Michigan State Model (MSU) – Monczka

Posted on: October 10, 2017, by :

The Michigan State Model is much more elaborate and complex than Kraljic, however it can be used complimentary.

The MSU-model works like a Plan-Do-Check-Act circle, also known as the Deming-circle. Each step in the circle is a call to action: a decision needs to be taken. The decision then leads to more circle and more decisions. 

An interesting article can be read here (Faber, Brigitte & Lamers, Nico & Pieters, Reinder. (2007). Models for decision making in purchasing: Kralic versus Monczka. 63 – 67. 10.1109/LINDI.2007.4343514.) Faber, Lamers and Pieters are lectors on the University of Applied Sciences in Arnhem.

They have given the below picture:
The Michigan State University Model as made by Monczka, describing one large circle of activities for procurement, where each activity has a new circle of processes.

 

The basic frame work is made in 8 steps, beginning with the classic make-or-buy decision. This in itself is a very difficult question in many occassions and might not be easily answered. It depends on the strategy, the resources available and the business case behind it. A separate article about this will follow later.

Step 2 is categorizing similar products or suppliers into similar groups. I do this usually in the following steps: Talk to colleagues to determine the right potential groups. Then categorize on several criteria, such as spend (per year), re-occurence of spend, critical to quality of our own end product and the type of product it is. Use excel, filter, and you can make a nice overview with pie-charts of your categories. Use the categories in the Kraljic-matrix (instead of single articles) and you have a good starting point for a strategy.

Step 3 is tricky, as is sounds very easy but is usually the work of many, many years. “establish a good and sound base of potential suppliers”. Piece of cake? Not really. Good suppliers means that they are interested in you, you have enough leverage over them, a reliable supply chain and perfect quality. Finding these is the core of our profession.

Step 4 again seems easy, but largely depends on step 3. Use supplier relationship management to ensure a good relation. With my critical suppliers, I try to talk weekly and meet face to face at least every quarter. We plan business review meetings on a yearly basis and the quality and logistics performance is fed back to the supply base on a monthly base. However, even as the supplier might be perfect, we are always depending on the customers. If they change the outlook radically (for example, phase-out a product or start using new techniques), I still might be forced to exit the relationship.

Step 5 is a step which is critical to the relation, in case of good and reliable suppliers, Early supplier involvement means getting your suppliers on board to WIN a new project. Use their knowledge, and make commitments, to win the business and grow bigger together. This makes everybodies life a lot easier and is the maximum value adding you can do in your relationship.

Step 6: make sure the supplier knows into which part of your product their products go. The human mind works in tricky ways. One of them is that you can “de-anonimize” the products by telling the supplier what you use it for, and in which part of your process. This helps troubleshooting and makes the salesmen proud.

Step 7 is a step which is only found in very mature supply chains (such as automotive and aerospace): supplier quality development. By the earlier described steps of early supplier involvement and regular contact points, it actually is only a small step. But a sensitive one: the supplier has to accept the help that you provide them and must trust you enough to share monetized benefits. They must also recognize that even as they are specialized in their particular field of expertise, it doesn’t mean that everything is 100% perfect and can’t be optimized. Especially in the lesser developed supply chains, comments as “that is internal knowledge” and “none of your business” are frequently heard.

Step 8 is a direct result of the above. However, a choice needs to be made where to start and to identify the best suppliers and categories to apply the steps. After all, in your routine products, you don’t want to invest to much time. However, it might be very interesting especially for the leverage products and is in my opinion a necessity for the strategic quadrant. For the bottleneck-products, it depends on more factors: why is it a bottleneck (this can be because of, for example, raw material shortage, in which case your supplier is likely to cooperate with finding alternatives) and would you still stay with the same suppliers when the bottleneck is resolved?

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