Nokia Siemens Networks Bangladesh Ltd (Part 3)

 Findings

There is significant positive relationship between good vendor management practice and working for vendor development. Contingency coefficient is 0.66 which is near to 1 shows strong relationship between good vendor management practice and vendor development.

 NSN’s thoughts towards supplier development:

NSN BD Ltd believes that vendor development is important for good vendor management.

The chief responsibility of Supplier Development is to ensure that suppliers to Global Procurement meet the performance requirements of Nokia Siemens Networks. This is accomplished through continuous development of chosen suppliers within the supplier base of Global Procurement. The aim is to minimize and mitigate risks identified in supplier interface.

To achieve this goal, from Early Supplier Evaluation Phase onwards Supplier Development evaluates suppliers based on clearly defined NSN Supplier Requirements. A foundation for continuous supplier quality assurance, on the other hand, is set by having negotiated Quality Assurance Appendices in place with suppliers. Supplier performance improvement is also based on having well-defined Key Performance Indicators in place based on which Supplier Development can initiate joint improvement actions with chosen suppliers of Global Procurement. Through Supplier Development Programs Supplier Development assumes the leading role in developing the chosen key strategic suppliers as defined by Global Procurement. The projects conducted within the framework of Supplier Development Programs are called Supplier Quality and Supplier Productivity Excellence Projects.

The chief responsibility of Supplier Development is to ensure that approved suppliers to Global Procurement meet the performance requirements of Nokia Siemens Networks. This is accomplished through continuous development of chosen suppliers within the supplier base of Global Procurement.

The operational design of Supplier Development is founded upon effective minimization and mitigation of identified risks in supplier interface, and is driven by the following objectives:

• Supplier evaluation and qualification based on clearly defined NSN Supplier Requirements (NSN SR)
• Continuous Supplier Quality Assurance based on negotiated Quality Assurance Appendices
• Continuous Supplier performance improvement based on defined Key Performance Indicators
• Development of chosen key strategic suppliers with an industry-leading approach based on mutual trust, professional support and well defined process and methodologies

Specific objective: 07

To find out whether NSN as a green company, chose suppliers producing environment friendly goods and services or not.

Related Hypothesis

Null Hypothesis: 70% employees of believe that NSN give importance on Environment friendly goods suppliers

Alternative Hypothesis: Less than 70% employees of believe that NSN give importance on Environment friendly goods suppliers

Related Question

Being a green company does NSN BD Ltd. gives preference to environment friendly goods and services.

 Response                                   

Table 09: Showing frequency distribution of related question

Source: primary

Using 5point likert scale, from1-always to 5never, taking the value below 3 are taken as positive response

This hypothesis is tested using Z test

 Z test: The case can be summarized symbolically

pHo = 0.70 (Hypothesized mean)

qHo= (1- pHo) = 0.30

n=30 (sample size)

= 0.83

σp      = { (pHo*qHo)/ n}^0.5

         =  {( 0.70*0.30)/ 30} ^0.5

=  0.0836

Zobs            = ( -pHo)/ σp

= {(0.833 – 0.70)/ 0.0836}

= 1.589

Zcrit         =1.64 (at 90% confidence level tabulated value of Zcrit)

Zobs<  Zcrit so there is no significant evidence to reject the null hypothesis

 The figure below shows this hypothesis test graphically.

From the figure above it can be said that the value of Zobs falls within the acceptable range.

Findings

From the hypothesis test it is found that NSN gives preference to those suppliers who supply environment friendly goods.

 NSN as a Green Company

As a green company NSN require suppliers to have a documented environmental management system (EMS), except in categories where impacts are very low such as research and development, software providers and consultancies. In the case of contract manufacturers, other key suppliers and those identified as having higher environmental risks, this EMS must be certified to environmental management standard ISO 14001.

At the end of 2009, we asked our 150 key suppliers (by purchase expenditure) to confirm whether they have an EMS in place at corporate level and at each individual site which supplies Nokia Siemens Networks. Focusing on direct suppliers of materials only, over 400 sites were included in the survey. Based on supplier confirmations and a review of public data sources, 76 percent of these sites meet Nokia Siemens Networks requirements and work continues with those suppliers who did not yet comply.

