Chapter 7- supplier relationship management (SRM)

Supplier Recognition Programs

A program to recognize suppliers who achieve the high performance standards necessary to meet customer expectations.

Keys to Successful Strategic Partnerships

1.Building Trust 2.Having a Shared Vision and Objectives 3.Developing Personal Relationships 4.Establishing Mutual Benefits and Needs 5.Gaining Commitment from Top Management 6.Managing Change 7.Information Sharing and Lines of Communication 8.Understanding and Influencing Capabilities 9.Continuous Improvement 10.Measuring Performance

Continuous Improvement

- Making a series of small improvements over time results in the elimination of waste in a system. - Buyers and suppliers must be willing to continuously improve their capabilities in meeting customer requirements.

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, and if only one party is happy, then the marriage (i.e., alliance) is not likely to last.

Personal Relationships

- Strategic Partnerships begin with the development of personal relationships between key people at each company. - It is people who communicate and make things happen.

Strong Supplier Partnerships

-Important to achieving win-win competitive performance for the buyer and supplier -These require a strategic perspective as opposed to a tactical perspective. -Involves "a mutual commitment over an extended time to work together to the mutual benefit of both parties, sharing relevant information and the risks and rewards of the relationship"

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

Developmental suppliers that need to make improvements

ISO 9000

`§A series of management and quality standards in design, development, production, installation, and service. §Companies wanting to sell in the global market seek ISO 9000 certification.

Value engineering

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

Supplier Certification

also used as verification that select suppliers operate, maintain, improve, and document effect procedures that relate to the buyer's requirements for supply elements such as cost, quality, delivery, flexibility, etc.

Supplier Certification Programs

are used to identify strategic supplier alliance candidates, strong partnership with supplier

A robust and long-lasting supplier partnership requires that both the buyer and the supplier adopt a strong tactical perspective

false

ISO 14000 is a widely accepted quality certification standard

false

Plan

identify each specific improvement that is needed, what change is necessary to make the improvement, and then plan for that change.

Supplier Relationship Management (SRM)

is often a part of the rollout of Strategic Sourcing and is typically applied with suppliers: - Providing high volumes of a product/service - Providing lesser quantities of a crucial product/ services - That serve many business units of a company or organization - Where intensive engineering, manufacturing and/or logistics interaction is essential.

Supplier Development

is the technical and financial assistance given to existing and potential suppliers to improve quality and/or delivery performance.

automation

meant to handle routine transactions

visibility

of information and clear and concise process flows

optimization

of processes and decision making

Building Trust

partners are more willing to work together, find compromise solutions to problems, work toward achieving long-term benefits for both parties, and go the extra mile.

collaboration

through information sharing

Preferred

work with these suppliers in maintaining a competitive position and on new product development

ISO 14000

§A family of standards for environmental management. §The benefits include reduced energy consumption, environmental liability, waste and pollution, and improved community goodwill.

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.`

Internal Certification Programs

§Supplier has no incoming product rejections for a specified time period. §Supplier has no incoming late deliveries for a specified time period §Supplier has no significant negative quality related incidents for a specified time period §Supplier is ISO 9000 certified or has successfully passed a recent on-site quality system evaluation §Supplier consistently meets a mutually agreed-upon set of clearly specified quality performance measures §Supplier has a fully documented process and quality system with cost controls and continuous improvement capabilities §Supplier's processes are determined to be stable and in control

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

Increasing the supplier base

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

Individualized Objectives

External Certification

International Organization for Standardization (known as ISO) is the world's largest developer of voluntary international standards.

Supplier Evaluation: Performance

It is important to actively monitor a supplier's performance and provide visibility and feedback on supplier performance at each stage of the evaluation process.

Supplier Evaluation

- A process to identify the best and most reliable suppliers - Sourcing decisions are made on facts and not on perception

Information Sharing and Establishing Lines of Communication

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

Shared Vision and Objectives

- Both partners must share the same vision and have objectives that are not only clear but mutually agreeable. - The focus must move beyond tactical issues and toward a more strategic path to corporate success.

