Intro Supply Chain Management Chapter 3: Creating and Managing Supplier Relationships

Supplier Certification Criteria

- No incoming product lot rejections for a specified time period (Less than 0.5 percent defective). - No incoming non-product rejections for a specified time period (Late delivery). - No significant supplier production-related negative incidents for a specified time period. - ISO9000/Q14000 certified or successfully passing a recent, on-site quality system evaluation. - Mutually agreed set of clearly specified quality performance measures. - Fully documented process and quality system with cost controls and continuous improvement capabilities. - Supplier's processes are stable and in control.

SRM System Key Points

1. *Automation* of transactional processes between an organization and its suppliers. 2. *Integration* that provides a view of the supply chain that spans multiple departments, processes and software applications for internal users and external partners. 3. *Visibility* of information and process flows in and between organizations. Views are customized by role and aggregated via a single portal. 4. *Collaboration* through information sharing and suppliers' ability to input information directly into an organizations' supply chain information system. 5. *Optimization* of processes and decision making through enhanced analytical tools such as data warehousing and online analytical processing (OLAP) tools with the migration toward more dynamic optimization tools in the future.

Supplier Recognition Programs

1. Companies should recognize & celebrate the achievements of their best suppliers. 2. Award winners exemplify true partnerships and continuous improvement, organizational commitment & excellence. 3. Award-winning suppliers serve as role models for other suppliers.

Supplier Development 7 Step Approach

A buyer's activities to improve a supplier's performance and/or capabilities are based on the following 7 step approach. 1. Identify critical products & services. 2. Identify critical suppliers. 3. Form a cross-functional team. 4. Meet with top management of supplier. 5. Identify key projects. 6. Define details of Agreement. 7. Monitor Status & Modify Strategies.

Step 6: Define the details of the buyer-supplier agreements.

Agreement is reached on how the development projects are ranked. Performance metrics are now jointly agreed upon to be monitored.

Analytical SRM

Allows the company to analyze the complete supplier base. - Which suppliers should the company develop long term relationships with? - Which suppliers would make the company more profitable? - In relationship to yesterday? - In relationship to today? - Where do we want to go?

Supplier Certification

An organizations process for evaluating the quality systems of key suppliers in an effort to eliminate incoming inspections.

(SRM) Software

Answers these questions: - Who are our current suppliers? - Who are our best suppliers? - What are suppliers performances in respect to key performance indicators *(KPIs)*? - Can we consolidate our buying? - Do we have consistency in suppliers and performance across different locations? - What goods and services do we purchase? - What purchases parts can be used in new designs? Automates the exchange of information and allows for improved efficiency and effectiveness in managing supplier relationships and improving performance.

Supplier Development

Any activity that a buyer undertakes to improve a suppliers performance and/or capabilities to meet the buyer's short and/or long term supply needs.

Step 1: Identify Critical Products & Services.

Assess the importance of the goods and services from a strategic perspective.

Step 3: Form a cross-functional supplier development team.

Buyer must have an internal cross functional team that must agree on what the supplier development initiatives are.

Step 4: Meet with top management of suppliers.

Buyers cross functional team and the suppliers top management meet to discuss details of strategic alignment. - Talk about supplier performance and expectations and time frame for improvement.

ISO 14000

Easier understandable standards that combined environmental and quality management systems.

Transactional SRM

Enables organizations to track supplier interactions through order planning, payments, and returns. - Short Term Reporting - What did we buy yesterday? - From what supplier? - What was the cost of this purchase?

Supplier Relationship Management (SRM)

Includes extended procurement processes, such as sourcing analytics, sourcing execution, procurement execution, payment and settlement and - closing the feedback loop - supplier score carding and performance monitoring. Strives to help companies recognize their most important suppliers. SRM Software eases this process.

Step 7: Monitor project status and modify strategies

Management must actively monitor progress. Must promote exchange of information and revise the development strategies as conditions demand.

Step 5: Rank Supplier Development Projects.

Supplier development opportunities are identified and resourced. They are then evaluated in terms of feasibility, resource, and time requirements. The most promising projects are selected.

Step 2: Identify Critical Suppliers not meeting performance requirements.

Suppliers of strategic supplies not meeting the MINIMUM performance in quality, on-time delivery, cost, technology are targets for *Supplier Development Initiatives.*

ISO 9000

Third party certification designed by the International Organization for Standardization in 1987. A series of management and quality assurance standards in design, development, production, installation and service.