It typically takes 12 to 18 months to develop an EMS for each site. As new suppliers are continually selected or existing suppliers supply Nokia Siemens Networks from new sites, this means EMS coverage is unlikely to reach 100 percent at any given time. In 2010, NSN also further improve their data collection process in this area. Cutting emissions related to energy use is a key part of NSN’s corporate responsibility strategy. This includes our commitment to improve energy efficiency in the supply chain.

In 2009, we invited 22 key suppliers to participate in a pilot energy efficiency program. Of these, 19 suppliers provided examples of how they are improving energy efficiency, which we shared together with best practices from our own operations. Suggestions ranged from improving the efficiency of buildings and equipment to streamlining specific manufacturing processes and encouraging employees to turn off equipment when not in use. NSN shared these examples of best practice with all participating suppliers.

NSN have asked suppliers to set targets to improve the energy efficiency of their operations and, where applicable, their products, beginning in 2010.

Targets fulfilled in 2010

• Invited a further 30 suppliers (based on high energy intensity and business significance) to participate in our energy efficiency program
• Drive implementation of good practices through meetings and target-setting on energy efficiency.

From the discussion it is clear that NSN as a green company always conscious about choosing environment friendly goods suppliers. They themselves also avoid unusual use of resources like paper, Energy, printing materials etc.

Specific objective: 08

To find out whether there is any change in cycle time for procurement of a product or not

Related Hypothesis

Null Hypothesis: More than 75% employees think that Cycle time for procurement of product has decreased more than 7 days each

Alternative Hypothesis: Less than 75% employees think that Cycle time for procurement has decreased less than 7 days each year.

Related Question

Cycle time for procurement of NSN BD Ltd is decreasing by 7days per year

 Response

Table 10: Showing frequency distribution for related question

Source: primary

Using 5point likert scale, from1-always- 5never, taking the value 3 and below are taken as positive response

This hypothesis is tested using Z test

 Z test: The case can be summarized symbolically

pHo = 0.75 (Hypoyhetical mean)

qHo= ( 1- pHo)= 0.25

n=30 (sample size)

= 0.867

σp ={ (pHo*qHo)/ n}^0.5

      = {( 0.75*0.25)/ 30} ^0.5

= 0.079

Zobs           = ( -pHo)/ σp

= {(0.867-0.75)/ 0.079}

= 1.47

Zcrit         =1.64 (at 90% confidence level tabulated value of Zcrit)

Zobs <  Zcrit so there is no significant evidence to reject the null hypothesis

The figure below shows this hypothesis test graphically.

Secondary data From NSN BD Ltd.

Table 11: Cycle time in last 3 years

 Exceptional case: Government vendors like electricity, water, gas bill etc which are processed locally and paid within 45days

Table 12: showing average cycle time for last 3 years

 Calculation:

Cycle time decreased from year 2008 to year 2009= (71.5 – 62.5) days

= 9 days

Cycle time decreased from year 2008 to year 2009= (62.5- 49.5) days = 13 days

Average per year reduction in days= 9+13/2 =11 days

Hypothetical mean=7 days

Findings

It shows that in previous years cycle time for purchasing product has decreased by more than 7 days per year.

But from the data we found that the time period for invoice payment has not changed, only the time due in PO creation has changed and came to a minimum range of 2to 7 days by using my order tools. Now in upcoming days it will only be possible to minimize the cycle time by decreasing payment period. It will also help the organization to increase number of potential vendors who are now not interested to do business just because of longer credit period.

It will also increase the bargaining power and save cost.

Specific Objective: 09

To find out the growth rate of purchase of NSN

 Related Hypothesis

Null Hypothesis: More than 70% employees said that purchase rate of NSN is growing more than 15% per year

Alternative Hypothesis: More than 70% employees said that purchase rate of NSN is not growing more than 15% per year

Related question

Purchase rate of NSN BD Ltd. (Direct and Indirect) increasing consistently more than 15% per year

Table 13: Showing the frequency of related question

Source: primary

Using 5point likert scale, from1-always- 5never, taking the value 3 and below are taken as positive response

This hypothesis is tested by using Z test

Z Test : The case can be summarized symbolically

pHo = 0.70 (hypothesized mean)

qHo= (1- pHo) =  0.30

n=30 (sample size)

= 0.80 (Observed mean )

σp ={ (pHo*qHo)/ n}^0.5

      = {( 0.70*0.30)/ 30} ^0.5

= 0.0836

Zobs           = ( -pHo)/ σp

= {(0.80-0.70)/ 0.0836}

= 1.19

Zcrit         =1.64 (at 90% confidence level tabulated value of Zcrit)

Zobs<  Zcrit so there is no significant evidence to reject the null hypothesis

The figure below shows this hypothesis test graphically.

