ClientNeedsParametersSupplierRequirementsPartnershipapproachDesireandcommitmenttomakeclientthe#1customerwhileservingothercustomersaswellCommitmenttocreatejointvaluetogetherwiththeclientThefollowing“ideal”supplierproenableclienttocapturefullpotentialvalue:CostpositionLowcostpositionEXAMPLEValuecreationCommitmenttodrivevalueacrossadditionalareasautomationfixedcostleveragesystemseconomicsSupplierRequirements(Continued)66第六十六页，共八十一页。CDEABFKeyrequirementsG#5#5#5#4#4#4#3#3#3#2#2#1#1#1#2#6#6#7TotalAssessmentRank:#7#7#6Materials:Experience:Givencurrentsuppliercapabilities,Aistheclosesttothe“ideal”candidateprofile.Red&Blue:BlueOnly:RedOnly:EXAMPLECapacity:BlueQuality:Valueengineering:Valuecreation:Partnershipapproach:Red89%82%71%68%61%46%43%SupplierCapab