Commitment from Top Management to Support the Strategic Partnership

- Commitment must start at the highest management level. - Partnerships tend to be successful when top executives are actively supporting the partnership.

Managing Change

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

Benefits of Strategic Partnerships with Suppliers (suppliers)

- Increased operating efficiencies - Lower cost of sales - Increased margins - Incremental revenue - Greater visibility into buyer's purchasing plans - Increased scope of business - Opportunities to develop, pilot, and showcase innovative solutions - Longer term buyer commitments; greater predictability of future business - Sustainable competitive advantage

Benefits of Strategic Partnerships with Suppliers (buyers)

- Increased operating efficiencies - Lower costs - Enhanced service - Incremental revenue - Improved quality - Preferred access to the supplier's best people - Influence over supplier investments and technology - Preferred access to supplier ideas - Increased innovation from and with suppliers - Sustainable competitive advantage

Understanding Capabilities

- Key suppliers must have the right technologies and capabilities to meet cost, quality, and delivery requirements in a timely manner (currently and in the future).

Measuring Performance

-You can't improve what you don't measure ─Measures related to quality, cost, delivery, and flexibility are used to evaluate suppliers. ─Metrics should be: 1) understandable, 2) easy to measure, and 3) focused on real value-added results [S.M.A.R.T. objectives]. ─A multi-criteria approach is best [i.e., a SCORECARD].

Benefits of Supplier Recognition Programs

1. Motivate Suppliers to Perform Better 2. Improve Supplier Loyalty and Commitment 3. Encourage Suppliers to Adapt to the Company's Culture 4. Helps to Create Entry Barriers for Competitors 5. Encourages Supplier Participation in Product Innovation

Supplier Development: Process Steps

1.Identify critical products and services 2.Identify the suppliers of those critical products and services 3.Form a cross-functional team internally to work with the supplier 4.Identify what issues or gaps exist and what specific improvements need to be made 5.Meet with the top management at the supplier to get their support and involvement 6.Define details of the agreement and the action plan 7.Monitor the status of the projects / action plan and modify strategies as necessary

Supplier Evaluation: Weighted-Criteria

1.Select the key dimensions of performance mutually acceptable to both buyer and supplier. 2.Monitor and collect performance data. 3.Assign weights to each of the dimensions. 4.Evaluate performance measures between 0 and 100. 5.Multiply dimension rating by weight and sum of overall score. 6.Classify suppliers based on their overall score, e.g., Certified, Preferred, Acceptable, Conditional, Developmental, Unacceptable, etc. 7.Audit and perform ongoing certification review.

Supplier Relationship Management System

Automation, integration, visibility, collaboration, optimization

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

False

The process commonly utilized in continuous improvement is

Plan, Do, Check, & Act

The process commonly utilized in continuous improvement is known as?

Plan, Do, Check, Act

Act

If the change was successful, implement it on a wider scale and continuously assess your results. If the change did not work, then most likely the root cause was not identified, or the change was not the correct solution, and you may need to begin the cycle all over.

Do

Implement the change on a small scale to see if the change improves the process before moving forward with full implementation

Key Supplier Selection

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

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

Supplier Relationship Management (SRM) is

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

Check

Use data to analyze the results to see if the change made a positive impact.

Acceptable

require a plan from these suppliers outlining how they will achieve preferred status

Developmental

require corrective actions from these suppliers on how they will achieve acceptable level. Look for alternative suppliers if these do not achieve acceptability within a fixed period of time, e.g., 3 months

integration

spans multiple departments, processes, and software applications

An effective supplier recognition program may provide motivation, improve loyalty, encourage suppliers to adapt to the company's culture, create entry barriers for competitors, and encourage suppliers to participate in product innovation.

true

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

true