Learning Objectives = Supplier Relationship Management « Internal Supply Chain Management, = Customer Relationship Management » Transaction Management a By eee CaneIAEELSUUL SON UOLERLISASSSAEAN DELOWhat is Supplier Relationsh' Management? cay According to The Global Supply Chain Forum... O Supply chain management is the integration of key business processes from end user through original supplier that provides products, services, and information that add value for customers and other stakeholders.eres Ss Supplier Relationship Management SSS O SRN is in fact a type of relationship management, which affects all areas of the supply chain and has a dramatic impact on supply chain performance. O One of the most fundamental yet more challenging requirements for supply chain integration is changing the nature of traditional relationships between suppliers and customers in the supply chain.SRM: Importance bc O Supply chain relationship is the most challenging aspect of effective SCM. O SCM is the integration and management of supply chain organizations and activities thorough co- operative organizational relationships, effective business process and high levels of information sharing to create high performing value systems that provide member organization a sustainable competitive advantageTS SRM: Importance What is Value System? ee tttsts—i_—O™SCS O A value system is defined as “ a connected series of organizational resources and knowledgeable streams involved in creation and delivery of value to end customer O It integrates supply chain activities from determination of customer needs through production/service development, production/ operations and distribution including first, second and third tier suppliers (as appropriate) O Objective is to position organization in supply chain to achieve the highest level of customer satisfaction and effectively exploiting the competencies of all organizations involved in supply chainSRM: Importance What Creating Value for Customer O Creating value for customers requires cycle time reduction. However without effective organisational relationships among Q supply chain member organisations, efforts to manage the flow of materials or information across the supply chain are likely to be unsuccessful. Hence relationship management (both customer relationship and supplier relationship) assumes great importance in supply chain management Q In recent years, collaboration has become the focus of supply chain systems. Q The ability to link and work effectively with suppliers has _ produced a new system called “supplier relationship management” (SRM). On the other hand, “customer relationship management” (CRM) systems are evolving to rovide better contact and understanding of customer needs.Q ooo In recent years, companies have started investing in two types of systems that allow for collaboration with supply chain partners. Supplier relationship management systems Customer relationship management systems. Supplier relations management (SRM) drives the optimisation of production of goods and materials for manufacturers. These systems include the following capabilities: Q Strategic Supply Management : Q Ensures that a company has right set of suppliers in terms of performance and company pay them best in class for their rendered services Q Supply Chain Collaboration : a Allows a company to share information with suppliers in real time, cutting material costs, minimizing inventory and reducing shortages Q Direct Materials Procurement Execution: Uses Intermet to automate the process of dealing suppliers thereb\ cycle time and increasing inventory turns: gare rey agSupply chain macro processes a rolonah | " rey Channel Soni Seemed rl som management anagement management O Logistics functional orientation Vs SCM process orientation O There are typically 5 nodes namely- customer, retailer, distributor, manufacturer and supplier and 4 stages In supply chain. O Cycle view clearly defines processes involved in each stage and the process owner O Cycle view linked to supply chain macro processes Customer order cycle (customer-retailer) Replenishment cycle (retailer-distributor) Manufacturing cycle (distributor-manufacturer) Procurementcycle (manufacturer-supplier)The Processes Management - provides the structure for how relationships with customers are developed & maintained, including the PSAs (Preferred supplier Agreements) between the firm & its customers. OCustomer Service Management - provides the firm's face to the customer, including management of the PSAs, and provides a single source of customer information. Demand Management - provides the structure for balancing the customers’ requirements with supply chain capabilities. UCustomer RelationshipThe Processes includes all activities necessary to OOrder Fulfilment — sign the logistics network, define customer requirements, de: and fill customer orders. Manufacturing Flow Management - includes all activities necessary to move products through the plants & to obtain & manage manufacturing flexibility in the supply chain. OSupplier Relationship Management - provides the structure for how relationships with suppliers are developed & maintained, including the PSAs between the firm & its ) suppliers.The processes EES OProduct Development and Commercialization — provides the structure for developing and bringing to market new products jointly with customers and suppliers. OReturns Management - includes all activities related to returns, reverse logistics, gatekeeping, & avoidance.Supply Chain Macro Processes ee Customer Supplier Firm SRM ISCM CRM * Source * Strategic Planning * Market * Negotiate * Demand Planning * Price + Buy * Supply Planning * Sell * Design Collaboration + Fulfillment * Call Center * Order Management * Supply Collaboration + Field Servicey mregrate: Because..