 Secondary data related to the issue

Table 14: Showing annual spending on purchase

 From the collected data we can see though the hypothesis is accepted but there is fluctuation in amount spend on direct and indirect purchase.

Specific Objective: 10

To find out the implementation rate of purchasing contract

 Related Hypothesis

Null Hypothesis: More than 80% employees believe that all the contracts for procurement of NSN BD LTD. have been successfully implemented.

Alternative Hypothesis: Less than 80% employees believe that all the contracts for procurement of NSN BD Ltd. have been successfully implemented.

 Related question

NSN BD Ltd implements 100% of its procurement contract.

 Response

Table 15: showing frequency distribution of related question

 (In the range of 1to 5 from strongly agree to strongly disagree here.  Answer below 3 are counted as agree)

At 95% confidence level testing hypothesis

Z test is use to test the hypothesis

Z test:

The case can be summarized symbolically

pHo = 0.80 (Hypothetical mean)

qHo= (1- pHo) 0.20

n=30 (sample size)

= 0.933 (Observed mean)

σp ={ (pHo*qHo)/ n}^0.5

      = {( 0.8*0.20)/ 30} ^0.5

= 0.073

Zobs           = ( -pHo)/ σp

= {(0.933-0.80)/ 0.073}

= 1.82

Zcrit         =1.96 (at 95% confidence level tabulated value of Zcrit)

Zobserved <  Zcrit so there is no significant reason to reject the Null hypothesis the null hypothesis

The figure below shows this hypothesis test graphically.

From the figure above it can be said that the value of Zobs falls within the acceptable range

Table 16: Showing list of contracts in 2010:

Total number of contract = 48

 From the above data base we can say that the entire contracts are made with the vendors of direct procurement are implemented.

So there is no specific reason to reject the null hypothesis.

In case of execution an of contract

Specific Objective: 11

To find out vendors perception towards NSN BD Ltd.

Related hypothesis

Null Hypothesis: More than 70% vendors think NSN is a good customer for their product (got less than 3 in the scale of 5)

Alternative Hypothesis: Less than 70% vendors think NSN is a good customer for their product (got less than 3 in the scale of 5)

 Related question

NSN BD LTD is a good customer for its vendors

 Response

Table 17: Showing frequency distribution of related question

Source: primary

Using 5point likert scale, from1-always- 5never, taking the value below 3 as positive response

This hypothesis is tested using Z test

Z test:

The case can be summarized symbolically

pHo =. 70 (Hypothesized mean)

qHo=(1- pHo) = 0.30

n=10 (sample size)

x= 0.8 (observed mean)

Sx ={ (pHo * qHo)/ n}^0.5                                     

      ={( 0.7* .30)/ 10} ^0.5

= 0.145

tobserved = (p- M)/ Sx

= {(.8-0.7)/ 0.145}

=0.69

tcrit          =1.833 (at alpha= 0.1,df=9 tabulated value of  tcrit)

tcrit > tobs , so there is not significant reason to reject the Null hypothesis.

The figure below shows this hypothesis test graphically.

Tobserved <  tcrit so there is no significant evidence to reject the null hypothesis Basing on only a single question test it’s not possible to conclude any strong findings for that reason some more points are required to be shown.

Table 18: Co-relation between years of business with NSN BD LTD and being strategic partners.

 Findings:

There is very insignificant but positive relationship between age of business with NSN BD Ltd and the relationship with its vendors. It means the higher the age of business with the vendors the stronger strategic partner relationship. But the value of Pearson correlation is very low. Means the relationship is very low.

Table 19: Co-relation between yearly turnover and being strategic partner

 *  Correlation is significant at the 0.05 level (2-tailed).

