Supplier Relationship Management

In Supply Chain Management

SRM => working collaboratively with those suppliers that are vital to the success of your organization, to maximize the potential value of those relationships.

Critical to any organization directly impact the 1. Financial performance 2. Profitability of a buying enterprise, 3. Product development costs,4. Inventory levels, 5. Manufacturing schedules 6. Timeliness of delivery of goods and services

What Is The Problem With Suppliers? –Why SRM ?

1. Unclear expectations2. Not mutually beneficial(Win-Win)3. Buyers multi-supplier environment4. Miscommunication5. Poor governance6. Poor cultural fit7. Lack of coordinated management

An effective SRM gives your organization a competitive power to:

1. Suppliers to reduce direct and indirect costs and improve service.

2. Goal is to improve the profitability of both the focus company and the suppliers.

3. Understand what purchase and from whom: => process to improve productivity and all areas of supplier performance

4. Strengthen the supply-chain management process by collaborating with your company and suppliers

5. Select the best suppliers to gain advantage over competitors6. Minimize the risk of supply chain7. Assure that your organization's resources are prioritized on the

most critical suppliers

How SRM?

1. Selection and assessment of supplier2. Organizing good communication btw. Sellers & buyers3. Ensuring the integration btw. Firms within supply chain4. Simplifying and standardizing the process of order, loading,

transportation, etc..5. Correctly identifying the supply chain relationship6. Setting the information effectively which is to be shared

Supplier relationship management (SRM) is the systematic, enterprise-wide assessment of suppliers’ assets and capabilities with respect to overall business strategy, determination of what activities to engage in with different suppliers, and planning and execution of all interactions with suppliers, in a coordinated fashion across the relationship life cycle, to maximize the value realized through those interactions.

The focus of SRM is to develop two-way, mutually beneficial relationships with strategic supply partners to deliver greater levels of innovation and competitive advantage than could be achieved by operating independently or through a traditional, transactional purchasing arrangement.

In many fundamental ways, SRM is analogous to customer relationship management.

Just as companies have multiple interactions over time with their customers, so too do they interact with suppliers – negotiating contracts, purchasing, managing logistics and delivery, collaborating on product design, etc.

The starting point for defining SRM is a recognition that these various interactions with suppliers are not discrete and independent – instead they are accurately and usefully thought of as comprising a relationship, one which can and should be managed in a coordinated fashion across functional and business unit touch-points, and throughout the relationship lifecycle

Organizational Structure

A formal SRM team The purpose of such a group is to facilitate and coordinate SRM activities across functions and business units.

A formal Relationship ManagerSuch individuals often sit within the business unit that interacts most frequently with that supplier, or may be filled by a category manager in the procurement function.

An executive sponsorThese individuals form a clear link between SRM strategies and overall business strategies, serve to determine the relative prioritization among a company’s varying goals as they impact suppliers, and act as a dispute resolution body

Challenges

1. Creating the business case2. Executive sponsorship3. Calculating ROI4. Developing an SRM sales pitch5. Finding vendors who have SRM capabilities

SRM and supplier performance management

SPM is a subset of SRM.

SPM is about ensuring the supplier delivers what has been promised in the contract, which suggests a narrow, one-way process.

SRM, in contrast, is about collaboratively driving value for both parties, resulting in lower costs, reduced risk, greater efficiency, better quality, and access to innovation. This requires a focus on both negotiating the contract and managing the resulting relationship throughout implementation, as well as systematic joint value-discovery efforts

SQM

1. Definition of the product's quality requirements,2. Evaluation of alternative suppliers.3. Selection of the most appropriate supplier,4. Conduction of joint quality planning,5. Cooperation during relationship period,6. Validation of conformance to requirements,7. Certification of qualified suppliers,8. Conduction of quality improvement plans,9. Creation and use of supplier ratings

1. Cost of quality2. Overall equipment effectiveness (OEE).3. Percentage of products in compliance.4. On-time and complete shipments.5. New products introduction (NPI).

Evaluation Process

1. Risk Criteria Evaluation2. Audit Strategy 3. Review of Frequency Suppliers Are Audited 4. Review of Audit Priorities

Key metrics