SCM Unit 11 Flashcards

SRM Definition

• Supplier Relationship Management (SRM) is a strategic, cross-functional approach to managing relationships with suppliers.
• Aims to minimize disruptions and deliver long-term growth for both buyer and seller.
• Focuses on superior financial performance through collaboration and quality goods/services.

Types of Supplier Relationships

• Transactional Relationships:
  • Adversarial, win-lose approach.
  • Minimal collaboration.
  • Suitable for non-critical products (e.g., stationery).
• Collaborative Relationships/Partnerships:
  • Buyers and sellers work closely, sharing operational information.
  • High planning and collaboration.
  • For items impacting operations moderately (e.g., packaging materials).
• Strategic Alliances:
  • Shared risks and benefits.
  • Long-term relationships aimed at developing suppliers.
  • For critical components (e.g., proprietary raw materials).

Strategic Importance of SRM

• Value Creation: Improves firm performance through integration.
• Cost Reduction: Enhances supplier efficiency and quality.
• Risk Management: Reduces supply chain disruptions via increased communication.
• Innovation and Growth: Leverages supplier knowledge for innovation.
• Competitive Advantage: Drives cost savings, improved delivery, and flexibility.

Approaches to SRM

• Reactive Approach:
  • Problem-driven, short-term.
  • Focuses on correcting issues as they arise.
  • Suitable for non-critical items.
• Proactive (Strategic) Approach:
  • Long-term, solution-driven.
  • Aims to minimize risks before sourcing begins.

Early Supplier Involvement (ESI) Advantages

• Reduced development time and costs.
• Improved product quality and innovation.
• Competitive advantage through joint resource dedication.

ESI Disadvantages

• Dependency on suppliers.
• Reduced flexibility to switch suppliers.
• Risk of information loss to competitors.
• Advantages typically outweigh disadvantages.

SRM Process

• Segmentation:
  • Use Kraljic Matrix to categorize suppliers by risk and profitability (Strategic, Leverage, Non-Critical).
• Objectives:
  • Cost management, risk management, value creation, innovation.
• Activities:
  • Build relationships, manage risks, optimize costs, innovate, ensure service delivery.
• Evaluation:
  • Establish performance metrics and conduct regular reviews.

Improving Supplier Management Systems Importance

• Integrates processes (procurement, R&D, logistics, etc.).
• Ensures continuous supply.
• Optimizes cost and performance.
• Reduces risk through better monitoring.
• Facilitates innovation and flexibility.
• Enhances sustainability and competitiveness using triple bottom line metrics.