Findings

There is very insignificant but positive relationship between yearly turnover of vendors business with NSN BD Ltd and the strategic relationship with its vendors. Means the higher the turnover (yearly) of business with the vendors the stronger strategic partner relationship. The value of Pearson correlation is very low. Means the relationship is strong.

Related Question

Does your organization meet the process with in the lead time

Table 20: Showing frequency distribution of related question

 Related Question

In case of failure to delivery product on time, step that NSN BD takes

Table 21: showing frequency distribution of related question

 Table 22: Showing Correlations between vendors delivering the product with in the lead time and steps taken in case of failure to deliver goods on time

 Findings:

The correlation between meeting the delivery process with in the lead time shows that the regularly the vendors complete the process with in pre-declared lead time the flexible initiative   (penalty) NSN BD LTD. charges.

From the above findings we can say that Vendors have positive perception towards NSN BD LTD. as their customer.

 Specific objective: 12

To show the impact of vendor management on its business

In this research impact of vendor management on its business is shown by limiting its scope. There can be several impact of vendor management system on its business like on time support, longer credit period, after sales service, cost saving etc on generating higher revenue and profit by running business smoothly with. In this research the impact of vendor management is measured in terms of cost saving on its profitability. The relationship between cost saving and

Profitability is ascertained by doing regression analysis below.

Regression Analysis of cost saving and profitability:

Table 23: Cost saving and spending in direct and indirect purchase

 From the data collected above the required values for regression analysis are ascertained. Taking the value of independent (cost saving) and dependent variable ( profitability)

Table 24: Relevant data for Regression analysis

 By using these data in SPSS we get the output:

Table: 25: Coefficients

 Dependent Variable: yearly profit of NSN BD LTD.

Findings and Interpretation of regression analysis of yearly cost saving and profitability:

• The calculated F value 1.065 is less than tabulated value 18.5 (at 2 Degree of freedom) which predicts that if sample size large there will be no impact of yearly cost saving on yearly profitability.
• The value of B is positive means there is a positive linier relationship between profitability and cost saving, so there will be an upward trend in regression line.
• The equation for  regression line is Y = 182.194X – 311.26
• The predicted residual values the gap between the regression line and the actual value

The figure below shows the regression line of cost saving and profitability

PATR- VI

FINDINGS OF THE ANALYSIS, CONCLUSION AND

RECOMMENDATION

Findings:

• In recent days vendor management has become an important part of running any type of business. It has reached to the position of managing an important partner of business from a merely a neglected supplier. Now a day there is a separate field of business where only job of vendor management is done. Many large companies are managing their vendors via vendor management firms. There are also some software and web based solution to manage for vendor management like “Talent20”
• There are some well practice rules and steps are widely practiced for better vendor management including supplier selection, preparing contract, contract management and renewal and payment procedure
• The vendor management system of NSN BD Ltd is regularly upgrading with the change of time and requirement of situation. Policies regarding procurement and payment are global and applied in all the countries.
• Of the total procurement indirect procurement have a small proportion but adequate importance are give to that part as those are important for running the business by fulfilling the individual employee’s need promptly
• For meeting the requirement of individual employees fast NSN BD LTD started using a software named MyOrder tool which most of the employees think one of the best tool. By using this tool the requester can place his/her demand for the product with the approval of manager(Approval) and purchase order can be placed within two to seven days which previously required almost a month.
• The invoice payment system serves the interest of both parties. Though NSN BD LTD takes 45 days for any kind of payments to vendor except Govt. vendors, but they pay the bills on the preset contract date. Some exceptional cases of delay are there, but those have sound reason behind keeping the payments outstanding. Most of those situation occurs due to not getting the required product as per specification on time
•  In most of the cases NSN BD LTD deals with its vendor as valued partner. NSN takes special care of its vendors and work hard for vendor’s development by providing different training, setting KPI for their services. They believe the more effort is given of vendor development the better it is for vendor management.
• NSN BD LTD claims that it is a Green Company, so they always try to avoid using those products which are harmful for the environment. They are also concern for energy saving. They are not only working for being green alone. They also encourage the vendors supplying environment friendly goods. They prefer those suppliers having ISO certification regarding environment friendly goods
• The efficiency in vendor management has decreased the cycle time for procurement to payment for purchasing any product. The cycle time decreased in the part of creating purchase order. Previously they did it manually, but now the product is ordered directly by the requestor via MyOrder tools, which require less time.
• The spending on purchase of direct and indirect products has an upward trend. But sometime there are fluctuation in the spending due to some specific reasons like change in technology, inflation etc
• NSN BD LTD works very efficient and effective in preparing contract for purchasing goods and service. All most all the contract they made are successfully implemented, In case of service procurement they regularly monitor the quality and speed of work and project management team regularly supervise them for getting best output.
• Vendor’s perception towards NSN BD LTD as a customer is good. Vendors are highly interested in doing business with them. Even though the payment system of NSN BD LTD require a bit longer than many other local and multinationals, still their numerous vendors are ready to supply product. Vendors are treated as their strategic partner and are provided support for development.
• The larger the amount of business with the vendor the stronger the relationship.
•  The longer the age of business with vendors the stronger the relationship.
•  Impact of vendor management on its business is prominent. Their good relationship with vendor helps them to run their business smoothly by saving time and cost. This cost saving has a positive relationship with the profitability of NSN BD LTD.

