2 Strategic Ways to Improve Supplier Relationship Management - Spend Matters
management, and supplier relationship management. . best practices. • procurement policy and process . international airport. A leading international airport. Presentation Outline. ▫ Importance of . Source: Negotiating and Managing Key Supplier Relationships: A Cross-Industry Study of 20 Best Practices. Vantage. Supplier relationship management is the supply chain management process that seven supply chain management processes are identified and guidelines for.
An Entrepreneurial Take on Supplier Relationship Management
Supplier relationship management can be described as the systematic management of post-contract value from relationships with suppliers over the life of selected key relationships. Supplier relationship management may become one of the few real core organizational competencies. There has been a great deal of research done on the subject of supplier relationship management in operations management; however, in my view, there are two strategic ways companies can improve supplier relationship management.
Category or Commodity Strategy Krause2 has suggested the identification of critical commodities for development as a first key step of a strategic supplier development process. After classifying all commodities into each category, the resulting portfolio discriminates between non-critical commodities and strategic commodities.
Classification matrix for commodities source: Therefore, if companies use proper commodity strategy, then they can focus resources on what is important for them and drive many improvements. Either the top management or a small group in a purchasing and supply chain organization translate this recognition of the need into a set of objectives dealing with various performance measures such as cost, quality, delivery performance or strategic objectives.
The main input to formulate these objectives comes from technical capability, costs, quality and delivery performance from existing and new suppliers, customer requirements and competitive challenges in the marketplace. Moreover, organizations need to ensure these objectives are aligned with their category or commodity strategy and supplier relationship management initiatives.
The main output of this strategic initiative is to select suppliers for development. Krause suggests companies should have formal supplier performance measurement i.
For example, at Eaton we use a supplier dashboard to understand cost, quality and delivery performance as the key agenda items in our quarterly or annual business reviews with suppliers. These supplier dashboards also serve the basis for supplier negotiation in terms of pricing. As one moves from the arm's length price relationship toward joint venture, the linkages become closer, more defined, and the benefits are broader and deeper beyond just price.
Supplier Relationship Management 2.0: Cross-industry Best Practices
Internal relationships are just as important as external ones. With SRM these links are common with operations, logistics, accounting and engineering. Internal ones can work against a concerted effort with a supplier or it can create a strong consistency of purpose. There are two types of measurements: Targets are those end goals being sought price, cost, quality, specific logistics details, order cycle times, time to market, etc.
ISM - Supplier Relationship Management Insights
Means types of measures are those manageable sub-component activities that add up to accomplishing targets. For example, an order cycle time target has within it a transportation transit time as a means measure. A common fault here is to over-require means measurements of suppliers. A simpler approach is to expect the supplier to perform to certain end goal targets. Whether target or means measures are used, stakeholders have specific ones that impact their performance and that of their groups.
What type of relationship will work toward that? What do you need to measure to assure that it will happen? These define the roles. Some key issues here are: To the left are activities common in basic sourcing. As the needs from suppliers increase, so do the needs to measure, control and develop the supplier in overall supply assurance.
The increased, more hands-on SRM needs are shown as the relationship moves to the right, with medium and more advanced levels of interaction. Where to Go With It?Seven Essentials of Vendor Management
SRM is often a part of the rollout of strategic sourcing. Here, it can be the management and leadership end of working with strategic suppliers or ones that are preferred or simply transactional see footnote.
Each SRM initiative is about determining and communicating needs and expectations to a supplier, measuring performance, and invoking actions for compliance.