- ee ive advantages, “dthere might be potential for competit tors might already be working on it, Ccompetit bring more stability to the relationship, Git should rovements to customer service, profits, costs, Git should bring imp QOtechnology is driving businesses in that direction, the world is becoming more global and business practices are changing, Ocompanies tend to focus on their core competencies, when these systems have been implemented they become an ipenable asset. 15Relationships —— st tst—“<=<=_;S ; CH ——~é O Relationship Management is defined as the strategy employed by an organization In which a continuous level of engagement Is maintained between the organization and its audience. O Relationship management can be between a business and its customers (customer relationship management) and between a business and other businesses (business relationship management). O Managers often assume that the personal relationships important to the supply chain will fall Into place; however, managing supply chain relationships among organizations can be the most difficult part of the SCM initiative.Relationships —— ee —™S DI The single most important ingredient for successful SCM may be trusting supply chain relationships among partners in the supply chain, where each party has confidence in the other members’ capabilities and actions. O Trust building is characterized as an ongoing process that must be continually managed. i7Relationships baHorizontal o = ee -ece ‘om (ey os da =n —S. oe men 5 1 COP —&, Cres24(a) Arm’s length relationship cons . of either one-time exchanges or multiple transactions, often over a long period of time, but_without any sense of joint commitment or joint operations be ; is case, when exchanges end, relationship ends. (b) Type I partnership in which the organisations involved recognise each other as partners on a limited basis/co-ordinate activities and planning. The partnership has short term focus and involves only one division or functional area within each organisation. (c) Type II partnership has a long-term horizon. Multiple divisions and functions within the firm are involved in the partnership. (d) Type III partnership in which the organisations share a significant level of integration. Each party views the other as an extension of their own firm. No end date for the partnership exists, (€) Joint Venture : An agreement between two or more partners to own and control an overseas business. (f) 7 : supply chain organisationally relates to one another, rt thePartnership - Definit.on A partnership is a tailored business relationship based on mutual trust, openness, shared risk and shared rewards that results in business performance greater than would be achieved by two firms working together in the absence of partnership. 26; Facilitators Drivers Decision to ‘Supportive Compelling reasons create or <— environmental to partner factors that enhance partnership growth Components Drivers set Joint activities and processes that expectations build and sustain the partnership of out Feedback to: J 1 Components | Drivers Outcomes Le | Facilitators The extent to which performance meets expectations a7SRM extends supfifier value Once a supplier has been sourced and contracted to provide a particular product or service, three different scenarios can play out in the organization related to the management of the supplier. Cerner} Without rigorous contract Re eee tod Petes eat eel else) lei Mela dat) VALUE 1 1 i r 1 1 A eo 28 TIMEResults, results, re@ults ©) Increased Efficiency Through improved communications, suppliers come Clean e nae uecs Dee een ay Cost Savings OM tee ee er reduce availabilty problems, quality issues, and Coes Pas sale] Revenue Growth Through greater operational effidencies derived from an SRMprogram, both the supplier and buyer can Cee ete Cerm A Risk Management RO eeu ie eae route) Pee Pee esas et eo nd Pr erouC emai carne ume Ceo aay fe Preferred Buver Status Oro iu Cnc rn ie neto Dee eeu ke eu! en ue es eed cost base and provide total price visibility. innovation ‘As expertsin theirfleld, suppliers can share knowledge Cum) Ce tee oe a aa) eres Rel cca sr Cents 29Supplier segmentati$n chart SE ee ee a a ie mene Tce ae et one graph in the categories of Critical and Strategicare typically the most qualified for a comprehensive SRM program. as Baad c= 5 services directly linked i pets; Atay at ce es sy 6 Rea ee) 5 PE pine tea ae een ee cee ~— fread lice Rgee acter! O73 opportunities with top executive tothe organizations well ae Pee er aid of eta a ous Sera aC nc 5 recedes eis eed end ora pores eens 1 cesta ce? PeSprsenipapren cremate dttioens) pare sarsheesen et naiae Re eect et’ Siete Peseta beeesacaiien Te Bie, L resol ul Soles ale) i ete)SRM Program @bjectives ene ren gc! Pee nn an prprenteead eee eee Penal nae ee ent ad eer caren eae SOTTO LD ‘A Abewe Pe: eee arenes ance) aship management programscan offer similar value, each has a specific set of objectives Pere ieit ae eee ets sUise) ite etareinireiinec}dlo iste pul) Basedon