Conclusion:

In this research paper, an exhaustive effort was made to analyze the vendor management system of  Nokia Siemens Networks focusing on Nokia Siemens Network Bangladesh Ltd. for analyzing the vendor management system few important aspects of vendor management like supplier base management, preparing contract, managing contract, payment process is analyzed.

Mission of vendor management is to provide world class product and services for Nokia Siemens Networks in a cost efficient manner. Vendor managers represent Nokia Siemens Networks in contract negotiations with vendors. Different vendor management group works closely with GPR, business unit representatives to achieve the goals. Vendor management’s key responsibility is to make sure NSN’s deals with suppliers are cost efficient and advantageous.

NSN already have a very updated rule, regulations, guide line and policies for efficient and effective vendor management which is used globally. And these rules are revised with the requirement of situation. These regulations are also prepared keeping vendors interest in mind. For this reason vendors are also interested in dealing with NSN as a valued customer. Though there are some points, which some time resist NSN to choose the best option, but the way the deal with their vendors, provide NSN good support in their business as strategic partner.

 Recommendation:

For preparing the research paper on critical analysis of Vendor Management System, it was required to go through the policy and process of it.  Observing the whole process and questionnaire survey of both employees and vendors, it is found that current vendor management practice is a good one. The concern persons dealing with this process are highly experienced and educated in relevant field. with due respect to them I would like to recommend few points which was found through the observation and suggestions from both employees and vendors of NSN BD LTD may help them to maintain good relationship, cost saving, timely delivery of the product and service.

• NSN BD LTD should focus on reducing the payment period which widen the range of potential vendor and increase bargaining power
• In case of indirect purchase by ordering via my Order tools, individual purchase as per requirement is done; if it is processed in the way to purchase in bulk it may reduce the cost of purchasing.
• Provide short training on purchasing policies and rule of NSN
• The impact of cost saving on profitability is positive. It is also very high because the largest portion of its revenue spend on the purchase of direct products, so little percentage change (increase) in cost saving will have multiplier effect on its profitability. So NSN must focus on cost saving on direct procurement.

BIBLIOGRAPHY

Books

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Company’s Internal Reports and Policies

Annual Report from 2007- 2010

Website

Company’s internal website:

Nokiasiemense/GPR_in_brief.aspx.htm

Nokiasiemense/mission-and-vision.htm

Nokiasiemense/vendormanagement.aspx.htm

www.nokiasiemensnetworks.com

fixed-mobile-convergence.tmcnet.com

www.answers.com

www.absoluteastronomy.com

en.wikipedia.org/wiki/Vendor_Management_System

www.oakenterprises.com/documents/vms_bestpractices.pdf

www.tempworks.com/vendor-management-software-vms.php

www.utrs.com/utrs/vendor/vendors

vendorsoft.com

jcibmvms.net

en.wikipedia.org/wiki/Vendor_Relationship_Management

Some are parts:

Nokia Siemens Networks Bangladesh Ltd (Part 1)

Nokia Siemens Networks Bangladesh Ltd (Part 2)

Nokia Siemens Networks Bangladesh Ltd (Part 3)