Supply Chain Chapter 7

Supplier Relationship Management (SRM)

- like an orchestra - many different sections

- some sections play one at a time - dictated by the music

each scenario is diff. like each piece of music

orchestra needs players based on their ability

SRM

the discipline of strategically planning for, and managing all interactions with the third party organizations that supply goods and/or services to an organization in order to maximize the value of those interactions.

SRM is often part of the rollout of strategic sourcing and is typically applied with suppliers

PART OF STRATEGIC SOURCING

- providing high volumes of a product/service

- lesser quantities of crucial product/service

strong supplier partnerships

- important to achieving win-win competitive performance for the buyer and supplier

- mutual commitment over an extended time to work together

- uses STRATEGIC perspective NOT TACTICAL

building trust

- willing to work together

- shared vision and objectives - both clear and mutually agreeable

personal relationships

- strategic partnerships begin w development of personal relationships b/t key people at each company

- COMMUNICATION

mutual benefits and needs

- partnership should result in a win-win situation, which can only be achieved if both companies have compatible needs

- an alliance is much like a marriage - if only one party is happy the relationship likely won't last

commitment and top management support

- commitment has to start at highest management level

- partnerships are successful when top management is ACTIVELY SUPPORTING partnership

change management

- companies must be prepared to manage change that comes with the formation of new partnerships

information sharing and lines of commnunication

- formal and informal lines of communication should be set up to facilitate the free flow of information

formal - i send you an order you send me a confirmation

informal - if something isn't right I pick up the phone and call supplier - figure out how to work it out

- confidentiality of sensitive info. must be maintained

capabilities

- key suppliers must have the right tech. and capabilities to meet cost, quality and delivery requirements in a timely manner

continuous improvement

- making a series of small improvements over time results in the elimination of waste in a system

DON'T WANT TO MAINTAIN WANT TO IMPROVE

- buyers and suppliers must be willing to continuously improve their capabilities in meeting customer requirements

PDCA (Plan, Do, Check, Act)

the process commonly utilized in continuous improvement is;

performance metrics

- you can't improve what you can't (or don't) measure

- metrics should be: 1) understandable 2) easy to measure 3) focused on real value-added results

- multi-criteria approach is best ex: SCORECARD

Total Cost of Ownership (TCO)

- is made up of all costs associated with the acquisition, use, and maintenance of a good or service

- where is it today, where do we want it to be in the future

SMART

Specific

Measureable

Achievable

Relevant

Time-oriented

supplier evaluation

- process to identify best and most reliable suppliers

- sourcing decisions are made on facts and not on perception

- frequent feedback can help avoid surprises and maintain good relationships

- suppliers should be allowed to provide constructive feedback to the customer

Supplier Evaluation: Performance

- get suppliers to agree on the measures you're going to use

- visibility and feedback

- how you're going to measure and what the target is

ex: cost, price, delivery performance, financial stability, ethics

evaluating and selecting key suppliers

- when evaluating key suppliers for developing a collaborative relationship, purchase cost becomes relatively less important

- excellent suppliers will be able to drive costs down

- squeezing suppliers only helps in short-term

key supplier selection

typically conducted by a cross functional team using evaluation forms or scorecards

- weighting techniques are often used

the weighted- criteria evaluation system

- takes all of the dimensions of performance and assigns weight to each one

- score between 0-100

- delivery, quantity and cost may be more important than others

- Certified, Preferred, Acceptable, Conditional, Developmental, Unacceptable

supplier certification programs

- certified supplier needs little if any receiving inspection of testing before going into approved stock or into the product process.

benefits of supplier certification programs

1) reducing - the amount of time and resources necessary for the buyer to conduct incoming inspections of products and materials from certified suppliers

2) building long-term relationships

3) decreasing the supplier base

4) recognizing excellence

internal or external certification programs (can use both, but rare)

internal:

- no incoming product lot rejections (less then 0.5 percent defective)

- no incoming non-product rejections (late delivery)

- no significant supplier production-related incidents

external certification

ISO (equal in Greek) - International Organization for Standardization

have to be re-certified every 3 years and look back at the last 3 years - have to maintain standards

Iso certification

a highly sought after as it represents achieving and maintaining a stand of excellence verified by an independent third party organization

ISO 9000

management and quality standards

ISO 14000

standards for environmental management

supplier development

- technical and financial assistance given to existing and potential suppliers to improve quality and/or delivery performance

- the buyer's activities to improve a supplier's capabilities

- not bullying them into charging less

- providing suppliers with what they need to be successful in the supply chain

early supplier involvement (ESI)

- key suppliers become more involved in the internal operations of the buyer's company, particularly with respect to new product and process design, concurrent engineering, and design for manufacturability.

value engineering

activities help the buyer's company to reduce cost, improve quality and reduce new product development time beginning with initial design

supplier recognition programs

- recognize suppliers who achieve the high performance standards necessary to meet customer expectations

- reward them by formally recognizing them

supplier recognition programs - 3 attributes

1) companies should recognize and celebrate achievements of their best suppliers

2) award winners exemplify true partnerships

3) award-winning suppliers serve as role models

benefits of supplier recognition programs

1) motivate suppliers to preform better

2) improve supplier loyalty and commitment

3) encourage suppliers to adapt to company's culture

4) entry barriers for competitors

5) supplier participation in product innovation

SRM System

1) Automation is meant to handle routine transactions

2) integration spans multiple dept., processes and software applications

3) visibility of info. and clear and concise process flows

4) collaboration through info. sharing

5) optimization of processes and decision making

investment in people and "soft skills"

treat suppliers with courtesy and respect. Be candid, and able to disagree without being disagreeable. Hold both sides to the same standards

QUIZ

QUESTIONS

The process commonly utilized in continuous improvement is known as?

Plan, Do, Check, Act

Benefits of implementing an effective supplier certification program include all of the following EXCEPT?

Increasing the supplier base

A strong supplier partnership requires that both buyer and supplier adopt a strong tactical perspective

FALSE - should be strategic perspective

The keys to developing successful supply partnerships include all of the following EXCEPT?

Individualized Objectives

The best supplier candidates for Supplier Relationship Management (SRM) include all of the following EXCEPT?

Developmental suppliers that need to make improvements

ISO 14000 is a widely accepted management and quality certification standard

FALSE - environment

Successful supplier relationships involve equal decision-making control between both the buyer and the supplier.

TRUE

Award-winning suppliers serve as role models for other suppliers and may therefore be exempt from audits and certification programs

FALSE

An organization's process for evaluating the quality systems of key suppliers in an effort to eliminate incoming inspections can be referred to as?

Supplier Certification

An effective supplier certification program may increase the time spent on incoming inspections

FALSE