supplier segmer Cet SU ct Pet net ests ce ea a ers ee i eee! formula forwhich activitiesare compulsory, it is intuitive that RR eC UC UD uo coe Pesia m = Strategic Alliances O Strategic alliances can occur in any number of different markets and with different combinations of suppliers and customers. Q A typical supplier-customer alliance involves a single supplier and a single customer. A good example Is the supply chain relationships between Proctor & Gamble and Wal-Mart, which have worked together to establish long-term electronic data interchange (EDI) linkages, shared forecasts, and pricing agreements./ Strategic Alliances Q Alliances also can develop between two horizontal suppliers in an industry, such as the supply chain relationships between Dell and Microsoft—organizations that collaborate to ensure that the technology road map for Dell computers (in terms of memory, speed, etc.) will be aligned with Microsoft's software requirements. QO Finally, a vertical supplier-supplier alliance may involve multiple parties, such as trucking companies that must work with rail-roads and ocean freighters to ensure proper timing of | deliveries for multi-modal transhipment,——____ 33] Logistics Relationships | a SCSCSCSCStsts—“—_™SCSCSC~* Types: Generally, there are two types of logistics relationships. 1.Vertical relationships: Q Refer to the traditional linkages between firms in supply chain such as retailers, distributors, manufacturers, and parts and materials suppliers. Q These firms relate to one another in the ways that buyers and sellers do In all industries, and significant attention Is directed toward making sure that these relationships help to achleve individual firm and supply chain objectives, Q Logistics service providers are involved on a day-to-day basis as they serve their customers in this traditional, vertical form of relationship.Logistics Relationships a CC~C*S*SsSsSsSsSststsiDC*# Step 4: Select Partners O While this stage Is of critical concern to the customer, the selection of a logistics or supply chain partner should be made only following very close consideration of the credentials of the most likely candidates. OQ Also, it is highly advisable to interact with and get to know the final candidates on a professionally intimate basis. Q Due to the strategic significance of the decision to form a logistics or supply chain relationships, it is essential to ensure that everyone involved in decision making has a consistent understanding of the decision that has been made and a consistent expectation of what to expect from the firm that has been selected. | F 42Mog or Develonia / Successful Supply Ch ain Relationships: mS Step 5: Structure Operating Model Q The structure of the relationship refers to the activities, processes, and priorities that will be used to build and sustain the relationship. O Make the relationship operational and help managers create the benefits of partnering. O Components of the operating model may include the following: - Q Planning. Q Joint operating controls Q Communication O Risk/Reward sharing OQ Trust and commitment OQ Contract style Q Scope of the relationship O Financial investment |ModeLTO Le Poninw and MEMentiod. Successful Supply Chain Relationships: Step 6: Implementation and Continuous Improvement © Depending on the complexity of the new relationship, the overall implementation process may be relatively short, or it may be extended over a longer period of time. Q If the situation Involves significant change to and restructuring of the Manufacturing firm’s logistics or supply chain network, for example, full Implementation may take longer to accomplish. In a situation where the degree of change Is more modest, the time needed for successful implementation may be abbreviated, Q Future success of the suppller relationship management will be a direct function of the ability of the Involved organizations to achleve both continuous and breakthrough improvement. QO A number of steps should be considered in the continuous improvement process. In addition, efforts should be directed to creating the breakthrough, or “paradigm-shifting,” type of improvement that is essential to enhance the functioning of the relationship and the market Positigning of the organizations involved.Management a dCSCSsSs—<“—NSSSSOS=sés=sSCSCSC O Today's supply chain relationships are most effective when collaboration occurs among the participants who are Involved. Q Collaboration may be thought of as a “business practice that encourages individual organizations to share information and resources for the benefit of all.” Q Collaboration allows companies to leverage each other on an operational basis so that together they perform better than they did separately.” Q Collaboration becomes a reality when the power of the Internet facilitates the ability of supply chain participants to read - transact with each other and to access each other's information. O Most simply, collaboration occurs when companies work together for mutual benefit. Q Collaboration is a business practice that requires the following: Q Parties involved to dynamically share and interchange information. Q Benefits experienced by parties to exceed individual benefits. Q All parties to modify their business practices. = : GAi 5 All parties to provide a mechanism and process for collaboration to occu?Internal supply chain Internal supply eg ‘a | Suppliers pulion =e Customers est 46